UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.20549

FORM 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, ~~2016~~2017

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

For the transition period from ~~_____________~~____________ to _____________

Commission File No. 001-34812

THT HEAT TRANSFER TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)

Nevada	20-5463509
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
organization)

THT Industrial Park
No. 5 Nanhuan Road, Tiexi District
Siping, Jilin Province 136000
People’s Republic of China
(Address of principal executive offices)

86-434-3265241
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[ ]

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 [ ]	Accelerated Filer [ ]
	Non-Accelerated Filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

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

As of June 30, ~~2016~~2017 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the shares of the registrant’s common stock held by non-affiliates (based upon the closing sale price of such shares as reported on the OTC Markets) was approximately $3.08 million. Shares of the registrant’s common stock held by each executive officer and director and each by each person who owns 10% or more of the outstanding common stock have been excluded from the calculation in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

There were a total of 20,453,500 shares of the registrant’s common stock outstanding as of April 1216, ~~2017~~2018.

DOCUMENTS INCORPORATED BY REFERENCE

None.

THT HEAT TRANSFER TECHNOLOGY, INC. Annual Report on Form 10-K Year Ended December 31, 2017

Annual Report on Form 10-K Year Ended December 31, 2016

TABLE OF CONTENTS

PART I
Item 1.	Business.	2
Item 1A.	Risk Factors.	2019
Item 1B.	Unresolved Staff Comments.	3031
Item 2.	Properties.	31
Item 3.	Legal Proceedings.	3132
Item 4.	Mine Safety Disclosures.	3132
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data.	33
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	33
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	4443
Item 8.	Financial Statements and Supplementary Data.	4439
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	4439
Item 9A.	Controls and Procedures.	4439
Item 9B.	Other Information.	4641
PART III
Item 10.	Directors, Executive Officers and Corporate Governance.	4641
Item 11.	Executive Compensation.	4947
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	5048
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	5148
Item 14.	Principal Accounting Fees and Services.	5149
PART IV
Item 15.	Exhibits, Financial Statement Schedules.	5250

INTRODUCTORY NOTE

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A “Risk Factors” herein, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Use of Terms

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to:

• “THT,” “Company,” “we,” “us,” or “our” are to the combined business of THT Heat Transfer Technology, Inc., a Nevada corporation, and its consolidated subsidiaries: Megaway, Star Wealth, ~~Siping~~SipingJuyuan and Beijing Juyuan; ~~and~~• “Megaway” are to Megaway International Holdings Limited, a BVI company; • “Star Wealth” are to Star Wealth International Holdings Limited, a Hong Kong company; • “SipingJuyuan” are to Siping City JuyuanHanyang Plate Heat Exchanger Co. Ltd., a PRC company; • “Beijing Juyuan” are to Beijing JuyuanHanyang Heat Exchange Equipment Co., Ltd., a PRC company; • “BVI” are to the British Virgin Islands; • “Hong Kong” are to the Hong Kong Special Administrative Region of the People’s Republic of China; • “PRC” and “China” are to the People’s Republic of China; • “SEC” are to the Securities and Exchange Commission; • “Exchange Act” are to the Securities Exchange Act of 1934, as amended; • “Securities Act” re to the Securities Act of 1933, as amended; • “Renminbi” and “RMB” are to the legal currency of China; and • “U.S. dollars,” “dollars” and “$” are to the legal currency of the United States.

“Megaway” are to Megaway International Holdings Limited, a BVI company;

“Star Wealth” are to Star Wealth International Holdings Limited, a Hong Kong company;

“Siping Juyuan” are to Siping City Juyuan Hanyang Plate Heat Exchanger Co. Ltd., a PRC company;

“Beijing Juyuan” are to Beijing Juyuan Hanyang Heat Exchange Equipment Co., Ltd., a PRC company;

“BVI” are to the British Virgin Islands;

“Hong Kong” are to the Hong Kong Special Administrative Region of the People’s Republic of China;

“PRC” and “China” are to the People’s Republic of China;

“SEC” are to the Securities and Exchange Commission;

“Exchange Act” are to the Securities Exchange Act of 1934, as amended;

“Securities Act” re to the Securities Act of 1933, as amended;

“Renminbi” and “RMB” are to the legal currency of China; and

“U.S. dollars,” “dollars” and “$” are to the legal currency of the United States.

PART I

ITEM 1.

BUSINESS.

Overview of Our Business

We are a leading total solution provider in the heat exchange industry. Our major products are plate heat exchangers, heat exchanger units, air-cooled heat exchangers and shell-and-tube heat exchangers. Unlike most other heat exchanger manufacturers in China, we not only provide heat exchange products, but also provide total solutions to our customers. As a total solutions provider, we analyze the working condition of our customers, provide optimized designs based on analysis and simulation, offer high quality heat exchange products, and continuously assist our customers in improving the heat exchange process.

Over the past ten years, we have successfully completed over 3,000 projects in more than 15 industries, including metallurgy, heat and power, petrochemical, food and beverage, pharmaceutical and shipbuilding. We have provided heat exchange solutions to Fortune 500 companies, including Shell, BP, BASF, LG, Sinopec and China Shenhua. We have also provided heat exchange products for important Chinese and international projects such as the Beijing 2008 Olympics Wukesong Sports Center, Guangdong Lin’ao nuclear plant and BASF Chemical plant in Germany.

Our operations are headquartered in Siping, Jilin Province, PRC. Our primary Chinese operating subsidiaries are ~~Siping~~SipingJuyuan ~~Juyuan~~ and Beijing Juyuan.

Our Corporate History

Background and History of BTHC VIII, Inc.

We were organized on August 7, 2006 as a Delaware corporation under the name BTHC VIII, Inc. to effect the reincorporation of BTHC VIII, LLC, a Texas limited liability company, mandated by the plan of reorganization discussed below. In accordance with the confirmed plan of reorganization, our business plan was to identify a privately-held operating company desiring to become a publicly held company by merging with us through a reverse merger or other acquisition transaction.

In September 1999, Ballantrae Healthcare LLC and affiliated limited liability companies, including BTHC VIII, LLC, were organized for the purpose of operating nursing homes throughout the United States. On March 28, 2003, they filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code. On November 29, 2004, the United States Bankruptcy Court in the Northern District of Texas, Dallas Division approved the First Amended Joint Plan of Reorganization. On August 16, 2006, pursuant to the plan of reorganization, BTHC VIII, LLC was merged into our Company.

We were subject to the jurisdiction of the bankruptcy court until we consummated the exchange transaction described below with Sino- America Ventures, Inc., a Delaware corporation, in February 2009. Because we consummated our merger with a qualifying entity in a timely manner, we filed a certificate of compliance with the bankruptcy court asserting that the requirements of the plan of reorganization had been satisfied, which resulted in an order granting the discharge. Thereafter, the post discharge injunction provisions (set forth in the plan of reorganization) and the confirmation order became effective.

Exchange Transaction with Sino-America Ventures, Inc.

On February 12, 2009, we entered into a share exchange agreement with Sino- America Ventures, Inc. and its sole stockholder, Mr. Gerard Pascale, pursuant to which Mr. Pascale transferred 100% of the issued and outstanding shares of the capital stock of Sino-America Ventures, Inc. to us in exchange for 5,404,800 newly issued shares of our common stock that constituted approximately 90% of our issued and outstanding capital stock on a fully-diluted basis as of, and immediately after, the consummation of such exchange. As a result of this transaction, Mr. Pascale became our controlling stockholder and Sino- America Ventures, Inc. became our subsidiary. Sino- America Ventures, Inc. was organized on February 10, 2009 to identify a privately-held operating company desiring to become a publicly held company by combination through a reverse merger or acquisition transaction, and was dissolved on May 22, 2009.

Acquisition of Megaway

On June 30, 2009, we completed a reverse acquisition transaction with Megaway, whereby we acquired all of the issued and outstanding capital stock of Megaway in exchange for 14,800,000 shares of our common stock, which, after giving effect to the cancellation of 4,805,387 shares of our common stock by Mr. Gerald Pascale in connection with the reverse acquisition, constituted 92.5% of our issued and outstanding capital stock on a fully-diluted basis as of and immediately after the consummation of the reverse acquisition. Megaway thereby became our wholly owned subsidiary and Wisetop International Holdings Limited, or Wisetop, the sole shareholder of Megaway, became our controlling stockholder. For accounting purposes, the share exchange transaction was treated as a reverse acquisition with Megaway as the acquirer and the Company as the acquired party.

As a result of the reverse acquisition of Megaway, our business became the business of Megaway and its subsidiaries, Star Wealth, ~~Siping Juyuan~~SipingJuyuan and Beijing Juyuan.

Megaway was incorporated in the BVI on April 8, 2009. Megaway is a holding company that has no operations or assets other than its ownership of all of the capital stock of Star Wealth. Star Wealth was incorporated in Hong ~~Kongon~~Kong on March 25, 2009. Star Wealth is also a holding company that has no operations or assets other than its ownership of all of the equity interests of ~~Siping Juyuan~~SipingJuyuan, which was acquired by Star Wealth on June 8, 2009. Siping City Juyuan Heat Exchange Equipment Co., Ltd., the predecessor of ~~Siping Juyuan~~SipingJuyuan, was first incorporated in China in December 1998. In May 2006, it was divided into three individual enterprises, including ~~Siping Juyuan~~SipingJuyuan. ~~Siping~~SipingJuyuan ~~Juyuan~~ carried on the primary business of Siping City Juyuan Heat Exchange Equipment Co., Ltd., while the other two enterprises gradually ceased operations. Mr. Guohong Zhao, our Chairman, Chief Executive Officer and President, is the founder of Siping City Juyuan Heat Exchange Equipment Co., Ltd.. All of our manufacturing operations are conducted through ~~Siping Juyuan~~SipingJuyuan. ~~Siping~~SipingJuyuan ~~Juyuan~~ owns 75% of the equity interests of Beijing Juyuan, which is solely engaged in the sales of ~~Siping Juyuan~~SipingJuyuan’s products, and carries no production activities. The other 25% is owned by Hanyang International GmbH, a German company.

Reincorporation

On November 24, 2009, we effected a reincorporation from Delaware to Nevada by merging with THT Heat Transfer Technology, Inc., a corporation that we established in the State of Nevada solely to effect the reincorporation. As a result of the reincorporation, our domicile was changed from Delaware to Nevada and our name was changed from BTHC VIII, Inc. to THT Heat Transfer Technology, Inc.

~~Our~~Contribution ~~Corporate~~from ~~Structure~~non-controlling interest On July 27, 2017, Jilin Science and Technology Fund Operation and Service Center (the “Center”), an organization controlled by local government, contributed $1,335,490 in cash in SipingJuyuan and obtained a 1.18% ownership interest in SipingJuyuan.

~~The~~Our ~~following~~Corporate ~~chart~~Structure ~~reflects our current corporate organizational structure:~~

3The following chart reflects our current corporate organizational structure:

~~Our~~3 ~~Industry~~

AOur heat exchanger is a device built for efficient heat transfer from one medium to another. It is widely used in various industries including metallurgy, heat and power, petrochemical, food and beverage, pharmaceutical and shipbuilding. Industry

A heat exchanger is a device built for efficient heat transfer from one medium to another. It is widely used in various industries including metallurgy, heat and power, petrochemical, food and beverage, pharmaceutical and shipbuilding.

~~According~~A ~~to “China Heat Exchanger Industry Report” issued by Zero Power Intelligence Co., Ltd., an independent market research firm in China, the world~~ heat exchanger ~~market~~is ~~has~~a ~~grown~~device ~~significantly~~built infor ~~the~~efficient ~~past several years. The global sales value of~~ heat ~~exchangers grew~~ transfer from ~~$29.7~~one ~~billion in~~medium ~~2005~~ to ~~$38~~another.6 ~~billion~~It ~~in 2008, representing a growth of 30%, and~~ is ~~expected to~~widely ~~grow~~used ~~to $56.5 billion~~ in ~~2015,~~various ~~representing~~industries ~~a growth of 46.37% in the~~including ~~six-year period from 2009 to 2015. According to the report~~metallurgy, ~~China~~heat ~~has become the second largest market~~ and ~~one of the fastest growing markets for heat exchangers. The sales value of heat exchangers in China grew from $3.2 billion in 2005 to $5.4 billion in 2008~~power, ~~representing a growth of 70%~~petrochemical, food and ~~is expected to grow to $ 16.3 billion in 2016~~beverage, ~~representing~~pharmaceutical ~~a growth of 202% in the~~and ~~eight-year period from 2009 to 2016~~shipbuilding.

~~Economic~~According ~~Growth~~to in “China. ~~According~~Heat toExchanger ~~the~~Industry ~~National~~Report” issued ~~Bureau~~by ~~of Statistics~~Zero ofPower ~~the~~Intelligence ~~PRC~~Co., ~~China’s~~Ltd., ~~GDP~~an ~~grew~~independent ~~6.7%~~market research firm in ~~2016~~China, ~~one~~the ofworld ~~the~~heat ~~fastest~~exchanger ~~rates~~ market has grown significantly in the ~~world~~past several years. ~~Because~~The global sales value of heat exchangers ~~are~~grew ~~widely~~from ~~used~~$29.7 billion in ~~various~~2005 ~~industries, including~~to ~~metallurgy~~$38.6 billion in 2008, ~~heat~~representing ~~and~~a ~~power~~growth of 30%, ~~petrochemical~~and is expected to grow to $56.5 billion in 2015, ~~food~~representing ~~and~~a ~~beverage~~growth of 46.37% in the six-year period from 2009 to 2015. According to the report, China has become the ~~pharmaceutical~~second largest market and ~~shipbuilding,~~one of the fastest growing markets for heat exchangers. ~~exchanger~~The ~~market~~sales ~~benefits~~value of heat exchangers in China grew from ~~the~~$3.2 billion ~~general~~in 2005 to $5.4 billion in 2008, representing a growth of ~~the economy~~70%.

~~Expanding~~We ~~Energy~~anticipate ~~Needs.~~that Agrowth ~~fast growing economy requires more energy. To keep pace with rising energy demands, additional power plants are being constructed. Heat exchangers are widely used~~ in the ~~closed~~Chinese ~~circulation systems of thermal power plants, nuclear reactor~~ heat ~~exchange systems and~~exchanger ~~regular~~industry water cooling systems of nuclear power plants. The Chinese government plans to spend a total of $66 billion in nuclear power plant construction. By 2020, 23 million kilowatt level nuclear power plants will mainly be ~~constructed.~~driven ~~In 2010,~~by ~~construction began on six new nuclear power plants in~~ the ~~provinces~~following ~~of Zhejiang,~~factors: ~~Shandong, Guangdong and Hainan.~~

• Economic Growth in China. According to the National Bureau of Statistics of the PRC, China’s GDP grew 6.9%in 2017, one of the fastest rates in the world. Because heat exchangers are widely used in various industries, including metallurgy, heat and power, petrochemical, food and beverage, pharmaceutical and shipbuilding, the heat exchanger market benefits from the general growth of the economy. • Expanding Energy Needs. A fast growing economy requires more energy. To keep pace with rising energy demands, additional power plants are being constructed. Heat exchangers are widely used in the closed circulation systems of thermal power plants, nuclear reactor heat exchange systems and regular water cooling systems of nuclear power plants. The Chinese government plans to spend a total of $66 billion in nuclear power plant construction. By 2020, 23 million kilowatt level nuclear power plants will be constructed. In 2010, construction began on six new nuclear power plants in the provinces of Zhejiang, Shandong, Guangdong and Hainan. • Environmental Protection. New environmental rules and regulations have helped reduce emissions and energy consumption. Both the Chinese and foreign governments encourage investments in order to reduce energy consumption and emissions. In many applications, industry buyers tend to use heat exchangers instead of simple cooling systems after giving consideration to their efficiency and energy savings. The investment in energy savings and emissions reduction in China was approximately159.78 billion during the twelfth five-year plan. According to the World Nuclear Organization, as of March 2014, China had 77operating ~~operating~~ nuclear reactors and 37 reactors in the construction or planning phases.

• Rapid Urbanization. Heat exchangers are an important part of district heating systems (i.e., systems for distributing heat generated in a centralized location for residential and commercial heating requirements such as space and water heating). Such systems are required in the cities of northern China, an area which is experiencing a rapid pace of urbanization. As well, Heating, Ventilation and Air Conditioning systems, or HVAC, which are essential for buildings, require installation of heat exchangers. In ~~2009,~~2018the ~~the~~ HVAC market in China ~~was~~was10billion ~~$6.0 billion~~ and is expected to grow at a compound annual growth rate of ~~250~~1% by ~~2016.~~ 2017

Our Competitive Strengths

We believe that the following strengths enable us to compete effectively in and to capitalize on growth in the heat exchange industry in China:

• Leading market position. Our leading sales position will help develop our brand and brand awareness throughout China and assist us in acquiring an even larger market share in the future. • Comprehensive solution provider. Unlike most other heat exchanger manufacturers in China, we not only provide heat exchange products, but also provide comprehensive solutions to our customers. As a total solution provider, we analyze the working condition of our customers, provide optimized design based on analysis and simulation, offer high quality heat exchange products and continuously assist our customers in improving their heat exchange processes. • Broad product range. We provide the broadest range of heat exchanger products in China, surpassed only by Alfa Laval, the global market leader for heat exchanger products. Our products include plate heat exchangers, shell and tube heat exchangers, heat exchange units, air-cooled heat exchangers, welded plate heat exchangers and plate- and-shell heat exchangers. Our broad product variety provides our customers with one-stop purchasing convenience. • Solid track record. Over the past ten years, we have successfully completed over 3,000 projects in more than 15 industries, including metallurgy, heat and power, petrochemical, food and beverage, pharmaceutical and shipbuilding. We have provided heat exchange solutions to Fortune 500 companies including Shell, BP, BASF, LG, Sinopec, and China Shenhua as well as for high profile projects in both the PRC and other countries. Noteworthy projects include the Wukesong Sports Center for the 2008 Olympics in Beijing, the Guangdong Linao nuclear plant and the BASF Chemical plant in Germany. Our strong track record and our demonstrated ability to develop and deliver high quality solutions provides our Company with a strong brand and reputation in the industry. • Professional sales team. We have a sales team with 121 experienced sales people, which we believe is among the largest in the Chinese market. Our sales people are organized into four groups by industry: metallurgy, heat and power, petrochemical and shipbuilding. Each group specializes in serving customers in their specific industry. We believe this specialization allows our sales people to be more focused and equipped with superior industry knowledge and experience.

~~Comprehensive~~Our ~~solution~~Growth ~~provider.~~Strategies Unlike most other heat exchanger manufacturers in China, we not only provide heat exchange products, but also provide comprehensive solutions to our customers. As a total solution provider, we analyze the working condition of our customers, provide optimized design based on analysis and simulation, offer high quality heat exchange products and continuously assist our customers in improving their heat exchange processes.

~~Broad product range.~~ We ~~provide~~are ~~the~~committed ~~broadest~~to ~~range~~enhancing ofour ~~heat exchanger products in China~~sales, ~~surpassed~~profitability ~~only by Alfa Laval, the global market leader for heat exchanger products. Our products include plate heat exchangers, shell~~ and ~~tube heat exchangers, heat exchange units, air-cooled~~cash ~~heat~~flows ~~exchangers,~~through ~~welded~~the ~~plate~~following ~~heat~~strategies:[need ~~exchangers~~to ~~and~~update] ~~plate- and-shell heat exchangers. Our broad product variety provides our customers with one-stop purchasing convenience.~~

~~Solid~~• ~~track~~Increasing ~~record.~~production ~~Over~~and ~~the~~processing ~~past~~capacity. ~~ten~~To ~~years,~~fulfill wefuture ~~have successfully~~sales ~~completed~~growth ~~over~~and ~~3,000~~enhance ~~projects~~our incapacity ~~more~~during ~~than~~peak ~~15 industries~~periods, ~~including~~ ~~metallurgy,~~we ~~heat~~expanded ~~and~~our ~~power,~~production ~~petrochemical, food and beverage, pharmaceutical and shipbuilding~~facility. WeOur ~~have~~workshop ~~provided~~has ~~heat~~a ~~exchange~~floor ~~solutions~~area ~~to Fortune~~of ~~500 companies including Shell~~7,356 ~~BP,~~square ~~BASF,~~meters ~~LG, Sinopec,~~ and ~~China Shenhua~~our asproduction ~~well~~line asof ~~for~~plate ~~high~~heat ~~profile~~exchangers, ~~projects~~with ina ~~both~~designed ~~the~~capacity ~~PRC~~of ~~and~~200,000 ~~other countries.~~square ~~Noteworthy~~meters ~~projects~~annually, ~~include~~was ~~the~~implemented ~~Wukesong Sports Center for the 2008 Olympics~~ in ~~Beijing,~~ the ~~Guangdong~~workshop ~~Linao nuclear plant and the BASF Chemical plant~~ in ~~Germany.~~October ~~Our strong track record and our demonstrated ability to develop and deliver high quality solutions provides our Company with a strong brand and reputation in the industry~~2009.

~~Professional~~5 sales team. We have a sales team with 135 experienced sales people, which we believe is among the largest in the Chinese market. Our sales people are organized into four groups by industry: metallurgy, heat and power, petrochemical and shipbuilding. Each group specializes in serving customers in their specific industry. We believe this specialization allows our sales people to be more focused and equipped with superior industry knowledge and experience.

~~Our~~• ~~Growth~~Expanding ~~Strategies~~sales network. We will further expand our sales network by establishing new sales offices in China. We are also strengthening our international marketing efforts. • Continually developing new products. We will continue to develop new products to broaden our product range so as to meet increased customer demands and seize larger market share. New products under development include large plate heat exchanger use for cold air-conditioning, integrated evaporation station and micro channel plate heat exchanger. These new products will help us reach a larger number of customers in the chemical, food and beverage, pharmaceutical and refinery industries.

WeOur ~~are committed to enhancing our sales, profitability and cash flows through the following strategies:~~ Products

~~Increasing~~Our ~~production~~products and ~~processing~~heat ~~capacity.~~exchange Tosolutions ~~fulfill future~~are ~~sales~~sold ~~growth~~to ~~and~~customers in ~~enhance~~the ~~our~~chemical, ~~capacity~~metallurgical ~~during~~and ~~peak~~shipbuilding ~~periods,~~industries weand ~~expanded~~ our ~~production~~products ~~facility.~~are also ~~Our~~used ~~workshop~~with ~~has~~HVAC aand ~~floor~~district ~~area~~heating ofsystems. ~~7,356~~Our ~~square~~products ~~meters and~~include ~~our production line of~~ plate heat exchangers, ~~with~~heat aexchanger ~~designed capacity of 200~~units,~~000~~ ~~square~~air-cooled ~~meters~~heat ~~annually~~exchangers, shell-and-tube ~~was~~heat ~~implemented~~exchangers, inwelded ~~the~~plate ~~workshop~~heat inexchangers ~~October~~and plate-and-shell ~~2009~~heat exchangers.

5Plate Heat Exchangers

~~Expanding~~A ~~sales~~plate ~~network.~~heat Weexchanger ~~will~~is ~~further~~a ~~expand~~type ~~our~~of ~~sales~~heat exchanger that uses ~~network~~metal byplates ~~establishing~~to ~~new~~transfer ~~sales~~heat ~~offices~~between intwo ~~China~~fluids. WeThis type of heat exchanger has a major advantage over a conventional shell and tube heat exchangers since the fluids are ~~also~~exposed ~~strengthening~~to a much larger surface area because the fluids spread ~~our~~out ~~international~~over ~~marketing~~the ~~efforts~~plates. This spreading of fluids over the plates facilitates the transfer of heat and greatly increases the speed of the temperature change.

~~Continually~~The ~~developing~~plate ~~new~~heat ~~products.~~exchanger Weconsists ~~will~~of ~~continue~~a tocoiled pipe containing ~~develop~~one ~~new~~fluid ~~products~~that topasses ~~broaden~~through ~~our~~a ~~product~~chamber ~~range~~containing soanother asfluid. toThe ~~meet~~walls ~~increased~~of ~~customer~~the ~~demands~~pipe ~~and~~are ~~seize~~usually ~~larger~~made ~~market~~of ~~share.~~metal ~~New~~or ~~products~~another ~~under~~substance ~~development include~~with ~~box~~a ~~type~~high ~~units~~thermal conductivity ~~and~~to ~~building~~facilitate ~~units~~the ~~use~~interchange. ~~for~~The ~~heating~~outer ~~company,~~casing ~~residential~~of the larger orchamber ~~commercial~~is ~~blocks~~made ~~and~~of ~~most~~a ~~power~~plastic ~~plants.~~or ~~These~~coated ~~new~~with ~~products~~thermal ~~will~~insulation ~~help~~to usdiscourage ~~reach~~heat afrom ~~larger~~escaping ~~number~~from ~~of customers in~~ the ~~central heating or district heating industries~~exchanger.

~~Our~~Plate ~~Products~~heat exchangers are used in a variety of applications including iron, steel and aluminum manufacturing, chemical manufacturing, electric and nuclear power generation, central building air-conditioning, pharmaceutical production, and the food and beverage industry. Plate heat exchanger sales accounted for approximately 31.38% of our sales revenue in 2017.

~~Our~~Heat ~~products~~Exchanger ~~and~~Units heat exchange solutions are sold to customers in the chemical, metallurgical and shipbuilding industries and our products are also used with HVAC and district heating systems. Our products include plate heat exchangers, heat exchanger units, air-cooled heat exchangers, shell-and-tube heat exchangers, welded plate heat exchangers and plate-and-shell heat exchangers.

~~Plate~~6 ~~Heat Exchangers~~

A ~~plate~~ heat exchanger unit is a ~~type~~whole set of ~~heat~~district ~~exchanger that uses~~heating ~~metal~~control ~~plates~~equipment. toA ~~transfer~~ heat ~~between~~exchanger ~~two~~unit ~~fluids.~~integrates ~~This~~the ~~type~~following ofcomponents: plate heat ~~exchanger has~~exchangers, acirculating ~~major~~pump, ~~advantage~~water ~~over~~supplement apump, ~~conventional~~thermometer, manometer, ~~shell~~sensors, conduits, valves and ~~tube~~industrial ~~heat~~controls, ~~exchangers~~water ~~since~~supplement ~~the~~system, ~~fluids~~pressure ~~are~~stabilization ~~exposed~~system, tofrequency aconversion ~~much~~flux ~~larger~~control ~~surface~~system, heat ~~area~~measurement ~~because~~and ~~the~~network ~~fluids~~communication ~~spread out~~control ~~over~~system. ~~the~~Combining ~~plates.~~these components ~~This~~on-site ~~spreading~~at ofour ~~fluids~~manufacturing ~~over~~facilities, ~~the~~we ~~plates~~utilize ~~facilitates~~our ~~the~~proprietary ~~transfer~~technologies ofto customize heat ~~and~~exchanger ~~greatly~~units ~~increases~~to ~~the~~our ~~speed of the temperature change~~client’s specifications.

~~The~~Our ~~plate~~ heat exchanger ~~consists~~units ofare amost ~~coiled~~widely ~~pipe~~used ~~containing one~~in ~~fluid~~thermal ~~that~~power plants ~~passes~~and ~~through~~residential aheating ~~chamber~~systems, ~~containing~~which ~~another~~require ~~fluid.~~integration ~~The~~of ~~walls~~control ofand ~~the~~monitoring ~~pipe~~systems ~~are~~for ~~usually~~several ~~made~~distinct ofspaces. ~~metal~~Sales orof ~~another~~heat ~~substance~~exchanger ~~with a high thermal~~units ~~conductivity~~accounted tofor ~~facilitate~~approximately ~~the interchange~~45.96% ~~The outer casing~~ of ~~the~~our ~~larger chamber~~sales isrevenue ~~made~~in ~~of a plastic or coated with thermal insulation to discourage heat from escaping from the exchanger~~2017.

~~Plate heat exchangers are used in a variety of applications including iron, steel and aluminum manufacturing, chemical manufacturing, electric and nuclear power generation, central building air~~Air-~~conditioning, pharmaceutical~~cooled ~~production,~~Heat ~~and~~Exchanger ~~the food and beverage industry. Plate heat exchanger sales accounted for approximately 40% of our sales revenue in 2016.~~

~~Heat~~An ~~Exchanger~~air-cooled ~~Units~~heat exchanger is a pressure vessel which cools a circulating fluid within finned tubes by forcing ambient air over the exterior of the tubes. A common example of an air cooler is a car’s radiator. Air-cooled heat exchangers are beneficial because they increase plant efficiency and are a “green” solution as compared to cooling towers and shell and tube heat exchangers since they do not require an auxiliary water supply (therefore, no water is lost due to drift or evaporation, and no water treatment chemicals are required).

AAir-cooled heat ~~exchanger~~exchangers ~~unit~~are isused ain ~~whole~~various ~~set~~industries ~~of district heating~~where ~~control~~cooling ~~equipment.~~liquids Aare ~~heat~~too ~~exchanger~~costly ~~unit~~to ~~integrates~~obtain ~~the~~or ~~following~~are ~~components: plate~~not ~~heat~~readily ~~exchangers,~~available. ~~circulating~~Sales ~~pump, water supplement pump, thermometer,~~of ~~manometer,~~air-cooled ~~sensors, conduits, valves and industrial controls, water supplement system, pressure stabilization system, frequency conversion flux control system,~~ heat ~~measurement~~exchangers ~~and~~accounted ~~network~~for ~~communication control system~~0.53% ~~Combining~~of ~~these components on-site at~~ our ~~manufacturing~~sales ~~facilities,~~revenue ~~we utilize~~in ~~our proprietary technologies to customize heat exchanger units to our client’s specifications~~2017.

6Shell-and-tube Heat Exchanger

~~Our~~7 heat exchanger units are most widely used in thermal power plants and residential heating systems, which require integration of control and monitoring systems for several distinct spaces. Sales of heat exchanger units accounted for approximately 44% of our sales revenue in 2016.

~~Air~~A shell-~~cooled~~and-tube heat exchanger is a type of heat exchanger that consists of a large pressure vessel, or a shell, containing a bundle of tubes. One fluid runs through the tubes, and another fluid flows over the tubes, through the shell, to transfer heat between the two fluids. Heat ~~Exchanger~~is transferred from one fluid to the other through the tube walls, either from tube side to shell side or vice versa. The fluids can be either liquids or gases on either the shell or the tube side.

~~An air~~Shell-~~cooled~~and-tube heat ~~exchanger~~exchangers isare agenerally ~~pressure~~used ~~vessel~~in ~~which cools a circulating fluid within finned tubes by forcing ambient air over~~ the ~~exterior~~same ofindustries ~~the~~as ~~tubes.~~plate ~~A common example of an air cooler is a car’s radiator. Air-cooled~~ heat exchangers, ~~are beneficial because they increase plant efficiency~~ and are ~~a “green”~~most ~~solution~~commonly asused ~~compared~~with toextremely high-pressure ~~cooling~~liquids. ~~towers~~ Shell-and ~~shell and~~ -tube heat ~~exchangers~~ ~~since~~exchanger ~~they~~sales doaccounted ~~not require an auxiliary water supply (therefore, no~~for ~~water~~approximately is0.54% ~~lost~~of ~~due~~our tosales ~~drift~~revenue orin ~~evaporation, and no water treatment chemicals are required)~~2017.

~~Air-cooled~~Welded ~~heat~~Plate ~~exchangers~~Heat ~~are~~Exchanger ~~used in various industries where cooling liquids are too costly to obtain or are not readily available .We did not have any sales of air-cooled heat exchangers in 2016.~~

~~Shell~~A welded plate heat exchanger is used for heat exchange between high-pressure fluids or where a more compact product is required. Instead of a pipe passing through a chamber, there are instead two alternating chambers, usually thin in depth, separated at their largest surface by a corrugated metal plate. The heat transfer plates are connected by welding. Compared with other plate heat exchangers, welded plate heat exchangers can work under situations where the liquid pressure is higher. However, since the heat transfer plates are welded, such units are less convenient to maintain and~~-tube~~ ~~Heat~~clean ~~Exchanger~~as compared with other types of plate heat exchangers that are connected by gaskets.

AWelded ~~shell-and-tube~~plate heat ~~exchanger~~exchangers isare autilized ~~type~~in ofmany ~~heat exchanger that consists~~ of athe ~~large pressure vessel, or a shell, containing a bundle of~~same ~~tubes.~~industries ~~One~~as ~~fluid~~other ~~runs~~plate ~~through~~heat ~~the~~exchangers ~~tubes,~~ and ~~another fluid flows over the tubes, through the~~ shell,-and-tube ~~to transfer~~ heat ~~between the two fluids~~exchangers. ~~Heat is transferred~~ ~~from~~Welded ~~one~~plate ~~fluid~~heat toexchangers ~~the~~accounted ~~other~~for ~~through the tube walls, either from tube side to shell side or vice versa~~0.61% ~~The~~of ~~fluids~~our ~~can~~sales berevenue ~~either~~in ~~liquids or gases on either the shell or the tube side~~2017.

7Plate-and-Shell Heat Exchanger

~~Shell~~A plate-and-~~tube~~shell heat ~~exchangers~~exchanger ~~are~~is ~~generally~~a ~~used~~hybrid intype ~~the~~of ~~same~~heat ~~industries~~exchanger asthat ~~plate~~combines ~~heat~~aspects ~~exchangers,~~of ~~and~~the ~~are~~plate ~~most~~heat ~~commonly~~exchanger ~~used~~and ~~with extremely high~~shell-~~pressure~~and-tube heat ~~liquids~~exchanger. ~~Shell~~Plate-and-~~tube~~shell heat ~~exchanger~~exchangers ~~sales~~consist ~~accounted~~of ~~for~~a shell with heat ~~approximately~~transfer 2%plates inside of ~~our~~the ~~sales~~shell ~~revenue~~instead inof ~~2016~~tubes.

~~Welded~~8 ~~Plate Heat Exchanger~~

AAdvantages ~~welded~~of a plate-and-shell heat exchanger isinclude ~~used~~its ~~for~~ high heat ~~exchange~~transfer ~~between high-pressure~~efficiency ~~fluids or where a~~ (more ~~compact~~than ~~product~~double isthat ~~required. Instead~~ of a ~~pipe~~ ~~passing~~shell-and-tube ~~through a chamber, there are instead two alternating chambers,~~heat ~~usually thin in depth~~exchanger), ~~separated~~compact atstructure ~~their~~and ~~largest~~light ~~surface~~weight. ~~by a corrugated metal~~ Shell-and-plate. ~~The~~ heat ~~transfer plates~~ exchangers are ~~connected~~also byresistant ~~welding.~~to ~~Compared~~high ~~with~~pressure ~~other plate~~and ~~heat~~high ~~exchangers,~~temperatures ~~welded~~and ~~plate~~are ~~heat~~commonly ~~exchangers~~used to ~~can~~meet ~~work~~the ~~under~~requirements ~~situations where~~of ~~the~~large-scale ~~liquid~~equipment ~~pressure~~used isin ~~higher.~~oil ~~However~~refining, ~~since~~ the ~~heat transfer plates are~~ ~~welded~~chemical industry, ~~such~~fertilizer ~~units~~production ~~are less convenient to maintain~~ and ~~clean~~metallurgy. asSales ~~compared with other types~~ of plate-and-shell heat exchangers ~~that~~accounted ~~are~~for ~~connected~~0.6%of byour ~~gaskets~~sales revenue in 2017.

~~Welded~~Other ~~plate~~ heat ~~exchangers~~exchange ~~are~~products ~~utilized~~accounted infor ~~many~~ 4.80%of ~~the~~our ~~same~~sales ~~industries~~revenue ~~as other plate heat exchangers and shell-and-tube heat exchangers. We did not have any sales of welded plate heat exchangers~~ in ~~2016~~2017.

~~Plate-and-Shell~~New ~~Heat~~Products ~~Exchanger~~under Development

AOur ~~plate-~~research and~~-shell~~ ~~heat~~development ~~exchanger~~department is aconstantly ~~hybrid~~working on ~~type~~new ofproducts ~~heat exchanger~~for ~~that~~our ~~combines~~customers ~~aspects~~and ofenhancements ~~the~~to ~~plate~~our ~~heat~~existing ~~exchanger~~products. Currently, ~~and~~our ~~shell-~~research and~~-tube heat~~ ~~exchanger.~~development ~~Plate-and-shell~~team ~~heat~~is ~~exchangers~~working ~~consist~~on ofplate aair ~~shell~~cooler ~~with~~used in thorium molten salt reactors, or the TMSR, plate heat exchanger used in ~~transfer~~distributed ~~plates~~energy ~~inside~~resource ofand ~~the~~plate ~~shell~~evaporators ~~instead~~and ofcondenser ~~tubes~~used in ship generators.

8• Large-scale plate heat exchanger used in cold air-conditioning. Large-scale plate heat exchanger used in cold air- conditioning adopts short and complex wave patterns. Large-scale plate heat exchanger used in cold air- conditioning will mainly be used in central cooling, concentrated cooling, heating and power system residue heat recovery, large-scale air conditioning system and interval pressure heat exchange station and other fields. • Integrated evaporation station. Integrated evaporation station utilizes heating to boil the solution with non-volatile matter to gasify and remove the non-volatile matter. It enhances the concentration of the solution. Integrated evaporation station will be widely used in chemical, food processing and pharmaceutical industries. • Micro channel plate heat exchanger. This product will be mainly used in ocean engineering equipment, natural gas, petrochemical, mechanical power, solar power and fuel cell industries. It can also be used in liquefaction, heating and cooling of gas; vaporization, heating, cooling and fractionation of liquid. Micro channel plate heat exchanger can improve efficiency by reducing bulkiness and weight of heat exchangers.

~~Advantages~~Manufacturing of a plate-and-shell heat exchanger include its high heat transfer efficiency (more than double that of a shell-and-tube heat exchanger), compact structure and light weight. Shell-and-plate heat exchangers are also resistant to high pressure and high temperatures and are commonly used to meet the requirements of large-scale equipment used in oil refining, the chemical industry, fertilizer production and metallurgy. We did not have any sales of plate-and-shell heat exchangers in 2016.

~~Other~~Manufacturing ~~heat~~Facilities ~~exchange products accounted for 12% of our sales revenue in 2016.~~

~~New~~Our ~~Products~~manufacturing ~~under~~facilities ~~Development~~are based in Siping City, Jilin Province, China and Tianjin City. The total floor area of our Siping facility is approximately 17,482 square meters. The production portion of the facility is approximately 11,275 square meters. Our research and development center is approximately 1,164 square meters and our executive office building, garage, and dormitory are approximately 5,043 square meters. We currently have two production lines for plate heat exchangers with an annual capacity of 500,000 square meters and one welding workshop with an annual capacity of 3,000 tons. The plate heat exchanger production line produces all heat transfer plates used in our plate heat exchangers, heat exchange units, air-cooled heat exchangers, welded plate heat exchangers and plate-and-shell heat exchangers. This production line also assembles heat transfer plates into plate heat exchangers. The welding work shop assembles shell and tube heat exchangers, heat exchanger units, air-cooled heat exchangers, welded plate heat exchangers and plate-and-shell heat exchangers, which require intensive welding operations. The facility is located on a 36,530 square meter plot of land for which we own the land use right.

~~Our~~9 research and development department is constantly working on new products for our customers and enhancements to our existing products. Currently, our research and development team is working on box type units and building units used in heating industry.

~~Manufacturing~~The capacity and utilization of our production lines are set forth below:

Manufacturing Facilities

Production Line	Current Capacity	2017 Utilization	2016 Utilization
Plate heat exchanger production line (square meters)	300,000	80%	70%
Welding workshop (tons)	3,000	85%	90%
Plate heat exchanger production line (square meters)	200,000	50%	45%

~~Our~~In ~~manufacturing~~real ~~facilities are based in Siping City~~operation, ~~Jilin Province,~~the ~~China~~hours ~~and Tianjin City. The total floor area of~~ our ~~Siping~~production ~~facility~~lines isrun vary ~~approximately~~considerably ~~17,482~~from ~~square~~time ~~meters.~~to ~~The~~time ~~production~~over ~~portion of~~ the ~~facility is approximately 11,275 square meters~~year. ~~Our~~This ~~research and development center~~ is ~~approximately~~ ~~1,164~~mainly ~~square~~because ~~meters and~~ our ~~executive office building, garage, and~~ ~~dormitory~~products are ~~approximately~~customized ~~5,043~~rather ~~square~~than ~~meters.~~standard Weproducts, ~~currently~~and ~~have~~our ~~two production~~sales ~~lines~~orders ~~for plate heat exchangers with an annual capacity of 500,000~~are ~~square~~commonly ~~meters~~project-based and ~~one~~placed ~~welding~~unevenly ~~workshop~~over ~~with~~the anyear. ~~annual~~In ~~capacity of 3~~addition,~~000~~ ~~tons.~~the ~~The~~market ~~plate~~demand ~~heat~~from ~~exchanger~~the ~~production line produces all~~ heat ~~transfer~~industry ~~plates~~tends ~~used in~~to ~~our~~demonstrate ~~plate~~strong ~~heat~~seasonality ~~exchangers, heat exchange units, air-cooled heat exchangers, welded plate heat exchangers~~ and ~~plate-and-shell heat exchangers. This~~ ~~production~~the ~~line~~period ~~also~~from ~~assembles~~July ~~heat~~to ~~transfer~~October ~~plates~~each ~~into~~year ~~plate~~is ~~heat~~commonly ~~exchangers. The~~the ~~welding~~peak ~~work shop assembles shell and tube heat exchangers~~season, ~~heat~~when ~~exchanger~~the ~~units,~~residential ~~air-cooled~~heating ~~heat~~system ~~exchangers,~~for ~~welded~~northern ~~plate~~China ~~heat~~is ~~exchangers~~implemented. ~~and plate-and-shell~~Under ~~heat~~our ~~exchangers, which require intensive welding operations. The~~current ~~facility~~utilization ~~is located on a 36~~rate,~~530~~ ~~square~~our ~~meter~~production ~~plot~~lines ofhave ~~land~~been ~~for~~running ~~which~~at wefull ~~own~~capacity ~~the~~during ~~land~~the ~~use~~peak ~~right~~periods.

~~The~~To fulfill future sales growth and to enhance our capacity during peak periods, we further expanded our production facility. Our new workshop, which began operations in October 2009, has a floor area of 7,356 square meters and ~~utilization~~a new production line for plate heat exchangers with a designed capacity of 200,000 square meters. With the new workshop, we have been able to further streamline our production lines ~~are~~and ~~set~~have more space available ~~forth~~for ~~below:~~assembly and welding. In the new plate heat exchanger production line, we installed a 6,000 ton press machine to produce smaller size heat transfer plates while the old plate heat exchanger production line with a 22,000 ton press machine will be used to produce larger sized heat transfer plates. With the new workshop and the new production line, we believe both our production capacity and efficiency will be significantly improved.

Production Line	Current Capacity	2016 Utilization	2015 Utilization
Plate heat exchanger production line (square meters)	300,000	70%	70%
Welding workshop (tons)	3,000	90%	90%
Plate heat exchanger production line (square meters)	200,000	45%	45%

Manufacturing Processes

InThe ~~real~~following ~~operation,~~diagram illustrates the ~~hours our~~ production ~~lines~~process ~~run vary~~for ~~considerably from time to time over the year. This is mainly because~~ our ~~products~~ ~~are~~plate ~~customized rather than standard products, and our sales orders are commonly project-based and placed unevenly over the year. In addition, the market demand from the~~ heat ~~industry tends to demonstrate strong seasonality and the period from July to October each year is commonly the peak season, when the residential heating system for northern China is implemented~~exchangers. ~~Under our current utilization rate, our production lines have been running at full capacity during the peak periods.~~

9Production Process forPlate Heat Exchanger Manufacturing

ToThe ~~fulfill~~manufacturing ~~future~~process ~~sales~~for ~~growth~~the ~~and~~plate toheat ~~enhance~~exchanger ~~our capacity~~begins ~~during~~with ~~peak~~the ~~periods,~~removal weof ~~further~~edges ~~expanded~~from ~~our~~steel ~~production~~plates ~~facility.~~that ~~Our~~we ~~new workshop,~~acquire ~~which~~as ~~began~~a ~~operations~~raw inmaterial. Once ~~October~~the ~~2009,~~edges ~~has~~are ~~a floor area of 7~~removed,~~356 square~~ ~~meters~~we ~~and~~cut athe ~~new~~steel ~~production~~plate ~~line~~down ~~for~~to ~~plate~~the ~~heat~~desired ~~exchangers~~size. ~~with a~~The ~~designed~~next ~~capacity~~step ofis ~~200,000~~the ~~square~~pressing ~~meters.~~of ~~With~~ the ~~new~~steel ~~workshop,~~plate ~~we have been able~~ to ~~further~~the ~~streamline~~desired ~~our~~shape ~~production lines~~ and ~~have more space available~~form. ~~for~~After ~~assembly and welding. In~~ the ~~new~~pressing ~~plate~~is ~~heat exchanger production line~~complete, we ~~installed~~ aseal ~~6,000~~and ~~ton~~combine ~~press~~the ~~machine to produce smaller size~~ heat transfer plates ~~while~~together. ~~the~~The ~~old~~final ~~plate~~step ~~heat~~is ~~exchanger~~to ~~production~~conduct ~~line~~a ~~with~~hydrostatic apressure 22test,~~000~~ ~~ton~~which ~~press~~tests ~~machine~~our ~~will~~product befor ~~used~~leakage toand ~~produce~~also ~~larger~~tests ~~sized heat transfer plates. With~~ the ~~new workshop~~strength ~~and~~of the ~~new~~product ~~production~~to ~~line, we believe both our production capacity~~ensure ~~and~~conformity ~~efficiency~~to ~~will~~customer ~~be significantly improved~~specifications.

~~Manufacturing~~The ~~Processes~~following diagram illustrates the production process for our shell-and-tube heat exchangers.

~~The~~10 ~~following diagram illustrates the production process for our plate heat exchangers.~~

Production Process ~~forPlate~~of Shell-and-Tube Heat Exchanger Manufacturing

The manufacturing process for the ~~plate~~shell-and-tube heat exchanger ~~begins~~ begins with the ~~removal~~welding ofand ~~edges~~combination ~~from steel plates that we acquire as a raw material. Once the edges are removed, we cut the steel plate down to the desired size. The next step is the pressing~~ of the ~~steel~~shell ~~plate to the desired shape~~ and ~~form. After the pressing is complete, we seal and combine the~~ heat ~~transfer~~exchange ~~plates together~~tube. The next ~~final~~ step is to conduct a hydrostatic pressure test, which tests our product for leakage and also tests the strength of the product to ensure conformity to customer specifications.

The ~~following~~production ~~diagram~~process ~~illustrates~~for ~~the~~our heat exchange units, air-cooled heat exchangers, welded plate heat exchangers and plate and shell heat exchangers is similar to that of our plate heat exchanger production process, except ~~for~~that additional processes are added to arrive at the finished product. ~~ourshell-~~With the heat exchange units, additional components are added in the welding workshop, including a circulating pump, water supplement pump, thermometer, manometer, various sensors, conduits and valves. In the case of the air-~~tube~~cooled heat exchanger, additional fans and blowers are added to the plate heat exchanger ~~exchangers~~in the welding workshop. With the welded plate heat exchanger, the heat transfer plates are welded rather than connected by gaskets. Finally, in the case of the plate and shell heat exchanger, the heat transfer plates replace tubes inside the shell vessel.

~~Production~~Raw ~~Process of Shell-and-Tube Heat Exchanger Manufacturing~~Materials

~~The~~We ~~manufacturing~~purchase ~~process~~raw materials for ~~the~~each ~~shell-~~project and~~-tube~~ ~~heat~~the ~~exchanger~~procurement ~~begins~~is ~~with~~subject to different solutions designed to customer specifications, including the ~~welding~~material type, material volume and ~~combination~~accessories. Our raw materials are mainly metal plates made of ~~the~~stainless ~~shell~~steel, carbon steel, titanium steel, nickel steel and other steel base alloys. Different steel plates are used to produce heat exchangers ~~exchange~~used ~~tube~~in different environments or for use with different fluids. ~~The~~For ~~next~~heat ~~step~~exchangers isused toin ~~conduct~~environments containing corrosive air or liquids, such as on a ~~hydrostatic~~ship ~~pressure~~or ~~test~~in alumina smelting, ~~which~~or ~~tests~~used ~~our~~to ~~product~~exchange ~~for~~heat from ~~leakage~~highly-corrosive fluids, such as acid and alkali chemicals, corrosion resistant steel plates made from such metals as titanium steel, nickel steel, steel base alloy (such as 254SMO) and Hastelloy alloy are used as raw materials. For heat exchangers used in a regular environment or with regular fluids, stainless steel plates and carbon steel plates are used as raw materials. We also ~~tests~~purchase ~~the~~heat transfer ~~strength~~tubes offrom ~~the~~third ~~product~~party vendors to ~~ensure~~produce ~~conformity~~shell-and-tube toheat ~~customer~~exchangers ~~specifications~~and plate-and-shell heat exchangers.

~~The~~Suppliers production process for our heat exchange units, air-cooled heat exchangers, welded plate heat exchangers and plate and shell heat exchangers is similar to that of our plate heat exchanger production process, except that additional processes are added to arrive at the finished product. With the heat exchange units, additional components are added in the welding workshop, including a circulating pump, water supplement pump, thermometer, manometer, various sensors, conduits and valves. In the case of the air-cooled heat exchanger, additional fans and blowers are added to the plate heat exchanger in the welding workshop. With the welded plate heat exchanger, the heat transfer plates are welded rather than connected by gaskets. Finally, in the case of the plate and shell heat exchanger, the heat transfer plates replace tubes inside the shell vessel.

10The raw materials that we use to produce our products are widely available in the market. Since our products are mostly customized rather than standard products, we usually make purchases based on orders received, frequently in small quantities. Accordingly, we purchase from trading companies so that we are able to place orders in small quantities and request quick deliveries. Most of these trading companies are distributors of large global steel or alloy manufacturers such as Nippon Yakin Co., Ltd., TISCO, Haynes International, Inc., BAOTI, and Nippon Steel Corporation.

~~Raw~~The ~~Materials~~following table sets forth our top ten suppliers in 2017:

We purchase raw materials for each project and the procurement is subject to different solutions designed to customer specifications, including the material type, material volume and accessories. Our raw materials are mainly metal plates made of stainless steel, carbon steel, titanium steel, nickel steel and other steel base alloys. Different steel plates are used to produce heat exchangers used in different environments or for use with different fluids. For heat exchangers used in environments containing corrosive air or liquids, such as on a ship or in alumina smelting, or used to exchange heat from highly-corrosive fluids, such as acid and alkali chemicals, corrosion resistant steel plates made from such metals as titanium steel, nickel steel, steel base alloy (such as 254SMO) and Hastelloy alloy are used as raw materials. For heat exchangers used in a regular environment or with regular fluids, stainless steel plates and carbon steel plates are used as raw materials. We also purchase heat transfer tubes from third party vendors to produce shell-and-tube heat exchangers and plate-and-shell heat exchangers.

Supplier	Raw Materials	Amount (in thousands of U.S. Dollars)
Shenyang Oriental Kunlun Stainless Steel Industrial Co., Ltd.	White Steel Plate	5,145,011.00

~~Suppliers~~11

The raw materials that we use to produce our products are widely available in the market. Since our products are mostly customized rather than standard products, we usually make purchases based on orders received, frequently in small quantities. Accordingly, we purchase from trading companies so that we are able to place orders in small quantities and request quick deliveries. Most of these trading companies are distributors of large global steel or alloy manufacturers such as Nippon Yakin Co., Ltd., TISCO, Haynes International, Inc., BAOTI, and Nippon Steel Corporation.

Supplier	Raw Materials	Amount (in thousands of U.S. Dollars)
Tianjin taisteel daming metal products co. LTD.	Titanium plate	3,169,781.00
Hebei xuanlong steel rolling co. LTD.	Angle Steel	3,148,437.00
Tangshan Longteng Steel Co., Ltd.	Round bar steel	2,616,505.14
Tianjin grui new metal material co. LTD.	White Steel Plate	2,319,214.33
Siping Jinye Steel Trade Co., Ltd.	Round bar steel	2,050,258.83
Tangshan jinxin steel co. LTD.	Round bar steel	1,687,301.59
Harbin kangda air conditioning equipment co. LTD.	Pump	1,527,133.81
Shenyang kai weixi fluid control equipment co. LTD.	Valve	1,286,389.17
Siping sambo automatic control equipment co. LTD.	electric control cabinet	1,246,990.95

The following table sets forth our top ten suppliers in 2016:

Supplier	Raw Materials	Amount (in thousands of U.S. Dollars)
Shenyang Oriental Kunlun Stainless Steel Industrial Co., Ltd.	White Steel Plate	4,064,446
Tangshan Longteng Steel Co., Ltd.	Round bar steel	2,155,534
Siping Jinye Steel Trade Co., Ltd.	Round bar steel	1,201,237
Xi’an Lianyi Rubber Products Co., Ltd.	Rubber Mat. Spacer	1,061,892
Hebei Xuanlong Steel Rolling Co., Ltd.	Round bar steel	1,044,031
Siping Xinguangju Auto Control Equipment Co., Ltd.	PLC	1,028,163
Nanfang Zhongjin Huanjing Co., Ltd.	Pump	930,359
Jiangmen Special Stainless Steel Materiasls Co., Ltd.	White Steel Plate	780,640
Jiangmen Special Stainless Steel Materials Co., Ltd.	White Steel Plate	780,640
Qinhuangdao Zhanqin Machine Co., Ltd.	Pump	776,274
Qingdao Zhanqin Machine Co., Ltd.	Pump	776,274
Tianjin Jiang Chang Stainless Steel Co., Ltd.	White Steel Plate	759,408

~~The~~We ~~following~~pay ~~table~~the ~~sets~~entire ~~forth~~purchase ~~our~~price ~~top~~for ~~ten~~the ~~suppliers~~raw inmaterials ~~2015:~~upon delivery. For materials purchased domestically, we pay 100% on receipt. For imported materials, we are usually required to make 30% deposit upon making an order with the balance due upon receipt.

Supplier	Raw Materials	Amount (in thousands of U.S. Dollars)
Shenyang Oriental Kunlun Stainless Steel Industrial Co., Ltd.	White Steel Plate	2,712,198
Tianjin Jiang Chang Stainless Steel Co., Ltd.	White Steel Plate	2,398,010
Liaoning Xingye Import and Export LLC.	Titanium Plate	1,689,090
Jiangmen Special Stainless Steel Materiasls Co., Ltd.	White Steel Plate	1,087,910
Xi’an Lianyi Rubber Products Co., Ltd.	RubberMat.Spacer	845,160
Tianjing Taigang Daming Metalwork Co., Ltd.	Titanium Plate	639,661

Customers

11Our customers are widely dispersed throughout various industries, including metallurgy, heat and power, petrochemical, food and beverage, pharmaceutical and shipbuilding. Our products have been well received by Fortune 500 companies in large projects worldwide. The following table identifies some of our customers and the projects in which our products have been used.*

Dashiqiao Petrochemical Machinery Forging Factory	Forging	627,242
Shenyang Tong Feng Da Material Co., Ltd.	Carbon Steel Pate	626,964
Shenyang Jixing Jingye Steel Co., Ltd.	Carbon Steel Pate	503,075
Langfang Shengong Forging Product Co., Ltd.	Forging	490,266

	Beijing 2008 OlympicsWukesongSportsCenter (Beijing, China)
	Sinopec-Shell Coal Gasification Plant (Yueyang, China)

We12 pay the entire purchase price for the raw materials upon delivery. For materials purchased domestically, we pay 100% on receipt. For imported materials, we are usually required to make 30% deposit upon making an order with the balance due upon receipt.

~~Customers~~BP (China) Chemical, Co., Ltd. (Zhuhai, China) Datang International Shanxi Power Plant (Shanxi, China) Sinopec Yueyang Plant (Yueyang, China) and Sinopec Anqing Plant (Anqing, China) ChinaShenhua Baotou Coal Chemical Plat (Baotou, China) LG Chemical Tianjin Plant (Tianjin, China) CNPC Cangzhou Plant (Cangzhou, China) and CNPC Harbin Plant (Harbin, China) CGN, Linao Nuclear Plant (Guangdong, China) BASF Chemical Plant (Germany) Isdemir, Inc. Steel Plant (Turkey)

~~Our~~*All ~~customers~~marks are ~~widely~~trademarks ~~dispersed~~or ~~throughout~~registered ~~various industries,~~trademarks ~~including~~of ~~metallurgy, heat and power, petrochemical, food and~~their ~~beverage,~~respective ~~pharmaceutical and shipbuilding~~owners. ~~Our~~The ~~products~~display ~~have~~of ~~been~~trademarks ~~well~~herein ~~received by~~does ~~Fortune~~not ~~500~~imply ~~companies~~that ~~in large projects worldwide. The following table~~a ~~identifies~~license ~~some~~ of ~~our~~any ~~customers~~kind ~~and~~has ~~the projects in which our products have~~ been ~~used~~granted.*

*All marks are trademarks or registered trademarks of their respective owners. The ~~display~~following oftable ~~trademarks~~sets ~~herein~~forth ~~does~~our ~~not~~top ~~imply~~ten ~~that~~customers ain ~~license of any kind has been granted.~~ 2017:

The following table sets forth our top ten customers in 2016:

Customer	Main Products	Amount (in thousands of U.S. Dollars) (without VAT)	% of Sales Revenue
SINOCONST	Plate Heat Units	2,610,731.00	4%
Kaifeng Jinsheng Thermal Power Co. LTD.	Plate Heat Units	2,233,544.34	3%
Baiyin Tongcheng Thermal Co. LTD.	Spare Parts	2,101,019.45	3%
Construction Investment Energy Dingzhou Thermal Limited Liability Company.	Plate Heat Units	1,794,442.23	3%
Shaanxi Blue Spring Trading Co. LTD.	Plate Heat Units	1,702,618.43	2%
Zhengning County Housing and Urban-Rural Development Bureau.	Plate Heat Units	1,610,691.10	2%
Xiangyuan County Tyreda Heating Co. LTD.	Spare Parts	1,382,485.21	2%
Minle County District Central Heating Project Construction Management Office.	Plate Heat Units	1,330,978.19	2%
COFCO (Anhui)	Plate Heat Exchanger	1,290,191.26	2%
China Kunlun Engineering Co. LTD	Plate Heat Exchanger	1,278,306.10	2%

12The following table sets forth our top ten customers in 2016:

Customer	Main Products	Amount (in thousands of U.S. Dollars) (without VAT)	% of Sales Revenue
Liaoning Huiming International Trade Co., Ltd.	Plate Heat Units	1,710,814.42	4%
Jinlin Tongda Heat Transfer System Integration, Ltd	Plate Heat Exchanger	1,309,520.42	3%
Hulunbeier Northeasten Fufeng Biotechnology Co., Ltd.	Plate Heat Exchanger	1,273,853.60	3%
Jiuquan Chunguang New Energy Heating Co., Ltd	Plate Heat Units	1,249,948.26	3%
Shanxi Hongtu Construction Engineering Co., Ltd. - the Tenth Branch	Plate Heat Exchanger	1,222,286.00	3%
Bayanzhuoer Yangguang Energy Co., Ltd.	Plate Heat Units	1,129,035.36	2%
Xingrun Construction Engineering Co., Ltd.	Plate Heat Units	1,020,690.64	2%
Taiyuan Heating Company	Plate Heat Exchanger	840,004.85	2%
Tebian Electric Apparatus Stock Co. Ltd. - Energy and Power Branch	Plate Heat Units	824,721.39	2%
Chengde thermoelectric engineering installation Co., Ltd.	Plate Heat Units	758,061.78	2%

~~The~~13 ~~following table sets forth our top ten customers in 2015:~~

Customer	Main Products	Amount (in thousands of U.S. Dollars) (without VAT)	% of Sales Revenue
Huaxia Hanhua Chemical equipment Co., Ltd.	Plate Heat Exchanger	2,367,181	5%
Qingdao Thermoelectric Engineering Co., Ltd.	Heat Exchanger Unit	1,627,708	4%
Tongfang Ted Inter Science &Technology (Beijing)Co., Ltd.	Plate Heat Exchanger	1,576,746	3%
Guazhou Heating Power Co., Ltd.	Heat Exchanger Unit	1,205,749	3%
Youyu Xincheng Heating Power Co., Ltd.	Heat Exchanger Unit	1,142,951	2%
Taiyuan Heating Company	Plate Heat Exchanger	1,098,716	2%
Heihe Thermal Power Plant	Plate-and-Shell Heat Exchanger	1,000,484	2%
Ningxia Electric Heating Power Co., Ltd.	Heat Exchanger Unit	983,768	2%
Jinan Thermoelectric Engineering Co., Ltd.	Heat Exchanger Unit	895,722	2%
Longji Taihe Industrial(Baoding) Co., Ltd.	Heat Exchanger Unit	879,788	2%

Sales and Marketing

~~Sales~~As of December 31, 2017, our sales force consisted of 121 experienced sales people organized into four groups based on industry: metallurgy, heat and ~~Marketing~~power, petrochemical and shipbuilding. Each group specializes in serving our customers in their specific industry. We believe this specialization allows our sales people to be more focused and equipped with superior industry knowledge and experience. Of the 121 members of our sales staff, 14 are based in Beijing and Siping, and 107 are based in 13 other sales offices throughout 13 different Chinese provinces.

AsThe offollowing ~~December~~table ~~31,~~sets ~~2016,~~forth ~~our~~the ~~sales~~location ~~force consisted~~ of ~~135 experienced sales people organized into four groups based on industry: metallurgy, heat and power, petrochemical and shipbuilding. Each group specializes in serving~~ our ~~customers in their specific industry. We believe this specialization allows our~~ sales ~~people to be more focused and equipped with~~ ~~superior industry knowledge and experience.~~ offices:

The following table sets forth the location of our sales offices:

Region	Number of Offices	Location
Northern China	4	Harbin, Shenyang, Baotou, Beijing
Eastern China	2	Qingdao, Shanghai
Central China	3	Wuhan, Zhengzhou, Hangzhou
Western China	4	Xi’an, Taiyuan, Chengdu, Urumqi

13Each sales office makes direct sales and provides after-sales services to the customers in its area. Our sales offices in Qingdao, Wuhan, Xi’an, Zhengzhou, Taiyuan, Chengdu, Harbin, Shenyang, Urumqi and Baotou are focused on sales to the heating and power industry while our Shanghai and Hangzhou sales offices are focused on sales to the shipbuilding industry.

Region	Number of Offices	Location
Northern China	4	Harbin, Shenyang, Baotou, Beijing
Eastern China	2	Qingdao, Shanghai
Central China	3	Wuhan, Zhengzhou,Hangzhou
Western China	4	Xi’an, Taiyuan, Chengdu, Urumqi

Competition

~~Each~~The ~~sales~~heat ~~office~~exchanger ~~makes~~market ~~direct~~in ~~sales~~China ~~and~~is ~~provides~~very ~~after-sales~~fragmented and ~~services~~competitive. toThere ~~the~~are ~~customers~~over 1,500heat exchanger manufacturers in ~~its~~China, ~~area.~~most ~~Our~~of which ~~sales~~are ~~offices~~relatively small in ~~Qingdao,~~size. ~~Wuhan,~~As a leading heat exchanger manufacturer in ~~Xi’an~~China, ~~Zhengzhou,~~we ~~Taiyuan,~~mainly ~~Chengdu,~~face ~~Harbin,~~competition ~~Shenyang~~from the leading domestic players including SmartHeat, ~~Urumqi~~Shanghai Accessen and ~~Baotou~~Lanzhou ~~are focused~~Lanshi, onas ~~sales~~well toas the ~~heating~~leading international ~~and~~players ~~power~~including ~~industry~~Alfa ~~while~~Laval ~~our~~and ~~Shanghai~~Aluminum ~~and~~Plant & Vessel ~~Hangzhou~~Company ~~sales~~Limited, ~~offices~~or ~~are~~APV, ~~focused~~each onof ~~sales~~whom tohas ~~the~~a ~~shipbuilding~~presence ~~industry~~in China. The following is a brief summary and analysis of our major competitors:

Competition

	•	Alfa Laval is the largest plate heat exchanger manufacturer in the world. Alfa Laval has the broadest range of products covering application in almost all applicable industries. Since it also produces other industrial products like separators, Alfa Laval is also able to provide customers with integrated solutions of heat exchangers and other industrial products. Alfa Laval is especially strong in providing shell-and-tube heat exchanger products to the food and beverage and pharmaceutical industries. Alfa Laval is our key competitor in almost all industries. As compared to Alfa Laval, we are able to provide products of similar quality at a lower price.

	•	APV is one of the most established plate heat exchanger manufacturers in the world. Founded by Dr. Richard Seligman, who made the first plate heat exchanger in 1910, APV was acquired by SPX, a multi-national company listed on the New York Stock Exchange, in 2008. APV is especially strong in providing solutions and products for the power industry. As compared to APV, we have a broader range of products and larger production capacity and sales volume in China.

~~The~~14 heat exchanger market in China is very fragmented and competitive. There are over 1,500heat exchanger manufacturers in China, most of which are relatively small in size. As a leading heat exchanger manufacturer in China, we mainly face competition from the leading domestic players including SmartHeat, Shanghai Accessen and Lanzhou Lanshi, as well as the leading international players including Alfa Laval and Aluminium Plant & Vessel Company Limited, or APV, each of whom has a presence in China. The following is a brief summary and analysis of our major competitors:

~~Alfa~~• ~~Laval~~SmartHeat, Inc. is ~~the~~a ~~largest~~Chinese manufacturer of heat exchangers. Its production facility is located in Shenyang, Northeast China. SmartHeat manufactures and sells plate heat exchangers, heat exchanger ~~manufacturer~~units inand ~~the world~~heat meters. ~~Alfa~~It ~~Laval~~used ~~has~~to be the ~~broadest~~original ~~range~~equipment manufacturer service provider of ~~products~~Sondex, ~~covering~~the ~~application~~Denmark manufacturer of plate heat exchangers, who is an especially strong competitor in ~~almost~~ ~~all~~the ~~applicable~~oil ~~industries~~and gas industry. ~~Since~~SmartHeat itis ~~also~~more ~~produces~~experienced ~~other~~than ~~industrial products~~us ~~like~~in ~~separators~~producing heat exchanger units but does not produce shell-and-tube heat exchangers. As compared to SmartHeat, ~~Alfa~~we ~~Laval~~believe that we have stronger research and development capabilities, a wider range of products and that we have a more established track record in the industry. • Shanghai Accessen is ~~also~~a ~~able~~Chinese tomanufacturer ~~provide~~of ~~customers~~heat exchangers with ~~integrated~~ ~~solutions~~its ofproduction facility in Shanghai. It started to produce and sell plate heat exchangers and ~~other~~heat ~~industrial~~exchanger ~~products.Alfa Laval~~units isunder ~~especially~~its ~~strong~~own brand in ~~providing~~2002 but does not produce shell-and-tube heat ~~exchangerproducts~~ exchangers. As compared to Accessen, we believe that we have stronger research and development capabilities and wider range of products. We also believe that we have a more established track record in the ~~food~~industry and ~~beverage~~that we are much larger than Accessen in terms of production capacity and ~~pharmaceutical~~sales ~~industries~~volume. ~~Alfa~~• ~~Laval~~Lanzhou Lanshi is ~~our~~a ~~key competitor~~Chinese manufacturer of heat exchangers with its production facility in ~~almost~~Lanzhou, ~~all~~Northwest ~~industries~~China. It manufactures and sells plate heat exchangers and heat exchanger units. Lanzhou Lanshi caters to the alumina production market. As compared to ~~Alfa Laval~~Lanshi, we ~~are~~believe ~~able~~that ~~to provide~~we ~~products~~have ofstronger ~~similar~~research ~~quality~~and atdevelopment capabilities and a ~~lower~~broader ~~price~~range of products. We are also much larger than Lanshi in terms of production capacity and sales volume.

~~APV~~Intellectual isProperty one of the most established plate heat exchanger manufacturers in the world. Founded by Dr. Richard Seligman, who made the first plate heat exchanger in 1910, APV was acquired by SPX, a multi-national company listed on the New York Stock Exchange, in 2008. APV is especially strong in providing solutions and products for the power industry.As compared to APV, we have a broader range of products and larger production capacity and sales volume in China.

~~SmartHeat,~~We ~~Inc.~~sell isall aour ~~Chinese~~products ~~manufacturer~~under trademarks of ~~heat~~“巨元” ~~exchangers.~~and ~~Its production facility is located in Shenyang, Northeast China~~“THT.” ~~SmartHeat~~“巨元” ~~manufactures~~has ~~and~~been ~~sells~~registered ~~plate~~with ~~heat exchangers, heat exchanger units and heat meters.Itused to be~~ the ~~original~~State ~~equipment~~Trademark ~~manufacturer~~Bureau ~~service provider~~ of ~~Sondex,~~ ~~the~~PRC ~~Denmark~~and ~~manufacturer~~has ofa ~~plate~~valid ~~heat exchangers, who is an~~term ~~especially~~of ~~strong~~ten ~~competitor~~years inexpiring ~~the~~August ~~oil~~20, ~~and gas industry~~2020. ~~SmartHeat~~“THT” ishas ~~more experienced~~been ~~than~~registered uswith inthe ~~producing heat exchanger units but does not produce~~State ~~shell-and-tube~~Trademark ~~heat~~Bureau ~~exchangers.~~of AsPRC ~~compared~~since toJuly ~~SmartHeat~~14, we2009 ~~believe that we have stronger research~~ and ~~development~~has ~~capabilities,~~a ~~wider~~valid ~~range~~term of ~~products~~ten years ~~and~~expiring ~~that~~July we13, ~~have a more established track record in the industry~~2019.

~~Shanghai~~We ~~Accessen~~own isfifteen apatents, ~~Chinese~~all ~~manufacturer~~ of ~~heat~~which ~~exchangers~~are ~~with its~~for ~~production~~utility ~~facility in Shanghai~~models. ~~It started to produce and sell plate heat~~ ~~exchangers~~The ~~and~~term ~~heat~~of ~~exchanger~~the ~~units~~patents, ~~under~~as ~~its~~stipulated ~~own~~by ~~brand~~the inPRC ~~2002~~Patent ~~but does not produce shell-and-tube heat exchangers. As compared to Accessen~~Law, weis ~~believe~~ten years ~~that~~starting wefrom ~~have~~the ~~stronger~~authorization ~~research and development capabilities andwider range of products~~date. WeThe ~~also~~following ~~believe~~table ~~that~~lists weour ~~have a more established track record in the~~patents, ~~industry~~their registration and ~~that~~certificate wenumbers ~~are much larger than Accessen in terms of production capacity~~ and ~~sales~~their ~~volume.~~authorization dates:

Lanzhou Lanshi is a Chinese manufacturer of heat exchangers with its production facility in Lanzhou, Northwest China. It manufactures and sells plate heat exchangers and heat exchanger units. Lanzhou Lanshi caters to the alumina production market. As compared to Lanshi, we believe that we have stronger research and development capabilities and a broader range of products. We are also much larger than Lanshi in terms of production capacity and sales volume.

Patents	Registration No.	Certificate No.	Authorization Date
Shell and tube helix baffle plate heat exchanger	ZL201020107719.2	1565896	2010-10-20
High efficiency wide flow channel disassemble plate heat exchanger	ZL200920093790.7	1512219	2010-08-18
Special high efficiency detachable type heat exchanger heat transfer plate	ZL200920094384.2	1565896	2010-05-12
A kind of plate heat exchanger use in air conditioning industry	ZL200920094383.8	1411275	2010-05-12
Variable section flow channel plate heat exchanger	ZL200720093847.4	1109105	2008-10-08
Wide flow channel disassemble plate heat exchanger	ZL200520127760.5	876165	2007-03-07
Wide flow channel welded plate heat exchanger	ZL200520127762.4	842256	2006-11-29
Large-scale closed cooling water circulator	ZL200520127763.9	CN 2842348Y	2006-11-29
Block type heat exchanger	ZL200520127761X	842022	2006-11-29
Powder heat exchanger	ZL20120579425.X	1817117	2010-10-28
Semi-welded plate heat exchanger	ZL201120167533.0	2055400	2011-12-28
O-ring composite sealing gasket with U type protective use in plate heat exchanger	ZL201120459019.4	2298122	2012-07-11
Plate heat exchangers with double sealed washer	ZL201120444804.2	2276392	2012-07-04
Plate and shell heat exchanger with countercurrent circular plate	ZL201220225259.2	2557243	2012-12-05
Main pump lube oil cooler	ZL201220225258.8	2555906	2012-05-18
Efficient detachable wide channel plate heat exchanger	ZL200910067086.9	1124253	2013-1-23
Hybrid heat heater for heating network	ZL201220679204.9	2925929	2013-5-29
Vertical floating-head heat exchanger	ZL201320105056.4	3099993	2013-8-14
Double seal high-pressure plate heat exchanger	ZL201320297235.2	3341805	2013-12-25

1415

~~Intellectual~~Regulation ~~Property~~

WeBecause ~~sell all~~ our ~~products~~primary ~~under~~operating ~~trademarks~~subsidiaries ofare ~~“巨元”~~located ~~and~~in China, ~~“THT.”~~we ~~“巨元”~~are ~~has~~subject ~~been~~to ~~registered~~China’s ~~with~~national ~~the~~and ~~State~~local ~~Trademark~~laws, ~~Bureau~~including ofthose outlined ~~PRC~~below. ~~and~~We ~~has~~believe athat ~~valid~~we ~~term~~are ofin ~~ten~~material ~~years~~compliance ~~expiring~~with ~~August~~all registrations ~~20,~~and ~~2020.~~requirements ~~“THT”~~for ~~has been registered with~~ the ~~State~~issuance ~~Trademark~~and ~~Bureau~~maintenance of ~~PRC~~all ~~since~~licenses required ~~July~~by ~~14,~~the ~~2009~~governing bodies, and ~~has~~that aall ~~valid~~license ~~term~~fees ofand ~~ten~~filings ~~years expiring July 13, 2019.~~are current.

We ~~own~~do ~~fifteen~~not ~~patents,~~face ~~all~~any ofsignificant ~~which~~government ~~are~~regulation ~~for utility models.~~in ~~The~~connection ~~term~~with of the ~~patents,~~production asof ~~stipulated~~our byproducts. ~~the~~We ~~PRC~~do ~~Patent~~not ~~Law,~~require isany ~~ten years~~special ~~starting~~government ~~from~~permits ~~the~~to ~~authorization~~produce ~~date.~~our ~~The~~products ~~following~~other ~~table~~than ~~lists~~those ~~our~~permits ~~patents,~~that are ~~their~~required ~~registration~~of ~~and~~all ~~certificate~~corporations ~~numbers~~in ~~and~~China. ~~their authorization dates:~~

Patents	Registration No.	Certificate No.	Authorization Date
Shell and tube helix baffle plate heat exchanger	ZL201020107719.2	1565896	2010-10-20
High efficiency wide flow channel disassemble plate heat exchanger	ZL200920093790.7	1512219	2010-08-18
Special high efficiency detachable type heat exchanger heat transfer plate	ZL200920094384.2	1565896	2010-05-12
A kind of plate heat exchanger use in air conditioning industry	ZL200920094383.8	1411275	2010-05-12
Variable section flow channel plate heat exchanger	ZL200720093847.4	1109105	2008-10-08
Wide flow channel disassemble plate heat exchanger	ZL200520127760.5	876165	2007-03-07
Wide flow channel welded plate heat exchanger	ZL200520127762.4	842256	2006-11-29
Large-scale closed cooling water circulator	ZL200520127763.9	CN 2842348Y	2006-11-29
Block type heat exchanger	ZL200520127761X	842022	2006-11-29
Powder heat exchanger	ZL20120579425.X	1817117	2010-10-28
Semi-welded plate heat exchanger	ZL201120167533.0	2055400	2011-12-28
O-ring composite sealing gasket with U type protective use in plate heat exchanger	ZL201120459019.4	2298122	2012-07-11
Plate heat exchangers with double sealed washer	ZL201120444804.2	2276392	2012-07-04
Plate and shell heat exchanger with countercurrent circular plate	ZL201220225259.2	2557243	2012-12-05
Main pump lube oil cooler	ZL201220225258.8	2555906	2012-05-18
Efficient detachable wide channel plate heat exchanger	ZL200910067086.9	1124253	2013-1-23
Hybrid heat heater for heating network	ZL201220679204.9	2925929	2013-5-29
Vertical floating-head heat exchanger	ZL201320105056.4	3099993	2013-8-14
Double seal high-pressure plate heat exchanger	ZL201320297235.2	3341805	2013-12-25

Environmental Matters

~~Regulation~~Our manufacturing facilities are subject to various pollution control regulations with respect to noise and air pollution and the disposal of waste and hazardous materials. We also are subject to periodic inspections by local environmental protection authorities. Our operating subsidiaries have received certifications from the relevant PRC government agencies indicating that their business operations are in material compliance with the relevant PRC environmental laws and regulations. We are not currently subject to any pending actions alleging any violations of applicable PRC environmental laws.

~~Because~~Occupational ~~our~~Health ~~primary operating subsidiaries are located in China, we are subject to China’s national~~ and local laws, including those outlined below. We believe that we are in material compliance with all registrations and requirements for the issuance and maintenance of all licenses required by the governing bodies, and that all license fees and filings are current.Safety

WeThe doStanding ~~not~~Committee ~~face~~of ~~any~~the ~~significant~~National ~~government~~People’s ~~regulation~~Congress promulgated inthe PRC Safe Production Law on June 29, 2002, which sets out the ~~connection~~legal ~~with~~framework to achieve and ensure safety in the production and operation activities of ~~our~~enterprises. ~~products~~Under the Safe Production Law, enterprises are required to establish internal safety systems and regulations, set up internal organization or appoint responsible personnel for safety affairs, to provide necessary safe working conditions and to strictly follow the State or industrial standards in relation to safe production. WeEnterprises which do not ~~require~~satisfy ~~any~~the facilities ~~special~~and conditions required under the laws and the State or industrial ~~government~~standards ~~permits~~are not allowed to ~~produce~~start ~~our~~or ~~products~~continue ~~other~~their ~~than~~production ~~those~~or ~~permits~~operation activities. ~~that~~Enterprises are also required ofto ~~all~~set ~~corporations~~up inobvious ~~China.~~safety caution signals on those production or operation sites, facilities or equipment where there is a material potential risk for safety and shall further provide protective uniforms and personal care products to the field employees for their personal protection.

15The PRC Law on the Prevention and Treatment of Occupational Diseases, which was promulgated on October 27, 2001 and became effective on May 1, 2002, requires that work environment and conditions established or provided by employers meet the occupational health standards and requirements of the State, and that employers shall further adopt and implement measures to assure employees’ access to occupational health protection. The employers are also required to participate in social insurance for work-related injury in accordance with the law and declare to and be supervised by the relevant health authorities if the employers are engaged in those harmful projects listed in the Occupational Diseases Catalogue.

~~Environmental~~We ~~Matters~~have not experienced any incident of injury or death due to violation of health and safety regulations. We have adopted a set of safety and occupational health protection procedures and standards, based on the specifications and guidelines set out under the PRC laws and regulations.

~~Our~~Regulations ~~manufacturing~~on ~~facilities~~Protection ~~are subject to various pollution control regulations with respect to noise and air pollution and the disposal~~ of ~~waste~~ ~~and~~Intellectual ~~hazardous materials. We also are subject to periodic inspections by~~Property local environmental protection authorities. Our operating subsidiaries have received certifications from the relevant PRC government agencies indicating that their business operations are in material compliance with the relevant PRC environmental laws and regulations. We are not currently subject to any pending actions alleging any violations of applicable PRC environmental laws. Rights

~~Occupational~~China ~~Health~~has adopted legislation governing protection of intellectual property rights, including copyrights, trademarks and ~~Safety~~patents. China is a signatory to the main international conventions governing protection of intellectual property rights and became a member of the Agreement on the Trade Related Aspects of Intellectual Property Rights upon its accession to the World Trade Organization in December 2001.

The ~~Standing Committee of the National People’s Congress promulgated the~~ PRC ~~Safe~~Patent ~~Production~~ Law, onadopted ~~June~~in ~~29,~~1984 ~~2002,~~and ~~which~~revised ~~sets~~in ~~out~~1992, ~~the~~2000 ~~legal~~and ~~framework~~2008, torespectively, ~~achieve~~ and ~~ensure safety in~~ the ~~production~~Implementing ~~and~~Rules ~~operation activities~~ of ~~enterprises. Under~~ the ~~Safe~~PRC ~~Production~~Patent Law, ~~enterprises are~~ ~~required~~promulgated toby ~~establish~~the ~~internal~~State ~~safety~~Council ~~systems~~in 2001 and ~~regulations,~~revised ~~set~~in up2002 ~~internal organization~~and ~~or appoint responsible personnel for safety affairs~~2010 respectively, togovern ~~provide necessary~~and ~~safe~~protect ~~working~~the ~~conditions~~proprietary ~~and~~rights to ~~strictly~~registered ~~follow~~patents. The ~~the~~ State orIntellectual ~~industrial standards~~Property inOffice, ~~relation~~or toSIPO, ~~safe~~handles ~~production.~~patent ~~Enterprises~~registration ~~which do not satisfy the~~and ~~facilities~~grants ~~and~~a ~~conditions~~term ~~required~~of ~~under~~twenty ~~the~~years ~~laws~~to inventions and ~~the~~a ~~State~~term orof ~~industrial~~ten ~~standards~~years ~~are not allowed~~ to ~~start~~utility ormodels ~~continue~~and ~~their production or operation activities~~designs. ~~Enterprises~~The ~~are~~protection ~~also required~~ to ~~set~~patent uprights ~~obvious~~may ~~safety caution~~be ~~signals~~terminated onbefore ~~those~~expiry ~~production~~of orthe ~~operation~~term ~~sites,~~granted ~~facilities~~as ora ~~equipment~~result ~~where there~~of isthe afailure ~~material~~of ~~potential~~the registrant ~~risk~~to ~~for~~pay ~~safety~~the ~~and~~annual ~~shall~~registration ~~further~~fee ~~provide protective~~accordingly. ~~uniforms~~Patent license agreements and ~~personal~~transfer ~~care~~agreements ~~products~~must tobe ~~the~~filed ~~field~~with ~~employees~~the SIPO for ~~their personal protection~~record.

~~The~~16 PRC Law on the Prevention and Treatment of Occupational Diseases, which was promulgated on October 27, 2001 and became effective on May 1, 2002, requires that work environment and conditions established or provided by employers meet the occupational health standards and requirements of the State, and that employers shall further adopt and implement measures to assure employees’ access to occupational health protection. The employers are also required to participate in social insurance for work-related injury in accordance with the law and declare to and be supervised by the relevant health authorities if the employers are engaged in those harmful projects listed in the Occupational Diseases Catalogue.

WeLand ~~have~~Use ~~not~~Rights experienced any incident of injury or death due to violation of health and safety regulations. We have adopted a set of safety and occupational health protection procedures and standards, based on the specifications and guidelines set out under the PRC laws and regulations.

All urban land in China is owned by the State. Pursuant to Interim Regulations of the People’s Republic of China Concerning the Assignment and Transfer of the Right to the Use of the State-owned Land in the Urban Areas, which became effective on ~~Protection~~May 19, 1990, individuals and companies are permitted to acquire rights to use urban land or land use rights for specific purposes, including residential, industrial and commercial purposes. The land use rights are granted for a period of ~~Intellectual~~70 ~~Property~~years for ~~Rights~~residential purposes, 50 years for industrial purposes and 40 years for commercial purposes. These periods may be renewed at the expiration of the initial and any subsequent terms. Upon approval by both the land administrative authorities and city planning authorities, industrial parcel uses may be converted to other uses, and the duration and other clauses in the land use right granting agreement will be revised to match the new use. Granted land use rights are transferable and may be used as security for borrowings and other obligations. We have received the necessary land use right certificates for the properties described under Item 2 “Properties.”

~~China~~Foreign ~~has~~Currency ~~adopted~~Exchange legislation governing protection of intellectual property rights, including copyrights, trademarks and patents. China is a signatory to the main international conventions governing protection of intellectual property rights and became a member of the Agreement on the Trade Related Aspects of Intellectual Property Rights upon its accession to the World Trade Organization in December 2001.

The majority of our sales revenue and expenses are denominated in RMB. Under the PRC ~~Patent~~foreign ~~Law~~currency exchange regulations applicable to us, RMB ~~adopted~~is inconvertible ~~1984~~for current account items, including the distribution of dividends, interest payments, trade and ~~revised~~service-related inforeign ~~1992~~exchange transactions. Currently, ~~2000~~our PRC operating subsidiaries may purchase foreign ~~and~~currencies ~~2008~~for settlement of current account transactions, ~~respectively~~including payments of dividends to us, ~~and~~employee ~~the~~salaries ~~Implementing~~(even ~~Rules~~if employees are based outside of China), ~~the~~and ~~PRC~~payment ~~Patent~~for ~~Law~~equipment purchases outside of China, without the ~~promulgated~~approval byof the State ~~Council~~Administration inof ~~2001~~Foreign ~~and~~Exchange ~~revised~~of inthe ~~2002~~People’s Republic ~~and~~of ~~2010 respectively~~China, ~~govern~~or ~~and~~SAFE, ~~protect~~by ~~the~~complying ~~proprietary~~with ~~rights~~certain toprocedural ~~registered patents~~requirements. ~~The~~Conversion ~~State~~of ~~Intellectual~~RMB ~~Property~~for ~~Office,~~capital oraccount ~~SIPO~~items, ~~handles~~such ~~patent~~as ~~registration~~direct ~~and~~investment, loan, ~~grants~~security ainvestment ~~term~~and repatriation of ~~twenty~~investment, ~~years~~however, tois ~~inventions~~still ~~and~~subject ato the ~~term~~approval of ~~ten~~SAFE. ~~years~~In toparticular, ~~utility~~if our PRC operating subsidiaries borrow ~~models~~foreign ~~and~~currency ~~designs.~~through ~~The~~loans ~~protection~~from tous ~~patent~~or ~~rights~~other ~~may~~foreign belenders, ~~terminated~~these ~~before~~loans ~~expiry~~must ofbe ~~the~~registered ~~term~~with ~~granted~~SAFE, asand aif ~~result~~we offinance the ~~failure~~subsidiaries by means of additional ~~the~~capital ~~registrant~~contributions, tothese ~~pay~~capital contributions must be approved by certain government authorities, including the ~~annual~~Ministry ~~registration~~of ~~fee~~Commerce, ~~accordingly~~or MOFCOM, or their respective local branches. ~~Patent~~These ~~license~~limitations ~~agreements~~could ~~and~~affect ~~transfer~~our ~~agreements~~PRC ~~must~~operating besubsidiaries’ ~~filed~~ability ~~with~~to obtain foreign exchange through debt or equity financing. In the ~~SIPO~~event ~~for~~of ~~record~~a liquidation of our PRC subsidiaries, SAFE approval is required before the remaining proceeds can be expatriated from China.

~~Land~~Taxation ~~Use Rights~~

~~All~~On ~~urban~~March ~~land~~16, in2007, the National People's Congress of China passed isa ~~owned~~new byEnterprise ~~the~~Income ~~State.~~Tax ~~Pursuant~~Law, ~~to Interim~~or ~~Regulations~~EIT ofLaw, and on November 28, 2007, the ~~People’s~~State ~~Republic~~Council of China ~~Concerning~~passed ~~the Assignment~~its ~~and~~implementing ~~Transfer~~rules, ofwhich ~~the~~took ~~Right~~effect toon January 1, 2008. Before the ~~Use~~implementation of the ~~State-owned~~EIT ~~Land~~Law, inforeign ~~the~~invested ~~Urban Areas~~enterprises, ~~which~~or ~~became~~FIEs, ~~effective~~established onin ~~May~~the 19PRC, ~~1990,~~unless ~~individuals~~granted ~~and~~preferential tax ~~companies~~treatments ~~are~~by ~~permitted~~the toPRC ~~acquire~~government, ~~rights~~were generally subject to ~~use~~an ~~urban~~earned ~~land~~income tax, or ~~land~~EIT, ~~use~~rate ~~rights for~~of ~~specific purposes~~33.0%, ~~including~~which ~~residential,~~included ~~industrial~~a 30.0% state income tax and ~~commercial~~a 3.0% ~~purposes~~local income tax. The ~~land~~EIT ~~use~~Law ~~rights~~and ~~are~~its ~~granted~~implementing ~~for~~rules impose a ~~period~~unified EIT of 25.0% 70on ~~years~~all ~~for residential~~domestic-invested ~~purposes~~enterprises and FIEs, 50unless ~~years~~they ~~for~~qualify ~~industrial~~under certain ~~purposes~~limited ~~and~~exceptions. 40Despite ~~years~~these ~~for~~changes, the EIT Law gives FIEs ~~commercial~~established ~~purposes.~~before ~~These~~March ~~periods~~16, ~~may~~2007, beor ~~renewed~~Old atFIEs, ~~the~~a ~~expiration~~five-year ofgrandfather ~~the~~period ~~initial~~during ~~and~~which ~~any~~they ~~subsequent~~can ~~terms.~~continue ~~Upon~~to ~~approval~~enjoy bytheir ~~both~~existing ~~the~~preferential ~~land administrative~~tax ~~authorities~~treatments. ~~and~~During ~~city~~this ~~planning~~five-year ~~authorities~~grandfather period, ~~industrial~~the ~~parcel~~Old ~~uses~~FIEs ~~may~~which beenjoyed ~~converted~~tax torates ~~other~~lower ~~uses,~~than ~~and~~25% under the ~~duration~~original ~~and~~EIT ~~other~~law ~~clauses~~will inbe ~~the~~subject ~~land~~to ~~use~~gradually ~~right~~increased ~~granting~~EIT ~~agreement~~rates ~~will~~over bea ~~revised~~5-year toperiod ~~match~~until ~~the~~their ~~new~~tax ~~use.~~rate ~~Granted~~reaches ~~land~~25%. ~~use~~In ~~rights~~addition, ~~are~~the ~~transferable~~Old ~~and~~FIEs ~~may~~that beare ~~used~~eligible ~~as security~~ for ~~borrowings~~other ~~and~~preferential ~~other~~tax treatments ~~obligations.~~by Wethe ~~have~~PRC ~~received~~government under the ~~necessary~~original ~~land~~EIT ~~use~~law ~~right~~are ~~certificates~~allowed ~~for~~to ~~the~~continue ~~properties~~enjoying ~~described~~their ~~under~~preference ~~Item~~until 2these ~~“Properties.”~~preferential treatment periods expire.

16In addition to the changes to the current tax structure, under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a resident enterprise and will normally be subject to an EIT of 25% on its global income. The implementing rules define the term “de facto management bodies” as “an establishment that exercises, in substance, overall management and control over the production, business, personnel, accounting, etc., of a Chinese enterprise.” If the PRC tax authorities subsequently determine that we should be classified as a resident enterprise, then our organization’s global income will be subject to PRC income tax of 25%. For detailed discussion of PRC tax issues related to resident enterprise status, see Item 1A “Risk Factors—Risks Related to Doing Business in China—Under the Enterprise Income Tax Law, we may be classified as a ‘resident enterprise’ of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders.”

~~Foreign~~17 ~~Currency Exchange~~

~~The~~In ~~majority~~addition, ofthe ~~our~~EIT ~~sales~~Law ~~revenue~~ and ~~expenses~~its ~~are~~implementing ~~denominated~~rules generally inprovide ~~RMB.~~that ~~Under~~an ~~the~~income ~~PRC~~tax ~~foreign~~rate ~~currency~~of ~~exchange~~10% ~~regulations~~will normally be applicable to ~~us,~~dividends ~~RMB~~payable isto ~~convertible~~investors ~~for~~that ~~current~~are ~~account~~“non-resident ~~items~~enterprises,” ~~including~~or ~~the distribution of~~non-resident ~~dividends~~investors, ~~interest~~which ~~payments,~~(i) ~~trade~~do ~~and~~not ~~service-related~~have ~~foreign~~an ~~exchange transactions.~~establishment ~~Currently,~~or ~~our~~place of business in the PRC ~~operating~~or ~~subsidiaries~~(ii) ~~may~~have ~~purchase~~an ~~foreign currencies~~establishment ~~for~~or ~~settlement~~place of ~~current~~business ~~account~~in ~~transactions~~the PRC, ~~including~~but ~~payments of~~the ~~dividends~~relevant toincome ~~us,~~is ~~employee~~not ~~salaries~~effectively ~~(even~~connected ifwith ~~employees~~the ~~are~~establishment ~~based~~or ~~outside~~place of ~~China),~~business ~~and~~to ~~payment~~the ~~for~~extent ~~equipment~~such ~~purchases~~dividends ~~outside~~are ofderived ~~China,~~from ~~without~~sources within the PRC. ~~approval~~The State Council of the ~~State~~PRC ~~Administration~~or ofa ~~Foreign~~tax ~~Exchange~~treaty ofbetween China and the ~~People’s~~jurisdictions ~~Republic~~in ofwhich ~~China,~~the ornon-PRC ~~SAFE,~~investors byreside ~~complying~~may ~~with~~reduce ~~certain~~such ~~procedural~~income ~~requirements~~tax. Under the ~~Conversion~~Arrangement ofbetween ~~RMB~~the Mainland and the Hong Kong Special Administrative Region for ~~capital~~the ~~account~~Avoidance ~~items,~~of ~~such~~Double asTaxation ~~direct~~and ~~investment,~~the ~~loan,~~Prevention of Fiscal Evasion with ~~security~~respect ~~investment~~to ~~and~~Taxes ~~repatriation~~on Income, effective as of ~~investment~~January 1, ~~however~~2007, issuch ~~still~~dividend withholding ~~subject~~tax rate is reduced to 5% if a Hong Kong resident enterprise owns ~~the~~over ~~approval~~25% of ~~SAFE.~~the InPRC ~~particular,~~company ifdistributing ~~our~~the ~~PRC~~dividends. ~~operating~~As ~~subsidiaries~~Star ~~borrow foreign~~Wealth ~~currency~~is ~~through~~a ~~loans~~Hong Kong ~~from~~company usand orowns ~~other~~100% ~~foreign~~of ~~lenders~~SipingJuyuan, ~~these~~under ~~loans~~the aforesaid arrangement, any ~~must~~dividends bethat ~~registered~~SipingJuyuan ~~with~~pays ~~SAFE,~~Star ~~and~~Wealth ifmay webe ~~finance~~subject ~~the~~to ~~subsidiaries~~a bywithholding ~~means~~tax at the rate of ~~additional~~ ~~capital~~5%. ~~contributions~~However, ~~these~~if ~~capital~~Star ~~contributions~~Wealth ~~must~~is not considered to be ~~approved~~the by“beneficial ~~certain~~owner” ~~government~~of ~~authorities,~~such ~~including~~dividends under the ~~Ministry~~Notice Regarding Interpretation and Recognition of ~~Commerce~~Beneficial Owners under Tax Treaties, or ~~MOFCOM~~ Notice 601, promulgated orby ~~their~~the ~~respective~~State ~~local~~Administration ~~branches.~~of ~~These~~Taxation ~~limitations~~on ~~could~~October ~~affect~~27, ~~our~~2009, such ~~PRC~~dividends ~~operating~~would ~~subsidiaries’~~be ~~ability~~subject to ~~obtain~~the ~~foreign~~withholding ~~exchange~~tax ~~through~~rate ~~debt~~of ~~or equity financing~~10%. InThe ~~the~~withholding tax ~~event~~rate of a5% ~~liquidation~~or of10% ~~our~~applicable ~~PRC~~to ~~subsidiaries,~~Star ~~SAFE approval~~Wealth iswill ~~required~~have ~~before~~a significant impact on the ~~remaining~~amount ~~proceeds~~of ~~can~~dividends to be ~~expatriated~~received ~~from~~by the Company and ultimately by ~~China~~shareholders.

~~Taxation~~Pursuant to the Provisional Regulation of China on Value Added Tax and its implementing rules, all entities and individuals that are engaged in the sale of goods, the provision of repairs and replacement services and the importation of goods in China are generally required to pay value added tax, or VAT, at a rate of 17.0% of the gross sales proceeds received, less any deductible VAT already paid or borne by the taxpayer. Further, when exporting goods, the exporter is entitled to some or all of the refund of VAT that it has already paid or borne.

OnOur ~~March~~subsidiaries ~~16,~~are ~~2007,~~based ~~the~~in ~~National~~China ~~People's~~and ~~Congress~~are ofsubject ~~China~~to income ~~passed~~taxes ain ~~new~~the ~~Enterprise~~PRC. ~~Income~~These ~~Tax~~China-based ~~Law,~~subsidiaries orconduct ~~EIT~~all ~~Law,~~of ~~and~~our ~~on November 28~~operations, ~~2007,~~ ~~the~~and ~~State~~generate ~~Council~~all of ~~China~~our ~~passed~~income ~~its~~in ~~implementing rules, which took effect on January 1, 2008~~China. ~~Before~~The ~~the~~Company ~~implementation~~is ofa ~~the~~Nevada ~~EIT~~corporation ~~Law, foreign invested~~and ~~enterprises,~~is orsubject ~~FIEs,~~to ~~established~~income tax in the ~~PRC,~~United ~~unless~~States. ~~granted~~New ~~preferential~~U.S. federal tax ~~treatments~~ ~~by the PRC government~~legislation, commonly ~~were~~referred ~~generally~~to ~~subject~~as tothe anTax ~~earned~~Cuts ~~income tax,~~and orJobs ~~EIT,~~Act ~~rate~~(the of“2017 ~~33.0%~~Act”), ~~which~~was ~~included~~signed into alaw ~~30.0%~~on ~~state~~December ~~income~~22, ~~tax and a 3~~2017.~~0% local~~ ~~income tax.~~ The ~~EIT~~2017 ~~Law~~Act ~~and~~significantly ~~its~~modified ~~implementing~~the ~~rules impose a unified EIT of 25~~U.0%S. Internal onRevenue ~~all~~Code ~~domestic-invested~~by, ~~enterprises~~among ~~and~~other ~~FIEs~~things, ~~unless~~reducing ~~they~~the ~~qualify~~statutory ~~under~~U.S. ~~certain~~federal ~~limited~~corporate ~~exceptions.~~income ~~Despite~~tax ~~these~~rate ~~changes,~~from ~~the~~35% ~~EIT~~to ~~Law~~21% ~~gives~~for ~~FIEs established~~taxable ~~before~~years ~~March~~beginning after ~~16,~~December ~~2007~~31, or2017; ~~Old~~limiting ~~FIEs,~~and/or aeliminating ~~five-year~~many ~~grandfather~~business ~~period~~deductions; ~~during~~migrating ~~which~~the ~~they~~U.S. ~~can continue~~ to ~~enjoy~~a ~~their~~territorial ~~existing preferential~~ tax ~~treatments.~~ ~~During~~system ~~this~~with ~~five~~a one-~~year~~time ~~grandfather~~transition ~~period,~~tax ~~the Old FIEs which enjoyed~~on ~~tax~~a ~~rates~~mandatory ~~lower~~deemed ~~than~~repatriation ~~25%~~of ~~under~~previously ~~the~~deferred ~~original~~foreign ~~EIT~~earnings ~~law~~of certain ~~will~~foreign besubsidiaries; subject to ~~gradually increased~~certain ~~EIT~~limitations, ~~rates~~generally eliminating ~~over~~U.S. acorporate ~~5-year~~income ~~period until their~~ tax ~~rate~~on ~~reaches~~dividends ~~25%.~~from Inforeign subsidiaries; ~~addition,~~and ~~the~~providing ~~Old~~for ~~FIEs~~new ~~that~~taxes ~~are~~on ~~eligible~~certain ~~for~~foreign ~~other~~earnings. ~~preferential~~Taxpayers ~~tax~~may ~~treatments~~elect to bypay the ~~PRC~~one-time ~~government~~transition ~~under~~tax ~~the~~over ~~original~~eight ~~EIT~~years, ~~law~~or ~~are~~in ~~allowed~~a tosingle ~~continue~~lump-sum ~~enjoying their preference until these preferential treatment periods expire~~payment.

InDividend ~~addition~~Distributions to the changes to the current tax structure, under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a resident enterprise and will normally be subject to an EIT of 25% on its global income. The implementing rules define the term “de facto management bodies” as “an establishment that exercises, in substance, overall management and control over the production, business, personnel, accounting, etc., of a Chinese enterprise.” If the PRC tax authorities subsequently determine that we should be classified as a resident enterprise, then our organization’s global income will be subject to PRC income tax of 25%. For detailed discussion of PRC tax issues related to resident enterprise status, see Item 1A “Risk Factors—Risks Related to Doing Business in China—Under the Enterprise Income Tax Law, we may be classified as a ‘resident enterprise’ of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.”

InAll ~~addition, the EIT Law and its implementing rules generally provide that an income tax rate~~ of ~~10%~~our ~~will~~sales ~~normally~~are beearned ~~applicable~~by toour ~~dividends payable~~PRC tosubsidiaries. ~~investors that are “non-resident enterprises~~However,~~” or non-resident~~ ~~investors,~~PRC ~~which~~regulations ~~(i)~~restrict dothe ~~not~~ability ~~have an establishment or place~~ of ~~business~~our ~~in the~~ PRC orsubsidiaries ~~(ii)~~to ~~have~~make andividends and ~~establishment~~other orpayments ~~place~~to ofits ~~business~~offshore inparent ~~the~~company. PRC, ~~but~~legal ~~the~~restrictions permit ~~relevant~~payments ~~income is not effectively connected with the establishment or place~~ of ~~business~~ ~~to the extent such~~ dividends ~~are~~by ~~derived~~our ~~from sources within the~~ PRC~~. The~~ ~~State~~subsidiaries ~~Council~~only out of ~~the~~their ~~PRC or a~~ accumulated after-tax ~~treaty~~profits, ~~between~~if ~~China~~any, ~~and~~determined ~~the jurisdictions~~ in ~~which~~accordance ~~the~~with ~~non-~~PRC ~~investors reside may reduce such income tax. Under the~~accounting ~~Arrangement~~standards ~~between the Mainland~~ and ~~the~~regulations. ~~Hong~~Our ~~Kong~~PRC ~~Special~~subsidiaries ~~Administrative~~are ~~Region for~~also ~~the~~required ~~Avoidance~~under ofPRC ~~Double Taxation~~ laws and ~~the~~regulations ~~Prevention of Fiscal Evasion with respect~~ to ~~Taxes~~allocate onat ~~Income,~~least ~~effective~~10% as of ~~January~~their 1,annual ~~2007,~~after-tax ~~such dividend~~profits ~~withholding~~determined ~~tax~~in ~~rate~~accordance iswith ~~reduced~~PRC GAAP to ~~5% if~~ a ~~Hong~~statutory ~~Kong~~general ~~resident~~reserve ~~enterprise~~fund ~~owns~~until ~~over 25% of~~ the ~~PRC~~amounts ~~company~~in ~~distributing~~said ~~the~~fund ~~dividends.~~reaches ~~As Star Wealth is a Hong Kong company and owns 100~~50% of ~~Siping~~our ~~Juyuan,~~registered ~~under~~capital. ~~the~~Allocations ~~aforesaid arrangement,~~to ~~any~~these ~~dividends~~statutory ~~that~~reserve ~~Siping~~funds ~~Juyuan~~can ~~pays~~only ~~Star Wealth may~~ be ~~subject~~used tofor ~~a withholding~~specific ~~tax~~purposes atand ~~the~~are ~~rate of 5%. However, if Star Wealth is~~ not transferable ~~considered~~ to be ~~the~~us ~~“beneficial~~in ~~owner” of such dividends under~~ the ~~Notice~~form ~~Regarding Interpretation and Recognition~~ of ~~Beneficial Owners under Tax Treaties~~loans, ~~or Notice 601~~advances, ~~promulgated by the State Administration of Taxation on October 27, 2009, such dividends would be subject to the withholding tax rate of 10%. The withholding tax rate of 5%~~ or ~~10%~~cash ~~applicable to Star Wealth will have a significant impact on the amount of~~ dividends ~~to be received by the Company and ultimately by stockholders~~.

17Circular 37

~~Pursuant~~On toJuly ~~the~~4, ~~Provisional~~2014, ~~Regulation~~SAFE ofissued ~~China~~the Notice on ~~Value~~Relevant ~~Added~~Issues ~~Tax~~Relating to Domestic Residents’ Investment and ~~its~~Financing ~~implementing~~and ~~rules~~Round-Trip Investment through Special Purpose Vehicles, ~~all~~or ~~entities~~Circular 37. Circular 37 repeals and ~~individuals~~replaces ~~that~~the ~~are~~Notice ~~engaged~~on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents to Engage in Overseas Financing and Round ~~the~~Trip ~~sale~~Investment ofvia ~~goods~~Overseas Special Purpose Vehicles, or Circular 75. Circular 37 regulates the ~~provision~~foreign exchange matters in relation to the use of ~~repairs~~a ~~and~~special purpose ~~replacement~~vehicle, ~~services~~or ~~and~~SPV, ~~the~~by PRC residents to seek offshore equity financing and ~~importation~~conduct of“round ~~goods~~trip investment” in China. ~~are~~Under ~~generally~~Circular ~~required~~37, a SPV refers to ~~pay~~an offshore ~~value~~entity ~~added~~established ~~tax~~or controlled, directly or ~~VAT~~ indirectly, atby aPRC residents ~~rate~~or ofPRC ~~17.0%~~entities offor the ~~gross~~purpose ~~sales~~of ~~proceeds~~investing ~~received,~~or ~~less~~obtaining ~~any~~financing, ~~deductible~~utilizing ~~VAT~~assets ~~already~~or ~~paid~~interests orlegally ~~borne~~held by ~~the~~such ~~taxpayer~~domestic residents. ~~Further~~Circular 37 requires that, ~~when~~before ~~exporting goods~~establishing or controlling a SPV, ~~the~~PRC ~~exporter~~residents isand PRC ~~entitled~~entities are required to ~~some~~complete orforeign ~~all~~exchange registration with the local offices of SAFE for their overseas investments. Circular 37 further requires amendment to the ~~refund~~registration in the event of ~~VAT~~any ~~that~~significant itchanges to ~~has~~the SPV. Failure to fulfill the required registration may result in being ~~already~~prohibited ~~paid~~from ormaking ~~borne~~profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities.

~~Dividend~~As ~~Distributions~~we stated under Item 1A “Risk factors—Risks Related to Doing Business in China—Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute profits to us or otherwise materially adversely affect us,” we have asked our shareholders, who are PRC residents as defined in Circular 75, to register with the relevant branch of SAFE, as then required, in connection with their equity interests in us and our acquisitions of equity interests in our PRC subsidiaries. Circular 37 shall apply to any subsequent amendments made by our shareholders after the effective date of Circular 37. However, we cannot predict how Circular 37 will affect our business operations or future strategies. For example, our present and prospective PRC subsidiaries’ ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 37 by our PRC resident beneficial holders.

~~All~~18 of our sales are earned by our PRC subsidiaries. However, PRC regulations restrict the ability of our PRC subsidiaries to make dividends and other payments to its offshore parent company. PRC legal restrictions permit payments of dividends by our PRC subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries are also required under PRC laws and regulations to allocate at least 10% of their annual after-tax profits determined in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of our registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in the form of loans, advances, or cash dividends.

~~Circular~~Mergers 37and Acquisitions

On ~~July~~August 48, ~~2014~~2006, ~~SAFE~~six ~~issued~~PRC ~~the~~regulatory ~~Notice~~agencies onpromulgated ~~Relevant Issues~~the ~~Relating~~Regulation toon ~~Domestic~~Mergers ~~Residents’ Investment~~ and ~~Financing~~Acquisitions ~~and~~of ~~Round-Trip Investment~~Domestic ~~through~~Companies ~~Special~~by ~~Purpose Vehicles~~Foreign Investors, or ~~Circular~~the ~~37.~~M&A ~~Circular~~Rule, 37which ~~repeals and~~became ~~replaces~~effective ~~the Notice~~ on ~~Relevant~~September ~~Issues~~8, ~~Concerning Foreign Exchange~~2006. ~~Administration~~According ~~for Domestic Residents~~ to ~~Engage~~the inM&A ~~Overseas~~Rule, ~~Financing~~a ~~and~~ “Round ~~Trip~~-trip Investment” ~~via~~is ~~Overseas~~defined ~~Special~~as ~~Purpose Vehicles, or Circular 75. Circular~~having 37taken ~~regulates~~place ~~the~~when ~~foreign exchange matters in relation to the use of~~ a ~~special purpose~~PRC ~~vehicle,~~business orthat ~~SPV,~~is owned by PRC ~~residents~~individual(s) tois ~~seek~~sold ~~offshore equity financing and conduct “round trip investment” in China. Under Circular 37, a SPV refers~~ to ana ~~offshore~~non-PRC entity that is established or controlled, directly or indirectly, by ~~PRC~~ ~~residents~~those orsame PRC ~~entities~~individual(s). ~~for~~Under the ~~purpose~~M&A ofRule, ~~investing~~any orRound-trip ~~obtaining financing,~~Investment ~~utilizing~~must ~~assets~~be orapproved ~~interests legally held~~ by ~~such~~MOFCOM ~~domestic~~and ~~residents.~~any ~~Circular 37~~indirect ~~requires~~arrangement ~~that, before establishing~~ or ~~controlling~~series ~~a SPV, PRC residents and PRC entities are required to complete foreign exchange registration with the local offices~~ of ~~SAFE for their overseas investments. Circular 37 further~~ ~~requires~~arrangements ~~amendment~~which toachieves the ~~registration~~same inend ~~the event of any significant changes to the SPV. Failure to fulfill the required registration may~~ result inwithout ~~being prohibited from making profit distributions to~~ the ~~offshore~~approval ~~parent~~of ~~and from~~MOFCOM ~~carrying~~is ~~out~~a ~~subsequent~~violation ~~cross-border~~of ~~foreign~~PRC ~~exchange activities~~law.

AsOn weJune ~~stated~~30, ~~under~~2009, ~~Item~~Mr. 1AGuohong ~~“Risk~~Zhao, ~~factors—Risks~~our ~~Related~~Chairman toand ~~Doing Business~~CEO inand ~~China—Failure to comply with PRC regulations relating to the~~a ~~establishment~~founder of ~~offshore~~SipingJuyuan, ~~special~~entered ~~purpose~~into ~~companies~~an byoption ~~PRC~~agreement ~~residents~~with ~~may~~Ms. ~~subject our~~Jinghua ~~PRC resident stockholders to personal liability~~Zhao, ~~limit our ability to~~ ~~acquire~~the ~~PRC~~sole ~~companies~~shareholder orof ~~to inject capital into our PRC subsidiaries~~Wisetop, ~~limit~~pursuant ~~our PRC subsidiaries’ ability~~ to ~~distribute~~which ~~profits~~Mr. toGuohong usZhao orwas ~~otherwise materially~~granted ~~adversely~~an ~~affect us~~option,” weexercisable ~~have~~after ~~asked~~180 ~~our stockholders~~days, ~~who are PRC residents as defined in Circular 75,~~ to ~~register~~acquire ~~with~~all of the ~~relevant~~equity ~~branch~~interests of ~~SAFE, as then~~ ~~required,~~Wisetop inowned ~~connection~~by ~~with~~Ms. ~~their~~Jinghua ~~equity~~Zhao ~~interests~~at inan usexercise ~~and~~price ~~our acquisitions~~ of ~~equity interests in our PRC subsidiaries~~$3,246,160. ~~Circular 37 shall apply to any~~This ~~subsequent~~initial ~~amendments~~expiration ~~made~~date byof ~~our stockholders after~~ the ~~effective~~option ~~date~~was ~~of Circular~~June ~~37.~~30, ~~However~~2011, wehowever, ~~cannot~~on ~~predict~~May ~~how Circular 37 will affect our business~~16, ~~operations or future strategies. For example~~2011, ~~our~~the ~~present~~parties ~~and~~extended ~~prospective~~the ~~PRC subsidiaries’~~expiration ~~ability~~date to ~~conduct~~June ~~foreign exchange activities~~30, ~~such~~2012. asOn ~~the remittance~~November ~~of dividends and foreign currency-denominated borrowings~~29, ~~may be~~ ~~subject~~2011, toMr. ~~compliance~~Zhao ~~with~~exercised ~~Circular~~his ~~37 by our PRC resident beneficial holders~~option.

~~Mergers~~Also on June 30, 2009, Wisetop entered into separate option agreements with the other original founders of SipingJuyuan, pursuant to which such founders were granted options, exercisable after 90 days, to purchase an aggregate of 10,240,786 shares of our common stock owned by Wisetop at a total exercise price of $7,291,440. The founders exercised their options on December 17, 2010. On December 17, 2010, the founders exercised their options and ~~Acquisitions~~the shares were transferred to the founders. Wisetop owned 4,559,214 after the option exercise.

OnAfter ~~August~~Mr. 8,Guohong ~~2006,~~Zhao ~~six~~and ~~PRC~~the ~~regulatory~~founders ~~agencies~~(collectively ~~promulgated the~~referred ~~Regulation~~to onherein ~~Mergers~~as ~~and~~the ~~Acquisitions~~PRC ofIndividuals) ~~Domestic~~exercised ~~Companies~~their ~~by Foreign Investors~~options, orthey ~~the~~became ~~M&A~~our controlling ~~Rule,~~shareholders. ~~which~~Their ~~became~~acquisition ~~effective~~of onour ~~September~~equity 8interest, ~~2006. According~~or to the ~~M&A Rule~~ Acquisition, ~~a “Round-trip Investment”~~ is ~~defined~~required asto ~~having taken~~be ~~place~~registered ~~when~~with athe ~~PRC~~competent ~~business~~administration ~~that is owned by PRC individual(s) is sold to a~~of ~~non-PRC~~industry ~~entity~~and ~~that~~commerce isauthorities, ~~established~~ or ~~controlled~~AIC, ~~directly~~in orBeijing. ~~indirectly,~~The byPRC Individuals are ~~those~~required ~~same~~to ~~PRC~~make ~~individual(s).~~filings ~~Under~~with the ~~M&A~~Beijing ~~Rule~~SAFE, ~~any~~to ~~Round-trip~~register ~~Investment must~~the beCompany ~~approved by MOFCOM~~ and ~~any indirect arrangement or series of~~its ~~arrangements~~non-PRC ~~which~~subsidiaries ~~achieves~~to ~~the~~qualify ~~same~~them ~~end~~as ~~result~~SPVs, ~~without~~pursuant ~~the~~to ~~approval~~Circular of75 ~~MOFCOM~~and isCircular ~~a violation of PRC law~~106.

OnAs ~~June~~we ~~30,~~stated ~~2009,~~under ~~Mr.~~Item ~~Guohong~~1A ~~Zhao,~~“Risk ~~our~~factors—Risks ~~Chairman~~Related ~~and~~to ~~CEO~~Doing Business in China—Our business and afinancial performance may be materially ~~founder~~adversely affected if the PRC regulatory authorities determine that our acquisition of ~~Siping~~SipingJuyuan ~~Juyuan~~constitutes a Round-trip Investment without MOFCOM approval,” ~~entered~~the ~~into~~PRC anregulatory ~~option~~authorities ~~agreement~~may ~~with~~take ~~Ms.~~the ~~Jinghua~~view that the Acquisition ~~Zhao,~~and the ~~sole~~reverse ~~shareholder~~acquisition of ~~Wisetop,~~Megaway ~~pursuant~~are topart ~~which~~of ~~Mr.~~an ~~Guohong~~overall ~~Zhao~~series ~~was~~of ~~granted~~arrangements anwhich ~~option,~~constitute ~~exercisable~~a ~~after~~Round-trip ~~180~~Investment ~~days,~~because toat ~~acquire~~the ~~all~~end of these transactions the ~~equity~~PRC Individuals became the majority owners and effective ~~interests~~controlling parties of ~~Wisetop~~a ~~owned~~foreign byentity Msthat acquired ownership of our Chinese subsidiaries. ~~Jinghua~~The ~~Zhao~~PRC atregulatory anauthorities ~~exercise~~may ~~price~~also take the view that the registration of the Acquisition with the relevant AIC in Beijing and the filings ~~$3,246,160.~~with ~~This~~the ~~initial~~Beijing ~~expiration~~SAFE ~~date~~may ofnot be evidence that the ~~option~~Acquisition ~~was~~has ~~June~~been ~~30,~~properly approved ~~2011~~because the relevant parties did not fully disclose to the AIC, SAFE or ~~however,~~MOFCOM onthe ~~May~~overall ~~16,~~restructuring ~~2011~~arrangements, the ~~parties~~existence ~~extended~~of the ~~expiration~~reverse acquisition ~~date~~of toMegaway ~~June~~and 30its link with the Acquisition. If the PRC regulatory authorities take the view that the Acquisition constitutes a Round-trip Investment without MOFCOM approval, they could invalidate our acquisition and ~~2012~~ownership of our Chinese subsidiaries. OnWe ~~November~~believe 29that if this takes place, ~~2011~~we may be able to find a way to re-establish control of our Chinese subsidiaries’ business operations through a series of contractual arrangements rather than an outright purchase of our Chinese subsidiaries, Mrbut we cannot assure you that such contractual arrangements will be protected by PRC law or that we can receive as complete or effective economic benefit and overall control of our Chinese subsidiaries’ business than if the Company had direct ownership of our Chinese subsidiaries. ~~Zhao~~In ~~exercised~~addition, ~~his~~we ~~option~~cannot assure you that such contractual arrangements can be successfully effected under PRC law.

18 Employees

~~Also~~As ~~on June 30, 2009, Wisetop entered into separate option agreements with the other original founders~~ of ~~Siping~~December ~~Juyuan~~31, ~~pursuant to which such founders were granted options~~2017, ~~exercisable~~we ~~after~~employed ~~90 days, to purchase an aggregate of 10,240,786 shares of our common stock owned by Wisetop at~~ a total ~~exercise~~ ~~price~~ of ~~$7,291,440.~~616 ~~The founders exercised their options on December~~full-time ~~17, 2010~~employees. OnThe ~~December~~following ~~17,~~table ~~2010,~~sets ~~the~~forth ~~founders exercised their options and~~ the ~~shares~~ ~~were~~number ~~transferred~~of toemployees ~~the~~by ~~founders. Wisetop owned 4,559,214 after the~~function: ~~option exercise.~~

After Mr. Guohong Zhao and the founders (collectively referred to herein as the PRC Individuals) exercised their options, they became our controlling stockholders. Their acquisition of our equity interest, or the Acquisition, is required to be registered with the competent administration of industry and commerce authorities, or AIC, in Beijing. The PRC Individuals are required to make filings with the Beijing SAFE, to register the Company and its non-PRC subsidiaries to qualify them as SPVs, pursuant to Circular 75 and Circular 106.

Function	Number of Employees
Senior Management	5
Solution design	17
Sales	121
Marketing	30
Procurement	10
Production	329
Quality Control	21
R&D	50
HR &Administration	21
Finance	10
Internal Audit and Control	2
TOTAL	616

As19 we stated under Item 1A “Risk factors—Risks Related to Doing Business in China—Our business and financial performance may be materially adversely affected if the PRC regulatory authorities determine that our acquisition of Siping Juyuan constitutes a Round-trip Investment without MOFCOM approval,” the PRC regulatory authorities may take the view that the Acquisition and the reverse acquisition of Megaway are part of an overall series of arrangements which constitute a Round-trip Investment because at the end of these transactions the PRC Individuals became the majority owners and effective controlling parties of a foreign entity that acquired ownership of our Chinese subsidiaries. The PRC regulatory authorities may also take the view that the registration of the Acquisition with the relevant AIC in Beijing and the filings with the Beijing SAFE may not be evidence that the Acquisition has been properly approved because the relevant parties did not fully disclose to the AIC, SAFE or MOFCOM the overall restructuring arrangements, the existence of the reverse acquisition of Megaway and its link with the Acquisition. If the PRC regulatory authorities take the view that the Acquisition constitutes a Round-trip Investment without MOFCOM approval, they could invalidate our acquisition and ownership of our Chinese subsidiaries. We believe that if this takes place, we may be able to find a way to re-establish control of our Chinese subsidiaries’ business operations through a series of contractual arrangements rather than an outright purchase of our Chinese subsidiaries, but we cannot assure you that such contractual arrangements will be protected by PRC law or that we can receive as complete or effective economic benefit and overall control of our Chinese subsidiaries’ business than if the Company had direct ownership of our Chinese subsidiaries. In addition, we cannot assure you that such contractual arrangements can be successfully effected under PRC law.

~~Employees~~As required by applicable PRC law, we have entered into employment contracts with most of our officers, managers and employees. We are working towards entering employment contracts with those employees who do not currently have employment contracts with us. We believe that we maintain a satisfactory working relationship with our employees, and we have not experienced any significant disputes or any difficulty in recruiting staff for our operations.

AsOur ofemployees ~~December~~in ~~31,~~China ~~2016,~~participate wein ~~employed~~ a ~~total~~state ofpension ~~576 full-time~~scheme ~~employees~~organized by PRC municipal and provincial governments. ~~The~~We ~~following~~are ~~table~~currently ~~sets~~required to ~~forth~~contribute to the ~~number~~scheme at a rate of ~~employees~~30.6% byto ~~function:~~31.2% of an employee’s average monthly salary.

Function	Number of Employees
Senior Management	7
Solution design	9
Sales	11
Marketing	124
Procurement	8
Production	295
Quality Control	20
R&D	59
HR &Administration	34
Finance	7
Internal Audit and Control	2
TOTAL	576

In addition, we are required by PRC law to cover employees in China with various types of social insurance, and we believe that we are in material compliance with the relevant PRC laws.

AsInsurance required by applicable PRC law, we have entered into employment contracts with most of our officers, managers and employees. We are working towards entering employment contracts with those employees who do not currently have employment contracts with us. We believe that we maintain a satisfactory working relationship with our employees, and we have not experienced any significant disputes or any difficulty in recruiting staff for our operations.

~~Our~~We ~~employees~~maintain inproperty insurance for our premises located at Siping, China ~~participate~~where inour amain ~~state~~production ~~pension~~facilities ~~scheme~~are located. The aggregate ~~organized~~maximum amount covered by ~~PRC~~our ~~municipal~~insurance ~~and~~policy ~~provincial~~is ~~governments~~up to RMB 25.39 million (approximately $3.72 million). We ~~are~~also ~~currently~~maintain ~~required~~property insurance for our toautomobiles. ~~contribute~~We todo ~~the~~not ~~scheme~~maintain atbusiness ainterruption, ~~rate~~product ofliability insurance ~~30.6%~~or tokey-man 31life insurance.2% We believe our insurance coverage is customary and standard of ancompanies ~~employee’s~~of ~~average~~comparable size in comparable industries ~~monthly~~in ~~salary~~China. However, we cannot ensure that our existing insurance policies are sufficient to insulate us from all loses and liabilities that we may incur.

19ITEM 1A. RISK FACTORS.

InAn ~~addition,~~investment wein ~~are~~our ~~required~~common bystock ~~PRC~~involves ~~law~~a tohigh ~~cover~~degree ~~employees~~of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment ~~China~~decision. ~~with~~If ~~various~~any ~~types~~of the following risks actually occurs, our business, financial condition or results of ~~social~~operations ~~insurance~~could suffer. In that case, the trading price of our common stock could decline, and weyou ~~believe~~may ~~that~~lose weall ~~are~~or inpart of your ~~material~~investment. ~~compliance~~You ~~with~~should read the ~~relevant~~section ~~PRC~~entitled ~~laws.~~“Special Note Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.

~~Insurance~~RISKS RELATED TO OUR BUSINESS

WeOur ~~maintain~~financial ~~property~~statements ~~insurance~~indicate ~~for~~that ~~our~~there ~~premises~~is ~~located~~a atgoing ~~Siping~~concern uncertainty, ~~China~~which ~~where~~could adversely affect our ~~main~~ability ~~production~~to ~~facilities~~meet ~~are~~our ongoing ~~located~~financing needs as well as to obtain third party financing. We ~~The~~suffered ~~aggregate~~significant operating loss and negative operating cash flow while a ~~maximum~~significant amount ~~covered~~of byshort-term ~~our~~borrowings ~~insurance~~and ~~policy~~other liabilities is uprequired to be ~~RMB~~repaid ~~25.39~~in ~~million (approximately~~the ~~$3.72~~near ~~million)~~future. WeIn ~~also~~connection ~~maintain~~with ~~property~~the ~~insurance~~global ~~for~~credit ~~our~~and economic ~~automobiles.~~crisis, Wesome doof ~~not~~our ~~maintain~~customers ~~business~~experienced ~~interruption~~reduction in cash flows resulting from declines in commodity prices, ~~product~~together ~~liability~~with reduced availability of credit and ~~insurance~~increased orcosts ~~key-man~~of ~~life~~borrowing ~~insurance.~~due Weto ~~believe~~tightening ~~our~~of ~~insurance~~the ~~coverage~~credit ismarkets, had ~~customary~~significant ~~and~~adverse ~~standard~~effects on the financial conditions of ~~companies~~some of ~~comparable~~our customers. ~~size~~This could result in ~~comparable~~project ~~industries~~modifications, delays or cancellations, ingeneral ~~China.~~business ~~However~~disruptions, weand ~~cannot~~delays ~~ensure~~in, ~~that~~or ~~our~~nonpayment ~~existing~~of, ~~insurance~~amounts ~~policies~~that are ~~sufficient~~owed to ~~insulate~~ us, ~~from~~which ~~all~~could ~~loses~~have ~~and~~a ~~liabilities~~significant ~~that~~adverse weeffect ~~may~~on ~~incur~~our results of operations and cash flows.

~~ITEM~~We ~~1A.~~face ~~RISK~~risks ~~FACTORS~~related to general domestic and global economic conditions and our revenue will decrease if the industries in which our customers operate experience a protracted slowdown.

AnThe ~~investment~~uncertainty inarising ~~our~~out ~~common stock involves a high degree~~ of ~~risk.~~ ~~You~~domestic ~~should~~and ~~carefully~~global ~~consider the risks described below~~economic conditions, ~~together~~including ~~with all of~~ the ~~other~~recent ~~information~~disruption ~~included~~ in ~~this~~credit ~~report~~markets, ~~before~~poses ~~making~~a anrisk ~~investment~~to ~~decision.~~the IfPRC ~~any~~economy ofand ~~the~~may ~~following~~impact ~~risks~~our ~~actually~~ability ~~occurs,~~to ~~our~~manage ~~business,~~normal ~~financial~~relationships with ~~condition~~our orcustomers, ~~results~~suppliers ofand ~~operations could suffer~~creditors. InIf ~~that case,~~ the ~~trading~~current ~~price~~situation deteriorates ofsignificantly, our ~~common~~business ~~stock~~ could ~~decline,~~be ~~and~~materially ~~you~~negatively ~~may~~impacted, ~~lose~~as ~~all or part of your~~demand ~~investment.~~for ~~You~~our ~~should~~products ~~read~~and ~~the~~services ~~section~~may ~~entitled~~decrease ~~“Special~~from ~~Note Regarding Forward Looking Statements” above for~~ a ~~discussion~~slow-down ofin ~~what~~the ~~types of statements are~~general ~~forward-looking statements~~economy, asor ~~well~~supplier asor ~~the~~customer ~~significance~~disruptions ofmay ~~such~~result ~~statements~~from ~~in the~~tighter ~~context of this report~~credit markets.

~~RISKS~~In ~~RELATED~~addition, TObecause ~~OUR~~our ~~BUSINESS~~products mainly serve as key components in projects operated by our customers who are mostly in the chemical, metallurgical, shipbuilding, HVAC and district heating industries, we are subject to the general changes in economic conditions affecting those industry segments of the economy. If the industry segments in which our customers operate do not grow or if there is a contraction in those industries, demand for our products will decrease. Demand for our products is typically affected by a number of overarching economic factors, including, but not limited to, interest rates, the availability and magnitude of private and governmental investment in infrastructure projects and the health of the overall global economy. If there is a decline in economic activity in China and the other markets in which we operate or a protracted slowdown in industries on which we rely for our sales, demand for our products and our revenue will likewise decrease.

We20 ~~face risks related to general domestic and global economic conditions and our revenue will decrease if the industries in which our customers operate experience a protracted slowdown.~~

~~The~~Our ~~uncertainty~~industry ~~arising~~is ~~out~~very ofcompetitive ~~domestic and global economic conditions, including the recent disruption~~ in ~~credit markets, poses a risk to~~ ~~the PRC economy and may impact our ability to manage normal relationships with our customers, suppliers and creditors~~China. If the current situation deteriorates significantly, our business could be materially negatively impacted, as demand for our products and services may decrease from a slow-down in the general economy, or supplier or customer disruptions may result from tighter credit markets.

InThe ~~addition,~~domestic ~~because~~market ~~our~~for ~~products~~heat ~~mainly~~exchange ~~serve~~products asis ~~key~~fragmented ~~components~~and inhighly ~~projects~~competitive. ~~operated~~We bycompete ~~our~~with ~~customers~~over ~~who are mostly in the chemical~~1, ~~metallurgical,~~500 ~~shipbuilding~~small-sized, ~~HVAC~~local ~~and district heating industries, we are~~Chinese ~~subject~~heat toexchanger ~~the~~manufacturers. ~~general~~The ~~changes~~number ~~in economic conditions affecting those industry segments~~ of ~~the~~these ~~economy.~~companies Ifvaries ~~the~~from ~~industry~~time ~~segments in which our customers operate~~to dotime. ~~not~~While ~~grow~~we ormay ifhave ~~there~~greater isresources athan ~~contraction~~our insmaller ~~those industries~~competitors, ~~demand~~it ~~for our~~is ~~products~~possible ~~will~~that ~~decrease.~~these ~~Demand~~competitors ~~for~~have ~~our~~better ~~products~~access isin ~~typically~~certain ~~affected~~local bymarkets ~~a number of overarching economic factors, including, but not limited~~ to~~, interest~~ ~~rates,~~customers ~~the availability~~ and ~~magnitude~~prospects ~~of private~~ and ~~governmental~~lower ~~investment~~production ~~in infrastructure projects~~ and ~~the~~raw ~~health~~material ~~of the overall global economy~~costs. IfSome ~~there~~of our isproducts acompete ~~decline~~on inthe ~~economic~~basis ~~activity~~of inprice ~~China~~ and ~~the~~are ~~other~~sold ~~markets~~ in ~~which~~fragmented wemarkets with ~~operate~~low orbarriers ato ~~protracted~~entry, ~~slowdown~~allowing inless ~~industries~~expensive ondomestic ~~which~~producers weto ~~rely~~gain ~~for our sales,~~market ~~demand~~share ~~for our products~~ and reduce our ~~revenue will likewise decrease~~margins.

~~Our~~Foreign ~~industry~~competition is ~~very~~intense ~~competitive~~and incould ~~China.~~have a material adverse effect on our financial condition and results of operations.

~~The~~In addition to domestic ~~market~~competition, ~~for~~we ~~heat~~face ~~exchange~~intense competition ~~products~~from foreign competitors. The intensity of foreign competition is affected ~~fragmented~~significantly by fluctuations in the value of the U.S. dollar against Chinese currency and ~~highly~~by ~~competitive.~~the Welevel ~~compete~~of ~~with~~import ~~over~~duties ~~1,500~~imposed ~~small-sized,~~by ~~local~~the Chinese ~~heat~~government ~~exchanger~~on ~~manufacturers~~certain products. ~~The~~Our ~~number~~major ofinternational ~~these~~competitors ~~companies~~are ~~varies~~Alfa Laval ~~from~~and ~~time to time~~APV. ~~While~~Many weof ~~may~~our competitors have ~~greater~~more resources ~~than~~and ~~our~~greater ~~smaller~~brand recognition ~~competitors,~~than itwe ~~is possible~~enjoy. ~~that~~While ~~these~~our ~~competitors~~resources ~~have~~may ~~better~~not ~~access~~be inas ~~certain~~great ~~local~~as ~~markets~~our tolarger ~~customers~~competitors, ~~and~~we ~~prospects~~believe our product quality and ~~lower~~direct ~~production~~sales offices and distribution ~~raw~~network ~~material~~are ~~costs.~~superior ~~Some~~in ofChina. If our ~~products~~ ~~compete~~competitors onare ~~the~~able ~~basis~~to ofgain greater ~~price~~market ~~and~~share ~~are~~or ~~sold~~improve intheir ~~fragmented~~sales ~~markets~~efforts, ~~with~~our sales may decrease, we ~~low~~may ~~barriers~~be forced to ~~entry~~lower our prices, ~~allowing~~or ~~less~~our ~~expensive~~marketing ~~domestic~~costs ~~producers~~may toincrease, ~~gain~~all ~~market~~of ~~share~~which ~~and~~could ~~reduce~~negatively impact our ~~margins~~financial results.

~~Foreign~~A ~~competition~~significant isamount ~~intense~~of our sales revenue are derived from our largest customers and ~~could~~any ~~have~~reduction ain ~~material~~revenue from any of these ~~adverse~~customers ~~effect~~would onreduce our ~~financial~~sales ~~condition~~revenue and ~~results~~net ~~of operations~~income.

InApproximately ~~addition to domestic competition, we face intense competition from foreign competitors~~21.64% ~~The intensity~~ of ~~foreign~~our ~~competition~~sales ~~is affected~~revenue ~~significantly by fluctuations~~ in ~~the~~2017 ~~value~~came offrom ~~the U.S. dollar against~~our ~~Chinese~~top ~~currency~~ten ~~and~~customers, bywith ~~the~~our ~~level~~largest ofcustomer, ~~import~~SINOCONST, ~~duties~~accounting ~~imposed by the Chinese~~for ~~government~~approximately ~~on certain products~~3.71% ~~Our~~of ~~major~~our ~~international~~sales ~~competitors~~revenue ~~are~~in ~~Alfa Laval and APV~~2017. ~~Many~~If ofwe ~~our~~cease ~~competitors~~to ~~have~~do ~~more~~business ~~resources and~~at ~~greater~~or ~~brand~~above ~~recognition~~current ~~than~~levels wewith ~~enjoy.~~the ~~While~~top ~~our~~customers ~~resources~~or ~~may~~with ~~not~~any beother aslarge ~~great~~customers aswho ~~our~~contribute ~~larger~~significantly ~~competitors,~~to ~~we believe~~ our ~~product~~sales ~~quality~~revenue, and ~~direct~~we ~~sales offices and distribution network~~ are ~~superior~~unable into ~~China. If our competitors are~~generate ~~able~~additional ~~to gain greater market share~~ or ~~improve~~substitute ~~their~~ sales ~~efforts~~revenue, our ~~sales~~net ~~may decrease,~~income wewould ~~may be forced to lower our prices, or our marketing costs may~~decline ~~increase, all of which could negatively impact our financial results~~considerably.

20Any decrease in the availability, or increase in the cost, of raw materials could materially affect our earnings.

AOur ~~significant~~operations ~~amount~~depend heavily on the availability of various raw materials. The raw materials for our ~~sales~~operations ~~revenue~~are mainly metal plates made of stainless steel, carbon steel, titanium steel, nickel steel and other steel based alloy. The availability of raw materials may decrease and their prices may fluctuate greatly. We have long-term relationships with several suppliers; however, if our suppliers are ~~derived~~unable or unwilling to provide us with raw ~~from~~materials on terms favorable to us, we may be unable to produce certain products. This could result in a decrease in profit and damage to our ~~largest~~reputation in ~~customers~~our industry. In the event our raw material and ~~any~~energy ~~reduction~~costs increase, we may not be able to pass these higher costs on to our customers in ~~revenue~~full or at all. Any increase in the prices for raw materials or energy resources could materially increase our costs and therefore lower our earnings. Additionally, certain of our supply contracts are for fixed prices. Although we currently benefit from ~~any~~favorable pricing in some of these supply contracts, if market ~~customers~~prices ~~would~~for ~~reduce~~these ~~our~~raw ~~sales~~materials ~~revenue~~decline, we may not be able to take advantage of decreasing market prices, and ~~net~~our ~~income.~~profit margins may suffer.

~~Approximately~~Our ~~36%~~rapid ofexpansion ~~our~~could ~~sales~~significantly ~~revenue~~strain ~~in 2016 came from~~ our ~~top ten customers~~resources, ~~with~~management ~~our~~and ~~largest~~operational ~~customer,~~infrastructure ~~Liaoning~~which ~~Huiming~~could ~~International Trade~~impair ~~Co., Ltd., accounting for approximately 4% of~~ our ~~sales revenue in 2016.~~ Ifability ~~we cease~~ to domeet ~~business~~increased atdemand orfor ~~above current levels with the top customers or with any other large customers who contribute significantly to~~ our ~~sales revenue,~~products and wehurt ~~are unable to generate additional or substitute sales revenue,~~ our ~~net income would decline considerably~~business results.

~~Any~~To ~~decrease~~accommodate inour ~~the~~anticipated ~~availability~~growth, orwe ~~increase~~will inneed ~~the~~to expend ~~cost~~capital resources and dedicate personnel to implement and upgrade our accounting, ofoperational ~~raw~~and ~~materials~~internal ~~could~~management ~~materially~~systems ~~affect~~and enhance our ~~earnings~~record keeping and contract tracking system. Such measures will require us to dedicate additional financial resources and personnel to optimize our operational infrastructure and to recruit more personnel to train and manage our growing employee base. If we cannot successfully implement these measures efficiently and cost-effectively, we will be unable to satisfy the demand for our products, which will impair our revenue growth and hurt our overall financial performance.

~~Our~~21 operations depend heavily on the availability of various raw materials. The raw materials for our operations are mainly metal plates made of stainless steel, carbon steel, titanium steel, nickel steel and other steel based alloy. The availability of raw materials may decrease and their prices may fluctuate greatly. We have long-term relationships with several suppliers; however, if our suppliers are unable or unwilling to provide us with raw materials on terms favorable to us, we may be unable to produce certain products. This could result in a decrease in profit and damage to our reputation in our industry. In the event our raw material and energy costs increase, we may not be able to pass these higher costs on to our customers in full or at all. Any increase in the prices for raw materials or energy resources could materially increase our costs and therefore lower our earnings. Additionally, certain of our supply contracts are for fixed prices. Although we currently benefit from favorable pricing in some of these supply contracts, if market prices for these raw materials decline, we may not be able to take advantage of decreasing market prices, and our profit margins may suffer.

Our ~~rapid~~business ~~expansion~~is ~~could~~capital ~~significantly~~intensive ~~strain~~and our ~~resources,~~ ~~management~~growth ~~and operational infrastructure which could impair our~~strategy ~~ability~~may torequire ~~meet~~additional ~~increased~~capital ~~demand~~which ~~for~~may ~~our~~not ~~products~~be ~~and~~available ~~hurt~~on ~~our~~favorable ~~business~~terms or ~~results~~at all.

ToWe ~~accommodate~~believe that our ~~anticipated~~current ~~growth,~~cash weand cash flow from operations will ~~need~~be sufficient to ~~expend capital~~meet ~~resources~~our present and ~~dedicate~~reasonably ~~personnel~~anticipated tocapital ~~implement~~ and capital ~~upgrade~~expenditure needs given the current state of our production line for the ~~accounting~~marketing of the products. We may, ~~operational~~however, ~~and~~require ~~internal~~additional ~~management~~cash ~~systems~~resources due ~~and~~to ~~enhance~~changed business conditions, implementation of our ~~record~~strategy to expand our ~~keeping~~manufacturing ~~and~~capacity ~~contract~~or ~~tracking~~other ~~system.~~investments ~~Such~~or ~~measures~~acquisitions ~~will~~we ~~require~~may usdecide to ~~dedicate~~ ~~additional~~pursue. If our own financial resources ~~and~~are ~~personnel~~insufficient to ~~optimize~~satisfy our ~~operational~~capital ~~infrastructure~~requirements, ~~and~~we may seek to ~~recruit~~sell ~~more~~additional ~~personnel~~equity toor ~~train~~debt ~~and~~securities ~~manage~~or ~~our~~obtain additional ~~growing~~credit facilities. The sale of additional equity securities could ~~employee~~result ~~base~~in dilution to our shareholders. IfThe weincurrence ~~cannot~~of ~~successfully~~indebtedness ~~implement~~would result ~~these~~in ~~measures~~increased ~~efficiently~~debt service obligations and could require us to agree to operating and ~~cost-effectively,~~financial wecovenants ~~will~~that would restrict our operations. Financing may not be ~~unable~~available in amounts or on terms acceptable to ~~satisfy~~us, ~~the~~if ~~demand~~at ~~for~~all. ~~our~~Any failure ~~products~~by us to raise additional funds on terms favorable to us, or at all, ~~which~~could ~~will~~limit ~~impair~~our ability to expand our ~~revenue~~business ~~growth~~operations and ~~hurt~~could ~~our~~harm our overall ~~financial~~business ~~performance~~prospects.

~~Our~~We ~~business~~depend isheavily ~~capital~~on ~~intensive~~key personnel, and ~~our~~turnover ~~growth~~of ~~strategy~~key ~~may~~employees ~~require~~and ~~additional~~senior ~~capital~~management ~~which~~could ~~may~~harm ~~not~~our ~~be available on favorable terms or at all~~business.

WeOur ~~believe~~future ~~that~~business ~~our current cash~~ and ~~cash~~results ~~flow~~of ~~from~~ operations ~~will~~ bedepend ~~sufficient to meet our present and reasonably anticipated capital and~~in ~~capital~~significant ~~expenditure~~part ~~needs~~upon ~~given~~ the ~~current~~continued ~~state~~contributions of our ~~production~~key ~~line~~technical ~~for the~~and ~~marketing~~senior ofmanagement ~~the~~personnel, ~~products.~~including WeGuohong ~~may~~Zhao, ~~however,~~our ~~require~~Chairman ~~additional~~and ~~cash resources~~Chief ~~due~~Executive toOfficer. ~~changed~~They ~~business~~also ~~conditions,~~depend ~~implementation~~in ofsignificant ~~our~~part ~~strategy~~upon toour ~~expand~~ability ~~our~~to ~~manufacturing~~attract ~~capacity~~and orretain ~~other~~additional ~~investments~~qualified ormanagement, ~~acquisitions~~technical, wemarketing ~~may~~and sales ~~decide~~and ~~to pursue.~~support Ifpersonnel for our ~~own~~operations. ~~financial~~If ~~resources~~we ~~are~~lose ~~insufficient~~a tokey ~~satisfy~~employee, ~~our~~if ~~capital~~a ~~requirements,~~key weemployee ~~may~~fails ~~seek~~ to ~~sell~~perform ~~additional~~in ~~equity~~his or ~~debt~~her ~~securities~~current position, or ~~obtain additional~~if ~~credit~~we ~~facilities.~~are ~~The~~not able ~~sale~~to ofattract ~~additional~~and ~~equity~~retain ~~securities~~skilled ~~could result~~employees inas ~~dilution~~needed, to our ~~stockholders~~business could suffer. ~~The~~Significant ~~incurrence~~turnover ~~of indebtedness would result~~ in ~~increased~~our ~~debt~~senior ~~service~~management ~~obligations and~~ could ~~require~~significantly deplete usour toinstitutional ~~agree~~knowledge ~~to operating~~held ~~and~~by ~~financial~~our ~~covenants~~existing ~~that~~senior ~~would~~management ~~restrict our operations~~team. ~~Financing~~ ~~may~~We ~~not~~depend beon ~~available~~the inskills ~~amounts~~and orabilities onof ~~terms~~these ~~acceptable~~key toemployees ~~us,~~in ifmanaging ~~at all. Any~~the ~~failure~~manufacturing, bytechnical, usmarketing toand ~~raise~~sales ~~additional~~aspects ~~funds~~of onour ~~terms favorable to us~~business, orany ~~at all,~~part ~~could~~of ~~limit~~which ~~our~~could ~~ability~~be toharmed ~~expand~~by ~~our~~turnover ~~business~~in ~~operations~~the ~~and could harm our overall business prospects~~future.

WeUnexpected ~~depend~~equipment ~~heavily~~failures onmay ~~key~~damage ~~personnel,~~our ~~and~~business ~~turnover of key~~due ~~employees~~to ~~and~~production ~~senior~~curtailments ~~management~~or ~~could harm our business~~shutdowns.

~~Our~~We ~~future~~conduct ~~business~~periodic inspection and ~~results~~maintenance of ~~operations~~all ~~depend~~of inour ~~significant~~equipment ~~part~~to ~~upon~~minimize the ~~continued~~impact ~~contributions~~ of ~~our~~interruption ~~key~~of ~~technical~~production and prevent ~~senior~~breakdown ~~management~~because ~~personnel,~~this ~~including~~machinery ~~Guohong~~is ~~Zhao,~~highly ~~our~~specialized ~~Chairman~~ and ~~Chief~~cannot be repaired or ~~Executive~~replaced ~~Officer.~~without ~~They~~significant ~~also~~expense ~~depend~~and intime ~~significant~~delay. ~~part~~On ~~upon~~occasion, our ~~ability to~~equipment ~~attract~~may ~~and~~be ~~retain~~out ~~additional~~of ~~qualified~~service ~~management,~~as ~~technical,~~a ~~marketing~~result ~~and~~of unanticipated failures which may result in ~~sales~~material ~~and~~plant ~~support~~shutdowns ~~personnel~~or ~~for~~periods ~~our~~of ~~operations~~reduced production. IfInterruptions wein production ~~lose~~capabilities awill ~~key~~inevitably ~~employee,~~increase ifproduction acosts and reduce our ~~key~~sales ~~employee~~and ~~fails~~earnings. In addition to ~~perform~~equipment infailures, ~~his~~our orfacilities ~~her~~are ~~current~~also subject ~~position,~~to orthe ifrisk weof ~~are~~catastrophic ~~not~~loss ~~able~~due to ~~attract~~unanticipated ~~and retain~~events ~~skilled~~such ~~employees~~ as ~~needed~~ fires, ~~our~~explosions ~~business~~or ~~could~~adverse ~~suffer~~weather conditions. ~~Significant turnover~~Furthermore, any interruption in ~~our~~production ~~senior~~capability ~~management~~may ~~could~~require ~~significantly~~us ~~deplete~~to ~~our~~make ~~institutional knowledge~~large ~~held~~capital byexpenditures ~~our~~to remedy ~~existing~~the ~~senior~~situation, ~~management~~which ~~team.~~could Wehave ~~depend~~a negative effect on ~~the~~our ~~skills~~profitability and ~~abilities~~cash offlows. ~~these~~In ~~key~~addition, ~~employees~~longer-term inbusiness ~~managing~~disruption ~~the~~could ~~manufacturing,~~result ~~technical,~~in a ~~marketing~~loss ~~and~~of ~~sales~~customers. ~~aspects~~If ofthis ~~our~~were ~~business~~to occur, ~~any~~our ~~part~~future ofsales ~~which~~levels, ~~could~~and ~~be harmed~~therefore byour ~~turnover~~profitability, incould ~~the~~be ~~future~~adversely affected.

21Our failure to adequately protect our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights may be costly.

~~Unexpected~~We ~~equipment~~strive ~~failures~~to ~~may~~strengthen ~~damage~~and differentiate our product portfolio by developing new and efficient manufacturing processes and innovative products and product improvements. We maintain seven utility model patents and three registered trademarks and one trademark application pending registration with State Trademark Bureau of PRC as intellectual property assets. We believe that the protection of our intellectual property will become increasingly important to our business. Implementation and enforcement of intellectual property-related laws in China has historically been lacking due primarily to ambiguities in PRC intellectual property law. Accordingly, protection of intellectual property and proprietary rights in China may not be as effective as in the United States or other countries. We will continue to ~~production~~rely ~~curtailments~~on a combination of patents, trade secrets, trademarks and copyrights to provide protection in this regard, but this protection may be inadequate. For example, our pending or ~~shutdowns~~future patent applications may not be approved or, if allowed, they may not be of sufficient strength or scope. As a result, third parties may use the technologies and proprietary processes that we have developed and compete with us, which could negatively affect any competitive advantage we enjoy, dilute our brand and harm our operating results.

WeIn ~~conduct~~addition, ~~periodic~~policing ~~inspection~~the ~~and~~unauthorized ~~maintenance~~use of ~~all of~~ our proprietary ~~equipment~~technology tocan ~~minimize~~be ~~the~~difficult ~~impact~~and ofexpensive. ~~interruption~~Litigation ofmay ~~production~~be ~~and~~necessary ~~prevent~~to ~~breakdown~~enforce ~~because~~our ~~this~~intellectual ~~machinery~~property isrights ~~highly specialized~~ and ~~cannot~~given bethe ~~repaired~~relative orunpredictability ~~replaced~~of ~~without~~China’s ~~significant~~legal ~~expense~~system and ~~time~~potential ~~delay.~~difficulties Onenforcing ~~occasion, our equipment may be out of service as~~ a ~~result~~court ofjudgment ~~unanticipated failures which may result~~ in ~~material~~China, ~~plant~~there ~~shutdowns~~is orno ~~periods~~guarantee oflitigation ~~reduced~~would ~~production.~~result ~~Interruptions~~ in ~~production~~ ~~capabilities~~an ~~will~~outcome ~~inevitably~~favorable ~~increase production costs and reduce our~~to ~~sales and earnings~~us. ~~In addition to equipment failures~~Furthermore, ~~our~~any ~~facilities~~such ~~are~~litigation ~~also subject~~may tobe ~~the~~costly ~~risk~~and ofmay ~~catastrophic~~divert ~~loss~~management attention ~~due~~away tofrom ~~unanticipated~~our ~~events~~core ~~such~~business. ~~as fires,~~An ~~explosions or~~ adverse ~~weather~~determination ~~conditions.~~in ~~Furthermore,~~ any ~~interruption~~lawsuit ininvolving ~~production~~our ~~capability~~intellectual ~~may~~property ~~require~~is uslikely to ~~make~~jeopardize ~~large~~our ~~capital expenditures to~~business ~~remedy~~prospects ~~the~~and ~~situation,~~reputation. ~~which~~We ~~could~~ have ano ~~negative~~insurance ~~effect~~coverage onagainst ~~our~~litigation ~~profitability~~costs ~~and~~so ~~cash~~we ~~flows.~~would Inbe ~~addition,~~forced ~~longer-term~~to ~~business~~bear ~~disruption~~all ~~could~~litigation ~~result~~costs inif ~~a loss~~we ofcannot ~~customers.~~recover Ifthem ~~this~~from ~~were~~other toparties. ~~occur,~~All ~~our~~of ~~future~~the foregoing ~~sales~~factors ~~levels,~~could ~~and~~harm ~~therefore~~ our ~~profitability,~~business ~~could~~and befinancial ~~adversely affected~~condition.

~~Our~~22 ~~failure to adequately protect our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights may be costly.~~

WeIf ~~strive to strengthen and differentiate~~ our ~~product~~customers ~~portfolio by developing new~~ and/or ~~efficient~~the ~~manufacturing~~ultimate ~~processes~~consumers ~~and innovative products~~of ~~and~~ products product improvements. We maintain seven utility model patents and three registered trademarks and one trademark application pending registration with State Trademark Bureau of PRC as intellectual property assets. We believe that ~~the~~ ~~protection~~use of our ~~intellectual~~products ~~property~~successfully ~~will~~assert ~~become~~product ~~increasingly~~liability ~~important~~claims to against ~~our~~us ~~business. Implementation and enforcement of intellectual property-related laws in China has historically been lacking~~ due ~~primarily~~ to ~~ambiguities~~defects in ~~PRC intellectual~~our ~~property law. Accordingly~~products, ~~protection~~our ofoperating ~~intellectual~~results ~~property and proprietary rights in China~~ may ~~not~~suffer ~~be as effective as in the United States or other countries. We will continue to rely on a combination of patents, trade secrets, trademarks~~ and ~~copyrights to provide protection in this regard, but~~ ~~this protection may be inadequate. For example,~~ our ~~pending~~reputation ~~or future patent applications~~ may ~~not~~ be ~~approved or, if allowed, they may not be of sufficient strength or scope~~harmed. As a result, third parties may use the technologies and proprietary processes that we have developed and compete with us, which could negatively affect any competitive advantage we enjoy, dilute our brand and harm our operating results.

InDue ~~addition,~~to ~~policing~~ the ~~unauthorized~~high ~~use~~pressures and temperatures at which many of our ~~proprietary~~ ~~technology~~products ~~can~~are beused ~~difficult~~ and ~~expensive.~~the ~~Litigation~~fact ~~may~~that besome ~~necessary~~of ~~to enforce~~our products are relied upon by our customers ~~intellectual~~or ~~property~~end ~~rights~~users ~~and~~in ~~given~~their ~~the~~facilities ~~relative~~or ~~unpredictability~~operations, or are manufactured offor ~~China’s~~relatively ~~legal~~broad ~~system~~consumer ~~and~~use, ~~potential~~we ~~difficulties~~face ~~enforcing~~an ainherent ~~court~~risk ~~judgment~~of inexposure to ~~China~~claims in the event that the failure, ~~there~~use isor nomisuse ~~guarantee~~of ~~litigation~~our ~~would~~products results, or is alleged to result, in anbodily ~~outcome~~injury, ~~favorable~~property ~~to us.~~damage ~~Furthermore,~~or ~~any~~economic ~~such~~loss. ~~litigation~~We believe ~~may~~that bewe ~~costly~~meet ~~and~~or ~~may~~exceed ~~divert~~existing ~~management~~professional specification standards ~~attention~~recognized ~~away~~or ~~from~~required ~~our~~in ~~core~~the ~~business~~industries in which we operate. AnWe ~~adverse~~have ~~determination~~been subject to claims in ~~any~~the ~~lawsuit~~past, none of which have had a material adverse effect ~~involving~~on our ~~intellectual~~financial ~~property~~condition isor ~~likely~~results toof ~~jeopardize~~operations, ~~our~~and ~~business~~we may be subject to ~~prospects~~claims ~~and~~in ~~reputation~~the future. We ~~have~~currently nodo ~~insurance~~not ~~coverage~~maintain ~~against~~product ~~litigation~~liability ~~costs~~coverage soand wesuch ~~would~~insurance may be ~~forced~~difficult to ~~bear~~obtain ~~all~~on ~~litigation~~terms ~~costs~~acceptable ifto weus ~~cannot~~and ~~recover them~~may ~~from~~not ~~other~~cover ~~parties~~warranty claims. ~~All~~A successful product liability claim or series of claims ~~the~~against ~~foregoing~~us, ~~factors~~including one or more consumer claims purporting to constitute class actions, or a significant warranty claim or series of claims against us could ~~harm~~materially decrease our ~~business~~liquidity and ~~financial~~ impair our financial condition.

IfOur ~~our customers and/or the ultimate consumers of~~ products ~~that~~may ~~use~~become ~~our~~subject ~~products successfully assert product liability claims against us due~~ to ~~defects~~recall in ~~our~~the ~~products,~~event ~~our operating results may suffer and~~of ~~our~~defects ~~reputation~~or ~~may~~other beperformance ~~harmed~~related issues.

~~Due~~We toare ~~the~~at ~~high~~risk ~~pressures~~for ~~and~~product ~~temperatures~~recall atcosts which ~~many~~are ~~of our~~costs ~~products~~incurred ~~are~~when, ~~used~~either ~~and~~voluntarily ~~the~~or ~~fact~~involuntarily, ~~that~~a ~~some~~product ofis ~~our~~recalled through ~~products~~a ~~are~~formal ~~relied~~campaign ~~upon~~to bysolicit ~~our customers~~the orreturn ~~end~~of ~~users~~specific inproducts ~~their~~due ~~facilities~~to ora known ~~operations,~~ or ~~are~~suspected ~~manufactured for~~performance ~~relatively~~defect. ~~broad~~Costs ~~consumer~~typically ~~use,~~include wethe ~~face~~cost ~~an inherent risk~~ of ~~exposure to~~the ~~claims~~product, inpart ~~the~~or ~~event~~component ~~that~~being ~~the failure~~replaced, ~~use~~the orcost ~~misuse~~ of ~~our~~the ~~products~~recall ~~results,~~borne orby our iscustomers ~~alleged~~and labor to ~~result,~~remove inand ~~bodily~~replace ~~injury,~~the ~~property~~defective ~~damage~~part or ~~economic loss~~component. WeOur ~~believe~~products ~~that~~have wenot ~~meet~~been orthe ~~exceed~~subject ~~existing~~of ~~professional~~an ~~specification~~open ~~standards recognized~~recall. orIf ~~required~~a inrecall ~~the~~decision ~~industries~~is made, ~~in which~~ we ~~operate.~~will Weneed ~~have been subject~~ to ~~claims~~estimate in the ~~past,~~cost ~~none~~ of ~~which~~the ~~have~~recall ~~had~~and record a ~~material~~charge ~~adverse effect~~to onearnings ~~our~~in ~~financial~~that ~~condition~~period. orIn ~~results~~making ofthis ~~operations~~estimate, ~~and~~judgment weis ~~may~~required beas ~~subject~~ to ~~claims~~ in the ~~future. We currently do not maintain product liability coverage~~ ~~and~~quantity ~~such~~or ~~insurance~~volume ~~may~~to be ~~difficult~~recalled, tothe ~~obtain~~total oncost ~~terms~~of ~~acceptable~~the torecall uscampaign, ~~and may~~the ~~not~~ultimate ~~cover~~negotiated ~~warranty~~sharing ~~claims.~~of Athe ~~successful~~cost ~~product~~between ~~liability~~us ~~claim~~and orour ~~series~~distributor ofor ~~claims~~customer. ~~against~~As usa result, ~~including~~these ~~one~~estimates orare ~~more~~subject ~~consumer~~to ~~claims~~change. ~~purporting~~Excessive torecall ~~constitute~~costs ~~class actions,~~ or aour ~~significant~~failure ~~warranty~~to ~~claim~~adequately orestimate ~~series~~these ofcosts ~~claims against~~may usnegatively ~~could materially decrease~~ affect our ~~liquidity~~operating ~~and impair our financial condition~~results.

22We have limited insurance coverage and do not carry any business interruption insurance, third-party liability insurance for our manufacturing facilities or insurance that covers the risk of loss of our products in shipment.

~~Our~~Operation of our manufacturing facilities involves many risks, including equipment failures, natural disasters, industrial accidents, power outages, labor disturbances and other business interruptions. Furthermore, if any of our products are faulty, then we may become subject to ~~recall~~product liability claims or we may have to engage in ~~the~~a ~~event~~product ofrecall. We do not carry any ~~defects~~business interruption insurance, product recall or third-party liability insurance for our manufacturing facilities or with respect to our products to cover claims pertaining to personal injury or property or environmental damage arising from defaults with our products, product recalls, accidents on our property or damage relating to our operations. Therefore, our existing insurance coverage may not be sufficient to cover all risks associated with our business. As a result, we may be required to pay for financial and other ~~performance~~losses, ~~related~~damages and ~~issues~~liabilities, including those caused by natural disasters and other events beyond our control, out of our own funds, which could have a material adverse effect on our business, financial condition and results of operations.

We ~~are~~have atidentified ~~risk~~material ~~for~~weaknesses ~~product~~in ~~recall~~our ~~costs which are costs~~internal ~~incurred~~control ~~when,~~over ~~either~~financial ~~voluntarily or involuntarily, a product is recalled through a formal campaign to solicit the return of specific products due to a known or suspected performance defect~~reporting. ~~Costs~~If ~~typically~~we ~~include~~fail ~~the cost of the product, part or component being replaced, the cost of the recall borne by our customers and labor~~ to ~~remove~~develop ~~and replace the defective part~~ or ~~component.~~maintain ~~Our products have not been the subject of~~ an ~~open recall. If a recall decision is~~effective ~~made,~~system ~~we will need to estimate the cost~~ of ~~the~~internal ~~recall and record a charge to earnings in that period. In making this estimate~~controls, ~~judgment~~we ismay ~~required~~not asbe toable ~~the quantity or volume~~ to beaccurately ~~recalled,~~report ~~the total cost of the recall campaign, the~~our ~~ultimate~~financial ~~negotiated~~results ~~sharing of the cost between us~~ and ~~our~~prevent ~~distributor or customer~~fraud. As a result, ~~these~~current ~~estimates~~and ~~are~~potential shareholders ~~subject~~could tolose ~~change.~~confidence ~~Excessive~~in ~~recall costs or~~ our ~~failure~~financial tostatements, ~~adequately~~which ~~estimate~~would ~~these~~harm the ~~costs~~trading ~~may~~price ~~negatively~~of ~~affect~~ our ~~operating~~common ~~results~~stock.

WeCompanies ~~have~~that ~~limited~~file ~~insurance~~reports ~~coverage~~with the SEC, including us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management to establish and domaintain ~~not~~a ~~carry~~system ~~any~~of ~~business~~internal ~~interruption~~control ~~insurance~~over financial reporting and annual reports on Form 10-K filed under the Exchange Act to contain a report from management assessing the effectiveness of a company’s internal control over financial reporting. Separately, ~~third~~under SOX 404, as amended by the Dodd-~~party~~Frank ~~liability~~Wall ~~insurance~~Street ~~for~~Reform ~~our~~and ~~manufacturing~~Consumer ~~facilities~~Protection orAct ~~insurance~~of 2010, public companies that ~~covers~~are ~~the~~large ~~risk~~accelerated filers or accelerated filers must include in their annual reports on Form 10-K an attestation report of ~~loss~~their regular auditors attesting to and reporting on management’s assessment of ~~our~~internal control over financial reporting. ~~products~~Non-accelerated filers and smaller reporting companies are not required to include an attestation report of their auditors in ~~shipment.~~annual reports.

~~Operation~~23 of our manufacturing facilities involves many risks, including equipment failures, natural disasters, industrial accidents, power outages, labor disturbances and other business interruptions. Furthermore, if any of our products are faulty, then we may become subject to product liability claims or we may have to engage in a product recall. We do not carry any business interruption insurance, product recall or third-party liability insurance for our manufacturing facilities or with respect to our products to cover claims pertaining to personal injury or property or environmental damage arising from defaults with our products, product recalls, accidents on our property or damage relating to our operations. Therefore, our existing insurance coverage may not be sufficient to cover all risks associated with our business. As a result, we may be required to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond our control, out of our own funds, which could have a material adverse effect on our business, financial condition and results of operations.

WeA ~~have~~report ~~identified~~of ~~material~~our ~~weaknesses~~management inis ~~our~~included ~~internal control~~under ~~over~~Item ~~financial~~9A ~~reporting.~~“Controls and IfProcedures” weof ~~fail~~this toreport. ~~develop~~We orare ~~maintain~~a ansmaller ~~effective system~~reporting ofcompany ~~internal controls~~and, consequently, weare ~~may~~ not berequired ~~able~~ to ~~accurately~~include an attestation report of our auditor ~~financial~~in ~~results~~this ~~and~~annual ~~prevent fraud~~report. ~~As a result~~However, ~~current~~if and ~~potential stockholders~~when ~~could~~we ~~lose~~become ~~confidence~~subject into ~~our~~the ~~financial~~auditor attestation ~~statements~~requirements under SOX 404, ~~which~~we ~~would~~can ~~harm~~provide no assurance that we will ~~the~~receive ~~trading~~a ~~price~~positive ofattestation from our ~~common~~independent ~~stock~~auditors.

~~Companies~~During ~~that~~its ~~file~~evaluation ~~reports~~of ~~with~~ the ~~SEC,~~effectiveness ~~including~~of ~~us,~~internal ~~are~~control ~~subject~~over tofinancial ~~the~~reporting ~~requirements~~as of ~~Section~~December ~~404~~31, of2017, ~~the~~management ~~Sarbanes-Oxley~~identified ~~Act~~material weaknesses. ofWe ~~2002,~~are ~~or SOX~~undertaking ~~404.~~remedial ~~SOX~~measures, ~~404~~which ~~requires~~measures ~~management~~will take time to ~~establish~~implement and ~~maintain~~test, ato ~~system~~address ~~of internal~~this ~~control~~material ~~over~~weakness. ~~financial~~There ~~reporting~~can ~~and~~be ~~annual~~no assurance ~~reports~~that onsuch ~~Form~~measures ~~10-K~~will ~~filed under~~be sufficient to remedy the ~~Exchange~~material ~~Act~~weakness identified toor ~~contain~~that aadditional ~~report~~material ~~from~~weaknesses ~~management~~or ~~assessing~~other ~~the~~control or ~~effectiveness~~significant ofdeficiencies awill ~~company’s~~not ~~internal~~be ~~control~~identified ~~over~~in ~~financial~~the ~~reporting~~future. ~~Separately,~~ ~~under~~If ~~SOX~~we ~~404,~~continue asto experience ~~amended~~material byweaknesses ~~the~~in ~~Dodd-Frank~~our ~~Wall~~internal ~~Street~~controls ~~Reform~~or ~~and~~fail to maintain or ~~Consumer~~implement ~~Protection~~required ~~Act~~new ofor ~~2010~~improved controls, ~~public~~such ~~companies~~circumstances ~~that~~could ~~are~~cause ~~large accelerated~~us ~~filers~~to orfail ~~accelerated~~to ~~filers~~meet ~~must~~our ~~include~~periodic reporting obligations or result in ~~their~~material misstatements ~~annual~~in ~~reports~~our onfinancial ~~Form~~statements, ~~10-K an~~or ~~attestation~~adversely ~~report~~affect the results of periodic ~~their~~management ~~regular~~evaluations ~~auditors~~and, ~~attesting~~if torequired, ~~and~~annual ~~reporting~~auditor onattestation ~~management’s~~reports. ~~assessment~~Each of ~~internal~~the ~~control~~foregoing ~~over~~results ~~financial~~could ~~reporting.~~cause investors to lose confidence ~~Non-accelerated~~in ~~filers~~our reported financial information and ~~smaller~~lead ~~reporting~~to ~~companies~~a ~~are~~decline ~~not~~in ~~required~~our tostock price. ~~include~~See anItem ~~attestation~~9A ~~report~~“Controls ofand ~~their~~Procedures” ~~auditors~~for inmore ~~annual reports~~information.

ARISKS ~~report~~RELATED ofTO ~~our~~DOING ~~management~~BUSINESS isIN ~~included~~CHINA under Item 9A “Controls and Procedures” of this report. We are a smaller reporting company and, consequently, are not required to include an attestation report of our auditor in this annual report. However, if and when we become subject to the auditor attestation requirements under SOX 404, we can provide no assurance that we will receive a positive attestation from our independent auditors.

~~During~~If ~~its~~we ~~evaluation~~become ofdirectly ~~the~~subject ~~effectiveness~~to ofthe ~~internal~~recent ~~control over financial reporting as of December 31~~scrutiny, ~~2016, management identified material~~ ~~weaknesses.~~criticism ~~We are undertaking remedial measures, which measures will take time to implement~~ and ~~test,~~negative topublicity ~~address~~involving ~~this material weakness~~U.S.-listed ~~There~~Chinese ~~can~~companies, bewe nomay ~~assurance~~have ~~that such measures will be sufficient~~ to ~~remedy~~expend ~~the material weakness identified or that additional material weaknesses or other control or~~ significant ~~deficiencies~~resources ~~will~~to ~~not~~investigate beand ~~identified~~resolve in the ~~future.~~matter ~~If we continue to~~which ~~experience~~could ~~material~~harm ~~weaknesses in~~ our ~~internal~~business ~~controls~~operations, orstock ~~fail~~price toand ~~maintain~~reputation ~~or implement~~and ~~required new or improved controls, such circumstances~~ could ~~cause us to fail to meet our periodic reporting obligations or~~ result ~~in material~~ ~~misstatements~~ in ~~our~~a ~~financial~~loss ~~statements, or adversely affect the results~~ of ~~periodic~~ ~~management~~your ~~evaluations~~investment ~~and, if required, annual auditor attestation reports. Each of the foregoing results could cause investors to lose confidence~~ in our ~~reported~~stock, ~~financial~~especially ~~information~~if ~~and~~such ~~lead~~matter tocannot ~~a decline in our stock price.~~be ~~See~~addressed ~~Item 9A “Controls~~ and ~~Procedures”~~resolved ~~for more information~~favorably.

23Recently, U.S. public companies that have substantially all of their operations in China, particularly companies like us which have completed so-called reverse merger transactions, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits, SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our Company, our business and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from growing our company. If such allegations are not proven to be groundless, our company and business operations will be severely and your investment in our stock could be rendered worthless.

~~RISKS~~Adverse ~~RELATED~~changes TOin ~~DOING~~political, ~~BUSINESS~~economic INand ~~CHINA~~other policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could materially and adversely affect the growth of our business and our competitive position.

IfMost weof ~~become~~our ~~directly~~business ~~subject~~operations toare ~~the~~conducted ~~recent~~in ~~scrutiny,~~China. ~~criticism~~Accordingly, ~~and~~our ~~negative~~business, ~~publicity~~financial ~~involving~~condition, ~~U.S.-listed~~results ~~Chinese~~of ~~companies,~~operations ~~we may~~and ~~have~~prospects toare ~~expend~~affected ~~significant~~significantly ~~resources~~by toeconomic, ~~investigate~~political and ~~resolve the matter which~~legal ~~could~~developments ~~harm~~in ~~our~~China. ~~business~~The ~~operations,~~Chinese ~~stock~~economy ~~price~~differs ~~and~~from ~~reputation~~the ~~and~~economies ~~could~~of ~~result~~most indeveloped acountries ~~loss of your investment~~ in ~~our~~many ~~stock~~respects, ~~especially if such matter cannot be addressed and resolved favorably.~~including:

~~Recently,~~• ~~U.S. public companies that have substantially all of their operations in China, particularly companies like us which have completed so-called reverse merger transactions, have been~~ the ~~subject~~degree of ~~intense scrutiny,~~government ~~criticism~~involvement; ~~and~~• ~~negative publicity by investors, financial commentators and regulatory agencies, such as~~ the ~~SEC.~~level ~~Much~~ of ~~the~~development; ~~scrutiny,~~• criticism and negative publicity has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the ~~scrutiny,~~growth ~~criticism~~rate; ~~and negative~~• ~~publicity,~~ the ~~publicly~~control ~~traded stock~~ of ~~many~~foreign ~~U.S.~~exchange; ~~listed~~• Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits, SEC enforcement actions and are conducting internal and external investigations into the ~~allegations.~~allocation ~~It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our Company, our business and our stock price. If we become the subject~~ of ~~any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant~~ resources; to• ~~investigate~~an ~~such~~evolving ~~allegations~~regulatory ~~and/or defend~~system; ~~our company. This situation will be costly~~ and ~~time~~• ~~consuming~~a ~~and distract~~lack ~~our~~of ~~management~~sufficient ~~from~~transparency ~~growing our company. If such allegations are not proven to be groundless, our company and business operations will be severely and your investment~~ in ~~our~~the ~~stock~~regulatory ~~could be rendered worthless~~process.

~~Adverse~~While ~~changes~~the Chinese economy has experienced significant growth in the ~~political~~past 30 years, ~~economic~~growth has been uneven, both geographically and ~~other~~among ~~policies~~various sectors of the economy. The Chinese ~~government~~economy ~~could~~has ~~have~~also aexperienced ~~material~~certain adverse effects ~~effect~~due onto the ~~overall~~recent global financial crisis. The Chinese government has implemented various measures to encourage economic growth ofand guide ~~China,~~the ~~which~~allocation ~~could~~of ~~materially~~resources. ~~and~~Some ~~adversely~~of ~~affect~~these measures benefit the ~~growth~~overall ofChinese economy, but may also have a negative effect on us. For example, our financial ~~business~~condition and ~~our~~results ~~competitive~~of ~~position~~operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.

~~Most~~24 of our business operations are conducted in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. The Chinese economy differs from the economies of most developed countries in many respects, including:

The Chinese economy has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the ~~degree~~Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of the productive assets in China is still owned by the Chinese government. ~~involvement;~~The continued control of these assets and other aspects of the national economy by the Chinese government could materially and adversely affect our business. The Chinese government also exercises significant control over Chinese economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

Any adverse change in the ~~level~~economic ofconditions ~~development;~~or government policies in China could have a material adverse effect on overall economic growth, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our businesses.

~~the~~Future ~~growth~~government ~~rate;~~regulations or other standards could have an adverse effect on our operations.

Our operations are subject to a variety of laws, regulations and licensing requirements of national and local authorities in the ~~control~~PRC. We are required to obtain licenses or permits and to meet certain standards in the conduct of ~~foreign~~our ~~exchange;~~business. The loss of such licenses, or the imposition of conditions to the granting or retention of such licenses, could have an adverse effect on us. In the event that these laws, regulations and/or licensing requirements change, we may be required to modify our operations or to utilize resources to maintain compliance with such rules and regulations. In addition, new regulations may be enacted that could have an adverse effect on us.

Uncertainties with respect to the ~~allocation~~PRC oflegal ~~resources;~~system could limit the legal protections available to you and us.

anWe ~~evolving~~conduct ~~regulatory~~substantially all of our business through our subsidiaries in the PRC. Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to FIEs. The PRC legal system; is based on written statutes, and prior court decisions may be cited for reference but have limited precedential value. Since 1979, a series of new PRC laws and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations, and rules are not always uniform, and enforcement of these laws, regulations, and rules involve uncertainties, which may limit legal protections available to you and us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. In addition, most of our executive officers and directors are residents of China and not of the United States, and substantially all the assets of these persons are located outside the United States. As a result, it could be difficult for investors to affect service of process in the United States or to enforce a judgment obtained in the United States against our Chinese operations and subsidiaries.

aYou ~~lack~~may ofhave ~~sufficient~~difficulty ~~transparency~~enforcing injudgments ~~the~~against ~~regulatory process~~us.

~~While~~Most of our assets are located outside of the ~~Chinese~~United ~~economy~~States ~~has~~and all ~~experienced~~of ~~significant~~our ~~growth~~current operations are conducted in the ~~past~~PRC. 30In ~~years~~addition, ~~growth~~most ~~has~~of ~~been~~our directors ~~uneven,~~and ~~both~~officers ~~geographically~~are nationals and ~~among~~residents ~~various~~of countries other than the ~~sectors~~United States. A substantial portion of the ~~economy~~assets of these persons is located outside the United States. ~~The~~As ~~Chinese~~a ~~economy~~result, ~~has~~it ~~also~~may ~~experienced~~be ~~certain~~difficult ~~adverse effects~~for ~~due~~you to effect service of process within the ~~recent~~United ~~global~~States ~~financial~~upon ~~crisis~~these persons. ~~The~~It ~~Chinese~~may ~~government~~also ~~has~~be ~~implemented~~difficult ~~various~~for ~~measures~~you to ~~encourage~~enforce ~~economic~~in ~~growth~~U.S. ~~and~~courts ~~guide~~judgments on the civil liability ~~allocation~~provisions of ~~resources~~the U.S. ~~Some~~federal securities laws against us and our officers and directors, all of ~~these~~whom ~~measures~~are ~~benefit~~not residents in the ~~overall~~United ~~Chinese~~States and the ~~economy~~substantial majority of whose assets are located outside of the United States. In addition, ~~but~~there ~~may~~is ~~also~~uncertainty ~~have~~as ato ~~negative~~whether ~~effect~~the oncourts usof the PRC would recognize or enforce judgments of U.S. ~~For~~courts. ~~example,~~Our ~~our~~counsel ~~financial~~as to PRC law has ~~condition~~advised us that the recognition and ~~results~~enforcement of ~~operations~~foreign judgments are provided for under the PRC Civil Procedures Law. Courts in China may berecognize and ~~adversely~~enforce ~~affected~~foreign byjudgments ~~government~~in accordance with the requirements of the PRC ~~control~~Civil ~~over~~Procedures ~~capital~~Law ~~investments~~based on treaties between China and the country where the judgment is made or ~~changes~~on inreciprocity ~~tax~~between ~~regulations~~jurisdictions. China does not have any treaties or other arrangements that ~~are~~provide for the reciprocal recognition ~~applicable~~and enforcement of foreign judgments with the United States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates basic principles of PRC law or national sovereignty, security, or the public interest. So it is uncertain whether a PRC court would enforce a judgment rendered by a court in the United States.

~~The~~25 Chinese economy has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of the productive assets in China is still owned by the Chinese government. The continued control of these assets and other aspects of the national economy by the Chinese government could materially and adversely affect our business. The Chinese government also exercises significant control over Chinese economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

~~Any~~The ~~adverse~~PRC ~~change~~government inexerts ~~the~~substantial ~~economic~~influence ~~conditions~~over ~~or government~~the ~~policies~~manner in ~~China could have a material adverse effect on overall economic growth,~~ which inwe ~~turn~~must ~~could~~conduct ~~lead to a reduction in demand for~~ our ~~products~~business ~~and consequently have a material adverse effect on our businesses~~activities.

24The PRC government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property, and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of the jurisdictions in which we operate may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.

~~Future~~Accordingly, government ~~regulations~~actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or ~~other~~regional ~~standards~~or ~~could~~local variations in the implementation of economic policies, could have ana ~~adverse~~significant effect on ~~our~~economic conditions ~~operations~~in China or particular regions thereof and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures.

~~Our~~Future ~~operations~~inflation ~~are subject to a variety of laws, regulations and licensing requirements of national and local authorities~~ in ~~the~~China ~~PRC.~~may Weinhibit ~~are required~~our toability ~~obtain licenses or permits and~~ to ~~meet certain standards in the~~ conduct ~~of our~~ business. ~~The~~in ~~loss of such licenses, or the imposition of conditions to the granting or retention of such licenses, could have an adverse effect on us~~China. In the event that these laws, regulations and/or licensing requirements change, we may be required to modify our operations or to utilize resources to maintain compliance with such rules and regulations. In addition, new regulations may be enacted that could have an adverse effect on us.

~~Uncertainties~~In ~~with~~recent ~~respect~~years, the Chinese economy has experienced periods of rapid expansion and highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has been as high as 5.9% and as low as -0.8% . These factors have led to the ~~PRC~~adoption ~~legal~~by ~~system~~the ~~could~~Chinese government, from ~~limit~~time to time, of various corrective measures designed to restrict the availability ~~legal~~of ~~protections~~credit ~~available~~or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to ~~you~~impose controls on credit and/or usprices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products and our company.

WeRestrictions conduct substantially all of our business through our subsidiaries in the PRC. Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to FIEs. The PRC legal system is based on ~~written~~currency ~~statutes,~~exchange ~~and prior court decisions~~ may be cited for reference but have limited precedential value. Since 1979, a series of new PRC laws and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations, and rules are not always uniform, and enforcement of these laws, regulations, and rules involve uncertainties, which may limit legal protections available to you and us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. In addition, most of our ~~executive officers~~ability ~~and~~to ~~directors~~receive ~~are residents of China~~ and ~~not~~use of the United States, and substantially all the assets of these persons are located outside the United States. As a result, it could be difficult for investors to affect service of process in the United States or to enforce a judgment obtained in the United States against our ~~Chinese~~sales ~~operations and subsidiaries~~effectively.

~~You~~The majority of our sales will be settled in RMB, and any future restrictions on currency exchanges may ~~have~~limit ~~difficulty~~our ~~enforcing~~ability ~~judgments~~to ~~against~~use usrevenue generated in RMB to fund any future business activities outside China or to make dividend or other payments in U.S. dollars. Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the RMB for current account transactions, significant restrictions still remain, including primarily the restriction that FIEs may only buy, sell or remit foreign currencies after providing valid commercial documents, at those banks in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. The Chinese regulatory authorities may impose more stringent restrictions on the convertibility of the RMB.

~~Most~~In ofaddition, ~~our~~the ~~assets~~Notice ~~are located outside~~ of the ~~United~~General ~~States~~Affairs ~~and all~~Department of the ~~our~~State ~~current~~Administration ~~operations~~of ~~are~~Foreign ~~conducted~~Exchange inon the ~~PRC.~~Relevant InOperating ~~addition, most of our~~Issues ~~directors~~concerning ~~and~~the ~~officers~~Improvement ~~are~~of ~~nationals~~the ~~and~~Administration ~~residents~~ of ~~countries~~Payment ~~other~~and ~~than~~Settlement ~~the~~of ~~United~~Foreign ~~States.~~Currency ACapital ~~substantial portion~~ of ~~the~~Foreign-Invested ~~assets~~Enterprises, ofissued ~~these~~by ~~persons~~SAFE ~~is located~~and ~~outside~~effective ~~the~~as ~~United~~of ~~States.~~August As29, ~~a result~~2008, itor ~~may~~Circular be142, ~~difficult~~regulates ~~for~~the ~~you~~conversion ~~to effect~~by ~~service~~FIEs of ~~process~~foreign ~~within~~currency ~~the~~into ~~United~~RMB ~~States~~by ~~upon~~restricting ~~these~~how ~~persons.~~the Itconverted RMB may ~~also~~ be ~~difficult for you to enforce in U~~used.S. ~~courts~~Circular ~~judgments~~142 onrequires ~~the~~that ~~civil~~RMB ~~liability provisions~~converted offrom the ~~U.S. federal securities laws against us and our officers and~~foreign ~~directors,~~currency-dominated ~~all~~capital of ~~whom~~a ~~are~~FIE ~~not~~may ~~residents~~only inbe ~~the~~used ~~United~~for ~~States~~purposes ~~and~~within the ~~substantial~~business ~~majority~~scope ofapproved ~~whose~~by ~~assets are located outside of~~ the ~~United~~relevant ~~States. In~~government ~~addition,~~authority ~~there~~and ismay ~~uncertainty~~not asbe used to ~~whether~~make ~~the~~equity ~~courts~~investments ofin ~~the~~ PRC, ~~would recognize~~unless orspecifically ~~enforce~~provided ~~judgments of U~~otherwise.S. ~~courts.~~SAFE further ~~Our~~strengthened ~~counsel~~its asoversight toover ~~PRC law has advised us that~~ the ~~recognition~~flow and ~~enforcement~~use of ~~foreign~~RMB ~~judgments~~funds ~~are~~converted ~~provided~~from ~~for under~~ the ~~PRC Civil Procedures Law. Courts in China may recognize and enforce~~ foreign ~~judgments~~currency-dominated incapital ~~accordance with the requirements~~ of ~~the~~a ~~PRC Civil~~FIE. ~~Procedures~~The ~~Law~~use ~~based~~of onsuch ~~treaties~~RMB ~~between China and the country where the~~may ~~judgment is made or on reciprocity between jurisdictions. China does~~ not ~~have any~~be ~~treaties~~changed orwithout ~~other~~approval ~~arrangements~~from ~~that~~SAFE, ~~provide for the reciprocal recognition~~ and ~~enforcement~~may ofnot ~~foreign~~be ~~judgments~~used ~~with the United States. In addition, according~~ to ~~the~~repay ~~PRC Civil Procedures Law, courts in the PRC will not enforce a~~RMB ~~foreign~~loans ~~judgment against us or our directors and officers~~ if ~~they decide that~~ the ~~judgment~~proceeds ~~violates basic principles~~ of ~~PRC~~such ~~law~~loans orhave ~~national~~not ~~sovereignty, security,~~yet orbeen ~~the public interest~~used. SoAny itviolation ~~is uncertain whether a PRC court would~~of ~~enforce~~Circular a142 ~~judgment~~may ~~rendered~~result byin asevere ~~court~~penalties, inincluding ~~the~~substantial ~~United States~~fines.

~~The~~Fluctuations ~~PRC~~in ~~government~~exchange ~~exerts~~rates ~~substantial~~could ~~influence~~adversely ~~over~~affect ~~the~~our ~~manner~~business inand ~~which~~the wevalue ~~must~~of ~~conduct~~ our ~~business activities~~securities.

The ~~PRC~~value ~~government~~of ~~has~~our ~~exercised~~common ~~and~~stock ~~continues~~will tobe ~~exercise substantial~~indirectly ~~control~~affected ~~over~~by the ~~virtually~~foreign ~~every~~exchange ~~sector~~rate ofbetween the ~~Chinese~~U.S. ~~economy~~dollar ~~through regulation~~ and ~~state~~RMB ~~ownership.~~and ~~Our~~between ~~ability~~those currencies toand ~~operate~~other currencies in ~~China~~which our sales may be ~~harmed by~~denominated. ~~changes~~Appreciation inor ~~its~~depreciation ~~laws~~in ~~and~~the ~~regulations,~~value ~~including~~of ~~those~~the ~~relating~~RMB relative to ~~taxation, import~~the ~~and~~U.S. ~~export~~dollar would ~~tariffs,~~affect ~~environmental~~our ~~regulations,~~financial ~~land~~results ~~use~~reported ~~rights,~~in ~~property, and other matters~~U.S. Wedollar ~~believe~~terms ~~that~~without ~~our~~giving effect ~~operations~~to inany ~~China~~underlying ~~are~~change in ~~material compliance~~our ~~with~~business ~~all~~or ~~applicable~~results ~~legal~~of ~~and regulatory requirements~~operations. Fluctuations ~~However,~~in the ~~central~~ orexchange ~~local~~rate ~~governments~~will ofalso affect the ~~jurisdictions~~relative invalue ~~which~~of any dividend we ~~operate~~issue ~~may~~that ~~impose new,~~will ~~stricter~~be ~~regulations~~exchanged orinto ~~interpretations~~U.S. ofdollars, ~~existing~~as ~~regulations~~well ~~that~~as ~~would~~earnings ~~require~~from, ~~additional expenditures~~ and ~~efforts~~the onvalue ~~our~~of, ~~part~~any toU.S. ~~ensure~~dollar-denominated ~~our~~investments ~~compliance with~~we ~~such~~make ~~regulations~~in ~~or interpretations~~the future.

~~Accordingly,~~26 government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures.

25Since July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.

~~Future~~Very ~~inflation~~limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may ~~inhibit~~enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to ~~conduct~~ ~~business~~convert inRMB ~~China~~into foreign currencies.

InRestrictions ~~recent~~under ~~years,~~PRC ~~the~~law ~~Chinese~~on ~~economy~~our ~~has~~PRC ~~experienced~~subsidiaries’ ability ~~periods~~to ~~of rapid~~make ~~expansion~~dividends and ~~highly~~other ~~fluctuating~~distributions ~~rates~~could ofmaterially ~~inflation. During the past ten years, the rate of inflation in China has been as high as 5.9%~~ and ~~as low as~~adversely ~~-0.8%~~affect .our ~~These~~ability ~~factors have led~~ to ~~the adoption by the Chinese government~~grow, ~~from time~~make toinvestments ~~time, of various corrective measures designed to restrict the availability of credit~~ or ~~regulate~~acquisitions ~~growth~~that ~~and~~could ~~contain inflation. High inflation~~benefit ~~may~~our inbusiness, ~~the~~pay ~~future~~dividends ~~cause the Chinese government~~ to ~~impose controls on credit and/or prices~~you, ~~or to take other action, which could inhibit economic activity in China,~~ and ~~thereby~~otherwise ~~harm~~fund ~~the market for our products~~ and ~~our~~conduct ~~company~~our business.

~~Restrictions~~Substantially all of our sales are earned by our PRC subsidiaries. However, as discussed more fully under Item 1 “Business —Regulation—Dividend Distributions,” PRC regulations restrict the ability of our PRC subsidiaries to make dividends and other payments to their offshore parent company. Any limitations on ~~currency~~the ~~exchange~~ability ~~may~~of our PRC subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to ~~receive~~our business, pay dividends and ~~use~~otherwise ~~our~~fund ~~sales~~and ~~effectively.~~conduct our business.

~~The~~Failure ~~majority of our sales will be settled in RMB, and any future restrictions on currency exchanges may limit our ability~~ to ~~use~~comply ~~revenue generated~~with inPRC ~~RMB~~regulations torelating ~~fund any future business activities outside China or~~ to ~~make~~the ~~dividend~~establishment orof ~~other~~offshore ~~payments~~special inpurpose ~~U.S.~~companies ~~dollars.~~by ~~Although~~PRC ~~the~~residents ~~Chinese~~may ~~government~~subject ~~introduced~~our ~~regulations~~PRC inresident ~~1996~~shareholders to ~~allow~~personal ~~greater convertibility of the RMB for current account transactions~~liability, ~~significant~~limit ~~restrictions~~our ~~still~~ability ~~remain, including~~to ~~primarily~~acquire ~~the~~PRC ~~restriction~~companies ~~that FIEs may only buy, sell~~ or ~~remit foreign currencies after providing valid commercial documents, at those banks in China authorized~~ to ~~conduct~~inject ~~foreign~~capital ~~exchange~~into ~~business.~~PRC ~~In addition~~subsidiaries, ~~conversion~~limit ofour ~~RMB~~PRC ~~for~~subsidiaries' ~~capital~~ability ~~account items, including direct investment and loans, is subject~~ to ~~governmental~~ ~~approval~~distribute inprofits ~~China, and companies are required~~ to ~~open~~us ~~and~~or ~~maintain separate~~otherwise ~~foreign exchange accounts for capital account items. The Chinese~~materially ~~regulatory~~adversely ~~authorities~~affect ~~may impose more stringent restrictions on the convertibility of the RMB~~us.

InOn ~~addition~~July 4, ~~the~~2014, ~~Notice~~SAFE ofissued the ~~General~~Notice ~~Affairs Department of the State Administration of Foreign Exchange~~ on ~~the~~ Relevant ~~Operating~~ Issues ~~concerning~~Relating ~~the~~to ~~Improvement~~Domestic ofResidents’ ~~the~~Investment ~~Administration~~and ofFinancing ~~Payment~~ and ~~Settlement of Foreign Currency Capital of Foreign~~Round-~~Invested Enterprises, issued by SAFE and~~Trip ~~effective~~Investment asthrough ofSpecial ~~August~~Purpose 29Vehicles, ~~2008,~~ or Circular ~~142,~~37. ~~regulates~~Circular ~~the~~37 ~~conversion by~~repeals ~~FIEs~~and ofCircular ~~foreign currency into RMB by restricting how the converted RMB may be used~~75. Circular ~~142~~37 ~~requires~~regulates ~~that RMB converted from~~ the foreign ~~currency-dominated~~ ~~capital~~exchange ofmatters ain ~~FIE may only be used for purposes within the~~relation ~~business scope approved by the relevant government authority and may not be used~~ to ~~make equity investments in PRC, unless specifically provided otherwise. SAFE further strengthened its oversight over~~ the ~~flow and~~ use of ~~RMB funds converted from the foreign currency-dominated capital of~~ a ~~FIE.~~SPV ~~The~~by ~~use~~PRC ofresidents ~~such~~to ~~RMB~~seek ~~may not~~offshore beequity ~~changed~~financing ~~without approval from SAFE,~~ and ~~may not be used to repay RMB~~ ~~loans~~conduct if“round ~~the~~trip ~~proceeds~~investment” ofin ~~such loans have not yet been used~~China. ~~Any~~See ~~violation~~Item of1 “Business—Regulation—Circular ~~142~~37” ~~may~~for ~~result~~a indetailed ~~severe~~discussion ~~penalties,~~of ~~including~~Circular ~~substantial~~37 ~~fines~~and its implementation.

~~Fluctuations~~We have asked our shareholders, who are PRC residents as defined in ~~exchange~~Circular ~~rates~~75, ~~could~~to ~~adversely~~register ~~affect~~with the relevant branch of SAFE as then required in connection with their equity interests in us and our acquisitions of equity interests in our PRC subsidiaries. However, we cannot provide any assurances that they can obtain the above SAFE registrations required by Circular 37. Moreover, we cannot predict how it will affect our business operations or future strategies. For example, our present and ~~the~~prospective ~~value~~PRC subsidiaries’ ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 37 by our ~~securities.~~PRC resident beneficial holders.

~~The~~In ~~value~~addition, ofsuch ~~our~~PRC ~~common~~residents ~~stock~~may ~~will~~not always be ~~indirectly~~able ~~affected by~~to complete the ~~foreign~~necessary ~~exchange~~registration ~~rate~~procedures ~~between~~required ~~the~~by UCircular 37.S. ~~dollar~~We ~~and RMB and between those~~also ~~currencies~~have ~~and~~little ~~other~~control ~~currencies~~over ineither ~~which~~ our ~~sales~~present ~~may~~or beprospective ~~denominated. Appreciation~~direct or ~~depreciation~~indirect shareholders inor the ~~value~~outcome of ~~the~~such ~~RMB~~registration ~~relative~~procedures. toA ~~the~~failure ~~U.S.~~by ~~dollar would~~our ~~affect~~PRC ~~our~~resident ~~financial~~beneficial ~~results~~holders ~~reported~~or infuture ~~U.S.~~PRC ~~dollar~~resident ~~terms~~shareholders ~~without~~to ~~giving~~comply ~~effect~~with toCircular ~~any~~37, ~~underlying~~if ~~change~~SAFE inrequires ~~our~~it, ~~business~~could orsubject ~~results~~these ofPRC ~~operations.~~resident ~~Fluctuations~~beneficial inholders ~~the~~to ~~exchange~~fines ~~rate~~or ~~will~~legal ~~also~~sanctions, ~~affect~~restrict ~~the~~our ~~relative~~overseas ~~value of any~~or ~~dividend~~cross-border weinvestment ~~issue~~activities, ~~that~~limit ~~will~~our besubsidiaries’ ~~exchanged~~ability ~~into~~to ~~U.S.~~make distributions ~~dollars,~~or aspay ~~well~~dividends asor ~~earnings from,~~affect ~~and~~our ~~the~~ownership ~~value of~~structure, ~~any~~which ~~U.S.~~could adversely ~~dollar-denominated~~affect ~~investments~~our webusiness ~~make~~and ~~in the future~~prospects.

~~Since~~Our ~~July~~business ~~2005,~~and ~~the~~financial ~~RMB~~performance has no longer been pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may ~~appreciate~~be ~~or depreciate significantly in value against the~~materially ~~U.S.~~adversely ~~dollar~~affected inif the ~~medium~~PRC toregulatory ~~long~~authorities ~~term.~~determine ~~Moreover, it is possible~~ that ~~in the~~our ~~future~~acquisition ~~PRC~~of ~~authorities~~SipingJuyuan ~~may~~constitutes ~~lift~~a ~~restrictions~~Round-trip onInvestment ~~fluctuations~~without ~~in the RMB exchange~~MOFCOM ~~rate and lessen intervention in the foreign exchange market~~approval.

~~Very~~On ~~limited~~August ~~hedging~~8, ~~transactions~~2006, ~~are~~six ~~available~~PRC inregulatory ~~China~~agencies topromulgated the ~~reduce~~M&A ~~our~~Rule, ~~exposure~~which toregulates ~~exchange~~“Round-trip ~~rate fluctuations. To date~~Investments,” wedefined ~~have~~as ~~not~~having ~~entered~~taken ~~into~~place ~~any~~when ~~hedging~~a ~~transactions.~~PRC ~~While~~business wethat ~~may~~is ~~enter~~owned ~~into~~by ~~hedging~~PRC ~~transactions~~individual(s) ~~in the~~is ~~future,~~sold ~~the~~to ~~availability~~a non-PRC ~~and~~entity ~~effectiveness~~that ofis ~~these~~established ~~transactions~~or ~~may be limited~~controlled, ~~and~~directly weor ~~may~~indirectly, ~~not~~by those besame ~~able~~PRC ~~to successfully hedge our exposure at all~~individual(s). ~~In addition,~~See ~~our~~Item ~~foreign~~1 ~~currency~~“Business— ~~exchange~~Regulation—Mergers ~~losses may be magnified by PRC exchange~~and ~~control~~Acquisitions” ~~regulations~~for ~~that~~a ~~restrict~~detailed ~~our~~discussion ~~ability~~of tothe ~~convert~~M&A ~~RMB into foreign currencies~~Rule.

~~Restrictions~~The ~~under~~PRC regulatory authorities may take the view that PRC Individuals’ ~~law~~acquisition onof our ~~PRC~~equity ~~subsidiaries’ ability~~interest, toor ~~make~~the ~~dividends~~Acquisition, and ~~other~~the reverse ~~distributions~~acquisition ~~could~~of ~~materially~~Megaway are part of an overall series of arrangements which constitute a Round-trip Investment because at the end of these transactions, the PRC Individuals became the majority owners and ~~adversely~~effective controlling parties ~~affect~~of a foreign entity that acquired ownership of our ~~ability~~Chinese tosubsidiaries. ~~grow,~~The ~~make~~PRC regulatory ~~investments~~authorities ormay ~~acquisitions~~also take the view that ~~could~~the ~~benefit~~registration of the ~~our~~Acquisition ~~business,~~with ~~pay~~the ~~dividends~~relevant AIC in Beijing and the filings with the Beijing SAFE may not be evidence that the Acquisition has been properly approved because the relevant parties did not fully disclose to ~~you~~the AIC, ~~and~~SAFE ~~otherwise~~or ~~fund~~MOFCOM ~~and~~the overall ~~conduct~~restructuring ~~our~~arrangements, the existence of the reverse acquisition and ~~business~~its link with the Acquisition. If the PRC regulatory authorities take the view that the Acquisition constitutes a Round-trip Investment under the M&A Rule, we cannot assure you we may be able to obtain the approval required from MOFCOM.

~~Substantially~~27 all of our sales are earned by our PRC subsidiaries. However, as discussed more fully under Item 1 “Business —Regulation—Dividend Distributions,” PRC regulations restrict the ability of our PRC subsidiaries to make dividends and other payments to their offshore parent company. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

26If the PRC regulatory authorities take the view that the Acquisition constitutes a Round-trip Investment without MOFCOM approval, they could invalidate our acquisition and ownership of our Chinese subsidiaries. We believe that if this takes place, we may be able to find a way to re-establish control of our Chinese subsidiaries’ business operations through a series of contractual arrangements rather than an outright purchase of our Chinese subsidiaries, but we cannot assure you that such contractual arrangements will be protected by PRC law or that we can receive as complete or effective economic benefit and overall control of our Chinese subsidiaries’ business than if the Company had direct ownership of our Chinese subsidiaries. In addition, we cannot assure you that such contractual arrangements can be successfully effected under PRC law. If we cannot obtain MOFCOM approval if required by the PRC regulatory authorities to do so, and if we cannot put in place or enforce relevant contractual arrangements as an alternative and equivalent means of control of our Chinese subsidiaries, our business and financial performance will be materially adversely affected.

~~Failure~~Under ~~to comply with PRC regulations relating to~~ the ~~establishment~~ ofEnterprise ~~offshore~~Income ~~special~~Tax ~~purpose~~Law, ~~companies~~we ~~by PRC residents~~ may ~~subject~~be classified ~~our~~as ~~PRC~~a “resident ~~stockholders~~enterprise” toof ~~personal~~China. ~~liability,~~Such ~~limit~~classification ~~our~~will ~~ability~~likely toresult in ~~acquire~~unfavorable ~~PRC~~tax ~~companies~~consequences or to ~~inject~~us ~~capital~~and ~~into PRC subsidiaries, limit~~ our non-PRC ~~subsidiaries'~~ ~~ability to distribute profits to us or otherwise materially adversely affect us~~shareholders.

On ~~July~~March 416, ~~2014~~2007, ~~SAFE~~the ~~issued~~National People’s Congress of China passed the ~~Notice~~EIT onLaw, ~~Relevant~~and ~~Issues Relating~~on toNovember ~~Domestic~~28, ~~Residents’~~2007, ~~Investment~~the ~~and~~State ~~Financing~~Council ~~and~~of ~~Round-Trip~~China passed ~~Investment~~its ~~through~~implementing ~~Special~~rules, ~~Purpose~~which ~~Vehicles,~~took oreffect ~~Circular~~on 37January 1, 2008. ~~Circular~~Under 37the ~~repeals~~EIT Law, ~~and~~an ~~Circular~~enterprise ~~75.~~established ~~Circular~~outside 37of ~~regulates~~China ~~the~~with ~~foreign~~“de ~~exchange~~facto ~~matters~~management ~~in relation~~bodies” towithin ~~the~~China ~~use~~is ofconsidered a ~~SPV~~“resident byenterprise,” ~~PRC~~meaning ~~residents~~that toit ~~seek~~can ~~offshore~~be treated ~~equity~~in ~~financing~~a ~~and conduct~~manner ~~“round~~similar ~~trip~~to ~~investment”~~a inChinese ~~China~~enterprise for enterprise income tax purposes. See Item 1 “Business—Regulation—~~Circular 37~~Taxation” for a detailed discussion of ~~Circular 37 and~~ ~~its~~the ~~implementation~~EIT Law.

WeIt ~~have~~remains ~~asked~~unclear whether the PRC tax authorities would require or permit our ~~stockholders,~~overseas ~~who~~registered ~~are~~entities ~~PRC~~to ~~residents~~be treated as PRC resident ~~defined~~enterprises. inWe ~~Circular~~do ~~75,~~not currently consider our company to ~~register~~be ~~with~~a PRC resident enterprise. However, if the ~~relevant~~PRC ~~branch~~tax ofauthorities ~~SAFE~~determine asthat ~~then required~~we inare ~~connection~~a “resident ~~with~~enterprise” ~~their~~for ~~equity~~PRC ~~interests~~enterprise inincome ustax ~~and~~purposes, ~~our~~a ~~acquisitions~~number of ~~equity~~unfavorable ~~interests~~PRC intax ~~our~~consequences ~~PRC~~could ~~subsidiaries~~follow. ~~However~~First, we ~~cannot~~may ~~provide~~be ~~any~~subject to the ~~assurances~~enterprise ~~that~~income ~~they~~tax ~~can~~at ~~obtain~~a ~~the~~rate ~~above~~of ~~SAFE~~25% ~~registrations~~on ~~required~~our byworldwide taxable income as well ~~Circular~~as 37PRC enterprise income tax reporting obligations. ~~Moreover~~In our case, wethis ~~cannot~~would ~~predict~~mean that ~~how~~income itsuch ~~will~~as ~~affect~~interest ~~our~~on ~~business~~offering proceeds and non-China source income ~~operations~~would orbe ~~future~~subject ~~strategies.~~to ~~For~~PRC ~~example~~enterprise income tax at a rate of 25%. Second, ~~our~~although under ~~present~~the EIT Law and ~~prospective~~its implementing rules dividends paid to us from our PRC subsidiaries’ ~~ability~~may qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to ~~conduct~~a ~~foreign~~5% or 10% withholding tax, as the PRC foreign exchange ~~activities~~control authorities, ~~such~~which asenforce the withholding tax, have not yet ~~remittance~~issued guidance with respect to the processing of ~~dividends~~outbound ~~and~~remittances ~~foreign~~to entities ~~currency-denominated~~that ~~borrowings~~are treated as resident enterprises for PRC enterprise income tax purposes. Finally, ~~may~~it beis possible that future guidance issued with respect to ~~subject~~the new “resident enterprise” classification could result in a situation in which a 5% or 10% withholding tax is imposed on dividends we pay to ~~compliance~~our non-PRC shareholders and with ~~Circular~~respect 37to gains derived by our non-PRC ~~resident~~shareholders ~~beneficial~~from transferring ~~holders~~our stock.

InWe ~~addition,~~face ~~such~~uncertainty ~~PRC~~from ~~residents~~China’s ~~may not always be able to complete the necessary registration procedures required by~~ Circular ~~37. We also~~on ~~have~~Strengthening ~~little control over either our present or prospective direct or indirect stockholders or~~ the ~~outcome~~Administration of ~~such~~Enterprise ~~registration~~Income ~~procedures.~~Tax Aon ~~failure by our~~NonResident ~~PRC~~Enterprises' ~~resident~~Share ~~beneficial~~Transfer ~~holders~~that orwas ~~future~~released ~~PRC~~in ~~resident~~December ~~stockholders~~2009 ~~to comply~~ with ~~Circular 37, if SAFE requires it, could subject these PRC resident~~retroactive ~~beneficial~~effect ~~holders~~from toJanuary ~~fines or legal sanctions~~1, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects2008.

~~Our~~The ~~business~~Chinese ~~and~~State ~~financial~~Administration ~~performance~~of Taxation, or SAT, released a circular on December 15, 2009 that addresses the transfer of shares by nonresident companies, generally referred to as Circular 698. Circular 698, which was effective retroactively to January 1, 2008, may behave ~~materially~~a significant ~~adversely~~impact ~~affected~~on ifmany companies that use offshore holding companies to invest in China. Circular 698, which provides parties with a short period of time to comply with its requirements, indirectly taxes foreign companies on gains derived from the indirect sale of a Chinese company. Where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise by selling the shares in an offshore holding company, and the latter is located in a country or jurisdiction where the effective tax burden is less than 12.5% or where the offshore income of his, her, or its residents is not taxable, the foreign investor is required to provide the tax authority in charge of that Chinese resident enterprise with the relevant information within 30 days of the transfers. Moreover, where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC ~~regulatory~~tax authority will have the power to re-assess the nature of the equity transfer in accordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holding company that is used for tax planning purposes. There is uncertainty as to the application of Circular 698. For example, while the term "indirectly transfer" is not defined, it is understood that the relevant PRC tax authorities ~~determine~~have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the country or jurisdiction and to what extent and the process of the disclosure to the tax authority in charge of that ~~our~~Chinese resident enterprise. ~~acquisition~~In addition, there are not any formal declarations with regard to how to decide “abuse of ~~Siping~~form ~~Juyuan~~of ~~constitutes~~organization” and “reasonable commercial purpose,” which can be utilized by us to balance if our Company complies with the Circular 698. As a result, ~~Round-trip~~we ~~Investment~~may ~~without~~become ~~MOFCOM~~at risk of being taxed under Circular 698 and we may be ~~approval~~required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations.

On28 August 8, 2006, six PRC regulatory agencies promulgated the M&A Rule, which regulates “Round-trip Investments,” defined as having taken place when a PRC business that is owned by PRC individual(s) is sold to a non-PRC entity that is established or controlled, directly or indirectly, by those same PRC individual(s). See Item 1 “Business— Regulation—Mergers and Acquisitions” for a detailed discussion of the M&A Rule.

~~The~~We ~~PRC regulatory authorities~~ may ~~take~~be ~~the~~exposed ~~view~~to ~~that~~liabilities ~~PRC Individuals’~~under ~~acquisition of our equity interest, or~~ the ~~Acquisition, and the~~Foreign ~~reverse~~ Corrupt ~~acquisition~~Practices ofAct ~~Megaway are part of an overall series of arrangements which constitute a Round-trip Investment because at the end of these transactions, the PRC Individuals became the majority owners~~ and ~~effective controlling parties of a foreign entity that acquired ownership of our~~ Chinese ~~subsidiaries.~~ ~~The~~anti-corruption PRC regulatory authorities may also take the view that the registration of the Acquisition with the relevant AIC in Beijing and the filings with the Beijing SAFE may not be evidence that the Acquisition has been properly approved because the relevant parties did not fully disclose to the AIClaws, ~~SAFE or MOFCOM the overall restructuring arrangements, the existence of the reverse acquisition~~ and ~~its~~any ~~link with the Acquisition. If the PRC regulatory authorities~~determination ~~take the view~~ that ~~the Acquisition constitutes a Round-trip Investment under the M&A Rule,~~ we ~~cannot~~violated ~~assure~~these ~~you~~laws wecould ~~may~~have bea ~~able~~material toadverse ~~obtain~~effect ~~the~~on ~~approval~~our ~~required from MOFCOM~~business.

IfWe are subject to the ~~PRC~~Foreign ~~regulatory~~Corrupt ~~authorities~~Practice ~~take~~Act, ~~the~~or ~~view~~FCPA, and other laws that ~~the Acquisition~~prohibit ~~constitutes~~improper apayments ~~Round-trip~~or ~~Investment~~offers ~~without~~of ~~MOFCOM~~payments ~~approval,~~to ~~they~~foreign ~~could~~governments ~~invalidate~~and ~~our~~their ~~acquisition~~officials and ~~ownership~~political ofparties ~~our~~by ~~Chinese subsidiaries~~U.S. Wepersons and ~~believe~~issuers ~~that~~as ifdefined ~~this~~by ~~takes~~the ~~place~~statute, wefor ~~may~~the bepurpose ~~able~~of toobtaining ~~find~~or aretaining business. ~~way~~We tohave ~~re-establish control~~operations, ofagreements with third parties, and make most of our ~~Chinese~~sales ~~subsidiaries’~~in ~~business~~China. ~~operations~~The ~~through~~PRC aalso ~~series~~strictly prohibits bribery of government ~~contractual~~officials. ~~arrangements~~Our ~~rather~~activities ~~than~~in anChina ~~outright~~create ~~purchase~~the risk of ~~our~~unauthorized ~~Chinese~~payments or ~~subsidiaries,~~offers ~~but~~of wepayments ~~cannot~~by ~~assure~~the ~~you~~employees, ~~that~~consultants, ~~such~~sales ~~contractual~~agents, ~~arrangements~~or ~~will~~distributors beof ~~protected~~our byCompany, ~~PRC~~even ~~law~~though orthey ~~that~~may wenot ~~can~~always ~~receive~~be assubject ~~complete~~to orour ~~effective~~control. ~~economic~~It is ~~benefit~~our ~~and~~policy ~~overall~~to ~~control~~implement ofsafeguards to discourage these practices by our employees. ~~Chinese~~However, ~~subsidiaries’~~our ~~business~~existing ~~than~~safeguards ifand ~~the~~any future improvements may ~~Company~~prove ~~had~~to ~~direct~~be ~~ownership~~less ofthan ~~our~~effective, ~~Chinese~~and ~~subsidiaries.~~the Inemployees, ~~addition~~consultants, wesales ~~cannot~~agents, ~~assure~~or ~~you~~distributors ~~that~~of ~~such~~our ~~contractual~~Company ~~arrangements~~may ~~can~~engage bein ~~successfully~~conduct ~~effected~~for ~~under PRC~~which ~~law.~~we Ifmight webe ~~cannot~~held responsible. ~~obtain~~Violations ~~MOFCOM~~of ~~approval~~the ifFCPA ~~required~~or byChinese ~~the~~anti-corruption ~~PRC~~laws ~~regulatory~~may result ~~authorities~~in tosevere docriminal soor civil sanctions, and if we ~~cannot~~may ~~put~~be insubject ~~place~~to orother liabilities, ~~enforce~~which ~~relevant contractual~~could ~~arrangements~~negatively asaffect anour ~~alternative~~business, operating results and financial ~~equivalent~~condition. ~~means~~In ofaddition, ~~control~~the ~~of our~~U.S. ~~Chinese~~government ~~subsidiaries,~~may seek to hold our Company ~~business~~liable ~~and~~for ~~financial~~successor ~~performance~~liability ~~will~~FCPA beviolations committed by companies in ~~materially~~which ~~adversely~~we ~~affected~~invest or that we acquire.

27The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC. Accordingly, our public disclosure should be reviewed in light of the fact that no governmental agency that is located in China where substantially all of our operations and business are located have conducted any due diligence on our operations or reviewed or cleared any of our disclosure.

~~Under~~We are regulated by the ~~Enterprise~~SEC ~~Income~~and ~~Tax~~our ~~Law~~reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act. Unlike public reporting companies whose operations are located primarily in the United States, wehowever, substantially all of our operations are located in China. Since substantially all of our operations and business takes place in China, it may be ~~classified~~more difficult for the Staff of the SEC to overcome the asgeographic and cultural obstacles that are present when reviewing our disclosure. These same obstacles are not present for similar companies whose operations or business take place entirely or primarily in the United States. Furthermore, our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review of the China Securities Regulatory Commission, a ~~“resident~~PRC ~~enterprise”~~regulator that is tasked with oversight of the capital markets in China. ~~Such~~Accordingly, ~~classification~~you should ~~will~~review ~~likely~~our ~~result~~SEC inreports, filings and our other public pronouncements with ~~unfavorable~~the ~~tax~~understanding ~~consequences~~that tono uslocal regulator has done any due diligence on our company and with the understanding that none of our SEC reports, other filings or any of our other public pronouncements has been reviewed or otherwise been scrutinized by any local regulator risk related to non-~~PRC~~U.S. ~~stockholders~~activities of the Company's non-U.S. subsidiaries may be subject to U.S. taxation.

OnOur ~~March~~non-U.S. ~~16,~~subsidiaries ~~2007,~~may ~~the~~be ~~National~~subject ~~People’s~~to ~~Congress~~U.S. ~~of China~~taxation ~~passed~~under the ~~EIT~~tax ~~Law,~~reform. On ~~and~~December ~~on November 28~~22, ~~2007~~2017, ~~the~~President ~~State~~Trump ~~Council~~signed ofbroad ~~China~~tax ~~passed its~~reform ~~implementing~~legislation ~~rules,~~into law ~~which~~and ~~took~~certain ~~effect~~revisions onmay ~~January~~subject ~~1, 2008~~non-U.S. ~~Under~~activities ~~the~~of ~~EIT~~our ~~Law,~~non-U.S. ansubsidiaries ~~enterprise~~to ~~established~~U.S. ~~outside~~taxation offor ~~China~~their ~~with~~undistributed ~~“de~~profit. ~~facto~~We ~~management~~are ~~bodies”~~in the ~~within~~process ~~China~~of isevaluating ~~considered~~the apossible ~~“resident~~impact ~~enterprise,”~~on ~~meaning~~our ~~that~~subsidiaries. itIf ~~can be~~our ~~treated~~subsidiaries inare asubject ~~manner similar~~ to aU.S. ~~Chinese~~taxation, ~~enterprise~~our ~~for~~revenue ~~enterprise~~and income ~~tax purposes.~~may ~~See Item 1 “Business—Regulation—Taxation” for a detailed discussion of~~be ~~the~~negatively ~~EIT Law~~affected.

ItRISKS ~~remains~~RELATED ~~unclear~~TO ~~whether~~THE ~~the~~MARKET ~~PRC~~FOR ~~tax~~OUR ~~authorities~~STOCK would require or permit our overseas registered entities to be treated as PRC resident enterprises. We do not currently consider our company to be a PRC resident enterprise. However, if the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on offering proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries may qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 5% or 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a 5% or 10% withholding tax is imposed on dividends we pay to our non-PRC stockholders and with respect to gains derived by our non-PRC stockholders from transferring our stock.

WeOur ~~face~~common ~~uncertainty~~stock ~~from~~is ~~China’s~~quoted ~~Circular~~ on ~~Strengthening~~ the ~~Administration~~OTC ofMarkets ~~Enterprise~~which ~~Income Tax on NonResident~~may ~~Enterprises'~~have ~~Share~~an ~~Transfer~~unfavorable ~~that~~impact ~~was~~on ~~released~~our instock ~~December~~price ~~2009~~and ~~with retroactive effect from January 1, 2008~~liquidity.

~~The~~Our ~~Chinese~~common ~~State~~stock ~~Administration~~was ofdelisted ~~Taxation,~~from orNasdaq ~~SAT,~~Capital ~~released a~~Market ~~circular~~ on ~~December 15, 2009 that addresses the transfer of shares by~~ ~~nonresident~~January ~~companies~~26, ~~generally referred to as Circular 698~~2016. ~~Circular~~Since ~~698~~then, ~~which~~ ~~was~~our ~~effective~~common ~~retroactively~~stock tois ~~January~~quoted ~~1, 2008, may have a significant impact~~ on many companies that use offshore holding companies to invest in China. Circular 698, which provides parties with a short period of time to comply with its requirements, indirectly taxes foreign companies on gains derived from the ~~indirect~~ ~~sale~~OTC ~~of a Chinese company~~Markets. ~~Where a foreign investor indirectly~~The ~~transfers~~OTC ~~equity~~Markets ~~interests~~is in a ~~Chinese~~significantly ~~resident~~more ~~enterprise~~limited bymarket ~~selling~~than the ~~shares~~ inNew anYork ~~offshore~~Stock Exchange ~~holding company, and the latter is located in a country~~ or ~~jurisdiction~~ ~~where the effective tax burden is less than 12~~NASDAQ.5% orThe ~~where~~quotation ~~the offshore income~~ of ~~his,~~our ~~her,~~shares oron ~~its residents is not taxable,~~ the ~~foreign investor~~OTC isMarkets ~~required~~may toresult ~~provide the tax authority~~ in ~~charge of that Chinese~~ ~~resident enterprise with the relevant information within 30 days of the transfers. Moreover, where~~ a ~~foreign~~less ~~investor~~liquid ~~indirectly~~market ~~transfers~~available ~~equity interests~~for inexisting ~~a Chinese resident enterprise through an abuse of form of organization~~ and ~~there~~potential ~~are~~shareholders noto ~~reasonable commercial purposes such that the~~trade ~~corporate~~shares ~~income~~of ~~tax~~our ~~liability~~common ~~is avoided~~stock, ~~the~~could ~~PRC~~depress ~~tax authority will have~~ the ~~power~~ totrading ~~re-assess~~price ~~the nature~~ of ~~the~~our ~~equity~~common ~~transfer in accordance with PRC’s~~stock ~~“substance-over-form” principle~~ and ~~deny~~could the existence of the offshore holding company that is used for tax planning purposes. There is uncertainty as to the application of Circular 698. For example, while the term "indirectly transfer" is not defined, it is understood that the relevant PRC tax authorities have ~~jurisdiction~~ ~~regarding requests for information over~~ a ~~wide~~long-term ~~range~~adverse ofimpact ~~foreign entities~~on ~~having~~our noability ~~direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how~~ to ~~calculate~~raise ~~the~~capital ~~effective tax~~ in the ~~country or jurisdiction and to what extent~~ ~~and~~future. ~~the~~We ~~process~~plan ~~of the disclosure~~ to ~~the~~list ~~tax~~our ~~authority~~common instock ~~charge~~as ofsoon ~~that~~as ~~Chinese resident enterprise~~practicable. ~~In addition~~However, ~~there~~we ~~are~~cannot ~~not~~assure ~~any~~you ~~formal~~that ~~declarations~~we ~~with regard~~will ~~to how to decide “abuse of form of organization” and “reasonable commercial purpose,” which can~~ be ~~utilized by us~~ able to ~~balance~~meet ~~if our Company complies with~~ the ~~Circular~~initial ~~698.~~listing Asstandards ~~a result, we may become at risk~~ of ~~being taxed~~any ~~under~~stock ~~Circular~~exchange, ~~698 and we may be required to expend valuable resources to comply with Circular 698~~ or ~~to establish~~ that we ~~should~~will ~~not~~ be ~~taxed under~~ ~~Circular~~able ~~698,~~to ~~which~~maintain ~~could~~any ~~have~~such ~~a material adverse effect on our financial condition and results of operations~~listing.

We29 may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we violated these laws could have a material adverse effect on our business.

We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business. We have operations, agreements with third parties, and make most of our sales in China. The ~~PRC~~market ~~also~~price ~~strictly prohibits bribery~~ of ~~government officials. Our activities in China create the risk of unauthorized payments or offers of payments by the employees, consultants, sales agents, or distributors of~~ our ~~Company,~~common ~~even though~~stock ~~they may not always be subject to our control. It~~ is ~~our~~volatile, ~~policy to~~leading ~~implement safeguards~~ to ~~discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and~~ the ~~employees,~~possibility ~~consultants, sales agents, or distributors~~ of ~~our Company~~its ~~may~~value ~~engage~~being indepressed ~~conduct~~at ~~for~~a ~~which~~time wewhen ~~might~~you ~~be held responsible. Violations of the FCPA or Chinese anti-corruption laws~~ may ~~result~~want ~~in severe criminal or civil sanctions, and we may be subject~~ to ~~other liabilities, which could~~ ~~negatively~~sell ~~affect~~your ~~our business, operating results and financial condition~~holdings. ~~In addition, the U.S. government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.~~

28The market price of our common stock is volatile, and this volatility may continue. Numerous factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. In addition to market and industry factors, the price and trading volume for our common stock may be highly volatile for specific business reasons. Factors such as variations in our revenues, earnings and cash flow, announcements of new investments, cooperation arrangements or acquisitions, and fluctuations in market prices for our products could cause the market price for our shares to change substantially. Moreover, the trading market for our common stock will be influenced by research or reports that industry or securities analysts publish about us or our business. If one or more analysts who cover us downgrade our common stock, the market price for our common stock would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the market price for our common stock or trading volume to decline.

~~The~~Furthermore, ~~disclosures~~securities inmarkets ~~our~~may ~~reports~~from ~~and~~time ~~other~~to ~~filings~~time experience ~~with~~significant ~~the SEC~~price and ~~our~~volume ~~other~~fluctuations ~~public~~for ~~pronouncements~~reasons ~~are~~unrelated ~~not subject~~ to operating ~~the~~performance ~~scrutiny~~ of ~~any regulatory~~particular ~~bodies in the PRC~~companies. ~~Accordingly,~~These ~~our~~market ~~public~~fluctuations ~~disclosure should be~~may ~~reviewed~~adversely inaffect ~~light of~~ the ~~fact~~price ~~that no governmental agency that is located in China where substantially all~~ of our ~~operations~~common stock and ~~business~~other ~~are~~interests ~~located~~in ~~have~~our ~~conducted~~company ~~any~~at ~~due~~a ~~diligence~~time onwhen ~~our~~you ~~operations~~want orto ~~reviewed~~sell oryour ~~cleared~~interest ~~any~~in ~~of our disclosure~~us.

~~We are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the~~ Securities ~~Act~~class ~~and~~action ~~the~~litigation ~~Exchange Act.~~is ~~Unlike~~often ~~public~~instituted ~~reporting~~ against companies ~~whose~~following ~~operations~~periods ~~are~~of ~~located~~volatility ~~primarily~~ in ~~the~~ ~~United~~their ~~States,~~stock ~~however, substantially all of our operations are located in China~~price. ~~Since~~This ~~substantially~~type ~~all~~ of ~~our operations and business takes place in~~ ~~China,~~litigation itcould ~~may~~result be more difficult for the Staff of the SEC to overcome the geographic and cultural obstacles that are present when reviewing our disclosure. These same obstacles are not present for similar companies whose operations or business take place entirely or primarily in ~~the~~substantial ~~United~~costs ~~States. Furthermore, our SEC reports and other disclosure and public pronouncements are not subject~~ to ~~the~~us ~~review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports~~ and ~~other~~divert ~~filings are not subject to the review of the China Securities Regulatory Commission, a PRC regulator that is tasked with oversight of the capital markets in China. Accordingly, you should review~~ our ~~SEC reports, filings and our other public pronouncements with~~management’s ~~the~~attention ~~understanding that no local regulator has done any due diligence on our company~~ and ~~with the understanding that none of our SEC reports, other filings or any of our other public pronouncements has been reviewed or otherwise been scrutinized by any local regulator~~resources.

~~RISKS~~We ~~RELATED~~may TObe ~~THE~~subject ~~MARKET~~to ~~FOR~~penny ~~OUR~~stock ~~STOCK~~regulations and restrictions and you may have difficulty selling shares of our common stock.

The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is ~~quoted~~a on“penny stock” and is subject to Rule 15g-9 under the ~~OTC~~Exchange ~~Markets~~Act, ~~which~~or ~~may~~the Penny Stock Rule. This rule imposes ~~have~~additional ansales ~~unfavorable~~practice ~~impact~~requirements on ~~our~~broker-dealers ~~stock~~that ~~price~~sell such securities to persons other than established customers and ~~liquidity~~“accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.

~~Our~~For ~~common~~any ~~stock~~transaction ~~was~~involving ~~delisted~~a ~~from~~penny ~~Nasdaq Capital Market on January 26~~stock, ~~2016.~~unless ~~Since then~~exempt, ~~our common stock is quoted on~~ the ~~OTC Markets. The~~ ~~OTC~~rules ~~Markets~~require isdelivery, aprior ~~significantly~~to ~~more~~any ~~limited~~transaction ~~market~~in ~~than~~penny ~~the~~stock, ~~New~~of ~~York~~a ~~Stock~~disclosure ~~Exchange~~schedule orprepared ~~NASDAQ.~~by ~~The~~the ~~quotation~~SEC ofrelating ~~our~~to ~~shares on~~ the ~~OTC~~penny ~~Markets~~stock ~~may~~market. ~~result~~Disclosure inis aalso ~~less~~required ~~liquid~~to ~~market~~be ~~available~~made ~~for~~about ~~existing~~sales ~~and~~commissions ~~potential~~payable ~~stockholders~~ to ~~trade shares~~both ~~of our common stock, could depress~~ the ~~trading price of our common stock~~ ~~and could have a long~~broker-~~term~~dealer ~~adverse~~and ~~impact~~the onregistered ~~our~~representative ~~ability~~and tocurrent ~~raise~~quotations ~~capital~~for in the ~~future~~securities. WeFinally, ~~plan~~monthly tostatements ~~list~~are ~~our~~required ~~common~~to ~~stock~~be assent ~~soon as practicable. However, we~~disclosing ~~cannot~~recent ~~assure~~price ~~you~~information ~~that~~for wethe ~~will~~penny bestock ~~able~~held toin ~~meet~~ the ~~initial~~account ~~listing~~and ~~standards of~~information ~~any~~on ~~stock~~the ~~exchange,~~limited ormarket ~~that~~in wepenny ~~will be able to maintain any such listing~~stock.

~~The~~There ~~market~~can ~~price~~be ofno assurance that our common stock iswill ~~volatile~~qualify for exemption from the Penny Stock Rule. In any event, ~~leading~~even if our common stock towere exempt from the ~~possibility~~Penny Stock Rule, we would remain subject to Section 15(b)(6) of ~~its~~the ~~value~~Exchange ~~being~~Act, ~~depressed~~which atgives the SEC the authority to restrict any person from participating in a ~~time~~distribution ~~when~~of ~~you~~penny ~~may~~stock, ~~want~~if tothe SEC finds ~~sell~~that ~~your~~such ~~holdings~~a restriction would be in the public interest.

~~The~~We ~~market~~do ~~price~~not ofintend ~~our common stock is volatile, and this volatility may continue. Numerous factors, many of which are beyond our control, may cause the market price of our common stock~~ to ~~fluctuate~~pay ~~significantly.~~dividends ~~In addition to market and industry factors, the price and trading volume~~ for our common stock may be highly volatile for specific business reasons. Factors such as variations in our revenues, earnings and cash flow, announcements of new investments, cooperation arrangements or acquisitions, and fluctuations in market prices for our products could cause the ~~market price for our shares to~~foreseeable ~~change substantially~~future. Moreover, the trading market for our common stock will be influenced by research or reports that industry or securities analysts publish about us or our business. If one or more analysts who cover us downgrade our common stock, the market price for our common stock would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the market price for our common stock or trading volume to decline.

29For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.

~~Furthermore,~~30 securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in our company at a time when you want to sell your interest in us.

~~Securities~~Certain ~~class~~provisions ~~action~~of ~~litigation~~our isArticles ~~often~~of ~~instituted~~Incorporation ~~against~~may ~~companies~~make ~~following~~it ~~periods~~more ofdifficult ~~volatility~~for ina ~~their~~third ~~stock~~party ~~price. This type of litigation could result in substantial costs~~ to useffect ~~and divert our management’s~~a ~~attention and resources~~change-of-control.

WeOur Articles of Incorporation authorize our board of directors to issue up to 10,000,000 shares of preferred stock. The preferred stock may be issued ~~subject~~in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by the shareholders. These terms may include voting rights including the right to ~~penny~~vote as ~~stock~~a ~~regulations~~series on particular matters, preferences as to dividends and liquidation, ~~restrictions~~conversion rights, redemption rights and ~~you~~sinking ~~may~~fund ~~have~~provisions. ~~difficulty~~The ~~selling~~issuance of ~~shares~~any preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of such common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change-in-control, which in turn could prevent our shareholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock.

~~The~~ITEM ~~SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5~~1B.00 ~~per~~UNRESOLVED ~~share~~STAFF ~~or an exercise price of less than $5~~COMMENTS.00 per share, subject to certain exemptions. Our common stock is a “penny stock” and is subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.

~~For~~Not any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock marketapplicable. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

~~There~~ITEM ~~can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule~~2. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interestPROPERTIES.

WeLand doUse ~~not~~Rights ~~intend to pay dividends for the foreseeable future.~~

~~For~~There ~~the~~is ~~foreseeable~~no ~~future,~~private weland ~~intend~~ownership toin ~~retain~~China. ~~any~~Individuals ~~earnings to~~and ~~finance~~companies ~~the~~are ~~development~~permitted ~~and~~to ~~expansion~~acquire ofland ~~our~~use ~~business,~~rights ~~and~~for wespecific dopurposes. ~~not anticipate~~We ~~paying~~were ~~any~~granted ~~cash~~land ~~dividends~~use onrights ~~our~~from ~~common~~the ~~stock.~~PRC ~~Accordingly,~~government ~~investors~~for ~~must~~136,776.6 ~~be prepared~~square ~~to rely on sales~~ meters of ~~their~~four ~~common~~land ~~stock~~slots ~~after~~located ~~price~~at ~~appreciation~~No.5 toNanhuan ~~earn an~~Road, ~~investment~~Tiexi ~~return~~District, ~~which~~Siping ~~may never occur. Investors seeking cash dividends~~City, ~~should~~Jilin ~~not~~Province, ~~purchase our common stock~~China. ~~Any~~The ~~determination~~land touse ~~pay~~rights ~~dividends in the future~~ will beexpire ~~made~~on atDecember ~~the~~8, ~~discretion of our board of directors and will depend~~2056, onDecember ~~our~~30, ~~results of operations~~2056, ~~financial~~December ~~condition~~30, ~~contractual restrictions~~2057, ~~restrictions~~ ~~imposed by applicable law~~ and ~~other~~May ~~factors~~18, ~~our~~2062 ~~board deems relevant~~respectively.

~~Certain~~Mortgages ~~provisions~~were created over the land use rights of ~~our~~the ~~Articles~~three land lots with an area of ~~Incorporation~~17,682.78 ~~may~~square meters, 11,619.6 square meters and ~~make~~7,227.22 itsquare ~~more~~meters, ~~difficult~~respectively. ~~for~~Such amortgages ~~third~~are ~~party~~used tofor ~~effect~~securing aour ~~change-~~indebtedness with Industrial and Commercial Bank of~~-control~~ China, Siping Branch. We believe that all our properties have been adequately maintained, are generally in good condition and are suitable and adequate for our business.

~~Our~~Buildings Articles of Incorporation authorize our board of directors to issue up to 10,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by the stockholders. These terms may include voting rights including the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of such common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock.

~~ITEM~~Our 1Bmanufacturing facilities are based in Siping City, Jilin Province, China. ~~UNRESOLVED~~The ~~STAFF~~total ~~COMMENTS~~floor area of our facility is approximately 17,482 square meters. The production portion of the facility is approximately 11,275 square meters. Our research and development center is approximately 1,164 square meters and our executive office building, garage, and dormitory are approximately 5,043 square meters. We currently have two production lines for plate heat exchangers with an annual capacity of 500,000 square meters and one welding workshop with an annual capacity of 3,000 tons. Our welding facility is located on a 36,530 square meter plot of land for which we own the land use right.

~~Not~~We ~~applicable~~currently own eleven buildings covered by ten Property Ownership Certificates issued by Siping City Housing Administration Bureau. All the buildings are located at No.5 Nanhuan Road, Tie Xi District, Siping City. The building with an area of 4,633.93 square meters was mortgaged to secure our indebtedness to Industrial and Commercial Bank of China, Siping Branch on August 10, 2018.

30Our new workshop, which began operations in October 2009, has a floor area of 7,356 square meters and a new production line for plate heat exchangers with a designed capacity of 200,000 square meters.

~~ITEM~~31 ~~2. PROPERTIES.~~

~~Land~~Buildings ~~Use~~under ~~Rights~~Construction

~~There~~Our isthird noworkshop ~~private~~and ~~land ownership~~our inresearch ~~China.~~center, ~~Individuals~~located ~~and~~at ~~companies~~the south ~~are~~side ~~permitted~~of toNanhuan ~~acquire~~Road, ~~land~~Tie ~~use rights~~Xi ~~for~~District, ~~specific~~Siping ~~purposes~~City, are under construction. We ~~were~~have ~~granted~~obtained ~~land~~a ~~use~~License ~~rights~~for ~~from~~Construction ~~the~~Land ~~PRC government~~Planning ~~for 136,776~~(Ref.6 ~~square~~Di Zi ~~meters~~No. of200802050) ~~four~~issued ~~land~~by ~~slots located at Tiexi District,~~ Siping City, ~~Jilin~~Construction ~~Province,~~Bureau ~~China. The land use rights will expire~~ on ~~December~~July 825, ~~2056~~2008, which ~~December~~shows ~~30,~~that ~~2056,~~the ~~December~~land ~~30,~~area ~~2057~~approved ~~and~~for ~~May~~our ~~18,~~above-mentioned ~~2062~~construction is 11, ~~respectively~~781 square meters.

~~Mortgages were~~We ~~created~~also ~~over~~acquired ~~the~~a ~~land~~License ~~use~~for ~~rights~~Construction ofProject ~~the four land lots with an area of 17,682~~Planning (Ref.78 ~~square~~Jian ~~meters,~~Zi ~~11,619~~No.6 ~~square~~200803043) ~~meters,~~issued ~~7,227.22~~on ~~square~~September ~~meters and 100~~5,~~247 square~~ ~~meters,~~2008 ~~respectively.~~by ~~Such mortgages are used for securing our indebtedness with China Agriculture Bank,~~ Siping ~~Branch~~City Construction Bureau. WeThe ~~believe~~License shows that ~~all our~~the ~~properties~~area ~~have~~of ~~been~~construction ~~adequately~~will ~~maintained~~be 7,716 ~~are~~square ~~generally in good condition and are suitable and adequate for our business~~meters.

~~Buildings~~Leased Properties

Our manufacturing facilities are based in Siping City, Jilin Province, China. The total floor area of our facility is approximately 17,482 square meters. The production portion of the facility is approximately 11,275 square meters. Our research and development center is approximately 1,164 square meters and our executive office building, garage, and dormitory are approximately 5,043 square meters. We currently ~~have~~lease ~~two~~nine ~~production~~real ~~lines~~properties ~~for~~as representative ~~plate~~offices ~~heat~~in ~~exchangers~~Qingdao ~~with an annual capacity of 500,000 square meters~~ and ~~one welding workshop with an annual capacity of 3,000 tons~~Harbin. ~~Our welding facility is located on a 36,530 square meter plot of land for which we own the land use right.~~

WeITEM ~~currently own ten buildings covered by ten Property Ownership Certificates issued by Siping City Housing Administration Bureau~~3. ~~All~~LEGAL ~~the buildings are located at No~~PROCEEDINGS.5 Nanhuan Road, Tie Xi District, Siping City. The buildings with an area of 29,292 square meters were mortgaged to secure our indebtedness to China Agriculture Bank, Siping Branch on September 10, 2015.

~~Our~~From ~~new~~time ~~workshop~~to time, ~~which~~we ~~began~~may ~~operations~~become involved in ~~October~~various ~~2009~~lawsuits and legal proceedings, ~~has~~which ~~a floor~~arise, ~~area~~in the ordinary course of 7business. However,~~356~~ litigation ~~square~~is ~~meters~~subject to inherent uncertainties, and aan ~~new~~adverse ~~production~~result ~~line~~in ~~for~~these, or ~~plate~~other ~~heat~~matters, may arise from time to time that may harm our business. We are ~~exchangers~~currently ~~with~~not aware of any such legal proceedings or claims that we believe will have a ~~designed~~material ~~capacity~~adverse ofeffect ~~200~~on our business,~~000~~ ~~square~~financial ~~meters.~~condition, cash flows or operating results.

~~Leased~~ITEM ~~Properties~~4. MINE SAFETY DISCLOSURES.

WeNot ~~currently lease two real properties as representative offices in Qingdao and Harbin~~applicable.

~~ITEM~~PART 3.II ~~LEGAL PROCEEDINGS.~~

~~From~~ITEM ~~time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business~~5. ~~However, litigation~~MARKET isFOR ~~subject~~REGISTRANT’S toCOMMON ~~inherent uncertainties~~EQUITY, ~~and~~RELATED anSTOCKHOLDER ~~adverse~~MATTERS ~~result~~AND inISSUER ~~these, or~~PURCHASES ~~other~~OF ~~matters,~~EQUITY ~~may arise from time to time that may harm our business~~SECURITIES. ~~We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition, cash flows or operating results.~~

~~ITEM~~Market 4.Information ~~MINE SAFETY DISCLOSURES.~~

~~Not~~Our ~~applicable.~~common stock is traded on the Nasdaq Capital Market under the symbol “THTI.”

31The following table sets forth, for the periods indicated, the high and low closing prices of our common stock. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

PART II

		Closing Prices⁽¹⁾
		High		Low
*Year Ended December 31, 2017*
1^stQuarter	$	0.28	$	0.15
2^ndQuarter		0.25		0.12
3^rdQuarter		0.20		0.16
4^thQuarter		0.27		0.16

*Year Ended December 31, 2016*
1^stQuarter	$	0.60	$	0.13
2^ndQuarter		0.34		0.15
3^rdQuarter		0.28		0.16
4^thQuarter		0.26		0.19

~~ITEM~~(1) 5.The ~~MARKET~~above ~~FOR~~table ~~REGISTRANT’S~~sets ~~COMMON~~forth ~~EQUITY,~~the ~~RELATED~~range ~~STOCKHOLDER~~of ~~MATTERS~~high ~~AND~~and ~~ISSUER~~low ~~PURCHASES~~closing OFprices ~~EQUITY~~per ~~SECURITIES~~share of our common stock as reported by quotemedia.com for the periods indicated.

~~Market~~32 ~~Information~~

~~Our~~Approximate ~~common~~Number ~~stock~~of isHolders ~~traded~~of onOur ~~the~~Common ~~Nasdaq~~Stock ~~Capital Market under the symbol “THTI.”~~

~~The~~As ~~following~~of ~~table~~April ~~sets forth~~17, ~~for the periods indicated~~2018, ~~the high~~there ~~and~~were ~~low~~approximately ~~closing~~797 ~~prices~~holders of record of our common stock. ~~These~~This ~~prices~~number ~~reflect inter-dealer~~excludes ~~prices,~~the ~~without~~shares ~~retail~~of ~~mark-up,~~our ~~mark-down~~common orstock owned ~~commission,~~byshareholders ~~and~~holding ~~may not~~stock ~~represent~~under ~~actual~~nominee ~~transactions.~~security position listings.

		Closing Prices(1)
		High		Low
Year Ended December 31, 2016
1st Quarter	$	0.60	$	0.13
2nd Quarter		0.34		0.15
3rd Quarter		0.28		0.16
4th Quarter		0.26		0.19
Year Ended December 31, 2015
1st Quarter	$	0.85	$	0.46
2nd Quarter		1.02		0.47
3rd Quarter		1.24		0.85
4th Quarter		1.23		0.94

Dividend Policy

~~(1)~~We ~~The~~have ~~above~~never ~~table~~declared ~~sets~~dividends ~~forth~~or ~~the~~paid ~~range~~cash dividends. Any future decisions regarding dividends will be made by our board of ~~high~~directors. We currently intend to retain and ~~low~~use ~~closing~~any ~~prices~~future ~~per~~earnings ~~share~~for the development and expansion of our ~~common~~business ~~stock~~and asdo ~~reported~~not byanticipate ~~quotemedia~~paying any cash dividends in the foreseeable future.~~com~~ ~~for~~Our board of directors has complete discretion on whether to pay dividends, subject to the ~~periods~~approval ~~indicated~~of our shareholders. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant

~~Approximate~~Securities ~~Number~~Authorized offor ~~Holders~~Issuance ofUnder ~~Our~~Equity ~~Common Stock~~ Compensation Plans

AsWe ofdo ~~April~~not ~~12,~~have ~~2017,~~any ~~there~~compensation ~~were~~plans ~~approximately~~in ~~797~~effect ~~holders~~under ~~of record~~which of our ~~common stock. This number excludes the shares of our common stock~~ ~~owned~~equity bysecurities ~~stockholders~~are ~~holding~~authorized ~~stock~~for ~~under nominee security position listings~~issuance.

~~Dividend~~Recent ~~Policy~~Sales of Unregistered Securities

We have ~~never~~not ~~declared~~sold ~~dividends or paid cash dividends. Any future decisions regarding dividends will be made by our board of directors. We currently intend to retain and use~~ any ~~future~~equity ~~earnings~~securities ~~for~~during the ~~development~~2017 ~~and~~fiscal ~~expansion~~year ofthat ~~our~~were ~~business and do~~ not ~~anticipate~~previously ~~paying~~disclosed ~~any cash dividends~~ in ~~the foreseeable~~a ~~future.~~quarterly ~~Our~~report ~~board of directors has complete discretion~~ on ~~whether~~Form ~~to pay~~10-Q ~~dividends,~~or ~~subject to the approval of our stockholders. Even if our board of~~a ~~directors~~current ~~decides~~report toon ~~pay~~Form ~~dividends,~~8-K ~~the~~that ~~form,~~was ~~frequency~~filed ~~and~~during ~~amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that~~ the ~~board~~ of2017 ~~directors~~fiscal ~~may deem relevant~~ year.

~~Securities~~Purchases ~~Authorized~~of ~~for Issuance Under~~ Equity ~~Compensation Plans~~Securities

WeNo dorepurchases ~~not~~of ~~have~~our ~~any~~common ~~compensation~~stock ~~plans~~were inmade ~~effect~~during ~~under~~the ~~which our~~fourth ~~equity~~quarter ~~securities~~of ~~are authorized for issuance~~2017.

~~Recent~~ITEM ~~Sales~~6. ofSELECTED ~~Unregistered~~FINANCIAL ~~Securities~~DATA.

WeNot have not sold any equity securities during the 2016 fiscal year that were not previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K that was filed during the 2016 fiscal yearapplicable.

~~Purchases~~ITEM of7. ~~Equity~~MANAGEMENT’S ~~Securities~~DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

NoThe ~~repurchases~~following ofmanagement’s discussion and analysis should be read in conjunction with our ~~common~~financial ~~stock~~statements ~~were~~and ~~made~~the ~~during~~notes thereto and the other ~~fourth~~financial information appearing elsewhere in this report. In addition to ~~quarter~~historical ofinformation, ~~2016~~the following discussion contains certain forward-looking information. See “Special Note Regarding Forward Looking Statements” above for certain information concerning those forward-looking statements. Our financial statements are prepared in U.S. dollars and in accordance with United States generally accepted accounting principles.

32Overview

~~ITEM~~We 6are a leading total solution provider in the heat exchange industry. ~~SELECTED~~Our ~~FINANCIAL~~major ~~DATA~~products are plate heat exchangers, heat exchanger units, air-cooled heat exchangers and shell-and-tube heat exchangers. Unlike most other heat exchanger manufacturers in China, we not only provide heat exchange products, but also provide total solutions to our customers. As a total solutions provider, we analyze the working condition of our customers, provide optimized designs based on analysis and simulation, offer high quality heat exchange products, and continuously assist our customers in improving the heat exchange process.

~~Not~~Over ~~applicable~~the past ten years, we have successfully completed over 3,000 projects in more than 15 industries, including metallurgy, heat and power, petrochemical, food and beverage, pharmaceutical and shipbuilding. We have provided heat exchange solutions to Fortune 500 companies, including Shell, BP, BASF, LG, Sinopec and China Shenhua. We have also provided heat exchange products for important Chinese and international projects such as the Beijing 2008 Olympics Wukesong Sports Center, Guangdong Lin’ao nuclear plant and BASF Chemical plant in Germany.

~~ITEM~~33 ~~7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.~~

~~The~~Our ~~following~~operations ~~management’s~~are ~~discussion~~headquartered ~~and analysis should be read~~ in ~~conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. In addition to historical information~~Siping, ~~the~~Jilin ~~following discussion contains certain~~Province, ~~forward-looking information~~PRC. ~~See~~Our ~~“Special~~primary ~~Note~~Chinese ~~Regarding~~operating ~~Forward~~subsidiaries ~~Looking Statements” above for certain information concerning those forward looking statements. Our financial statements~~ are ~~prepared~~Siping inJuyuan ~~U.S. dollars~~ and inBeijing ~~accordance with United States generally accepted accounting principles~~Juyuan.

~~Overview~~Financial Performance Highlights

WeThe ~~are~~following ~~a leading total solution provider in the heat exchange industry. Our major products~~ are ~~plate~~some ~~heat~~financial ~~exchangers,~~highlights ~~heat~~for exchanger units, air-cooled heat exchangers and shell-and-tube heat exchangers. Unlike most other heat exchanger manufacturers in China, we not only provide heat exchange products, but also provide total solutions to our customers. As a total solutions provider, we analyze the working condition of our customers, provide optimized designs based on analysis and simulation, offer high quality heat exchange products, and continuously assist our customers in improving the heat exchange process. year:

~~Over~~• ~~the~~Sales ~~past~~revenue: ~~ten~~Sales ~~years~~revenue increased by $17.63 million, weor ~~have~~37.05%, ~~successfully~~to ~~completed~~$65.22 ~~over 3~~million for 2017,~~000~~ ~~projects~~from in$47.59 ~~more~~million ~~than~~for 152016. ~~industries~~• Gross profit: Gross profit increased by $1.60 million, ~~including~~or ~~metallurgy~~10.07%, ~~heat~~to ~~and~~$17.50 ~~power~~million for 2017, ~~petrochemical~~ from $15.90 million for 2016. As a percentage of sales revenue, ~~food~~gross ~~and~~profit ~~beverage~~decreased by 6.57% to 26.84% for 2017 from 33.41% for 2016. • Net loss attributable to THT Heat Transfer Technology, ~~pharmaceutical~~Inc. ~~and~~common ~~shipbuilding~~shareholders: Net loss attributable to THT Heat Transfer Technology, Inc. Wecommon ~~have provided~~shareholders ~~heat~~increased ~~exchange~~by ~~solutions~~$6.13 million, or 188.67%, to ~~Fortune~~$2.88 ~~500~~million ~~companies~~for 2017, ~~including~~from ~~Shell~~net income attributable to THT Heat Transfer Technology, BPInc. common shareholders of $3.25 million for 2016. • Net loss attributable to non-controlling interest: As of December 31, ~~BASF~~ 2017, LGwe had a 98.82% controlling economic interest and 100% voting interest in SipingJuyuan. As of December 31, ~~Sinopec~~2016, we had a 100% controlling economic interest and ~~China~~100% ~~Shenhua~~voting interest in SipingJuyuan. We ~~have~~consolidate ~~also~~SipingJuyuan’s ~~provided~~operating ~~heat~~results ~~exchange products~~ for ~~important~~financial ~~Chinese~~statement ~~and~~purposes. ~~international~~Net ~~projects~~loss ~~such~~attributable asto non-controlling interest represents the ~~Beijing 2008~~portion ~~Olympics~~of ~~Wukesong~~net ~~Sports~~loss attributable to the Jilin Province Technology Fund Operation and Service Center (the “Center”). • Fully diluted loss per share attributable to THT Heat Transfer Technology, ~~Guangdong~~Inc. ~~Lin’ao~~common ~~nuclear~~shareholders: ~~plant~~Fully ~~and~~diluted ~~BASF Chemical~~loss ~~plant~~per inshare ~~Germany~~attributable to THT Heat Transfer Technology, Inc. common shareholders was $0.14 for 2017, as compared to fully diluted earnings per share attributable to THT Heat Transfer Technology, Inc. common shareholders of $0.16 for 2016.

~~Our~~Principal ~~operations~~Factors ~~are~~Affecting ~~headquartered~~our ~~in Siping, Jilin Province,~~Financial ~~PRC. Our primary Chinese operating subsidiaries are Siping Juyuan and Beijing Juyuan.~~ Performance

~~Financial~~We ~~Performance~~believe ~~Highlights~~that the following factors will continue to affect our financial performance:

• China’s Strong Commitment to the Environment. In March 2013, China’s Premier Li Keqiang “declared war” on pollution at China’s annual parliamentary session. Environmental quality in China has become inseparable from economic growth. The ~~following~~Chinese ~~are~~government ~~some~~has ~~financial~~been ~~highlights~~demonstrating strong commitment to tackle environmental issues. In the green initiatives such as the TMSR program supported by the government, our products may play an important role to improve energy efficiency and reduce waste. We expect our R&D efforts will go in line with China’s green agenda and contribute to a better environment. • Growth of China’s Urbanization and Industrialization. According to China Heat Association, the annual growth rate of the heat exchange industry in China is expected to be 101% from 2012 to 2017. This growth is fueled by rapid industrialization and manufacturing industries developing in China. If this growth continues, we believe that we will be able to sustain our growth and continue to be a leader in the heat exchange industry in China. • • PRC Regulations. China has looked favorably on the heat exchange industry and has loosened regulations to promote manufacturing growth in China, which ultimately benefits the Company and similarly situated companies. The Chinese government committed to promote the development of China’s urbanization, which includes the heat exchange industry, through, among other things, tax incentives, import/export support and capital support. In addition, the stimulus package offered by the Chinese government will provide market opportunities for us. As long as China continues to promote economic growth and allows manufacturing companies to grow and expand their operations, we expect our operations will be positively affected by PRC regulations. • China’s Economic Growth. China’s economic growth rate was 6.9% in 2017, faster than in 2016. The growing economic in 2017 has affected several industries we serve, especially the ~~year:~~industries with excessive capacity such as petrochemical, metallurgical and shipbuilding industries. The economic recovery may promote us to achieve our adjusted product structure and strategies to expand to serve more sustainable industries.

•34 Sales revenue: Sales revenue increased by $1.62 million, or 3.53%, to $47.59 million for 2016, from $45.96 million for 2015. • Gross profit: Gross profit increased by $4.4 million, or 38.25%, to $15.90 million for 2016, from $11.50 million for 2015. As a percentage of sales revenue, gross profit increased by 8.39% to 33.41% for 2016 from 25.02% for 2015. • Net income attributable to stockholders: Net income attributable to our stockholders increased by $2.68 million, or 474.30%, to $3.25 million for 2016, from $0.57 million for 2015. • Fully diluted net income per share: Fully diluted net income per share was $0.16 for 2016, as compared $0.03 for 2015.

33Taxation

~~Principal~~The ~~Factors~~Company ~~Affecting~~is ~~our~~a ~~Financial~~Nevada ~~Performance~~corporation that is subject to U.S. corporate income tax on its taxable income at a rate of up to 21% for taxable years beginning after December 31, 2017 and U.S. corporate income tax on its taxable income of up to 35% for prior tax years. Recent U.S. federal tax legislation, commonly referred to as the Tax Cuts and Jobs Act (the “2017 Act”), was signed into law on December 22, 2017. The 2017 Act significantly modified the U.S. Internal Revenue Code by, among other things, reducing the statutory U.S. federal corporate income tax rate from 35% to 21% for taxable years beginning after December 31, 2017; limiting and/or eliminating many business deductions; migrating the U.S. to a territorial tax system with a one-time transition tax on a mandatory deemed repatriation of previously deferred foreign earnings of certain foreign subsidiaries; subject to certain limitations, generally eliminating U.S. corporate income tax on dividends from foreign subsidiaries; and providing for new taxes on certain foreign earnings. Taxpayers may elect to pay the one-time transition tax over eight years or in a single lump sum.

WeThe ~~believe~~2017 ~~that~~Act also includes provisions for a new tax on GILTI effective for tax years of foreign corporations beginning after December 31, 2017. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of controlled foreign corporations (“CFCs”), subject to the ~~following~~possible ~~factors~~use ~~will~~of ~~continue~~foreign tax credits and a deduction equal to ~~affect~~50 ~~our~~percent ~~financial~~to ~~performance:~~offset the income tax liability, subject to some limitations. The Company’s management is still evaluating the effect of the 2017 Act on the Company. Management may update its judgment of that effect based on its continuing evaluation and on future regulations or guidance issued by the U.S. Department of the Treasury, and specific actions the Company may take in the future.

~~China’s~~To ~~Strong~~the ~~Commitment~~extent tothat portions of the ~~Environment~~Company’s U.S. Intaxable income, ~~March~~such ~~2013, China’s~~as ~~Premier~~Subpart LiF ~~Keqiang~~income ~~“declared~~or ~~war”~~GILTI, onare ~~pollution~~determined atto ~~China’s~~be ~~annual~~from sources ~~parliamentary~~outside ~~session~~of the U.S., ~~Environmental~~subject ~~quality~~to incertain ~~China~~limitations, ~~has~~the ~~become~~Company ~~inseparable from~~may ~~economic~~be ~~growth.~~able ~~The~~to claim ~~Chinese~~foreign ~~government~~tax ~~has~~credits ~~been~~to ~~demonstrating~~offset ~~strong commitment~~its toU.S. ~~tackle~~income ~~environmental~~tax ~~issues~~liabilities. InIf dividends that the ~~green~~Company ~~initiatives~~receives ~~such~~from ~~as the~~its ~~TMSR~~subsidiaries ~~program~~are ~~supported~~determined byto be from sources outside of the ~~government~~U.S., ~~our~~subject ~~products~~to ~~may~~certain ~~play~~limitations, anthe Company ~~important~~will ~~role~~generally not be required to ~~improve~~pay ~~energy~~U.S. ~~efficiency~~corporate ~~and~~income ~~reduce~~tax ~~waste~~on those dividends. WeAny ~~expect~~liabilities ~~our R&D~~for ~~efforts~~U.S. ~~will~~corporate goincome intax ~~line~~will ~~with~~be ~~China~~accrued in the Company’s ~~green~~consolidated ~~agenda~~statements of income and ~~contribute~~comprehensive toincome a(loss) and ~~better~~estimated ~~environment~~tax payments will be made when required by U. S. law.

~~Growth~~On ofDecember ~~China’s~~22, ~~Urbanization~~2017, the Securities and Exchange Commission ~~Industrialization~~staff issued Staff Accounting Bulletin No. ~~According~~188 (“SAB 118”), which provides guidance on accounting for the tax effects of the 2017 Act. SAB 118 provides a measurement period that should not extend beyond one year from the 2017 Act enactment date for companies to ~~China~~complete ~~Heat~~the ~~Association~~accounting under ASC 740, Income Taxes. In accordance with SAB 118, companies are not required to report provisional amounts for any specific income tax effects of the ~~annual~~2017 Act for ~~growth~~which ~~rate~~a reasonable estimate cannot be determined, and would continue to apply ASC 740 based on the provisions of the ~~heat~~tax ~~exchange~~laws ~~industry~~that were in ~~China~~effect immediately prior to the enactment of the 2017 Act. The Company’s management is ~~expected~~in tothe process beof ~~200%~~gathering ~~from~~information and evaluating the amount of U.S. corporate ~~2015~~income tax based on the deemed repatriation to ~~2016~~the United States of the Company’s share of previously deferred earnings of certain non-U.S. ~~This~~subsidiaries of ~~growth~~the isCompany ~~fueled~~mandated by ~~rapid~~the ~~industrialization~~2017 Act, and a reasonable estimate cannot be ~~manufacturing~~determined ~~industries~~at ~~developing~~this point in ~~China~~time. IfAs ~~this~~such, ~~growth~~no ~~continues~~provision of the one-time transition tax was made for the year ended December 31, we2017. Management may ~~believe~~update ~~that~~its wejudgment ~~will~~of bethat ~~able~~effect tobased ~~sustain~~on ~~our~~its ~~growth~~continuing evaluation and ~~continue~~on future toregulations beor aguidance ~~leader~~issued by the U.S. Department of Treasury, and inspecific action the ~~heat~~Company ~~exchange~~may ~~industry~~take in ~~China~~the future.

~~PRC~~Megaway ~~Regulations.~~was ~~China~~incorporated ~~has looked favorably on the heat exchange industry and has loosened regulations to promote manufacturing growth~~ in ~~China, which ultimately benefits~~ the ~~Company and similarly situated companies. The Chinese government committed to promote the development of China’s urbanization~~BVI, ~~which~~but ~~includes~~is ~~the~~not ~~heat~~subject exchange industry, through, among other things, tax incentives, import/export support and capital support. In addition, the stimulus package offered by the Chinese government will provide market opportunities for us. As long as China continues to ~~promote~~ ~~economic~~taxation ~~growth~~in ~~and~~that ~~allows manufacturing companies to grow and expand their operations, we expect our operations will be positively affected by PRC regulations~~jurisdiction.

~~China’s~~Star ~~Slow~~Wealth ~~Economic~~was ~~Growth.~~incorporated ~~China’s~~in ~~economic~~Hong ~~growth~~Kong ~~rate~~and under the current ~~was~~laws ~~6.7%~~of inHong ~~2016~~Kong, ~~weakest~~is insubject 24to ~~years.~~a ~~China~~Profits ~~government's~~Tax ~~supply~~of ~~side~~16.5% ~~reforms is~~. ~~used~~However, inno ~~traditional~~provision for ~~manufacturing.~~Hong ItKong isProfits ~~beneficial~~Tax ~~for~~has ~~the~~been ~~development~~made ~~of heat~~as ~~exchange~~Star ~~industry~~Wealth inhas ~~China.~~no taxable income.

~~Taxation~~According to the PRC’s central government policy, new or high technology companies will enjoy preferential tax treatment of 15%, instead of 25% under the EIT Law. On September 17, 2014, Siping Juyuan was granted the High and New Technology Enterprise status which entitled it to a 15% preferential income tax rate for a period of three years from 2014 to 2017. Beijing Juyuan, being a Sino-foreign joint venture enterprise, was entitled to two years’ EIT exemption, from the first profit making calendar year of operations after offset of accumulated taxable losses, followed by a 50% tax reduction for the immediate next three calendar years. This tax holiday commenced in the fiscal year of 2008. Beijing Juyuan was therefore subject to EIT at the rate of 12.5% during the year ended December 31, 2012. Beijing Juyuan ceased to be a Sino-foreign joint venture after we acquired 25% equity interest in Beijing Juyuan from Hanyang International GmbH (“Hanyang”), our foreign business partner, in May 2013. Beijing Juyuan was subject to EIT at the standard rate of 25% during the years ended December 31, 2017 and 2016.

~~The~~35 Company is subject to United States tax at a tax rate of 34%. No provision for income taxes in the United States has been made as the Company has no income taxable in the United States. Megaway was incorporated in the BVI, but is not subject to taxation in that jurisdiction.

~~Star~~See ~~Wealth~~Item ~~was~~1 ~~incorporated~~“Business in– ~~Hong~~Regulation ~~Kong~~– ~~and~~Taxation” ~~under~~for ~~the~~a ~~current~~detailed ~~laws~~description of ~~Hong~~the ~~Kong,~~EIT isLaw ~~subject~~and totax aregulations ~~Profits~~applicable ~~Tax~~to ofour ~~16.5% . However, no provision~~PRC ~~for Hong Kong Profits Tax has been made as Star Wealth has no taxable income~~subsidiaries.

~~According~~Results ~~to the PRC’s central government policy, new or high technology companies will enjoy preferential tax treatment~~ of ~~15%,~~Operations instead of 25% under the EIT Law. On September 17, 2014, Siping Juyuan was granted the High and New Technology Enterprise status which entitled it to a 15% preferential income tax rate for a period of three years from 2014 to 2017. Beijing Juyuan, being a sino-foreign joint venture enterprise, was entitled to two years’ EIT exemption, from the first profit making calendar year of operations after offset of accumulated taxable losses, followed by a 50% tax reduction for the immediate next three calendar years. This tax holiday commenced in the fiscal year of 2008. Beijing Juyuan was therefore subject to EIT at the rate of 12.5% during the year ended December 31, 2012. Beijing Juyuan ceased to be a sino-foreign joint venture after we acquired 25% equity interest in Beijing Juyuan from Hanyang International GmbH (“Hanyang”), our foreign business partner, in May 2013. Beijing Juyuan was subject to EIT at the standard rate of 25% during the years ended December 31, 2016 and 2015.

34The following table sets forth key components of our results of operations for fiscal years ended December 31, 2017 and 2016.

See Item 1 “Business – Regulation – Taxation” for a detailed description of the EIT Law and tax regulations applicable to our PRC subsidiaries.

		Year Ended December 31,						$		%
		2017			2016			Change		Change
Sales revenue-third parties	$	65,134,385		$	46,277,202		$	18,857,183		40.75
Sales revenue-related party		81,893			1,309,522			(1,227,629	)	(93.75	)
Total sales revenues		65,216,278			47,586,724			17,629,554		37.05
Total cost of revenues		(47,714,817	)		(31,686,457	)		(16,028,360	)	50.58
Gross profit		17,501,461			15,900,267			1,601,194		10.07
Operating expenses:
General and administrative expenses		7,166,261			5,578,919			1,587,342		28.45
Research and development expenses		2,278,003			1,967,158			310,845		15.80
Selling expenses		10,827,401			5,949,034			4,878,367		82.00
Loss (gain) on disposal of property, plant and equipment		342			(1,050,322	)		1,050,664		(100.03	)
Total operating expenses		20,272,007			12,444,789			7,827,218		62.90
Income (Loss) from operations		(2,770,546	)		3,455,478			(6,226,024	)	(180.18	)
Interest income		14,656			16,387			(1,731	)	(10.56	)
Other income		722,313			456,304			266,009		58.30
Finance costs		(342,299	)		(157,690	)		(184,609	)	117.07
Investment income		29,445			79,509			(50,064	)	(62.97	)
Other expenses		(487,058	)		(87,678	)		(399,380	)	455.51
Income (loss) before income taxes		(2,833,489	)		3,762,310			(6,595,799	)	(175.31	)
Income taxes expense		(44,083	)		(514,649	)		470,566		(91.43	)
Net income (loss)		(2,877,572	)		3,247,661			(6,125,233	)	(188.60	)
Net income attributable to non-controlling interests		2,267			-			2,267		100.00
Net income (Loss) attributable to THT Heat transfer Technology, Inc. common shareholders	$	(2,879,839	)	$	3,247,661		$	(6,127,500	)	(188.67	)

~~Results~~Sales revenue. Our sales revenue is generated from sales of ~~Operations~~heat exchange products. Sales revenue increased by $17.63 million, or 37.05%, to $65.22 million in 2017 from $47.59 million in 2016. Our sales volume in 2017 amounted to 3,697 units, an increase of 812 units, from 2,885 units in 2016. Such increase was mainly due to increased sales revenue from plate heat exchanger, heat exchange unit and other products in 2017, as compared with 2016. Sales revenue from plate heat exchange increased by $4.37 million, or 22.80%, to $23.54 million in 2017 from $19.17 million in 2016. Sales revenue from heat exchange units increased by $8.86 million, or 42.29%, to $29.81 million in 2017 from $20.95 million in 2016. We generated more revenue from plate heat exchange and heat exchange unit as the economy became better in 2017 compared with in 2016 since we were in the cyclical industry. Sales revenue from other products increased by $4.56 million, or 68.99%, to $11.17 million in 2017 from $6.61 million in 2016. We generated more revenue from selling other products as the economy became better, and we are trying to sell our aged raw materials and replenish our stock with the newer ones to stable the profit line and respond to supply-side structural reform of by the Chinese government.

The following table ~~sets~~shows ~~forth~~our ~~key~~sales ~~components~~revenue ofby ~~our~~product ~~results of operations~~ for ~~fiscal~~ the years ended December 31, ~~2016~~2017 and ~~2015.~~2016:

		Year Ended December 31,				$ Change	% Change
		2016		2015
Sales revenue-third parties	$	46,277,202	$	45,706,371	$	$570,831	1.25
Sales revenue-related party		1,309,522		257,674		1,051,848	408.21
Total sales revenues		47,586,724		45,964,045		1,622,679	3.53
Cost of sales revenue-third parties		(31,686,457)		(34,325,572)		2,639,115	(7.69)
Cost of sales revenue-related party		-		(136,962)		136,962	(100.00)
Total cost of sales revenue		(31,686,457)		(34,462,534)		2,776,077	(8.06)
Gross profit		15,900,267		11,501,511		4,398,756	38.25
Operating expenses (income):
Administrative expenses		5,578,919		4,929,870		649,049	13.17
Research and development expenses		1,967,158		2,054,740		(87,582)	(4.26)
Selling expenses		5,949,034		4,626,004		1,323,030	28.60
Loss (Gain) on disposal of property, plant and equipment		(1,050,322)		16,102		(1,066,424)	6622.93
Total operating expenses		12,444,789		11,626,716		818,073	7.04
Income (loss) from operations		3,455,478		(125,205)		3,580,63	2,859.86
Interest income		16,387		12,418		3,969	31.96
Other income		456,304		683,771		(227,467)	(33.27)
Finance costs		(157,690)		(84,331)		(73,359)	(86.99)
Investment income		79,509		91,604		(12,095)	(13.20)
Other expenses		(87,678)		(12,756)		(74,922)	587.35
Income before income taxes		3,762,310		565,501		3,196,809	565.31
Income taxes		(514,649)		-		(514,649)	100
Net income	$	3,247,661	$	565,501	$	2,682,160	474.30

Sales revenue. Our sales revenue is generated from sales of heat exchange products. Sales revenue increased by $1.62 million, or 3.53%, to $47.59 million in 2016 from $45.96 million in 2015.Our sales volume in 2016 amounted to 2,885units, a decrease of 175 units or 5.72%, from 3,060 units in 2015. Such decrease was mainly due to increase in unit price. Sales revenue from plate heat exchangers decreased by $1.73 million, or 8.28%, to $19.17 million in 2016 from $20.90 million in 2015. Sales revenue from heat exchange units increased by $5.16 million, or 32.71%, to $20.95 million in 2016 from $15.79 million in 2015.Such increase was mainly due to increased sales orders of heat exchange units . Sales revenue from air coolers decreased by $0.51 million, or 100%, to $nil million in 2016 from $0.51 million in 2015. Air-cooled heat exchangers are long production cycle products. We stopped receiving orders for air coolers in 2016.

		Year Ended December 31,
		2017			2016
		$	%		$	%
Plate heat exchanger	$	23,542,851	36	$	19,170,010	40
Heat exchange unit		29,810,517	46		20,951,276	44
Air-cooled heat exchanger		344,367	0.5		-	-
Shell-and-tube heat exchanger		349,251	0.5		852,347	2
Others		11,169,292	17		6,613,091	14
TOTAL	$	65,216,278	100	$	47,586,724	100

35Cost of sales. Our cost of sales is primarily comprised of the costs of our raw materials, labor and factory overhead. Our cost of sales increased by $16.02 million, or 50.58%, to $47.71 million in 2017 from $31.69 million in 2016. Cost of sales as a percentage of sales revenue were 73.16% and 66.59 % for 2017 and 2016, respectively. The increase in cost of sales was mainly attributable to increase in sales and our recognition of inventory obsolescence on obsolete inventories due to production upgrade in 2017.

~~The~~Gross ~~following~~profit. ~~table~~Our ~~shows~~gross profit is equal to the difference between our sales revenue and our cost of sales. Our gross profit increased by ~~product~~$1.60 ~~for~~million, or 10.07%, to $17.50 million in 2017 from $15.90 million in 2016. The increase in our gross profit was mainly attributable to the ~~years~~increased ~~ended~~sales ~~December~~volume 31in 2017 compared with in 2016. The average unit selling price of our products increased by 6.94% to $17,640 in 2017 in comparison with $16,495 in 2016, and ~~2015:~~the average unit cost increased by 17.51% to $12,906 in 2017 in comparison with $10,983 in 2016. As a result of these factors, our gross profit margin in 2017 decreased to 26.84% from 33.41% in 2016.

		Year Ended December 31,
		2016			2015
		$	%		$	%
Plate heat exchanger	$	19,170,010	40	$	20,900,957	45
Heat exchange unit		20,951,276	44		15,787,022	34
Air-cooled heat exchanger		-	-		509,975	1
Shell-and-tube heat exchanger		852,347	2		2,569,986	6
Others		6,613,091	14		6,196,105	13
TOTAL	$	47,586,724	100	$	45,964,045	100

General and administrative expenses. Our general and administrative expenses consist of the costs associated with staff and support personnel who manage our business activities. Our general and administrative expenses increased by $1.59 million, or 28.45%, to $7.17 million in 2017 from $5.58 million in 2016. As a percentage of sales revenue, general and administrative expenses decreased to 10.99% in 2017, as compared to 11.72 % in 2016. The decrease in general and administrative expenses as a percentage of sales revenue was primarily due to increase in sales revenue in 2017, compared in 2016.

~~Cost~~Research ofand ~~sales~~development ~~revenue~~expenses. Our ~~cost~~research ofand ~~sales~~development ~~revenue is~~expenses ~~primarily~~consist ~~comprised~~ of the costs ofassociated with ~~our~~research ~~raw~~and ~~materials,~~development ~~labor~~personnel and ~~factory~~expense in research and development ~~overhead~~projects. Our ~~cost~~research ofand ~~sales~~development ~~decreased~~expenses increased by $20.7831 million, or 8 15.0680%, to $312.69 28 million in ~~2016~~2017 from $341.4697 million in ~~2015~~2016. ~~Cost~~The ofincrease ~~sales as a percentage of~~in ~~sales~~research ~~revenue~~and ~~were~~development ~~66.59%~~expenses ~~and~~was ~~74.98%~~mainly ~~for~~attributable ~~2016~~to ~~and~~more ~~2015,~~sales ~~respectively. The~~orders ~~decrease~~required ~~was~~us ~~mainly attributable~~ to ~~the~~put ~~decrease~~more inmaterials ~~unit~~and ~~price~~labors ofin ~~raw~~research ~~materials.~~and development activities.

~~Gross~~Selling ~~profit~~expenses. Our ~~gross~~selling ~~profit~~expenses isinclude sales ~~equal~~commissions, to the ~~difference~~ ~~between~~cost ~~our~~of ~~sales~~advertising ~~revenue~~and promotional materials, salaries and ~~our~~fringe ~~cost~~benefits of sales ~~revenue~~personnel, after-sale support services and other sales-related costs. Our ~~gross profit~~selling expenses increased by $4.4088 million, or 3882.2500%, to $1510.9083 million in ~~2016~~2017, from $115.5095 million in ~~2015~~2016. ~~The~~As ~~increase~~a inpercentage ~~our~~of ~~gross~~sales revenue, ~~profit~~selling ~~was~~expenses ~~mainly~~increased ~~attributable~~ to ~~the~~16.60% ~~decrease~~ in ~~unit price of raw materials~~2017, ~~leading~~as compared to ~~the~~12.50 ~~decrease~~% in ~~cost~~ of2016. ~~sales~~The ~~revenue,~~increase ~~which~~was ~~led~~mainly attributable to the ~~gross~~Company’s ~~profit~~efforts ~~margin~~to ~~for~~develop new ~~2016~~customers, ~~increased~~which led to ~~33.41%~~ ~~from~~more ~~25.02%~~travelling ~~for~~and ~~2015~~other marketing activities.

~~Administrative~~Loss ~~expenses.~~(gain) ~~Our~~on ~~administrative expenses~~disposal ~~consist~~on ofproperty, ~~the~~plant ~~costs associated with staff~~ and ~~support personnel who~~ ~~manage our business activities~~equipment. Our ~~administrative~~loss ~~expenses~~(gain) ~~increased~~on bydisposal ~~$0.65 million~~of property, orplant ~~13.17%,~~and toequipment include ~~$5.58~~loss ~~million~~or ingain ~~2015~~associated ~~from~~with ~~$4.93~~sale ~~million~~of infixed ~~2015~~assets. As ~~a percentage~~ of ~~sales~~December ~~revenue~~31, 2017 ~~administrative~~and ~~expenses increased to 11.72% in~~ 2016, aswe ~~compared~~had to$324 ~~10.73%~~loss inand ~~2015~~$1.05 ~~The~~million ~~increase~~gain inon ~~administrative~~disposal ~~expenses was primarily due to the increase~~ of ~~bad debt expense. We record an allowance for doubtful accounts at a rate of 25% for receivables aged between 1 to 2 years~~property, ~~50%~~plant ~~for receivables aged between 2 to 3 years~~ and ~~100%~~equipment, ~~for receivables aged over 3 years~~respectively.

WeIncome ~~believe~~(loss) ~~our~~before ~~allowance~~income ~~for doubtful accounts is appropriate~~taxes. We ~~have~~Loss ~~installment payment arrangement with our customers. The current economic~~before ~~slowdown~~income ~~and~~taxes ~~China’s~~increased ~~tightened credit policy led to delayed payments and delayed delivery schedules~~ by ~~our customers, which in turn caused us to increase our allowance for doubtful accounts to~~ $76.9859 million, inor ~~2016~~175.31%, ~~from~~to $72.6983 million in ~~2015.~~ ~~To control inflation after a massive stimulus plan~~2017, ~~the Chinese government~~ ~~tightened~~from ~~its~~income ~~credit~~before ~~policy.~~income Astaxes aof ~~result, state-owned banks limited their lending to large state-owned corporations and privately held companies continue to have difficulty accessing capital~~$3.76 ~~Certain~~million ~~our~~in ~~customers have been affected by the tightened credit policy and have limited access to capital~~2016. WeSuch ~~record~~increase anwas ~~allowance~~mainly ~~for~~attributable ~~doubtful accounts at a rate of 25% for receivables aged between 1~~ to 2increase ~~years,~~in ~~50%~~total ~~for~~operating ~~receivables aged between 2 to 3 years and 100% for receivables aged over 3 years~~expenses.

36Income tax expenses. Our income tax expenses decreased to $44,083 in 2017 from $514,649 in 2016, as a result of decreased taxable income.

~~Our~~Net ~~allowance~~income (loss) attributable to THT Heat Transfer Technology, Inc. common shareholders. As a result of ~~obsolete~~the cumulative ~~inventory~~effect isof ~~also~~the ~~appropriate~~foregoing ~~because~~factors, our net loss attributable to THT weHeat ~~purchase~~Transfer, ~~raw~~Inc. ~~materials~~common ~~after~~shareholders weincreased ~~receive~~by ~~purchase~~$6.13 ~~orders~~million, or 188.67%, to ~~Although~~$2.88 ~~our~~million for 2017, from net income attributable to THT Heat Transfer, ~~customers~~Inc. ~~may~~common ~~delay~~shareholders ~~their~~of ~~payment~~$3.25 ormillion ~~delivery~~for ~~schedules~~2016. ~~which~~As ~~increase~~a ~~our~~percentage of sales ~~inventories~~revenue, ~~they~~our donet ~~not~~income ~~cancel~~(loss) ~~their~~attributable ~~orders~~ to ~~cause~~THT usHeat ~~classify~~Transfer, ~~the~~Inc. ~~delayed~~common ~~inventories~~shareholders aswas ~~obsolete~~(4.42%) ~~inventories~~and 6.82% for 2017 and 2016, respectively.

~~Research~~37 and development expenses. Our research and development expenses consist of the costs associated with research and development personnel and expense in research and development projects. Our research and development expenses decreased by $0.09 million, or 4.26%, to $1.97 million in 2016 from $2.05 million in 2015. The decrease in research and development expenses was attributable to different type of materials used in R&D process, which led to the decrease in monetary value of raw material of $0.09 million compared to 2015.

~~Selling~~Net ~~expenses.~~income ~~Our~~(loss) ~~selling~~attributable ~~expenses~~to ~~include~~non-controlling ~~sales~~interest. ~~commissions,~~Non-controlling ~~the~~interest ~~cost~~represents ofthe ~~advertising and promotional materials, salaries~~ownership ~~and~~interests ~~fringe~~the ~~benefits~~Center ofholds ~~sales~~in ~~personnel,~~SipingJuyuan ~~after-sale~~and ~~support~~the ~~services~~amount ~~and~~recorded ~~other~~as ~~sales~~non-~~related~~controlling ~~costs.~~interest ~~Our~~in ~~selling~~our ~~expenses~~consolidated ~~increased~~statements byof ~~$1.32~~income ~~million, or 28.60%,~~and tocomprehensive ~~$5.95~~loss ~~million~~is incomputed ~~2016,~~by ~~from~~multiplying ~~$4.63~~after-tax ~~million~~loss infor ~~2015.~~the ~~The~~year ~~increase in selling~~ended ~~expense~~December ~~was~~31, ~~mainly~~2017 ~~due~~by to the ~~increase~~percentage ownership in ~~sales~~SipingJuyuan ~~revenues.~~not Asdirectly attributable ato ~~percentage~~us. ~~of sales~~For ~~revenue,~~the ~~selling~~years ~~expenses~~ended ~~increased~~December to31, ~~12.05%~~2017 inand 2016, asthe ~~compared to~~weighted ~~10.06%~~average innon-controlling ~~2015.~~interest ~~The~~attributable ~~increase~~to ~~was~~ownership ~~mainly~~interests in SipingJuyuan not directly attributable to ~~the~~us ~~Company’s~~was ~~effort~~0.51% ~~to develop~~and ~~new~~0%, ~~customers~~respectively.

~~Loss~~Liquidity ~~(Gain) on disposal on property, plant~~ and ~~equipment.~~Capital ~~Our~~Resources loss (gain) on disposal of property, plant and equipment include gain or loss associated with sale of fixed assets. Our loss (gain) on disposal of property, plant and equipment increased by $1.07 million, or 6,622.93% to a gain of $1.05 million in 2016, from a loss of $0.02 million in 2015. The increase in loss (gain) on disposal of property, plant and equipment was mainly due to our disposal of fixed asset to a related party in 2016 for a price higher than the net book value of the property, plant and equipment disposed. The respective loss and gain recognized in fiscal year 2015 and 2016 are not correlated with each other.

~~Income~~As ~~before~~of ~~income~~December ~~taxes.~~31, ~~Income~~2017, ~~before~~we ~~income taxes~~had ~~increased~~cash byand cash equivalents of $36.2030 million~~, or 565~~.~~31%,~~ toWe ~~$3.76~~anticipate ~~million~~that incash ~~2016,~~on ~~from $0.57~~hand ~~million~~and inborrowing ~~2015.~~capacity ~~Such~~under ~~increase~~our bank ~~was~~loans ~~mainly~~will ~~attributable~~be sufficient to ~~increased~~satisfy ~~gross profit~~our ongoing obligations.

~~Income~~We ~~taxes~~believe our allowance for doubtful accounts is appropriate. We ~~Our~~have ~~income~~an ~~taxes~~installment ~~increased~~payment arrangement with our customers. The China’s tightened credit policy led to delayed payments and delayed delivery schedules by our customers, which in turn caused us to increase our allowance for doubtful accounts from $07.51 98 million in 2016 ~~from~~to $~~nil~~11.55 million in ~~2015~~2017. To control inflation after a massive stimulus plan, asthe Chinese government tightened its credit policy. As a result, state-owned banks limited their lending to large state-owned corporations and privately held companies continue to have difficulty accessing capital. Most of ~~increased~~our ~~taxable~~customers ~~income~~have been affected by the tightened credit policy and have limited access to capital. The Company records an allowance for doubtful accounts at a rate of 25% for receivables aged between 1 to 2 years, 50% for receivables aged between 2 to 3 years and 100% for receivables aged over 3 years.

~~Net~~Our ~~income~~allowance ~~attributable~~of toobsolete ~~common~~inventory ~~stockholders. As~~is aalso ~~result~~appropriate ofbecause we ~~the~~purchase ~~cumulative~~raw ~~effect~~materials ofafter ~~the~~we ~~foregoing~~receive ~~factors,~~purchase ~~our~~orders. ~~net~~Although ~~income~~our ~~attributable~~customers tomay ~~common~~delay ~~stockholders~~their ~~increased~~payment byor ~~$2.68~~delivery ~~million~~schedules, orwhich ~~474.30%,~~increase toour ~~$3.25 million for 2016~~inventories, ~~from~~they ~~$0.57~~do ~~million~~not ~~for~~cancel ~~2015.~~their Asorders aso ~~percentage~~as ofto ~~sales revenue,~~cause ~~our~~us ~~net income attributable~~ to ~~common~~classify ~~stockholders was 6.82% and 1.23%~~the ~~for~~delayed ~~2016~~inventories ~~and~~as ~~2015,~~obsolete ~~respectively~~inventories.

~~Liquidity~~We expect that the trend of delayed customer payments and delayed ~~Capital~~delivery ~~Resources~~schedules will continue in the future. We have been taking the following measures to mitigate the situation: 1) send the collection letters or call the customers to request payment; 2) appoint specialists to visit our customers to collect payment; and 3) file law suits.

AsPRC legal restrictions permit payments of ~~December~~dividends 31by our PRC subsidiaries only out of their accumulated after-tax profits, ~~2016~~if any, wedetermined in ~~had~~accordance ~~cash~~with ~~and~~PRC ~~cash~~accounting ~~equivalents of~~standards $6and regulations.61 ~~million,~~Our ~~primarily~~PRC subsidiaries ~~consisting~~are ofalso ~~cash~~required onunder ~~hand~~PRC laws and ~~demand~~regulations ~~deposits.~~to ~~We can~~allocate ~~use~~at least ~~our~~10% ~~land~~of astheir ~~collateral~~annual toafter-tax ~~borrow~~profits ~~approximately~~determined ~~$5.47~~in ~~million,~~accordance ~~and~~with PRCGAAP ~~we have~~to ana ~~approximately~~statutory ~~$5.47~~general ~~million~~reserve ~~credit~~fund ~~line~~until ~~from~~the ~~Agricultural~~amounts ~~Bank~~in said fund reaches 50% of ~~China~~ our registered capital. WeAllocations ~~anticipate~~to ~~that~~these ~~cash~~statutory onreserve funds ~~hand~~can only be used for specific purposes and ~~borrowing~~are ~~capacity~~not ~~under~~transferable ~~our~~to ~~bank~~ us in the form of loans, ~~will~~advances, beor ~~sufficient~~cash dividends. Given that the Company and the PRC subsidiaries do not intend to ~~satisfy~~pay dividends for the foreseeable future, we consider the impact of restrictions on our ~~ongoing~~liquidity, ~~obligations~~financial condition and results of operations is not significant.

~~We believe our allowance for doubtful accounts is appropriate. We have an installment payment arrangement with our customers.~~ The ~~current economic~~following ~~slowdown~~table ~~and~~provides ~~China’s tightened credit policy led to delayed payments and delayed delivery schedules by our customers. To control inflation after~~ a ~~massive~~ ~~stimulus~~summary plan, the Chinese government tightened its credit policy. As a result, state-owned banks limited their lending to large state-owned corporations and privately held companies continue to have difficulty accessing capital. Most of our ~~customers~~net ~~have~~cash ~~been affected by the tightened credit policy~~flows ~~and~~from ~~have~~operating, ~~limited access to capital. The Company records an allowance for doubtful accounts at a rate of 25% for receivables aged between 1 to 2 years~~investing, ~~50%~~ ~~for receivables aged between 2 to 3 years~~ and ~~100%~~financing ~~for receivables aged over 3 years~~activities.

~~Our~~Cash ~~allowance~~Flow of obsolete inventory is also appropriate because we purchase raw materials after we receive purchase orders. Although our customers may delay their payment or delivery schedules, which increase our inventories, they do not cancel their orders so as to cause us to classify the delayed inventories as obsolete inventories.

		Year Ended December 31,
		2017			2016
Net cash provided by (used in) operating activities	$	(7,843,709	)	$	666,093
Net cash used in investing activities		(747,211	)		(1,360,343	)
Net cash provided by (used in) financing activities		7,914,514			(1,849,072	)
Effects of exchange rate change in cash		364,272			(527,291	)
Net decrease in cash and cash equivalents		(312,134	)		(3,070,613	)
Cash and cash equivalents at beginning of the year		6,609,680			9,680,293
Cash and cash equivalent at end of the year	$	6,297,546		$	6,609,680

WeOperating expect that the trend of delayed customer payments and delayed delivery schedules will continue in the future. We have been taking the following measures to mitigate the situation: 1) send the collection letters or call the customers to request payment; 2) appoint specialists to visit our customers to collect payment; and 3) file law suits. Activities

~~PRC~~Net ~~legal~~cash ~~restrictions~~used ~~permit~~in ~~payments~~operating ofactivities ~~dividends~~was by$7.84 ~~our~~million ~~PRC~~for ~~subsidiaries~~2017, ~~only~~compared ~~out~~with ofnet ~~their~~cash ~~accumulated~~provided ~~after-tax~~by ~~profits,~~operating ifactivities ~~any,~~of ~~determined~~$0.67 million for 2016. The increase in ~~accordance~~net ~~with~~cash ~~PRC~~used ~~accounting~~in ~~standards~~operating ~~and~~activities ~~regulations.~~was ~~Our~~mainly ~~PRC~~due ~~subsidiaries~~to ~~are~~net ~~also~~loss ~~required~~increased ~~under~~by ~~PRC~~$6.13 ~~laws~~million, ~~and~~trade ~~regulations~~receivables, tonet ~~allocate~~increased atby ~~least~~$7.06 ~~10%~~million, ofinventories, ~~their~~net ~~annual~~increased ~~after-tax~~by ~~profits~~$4.62 ~~determined~~million, inretention ~~accordance with~~receivable ~~PRCGAAP~~increased toby a$1.21 ~~statutory~~million, ~~general~~depreciation ~~reserve~~and ~~fund~~amortization ~~until~~decreased ~~the~~by ~~amounts in said fund~~$0.14 ~~reaches~~million, ~~50%~~and ofbills ~~our~~receivable ~~registered~~decreased ~~capital~~by $0.03 ~~Allocations~~million, tooffset ~~these~~by ~~statutory~~increased ~~reserve~~in ~~funds~~allowance ~~can only be used~~ for ~~specific~~doubtful ~~purposes~~accounts ~~and~~of ~~are~~$2.16 ~~not~~million, ~~transferable~~decreased ~~to us~~ in trade ~~the~~receivables-related ~~form~~party of ~~loans,~~$2.79 ~~advances~~million, orincreased ~~cash~~in ~~dividends~~accounts payable of $2.16 ~~Given~~million, ~~that~~increased ~~the~~in ~~Company~~other payable and ~~the PRC~~accrued ~~subsidiaries~~expenses doof ~~not~~$1.27 ~~intend~~million, decreased toin ~~pay~~gain ~~dividends~~on ~~for~~sales ~~the~~of ~~foreseeable future~~property, ~~we consider~~plant ~~the~~and ~~impact~~equipment of ~~restrictions~~$1.05 ~~on our liquidity~~million, and ~~financial~~increased ~~condition~~in ~~and results~~inventory write-down of ~~operations~~$1.49 ~~is not significant~~million.

~~The~~38 ~~following table provides a summary of our net cash flows from operating, investing, and financing activities.~~

~~Cash~~Investing ~~Flow~~ Activities

		Year Ended December 31,
		2016		2015
Net cash provided by operating activities	$	666,093	$	4,133,356
Net cash provided by (used in) investing activities		(1,360,343)		324,529
Net cash used in financing activities		(1,849,072)		(6,452,989)
Effects of exchange rate change in cash		(527,291)		(572,111)
Net decrease in cash and cash equivalents		(3,070,613)		(2,567,215)
Cash and cash equivalents at beginning of the year		9,680,293		12,247,508
Cash and cash equivalent at end of the year	$	6,609,680	$	9,680,293

Net cash used in investing activities was $0.75 million for 2017, compared with $1.36 million of net cash used in investing activities for 2016. The increase in net cash used in investing activities during 2017 was due to decrease in repayments from related parties of $1.80 million, increase in loans made to others of $1.36 million, and increase in payments to acquire property, plant and equipment of $0.74 million, offset by increase in repayment from others of $2.11 million, decrease in loans to related party of $1 million, increase in proceeds from disposal of property, plant and equipment of $0.06 million, and increase in restricted cash of $0.60 million.

~~Operating~~Financing Activities

Net cash provided by ~~operating~~financing activities was $07.6791 million for ~~2016~~2017, compared with $41.1385 million ~~for~~of ~~2015~~net cash used in financing activities for 2016. The ~~decrease~~increase in net cash provided by ~~operating~~ financing activities was ~~mainly~~attributable to ~~due~~increase toin ~~the~~proceeds ~~decrease~~from inrelated ~~inventory~~parties of $911.57 37 million, ~~trade~~decrease ~~receivables~~in repayments ~~from~~of ~~third~~short-term ~~parties~~loans and ~~related~~long-term ~~party~~loan of 6$4.8662 million, ~~partially~~and ~~offset~~$0.53 million, byrespectively, and increase in ~~net~~contribution from non-controlling ~~income~~investor of $21.6834 million, ~~accounts~~offset ~~payables~~by ofincrease ~~$2.93~~in ~~million,~~repayments ~~other~~to ~~payables~~related ~~and~~parties ~~accrued expenses~~ of $54.6874 million and ~~income~~decreased ~~taxes~~proceeds ~~payable~~from short-term loan of $13.1435 million.

~~Investing~~Short-Term ~~Activities~~Loans

~~Net~~As ~~cash~~of ~~used~~December in31, ~~investing~~2017, ~~activities~~we ~~was~~had ~~$1.36~~short-term ~~million~~bank ~~for 2016,~~loan ~~compared~~in ~~with~~the amount of $04,918,234.32 ~~million~~The ofloan ~~net~~carries ~~cash~~and ~~provided~~interest byrate ~~investing~~of ~~activities for 2015~~4.611% ~~The~~per ~~increase~~annum ~~was~~and the ~~mainly~~interest ~~due~~is topayable ~~investing low risk financial products~~monthly.

~~Financing~~Capital ~~Activities~~ Expenditures

~~Net~~Our ~~cash~~capital ~~used~~expenditures inwere ~~financing activities was $1.85 million for 2016, compared with $6.45million of net cash~~ used inprimarily ~~financing activities~~ for ~~2015.~~ ~~The decrease in net cash used in financing activities was mainly attributable to~~ the ~~increase in proceeds~~ purchase of ~~$1.11 million~~equipment ~~from~~to ~~short-term~~expand ~~loans~~our ~~and~~production ~~decrease in repayments of short-term loans of $3~~capacity.77 ~~million.~~

		Year Ended December 31,
		2017		2016
Construction costs	$	399,746	$	17,045
Purchase of equipment		365,325		9,184
Total capital expenditures	$	765,071	$	26,229

~~Short-Term~~We ~~Loans~~estimate that our total capital expenditures in fiscal year 2018 will reach approximately $0.85 million to acquire the equipment for necessary products used in the nuclear power industry.

AsObligations ofUnder ~~December~~Material ~~31,~~Contracts ~~2016, the Company had short-term bank loans in the amount of $4,608,494. The loan carries an interest rate of 4.785% per annum and the interest is payable monthly.~~

~~Long-Term~~Except ~~Loan~~with respect to the loan obligations disclosed above, we have no material obligations to pay cash or deliver cash to any other party

~~As of December 31, 2016, the Company had no outstanding long-term loan.~~ Seasonality

~~Capital~~Our ~~Expenditures~~operating results and operating cash flows historically have been subject to seasonal variations. Our revenues usually increase over each quarter of the calendar year with the first quarter usually the slowest quarter because fewer projects are undertaken during and around the Chinese spring festival.

~~Our~~Inflation ~~capital expenditures were used primarily for the purchase of equipment to expand our production capacity.~~

		Year Ended December 31,
		2016		2015
Construction costs	$	17,045	$	15,329
Purchase of equipment		9,184		8,906
Total capital expenditures	$	26,229	$	24,235

Inflation and changing prices have not had a material effect on our business, and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in the Chinese economy and our industry and continually maintain effective cost controls in operations.

We39 ~~estimate that our total capital expenditures in fiscal year 2017 will reach approximately $0.85 million to acquire the equipment for necessary products used in the nuclear power industry.~~

~~Obligations~~Off-Balance ~~Under~~Sheet ~~Material~~Arrangements ~~Contracts~~

~~Except~~We ~~with~~do ~~respect~~not tohave ~~the~~any ~~loan~~off-balance ~~obligations~~sheet ~~disclosed~~arrangements ~~above,~~that we have noor are ~~material~~reasonably ~~obligations~~likely to ~~pay~~have ~~cash~~a current or ~~deliver~~future ~~cash~~effect toon ~~any~~our ~~other~~financial condition, ~~party~~changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

~~Seasonality~~Critical Accounting Policies

~~Our~~The ~~operating~~preparation ~~results~~of ~~and~~financial ~~operating~~statements ~~cash~~in ~~flows~~conformity ~~historically~~with ~~have~~United ~~been~~States ~~subject~~generally toaccepted ~~seasonal~~accounting ~~variations~~principles, or U.S. ~~Our~~GAAP, ~~revenues~~requires our ~~usually~~management ~~increase~~to ~~over~~make assumptions, estimates and judgments that affect the ~~each~~amounts ~~quarter~~reported ofin the ~~calendar~~financial ~~year~~statements, ~~with~~including the ~~first~~notes ~~quarter~~thereto, ~~usually~~and related ~~the~~disclosures ~~slowest~~of commitments and contingencies, if any. We consider our ~~quarter~~critical ~~because~~accounting ~~fewer~~policies ~~projects~~to ~~are~~be ~~undertaken~~those ~~during~~that require the more significant judgments and ~~around~~estimates in the ~~Chinese spring~~preparation ~~festival.~~of financial statements, including the following:

~~Inflation~~Use of estimates

~~Inflation~~In preparing financial statements in conformity with US GAAP, management makes estimates and ~~changing~~assumptions ~~prices~~that ~~have~~affect ~~not~~the ~~had~~reported aamounts ~~material~~of assets ~~effect~~and onliabilities and disclosures of contingent assets and liabilities at ~~our~~the ~~business~~dates of the financial statements, ~~and~~as wewell doas ~~not~~the ~~expect~~reported ~~that~~amounts ~~inflation~~of revenues orand ~~changing~~expenses ~~prices~~during ~~will~~the reporting periods. These accounts and estimates ~~materially~~include, ~~affect~~but ~~our~~are ~~business~~not inlimited to, the ~~foreseeable~~valuation ~~future.~~of ~~However~~trade receivables, ~~our~~other ~~management~~receivables, ~~will~~prepayments ~~closely~~and ~~monitor~~deposit, ~~price~~inventories, ~~changes~~deferred inincome taxes and the estimation ~~Chinese~~on ~~economy~~useful lives and ~~our industry~~residual values of property, plant and ~~continually~~equipment and ~~maintain~~land ~~effective~~use ~~cost~~right. ~~controls~~Actual inresults ~~operations~~could differ from those estimates.

~~Off-Balance~~Concentration ~~Sheet~~of ~~Arrangements~~credit risk

WeFinancial doinstruments ~~not~~that ~~have~~potentially ~~any~~subject ~~off-balance~~the ~~sheet~~Company ~~arrangements~~to significant ~~that~~concentration ~~have~~of orcredit risk consist principally of cash and cash equivalents, bills receivable, restricted cash, and trade and other receivables. As of December 31, 2017 and 2016, substantially all of the Company’s cash and cash equivalents and restricted cash were held by major financial institutions located in the PRC, which management believes are ~~reasonably~~of ~~likely~~high credit quality. With respect to ~~have~~trade areceivables, ~~current~~the orCompany ~~future~~extends ~~effect~~credit based on ~~our~~an ~~financial~~evaluation ~~condition,~~of ~~changes~~the incustomer’s financial condition,. ~~revenues~~The orCompany ~~expenses,~~generally ~~results~~does ofnot require ~~operations,~~collateral ~~liquidity,~~for ~~capital~~trade ~~expenditures~~receivables orand ~~capital~~maintains ~~resources~~an ~~that~~allowance ~~are~~for doubtful ~~material~~accounts toof ~~our~~trade ~~investors~~and other receivables.

39During the years ended December 31, 2017 and 2016, the Company did not have any customers that contributed 10% or more to the Company’s sales revenue.

~~Critical~~As ~~Accounting~~of ~~Policies~~December 31, 2017 and 2016, the Company did not have any balance of gross trade receivable due from individual customer that represented 10% or more of the Company’s gross trade receivables.

~~The~~Receivables ~~preparation of financial statements in conformity with United States generally accepted accounting principles, or U.S. GAAP, requires our management to make assumptions, estimates~~ and ~~judgments~~allowance ~~that~~for ~~affect~~doubtful ~~the amounts~~debts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:

~~Use~~Receivables are stated at cost, net of ~~estimates~~an allowance for doubtful debts. The Company establishes an allowance for doubtful debts based on management’s assessment of the collectability of trade receivables and other receivables. A considerable amount of judgment is required in assessing the amount of the allowance and the Company considers the historical level of credit losses and collection history and applies percentages to aged receivable categories. The Company makes judgments about the creditworthiness of debtors based on ongoing credit evaluations, and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the debtors were to deteriorate, resulting in their inability to make payments, a larger allowance may be required. Bad debts are written off when identified. The Company extends unsecured credit to customers ranging from three to six months in the normal course of business. The Company does not accrue interest on trade receivables.

InHistorically, ~~preparing~~losses ~~financial~~from ~~statements~~uncollectible inaccounts ~~conformity~~have ~~with US GAAP,~~not ~~management~~significantly ~~makes~~deviated ~~estimates~~from ~~and~~the ~~assumptions~~general ~~that~~allowance ~~affect~~estimated by the ~~reported amounts of~~management ~~assets~~ and ~~liabilities~~no ~~and~~significant ~~disclosures~~additional ofbad ~~contingent~~debts ~~assets~~have ~~and~~been ~~liabilities~~written ~~at the~~off ~~dates~~directly ofto the ~~financial statements, as well as the reported amounts of~~ ~~revenues~~profit and ~~expenses during the reporting periods~~loss. ~~These~~This ~~accounts~~general ~~and~~provisioning ~~estimates include,~~policy ~~but~~has ~~are~~ not ~~limited~~changed ~~to,~~in the ~~valuation of trade receivables, other~~past ~~receivables,~~since ~~prepayments~~establishment and ~~deposit,~~the ~~inventories,~~management ~~deferred~~considers ~~income~~that ~~taxes~~the ~~and~~aforementioned ~~the~~general ~~estimation~~provisioning onpolicy ~~useful~~is ~~lives~~adequate and ~~residual~~not ~~values~~too ofexcessive ~~property, plant~~ and ~~equipment and~~does ~~land~~not ~~use~~expect ~~right.~~to change ~~Actual~~this ~~results~~established ~~could~~policy ~~differ~~in ~~from~~the ~~those~~near ~~estimates~~future.

~~Concentration~~40 ~~of credit risk~~

~~Financial~~Retention ~~instruments that potentially subject the Company to significant concentration of credit risk consist principally of cash and cash equivalents, bills~~ receivable, restricted cash, and trade and other receivables. As of December 31, 2016 and 2015, substantially all of the Company’s cash and cash equivalents and restricted cash were held by major financial institutions located in the PRC, which management believes are of high credit quality. With respect to trade receivables, the Company extends credit based on an evaluation of the customer’s financial condition. The Company generally does not require collateral for trade receivables and maintains an allowance for doubtful accounts of trade and other receivables.

~~During~~Retention receivable is the ~~years~~amount ~~ended~~withheld ~~December~~by ~~31,~~a ~~2016~~customer until the warranty period is over. Retention receivables which were expected to be collected within one year of $9,551,973 and ~~2015~~$8,264,642 ~~the~~were ~~Company~~included in the ~~did~~balance ~~not~~of ~~have~~trade ~~any~~receivables ~~customers~~as ~~that~~of ~~contributed~~December ~~10%~~31, or2017 ~~more~~and 2016, respectively. Retention receivables which were expected to ~~the~~be ~~Company’s~~collected ~~sales~~after one year were ~~revenue~~presented separately as a non-current asset.

AsInventories ~~of December 31, 2016 and 2015, the Company did not have any balance of gross trade receivable due from individual customer that represented 10% or more of the Company’s gross trade receivables.~~

~~Receivables~~Inventories are stated at the lower of cost or market value. Cost is determined on a weighted average basis and ~~allowance~~includes ~~for~~all ~~doubtful~~expenditures incurred ~~debts~~in bringing the goods to the point of sale and putting them in a saleable condition. In assessing the ultimate realization of inventories, the management makes judgments as to future demand requirements compared to current or committed inventory levels. The Company’s reserve requirements generally increase with its projected demand requirements; decrease due to market conditions and product life cycle changes. The Company estimates the demand requirements based on market conditions, forecasts prepared by its customers, sales contracts and orders in hand.

~~Receivables~~Impairment ~~are stated at cost, net~~ of anlong-lived ~~allowance~~assets for doubtful debts. The Company establishes an allowance for doubtful debts based on management’s assessment of the collectability of trade receivables and other receivables. A considerable amount of judgment is required in assessing the amount of the allowance and the Company considers the historical level of credit losses and collection history and applies percentages to aged receivable categories. The Company makes judgments about the creditworthiness of debtors based on ongoing credit evaluations, and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the debtors were to deteriorate, resulting in their inability to make payments, a larger allowance may be required. Bad debts are written off when identified. The Company extends unsecured credit to customers ranging from three to six months in the normal course of business. The Company does not accrue interest on trade receivables.

~~Historically,~~Long-lived ~~losses~~assets ~~from~~are ~~uncollectible~~tested ~~accounts~~for ~~have~~impairment ~~not~~in accordance with ~~significantly~~ASC ~~deviated~~360-10-45 ~~from~~“Impairment or Disposal of Long-Lived Assets”. The Company periodically evaluates potential impairment whenever events or changes in circumstances indicate that the ~~general~~carrying ~~allowance~~amount ~~estimated~~of bythe assets may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the ~~management~~Company first compares undiscounted cash ~~and~~flows noexpected ~~significant~~to ~~additional~~be ~~bad~~generated ~~debts~~by ~~have~~that ~~been~~asset ~~written~~or ~~off~~asset ~~directly~~group to its carrying value. If the ~~profit~~carrying ~~and~~value ~~loss.~~of ~~This~~the ~~general~~long-lived ~~provisioning policy~~asset ~~has~~or asset group is not recoverable ~~changed~~on inan ~~the~~undiscounted ~~past~~cash ~~since~~flow ~~establishment~~basis, ~~and~~an ~~the~~impairment ~~management~~is recognized to ~~considers~~the extent that the ~~aforementioned~~carrying ~~general~~value ~~provisioning~~exceeds ~~policy~~its fair value. Fair value is determined ~~adequate~~through ~~and~~various valuation techniques including discounted cash flow ~~not~~models, ~~too~~quoted ~~excessive~~market values and ~~does~~third-party ~~not~~independent ~~expect~~appraisals, toas considered ~~change~~necessary. ~~this~~No ~~established~~impairment ~~policy~~of inlong-lived assets was recognized for the ~~near~~years ~~future~~ended December 31, 2017 and 2016.

40Government grants

~~Retention~~Government ~~receivable~~grants include cash subsidies as well as other subsidies received from the PRC government by the subsidiaries of the Company. Such subsidies are generally provided as incentives from the local government to encourage the expansion of local business. The government grant is recognized in the consolidated statements of income and comprehensive income when the relevant performance criteria specified in the grant are met. Grants applicable to purchase of property, plant and equipment and/or encourage research and development activities are credited to deferred income upon receipt and are amortized over the life of depreciable assets.

Revenue ~~Retention~~recognition receivable is the amount withheld by a customer until the warranty period is over. Retention receivables which were expected to be collected within one year of $8,264,642 and $10,533,304 were included in the balance of trade receivables as of December 31, 2016 and 2015, respectively. Retention receivables which were expected to be collected after one year were presented separately as a non-current asset.

~~Inventories~~Revenue from sales of the Company’s products is recognized when products are delivered and successfully installed, the sales price is fixed or determinable, no other significant obligations of the Company exist, and collection is reasonably assured.

~~Inventories~~The ~~are~~Company ~~stated~~does atnot ~~the~~provide ~~lower~~unconditional right of ~~cost or market value.~~return, ~~Cost~~pricing isprotection ~~determined~~or onany aother ~~weighted~~concessions ~~average~~to ~~basis~~its ~~and~~customers. ~~includes all expenditures~~Historically, ~~incurred~~there inhave ~~bringing~~been ~~the~~very ~~goods~~few tosales ~~the~~returns ~~point of sale~~ and ~~putting~~adjustments ~~them~~that inhave ~~a saleable~~impacted ~~condition. In assessing~~ the ultimate ~~realization~~collection of ~~inventories~~revenues. Generally, the ~~management~~ ~~makes judgments as to future demand requirements compared to current or committed inventory levels. The~~ Company’s ~~reserve~~provides ~~requirements~~free ~~generally~~after-sale ~~increase~~service ~~with~~for ~~its~~a ~~projected~~period ~~demand~~ranging ~~requirements;~~from ~~decrease~~half ~~due~~year to ~~market conditions~~1 ~~and product life cycle changes~~year. ~~The~~After-sale ~~Company~~expense ~~estimates the demand~~was ~~requirements~~$93,807 ~~based~~and ~~on market conditions~~$176,515 ~~forecasts~~for ~~prepared~~the byyears ~~its~~ended ~~customers~~December 31, ~~sales~~ ~~contracts~~2017 and ~~orders in hand~~2016, respectively.

~~Impairment~~Cost of ~~long-lived~~sales ~~assets~~

~~Long-lived~~Cost ~~assets are tested for impairment in accordance with ASC 360-10-45 “Impairment or Disposal~~ of ~~Long-Lived~~sales ~~Assets”.~~consists ~~The~~primarily ~~Company periodically evaluates potential impairment whenever events or changes in circumstances indicate that the carrying amount~~ of ~~the~~materials ~~assets~~costs, ~~may not be~~freight ~~recoverable.~~charges, Ifpurchasing ~~circumstances~~and ~~require~~receiving acosts, ~~long-lived~~inspection ~~asset~~costs, ~~or asset group be~~employee ~~tested for possible impairment~~compensation, ~~the~~depreciation ~~Company~~and ~~first~~related ~~compares~~costs, ~~undiscounted~~which ~~cash flows~~are ~~expected~~directly toattributable ~~be generated by that asset or asset group~~ to ~~its carrying~~ ~~value~~production. IfWrite-down ~~the carrying value~~ of ~~the~~inventories ~~long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized~~ to ~~the~~ ~~extent~~lower ~~that~~of ~~the~~cost ~~carrying~~or ~~value~~market ~~exceeds its fair value. Fair value~~ is ~~determined~~ ~~through various valuation techniques including discounted cash flow~~also ~~models,~~recorded ~~quoted~~in ~~market~~cost ~~values and third-party independent appraisals, as considered necessary. No impairment~~ of ~~long-lived assets was recognized for the years ended December 31~~sales, ~~2016~~if ~~and 2015~~any.

~~Government~~Research ~~grants~~and development expenses

~~Government~~Research ~~grants~~and ~~include~~development ~~cash~~costs ~~subsidies as well as other subsidies received from the PRC government by the subsidiaries of the Company. Such subsidies~~ are ~~generally~~charged ~~provided as incentives from the local government~~ to ~~encourage~~ ~~the~~expense ~~expansion of local business~~as incurred. ~~The~~Research ~~government grant is recognized in the consolidated statements of income~~ and ~~comprehensive~~development ~~income~~costs ~~when~~for the ~~relevant performance~~years ~~criteria~~ended ~~specified~~December ~~in the grant are met. Grants applicable to purchase of property~~31, ~~plant~~ 2017 and ~~equipment~~2016 ~~and/or~~were ~~encourage~~$2,278,003 ~~research~~ and ~~development~~ ~~activities~~$1,967,158, ~~are credited to deferred income upon receipt and are amortized over the life of depreciable assets~~respectively.

~~Revenue~~Income ~~recognition~~taxes

~~Revenue~~The ~~from~~Company ~~sales~~uses the asset and liability method of accounting for income taxes pursuant to ASC 740 “Income Taxes”. Under the ~~Company’s~~asset ~~products~~and liability ismethod of ASC 740, deferred tax assets and liabilities are recognized for ~~when~~the future tax consequences attributable to temporary differences between ~~products~~the ~~are~~financial ~~delivered~~statements carrying amounts of existing assets and ~~customer~~liabilities ~~acceptance~~and loss iscarryforwards ~~made,~~and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the ~~sales~~years ~~price~~in iswhich ~~fixed~~those temporary differences are expected to be recovered or ~~determinable,~~settled. noA ~~other~~valuation ~~significant~~allowance ~~obligations~~is ofprovided ~~the~~to ~~Company~~reduce ~~exist~~the ~~and~~amount of ~~collection~~deferred tax assets if it is ~~reasonably~~considered ~~assured~~more likely than not that some portion or all of the deferred tax assets will not be realized.

~~The~~Comprehensive ~~Company~~income does not provide unconditional right of return, pricing protection or any other concessions to its customers. Historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues. Generally, the Company provides free after-sale service for a period ranging from half year to 1 year. After-sale expense was $176,515 and $51,050 for the years ended December 31, 2016 and 2015, respectively.

~~Cost~~ASC 220 “Comprehensive Income” established standards for reporting and display of ~~sales~~comprehensive income, its components and accumulated balances. Components of comprehensive income include net income and foreign currency translation adjustments. As of December 31, 2017 and 2016, the only component of accumulated other comprehensive income was foreign currency translation adjustments.

~~Cost~~Foreign ofcurrency ~~sales~~translation consists primarily of materials costs, freight charges, purchasing and receiving costs, inspection costs, employee compensation, depreciation and related costs, which are directly attributable to production. Write-down of inventories to lower of cost or market is also recorded in cost of sales, if any.

~~Research~~The functional currencies of the Company and ~~development~~its ~~expenses~~subsidiaries include United States dollars “USD” and Renminbi “RMB”. The Company and its subsidiaries maintain their financial statements in their respective functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income or loss for the respective periods.

~~Research~~For financial reporting purposes, the financial statements of the subsidiaries that are prepared using RMB have been translated into USD. Assets and ~~development~~liabilities ~~costs~~are translated at the exchange rates at the balance sheet date and revenue and expenses are ~~charged~~translated at the average exchange rates and shareholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income or loss but are included in foreign currency translation adjustments to ~~expense~~accumulate asother ~~incurred~~comprehensive income, a component of shareholders’ equity. ~~Research~~The exchange rates in effect as of December 31, 2017 and ~~development~~2016 ~~costs~~were RMB1 for $0.1537 and $0.1440, respectively. The average exchange rates for the ~~year~~years ended December 31, ~~2016~~2017 and ~~2015~~2016 were RMB1 for $~~1,967,158~~0.1480 and $20.1505,~~054,740,~~ respectively. There was no significant fluctuation in the exchange rates for conversion of RMB to USD after the balance sheet date.

~~Income~~Fair ~~taxes~~value of financial instruments

~~The~~ASC ~~Company~~825 ~~uses~~requires the ~~asset~~disclosure ~~and liability method~~ of ~~accounting for income taxes pursuant to ASC 740 “Income Taxes”. Under~~ the ~~asset~~estimated ~~and liability~~fair ~~method~~value of ~~ASC 740, deferred tax assets and liabilities are recognized~~ ~~for~~financial ~~the~~instruments ~~future~~including ~~tax~~those ~~consequences attributable to temporary differences between the~~ financial ~~statements~~instruments ~~carrying~~for amounts of existing assets and liabilities and loss carryforwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which ~~those~~fair ~~temporary differences are expected to be~~value ~~recovered~~option orwas ~~settled. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than~~ not ~~that some portion or all of the deferred tax assets will not be realized~~elected.

~~Comprehensive~~As ~~income~~of December 31, 2017 and 2016, the carrying amounts of the Company’s financial assets and liabilities (including the current maturity of long-term loan) approximated their fair values due to short maturities or the applicable interest rates approximate the current market rates.

~~ASC~~Basic ~~220 “Comprehensive Income” established standards for reporting~~ and ~~display~~diluted ofearnings ~~comprehensive~~per ~~income,~~share its components and accumulated balances. Components of comprehensive income include net income and foreign currency translation adjustments. As of December 31, 2016 and 2015, the only component of accumulated other comprehensive income was foreign currency translation adjustments.

~~Foreign~~The ~~currency~~Company ~~translation~~reports earnings per share in accordance with ASC 260 “Earnings Per Share”. Basic earnings per share is computed by dividing net income attributable to the Company’s common shareholders by the weighted average number of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to the Company’s common shareholders by the sum of the weighted average number of common stock outstanding and dilutive potential common stock during the period.

~~The~~There ~~functional~~were ~~currencies~~no ofdilutive ~~the~~instruments ~~Company~~for ~~and~~the ~~its~~years ~~subsidiaries~~ended December ~~include~~31, ~~United~~2017 ~~States dollars “USD”~~ and ~~Renminbi “RMB”~~2016. ~~The~~Accordingly, ~~Company~~the ~~and~~basic ~~its subsidiaries maintain their financial statements in their respective functional currency. Monetary assets~~ and ~~liabilities~~diluted ~~denominated~~earnings inper ~~currencies~~share ~~other than the functional currency~~ are ~~translated into~~ the ~~functional currency at rates of~~ ~~exchange~~same prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income or loss for ~~the~~both ~~respective~~reporting periods.

42Related parties transactions

~~For~~A ~~financial~~related ~~reporting~~party ~~purposes,~~is ~~the~~generally ~~financial~~defined ~~statements~~as ~~of the~~(i) ~~subsidiaries~~any ~~that~~person ~~are prepared using RMB have been translated into USD.~~that ~~Assets~~holds ~~and~~10% ~~liabilities~~or ~~are~~more ~~translated~~of at the ~~exchange~~Company’s ~~rates~~securities ~~at the balance sheet date~~ and ~~revenue~~their ~~and~~immediate ~~expenses~~families, ~~are translated at~~ (ii) the ~~average exchange rates and stockholders~~Company’s ~~equity~~management, is(iii) ~~translated~~someone atthat ~~historical~~directly ~~exchange~~or ~~rates.~~indirectly ~~Any~~controls, ~~translation~~is ~~adjustments~~controlled ~~resulting~~by ~~are not included in determining net income~~ or ~~loss~~is ~~but~~under ~~are included~~common incontrol ~~foreign~~with ~~currency~~the ~~translation adjustments to accumulate other comprehensive income~~Company, aor ~~component~~(iv) ofanyone ~~stockholders’~~who ~~equity. The exchange rates in~~can ~~effect~~significantly asinfluence ofthe ~~December~~financial ~~31, 2016~~ and ~~2015~~operating ~~were~~decisions ~~RMB1~~of ~~for~~the $0Company.~~1440~~ ~~and $0.1541,~~A ~~respectively.~~transaction ~~The~~is ~~average~~considered ~~exchange~~to ~~rates~~be ~~for~~a ~~the~~related ~~years~~party ~~ended~~transaction ~~December~~when ~~31,~~there ~~2016~~is a ~~and~~transfer ~~2015~~of ~~were~~resources ~~RMB1~~or ~~for~~obligations ~~$0.1505~~between ~~and~~related $0parties.~~1608,~~ ~~respectively.~~The ~~There~~Company conducts ~~was~~business ~~no significant~~with ~~fluctuation~~its related parties in the ~~exchange~~ordinary ~~rates~~course ~~for conversion~~ of ~~RMB~~business. Related toparties ~~USD~~may ~~after the~~be ~~balance~~individuals ~~sheet~~or ~~date~~corporate entities.

~~Fair~~42 ~~value of financial instruments~~

~~ASC~~Recent ~~825~~Accounting ~~requires~~Pronouncements ~~the disclosure of the estimated fair value of financial instruments including those financial instruments for which fair value option was not elected.~~

AsSee ofNote ~~December~~[3] ~~31,~~to ~~2016~~our ~~and~~audited ~~2015,~~consolidated ~~the carrying amounts of the Company’s~~ financial ~~assets and liabilities (including the current maturity of~~statements ~~long-term~~included ~~loan)~~elsewhere ~~approximated~~in ~~their~~this ~~fair values due to short maturities or the applicable interest rates approximate the current market rates~~report.

~~Basic~~ITEM ~~and~~7A. ~~diluted~~QUANTITATIVE ~~earnings~~AND ~~per~~QUALITATIVE ~~share~~DISCLOSURES ABOUT MARKET RISK.

~~The~~Not ~~Company reports earnings per share in accordance with ASC 260 “Earnings Per Share”~~applicable. Basic earnings per share is computed by dividing net income attributable to the Company’s common stockholders by the weighted average number of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to the Company’s common stockholders by the sum of the weighted average number of common stock outstanding and dilutive potential common stock during the period.

~~There~~ITEM ~~were no dilutive instruments for the years ended December 31, 2016 and 2015~~8. ~~Accordingly,~~FINANCIAL ~~the~~STATEMENTS ~~basic~~AND ~~and~~SUPPLEMENTARY ~~diluted earnings per share are the same for both reporting periods~~DATA.

~~Related~~The ~~parties~~full ~~transactions~~text of our audited consolidated financial statements as of December 31, 2017 and 2016 begins on page F-1 of this report.

AITEM related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company9. ACHANGES ~~transaction~~IN isAND ~~considered~~DISAGREEMENTS toWITH beACCOUNTANTS aON ~~related~~ACCOUNTING ~~party~~AND ~~transaction~~FINANCIAL ~~when there is a transfer of resources or obligations between related parties~~DISCLOSURE. ~~The Company conducts business with its related parties in the ordinary course of business. Related parties may be individuals or corporate entities.~~

43None.

~~Recent~~ITEM ~~Accounting~~9A. ~~Pronouncements~~CONTROLS AND PROCEDURES.

~~See~~Evaluation ~~Note~~of ~~3to~~Disclosure ~~our~~Controls ~~audited~~and ~~consolidated~~Procedures ~~financial statements included elsewhere in this report.~~

~~ITEM~~We 7Amaintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). ~~QUANTITATIVE~~Disclosure ~~AND~~controls ~~QUALITATIVE~~and ~~DISCLOSURES~~procedures ~~ABOUT~~refer to ~~MARKET~~controls ~~RISK~~and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

~~Not~~As ~~applicable~~required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer, Mr. Guohong Zhao, and Interim Chief Financial Officer, Mr. Zhigang Xu, of the effectiveness of the design and operation of our disclosure controls and procedures, as of December 31, 2017. Based upon, and as of the date of this evaluation, Messrs. Zhao and Xu determined that, because of the material weaknesses described below, our disclosure controls and procedures were not effective.

~~ITEM~~Notwithstanding 8.management’s ~~FINANCIAL~~assessment ~~STATEMENTS~~that ~~AND~~our ~~SUPPLEMENTARY~~internal control ~~DATA~~over financial reporting was ineffective as of December 31, 2017 due to the material weaknesses described below, we believe that the consolidated financial statements included in this report correctly present our financial condition, results of operations and cash flows for the fiscal years covered thereby in all material respects.

~~The~~Management’s ~~full~~Annual ~~text~~Report ofon ~~our~~Internal ~~audited~~Control ~~consolidated financial statements~~over asFinancial ~~of December 31, 2016 and 2015 begins on page F-1 of this report.~~ Reporting

~~ITEM~~Our 9management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. ~~CHANGES~~Internal control INover ~~AND~~financial ~~DISAGREEMENTS~~reporting ~~WITH~~refers ~~ACCOUNTANTS~~to ONthe ~~ACCOUNTING~~process ~~AND~~designed ~~FINANCIAL~~by, ~~DISCLOSURE~~or under the supervision of, our Chief Executive Officer and Interim Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, and includes those policies and procedures that:

~~None.~~(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

~~ITEM~~43 ~~9A. CONTROLS AND PROCEDURES.~~

Evaluation of Disclosure Controls and Procedures

	(2)	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and

	(3)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

WeManagement ~~maintain~~evaluated ~~disclosure~~the ~~controls~~effectiveness ~~and~~of ~~procedures~~our ~~(as~~internal ~~defined in~~control ~~Rule~~over ~~13a-15(e)~~financial ~~under~~reporting ~~the~~as ~~Exchange~~of ~~Act).~~December ~~Disclosure~~31, ~~controls~~2017 ~~and~~In ~~procedures~~making ~~refer~~this evaluation, tomanagement ~~controls~~used ~~and~~the ~~other~~framework ~~procedures~~established ~~designed~~in toInternal ~~ensure~~Control ~~that~~- ~~information required to~~Integrated beFramework ~~disclosed~~issued in ~~the~~2013 ~~reports~~by wethe ~~file~~Committee orof ~~submit~~Sponsoring ~~under~~Organizations of the ~~Exchange Act is~~Treadway ~~recorded~~Commission, ~~processed,~~or ~~summarized~~COSO. ~~and~~The ~~reported~~COSO ~~within~~framework summarizes each of the ~~time~~components ~~periods~~of ~~specified~~a incompany’s ~~the~~internal ~~rules~~control ~~and~~system, ~~forms~~including of(i) the ~~SEC~~control ~~and~~environment, ~~that~~(ii) risk ~~such~~assessment, ~~information~~(iii) iscontrol ~~accumulated~~activities, (iv) information and communication, ~~communicated~~and to(v) monitoring. Based on our ~~management~~evaluation, ~~including~~we determined that, as of December 31, 2017, our ~~Chief~~internal ~~Executive~~control ~~Officer~~over ~~and~~financial reporting was not effective ~~Interim~~because ~~Chief~~of ~~Financial~~the ~~Officer,~~material asweaknesses ~~appropriate,~~in toour ~~allow~~internal ~~timely~~control ~~decisions~~over financial ~~regarding~~reporting ~~required~~described ~~disclosure~~below.

As1. ~~required~~Lack byof ~~Rule~~sufficient ~~13a-15(e)~~and ofadequately ~~the~~trained ~~Exchange~~accounting ~~Act,~~and ~~our management~~finance ~~has~~personnel ~~carried~~with ~~out~~appropriate anunderstanding ~~evaluation,~~of ~~with~~U.S. ~~the~~GAAP ~~participation~~ and ~~under~~SEC ~~the supervision~~reporting ofrequirement; ~~our~~2. ~~Chief~~Inadequate ~~Executive~~segregation ~~Officer,~~of ~~Mr.~~duties ~~Guohong~~relative ~~Zhao,~~to ~~and~~key ~~Interim~~financial ~~Chief Financial~~reporting ~~Officer,~~functions; Mr3. ~~Zhigang~~Lack ~~Xu,~~ of ~~the~~qualified ~~effectiveness~~resources ofto perform the ~~design~~internal ~~and operation~~audit functions properly; 4. Lack of ~~our~~internal ~~disclosure~~audit ~~controls~~system to prevent and ~~procedures,~~detect ascontrol lapses and errors in the accounting of ~~December~~certain 31key areas including revenue recognition, ~~2016. Based~~purchase ~~upon~~approvals, cash receipts and ascash disbursement authorization, inventory safeguard and accumulation of cost of revenues in accordance with the ~~date~~Company's ofpolicies ~~this~~and ~~evaluation,~~appropriate ~~Messrs~~costing method. ~~Zhao~~5. Lack of skills and ~~Xu determined~~understanding ~~that~~to operate, ~~because~~review, and supervise the process of bookkeeping under the ~~material~~newly ~~weaknesses~~implemented ~~described~~ERP ~~below,~~system. ~~our disclosure~~6. ~~controls~~Lack ~~and~~of well-established procedures ~~were~~to ~~not~~identify, ~~effective.~~approve and report related party transactions.

~~Notwithstanding~~Our management’s ~~assessment~~has ~~that~~identified ~~our~~the ~~internal control~~steps ~~over~~necessary ~~financial reporting was ineffective as of December 31, 2016 due~~ to address the material weaknesses described ~~below,~~above weand ~~believe that the consolidated financial statements included~~ in ~~this~~2017, ~~report~~we ~~correctly~~have ~~present~~continued ~~our financial~~to ~~condition,~~implement ~~results of operations and cash flows for~~ the ~~fiscal~~following ~~years~~remedial ~~covered thereby in all material respects~~procedures.

~~Management’s~~• ~~Annual~~Hire, ~~Report~~as onneeded, ~~Internal~~additional ~~Control~~accounting ~~over Financial~~and ~~Reporting~~operations personnel and outside contractors with technical accounting expertise and reorganized the accounting and finance department to ensure that accounting personnel with adequate experience, skills and knowledge relating to complex, non-routine transactions are directly involved in the review and accounting evaluation of our complex, non-routine transactions. • Involve, as needed, both internal accounting and operations personnel and outside contractors with technical accounting expertise early in the evaluation of our complex, non-routine transaction to obtain additional guidance as to the application of generally accepted accounting principles to such a proposed transaction. • Require that our senior accounting personnel and the principal accounting officer review our complex, non-routine transactions to evaluate and approve the accounting treatment for such transactions. • Evaluate our internal audit function in relation to our financial resources and requirements.

~~Our~~We ~~management~~will isimplement ~~responsible~~an ~~for~~initiative ~~establishing~~to ~~and~~ensure ~~maintaining adequate~~the importance of internal ~~control~~controls ~~over~~and ~~financial~~compliance ~~reporting~~with ~~for~~established ~~the~~policies ~~Company.~~and ~~Internal~~procedures are ~~control~~fully ~~over~~understood ~~financial~~throughout ~~reporting~~our ~~refers~~company. toWe ~~the~~will ~~process~~provide ~~designed~~training ~~by,~~to ~~or under the~~our ~~supervision~~employees ~~of,~~to ~~our~~ensure ~~Chief~~these ~~Executive~~procedures ~~Officer~~are ~~and~~properly ~~Interim~~performed. ~~Chief~~We ~~Financial~~will ~~Officer,~~also ~~and~~evaluate ~~effected~~hiring byadditional ~~our~~personnel ~~Board~~involved ofin ~~Directors,~~the ~~management~~preparation ~~and~~of ~~other personnel, to~~the ~~provide~~financial ~~reasonable~~statements ~~assurance~~and ~~regarding~~disclosures with the ~~reliability~~requisite ofexpertise ~~our~~in ~~financial~~U.S. GAAP ~~reporting~~to ~~and~~ensure the ~~preparation~~proper ofapplication ~~financial~~thereof. ~~statements~~Management ~~for~~believes ~~external~~the ~~purposes in~~actions ~~accordance~~described ~~with~~above ~~U.S.~~will ~~GAAP,~~strengthen ~~and~~our ~~includes~~internal ~~those~~control ~~policies~~over ~~and~~financial ~~procedures that:~~ reporting.

	(1)	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
	(2)	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
	(3)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Management is committed to improving its internal control over financial reporting and will continue to work to put effective controls in place. The reportable conditions and other areas of our internal control over financial reporting identified by us as needing improvement have not resulted in a material restatement of our financial statements.

~~Management~~Because ~~evaluated~~of ~~the~~its ~~effectiveness~~inherent oflimitations, ~~our~~ internal control ~~over~~ over financial reporting asmay ofnot ~~December~~prevent ~~31,~~or ~~2016~~detect misstatements. InProjections ~~making~~of ~~this evaluation,~~any ~~management~~evaluation ~~used~~of ~~the~~effectiveness ~~framework~~to ~~established~~future inperiods ~~Internal~~are ~~Control~~subject -to ~~Integrated Framework issued by~~ the ~~Committee~~risk ~~of Sponsoring Organizations of the Treadway~~that ~~Commission,~~controls ormay ~~COSO.~~become ~~The~~inadequate ~~COSO~~because ~~framework summarizes each~~ of ~~the~~changes ~~components~~in ~~of a company’s internal control system~~conditions, ~~including~~or ~~(i)~~that the ~~control environment, (ii)~~ ~~risk~~degree ~~assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on our evaluation, we determined that, as~~ of ~~December 31,~~compliance ~~2016,~~with ~~our internal control over financial reporting was not effective because of~~ the ~~material~~policies ~~weaknesses~~and inprocedures ~~our~~may ~~internal control over financial reporting described below~~deteriorate.

~~1. Lack~~Because ofthe ~~sufficient~~Company ~~and adequately~~is ~~trained~~a ~~accounting~~smaller ~~and~~reporting ~~finance~~company, ~~personnel~~this ~~with appropriate~~annual ~~understanding~~report ofdoes ~~U.S.~~not ~~GAAP~~include ~~and~~an ~~SEC~~attestation ~~reporting~~report ~~requirement; 2. Inadequate segregation~~ of ~~duties~~our ~~relative~~registered topublic ~~key~~accounting ~~financial~~firm ~~reporting~~regarding ~~functions; 3. Lack of qualified resources to perform the~~ internal ~~audit~~control ~~functions~~over ~~properly;~~financial 4reporting. ~~Lack of internal audit system to prevent and~~ detect control lapses and errors in the accounting of certain key areas including revenue recognition, purchase approvals, cash receipts and cash disbursement authorization, inventory safeguard and accumulation of cost of revenues in accordance with the Company'Management’s ~~policies~~report ~~and~~was ~~appropriate~~not ~~costing method. 5. Lack~~subject ~~of skills and understanding~~ to ~~operate, review,~~attestation ~~and~~by ~~supervise~~our ~~the~~registered ~~process of bookkeeping under newly implemented ERP~~public ~~system. 6. Lack~~accounting ~~of well-established procedures to identify, approve and report related party transactions~~firm.

~~Our~~Changes ~~management has identified the steps necessary to address the material weaknesses described above and~~ in ~~2016,~~Internal weControls ~~have~~over ~~continued to~~Financial ~~implement the following remedial procedures.~~Reporting

~~Hire,~~We asregularly ~~needed,~~review ~~additional~~our ~~accounting~~system ~~and~~of ~~operations~~internal ~~personnel~~control over financial reporting and ~~outside contractors~~make ~~with~~changes ~~technical~~to ~~accounting~~our ~~expertise~~processes and ~~reorganized~~systems ~~the~~to ~~accounting~~improve controls and ~~finance~~increase ~~department~~efficiency, towhile ~~ensure~~ensuring that ~~accounting~~we ~~personnel~~maintain ~~with~~an ~~adequate~~effective ~~experience,~~internal ~~skills~~control ~~and~~environment. ~~knowledge~~Changes ~~relating~~may toinclude ~~complex,~~such ~~non-routine~~activities ~~transactions~~as ~~are~~implementing ~~directly~~new, ~~involved~~more inefficient ~~the~~systems, ~~review~~consolidating ~~and accounting evaluation of our complex~~activities, and ~~non-routine~~migrating ~~transactions~~processes.

~~Involve,~~Other asthan ~~needed,~~in ~~both~~connection ~~internal~~with ~~accounting~~the ~~and~~implementation ~~operations~~of ~~personnel and~~the ~~outside~~remedial ~~contractors~~measures ~~with~~described ~~technical~~above, ~~accounting~~there ~~expertise~~have ~~early~~been no changes in ~~the~~our internal ~~evaluation~~control ofover ~~our~~financial ~~complex,~~reporting ~~non-routine~~during ~~transaction~~the tofourth ~~obtain~~quarter ~~additional guidance~~of asfiscal toyear ~~the~~2017 that ~~application~~have ofmaterially ~~generally~~affected, ~~accepted~~or ~~accounting~~are ~~principles~~reasonably likely to materially affect, ~~such~~our ainternal ~~proposed~~control ~~transaction~~over financial reporting.

~~Require~~ITEM ~~that~~9B. ~~our~~OTHER ~~senior accounting personnel and the principal accounting officer review our complex, non-routine transactions to evaluate and approve the accounting treatment for such transactions~~INFORMATION.

~~Evaluate~~We ~~our~~have ~~internal~~no ~~audit~~information ~~function~~to indisclose ~~relation~~that was required to ~~our~~be disclosed ~~financial~~in ~~resources~~a report on Form 8-K during fourth quarter of fiscal year 2017, but ~~and~~was ~~requirements~~not reported.

WePART ~~will~~III implement an initiative to ensure the importance of internal controls and compliance with established policies and procedures are fully understood throughout our company. We will provide training to our employees to ensure these procedures are properly performed. We will also evaluate hiring additional personnel involved in the preparation of the financial statements and disclosures with the requisite expertise in U.S. GAAP to ensure the proper application thereof. Management believes the actions described above will strengthen our internal control over financial reporting.

~~Management~~ITEM ~~is committed to improving its internal control over financial reporting and will continue to work to put effective controls in place~~10. ~~The~~DIRECTORS, ~~reportable~~EXECUTIVE ~~conditions~~OFFICERS ~~and~~AND ~~other~~CORPORATE ~~areas of our internal control over financial reporting identified by us as needing improvement have not resulted in a material restatement of our financial statements~~GOVERNANCE.

~~Because~~Directors of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and ~~procedures~~Executive ~~may deteriorate.~~Officers

45The following sets forth information about our directors and executive officers as of the date of this report:

Because the Company is a smaller reporting company, this annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm.

Name	Age	Position
Guohong Zhao	57	Chairman, Chief Executive Officer and President
Zhigang Xu	46	Interim Chief Financial Officer, Treasurer and Secretary
Yue Cui	57	Vice President of Production
Fucai Zhan	47	Vice President of R&D and Director
Ariel Poppel	65	Director

~~Changes~~Mr. Guohong Zhao. Mr. Zhao became our Chairman, Chief Executive Officer and President on June 30, 2009, the day that we consummated our reverse acquisition of Megaway, and has served as the Chairman and CEO of SipingJuyuan since founding the company in ~~Internal~~1998. ~~Controls~~Mr. Zhao has over ~~Financial~~10 years’ ~~Reporting~~experience in the heat exchanger industry and over 20 years management experience. From 1996 to 1997, he was the Chairman and CEO of Siping City Traffic Safety Equipment Co., Ltd., a manufacturer of traffic safety equipment. Before 1995, he worked in senior positions in China Agriculture Bank, Siping Branch. Mr. Zhao graduated from Jilin Province Radio and Television University in 1986, holding a college degree in Economics.

WeMr. ~~regularly~~Zhigang ~~review~~Xu. Mr. Xu was appointed as our ~~system~~Interim Chief Financial Officer, Treasurer and Secretary of ~~internal~~September ~~control~~29, ~~over~~2012. Mr. Xu ~~financial~~has ~~reporting~~worked ~~and~~in ~~make~~different ~~changes~~positions toin ~~our~~the ~~processes~~Company’s subsidiaries SipingJuyuan and Beijing ~~systems~~Juyuan tosince ~~improve controls~~2000. Mr. Xu was Beijing Juyuan’s accountant and ~~increase~~Financial Director. ~~efficiency,~~He ~~while~~was ~~ensuring~~also ~~that~~SipingJuyuan’s weDeputy ~~maintain~~Financial anDirector ~~effective~~and CFO ~~internal~~Assistant. ~~control~~From ~~environment.~~1993 ~~Changes~~to ~~may~~1999, ~~include~~Mr. ~~such~~Xu ~~activities~~worked as an account at SipingJiuyuan Heat ~~implementing~~Exchange ~~new~~Equipment Co., ~~more~~Ltd. ~~efficient~~Mr. ~~systems,~~Xu ~~consolidating~~holds ~~activities,~~a ~~and~~Bachelor’s Degree in Accounting from ~~migrating~~Jilin ~~processes~~Industry University.

~~Other~~Mr. ~~than~~Yue inCui. ~~connection~~Mr. ~~with~~Cui ~~the~~became ~~implementation~~our ofVice ~~the~~President of ~~remedial~~Production ~~measures~~on ~~described~~June ~~above~~30, ~~there~~2009, ~~have~~the ~~been~~day nothat ~~changes~~we inconsummated our ~~internal~~reverse acquisition ~~control~~of ~~over~~Megaway, ~~financial~~and ~~reporting~~has ~~during~~served ~~the~~as ~~fourth~~Vice ~~quarter~~President of ~~fiscal~~Production ~~year~~of ~~2016~~SipingJuyuan since ~~that~~2006. ~~have~~From ~~materially~~2000 ~~affected~~to 2006, orhe ~~are~~was ~~reasonably~~the ~~likely~~operation tomanager ~~materially~~of ~~affect~~SipingJuyuan. With 20 years’ experience in manufacturing industry, he has significantly improved the production management of the ~~our~~Company. ~~internal~~From ~~control~~1979 ~~over~~to ~~financial~~2000, ~~reporting~~he was the production manager of Siping Tool Factory, a tool manufacturer.

~~ITEM~~45 ~~9B. OTHER INFORMATION.~~

WeMr. ~~have~~Fucai noZhan. ~~information~~Mr. toZhan ~~disclose~~became our Vice President of Research and Development on June 30, 2009, the day that ~~was~~we ~~required~~consummated our reverse acquisition of Megaway, and became a member of our Board of Directors on September 25, 2009. Mr. Zhan possesses over 15 years comprehensive experience in production, research and development, and sales and is well positioned to lead our research and development function to be highly market oriented. Mr. Zhan ~~disclosed~~ joined SipingJunyuan in a1999 ~~report~~as onVice ~~Form~~President ~~8-K~~of ~~during~~Sales ~~fourth~~and ~~quarter~~was appointed as Vice President of ~~fiscal~~Research ~~year~~and ~~2016~~Development in 2009. Before joining SipingJuyuan, he ~~but~~worked as production manager, Research and Development manager and assistant ~~was~~ to ~~not~~GM ~~reported~~in Dong Feng Siping Auto Parts Co., Ltd. Mr. Zhan graduated from Jilin University of Technology in 1996.

~~PART~~Mr. ~~III~~Ariel Poppel. Mr. Poppel became a member of our Board of Directors on July 14, 2011. Since 2005, Mr. Poppel has been the Managing Director and CFO of Infinity Group, a leading Chinese-Israeli management group and investment fund. He is also currently the CEO of EIPAT (formally Shellcase). From 2004 to 2005, Mr. Poppel served as the Interim CEO, CFO and VP of Administration of Shellcase, a leading global supplier of innovative wafer level chip size packaging solutions for semiconductor devices for growing digital consumer products and telecom infrastructure markets. Mr. Poppel obtained his Bachelor’s degree in Economics and International Affairs from Bar Ilan University. He also had MBA training at Israeli Management Center. Mr. Poppel is serving as a director on the boards of Nicast, Teledata, WLCSP, Mango/Mate, China Med, Yaan Securities and United Water which are all private companies.

~~ITEM~~Directors ~~10.~~are ~~DIRECTORS,~~elected ~~EXECUTIVE~~until ~~OFFICERS~~their ~~AND~~successors ~~CORPORATE~~are ~~GOVERNANCE~~duly elected and qualified.

~~Directors~~Except as set forth in our discussion below in Item 13 “Certain Relationships and ~~Executive~~Related ~~Officers~~Transactions, and Director Independence—Transactions with Related Persons,” none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

~~The~~There ~~following~~are ~~sets~~no ~~forth~~agreements ~~information~~or ~~about~~understandings for any of our executive officers or directors to resign at the request of another person and ~~executive~~no ~~officers~~officer asor director is acting on behalf of ~~the~~nor ~~date~~will any of ~~this~~them ~~report:~~act at the direction of any other person.

Name	Age	Position
Guohong Zhao	56	Chairman, Chief Executive Officer and President
Zhigang Xu	45	Interim Chief Financial Officer, Treasurer and Secretary
Yue Cui	56	Vice President of Production
Fucai Zhan	46	Vice President of R&D and Director
Ariel Poppel	64	Director

Director Qualifications

~~Mr.~~Directors ~~Guohong~~are ~~Zhao.~~responsible ~~Mr.~~for ~~Zhao~~overseeing ~~became~~ our ~~Chairman, Chief~~business ~~Executive~~consistent ~~Officer~~with ~~and~~their ~~President~~fiduciary onduty ~~June~~to ~~30,~~shareholders. ~~2009,~~This ~~the~~significant responsibility ~~day~~requires ~~that~~highly-skilled weindividuals ~~consummated our~~with ~~reverse~~various ~~acquisition of Megaway~~qualities, attributes and ~~has~~professional ~~served~~experience. asThe ~~the~~Board ~~Chairman~~believes ~~and~~that ~~CEO~~there ofare ~~Siping~~general ~~Juyuan~~requirements ~~since~~for ~~founding~~service ~~the~~on ~~company~~our inBoard ~~1998.~~of ~~Mr.~~Directors ~~Zhao~~that ~~has~~are ~~over 10 years~~applicable ~~experience~~to inall ~~the~~directors ~~heat~~and ~~exchanger~~that ~~industry~~there ~~and~~are ~~over~~other 20skills ~~years~~and ~~management~~ experience. ~~From~~that ~~1996~~should tobe represented ~~1997,~~on ~~he was~~ the ~~Chairman~~Board ~~and~~as ~~CEO~~a ofwhole, ~~Siping~~but ~~City Traffic~~not ~~Safety~~necessarily ~~Equipment~~by ~~Co.,~~each ~~Ltd~~director., aThe Board ~~manufacturer~~considers ofthe ~~traffic~~qualifications ~~safety~~of ~~equipment. Before~~directors ~~1995,~~and hedirector ~~worked~~candidates individually inand ~~senior positions~~ in ~~China~~the ~~Agriculture~~broader ~~Bank,~~context ~~Siping Branch.Mr.~~of ~~Zhao~~the ~~graduated~~Board’s ~~from~~overall ~~Jilin~~composition ~~Province Radio~~ and ~~TelevisionUniversity in~~ ~~1986,~~our ~~holding~~current aand ~~college~~future ~~degree in Economics~~needs.

~~Mr.~~Qualifications ~~Zhigang~~for ~~Xu.~~All ~~Mr.~~Directors Xu was appointed as our Interim Chief Financial Officer, Treasurer and Secretary of September 29, 2012. Mr. Xu has worked in different positions in the Company’s subsidiaries Siping Juyuan and Beijing Juyuan since 2000. Mr. Xu was Beijing Juyuan’s accountant and Financial Director. He was also Siping Juyuan’s Deputy Financial Director and CFO Assistant. From 1993 to 1999, Mr. Xu worked as an account at Siping Jiuyuan Heat Exchange Equipment Co., Ltd. Mr. Xu holds a Bachelor’s Degree in Accounting from Jilin Industry University.

~~Mr.~~In ~~Yue~~its ~~Cui.~~assessment ~~Mr.~~of ~~Cui~~each ~~became~~potential ~~our~~candidate, ~~Vice~~including ~~President of~~those ~~Production~~recommended onby ~~June 30~~shareholders, ~~2009,~~ the ~~day~~Board ~~that~~considers wethe ~~consummated~~nominee’s ~~our reverse acquisition~~judgment, ofintegrity, ~~Megaway~~experience, ~~and~~independence, ~~has~~understanding ~~served as Vice President~~ of ~~Production~~our ofbusiness ~~Siping~~or ~~Juyuan~~other ~~since~~related ~~2006.~~industries ~~From~~and ~~2000~~such toother ~~2006,~~factors ~~he was~~ the ~~operation~~Board ~~manager~~determines ofare ~~Siping~~pertinent in ~~Juyuan.With~~light 20of ~~years’~~the ~~experience~~current inneeds ~~manufacturing~~of ~~industry,~~the heBoard. ~~has~~The ~~significantly improved~~Board ~~the~~also ~~production~~takes ~~management~~into ofaccount the ability ~~Company.From~~of ~~1979~~a director to ~~2000,~~devote hethe ~~was~~time ~~the production~~and ~~manager~~effort ofnecessary ~~Siping~~to ~~Tool~~fulfill ~~Factory,~~his aor her ~~tool~~responsibilities ~~manufacturer~~to the Company.

~~Mr.~~The ~~Fucai~~Board ~~Zhan.~~requires ~~Mr.~~that ~~Zhan~~each ~~became~~director ~~our~~be ~~Vice~~a ~~President~~recognized person of ~~Research~~high ~~and~~integrity ~~Development~~with ona ~~June~~proven ~~30,~~record ~~2009, the day that we consummated our reverse acquisition~~ of ~~Megaway,~~success ~~and~~in ~~became~~his aor ~~member~~her offield. ~~our~~Each director ~~Board~~must ofdemonstrate ~~Directors~~innovative ~~on September 25~~thinking, ~~2009.~~familiarity ~~Mr.~~with ~~Zhan~~and ~~possesses~~respect ~~over~~for corporate 15governance ~~years~~requirements ~~comprehensive~~and ~~experience in production~~practices, ~~research~~an ~~and~~appreciation ~~development,~~of ~~and~~multiple cultures ~~sales~~ and isa ~~well~~commitment ~~positioned~~ to ~~lead~~sustainability ~~our research~~ and ~~development~~to ~~function~~dealing toresponsibly bewith ~~highly~~social ~~market oriented~~issues. ~~Mr.~~In ~~Zhan~~addition ~~joined~~to ~~Siping~~the ~~Junyuan~~qualifications inrequired ~~1999~~of asall ~~Vice~~directors, ~~President~~the ofBoard ~~Sales~~assesses ~~and~~intangible ~~was~~qualities ~~appointed~~including asthe ~~Vice~~individual’s ~~President~~ability ofto ~~Research and Development in~~ask ~~2009.~~difficult ~~Before~~questions ~~joiningSiping Juyuan~~and, ~~he worked as production manager~~simultaneously, ~~Research and Development manager and assistant~~ to GMwork ~~in Dong Feng Siping Auto Parts Co~~collegially.~~, Ltd.Mr.~~ ~~Zhan graduated from Jilin University of Technology in 1996.~~

46The Board does not have a specific diversity policy, but considers diversity of race, ethnicity, gender, age, cultural background and professional experiences in evaluating candidates for Board membership. Diversity is important because a variety of points of view contribute to a more effective decision-making process.

~~Mr.~~46 Ariel Poppel. Mr. Poppel became a member of our Board of Directors on July 14, 2011. Since 2005, Mr. Poppel has been the Managing Director and CFO of Infinity Group, a leading Chinese-Israeli management group and investment fund. He is also currently the CEO of EIPAT (formally Shellcase). From 2004 to 2005, Mr. Poppel served as the Interim CEO, CFO and VP of Administration of Shellcase, a leading global supplier of innovative wafer level chip size packaging solutions for semiconductor devices for growing digital consumer products and telecom infrastructure markets. Mr. Poppel obtained his Bachelor’s degree in Economics and International Affairs from Bar Ilan University. He also had MBA training at Israeli Management Center. Mr. Poppel is serving as a director on the boards of Nicast, Teledata, WLCSP, Mango/Mate, China Med, Yaan Securities and United Water which are all private companies.

~~Directors~~Qualifications, ~~are~~Attributes, ~~elected~~Skills ~~until~~and ~~their~~Experience ~~successors~~to ~~are~~be Represented ~~duly~~on ~~elected and~~the ~~qualified.~~Board as a Whole

~~Except~~The asBoard ~~set~~has ~~forth~~identified inparticular ~~our~~qualifications, ~~discussion~~attributes, skills ~~below~~and inexperience ~~Item~~that 13are ~~“Certain Relationships~~important ~~and~~to ~~Related~~be ~~Transactions,~~represented ~~and~~on ~~Director~~the ~~Independence—Transactions with~~Board ~~Related~~as ~~Persons~~a whole,” ~~none~~in light of our ~~directors,~~current ~~director~~needs ~~nominees~~and orbusiness ~~executive officers~~priorities. ~~has~~We ~~been~~are ~~involved~~a inU.S. public ~~any~~company ~~transactions~~that ~~with~~manufactures usand orsells ~~any~~heat ofexchange ~~our~~products. ~~directors~~Therefore, ~~executive~~the ~~officers,~~Board ~~affiliates~~believes orthat ~~associates~~a ~~which~~diversity ~~are~~of ~~required~~professional toexperiences bein ~~disclosed~~the heat ~~pursuant~~exchanger toindustry, ~~the~~specific ~~rules~~knowledge of key geographic growth areas, and knowledge ~~regulations~~of U.S. capital markets and of U.S. accounting and financial reporting standards should be represented on the ~~SEC~~Board.

~~There~~Summary ~~are no agreements or understandings for any~~ of ~~our executive~~Qualifications ~~officers or directors to resign at the request~~ of ~~another person and~~Directors ~~no officer or director is acting on behalf of nor will any of them act at the direction of any other person.~~

~~Director~~Set ~~Qualifications~~forth below is a narrative disclosure that summarizes some of the specific qualifications, attributes, skills and experiences of our directors. For more detailed information, please refer to the biographical information for each director set forth above.

~~Directors~~Mr. ~~are~~Guohong ~~responsible~~Zhao. ~~for overseeing our business consistent with their fiduciary duty to stockholders~~Mr. ~~This~~Zhao ~~significant responsibility~~is ~~requires~~a ~~highly-skilled~~founder ~~individuals~~of ~~with various qualities,~~SipingJuyuan ~~attributes~~ and ~~professional~~has ~~experience.~~served ~~The~~as ~~Board~~the ~~believes~~Chairman ~~that~~and ~~there~~Chief ~~are general~~Executive ~~requirements~~Officer ~~for service on our Board~~ of ~~Directors~~SipingJuyuan ~~that are applicable~~since toits ~~all~~inception ~~directors~~in ~~and~~1998. ~~that~~Mr. ~~there~~Zhao ~~are~~has ~~other~~over ~~skills~~10 ~~and~~years’ experience ~~that~~in ~~should~~the beheat ~~represented~~exchanger onindustry ~~the~~and ~~Board~~over as20 ayears ~~whole,~~management ~~but not necessarily by each director~~experience. ~~The~~He contributes ~~Board~~invaluable ~~considers~~long-term ~~the~~knowledge ~~qualifications~~ of ~~directors~~our business and ~~director~~operations ~~candidates individually~~ and extensive experience in the ~~broader~~heat ~~context~~exchanger ~~of the Board’s overall composition and our current and future needs~~industry.

~~Qualifications~~Mr. ~~for~~Fucai ~~All~~Zhan. ~~Directors~~Mr. Zhan possesses over 15 years of experience in production, research and development, and sales. He joined SipingJunyuan in 1999 as Vice President of Sales and was appointed as Vice President of Research and Development in 2009. He contributes invaluable long-term knowledge of our business and operations to our Board.

InMr. ~~its~~Ariel ~~assessment~~Poppel. of each potential candidate, including those recommended by stockholders, the Board considers the nominee’s judgment, integrity, experience, independence, understanding of our business or other related industries and such other factors the Board determines are pertinent in light of the current needs of the BoardMr. ~~The~~Poppel ~~Board~~contributes ~~also takes into account the ability of a director~~ to ~~devote~~ the ~~time and effort necessary to fulfill his or her responsibilities to the Company. The~~ Board ~~requires that each director be a~~is ~~recognized~~extensive ~~person~~experience ofserving ~~high integrity with a proven record of success~~ in ~~his~~management ~~or her~~positions ~~field. Each director must demonstrate innovative thinking, familiarity with~~ and ~~respect~~on ~~for corporate governance requirements and practices, an appreciation of multiple cultures and a commitment to sustainability and to dealing responsibly with social issues. In addition to~~ the ~~qualifications~~boards ~~required~~ of ~~all~~numerous ~~directors, the Board assesses intangible qualities including the individual’s ability to ask difficult questions and, simultaneously, to work collegially~~companies.

~~The~~Family Board does not have a specific diversity policy, but considers diversity of race, ethnicity, gender, age, cultural background and professional experiences in evaluating candidates for Board membership. Diversity is important because a variety of points of view contribute to a more effective decision-making process. Relationships

~~Qualifications,~~There ~~Attributes,~~are ~~Skills~~no ~~and~~family ~~Experience~~relationships toamong ~~be Represented~~any onof ~~the~~our ~~Board~~officers asor directors. ~~a Whole~~

~~The~~Involvement ~~Board has identified particular qualifications, attributes, skills and experience that are important to be represented on the Board as a whole,~~ in ~~light~~Certain ofLegal our current needs and business priorities. We are a U.S. public company that manufactures and sells heat exchange products. Therefore, the Board believes that a diversity of professional experiences in the heat exchanger industry, specific knowledge of key geographic growth areas, and knowledge of U.S. capital markets and of U.S. accounting and financial reporting standards should be represented on the Board. Proceedings

47To the best of our knowledge, none of our directors or executive officers has, during the past ten years:

~~Summary~~• been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); • had any bankruptcy petition filed by or against the business or property of ~~Qualifications~~the person, or of ~~Directors~~any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; • been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; • been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; • been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or • been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

~~Set~~47 forth below is a narrative disclosure that summarizes some of the specific qualifications, attributes, skills and experiences of our directors. For more detailed information, please refer to the biographical information for each director set forth above.

~~Mr.~~Section ~~Guohong~~16(A) ~~Zhao.~~Beneficial ~~Mr.~~Ownership ~~Zhao is a founder of Siping Juyuan~~Reporting and has served as the Chairman and Chief Executive Officer of Siping Juyuan since its inception in 1998. Mr. Zhao has over 10 years experience in the heat exchanger industry and over 20 years management experience. He contributes invaluable long-term knowledge of our business and operations and extensive experience in the heat exchanger industry. Compliance

~~Mr.~~Section ~~Fucai~~16(a) ~~Zhan.~~of ~~Mr.~~the ~~Zhan~~Exchange ~~possesses~~Act ~~over~~requires 15our ~~years~~executive officers, directors and beneficial owner of more than 10% of a registered class ~~experience~~of inour ~~production,~~equity ~~research~~securities ~~and~~to ~~development,~~file ~~and~~with ~~sales.~~the HeSEC ~~joined~~statements ~~Siping~~of ownership and ~~Junyuan~~changes in ~~1999~~ownership. asThe ~~Vice~~same ~~President~~persons ofare ~~Sales~~required ~~and~~to ~~was~~furnish ~~appointed~~us aswith ~~Vice~~copies ~~President~~ of all ~~Research~~Section ~~and~~16(a) ~~Development~~forms inthey ~~2009~~file. HeExcept ~~contributes~~as ~~invaluable~~set ~~long-term~~forth below, we believe that ~~knowledge~~all of our ~~business~~executive officers, directors and ~~operations~~beneficial toowner of more than 10% of a registered class of our ~~Board~~equity securities complied with the applicable filing requirements during fiscal year 2017.

~~Mr.~~In ~~Ariel~~making ~~Poppel.~~these ~~Mr.~~statements, ~~Poppel~~we ~~contributes~~have torelied ~~the~~upon ~~Board~~examination isof ~~extensive~~the ~~experience~~copies ~~serving~~of inall ~~management~~Section ~~positions~~16(a) ~~and~~forms onprovided to us and the ~~boards~~written representations of our executive officers, directors and beneficial owner of ~~numerous~~more ~~companies~~than 10% of a registered class of our equity securities.

~~Family~~Code ~~Relationships~~of Ethics

~~There~~On ~~are~~September no25, ~~family~~2009, ~~relationships~~our ~~among~~Board ~~any~~adopted a new Code of Ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. The new Code of Ethics replaces our prior Code of Ethics that applied only to our principal executive officer, principal financial officer, principal accounting officer or controller and any person who performed ~~directors~~similar functions. Our Code of Ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of the code. A copy of the Code of Ethics can be found on our website at www.tht.cn.

~~Involvement~~We inare ~~Certain~~required ~~Legal~~to ~~Proceedings~~disclose any amendment to, or waiver from, a provision of our Code of Ethics applicable to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. We intend to use our website as a method of disseminating this disclosure, as permitted by applicable SEC rules. Any such disclosure will be posted to our website within four business days following the date of any such amendment to, or waiver from, a provision of our Code of Ethics.

ToBoard ~~the best of our knowledge, none of our directors or executive officers has, during the past ten years:~~ Composition

~~been~~The ~~convicted~~Company inis governed by a ~~criminal~~Board ~~proceeding~~of orDirectors ~~been~~that ~~subject~~currently consists toof athree ~~pending criminal~~members: ~~proceeding~~Messrs. ~~(excluding~~Guohong ~~traffic~~Zhao, ~~violations~~Fucai Zhan and ~~other~~Ariel ~~minor~~Poppel. All ~~offences);~~actions of the Board of Directors require the approval of a majority of the directors in attendance at a meeting at which a quorum is present.

~~had~~Material ~~any~~Changes bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to ~~that~~Director ~~time;~~Nomination Procedures

~~been~~There ~~subject~~have tobeen ~~any~~no ~~order,~~material ~~judgment,~~changes orto ~~decree,~~the ~~not~~procedures ~~subsequently~~by ~~reversed,~~which ~~suspended~~shareholders ormay ~~vacated,~~recommend ofnominees ~~any~~to ~~court~~our ofBoard ~~competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type~~ of ~~business,~~Directors ~~securities, futures,~~since ~~commodities, investment, banking, savings and loan, or insurance~~such ~~activities,~~procedures orwere tolast bedisclosed. ~~associated with persons engaged in any such activity;~~

~~been~~ITEM ~~found~~11. byEXECUTIVE a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; COMPENSATION.

~~been~~Summary ~~the~~Compensation ~~subject~~Table ~~of,~~— orFiscal aYears ~~party~~Ended ~~to,~~December ~~any federal or state judicial or administrative order~~31, ~~judgment, decree, or finding, not subsequently reversed,~~ ~~suspended~~2017 or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and~~-desist~~ ~~order,~~2016 ~~or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or~~

~~been~~The ~~the~~following ~~subject~~table ~~of,~~sets orforth ainformation ~~party~~concerning ~~to,~~all ~~any~~cash and ~~sanction~~non-cash orcompensation ~~order,~~awarded ~~not subsequently reversed~~to, ~~suspended~~earned by or ~~vacated,~~paid ofto ~~any self-regulatory organization (as defined in Section 3(a)(26) of~~ the ~~Exchange~~named ~~Act~~persons ~~(15 U.S.C. 78c(a)(26))), any~~for ~~registered~~services ~~entity~~rendered ~~(as defined~~ in ~~Section~~all ~~1(a)(29)~~capacities ofduring the ~~Commodity~~noted ~~Exchange Act (7 U~~periods.~~S.C.~~ ~~1(a)(29))),~~No orother ~~any equivalent exchange, association, entity or~~executive ~~organization~~officer ~~that~~received ~~has~~total ~~disciplinary~~annual ~~authority~~salary ~~over~~and ~~its~~bonus ~~members~~compensation orin ~~persons associated~~excess ~~with a member~~of $100,000.

Section 16(A) Beneficial Ownership Reporting Compliance

Name and Principal Position	Fiscal Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Guohong Zhao, Chief Executive Officer	2017	17,521	-	-	-	-	17.521
Guohong Zhao, Chief Executive Officer	2016	16,819	-	-	-	-	16,819

Section 16(a) of the Exchange Act requires our executive officers, directors and beneficial owner of more than 10% of a registered class of our equity securities to file with the SEC statements of ownership and changes in ownership. The same persons are required to furnish us with copies of all Section 16(a) forms they file. Except as set forth below, we believe that all of our executive officers, directors and beneficial owner of more than 10% of a registered class of our equity securities complied with the applicable filing requirements during fiscal year 2016. 48

48Employment Agreements

InWe ~~making~~do ~~these~~not ~~statements, we~~ have ~~relied~~an ~~upon~~employment ~~examination~~agreement ~~of the~~with ~~copies~~any of ~~all Section 16(a) forms provided to us and the written representations of~~ our ~~executive officers, directors and beneficial owner of~~ ~~more than 10% of a registered class of our equity securities~~management.

~~Code~~We have not provide retirement benefits (other than a state pension scheme in which all of ~~Ethics~~our employees in China participate) or severance or change of control benefits to our named executive officer.

OnOutstanding ~~September~~Equity ~~25,~~Awards ~~2009,~~at ~~our~~Fiscal ~~Board~~Year ~~adopted~~End a new Code of Ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. The new Code of Ethics replaces our prior Code of Ethics that applied only to our principal executive officer, principal financial officer, principal accounting officer or controller and any person who performed similar functions. Our Code of Ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of the code. A copy of the Code of Ethics can be found on our website at www.tht.cn.

WeFor ~~are~~the ~~required~~year toended ~~disclose~~December ~~any~~31, ~~amendment to~~2017, orno ~~waiver~~director ~~from,~~or aexecutive ~~provision~~officer ofhas ~~our~~received ~~Code~~compensation offrom ~~Ethics~~us ~~applicable~~pursuant to ~~our~~any ~~principal~~compensatory ~~executive officer, principal financial officer, principal accounting officer, controller,~~ or ~~persons~~benefit ~~performing similar functions~~plan. WeThere ~~intend~~is tono ~~use~~plan ~~our~~or ~~website~~understanding, asexpress aor ~~method of disseminating this disclosure~~implied, asto ~~permitted~~pay ~~by applicable SEC rules. Any such~~any ~~disclosure~~compensation ~~will be posted~~ to ~~our~~any ~~website~~director ~~within~~or ~~four~~executive ~~business~~officer ~~days~~pursuant ~~following~~to ~~the date of~~ any ~~such amendment to,~~ compensatory or ~~waiver~~benefit ~~from, a provision of our Code of Ethics~~plan.

~~Board~~Compensation ~~Composition~~of Directors

The ~~Company~~following istable ~~governed~~sets byforth athe ~~Board~~total ofcompensation ~~Directors~~earned ~~that currently~~by ~~consists~~our ofdirectors ~~three~~for ~~members:~~their ~~Messrs.~~services ~~Guohong~~as ~~Zhao,~~directors ~~Fucai~~during ~~Zhan~~fiscal ~~and~~year ~~Ariel~~ended ~~Poppel.~~December ~~All~~31, ~~actions~~2017: ~~of the Board of Directors require the approval of a majority of the directors in attendance at a meeting at which a quorum is present.~~

~~Material~~Name ~~Changes~~Fees toearned ~~Director~~or ~~Nomination~~paid ~~Procedures~~in cash ($) All other compensation ($) Total ($) Guohong Zhao - - - Fucai Zhan - - - Ariel Poppel - - -

~~There~~Mr. ~~have~~Poppel ~~been~~does nonot ~~material~~receive ~~changes~~any tocompensation ~~the~~for ~~procedures~~his byservice ~~which~~as ~~stockholders~~director. ~~may~~Mr. ~~recommend~~Guohong ~~nominees~~Zhao toand ~~our~~Mr. ~~Board~~Fucai Zhan are paid in their capacity as executive officers of ~~Directors~~the ~~since~~Company ~~such~~and they do not receive any additional ~~procedures~~compensation ~~were~~for ~~last~~their ~~disclosed~~service as directors.

~~ITEM~~It ~~11.~~is ~~EXECUTIVE~~our ~~COMPENSATION~~practice to reimburse our directors for reasonable travel expenses related to attendance at Board and Committee meetings.

~~Summary~~ITEM ~~Compensation~~12. ~~Table~~SECURITY —OWNERSHIP ~~Fiscal~~OF ~~Years~~CERTAIN ~~Ended~~BENEFICIAL ~~December~~OWNERS ~~31, 2016~~AND ~~and~~MANAGEMENT ~~2015~~AND RELATED STOCKHOLDER MATTERS.

~~The~~Security ~~following~~Ownership ~~table~~of ~~sets~~Certain ~~forth~~Beneficial ~~information~~Owners ~~concerning all cash~~ and ~~non-cash compensation awarded to, earned by or paid to the named persons for~~ ~~services~~Management ~~rendered in all capacities during the noted periods. No other executive officer received total annual salary and bonus compensation in excess of $100,000.~~

Name and Principal Position	Fiscal Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Guohong Zhao, Chief Executive Officer	2016	16,819	-	-	-	-	16,819
	2015	16,819	-	-	-	-	16,819

The following table sets forth information regarding beneficial ownership of our common stock as of April 16, 2017 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group. Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, THT Industrial Park, No. 5 Nanhuan Road, Tiexi District, Siping, Jilin Province, 136000, People’s Republic of China.

Employment Agreements

Name and Address of Beneficial Owner	Office, If Any	Title of Class	Amount and Nature of Beneficial Ownership⁽¹⁾	Percent of Class⁽²⁾
Officers and Directors
Guohong Zhao	Chairman and CEO	Common Stock	4,217,804	20.6%
Zhigang Xu	Interim Chief Financial Officer	Common Stock	0	*
Yue Cui	VP of Production	Common Stock	0	*
Fucai Zhan	VP of R&D and Director	Common Stock	0	*
All officers and directors as a group (8 persons named above)		Common Stock	4,241,804	20.6%
5% Security Holders
Guohong Zhao		Common Stock	4,217,804	20.6%

We* doLess ~~not~~than ~~have~~1% ~~an employment agreement with any of our management.~~

We have not provide retirement benefits (other than a state pension scheme in which all of our employees in China participate) or severance or change of control benefits to our named executive officer.

⁽¹⁾	Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of our common stock.

⁽²⁾	A total of 20,453,500 shares of our common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of April 16, 2018. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator.

~~Outstanding~~Changes ~~Equity~~in ~~Awards at Fiscal Year End~~ Control

~~For~~We ~~the~~are ~~year~~not ~~ended~~aware ~~December~~of ~~31, 2016, no director or executive officer has received compensation from us pursuant to~~ any ~~compensatory~~arrangements ~~or benefit~~which ~~plan.~~if ~~There~~consummated ~~is no plan or understanding, express or implied, to pay any~~may ~~compensation~~result toin ~~any~~a ~~director~~change orof ~~executive~~control ~~officer~~of ~~pursuant~~our ~~to any compensatory or benefit plan~~Company.

~~Compensation~~Securities ofAuthorized ~~Directors~~for Issuance Under Equity Compensation Plans

~~The~~We ~~following~~do ~~table~~not ~~sets~~have ~~forth~~any ~~the total~~ compensation ~~earned~~plans ~~by our~~in ~~directors~~effect ~~for~~under ~~their~~which ~~services~~our equity assecurities ~~directors~~are ~~during~~authorized ~~fiscal~~for ~~year~~issuance. ~~ended December 31, 2016:~~

Name	Fees earned or paid in cash ($)	All other compensation ($)	Total ($)
Guohong Zhao	-	-	-
Fucai Zhan	-	-	-
Jingxun Chen(1)	3,000	-	3,000
To Tsang(2)	4,800	-	4,800
Youjun Lian(3)	3,600	-	3,600
Ariel Poppel	-	-	-

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

~~(1)(2)(3)~~Transactions ~~Messrs.~~with ~~Chen,~~Related ~~Tsang and Lian resigned as directors on March 25, 2016.~~ Persons

~~Mr.~~Below ~~Poppel~~were ~~does~~transactions ~~not~~since ~~receive~~the beginning of the 2016 fiscal year, or any ~~compensation~~currently ~~for~~proposed ~~his~~transaction, ~~service~~in ~~as director~~which ~~.Mr.~~we ~~Guohong~~were ~~Zhao~~or are to be a participant and ~~Mr.~~the ~~Fucai~~amount ~~Zhan~~involved ~~are~~exceeded ~~paid~~or inexceeds ~~their~~the ~~capacity~~lesser asof $120,000 ~~executive~~or ~~officers~~one percent of the ~~Company~~average ~~and~~of ~~they~~our dototal ~~not~~assets ~~receive~~at ~~any~~year-end ~~additional~~for the last two ~~compensation~~completed ~~for~~fiscal ~~their~~years, ~~service~~and asin ~~directors~~which any related person had or will have a direct or indirect material interest. The related parties consist of as following:

ItName isof ~~our~~Related ~~practice~~Party toNature ~~reimburse~~of ~~our~~Relationship ~~directors~~Guohong ~~for~~Zhao ~~reasonable travel~~Chairman, ~~expenses~~Chief ~~related~~Executive toOfficer ~~attendance~~and atPresident ~~Board~~Zhigang Xu Interim Chief Financial Officer, Treasurer and ~~Committee~~Secretary ~~meetings~~Fucai Zhan Vice President of R&D and Director Kai Liu Chief Engineer, Manager of Market development Others Individuals who have significant influence on the Company Jilin Tongda Heat Transfer System Integration, Ltd (“Tongda”) The Company has significant influence on Tongda Liaoning Hongsheng Heat Energy Technology, Ltd (“Hongsheng”) The Company has significant influence on Hongsheng Siping Juyuan Heat Exchange Service Technology, Co., Ltd. (“Fuwu”) The Company has significant influence on Fuwu

~~ITEM~~Trade ~~12.~~receivables ~~SECURITY~~– ~~OWNERSHIP~~related OFparty ~~CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.~~

~~Security~~During ~~Ownership~~the years ended December 31, 2017 and 2016, the Company sold products to Tongda in the amount of ~~Certain~~$81,893 ~~Beneficial~~and ~~Owners~~$1,309,522, respectively. The corresponding cost for the related party sales was $15,944 and $953,827, ~~Management~~respectively. As of December 31, 2017 and 2016, the Company had trade receivables from Tongda in the amount of $27,676 and $1,358,399, respectively.

~~The~~Due ~~following~~from ~~table~~related ~~sets~~parties forth information regarding beneficial ownership of our common stock as of April 12, 2017 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group. Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, THT Industrial Park, No. 5 Nanhuan Road, Tiexi District, Siping, Jilin Province, 136000, People’s Republic of China.

Name and Address of Beneficial Owner	Office, If Any	Title of Class	Amount and Nature of Beneficial Ownership(1)	Percent of Class(2)
Officers and Directors
Guohong Zhao	Chairman and CEO	Common Stock	4,217,804	20.6%
Zhigang Xu	Interim Chief Financial Officer	Common Stock	0	*
Yue Cui	VP of Production	Common Stock	0	*
Fucai Zhan	VP of R&D and Director	Common Stock	0	*
Jingxun Chen(3)	Director	Common Stock	24,667	*

As of December 31, 2017 and 2016, respectively, the Company advanced $14,075 and $31,978 to Guohong Zhao for handling selling and logistic activities for the Company in the ordinary course of business.

50As of December 31, 2017 and 2016, respectively, the Company advanced $11,742 and $11,003 to Kai Liu for handling selling and logistic activities for the Company in the ordinary course of business.

To Tsang(4)	Director	Common Stock	0	*
Youjun Lian(5)	Director	Common Stock	0	*
Ariel Poppel	Director	Common Stock	0	*
All officers and directors as a group (8 persons named above)		Common Stock	4,242,471	20.7%
5% Security Holders
Guohong Zhao		Common Stock	4,217,804	20.6%

During the year ended December 31, 2017, the Company advanced RMB509 (approximately $75) to Hongsheng as inventory purchase prepayments. As of December 31, 2017 and 2016, the Company had advance to Hongsheng in the amount of $239,701 and $224,532, respectively, which were included in due from related parties in the accompanying consolidation balance sheets.

*During ~~Less~~the ~~than~~years ended December 31, 2017 and 2016, the Company made loans to Tongda in the amount of $497,133 and $1%,857,761, and Tongda repaid to the Company in the amount of $290,070 and $1,589,691 respectively. The loans were nonsecured, noninterest bearing and due on demand. On December 28, 2016, the Company sold certain used equipment with original cost and net book value of $977,650 and $121,307, respectively, to Tongda in exchange for $1,315,958 including VAT. During the year ended December 31, 2017, the Company collected $61,332 from Tongda for the equipment sold. As of December 31, 2017 and 2016, the Company had loans to Tongda in the amount of $488,737 and $256,461, and receivable from Tongda regarding sale of equipment in the amount of $1,340,710 and $1,315,958, respectively, both of which were included in due from related parties in the accompanying consolidation balance sheets.

(1)	Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of our common stock.
(2)	A total of 20,453,500 shares of our common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of March 29,2016. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator.

During the year ended December 31, 2017, the Company advanced $365,448 to, and received repayment of $250,111 from Fuwu as of December 31, 2017. In addition, Fuwu also paid operating expense on behalf of the Company in the amount of $21,471. As of December 31, 2017, the total amount due from Fuwu of $97,481 was included in due from related parties in the accompanying consolidation balance sheets.

~~(3)(4)(5)~~Due ~~Messrs.~~to ~~Chen,~~related ~~Tsang~~parties ~~and Lian resigned as directors on March 25, 2016.~~

~~Changes~~Due into ~~Control~~related parties consist of the following:

We are not aware of any arrangements which if consummated may result in a change of control of our Company.

		Year ended December 31,
		2017		2016
Zhigang Xu	$	-	$	72,008
Kai Liu		-		144,015
Others		7,050,268		18,711
Fucai Zhan		138,325		148,498
Guohong Zhao		19,010		-
	$	7,207,603	$	383,232

~~Securities~~Amounts ~~Authorized~~owed ~~for~~by ~~Issuance~~the ~~Under~~Company ~~Equity~~represent ~~Compensation~~loans obtained from ~~Plans~~related parties and expenses paid by related parties, which are non-secured, non-interest bearing, and due on demand.

WeDuring dothe ~~not~~year ~~have~~ended ~~any~~December ~~compensation~~31, ~~plans~~2017, inthe ~~effect~~Company ~~under~~was advanced ~~which~~$11,413,624 ~~our~~from the related parties and made repayment of $4,885,459 ~~equity~~against ~~securities~~the ~~are~~advances. ~~authorized~~Guohong ~~for~~Zhao ~~issuance~~also paid $37,614 operating expense on behalf of the Company.

ITEM 1314. ~~CERTAIN~~PRINCIPAL ~~RELATIONSHIPS~~ACCOUNTING ~~AND~~FEES ~~RELATED TRANSACTIONS,~~ AND ~~DIRECTOR INDEPENDENCE~~SERVICES.

~~Transactions~~Independent ~~with~~Auditors’ ~~Related Persons~~Fees

~~Below~~The ~~were~~following ~~transactions~~is ~~since~~a ~~the~~summary ~~beginning~~ of the ~~2015~~fees ~~fiscal~~billed ~~year, or any currently proposed transaction, in which we were or are~~ to ~~be a participant and~~ the ~~amount~~Company for ~~involved~~professional ~~exceeded~~services orrendered ~~exceeds the lesser of $120,000 or one percent of the average of our total assets at year end~~ for the ~~last~~ ~~two completed~~ fiscal years, ~~and~~ended inDecember ~~which~~31, ~~any related person had or will have a direct or indirect material interest.~~2017 ~~The related~~and ~~parties consist of as following~~2016:

Name of Related Party Nature of Relationship Guohong Zhao Chairman, Chief Executive Officer and President Zhigang Xu Interim Chief Financial Officer, Treasurer and Secretary Fucai Zan Vice President of R&D and Director Kai Liu Chief Engineer, Manager of Market development Zhijun Ma Sales Director Yongfu Tian Vice Sales Director Feng Xu Factory Director, Manager of production Jilin Tongda Heat Transfer System Integration, Ltd ( “Tongda”) The Company has significant influence on Tongda Liaoning Hongsheng Heat Energy Technology, Ltd ( “Hongsheng”) The Company has significant influence on Hongsheng

		Year Ended December 31,
		2017		2016
Audit Fees	$	109,000	$	105,000
Audit-Related Fees		-		8,000
Tax Fees		-		-
All Other Fees		-		-
TOTAL	$	109,000	$	113,000

~~The~~“Audit ~~Company~~Fees” ~~does not~~consisted ~~own~~of ~~any~~fees ~~equity~~billed for professional services rendered by the principal accountant for the audit of ~~either~~our ~~Tongda~~annual orfinancial statements ~~Hongsheng.~~and ~~Neither~~review ~~Tongda~~of the financial statements included in our Form 10-K and 10-Q or ~~Hongsheng~~services ~~owns any~~that ~~equity~~are ofnormally provided by the ~~Company~~accountant in connection with statutory and regulatory filings or engagements.

~~Trade receivables~~50 ~~– related party~~

“Audit-Related ~~During~~Fees” ~~the~~consisted ~~years~~of ~~ended~~fees ~~December~~billed ~~31,~~for ~~2016~~assurance and ~~2015, the~~ ~~Company~~related ~~sold~~services ~~products~~by tothe ~~Tongda~~principal inaccountant ~~the~~that ~~amount~~were ofreasonably ~~$1,309,522~~related ~~and~~to ~~$257,674,~~the ~~respectively.~~performance ~~The~~of ~~corresponding cost for~~ the ~~related~~audit ~~party~~or ~~sales~~review ~~was $953,827 and $212,873, respectively. As~~ of ~~December~~our ~~31,~~financial ~~2016~~statements and ~~2015,~~are ~~the Company had~~not ~~trade~~reported ~~receivables~~under ~~from Tongda in~~ the ~~amount~~paragraph ofcaptioned ~~$1,358,399~~“Audit ~~and~~Fees” ~~$nil, respectively~~above.

~~Due from~~“Tax ~~related~~Fees” ~~parties~~consisted of fees billed for professional services rendered by the principal accountant for tax returns preparation.

“All ~~As of~~Other ~~December~~Fees” ~~31,~~consisted ~~2016~~of ~~and~~fees ~~2015,~~billed ~~respectively,~~for ~~the~~products ~~Company advanced $31,978~~ and ~~$26,896~~ services toprovided ~~Guohong~~by ~~Zhao~~the ~~for~~principal ~~handling~~accountant, ~~selling~~other ~~and~~than ~~logistic~~the ~~activities~~services ~~for~~reported above ~~the Company~~under inother ~~the~~captions ~~ordinary~~of ~~course~~this ofItem ~~business~~14.

Pre-Approval ~~As of~~Policies ~~December 31, 2016~~ and ~~2015, respectively, the Company advanced $nil and $886 to Fucai Zan for handling selling and logistic activities for the Company in the ordinary course of business.~~ Procedures

Under ~~As of~~the ~~December~~Sarbanes-Oxley 31Act of 2002, ~~2016~~all audit and ~~2015,~~non-audit services ~~respectively,~~performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the ~~Company~~auditors’ ~~advanced~~independence from ~~$11,003~~us. In accordance with its policies and ~~$11~~ procedures,~~771~~ toour ~~Kai~~board ~~Liu~~of ~~for~~directors pre-approved ~~handling~~the ~~selling~~audit ~~and~~service ~~logistic~~performed ~~activities~~by MaloneBailey LLP for ~~the~~our ~~Company in~~financial statements as of and for the ~~ordinary~~year ~~course~~ended ofDecember ~~business~~31, 2017.

PART ~~On June~~IV 1, 2016, the Company advanced inventory payment to Hongsheng in the amount of RMB32,000,000 (approximate 4,817,000), which was derived from the loan obtained from Agricultural Bank of China on May 31, 2016. As of December 31, 2016, the advance was returned to the Company in full without inventory purchase due to change in purchase plan. During the year ended December 31, 2016 and 2015, the Company purchased inventory from Hongsheng in the amount of $0 and $136, 962, respectively. As of December 31, 2016 and 2015, the Company had advance to Hongsheng in the amount of $224,532 and $239,597, respectively, which were presented as due from related parties on the accompanying consolidation financial statements.

ITEM During the years ended December 31, 2016 and 2015, the Company made loans to Tongda in the amount of $1,857,761 and $976,598, and Tongda repaid to the Company in the amount of $1,589,691 and $976,598, respectively15. ~~The loans were nonsecured~~EXHIBITS, ~~noninterest~~FINANCIAL ~~bearing~~STATEMENT ~~and due on demand~~SCHEDULES. On December 28, 2016, the Company sold certain used equipment with original cost and net book value of $977,650 and $121,307, respectively, to Tongda in exchange for $1,315,958 including VAT. As of December 31, 2016 and 2015, the Company had loans to Tongda in the amount of $256,461 and $nil, and receivable from Tongda regarding sale of equipment in the amount of $1,315,958 and $nil, respectively, both of which were included in due from related parties in the accompanying consolidation balance sheets.

~~Due~~Financial toStatements ~~related~~and ~~parties~~Schedules

The ~~During the~~financial ~~normal~~statements ~~course~~are ofset ~~business,~~forth ~~our~~under ~~Company,~~Item ~~from~~8 ~~time~~of tothis annual ~~time,~~report ~~has~~on ~~temporarily borrowed~~Form ~~money~~10-K. ~~from~~Financial ~~its~~statement ~~officers~~schedules tohave ~~finance~~been ~~its~~omitted since ~~working~~they ~~capital~~are aseither ~~needed.~~not ~~The amounts~~required, ~~are~~not ~~usually unsecured~~applicable, ~~non-interest~~or ~~bearing~~the ~~and~~information ~~due~~is otherwise ~~on demand~~included.

Exhibit ~~Due to~~List ~~related parties consist of the following:~~

		Year ended December 31,
		2016		2015
Zhigang Xu	$	72,008	$	77,033
Kai Liu		144,015		154,067
Zhijun Ma		6,788		12,757
Yongfu Tian		-		77,033
Yue Cui		11,923		-
Fucai Zan		148,498		107,847
	$	383,232	$	428,737

The list of exhibits in the Exhibit Index to this Report is incorporated herein by reference.

~~All~~51 ~~material related party transactions are made or entered into on terms that are no less favorable to use than can be obtained from unaffiliated third parties.~~

~~ITEM~~SIGNATURES ~~14. PRINCIPAL ACCOUNTING FEES AND SERVICES.~~

~~Independent~~Pursuant ~~Auditors’~~to ~~Fees~~the requirements of section 13 or 15(d) 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.

~~The~~Date: ~~following~~April ~~is a summary of the fees billed to the Company for professional services rendered for the fiscal years ended December 31~~17, ~~2016 and~~2018 ~~2015:~~

		Year Ended December 31,
		2016		2015
Audit Fees	$	105,000	$	120,000
Audit-Related Fees		8,000		8,000
Tax Fees		-		-
All Other Fees		-		-
TOTAL	$	113,000	$	128,000

	THT HEAT TRANSFER TECHNOLOGY, INC.

	By:	/s/Guohong Zhao
		Guohong Zhao
		Chief Executive Officer

	By:	/s/Zhigang Xu
		Zhigang Xu
		Interim Chief Financial Officer

51Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

“Audit Fees” consisted of fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-K and 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

Signature	Title	Date

/s/ Guohong Zhao	Chairman and Chief Executive Officer	April 17, 2018
Guohong Zhao	(Principal Executive Officer)

/s/ Zhigang Xu	Interim Chief Financial Officer	April 17, 2018
Zhigang Xu	(Principal Financial and Accounting Officer)

/s/ Fucai Zhan	Director	April 17, 2018
Fucai Zhan

/s/ Ariel Poppel	Director	April 17, 2018
Ariel Poppel

~~“Audit-Related~~52 Fees” consisted of fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit or review of our financial statements and are not reported under the paragraph captioned “Audit Fees” above.

~~“Tax~~THT ~~Fees”~~Heat ~~consisted~~Transfer ofTechnology, ~~fees~~Inc. ~~billed~~INDEX ~~for professional services~~TO ~~rendered~~CONSOLIDATED byFINANCIAL ~~the~~STATEMENTS ~~principal accountant for tax returns preparation.~~

~~“All~~For ~~Other~~the ~~Fees”~~Years ~~consisted~~Ended ofDecember ~~fees~~31, ~~billed~~2017 ~~for products~~ and ~~services~~ ~~provided~~2016 ~~by the principal accountant, other than the services reported above under other captions of this Item 14.~~

~~Pre-Approval~~CONTENTS ~~Policies and Procedures~~

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the auditors’ independence from us. In accordance with its policies and procedures, our board of directors pre-approved the audit service performed by MaloneBailey LLP for our financial statements as of and for the year ended December 31, 2016.

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets	F-3

Consolidated Statements of Income and Comprehensive Income (Loss)	F-4

Consolidated Statements of Changes in Shareholders' Equity	F-5

Consolidated Statements of Cash Flows	F-6

Notes to Consolidated Financial Statements	F-7 - F-21

~~PART IV~~ F-1

~~ITEM~~REPORT ~~15.~~OF ~~EXHIBITS,~~INDEPENDENT ~~FINANCIAL~~REGISTERED ~~STATEMENT~~PUBLIC ~~SCHEDULES.~~ACCOUNTING FIRM

~~Financial~~To ~~Statements~~the Shareholders and ~~Schedules~~Board of Directors of THT Heat Transfer Technology, Inc.

~~The~~Opinion ~~financial statements are set forth under Item 8 of this annual report~~ on ~~Form~~the ~~10-K.~~ Financial ~~statement~~Statements ~~schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.~~

~~Exhibit~~We ~~List~~have audited the accompanying consolidated balance sheets of THT Heat Transfer Technology, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of income and comprehensive income (loss), stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Matter The ~~list~~accompanying offinancial ~~exhibits~~statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial ~~Exhibit~~statements, ~~Index~~the Company has suffered loss from operations and has negative cash flow from operating activities that raises substantial doubt about its ability to ~~this~~continue ~~Report~~as isa going concern. Management's plans in regard to ~~incorporated~~these ~~herein~~matters byare ~~reference~~also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

52Basis for Opinion

~~SIGNATURES~~These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

~~Pursuant~~We toconducted our audits in accordance with the ~~requirements~~standards of ~~section~~the PCAOB. 13Those orstandards ~~15(d)~~require ofthat we plan and perform the audit to obtain ~~Securities~~reasonable ~~Exchange~~assurance ~~Act~~about whether the financial statements are free of ~~1934~~material misstatement, ~~the~~whether ~~registrant~~due ~~has~~to ~~duly~~error ~~caused~~or ~~this~~fraud. ~~report~~The Company is not required to behave, ~~signed~~nor onwere we engaged to perform, an audit of its ~~behalf~~internal bycontrol over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose ~~undersigned~~of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, ~~thereunto~~we ~~duly~~express ~~authorized~~no such opinion.

~~Date:~~Our ~~April~~audits 17included performing procedures to assess the risks of material misstatement of the financial statements, ~~2017~~whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~THT~~/s/ ~~HEAT~~MaloneBailey, ~~TRANSFER~~LLP ~~TECHNOLOGY, INC~~www.malonebailey.com We have served as the Company's auditor since 2013. Houston, Texas April 17, 2018

~~By: /s/ Guohong Zhao Guohong Zhao Chief Executive Officer By: /s/Zhigang Xu Zhigang Xu Interim Chief Financial Officer~~F-2

~~Pursuant~~THT toHeat ~~the~~Transfer ~~requirements of the Securities Exchange Act of 1934~~Technology, ~~this~~Inc. ~~report~~Consolidated ~~has~~Balance ~~been~~Sheets ~~signed~~(Stated ~~below by the following persons on behalf of the registrant and~~ in ~~the~~US ~~capacities and on the dates indicated.~~ dollars)

Signature		Title	Date
		December 31,			December 31,
/s/ Guohong Zhao		Chairman and Chief Executive Officer	April 17, 2017
		2017			2016
Guohong Zhao		(Principal Executive Officer)
ASSETS
/s/ Zhigang Xu		Interim Chief Financial Officer	April 17, 2017
Current Assets
Zhigang Xu		(Principal Financial and Accounting Officer)
Cash and cash equivalents	$	6,297,546		$	6,609,680
/s/ Fucai Zhan		Director	April 17, 2017
Restricted cash, current		571,918			974,749
Fucai Zhan
Trade receivables, net		46,311,537			37,074,481
Trade receivables - related party		27,676			1,358,399
Bills receivable		394,242			398,374
Other receivables, prepayments and deposits, net		7,371,301			8,904,968
Due from related parties		2,192,446			1,839,932
Inventories, net		28,521,552			21,087,301
Total Current Assets		91,688,218			78,247,884
Restricted cash, non-current		1,112,408			514,201
Retention receivables		3,200,117			1,653,956
Property, plant and equipment, net		8,825,346			8,437,632
Land use rights, net		5,325,127			5,104,121
Deferred tax assets		159,574			149,525
TOTAL ASSETS	$	110,310,790		$	94,107,319
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable		8,954,475			6,727,206
Other payables and accrued liabilities		25,305,594			20,525,878
Income tax payable		55,756			511,314
Short-term loans		4,918,234			4,608,494
Due to related parties		7,207,603			383,232
Total Current Liabilities		46,441,662			32,756,124
Total Liabilities		46,441,662			32,756,124
EQUITY
Preferred stock, $.001 par value, 10,000,000 shares authorized, no shares issued and outstanding
Common stock, $.001 par value, 190,000,000 shares authorized, 20,453,500 shares issued and outstanding at December 31, 2017 and 2016		20,454			20,454
Additional paid-in capital		27,136,310			26,524,324
Statutory reserve		4,270,861			4,270,861
Retained earnings		29,486,561			32,366,400
Accumulated other comprehensive income (loss)		2,202,886			(1,830,844	)
Total THT Heat Transfer Technology, Inc. shareholders' equity		63,117,072			61,351,195
Non-controlling interest		752,056			-
TOTAL EQUITY		63,869,128			61,351,195
TOTAL LIABILITIES AND EQUITY	$	110,310,790		$	94,107,319

53The accompanying notes are an integrated part of these consolidated financial statements

~~THT Heat Transfer Technology, Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~F-3

~~For~~THT ~~the~~Heat ~~Years~~Transfer ~~Ended~~Technology, ~~December~~Inc. ~~31,~~Consolidated ~~2016~~Statements of Income and ~~2015~~Comprehensive Income (Loss) (Stated in US dollars)

CONTENTS

		For the Years Ended December 31,
		2017			2016

REVENUES:
Sales revenue	$	65,134,385		$	46,277,202
Sales revenue-related party		81,893			1,309,522
Total Revenues		65,216,278			47,586,724

COST OF REVENUES:
Cost of revenues		(47,714,817	)		(31,686,457	)
Total Cost of Revenues		(47,714,817	)		(31,686,457	)

Gross Profit		17,501,461			15,900,267

Operating expenses (income)
General and administrative expenses		7,166,261			5,578,919
Research and development expenses		2,278,003			1,967,158
Selling expenses		10,827,401			5,949,034
Loss (gain) on disposal of property, plant and equipment		342			(1,050,322	)
Total Operating Expenses		20,272,007			12,444,789

Income (loss) from operations		(2,770,546	)		3,455,478

Other income (expenses)
Interest income		14,656			16,387
Other income		722,313			456,304
Finance costs		(342,299	)		(157,690	)
Investment income		29,445			79,509
Other expense		(487,058	)		(87,678	)
Total Other Income (Expenses)		(62,943	)		306,832

Income (loss) before income taxes		(2,833,489	)		3,762,310
Income tax expenses		(44,083	)		(514,649	)
Net Income (Loss)		(2,877,572	)		3,247,661
Net income attributable to non-controlling interest		2,267			-
Net income (loss) attributable to THT Heat Transfer Technology, Inc. common shareholders		(2,879,839	)		3,247,661

Comprehensive Income (Loss)
Net Income (Loss)		(2,877,572	)		3,247,661
Other Comprehensive Income (Loss)
Foreign currency translation adjustments		4,060,015			(4,211,941	)
Comprehensive Income (Loss)		1,182,443			(964,280	)
Less: Comprehensive income attributable to non-controlling interest		32,817			-
Comprehensive income (loss) attributable to THT Heat Transfer Technology, Inc. common shareholders		1,149,626			(964,280	)

Earnings (loss) per share attributable to THT Heat Transfer Technology, Inc. common shareholders
Basic and diluted	$	(0.14	)	$	0.16
Weighted average number of shares outstanding
Basic and diluted		20,453,500			20,453,500

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Income and Comprehensive Loss	F-4
Consolidated Statements of Changes in Shareholders’ Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7 - F-20

The accompanying notes are an integrated part of these consolidated financial statements

F-14

~~REPORT~~THT OFHeat ~~INDEPENDENT~~Transfer ~~REGISTERED~~Technology, ~~PUBLIC~~Inc. ~~ACCOUNTING~~Consolidated ~~FIRM~~Statements of Changes in Shareholders' Equity (Stated in US dollars)

To the Board of Directors and Shareholders of: THT Heat Transfer Technology, Inc.

	THT Heat Transfer Technology, Inc.
	Common Stock				Additional				Accumulated Other
					Paid-in		Statutory		Comprehensive			Retained			Non-controlling		Total
	No. of Shares		Amount		Capital		Reserve		Income			Earnings			Interest		Equity
Balance, December 31, 2015	20,453,500	$	20,454	$	26,524,324	$	3,943,474	$	2,381,097		$	29,446,126		$	-	$	62,315,475

Net income												3,247,661					3,247,661
Foreign currency translation adjustment									(4,211,941	)							(4,211,941	)
Appropriation to reserve							327,387					(327,387	)				-

Balance, December 31, 2016	20,453,500	$	20,454	$	26,524,324	$	4,270,861	$	(1,830,844	)	$	32,366,400		$	-	$	61,351,195

Net loss												(2,879,839	)		2,267		(2,877,572	)
Foreign currency translation adjustment									4,029,465						30,550		4,060,015
Contribution from non-controlling investor in subsidiary					611,986				4,265						719,239		1,335,490

Balance, December 31, 2017	20,453,500	$	20,454	$	27,136,310	$	4,270,861	$	2,202,886		$	29,486,561		$	752,056	$	63,869,128

WeThe ~~have audited the~~ accompanying ~~consolidated~~notes ~~balance~~are ~~sheets~~an ~~of THT~~integrated ~~Heat~~part ~~Transfer Technology, Inc. and its subsidiaries (collectively, the "Company") as~~ of ~~December 31, 2016 and 2015, and the related consolidated~~these ~~statements of income and comprehensive loss, changes in shareholders' equity and cash flows for the years then ended. The~~ consolidated financial ~~statements~~ ~~are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial~~ statements ~~based~~ ~~on our audits.~~

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company‘s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.financials F-5

~~In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of~~ THT Heat Transfer Technology, Inc. ~~and~~ ~~its~~Consolidated ~~subsidiaries~~Statements as of ~~December~~Cash ~~31,~~Flows ~~2016~~(Stated ~~and 2015, and the results of their operations and their cash flows for the years then ended,~~ in ~~conformity~~US ~~with accounting principles generally accepted in the United States of America.~~ dollars)

/s/ MaloneBailey, LLP www.malonebailey.com Houston, Texas April 17, 2017

		For the Years Ended December 31,
		2017			2016

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,877,572	)	$	3,247,661
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		1,201,752			1,339,244
Allowance for doubtful accounts		3,113,255			951,237
Loss (gain) on disposal of property, plant and equipment		342			(1,050,322	)
Inventory write-down		1,493,021			-
Changes in operating assets and liabilities:
Trade receivables, net		(9,452,488	)		(2,391,199	)
Trade receivables - related party		1,369,283			(1,419,888	)
Bills receivable		29,761			293,167
Other receivables, prepayments and deposits, net		1,523,959			568,188
Inventories, net		(7,286,825	)		(2,666,434	)
Retention receivables		(1,381,777	)		(175,948	)
Due from related parties		-			(6,872	)
Accounts payable		1,562,194			(598,060	)
Other payables and accrued liabilities		3,333,139			2,060,496
Income taxes payable		(471,753	)		514,823
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(7,843,709	)		666,093

CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash		(91,767	)		(690,334	)
Payments to acquire property, plant and equipment		(765,071	)		(26,229	)
Proceeds from disposal of property, plant and equipment		61,662			3,906
Loans made to others		(1,742,110	)		(379,616	)
Loans to related parties		(862,581	)		(1,857,761	)
Repayments from others		2,112,475			-
Repayments from related parties		540,181			1,589,691
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(747,211	)		(1,360,343	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans		9,516,833			12,868,857
Repayment of short-term loans		(9,465,974	)		(14,086,680	)
Repayment of long-term loan		-			(526,870	)
Proceeds from related parties		11,413,624			45,160
Repayment to related parties		(4,885,459	)		(149,539	)
Contribution from non-controlling investor		1,335,490			-
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES		7,914,514			(1,849,072	)

Effect of foreign currency translation on cash and cash equivalents		364,272			(527,291	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(312,134	)		(3,070,613	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR	$	6,609,680		$	9,680,293
CASH AND CASH EQUIVALENTS AT END OF THE YEAR	$	6,297,546		$	6,609,680

Supplementary Disclosures for Cash Flow Information:
Interest paid	$	233,498		$	146,422
Income taxes paid	$	550,050		$	-

Non-cash investing and financial activities:
Operating expense paid by related parties	$	59,085		$	86,051
Liabilities assumed in connection with purchase of property, plant and equipment	$	147,100		$	697,144

~~F-2~~The accompanying notes are an integrated part of these consolidated financial statements

~~THT Heat Transfer Technology, Inc. Consolidated Balance Sheets (Stated in US dollars)~~ F-6

	December 31,	December 31,
	2016	2015
ASSETS

Filing Compare · THT Heat Transfer Technology, Inc.