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, ~~2015~~2016

[ ] 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 [ ]

~~Yes~~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 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, ~~2015~~2016 (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 ~~NASDAQ~~OTC ~~Capital Market~~Markets) ~~was~~ was approximately $153.2408 million. Shares of the registrant’s common stock held by by each executive officer and director and each by each person who owns 10% or ~~more~~ more of the outstanding common stock have been excluded from the calculation in ~~that~~ 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 ~~March~~April 3012, ~~2016~~2017.

DOCUMENTS INCORPORATED BY REFERENCE

None.

THT HEAT TRANSFER TECHNOLOGY, INC. ~~Annual Report on Form 10-K Year Ended December 31, 2015~~

Annual Report on Form 10-K

Year Ended December 31, 2016

TABLE OF CONTENTS

PART I
Item 1.	Business.	2
Item 1A.	Risk Factors.	1920
Item 1B.	Unresolved Staff Comments.	30
Item 2.	Properties.	3031
Item 3.	Legal Proceedings.	31
Item 4.	Mine Safety Disclosures.	31
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3132
Item 6.	Selected Financial Data.	3233
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	3233
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	4044
Item 8.	Financial Statements and Supplementary Data.	4044
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	4044
Item 9A.	Controls and Procedures.	4044
Item 9B.	Other Information.	4246
PART III
Item 10.	Directors, Executive Officers and Corporate Governance.	4246
Item 11.	Executive Compensation.	4549
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	4650
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	4751
Item 14.	Principal Accounting Fees and Services.	4751
PART IV
Item 15.	Exhibits, Financial Statement Schedules.	4852

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 Juyuan and Beijing Juyuan;
“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 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 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 ~~Kong~~Kongon 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, which was acquired by Star Wealth on June 8, 2009. Siping City Juyuan Heat Exchange Equipment Co., Ltd., the predecessor of Siping Juyuan, was first incorporated in China in December 1998. In May 2006, it was divided into three individual enterprises, including Siping Juyuan. Siping 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. Siping Juyuan owns 75% of the equity interests of Beijing Juyuan, which is solely engaged in the sales of Siping Juyuan’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 Corporate Structure

The following chart reflects our current corporate organizational structure:

Our 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 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 has grown significantly in the past several years. The global sales value of heat exchangers grew from $29.7 billion in 2005 to $38.6 billion in 2008, representing a growth of 30%, and is expected to grow to $56.5 billion in 2015, representing a growth of 46.37% in the six-year period from 2009 to 2015. According to the report, China 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, representing a growth of 70%, and is expected to grow to $ 16.3 billion in 2016, representing a growth of 202% in the eight-year period from 2009 to 2016.

WeEconomic ~~anticipate~~Growth ~~that~~in ~~growth~~China. According to the National Bureau of Statistics of the PRC, China’s GDP grew 6.7% in 2016, one of the ~~Chinese~~fastest rates in the world. Because heat ~~exchanger~~exchangers are widely used in various industries, ~~industry~~ including ~~will~~metallurgy, ~~mainly~~heat beand ~~driven~~power, bypetrochemical, food and beverage, pharmaceutical and shipbuilding, the ~~following~~heat ~~factors:~~exchanger market benefits from the general growth of the economy.
Economic Growth in China. According to the National Bureau of Statistics of the PRC, China’s GDP grew 6.8% in 2015, 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 7 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, the HVAC market in China was $6.0 billion and is expected to grow at a compound annual growth rate of 250% by 2016.

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 ~~118~~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 Strategies

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

Increasing production and processing capacity. To fulfill future sales growth and enhance our capacity during peak periods, we ~~recently~~expanded ~~expanded~~ our production facility. Our ~~new~~ workshop has a floor area of 7,356 square meters and our ~~new~~ production line of plate heat exchangers, with a designed capacity of 200,000 square meters annually, was implemented in the ~~new~~ workshop in October 2009.

Expanding 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~~Expanding ~~developing~~sales ~~new products~~network. We will ~~continue~~further ~~to develop~~expand ~~new products to broaden~~ our ~~product range so as to meet increased~~sales ~~customer~~network ~~demands~~by ~~and~~establishing 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~~sales ~~help~~offices ~~us reach a larger number of customers~~ in ~~the~~China. ~~chemical,~~We ~~food~~are ~~and~~also strengthening ~~beverage,~~our ~~pharmaceutical~~international ~~and~~marketing ~~refinery industries~~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 box type units and building units use for heating company, residential or commercial blocks and most power plants. These new products will help us reach a larger number of customers in the central heating or district heating industries.

Our Products

Our products and 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 Heat Exchangers

A plate heat exchanger is a type of heat exchanger that uses metal plates to transfer heat between two fluids. This type of heat exchanger has a major advantage over a conventional shell and tube heat exchangers since the fluids are exposed to a much larger surface area because the fluids spread out over the plates. This spreading of fluids over the plates facilitates the transfer of heat and greatly increases the speed of the temperature change.

The plate heat exchanger consists of a coiled pipe containing one fluid that passes through a chamber containing another fluid. The walls of the pipe are usually made of metal or another substance with a high thermal conductivity to facilitate the interchange. The outer casing of the larger chamber is made of a plastic or coated with thermal insulation to discourage heat from escaping from the exchanger.

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-conditioning, pharmaceutical production, and the food and beverage industry. Plate heat exchanger sales accounted for approximately 40% of our sales revenue in 2016.

Heat Exchanger Units

A heat exchanger unit is a whole set of district heating control equipment. A heat exchanger unit integrates the following components: plate heat exchangers, circulating pump, water supplement pump, thermometer, manometer, sensors, conduits, valves and industrial controls, water supplement system, pressure stabilization system, frequency conversion flux control system, heat measurement and network communication control system. Combining these components on-site at our manufacturing facilities, we utilize our proprietary technologies to customize heat exchanger units to our client’s specifications.

Our 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-cooled Heat Exchanger

An air-cooled 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).

Air-cooled heat exchangers are 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-and-tube Heat Exchanger

A shell-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 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.

Shell-and-tube heat exchangers are generally used in the same industries as plate heat exchangers, and are most commonly used with extremely high-pressure liquids. Shell-and-tube heat exchanger sales accounted for approximately 2% of our sales revenue in 2016.

Welded Plate Heat Exchanger

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 clean as compared with other types of plate heat exchangers that are connected by gaskets.

Welded plate heat exchangers are utilized in many of the same industries as other plate heat exchangers and shell-and-tube heat exchangers. We did not have any sales of welded plate heat exchangers in 2016.

Plate-and-Shell Heat Exchanger

A plate-and-shell heat exchanger is a hybrid type of heat exchanger that combines aspects of the plate heat exchanger and shell-and-tube heat exchanger. Plate-and-shell heat exchangers consist of a shell with heat transfer plates inside of the shell instead of tubes.

Advantages 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 heat exchange products accounted for 12% of our sales revenue in 2016.

New Products under Development

Our 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 ~~plate~~box ~~air~~type ~~cooler~~units ~~used~~and inbuilding ~~thorium~~units ~~molten salt reactors, or the TMSR, plate heat exchanger~~ used in ~~distributed~~ ~~energy~~heating ~~resource and plate evaporators and condenser used in ship generators~~industry.

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.

Manufacturing

Manufacturing Facilities

Our manufacturing facilities 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.

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

Production Line	Current Capacity	~~2015~~2016 Utilization	~~2014~~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%

In real operation, the hours our production lines run vary considerably from time to time over the year. This is mainly because our products are 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. Under our current utilization rate, our production lines have been running at full capacity during the peak periods.

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 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 and have more space available for 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.

Manufacturing Processes

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

Production Process ~~for~~forPlate ~~Plate~~ Heat Exchanger Manufacturing

The manufacturing process for the plate heat exchanger begins with the removal of edges 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 plate to the desired shape and form. After the pressing is complete, we seal and combine the heat transfer plates together. The 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 diagram illustrates the production process for ~~our shell~~ourshell-and-tube heat exchangers.

Production Process of Shell-and-Tube Heat Exchanger Manufacturing

The manufacturing process for the shell-and-tube heat exchanger begins with the welding and combination of the shell and heat exchange tube. The next 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 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.

Raw Materials

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.

Suppliers

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.

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
Qinhuangdao Zhanqin Machine Co., Ltd.	Pump	776,274
Tianjin Jiang Chang Stainless Steel Co., Ltd.	White Steel Plate	759,408

The following table sets forth our top ten suppliers in 2015:

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
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

The following table sets forth our top ten suppliers in 2014:

Supplier	Raw Materials	Amount
Tangshan Longteng Steel Co., Ltd.	Round bar steel	4,394,936
Dashiqiao Petrochemical Machinery Forging Factory	Forging	2,721,042
Shenyang Oriental Kunlun Stainless Steel Industrial Co., Ltd.	White Steel Plate	2,155,965
Hebei Xuanlong Steel Rolling Co., Ltd.	Angel Iron	1,769,128
Liaoning Xingye Import and Export LLC.	Titanium Plate	1,325,585
Shenyang Tong Feng Da Material Co., Ltd.	Carbon Steel Pate	1,290,267
Tangshan Qicheng Iron and Steel Plant	U-steel	1,273,319
Xi’an Lianyi Rubber Products Co., Ltd.	Rubber Mat. Spacer	1,325,585
Qingdao Puxiang Stainless Steel Co., Ltd.	White Steel Plate	1,290,267
Tianjin Gerui New Metal Co., Ltd.	White Steel Plate	1,273,319

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

We 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

Our 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.*

*All marks are trademarks or registered trademarks of their respective owners. The display of trademarks herein does not imply that a license of any kind has been granted.

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
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 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%

The following table sets forth our top ten customers in 2014:

Customer	Main Products	Amount (without VAT)	% of Sales Revenue
Gansu Red Sun Heating Power Co., Ltd.	Heat Exchanger Unit	3,503,059	5.73
Tengzhou Heating Power Co., Ltd.	Heat Exchanger Unit	2,316,692	3.79
Qitaihe Shantytowns Transformation Office	Spare Part	1,628,545	2.67
Guazhou Heating Power Co., Ltd.	Heat Exchanger Unit	1,473,767	2.41
Great Khingan Energy Development Co., Ltd.	Heat Exchanger Unit	1,251,657	2.05
TongfangCo., Ltd.	Heat Exchanger Unit	1,192,467	1.95
Daerkai Sunshine(Harbin) Thermoelectricity Co., Ltd.	Heat Exchanger Unit	1,170,573	1.92
YouyuXincheng Heating Power Co., Ltd.	Heat Exchanger Unit	1,137,948	1.86
Beijing Spaceflight Changfeng Co., Ltd.	Heat Exchanger Unit	1,075,883	1.76
Xiji Urban and Rural Construction and Environmental Protection Agency	Heat Exchanger Unit	922,110	1.51

Sales and Marketing

As of December 31, ~~2015~~2016, our sales force consisted of ~~115~~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. ~~Of the 115 members of our sales staff, 70 are based in Beijing and Siping, and 45 are based in 13 other sales offices throughout 13 different Chinese provinces.~~

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

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

Each 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.

Competition

The 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 ~~Smart Heat~~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 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~~exchangerproducts 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.
13SmartHeat, Inc. is a Chinese manufacturer of heat exchangers. Its production facility is located in Shenyang, Northeast China. SmartHeat manufactures and sells plate heat exchangers, heat exchanger units and heat meters.Itused to be the original equipment manufacturer service provider of Sondex, the Denmark manufacturer of plate heat exchangers, who is an especially strong competitor in the oil and gas industry. SmartHeat is more experienced than us in producing heat exchanger units but does not produce shell-and-tube heat exchangers. As compared to SmartHeat, we 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.
~~Smart~~Shanghai ~~Heat,~~Accessen ~~Inc.~~ is a Chinese manufacturer of heat exchangers. ~~Its~~with its production facility ~~is located~~ in ~~Shenyang, Northeast China~~Shanghai. ~~Smart Heat manufactures and sells plate heat exchangers, heat exchanger units and heat meters.~~ It ~~used~~started to beproduce ~~the~~and ~~original~~sell ~~equipment manufacturer service provider of Sondex, the Denmark manufacturer of~~ plate heat ~~exchangers, who is an~~ ~~especially~~exchangers ~~strong competitor in the oil~~ and ~~gas~~heat ~~industry.~~exchanger ~~SmartHeat~~units isunder ~~more experienced~~its ~~than~~own usbrand in ~~producing~~2002 ~~heat exchanger units~~ but does not ~~produce~~ produce shell-and-tube heat exchangers. As compared to ~~SmartHeat~~Accessen, we believe that we have stronger research and development capabilities, aandwider ~~wider~~ range of ~~products~~ ~~and~~products. We also believe that we have a more established track record in the industry and that we are much larger than Accessen in terms of production capacity and sales volume.
Shanghai Accesses a Chinese manufacturer of heat exchangers with its production facility in Shanghai. It started to produce and sell plate heat exchangers and heat exchanger units under its own brand in 2002 but does not produce shell-and-tube heat 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 industry and that we are much larger than Accessen in terms of production capacity and sales volume.
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.

Intellectual Property

We sell all our products under trademarks of “巨元” and “THT.” “巨元” has been registered with the State Trademark Bureau of PRC and has a valid term of ten years expiring August 20, 2020. “THT” has been registered with the State Trademark Bureau of PRC since July 14, 2009 and has a valid term of ten years expiring July 13, 2019.

We own fifteen patents, all of which are for utility models. The term of the patents, as stipulated by the PRC Patent Law, is ten years starting from the authorization date. The following table lists our patents, their registration and certificate numbers and 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

Regulation

Because our 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.

We do not face any significant government regulation in connection with the production of our products. We do not require any special government permits to produce our products other than those permits that are required of all corporations in China.

Environmental Matters

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.

Occupational Health and Safety

The Standing Committee of the National People’s Congress promulgated the PRC Safe Production Law on June 29, 2002, which sets out the legal framework to achieve and ensure safety in the production and operation activities of enterprises. 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. Enterprises which do not satisfy the facilities and conditions required under the laws and the State or industrial standards are not allowed to start or continue their production or operation activities. Enterprises are also required to set up obvious 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.

The 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.

We 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.

Regulations on Protection of Intellectual Property Rights

China has adopted 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 PRC Patent Law, adopted in 1984 and revised in 1992, 2000 and 2008, respectively, and the Implementing Rules of the PRC Patent Law, promulgated by the State Council in 2001 and revised in 2002 and 2010 respectively, govern and protect the proprietary rights to registered patents. The State Intellectual Property Office, or SIPO, handles patent registration and grants a term of twenty years to inventions and a term of ten years to utility models and designs. The protection to patent rights may be terminated before expiry of the term granted as a result of the failure of the registrant to pay the annual registration fee accordingly. Patent license agreements and transfer agreements must be filed with the SIPO for record.

Land Use Rights

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 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 70 years for 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.”

Foreign Currency Exchange

The majority of our sales revenue and expenses are denominated in RMB. Under the PRC foreign currency exchange regulations applicable to us, RMB is convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions. Currently, our PRC operating subsidiaries may purchase foreign currencies for settlement of current account transactions, including payments of dividends to us, employee salaries (even if employees are based outside of China), and payment for equipment purchases outside of China, without the approval of the State Administration of Foreign Exchange of the People’s Republic of China, or SAFE, by complying with certain procedural requirements. Conversion of RMB for capital account items, such as direct investment, loan, security investment and repatriation of investment, however, is still subject to the approval of SAFE. In particular, if our PRC operating subsidiaries borrow foreign currency through loans from us or other foreign lenders, these loans must be registered with SAFE, and if we finance the subsidiaries by means of additional capital contributions, these capital contributions must be approved by certain government authorities, including the Ministry of Commerce, or MOFCOM, or their respective local branches. These limitations could affect our PRC operating subsidiaries’ ability to obtain foreign exchange through debt or equity financing. In the event of a liquidation of our PRC subsidiaries, SAFE approval is required before the remaining proceeds can be expatriated from China.

Taxation

On March 16, 2007, the National People's Congress of China passed a new Enterprise Income Tax Law, or EIT Law, and on November 28, 2007, the State Council of China passed its implementing rules, which took effect on January 1, 2008. Before the implementation of the EIT Law, foreign invested enterprises, or FIEs, established in the PRC, unless granted preferential tax treatments by the PRC government, were generally subject to an earned income tax, or EIT, rate of 33.0%, which included a 30.0% state income tax and a 3.0% local income tax. The EIT Law and its implementing rules impose a unified EIT of 25.0% on all domestic-invested enterprises and FIEs, unless they qualify under certain limited exceptions. Despite these changes, the EIT Law gives FIEs established before March 16, 2007, or Old FIEs, a five-year grandfather period during which they can continue to enjoy their existing preferential tax treatments. During this five-year grandfather period, the Old FIEs which enjoyed tax rates lower than 25% under the original EIT law will be subject to gradually increased EIT rates over a 5-year period until their tax rate reaches 25%. In addition, the Old FIEs that are eligible for other preferential tax treatments by the PRC government under the original EIT law are allowed to continue enjoying their preference until these preferential treatment periods expire.

In 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 stockholders.”

In addition, the EIT Law and its implementing rules generally provide that an income tax rate of 10% will normally be applicable to dividends payable to investors that are “non-resident enterprises,” or non-resident investors, which (i) do not have an establishment or place of business in the PRC or (ii) have an establishment or place of business in the PRC, but the relevant income is not effectively connected with the establishment or place of business to the extent such dividends are derived from sources within the PRC. The State Council of the PRC or a tax treaty between China and the jurisdictions in which the non-PRC investors reside may reduce such income tax. Under the Arrangement between the Mainland and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, effective as of January 1, 2007, such dividend withholding tax rate is reduced to 5% if a Hong Kong resident enterprise owns over 25% of the PRC company distributing the dividends. As Star Wealth is a Hong Kong company and owns 100% of Siping Juyuan, under the aforesaid arrangement, any dividends that Siping Juyuan pays Star Wealth may be subject to a withholding tax at the rate of 5%. However, if Star Wealth is not considered to be the “beneficial owner” of such dividends under the Notice Regarding Interpretation and Recognition of Beneficial Owners under Tax Treaties, or Notice 601, 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% applicable to Star Wealth will have a significant impact on the amount of dividends to be received by the Company and ultimately by stockholders.

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.

Dividend Distributions

All 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 37

On July 4, 2014, SAFE issued the Notice on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or Circular 37. Circular 37 repeals and replaces the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents to Engage in Overseas Financing and Round Trip Investment via Overseas Special Purpose Vehicles, or Circular 75. Circular 37 regulates the foreign exchange matters in relation to the use of a special purpose vehicle, or SPV, by PRC residents to seek offshore equity financing and conduct “round trip investment” in China. Under Circular 37, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or PRC entities for the purpose of investing or obtaining financing, utilizing assets or interests legally held by such domestic residents. Circular 37 requires that, before establishing or controlling 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 amendment to the registration in the event of any significant changes to the SPV. Failure to fulfill the required registration may result in being prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities.

As 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 stockholders 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 stockholders, 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 stockholders 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.

Mergers and Acquisitions

On August 8, 2006, six PRC regulatory agencies promulgated the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rule, which became effective on September 8, 2006. According to the M&A Rule, a “Round-trip Investment” is 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). Under the M&A Rule, any Round-trip Investment must be approved by MOFCOM and any indirect arrangement or series of arrangements which achieves the same end result without the approval of MOFCOM is a violation of PRC law.

On June 30, 2009, Mr. Guohong Zhao, our Chairman and CEO and a founder of Siping Juyuan, entered into an option agreement with Ms. Jinghua Zhao, the sole shareholder of Wisetop, pursuant to which Mr. Guohong Zhao was granted an option, exercisable after 180 days, to acquire all of the equity interests of Wisetop owned by Ms. Jinghua Zhao at an exercise price of $3,246,160. This initial expiration date of the option was June 30, 2011, however, on May 16, 2011, the parties extended the expiration date to June 30, 2012. On November 29, 2011, Mr. Zhao exercised his option.

Also on June 30, 2009, Wisetop entered into separate option agreements with the other original founders of Siping Juyuan, 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 the shares were transferred to the founders. Wisetop owned 4,559,214 after the 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.

As 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 of December 31, ~~2015~~2016, we employed a total of ~~630~~576 full-time employees. The following table sets forth the number of employees by function:

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

Function Number of Employees Senior Management 7 Solution design 9 Sales 115 Marketing 130 Procurement 8 Production 150 Quality Control 20 R&D 40 HR &Administration 142 Finance 7 Internal Audit and Control 2 TOTAL 630

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.

Our employees in China participate in a state pension scheme organized by PRC municipal and provincial governments. We are currently required to contribute to the scheme at a rate of 30.6% to 31.2% of an employee’s average monthly salary.

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.

Insurance

We maintain property insurance for our premises located at Siping, China where our main production facilities are located. The aggregate maximum amount covered by our insurance policy is up to RMB 25.39 million (approximately $3.72 million). We also maintain property insurance for our automobiles. We do not maintain business interruption, product liability insurance or key-man life insurance. We believe our insurance coverage is customary and standard of companies of comparable size in comparable industries in China. However, we cannot ensure that our existing insurance policies are sufficient to insulate us from all loses and liabilities that we may incur.

ITEM 1A. RISK FACTORS.

An investment in our common stock involves a high degree 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 decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should read the section entitled “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.

RISKS RELATED TO OUR BUSINESS

We 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 uncertainty arising out of 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. 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.

In addition, because our 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.

Our industry is very competitive in China.

The domestic market for heat exchange products is fragmented and highly competitive. We compete with over 1,500 small-sized, local Chinese heat exchanger manufacturers. The number of these companies varies from time to time. While we may have greater resources than our smaller competitors, it is possible that these competitors have better access in certain local markets to customers and prospects and lower production and raw material costs. Some of our products compete on the basis of price and are sold in fragmented markets with low barriers to entry, allowing less expensive domestic producers to gain market share and reduce our margins.

Foreign competition is intense and could have a material adverse effect on our financial condition and results of operations.

In addition to domestic competition, we face intense competition from foreign competitors. The intensity of foreign competition is affected significantly by fluctuations in the value of the U.S. dollar against Chinese currency and by the level of import duties imposed by the Chinese government on certain products. Our major international competitors are Alfa Laval and APV. Many of our competitors have more resources and greater brand recognition than we enjoy. While our resources may not be as great as our larger competitors, we believe our product quality and direct sales offices and distribution network are superior in China. If our competitors are able to gain greater market share or improve their sales efforts, our sales may decrease, we may be forced to lower our prices, or our marketing costs may increase, all of which could negatively impact our financial results.

A significant amount of our sales revenue are derived from our largest customers and any reduction in revenue from any of these customers would reduce our sales revenue and net income.

Approximately 2836% of our sales revenue in ~~2015~~2016 came from our top ten customers, with our largest customer, ~~Huaxia~~Liaoning ~~Hanhua~~Huiming ~~Chemical equipment~~International Trade Co., Ltd., accounting for approximately 284% of our sales revenue in ~~2015~~2016. If we cease to do business at or above current levels with the top customers or ~~with~~ with any other large customers who contribute significantly to our sales revenue, and we are unable to generate additional or substitute sales revenue, our net income would decline considerably.

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

Our 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 expansion could significantly strain our resources, management and operational infrastructure which could impair our ability to meet increased demand for our products and hurt our business results.

To accommodate our anticipated growth, we will need to expend capital resources and dedicate personnel to implement and upgrade our accounting, operational and internal management systems and enhance our 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 business is capital intensive and our growth strategy may require additional capital which may not be available on favorable terms or at all.

We believe that our current cash and cash flow from operations will be sufficient to meet our present and reasonably anticipated capital and capital expenditure needs given the current state of our production line for the marketing of the products. We may, however, require additional cash resources due to changed business conditions, implementation of our strategy to expand our manufacturing capacity or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

We depend heavily on key personnel, and turnover of key employees and senior management could harm our business.

Our future business and results of operations depend in significant part upon the continued contributions of our key technical and senior management personnel, including Guohong Zhao, our Chairman and Chief Executive Officer. They also depend in significant part upon our ability to attract and retain additional qualified management, technical, marketing and sales and support personnel for our operations. If we lose a key employee, if a key employee fails to perform in his or her current position, or if we are not able to attract and retain skilled employees as needed, our business could suffer. Significant turnover in our senior management could significantly deplete our institutional knowledge held by our existing senior management team. We depend on the skills and abilities of these key employees in managing the manufacturing, technical, marketing and sales aspects of our business, any part of which could be harmed by turnover in the future.

Unexpected equipment failures may damage our business due to production curtailments or shutdowns.

We conduct periodic inspection and maintenance of all of our equipment to minimize the impact of interruption of production and prevent breakdown because this machinery is highly specialized and cannot be repaired or replaced without significant expense and time delay. On occasion, our equipment may be out of service as a result of unanticipated failures which may result in material plant shutdowns or periods of reduced production. Interruptions in production capabilities will inevitably increase production costs and reduce our sales and earnings. In addition to equipment failures, our facilities are also subject to the risk of catastrophic loss due to unanticipated events such as fires, explosions or adverse weather conditions. Furthermore, any interruption in production capability may require us to make large capital expenditures to remedy the situation, which could have a negative effect on our profitability and cash flows. In addition, longer-term business disruption could result in a loss of customers. If this were to occur, our future sales levels, and therefore our profitability, could be adversely affected.

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

We strive to strengthen 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 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 or 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.

In addition, policing the unauthorized use of our proprietary technology can be difficult and expensive. Litigation may be necessary to enforce our intellectual property rights and given the relative unpredictability of China’s legal system and potential difficulties enforcing a court judgment in China, there is no guarantee litigation would result in an outcome favorable to us. Furthermore, any such litigation may be costly and may divert management attention away from our core business. An adverse determination in any lawsuit involving our intellectual property is likely to jeopardize our business prospects and reputation. We have no insurance coverage against litigation costs so we would be forced to bear all litigation costs if we cannot recover them from other parties. All of the foregoing factors could harm our business and financial condition.

If our customers and/or the ultimate consumers of products that use our products successfully assert product liability claims against us due to defects in our products, our operating results may suffer and our reputation may be harmed.

Due to the high pressures and temperatures at which many of our products are used and the fact that some of our products are relied upon by our customers or end users in their facilities or operations, or are manufactured for relatively broad consumer use, we face an inherent risk of exposure to claims in the event that the failure, use or misuse of our products results, or is alleged to result, in bodily injury, property damage or economic loss. We believe that we meet or exceed existing professional specification standards recognized or required in the industries in which we operate. We have been subject to claims in the past, none of which have had a material adverse effect on our financial condition or results of operations, and we may be subject to claims in the future. We currently do not maintain product liability coverage and such insurance may be difficult to obtain on terms acceptable to us and may not cover warranty claims. A successful product liability claim or series of claims against us, including one or more consumer claims purporting to constitute class actions, or a significant warranty claim or series of claims against us could materially decrease our liquidity and impair our financial condition.

Our products may become subject to recall in the event of defects or other performance related issues.

We are at risk for product recall costs which are costs incurred when, either 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. Costs typically include the cost of the product, part or component being replaced, the cost of the recall borne by our customers and labor to remove and replace the defective part or component. Our products have not been the subject of an open recall. If a recall decision is made, we will need to estimate the cost of the recall and record a charge to earnings in that period. In making this estimate, judgment is required as to the quantity or volume to be recalled, the total cost of the recall campaign, the ultimate negotiated sharing of the cost between us and our distributor or customer. As a result, these estimates are subject to change. Excessive recall costs or our failure to adequately estimate these costs may negatively affect our operating results.

We 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.

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 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.

We have identified material weaknesses in our internal control over financial reporting. If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results and prevent fraud. As a result, current and potential stockholders could lose confidence in our financial statements, which would harm the trading price of our common stock.

Companies that file reports 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 maintain a system of internal control 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, under SOX 404, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, public companies that are large accelerated filers or accelerated filers must include in their annual reports on Form 10-K an attestation report of their regular auditors attesting to and reporting on management’s assessment of internal control over financial reporting. Non-accelerated filers and smaller reporting companies are not required to include an attestation report of their auditors in annual reports.

A report of our management is included 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 its evaluation of the effectiveness of internal control over financial reporting as of December 31, ~~2015~~2016, management identified material weaknesses. We are undertaking remedial measures, which measures will take time to implement and test, to address this material weakness. There can be no assurance that such measures will be sufficient to remedy the material weakness identified or that additional material weaknesses or other control or significant deficiencies will not be identified in the future. If we continue to experience material weaknesses in our internal controls or fail to maintain or implement 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 financial statements, or adversely affect the results of periodic management evaluations and, if required, annual auditor attestation reports. Each of the foregoing results could cause investors to lose confidence in our reported financial information and lead to a decline in our stock price. See Item 9A “Controls and Procedures” for more information.

RISKS RELATED TO DOING BUSINESS IN CHINA

If we become directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved favorably.

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 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.

Adverse changes in political, economic and 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.

Most 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 degree of government involvement;
the level of development;
the growth rate;
the control of foreign exchange;
the allocation of resources;
an evolving regulatory system; and
a lack of sufficient transparency in the regulatory process.

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

The 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 adverse change in the economic conditions 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.

Future government 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 PRC. We are required to obtain licenses or permits and to meet certain standards in the conduct of our 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 PRC legal system could limit the legal protections available to you and us.

We 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 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.

You may have difficulty enforcing judgments against us.

Most of our assets are located outside of the United States and all of our current operations are conducted in the PRC. In addition, most of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons is located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, all of whom are not residents in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts. Our counsel as to PRC law has advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. Courts in China may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other arrangements that provide for the reciprocal recognition 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 PRC government exerts substantial influence over the manner in which we must conduct our business activities.

The 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.

Accordingly, 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.

Future inflation in China may inhibit our ability to conduct business in China.

In recent 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 adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products and our company.

Restrictions on currency exchange may limit our ability to receive and use our sales effectively.

The majority of our sales will be settled in RMB, and any future restrictions on currency exchanges may limit our ability to use revenue 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.

In addition, the Notice of the General Affairs Department of the State Administration of Foreign Exchange on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, issued by SAFE and effective as of August 29, 2008, or Circular 142, regulates the conversion by FIEs of foreign currency into RMB by restricting how the converted RMB may be used. Circular 142 requires that RMB converted from the foreign currency-dominated capital of a FIE may only be used for purposes within the 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. The use of such RMB may not be changed without approval from SAFE, and may not be used to repay RMB loans if the proceeds of such loans have not yet been used. Any violation of Circular 142 may result in severe penalties, including substantial fines.

Fluctuations in exchange rates could adversely affect our business and the value of our securities.

The value of our common stock will be indirectly affected by the foreign exchange rate between the U.S. dollar and RMB and between those currencies and other currencies in which our sales may be denominated. Appreciation or depreciation in the value of the RMB relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will be exchanged into U.S. dollars, as well as earnings from, and the value of, any U.S. dollar-denominated investments we make in the future.

Since 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.

Very 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 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 convert RMB into foreign currencies.

Restrictions under PRC law on our PRC subsidiaries’ ability to make dividends and other distributions could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our business.

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 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.

Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability to acquire PRC companies or to inject capital into PRC subsidiaries, limit our PRC subsidiaries' ability to distribute profits to us or otherwise materially adversely affect us.

On July 4, 2014, SAFE issued the Notice on Relevant Issues Relating to Domestic Residents’ Investment and Financing and Round-Trip Investment through Special Purpose Vehicles, or Circular 37. Circular 37 repeals and Circular 75. Circular 37 regulates the foreign exchange matters in relation to the use of a ~~SPVby~~SPV by PRC residents to seek offshore equity financing and conduct “round trip investment” in China. See Item 1 “Business—Regulation—Circular 37” for a detailed discussion of Circular 37 and its implementation.

We have asked our stockholders, 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. 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 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.

In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 37. We also have little control over either our present or prospective direct or indirect stockholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident stockholders to comply with Circular 37, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions, 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 prospects.

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.

On 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 PRC regulatory authorities may take the view that PRC Individuals’ acquisition of our equity interest, or 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 and 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.

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. 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.

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.

On March 16, 2007, the National People’s Congress of China passed the EIT Law, and on November 28, 2007, the State Council of China passed its implementing rules, which took effect on January 1, 2008. Under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. See Item 1 “Business—Regulation—Taxation” for a detailed discussion of the EIT Law.

It remains unclear whether the PRC tax authorities 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.

We face uncertainty from China’s Circular on Strengthening the Administration of Enterprise Income Tax on NonResident Enterprises' Share Transfer that was released in December 2009 with retroactive effect from January 1, 2008.

The Chinese State Administration 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 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 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 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 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 Chinese resident enterprise. In addition, there are not any formal declarations with regard to how to decide “abuse of form of organization” and “reasonable commercial purpose,” which can be utilized by us to balance if our Company complies with the Circular 698. As a result, we may become at risk of being taxed under Circular 698 and we may be 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.

We 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 also 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, even though they may not always be subject to our control. It is our policy to 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, consultants, sales agents, or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. 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.

The 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.

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 and the Exchange Act. Unlike public reporting companies whose operations are located primarily in the United States, however, substantially all of our operations are located in China. Since substantially all of our operations and business takes place in China, it may 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 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 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 the 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.

RISKS RELATED TO THE MARKET FOR OUR STOCK

Our common stock is quoted on the OTC Markets which may have an unfavorable impact on our stock price and liquidity.

Our common stock was delisted from Nasdaq Capital Market on January 26, 2016. Since then, our common stock is quoted on the OTC Markets. The OTC Markets is a significantly more limited market than the New York Stock Exchange or NASDAQ. The quotation of our shares on the OTC Markets may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future. We plan to list our common stock as soon as practicable. However, we cannot assure you that we will be able to meet the initial listing standards of any stock exchange, or that we will be able to maintain any such listing.

The market price of our common stock is volatile, leading to the possibility of its value being depressed at a time when you may want to sell your holdings.

The 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.

Furthermore, 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 class action litigation is often instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs to us and divert our management’s attention and resources.

We may be subject to penny 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 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 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 market. 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 can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. 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 interest.

We do not intend to pay dividends for the foreseeable future.

For 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.

Certain provisions of our Articles of Incorporation may make it more difficult for a third party to effect a change-of-control.

Our 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 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

Land Use Rights

There is no private land ownership in China. Individuals and companies are permitted to acquire land use rights for specific purposes. We were granted land use rights from the PRC government for 36136,~~529~~776.6 square meters of ~~three~~four land slots located at ~~No.5 Nanhuan Road,~~ Tiexi District, Siping City, Jilin Province, China. The land use rights will expire on December 8, 2056, December 30, 2056, ~~and~~ December 30, 2057 and May 18, 2062, respectively.

Mortgages were created over the land use rights of the ~~three~~ four land lots with an area of 17,682.78 square meters, 11,619.6 square meters, ~~and~~ 7,227.22 square meters and 100,247 square meters, respectively. Such mortgages are used for securing our indebtedness with China Agriculture Bank, 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.

Buildings

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 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.

30We currently own ten 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 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.

We currently own ten 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 China Agriculture Bank, Siping Branch on November 8, 2010.

Our 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.

Buildings under Construction

Our third workshop and our research center, located at the south side of Nanhuan Road, Tie Xi District, Siping City, are under construction. We have obtained a License for Construction Land Planning (Ref. Di Zi No. 200802050) issued by Siping City Construction Bureau on July 25, 2008, which shows that the land area approved for our above-mentioned construction is 11,781 square meters.

We also acquired a License for Construction Project Planning (Ref. Jian Zi No. 200803043) issued on September 5, 2008 by Siping City Construction Bureau. The License shows that the area of construction will be 7,716 square meters.

Leased Properties

We currently lease ~~nine~~two real properties as representative offices in ~~Shanghai,~~Qingdao ~~Zhengzhou, Taiyuan, Baotou, Shenyang, Harbin, Beijing, Wuhan~~ and ~~Qingdao~~Harbin.

ITEM 3. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. 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 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock is traded on the Nasdaq Capital Market under the symbol “THTI.”

The 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.

		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
Year Ended December 31, 2014
1st Quarter	$	2.84	$	0.79
2nd Quarter		1.69		1.01
3rd Quarter		1.95		1.12
4th Quarter		1.80		1.00

(1) The above table sets forth the range of high and low closing prices per share of our common stock as reported by ~~finance~~quotemedia.~~yahoo.~~com for the periods indicated.

Approximate Number of Holders of Our Common Stock

As of ~~March~~April 2912, ~~2016~~2017, there were approximately 797 holders of record of our common stock. This number excludes the shares of our common stock owned by stockholders holding stock under nominee security position listings.

Dividend Policy

We have never declared 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 earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors has complete discretion on whether to pay dividends, subject to the approval of our stockholders. 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

Securities Authorized for Issuance Under Equity Compensation Plans

We do not have any compensation plans in effect under which our equity securities are authorized for issuance.

Recent Sales of Unregistered Securities

We have not sold any equity securities during the ~~2015~~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 ~~2015~~2016 fiscal year.

Purchases of Equity Securities

No repurchases of our common stock were made during the fourth quarter of ~~2015~~2016.

ITEM 6. SELECTED FINANCIAL DATA.

Not applicable.

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

The following management’s discussion 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, 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.

Overview

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

Financial Performance Highlights

The following are some financial highlights for the year:

• Sales revenue: Sales revenue ~~decreased~~increased by $151.1362 million, or 24 3.7753%, 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 $6111.1050 million for ~~2014~~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.

~~Gross~~33 profit: Gross profit decreased by $7.35 million, or 39.00%, to $11.50 million for 2015, from $18.85 million for 2014. As a percentage of sales revenue, gross profit decreased by 5.84% to 25.02% for 2015 from 30.86% for 2014.

Net income attributable to stockholders: Net income attributable to our stockholders decreased by $1.56 million, or 73.24%, to $0.57 million for 2015, from $2.13 million for 2014.

Fully diluted net income per share: Fully diluted net income per share was $0.03 for 2015, as compared $0.10 for 2014.

Principal Factors Affecting our Financial Performance

We believe 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 Chinese government has been 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~~200% from ~~2012~~2015 to 2016. 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 Slow Economic Growth. China’s economic growth rate was 6.97% in ~~2015~~2016, weakest in 24 years. ~~The~~China ~~economic~~government's ~~slowdown~~supply inside ~~2015 has~~reforms ~~affected~~is ~~several~~used ~~industries~~in wetraditional ~~serve, especially the industries with excessive capacity such as petrochemical, metallurgical and shipbuilding industries~~manufacturing. ~~A protracted~~It ~~slowdown~~is ~~may~~beneficial ~~impact~~for ~~our~~the ~~operations~~development ~~and business if our adjusted~~of ~~product~~heat ~~structure~~exchange ~~and~~industry ~~strategies~~in ~~to expand to serve more sustainable industries did not work as we expected~~China.

Taxation

The 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.

Megaway was incorporated in the BVI, but is not subject to taxation in that jurisdiction.

Star Wealth was incorporated in Hong Kong and under the current laws of Hong Kong, is subject to a Profits Tax of 16.5% . However, no provision for Hong Kong Profits Tax has been made as Star Wealth has no taxable income.

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, ~~2015~~2016 and ~~2014~~2015.

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

Results of Operations

The following table sets forth key components of our results of operations for fiscal years ended December 31, ~~2015~~2016 and ~~2014~~2015.

		Year Ended December 31,				$ Change	% Change
		2015		2014
		2016		2015
Sales revenue	$	45,964,045	$	61,097,433	$	(15,133,388)	-24.77
Sales revenue-third parties	$	46,277,202	$	45,706,371	$	$570,831	1.25
Cost of sales		(34,462,534)		(42,243,326)		7,780,792	-18.42
Sales revenue-related party		1,309,522		257,674		1,051,848	408.21
Gross profit		11,501,511		18,854,107		(7,352,596)	-39.00
Total sales revenues		47,586,724		45,964,045		1,622,679	3.53
Operating expenses:
Cost of sales revenue-third parties		(31,686,457)		(34,325,572)		2,639,115	(7.69)
Administrative expenses		4,929,870		7,200,530		(2,270,660)	-31.53
Cost of sales revenue-related party		-		(136,962)		136,962	(100.00)
Research and development expenses		2,054,740		2,852,228		(797,488)	-27.96
Total cost of sales revenue		(31,686,457)		(34,462,534)		2,776,077	(8.06)
Selling expenses		4,626,004		5,676,816		(1,050,812)	-18.51
Gross profit		15,900,267		11,501,511		4,398,756	38.25
Total operating expenses		11,610,614		15,729,574		(4,118,960)	-26.19
Operating expenses (income):
Income from operations		(109,103)		3,124,533		(3,233,636)	-103.49
Administrative expenses		5,578,919		4,929,870		649,049	13.17
Interest income		12,418		11,860		558	4.70
Research and development expenses		1,967,158		2,054,740		(87,582)	(4.26)
Other income		683,771		632,246		51,525	8.15
Selling expenses		5,949,034		4,626,004		1,323,030	28.60
Finance costs		(84,331)		(741,111)		656,780	-88.62
Loss (Gain) on disposal of property, plant and equipment		(1,050,322)		16,102		(1,066,424)	6622.93
Investment income		91,604		128,779		(37,175)	(28.87%)
Total operating expenses		12,444,789		11,626,716		818,073	7.04
Other expenses		(28,858)		(77,008)		48,150	-62.53
Income (loss) from operations		3,455,478		(125,205)		3,580,63	2,859.86
Income before income taxes		565,501		3,079,299		(2,513,798)	-81.64
Interest income		16,387		12,418		3,969	31.96
Income taxes		-		(951,376)		951,376	-100.00
Other income		456,304		683,771		(227,467)	(33.27)
Net income before noncontrolling interests		565,501		2,127,923		(1,562,422)	-73.42
Finance costs		(157,690)		(84,331)		(73,359)	(86.99)
Net income attributable to noncontrolling interests				-
Investment income		79,509		91,604		(12,095)	(13.20)
Net income attributable to THT common stockholders	$	565,501	$	2,127,923	$	(1,562,422)	-73,42
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 ~~decreased~~increased by $151.1362 million, or 243.7753%, to $4547.9659 million in ~~2015~~2016 from $6145.1096 million in ~~2014~~2015.Our sales ~~volume~~ volume in ~~2015~~2016 amounted to 32,~~060 units~~885units, a decrease of ~~196~~175 units or 5.72%, from 3,~~256~~060 units in ~~2014~~2015. Such decrease was mainly due to ~~decrease~~increase in ~~sales~~unit ~~orders~~price. Sales revenue from plate heat exchangers ~~increased~~decreased by $21.8373 million, or 158.6928%, to $2019.9017 million in ~~2015~~2016 from $1820.0790 million in ~~2014~~2015. Sales revenue from heat exchange units ~~decreased~~increased by $125.8216 million, or 4432.8271%, to $1520.7995 million in ~~2015~~2016 from $2815.6179 million in ~~2014~~2015.Such increase was mainly due to increased sales orders of heat exchange units . Sales revenue from air coolers decreased by $0.7451 million, or ~~59.28~~100%, to $~~0.51~~nil million in ~~2015~~2016 from $10.2551 million in ~~2014. China’s economic slowdown in~~ 2015 ~~affected several industries we serve, especially the industries with excessive capacity such as petrochemical, metallurgical and shipbuilding industries~~. ~~Because of the energy conservation and emission~~Air-cooled ~~reduction~~heat ~~policies~~exchangers ofare ~~China,~~long ~~many~~production ~~projects~~cycle ~~in petrochemical industry were suspended and delayed with less orders in 2015~~products. ~~Many~~We ~~orders~~stopped ~~from~~receiving ~~shipbuilding~~orders ~~industry~~for ~~also declined drastically. Although sales revenue from plate heat exchanger increased, the increase was not enough to offset the decreased sales revenue from heat exchange units,~~ air coolers, ~~shell-and-tube~~in ~~heat exchange and other products~~2016.

The following table shows our sales revenue by product for the years ended December 31, 2015 and 2014:

		Year Ended December 31,
		2015			2014
		$	%		$	%
Plate heat exchanger	$	20,900,957	45	$	18,066,105	30
Heat exchange unit		15,787,022	34		28,609,928	47
Air-cooled heat exchanger		509,975	1		1,252,547	2
Shell-and-tube heat exchanger		2,569,986	6		3,026,746	5
Others		6,196,105	13		10,142,107	16
TOTAL	$	45,964,045	100	$	61,097,433	100

Cost of sales. Our cost of sales is primarily comprised of the costs of our raw materials, labor and factory overhead. Our cost of sales decreased by $7.78million, or 18.42%, to $34.46million in 2015 from $42.24 million in 2014. The decrease in the cost of sales was generally in line with the decrease in our sales revenue. Cost of sales as a percentage of sales revenue were 74.98% and 69.14% for 2015 and 2014, respectively. The increase was mainly attributable to the increase in unit price of raw materials and the higher labor cost.

Gross profit. Our gross profit is equal to the difference between our sales revenue and our cost of sales. Our gross profit decreased by $7.35 million, or 39.00%, to $11.50 million in 2015 from $18.85 million in 2014. The decrease in our gross profit was mainly attributable to the average sales price per unit decreased by 19.95% year over year, which led to the gross profit margin for 2015 decreased to 25.02% from 30.86% for 2014.

Administrative expenses. Our administrative expenses consist of the costs associated with staff and support personnel who manage our business activities. Our administrative expenses decreased by $2.27 million, or 31.53%, to $4.93 million in 2015 from $7.20 million in 2014. As a percentage of sales revenue, administrative expenses decreased to10.73% in 2015, as compared to 11.79% in 2014. The decrease in administrative expenses was primarily due to the decrease of bad debt expense. We record 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. Our account receivables decreased by $4.82 million in 2015 compare to 2014.

We believe our allowance for doubtful accounts is appropriate. We have installment payment arrangement with our customers. The current economic slowdown and China’s tightened credit policy led to delayed payments and delayed delivery schedules by our customers, which in turn caused us to decrease our allowance for doubtful accounts from $9.08 million in 2014 to $7.69 million in 2015. To control inflation after a massive stimulus 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. 54% of our customers have been affected by the tightened credit policy and have limited access to capital. We record 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.

Our allowance 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 to cause us classify the delayed inventories as obsolete inventories.

Research 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 $0.80million, or 27.96%, to $2.05 million in 2015 from $2.85 million in 2014. The decrease in research and development expenses was mainly attributable to the company having fewer new projects in process.

The detailed information of the last two years on research and development activities’ expenses are as follows:

		2015		2014		Change	Change %
Material	$	1,007,606	$	2,036,176	$	(1,028,570)	-50.51
Depreciation expense		111,408		144,685		(33,277)	-23.00
Cost		543,666		222,109		321,557	144.77
Salary		392,060		449,258		(57,198)	-12.73
Total	$	2,054,740	$	2,852,228	$	(797,488)	-27.96

~~Selling~~The ~~expenses.~~following ~~Our~~table ~~selling~~shows ~~expenses~~our ~~include~~ sales ~~commissions,~~revenue ~~the~~by ~~cost~~product offor ~~advertising and promotional materials, salaries~~the ~~and~~years ~~fringe~~ended ~~benefits~~December ~~of sales personnel~~31, ~~after-sale~~2016 ~~support services~~ and ~~other sales-related costs. Our selling expenses decreased by $1.05 million, or 18.51%, to $4.63 million in~~ 2015,: from $5.68 million in 2014. The decrease in selling expense was mainly due to the decrease in sales orders. As a percentage of sales revenue, selling expenses increased to 10.06% in 2015, as compared to9.29% in 2014. The increase was mainly attributable to the Company’s effort to develop new customers.

Income before income taxes. Income before income taxes decreased by $2.51 million, or 81.64%, to $0.57 million in 2015, from $3.08 million in 2014. Such decrease was mainly attributable to decreased gross profit.

		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

~~Income~~Cost ~~taxes~~of sales revenue. Our ~~income~~cost ~~taxes~~of sales revenue is primarily comprised of the costs of our raw materials, labor and factory overhead. Our cost of sales decreased by $2.78 million, or 8.06%, to $~~nil~~31.69 million in ~~2015~~2016 from $034.9546 million in ~~2014,~~2015. Cost of sales as a ~~result~~percentage of sales ~~decreased~~revenue ~~taxable~~were ~~income~~66.59% and 74.98% for 2016 and 2015, respectively. The decrease was mainly attributable to the decrease in unit price of raw materials.

~~Net~~Gross ~~income~~profit. ~~attributable~~Our togross ~~common~~profit ~~stockholders. As~~is aequal ~~result~~to of the difference ~~cumulative~~between ~~effect~~our ofsales ~~the~~revenue ~~foregoing~~and ~~factors,~~ our ~~net~~cost ~~income attributable~~of tosales ~~common~~revenue. ~~stockholders~~Our ~~decreased~~gross profit increased by $14.5640 million, or 7338.4225%, to $015.5790 million ~~for~~in ~~2015,~~2016 from $211.1350 million ~~for~~in ~~2014~~2015. AsThe aincrease ~~percentage~~in our gross profit was mainly attributable to the decrease in unit price of ~~sales~~raw materials, leading to the decrease in cost of sales revenue, ~~our~~which ~~net~~led ~~income~~to ~~attributable~~the togross ~~common~~profit ~~stockholders~~margin ~~was~~for 12016 increased to 33.2341% ~~and~~from 325.0402% for 2015 ~~and 2014, respectively~~.

Administrative expenses. Our administrative expenses consist of the costs associated with staff and support personnel who manage our business activities. Our administrative expenses increased by $0.65 million, or 13.17%, to $5.58 million in 2015 from $4.93 million in 2015. As a percentage of sales revenue, administrative expenses increased to 11.72% in 2016, as compared to 10.73% in 2015. The increase in administrative 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, 50% for receivables aged between 2 to 3 years and 100% for receivables aged over 3 years.

We believe our allowance for doubtful accounts is appropriate. We have installment payment arrangement with our customers. The current economic slowdown and 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 to $7.98 million in 2016 from $7.69 million in 2015. To control inflation after a massive stimulus 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. Certain our customers have been affected by the tightened credit policy and have limited access to capital. We record 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.

Research 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 expenses. Our selling expenses include sales commissions, the cost of advertising and promotional materials, salaries and fringe benefits of sales personnel, after-sale support services and other sales-related costs. Our selling expenses increased by $1.32 million, or 28.60%, to $5.95 million in 2016, from $4.63 million in 2015. The increase in selling expense was mainly due to the increase in sales revenues. As a percentage of sales revenue, selling expenses increased to 12.05% in 2016, as compared to 10.06% in 2015. The increase was mainly attributable to the Company’s effort to develop new customers.

Loss (Gain) on disposal on property, plant and equipment. Our 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 before income taxes. Income before income taxes increased by $3.20 million, or 565.31%, to $3.76 million in 2016, from $0.57 million in 2015. Such increase was mainly attributable to increased gross profit.

Income taxes. Our income taxes increased to $0.51 in 2016 from $nil million in 2015, as a result of increased taxable income.

Net income attributable to common stockholders. As a result of the cumulative effect of the foregoing factors, our net income attributable to common stockholders increased by $2.68 million, or 474.30%, to $3.25 million for 2016, from $0.57 million for 2015. As a percentage of sales revenue, our net income attributable to common stockholders was 6.82% and 1.23% for 2016 and 2015, respectively.

Liquidity and Capital Resources

As of December 31, ~~2015~~2016, we had cash and cash equivalents of $96.6861 million, primarily consisting of cash on hand and demand deposits. We can use our land as collateral to borrow approximately $45.7647 million., Inand ~~addition,~~ we have an approximately $5.9847 million credit line from Agricultural Bank of China. We anticipate that cash on hand and borrowing capacity under our bank loans will be sufficient to satisfy our ongoing obligations.

We believe our allowance for doubtful accounts is appropriate. We have an installment payment arrangement with our customers. The current economic slowdown and China’s tightened credit policy led to delayed payments and delayed delivery schedules by our customers. To control inflation after a massive stimulus 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 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.

Our allowance 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.

We 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.

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 PRCGAAP 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. Given that the Company and the PRC subsidiaries do not intend to pay dividends for the foreseeable future, we consider the impact of restrictions on our liquidity, financial condition and results of operations is not significant.

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

Cash Flow

		Year Ended December 31,
		2015			2014
		2016		2015
Net cash provided by operating activities	$	4666,~~147,598~~093	$	$4,133,356	~~6,120,482~~
Net cash provided by investing activities		324,529			173,378
Net cash provided by (used in) investing activities		(1,360,343)		324,529
Net cash used in financing activities		(61,~~467~~849,~~231~~072)	)	(6,452,989)	~~(3,172,950~~	)
Effects of exchange rate change in cash		(~~572~~527,~~111~~291)	)	(572,111)	~~44,461~~
Net increase/(decrease) in cash and cash equivalents		(2,567,215	)		3,165,371
Net decrease in cash and cash equivalents		(3,070,613)		(2,567,215)
Cash and cash equivalents at beginning of the year		129,~~247~~680,~~508~~293		12,247,508	~~9,082,137~~
Cash and cash equivalent at end of the year	$	96,~~680~~609,~~293~~680	$	$9,680,293	~~12,247,508~~

Operating Activities

Net cash ~~used~~provided inby operating activities was $40.1567 million for ~~2015~~2016, compared with $64.1213 million for ~~2014~~2015. The decrease in net cash provided by operating activities was mainly due to the decrease in ~~accounts~~inventory ~~payables~~ of $39.10 57 million, ~~other~~trade ~~payables~~receivables from third parties and ~~accrued~~related ~~expenses~~party of $56.886 million, ~~and~~partially ~~other~~offset by increase in net ~~receivables,~~income ~~prepayments~~of ~~and~~$2.68 ~~deposits~~million, accounts payables of $32.3793 million, ~~partially~~other ~~offset~~payables byand ~~increase~~accrued inexpenses ~~inventories~~of $5.68 million and income taxes payable of $91.6714 million.

Investing Activities

Net cash used in investing activities was $01.3236 million for ~~2015~~2016, compared with $0.1732 million of net cash provided by investing activities for ~~2014~~2015. The increase was mainly due to ~~cash~~investing ~~payment~~low ofrisk ~~$0.24~~financial ~~million to acquire property, plant and equipment~~products.

Financing Activities

Net cash used in financing activities was $61.4785 million for ~~2015~~2016, compared with $36.1745million ~~million~~ of net cash used in financing activities for ~~2014~~2015. The ~~increase~~decrease in net cash used in financing activities was mainly attributable ~~tithe~~to ~~decrease~~the increase in proceeds of $91.07 11 million from short-term loans~~, partially~~ ~~offset~~and bydecrease ~~the increase~~ in ~~repayment~~repayments of ~~$6.23 million of~~ short-term loans of $3.77 million.

Short-Term Loans

As of December 31, ~~2015~~2016, the Company ~~has~~had ~~no outstanding~~ 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 Loan

InAs of December ~~2013~~31, 2016, the Company ~~obtained~~had ano ~~3-year entrusted loan~~outstanding ~~from a non~~long-~~financial~~term ~~institution in the amount of $539,233 bearing interest at 3% per annum granted by local government~~loan.

As of December 31, 2015, the amounts outstanding of our current portion of long-term bank loans were as follows:

Interest

Bank

Amount*

Rate

Maturity Date

Duration

Industrial and Commercial Bank of China

539,233

3.0%

December 24, 2016

3 years

TOTAL

539,233

* Calculated based on the exchange rate of $1 = RMB 6.4907 (December 31, 2015)

Capital Expenditures

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

		Year Ended December 31,
		2015		2014
		2016		2015
Construction costs	$	1517,~~329~~045	$	~~266~~15,~~376~~329
Purchase of equipment		89,~~906~~184		-8,906
Total capital expenditures	$	2426,~~235~~229	$	~~266~~24,~~376~~235

37We 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.

We estimate that our total capital expenditures in fiscal year 2016 will reach approximately $0.85 million to acquire the equipment for necessary products used in the nuclear power industry.

Obligations Under Material Contracts

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

Seasonality

Our 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.

Inflation

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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our investors.

Critical Accounting Policies

The 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 that affect the amounts 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:

~~Allowance~~Use ~~for~~of ~~Doubtful~~estimates ~~Accounts~~

WeIn ~~present~~preparing ~~trade~~financial ~~receivables,~~statements ~~net~~in ofconformity ~~allowances~~with ~~for~~US ~~doubtful accounts~~GAAP, management tomakes ~~ensure~~estimates ~~trade~~and ~~receivables~~assumptions ~~are~~that ~~not~~affect ~~overstated~~the ~~due~~reported toamounts ~~uncollectible~~of ~~accounts.~~assets ~~Allowances,~~and ~~when~~liabilities ~~required,~~and ~~are~~disclosures ~~calculated based on a detailed review~~ of ~~certain~~contingent ~~individual~~assets ~~customer accounts~~ and anliabilities ~~estimation~~at the dates of the ~~overall economic~~financial ~~conditions~~statements, ~~affecting~~as ~~our~~well ~~customer~~as ~~base.~~the Wereported ~~review~~amounts ~~a customer’s credit~~of ~~history~~revenues ~~before~~and ~~extending~~expenses ~~credit.~~during ~~Our~~the ~~allowance~~reporting ~~for~~periods. ~~doubtful~~These accounts ~~was~~and ~~$8.40~~estimates ~~million~~include, atbut ~~December~~are 31not limited to, ~~2015~~the ~~compared~~valuation toof ~~$9.08~~trade ~~million~~receivables, atother receivables, ~~December~~prepayments 31and deposit, ~~2014.~~inventories, ~~The decrease~~deferred ~~was~~income ~~due~~taxes toand the estimation ~~following:~~on 1)useful ~~the~~lives ~~strict~~and ~~credit~~residual ~~sales~~values ~~policy implemented~~of property, 2)plant ~~significant~~and ~~decrease~~equipment and inland ~~our~~use ~~revenue~~right. ~~which~~Actual ~~led~~results tocould ~~the~~differ ~~decrease~~from ~~in our~~those ~~accounts receivable~~estimates.

~~Inventory~~Concentration ~~Obsolescence~~of credit risk

~~Our~~Financial ~~inventories~~instruments ~~are~~that ~~stated~~potentially atsubject the ~~lower~~Company ~~of cost or net~~to ~~realizable~~significant ~~value.~~concentration ~~We routinely evaluate quantities and value~~ of ~~our~~credit ~~inventories in~~risk ~~light~~consist ofprincipally ~~current market conditions and market trends, and record a write-down against the cost~~ of ~~inventories~~cash ~~for a decline in net realizable value. Expected demand~~ and ~~anticipated sales price are the key factors affecting our inventory~~cash ~~valuation~~equivalents, ~~analysis.~~bills ~~For~~receivable, ~~purposes~~restricted ~~of our inventory valuation analysis~~cash, ~~we develop expected demand~~ and ~~anticipated~~trade ~~sales prices primarily based on sales orders as well as industry trends~~ and ~~individual~~other ~~customer analysis~~receivables. ~~We also consider sales~~ ~~and~~As ~~sales~~of ~~orders~~December ~~after~~31, ~~each~~2016 ~~reporting~~and ~~period-end~~2015, ~~but~~substantially ~~before~~all ~~the issuance~~ of ~~our financial statements to assess~~ the ~~accuracy~~Company’s ofcash ~~our inventory valuation~~and ~~estimates.~~cash ~~Historically,~~equivalents ~~actual demand~~ and ~~sales~~restricted ~~price~~cash ~~have~~were ~~generally~~held ~~been consistent~~by ~~with~~major orfinancial ~~greater than expected demand and anticipated sales price used~~institutions ~~for~~located ~~purposes~~in of the ~~our~~PRC, ~~inventory~~which ~~valuation~~management ~~analysis.~~believes ~~Market conditions~~ are ~~subject~~ ~~to change and actual consumption~~ of ~~inventories~~high ~~could~~credit ~~differ~~quality. ~~from~~With ~~forecasted~~respect ~~demand.~~to ~~Furthermore~~trade receivables, the ~~price~~Company ofextends ~~our~~credit ~~primary raw material is subject to fluctuations~~ based on ~~global~~an ~~supply and demand. Our management continually~~evaluation ~~monitors~~of the ~~changes~~customer’s ~~these~~financial ~~purchase~~condition. ~~prices,~~The ~~including~~Company ~~advances~~generally todoes ~~suppliers,~~not ~~and~~require ~~the~~collateral ~~impact~~for oftrade ~~such~~receivables ~~change on our ability to recover the cost of inventory~~ and ~~our~~ ~~prepayments~~maintains toan ~~suppliers.~~allowance ~~Our~~for ~~products have a long life cycle and~~doubtful ~~obsolescence~~accounts ~~has not historically been a significant factor in the valuation~~ of ~~inventories.~~ Wetrade ~~have~~and ~~not~~other ~~experienced any material inventory write-downs before~~receivables.

38During the years ended December 31, 2016 and 2015, the Company did not have any customers that contributed 10% or more to the Company’s sales revenue.

~~Income~~As ~~Taxes~~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.

~~Our~~Receivables ~~provision for income taxes is determined using the applicable statutory rate for each jurisdiction. We recognize deferred tax assets~~ and ~~liabilities~~allowance for ~~temporary~~doubtful ~~differences~~debts between the financial reporting basis and the tax basis of our assets and liabilities along with net operating loss and tax credit carryovers. Our deferred tax asset was $0.16 million and $0.17 million at December 31, 2015 and 2014, respectively. We record a valuation allowance against our deferred tax assets to reduce the net carrying value to an amount that we believe is more likely than not to be realized. As a result, Management recorded a valuation allowance against the deferred tax asset of $1.41 million and $1.56 million at December 31, 2015 and 2014, respectively. If we reduce the valuation allowance against our available deferred tax asset, our operating results and financial condition will be positively affected in future periods.

~~Depreciable~~Receivables ~~Lives~~are ofstated ~~Property~~at cost, ~~Plant~~net of 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 ~~Equipment~~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.

~~Property~~Historically, ~~plant~~losses ~~and~~from ~~equipment~~uncollectible isaccounts ~~recorded~~have ~~at cost and~~not ~~depreciated~~significantly ~~using~~deviated from the ~~straight-line~~general ~~method,~~allowance ~~which~~estimated ~~deducts~~by ~~equal amounts of~~ the management ~~cost~~and ofno ~~each~~significant ~~asset~~additional ~~from~~bad ~~earnings~~debts ~~every~~have ~~year~~been ~~over~~written ~~its~~off ~~estimated~~directly ~~economic~~to ~~useful life. Economic useful life is~~ the ~~duration~~profit ofand ~~time~~loss. anThis ~~asset~~general ~~is expected to be~~provisioning ~~productively~~policy ~~employed~~has bynot ~~us,~~changed ~~which~~in ~~may~~the bepast ~~less~~since ~~than~~establishment ~~its~~and ~~physical~~the ~~life.~~management ~~Assumptions~~considers onthat the ~~following~~aforementioned ~~factors,~~general ~~among~~provisioning ~~others,~~policy ~~affect~~is ~~the~~adequate ~~determination of~~and ~~estimated~~not ~~economic~~too ~~useful~~excessive ~~life: wear~~ and ~~tear,~~does ~~obsolescence,~~not ~~technical standards,~~expect ~~contract~~to ~~life,~~change ~~market~~this ~~demand,~~established ~~competitive~~policy ~~position,~~in ~~raw material~~the ~~availability,~~near ~~and geographic location~~future.

~~The~~40 estimated economic useful life of an asset is monitored to determine its appropriateness, especially in light of changed business circumstances. For example, changes in technology, changes in the estimated future demand for products, or excessive wear and tear may result in a shorter estimated useful life than originally anticipated. In these cases, we would depreciate the remaining net book value over the new estimated remaining life, thereby increasing depreciation expense per year on a prospective basis.

~~Net~~Retention property, plant and equipment totaled $9.67 million and depreciation expense totaled $0.94 million as of and for the year ended December 31, 2015, respectively. Net property, plant and equipment totaled $8.89 million and depreciation expense totaled $0.89 million as of and for the year ended December 31, 2014 respectively. receivable

~~These~~ ~~depreciable~~Retention ~~lives~~receivable ~~have~~is ~~been~~the ~~determined~~amount withheld ~~based~~by ~~on historical~~a ~~experience~~customer ~~combined~~until ~~with~~the ~~judgment~~warranty onperiod ~~future~~is ~~assumptions~~over. ~~such~~Retention asreceivables ~~technological~~ which ~~advances,~~were ~~potential~~expected ~~obsolescence,~~to ~~competitors’~~be ~~actions~~collected within one year of $8,264,642 ~~etc.~~and ~~Management~~ $10,533,304 ~~monitors~~were ~~its~~included ~~assumptions~~in the balance of trade receivables as of December 31, 2016 and ~~may~~2015, ~~potentially~~respectively. ~~need~~Retention receivables which were expected to ~~adjust~~be ~~depreciable~~ collected ~~life~~after one year were presented separately as ~~circumstances~~a ~~change~~non-current asset.

~~Impairment~~Inventories ~~of Long-Lived Assets~~

~~Long-lived~~Inventories ~~assets which include property, plant, and equipment and land use rights~~ are ~~grouped~~stated ~~for~~at ~~impairment~~the ~~testing~~lower atof ~~the~~cost ~~lowest~~or ~~level~~market ~~for~~value. ~~which~~Cost ~~there~~ is andetermined ~~identifiable~~on ~~cash~~a ~~flow.~~weighted ~~Impairment~~average ~~testing~~basis ofand ~~the~~includes ~~asset~~all ~~group~~expenditures ~~occurs~~incurred ~~whenever events or changes~~ in ~~circumstances~~bringing ~~indicate that~~ the ~~carrying amount~~goods ofto the ~~assets~~point ~~may~~of ~~not~~sale beand ~~recoverable.~~putting ~~Such~~them ~~circumstances would include a significant decrease~~ in ~~the market value of~~ a ~~long-lived asset grouping, a~~ ~~significant~~saleable ~~adverse~~condition. ~~change~~In inassessing the ~~manner~~ultimate inrealization ~~which the asset grouping is being used or in its physical condition, a history~~ of ~~operating or cash flow losses associated with the use of the asset grouping~~inventories, ~~or changes in~~ the ~~expected useful~~ ~~life~~management ofmakes ~~the~~judgments ~~long-lived~~as ~~assets. If such circumstances are determined~~ to ~~exist, an estimate of undiscounted~~ future ~~cash~~demand ~~flows~~requirements ~~produced by that asset group is~~ compared to ~~the~~current or ~~carrying~~committed ~~value~~inventory tolevels. ~~determine~~The ~~whether~~Company’s ~~impairment~~reserve ~~exists.~~requirements ~~If an~~generally ~~asset~~increase ~~group~~with isits ~~determined~~projected todemand berequirements; ~~impaired,~~decrease ~~the~~due ~~loss~~to ~~is measured based on the~~market ~~difference~~conditions ~~between~~and ~~the~~product ~~asset~~life ~~group’s~~cycle ~~fair~~changes. ~~value~~The ~~and~~Company ~~its~~estimates ~~carrying~~the ~~value. An~~demand ~~estimate~~requirements ~~of the asset group’s fair value is~~ based on ~~the~~market ~~discounted~~conditions, ~~value~~forecasts ofprepared ~~its estimated cash flows. Assets to be disposed of~~ by ~~sale~~its ~~are reported at the lower~~customers, ofsales ~~carrying~~contracts ~~amount~~and ororders ~~fair~~in ~~value less cost to sell~~hand.

~~The~~Impairment ~~assumptions underlying cash flow projections represent our best estimates at the time~~ of ~~the~~long-lived ~~impairment~~assets review. Factors that we must estimate include industry and market conditions, sales volume and prices, costs to produce, etc. Changes in key assumptions or actual conditions that differ from estimates could result in an impairment charge. Management believes it uses reasonable and supportable assumptions when performing impairment reviews and cannot predict the occurrence of future events and circumstances that could result in impairment charges.

39Long-lived assets are tested for impairment in accordance with ASC 360-10-45 “Impairment or Disposal of Long-Lived Assets”. The Company periodically evaluates potential impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairment of long-lived assets was recognized for the years ended December 31, 2016 and 2015.

Government grants

Government 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 recognition

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

The Company 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 of sales

Cost of sales 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 and development expenses

Research and development costs are charged to expense as incurred. Research and development costs for the year ended December 31, 2016 and 2015 were $1,967,158 and $2,054,740, respectively.

Income taxes

The Company uses the asset and liability method of accounting for income taxes pursuant to ASC 740 “Income Taxes”. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying 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 temporary differences are expected to be recovered or 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.

Comprehensive income

ASC 220 “Comprehensive Income” established standards for reporting and display of comprehensive income, 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 currency translation

The functional currencies of the Company and its 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.

For financial reporting purposes, the financial statements of the subsidiaries that are prepared using RMB have been translated into USD. Assets and liabilities are translated at the exchange rates at the balance sheet date and revenue and expenses are translated at the average exchange rates and stockholders’ 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 accumulate other comprehensive income, a component of stockholders’ equity. The exchange rates in effect as of December 31, 2016 and 2015 were RMB1 for $0.1440 and $0.1541, respectively. The average exchange rates for the years ended December 31, 2016 and 2015 were RMB1 for $0.1505 and $0.1608, respectively. There was no significant fluctuation in the exchange rates for conversion of RMB to USD after the balance sheet date.

Fair value of financial instruments

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

As of December 31, 2016 and 2015, 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.

Basic and diluted earnings per share

The Company 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 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 were no dilutive instruments for the years ended December 31, 2016 and 2015. Accordingly, the basic and diluted earnings per share are the same for both reporting periods.

Related parties transactions

A 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 Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary course of business. Related parties may be individuals or corporate entities.

Recent Accounting Pronouncements

See Note 3to our audited consolidated financial statements included elsewhere in this report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The full text of our audited consolidated financial statements as of December 31, ~~2015~~2016 and ~~2014~~2015 begins on page F-1 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls 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.

As 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, ~~2015~~2016. 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.

Notwithstanding management’s assessment that our internal control over financial reporting was ineffective as of December 31, ~~2015~~2016 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.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed by, 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:

	(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.

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Management evaluated the effectiveness of our internal control over financial reporting as of December 31, ~~2015~~2016. In making this evaluation, management used the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on our evaluation, we determined that, as of December 31, ~~2015~~2016, our internal control over financial reporting was not effective because of the material weaknesses in our internal control over financial reporting described below.

1. ~~Accounting~~ Lack of sufficient and adequately ~~Finance~~trained ~~Personnel~~accounting ~~Weaknesses~~and –finance ~~Our~~personnel ~~current~~with appropriate ~~accounting~~understanding ~~staff~~of isU.S. ~~relatively~~GAAP ~~new~~ and ~~inexperienced,~~SEC ~~and~~reporting ~~needs~~requirement; 2. Inadequate ~~substantial~~segregation of duties relative to ~~training~~key financial reporting functions; 3. Lack of qualified resources to ~~meet~~perform the internal ~~higher~~audit ~~demands~~functions ofproperly; ~~being~~ 4. Lack aof ~~U.S.~~internal ~~public~~audit ~~company.~~system ~~The accounting~~to ~~skills~~prevent and detect ~~understanding~~control ~~necessary~~lapses toand ~~fulfill~~errors in the ~~requirements~~accounting of certain key areas ~~U.S.~~including ~~GAAP-based~~revenue ~~reporting~~recognition, ~~including~~purchase ~~the~~approvals, ~~skills~~cash ofreceipts ~~subsidiary~~and ~~financial~~cash ~~statements~~disbursement ~~consolidation~~authorization, ~~are~~inventory ~~inadequate~~safeguard and ~~were~~accumulation ~~inadequately~~of ~~supervised.~~cost ~~The~~of ~~lack~~revenues ofin ~~sufficient~~accordance with the Company's policies and ~~adequately~~appropriate ~~trained~~costing method. 5. Lack ~~accounting~~of skills and ~~finance~~understanding ~~personnel~~to operate, ~~resulted~~review, inand ansupervise ~~ineffective~~the ~~segregation~~process of ~~duties~~bookkeeping ~~relative~~under tonewly ~~key~~implemented ~~financial~~ERP ~~reporting functions~~system. 6. Lack of well-established procedures to identify, approve and report related party transactions.

~~2. Lack~~Our ofmanagement ~~Internal~~has ~~Audit~~identified ~~Function~~the –steps Wenecessary ~~lack qualified resources~~ to ~~perform~~ address the ~~internal~~material ~~audit~~weaknesses ~~functions~~described ~~properly.~~above Inand ~~addition~~in 2016, ~~the~~we ~~scope~~have ~~and~~continued to ~~effectiveness~~implement of the ~~internal~~following ~~audit~~remedial ~~function are yet to be developed~~procedures.

~~3. Lack~~Hire, ~~of Internal~~as ~~Audit~~needed, ~~System–~~additional Weaccounting ~~lack~~and anoperations ~~internal~~personnel ~~audit~~and ~~department, which renders~~outside ~~ineffective~~ contractors ~~our~~with ~~ability~~technical toaccounting ~~prevent~~expertise and ~~detect~~reorganized ~~control~~the ~~lapses~~ accounting and ~~errors~~finance indepartment ~~the~~ to ensure that accounting ofpersonnel ~~certain~~with ~~key~~adequate experience, ~~areas~~skills ~~like~~and ~~revenue~~knowledge ~~recognition,~~relating ~~purchase~~to ~~approvals~~complex, ~~inter~~ non-~~company~~routine transactions, are ~~cash~~directly ~~receipt~~involved ~~and~~in ~~cash~~the ~~disbursement~~review ~~authorizations, inventory safeguard~~ and ~~proper~~accounting ~~accumulation~~evaluation ~~for cost~~ of ~~products,~~our ~~in accordance~~complex, ~~with~~ non-routine ~~our appropriate costing method~~transactions.
~~Our~~Involve, ~~management~~as ~~has~~needed, ~~identified~~both ~~the~~internal ~~steps~~accounting ~~necessary~~and tooperations ~~address~~personnel and ~~the~~ outside ~~material~~contractors ~~weaknesses~~with ~~described~~technical ~~above~~accounting ~~and~~expertise early in ~~2014,~~the evaluation weof ~~have~~our ~~continued~~complex, non-routine transaction to obtain additional ~~implement~~ guidance as to the ~~following~~application ~~remedial~~of ~~procedures~~generally accepted accounting principles to such a proposed transaction.
Hire, as needed, additional accounting and 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.~~
Evaluate our internal audit function in relation to our financial resources and requirements.

We will 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 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.

Because 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 may deteriorate.

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.

Changes in Internal Controls over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

Other than in connection with the implementation of the remedial measures described above, there have been no changes in our internal control over financial reporting during the fourth quarter of fiscal year ~~2015~~2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

We have no information to disclose that was required to be disclosed in a report on Form 8-K during fourth quarter of fiscal year ~~2015~~2016, but was not reported.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Directors and Executive Officers

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

Name	Age	Position
Guohong Zhao	5556	Chairman, Chief Executive Officer and President
Zhigang Xu	4445	Interim Chief Financial Officer, Treasurer and Secretary
Yue Cui	5556	Vice President of Production
Fucai Zhan	4546	Vice President of R&D and Director
Ariel Poppel	6364	Director

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 Siping Juyuan since founding the company in 1998. Mr. Zhao has over 10 years’ 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~~TelevisionUniversity ~~University~~ in 1986, holding a college degree in Economics.

Mr. Zhigang Xu. Mr. 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. Yue Cui. Mr. Cui became our Vice President of Production on June 30, 2009, the day that we consummated our reverse acquisition of Megaway, and has served as Vice President of Production of Siping Juyuan since 2006. From 2000 to 2006, he was the operation manager of Siping Juyuan. With 20 years’ experience in manufacturing industry, he has significantly improved the production management of the Company. From 1979 to 2000, he was the production manager of Siping Tool Factory, a tool manufacturer.

Mr. Fucai Zhan. Mr. Zhan became our Vice President of Research and Development on June 30, 2009, the day that we 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 joined Siping Junyuan in 1999 as Vice President of Sales and was appointed as Vice President of Research and Development in 2009. Before ~~joining~~joiningSiping ~~Siping~~ Juyuan, he worked as production manager, Research and Development manager and assistant to GM in Dong Feng Siping Auto Parts Co., Ltd. Mr. Zhan graduated from Jilin University of Technology in 1996.

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Mr. 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 are elected until their successors are duly elected and qualified.

Except as set forth in our discussion below in Item 13 “Certain Relationships and Related 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.

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

Director Qualifications

Directors are responsible for overseeing our business consistent with their fiduciary duty to stockholders. This significant responsibility requires highly-skilled individuals with various qualities, attributes and professional experience. The Board believes that there are general requirements for service on our Board of Directors that are applicable to all directors and that there are other skills and experience that should be represented on the Board as a whole, but not necessarily by each director. The Board considers the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and our current and future needs.

Qualifications for All Directors

In its assessment 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 Board. The Board 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 recognized person of high integrity with a proven record of success in his or her field. Each director must demonstrate innovative thinking, familiarity with and respect 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 required of all directors, the Board assesses intangible qualities including the individual’s ability to ask difficult questions and, simultaneously, to work collegially.

The 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.

Qualifications, Attributes, Skills and Experience to be Represented on the Board as a Whole

The Board has identified particular qualifications, attributes, skills and experience that are important to be represented on the Board as a whole, in light of 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.

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Summary of Qualifications of Directors

Set 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. Guohong Zhao. Mr. Zhao is a founder of Siping Juyuan 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.

Mr. Fucai Zhan. Mr. Zhan possesses over 15 years of experience in production, research and development, and sales. He joined Siping Junyuan 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.

Mr. Ariel Poppel. Mr. Poppel contributes to the Board is extensive experience serving in management positions and on the boards of numerous companies.

Family Relationships

There are no family relationships among any of our officers or directors.

Involvement in Certain Legal Proceedings

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

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 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 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.

Section 16(A) Beneficial Ownership Reporting Compliance

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 ~~2015~~2016.

4448

In making these statements, we have relied upon examination of the copies 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.

Code of Ethics

On September 25, 2009, our Board 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 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.

We are required to 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.

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.

Board Composition

The Company is governed by a Board of Directors that currently consists of three members: Messrs. Guohong Zhao, Fucai Zhan and Ariel Poppel. All 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.

Material Changes to Director Nomination Procedures

There have been no material changes to the procedures by which stockholders may recommend nominees to our Board of Directors since such procedures were last disclosed.

ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table — Fiscal Years Ended December 31, ~~2015~~2016 and ~~2014~~2015

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services 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	~~2015~~2016	16,819	-	-	-	-	16,819
	2014	16,819	-	-	-	-	16,819
	2015	16,819	-	-	-	-	16,819

Employment Agreements

We do not have 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.

4549

Outstanding Equity Awards at Fiscal Year End

For the year ended December 31, ~~2015~~2016, no director or executive officer has received compensation from us pursuant to any compensatory or benefit plan. There is no plan or understanding, express or implied, to pay any compensation to any director or executive officer pursuant to any compensatory or benefit plan.

Compensation of Directors

The following table sets forth the total compensation earned by our directors for their services as directors during fiscal year ended December 31, ~~2015~~2016:

Name	Fees earned or paid in cash ($)	All other compensation ($)	Total ($)
Guohong Zhao	-	-	-
Fucai Zhan	-	-	-
Jingxun Chen(1)	363,000	-	363,000
To Tsang(2)	244,~~000~~800	-	244,~~000~~800
Youjun Lian(3)	123,~~000~~600	-	123,~~000~~600
Ariel Poppel	-	-	-

(1)(2)(3) Messrs. Chen, Tsang and Lian resigned as directors on March 25, 2016.

~~We entered into independent director contract and indemnification agreement with~~ Mr. ToPoppel ~~Tsang.~~does ~~Under~~not ~~the~~receive ~~terms~~any ofcompensation ~~the~~for ~~independent~~his service as director’s ~~contracts,~~.Mr. weGuohong ~~agreed~~Zhao toand ~~pay~~ Mr. ~~Tsang~~Fucai anZhan ~~annual~~are ~~fee~~paid ofin ~~$24,000,~~their ~~as compensation~~capacity ~~for the services to be provided by him~~ as ~~independent director.~~ ~~Under~~executive ~~the~~officers ~~terms~~ of the ~~indemnification~~Company ~~agreement, we agreed to indemnify the independent director against expenses, judgments, fines, penalties or other amounts actually~~ and ~~reasonably~~they ~~incurred~~do bynot ~~the~~receive ~~independent director in connection with~~ any ~~proceeding if the independent director acted in good faith~~additional ~~and~~compensation infor ~~our~~their ~~best~~service ~~interests~~as directors.

We agreed to pay Mr. Jingxun Chen an annual fee of $36,000 as compensation for the services to be provided by him as independent director. We have not entered into independent director agreements or indemnification agreements with Mr. Poppel, Mr. Lian and Mr. Chen. Mr. Poppel does not receive any compensation for his service as director.

Mr. Guohong Zhao and Mr. Fucai Zhan are paid in their capacity as executive officers of the Company and they do not receive any additional compensation for their service as directors.

It is our practice to reimburse our directors for reasonable travel expenses related to attendance at Board and Committee meetings.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding beneficial ownership of our common stock as of ~~March~~April 2912, ~~2016~~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	*

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	*
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%

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%

* Less than 1%

(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.

(3)(4)(5) Messrs. Chen, Tsang and Lian resigned as directors on March 25, 2016.

Changes in Control

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

Securities Authorized for Issuance Under Equity Compensation Plans

We do not have any compensation plans in effect under which our equity securities are authorized for issuance.

Transactions with Related Persons

~~There~~Below ~~have~~were ~~been no~~ transactions since the beginning of the ~~2014~~ 2015 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at ~~yearend~~year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest ~~(other than compensation described~~. ~~under~~ The related ~~Item~~parties 11consist ~~“Executive~~of ~~Compensation”).~~as following:

~~None~~Name of ~~our~~Related ~~directors~~Party Nature of Relationship Guohong Zhao Chairman, ~~director~~Chief ~~nominees~~Executive orOfficer ~~executive~~and ~~officers has~~President ~~been~~Zhigang ~~involved~~Xu inInterim ~~any~~Chief ~~transactions~~Financial ~~with~~Officer, usTreasurer orand ~~any~~Secretary Fucai Zan Vice President of ~~our~~R&D ~~directors,~~and ~~executive officers~~Director Kai Liu Chief Engineer, ~~affiliates~~Manager orof ~~associates~~Market ~~which~~development ~~are~~Zhijun ~~required~~Ma toSales beDirector ~~disclosed~~Yongfu ~~pursuant to~~Tian ~~the~~Vice ~~rules~~Sales ~~and~~Director ~~regulations~~Feng Xu Factory Director, Manager of ~~the~~production ~~SEC.~~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

The Company does not own any equity of either Tongda or Hongsheng. Neither Tongda or Hongsheng owns any equity of the Company.

Trade receivables – related party

During the years ended December 31, 2016 and 2015, the Company sold products to Tongda in the amount of $1,309,522 and $257,674, respectively. The corresponding cost for the related party sales was $953,827 and $212,873, respectively. As of December 31, 2016 and 2015, the Company had trade receivables from Tongda in the amount of $1,358,399 and $nil, respectively.

Due from related parties

As of December 31, 2016 and 2015, respectively, the Company advanced $31,978 and $26,896 to Guohong Zhao for handling selling and logistic activities for the Company in the ordinary course of business.

As of 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.

As of December 31, 2016 and 2015, respectively, the Company advanced $11,003 and $11,771 to Kai Liu for handling selling and logistic activities for the Company in the ordinary course of business.

On June 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.

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, 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. 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 to related parties

During the normal course of business, our Company, from time to time, has temporarily borrowed money from its officers to finance its working capital as needed. The amounts are usually unsecured, non-interest bearing and due on demand.

Due to 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

All 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 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Independent Auditors’ Fees

The following is a summary of the fees billed to the Company for professional services rendered for the fiscal years ended December 31, ~~2015~~2016 and ~~2014~~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

		Year Ended December 31,
		2015		2014
Audit Fees	$	120,000	$	165,158
Audit-Related Fees		-		-
Tax Fees		-		-
All Other Fees		-		-
TOTAL	$	120,000	$	165,158

“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.

“Audit-Related 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 Fees” consisted of fees billed for professional services rendered by the principal accountant for tax returns preparation.

“All Other Fees” consisted of fees billed for products and services provided by the principal accountant, other than the services reported above under other captions of this Item 14.

Pre-Approval 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 ~~Malone~~MaloneBailey ~~Bailey~~ LLP for our financial statements as of and for the year ended December 31, ~~2015~~2016.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES. ~~Financial Statements and Schedules~~

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

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

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

48The list of exhibits in the Exhibit Index to this Report is incorporated herein by reference.

~~SIGNATURES~~52

~~Pursuant~~SIGNATURES ~~to 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.~~

~~Date:~~Pursuant ~~March~~to 30the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, ~~2016~~the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~THT~~Date: ~~HEAT~~April ~~TRANSFER TECHNOLOGY~~17, ~~INC.~~ 2017

~~By:~~THT ~~/s/Guohong~~HEAT ~~Zhao~~TRANSFER ~~Guohong Zhao Chief Executive Officer By: /s/Zhigang Xu Zhigang Xu Interim Chief Financial Officer~~TECHNOLOGY, INC.

~~Pursuant~~By: to/s/ ~~the~~Guohong ~~requirements~~Zhao ofGuohong ~~the~~Zhao ~~Securities~~Chief ~~Exchange~~Executive ~~Act~~Officer ~~of 1934,~~By: ~~this~~/s/Zhigang ~~report~~Xu ~~has~~Zhigang ~~been~~Xu ~~signed~~Interim ~~below~~Chief byFinancial ~~the following persons on behalf of the registrant and in the capacities and on the dates indicated.~~ Officer

Signature	Title	Date
/s/ Guohong Zhao	Chairman and Chief Executive Officer	March 30, 2016
Guohong Zhao	(Principal Executive Officer)
/s/ Zhigang Xu	Interim Chief Financial Officer	March 30, 2016
Zhigang Xu	(Principal Financial and Accounting Officer)
/s/ Fucai Zhan	Director	March 30, 2016
Fucai Zhan
/s/ Ariel Poppel	Director	March 30, 2016
Ariel Poppel

Pursuant 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.

Signature	Title	Date

/s/ Guohong Zhao	Chairman and Chief Executive Officer	April 17, 2017
Guohong Zhao	(Principal Executive Officer)

/s/ Zhigang Xu	Interim Chief Financial Officer	April 17, 2017
Zhigang Xu	(Principal Financial and Accounting Officer)

/s/ Fucai Zhan	Director	April 17, 2017
Fucai Zhan

~~REPORT~~53 ~~OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the Board of Directors and Shareholders of:~~ THT Heat Transfer Technology, Inc. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

WeFor ~~have audited~~ the ~~accompanying~~Years ~~consolidated~~Ended ~~balance sheets of THT Heat Transfer Technology, Inc. and its subsidiaries (collectively, the "Company") as of~~ December 31, ~~2015~~2016 and 2014, and the related consolidated statements of income and comprehensive income, 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. 2015

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. CONTENTS

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 subsidiaries as of December 31, 2015 and 2014, 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.

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

~~/s/ MaloneBailey, LLP www.malonebailey.com Houston, Texas March 30, 2016~~F-1

~~F-1~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~THT~~To ~~Heat~~the ~~Transfer~~Board ~~Technology,~~of ~~Inc.~~Directors ~~Consolidated~~and ~~Balance Sheets~~Shareholders ~~(Stated~~of: in THT USHeat Transfer ~~dollars)~~Technology, Inc.

		December 31,		December 31,
		2015		2014
ASSETS
Current assets
Cash and cash equivalents	$	9,680,293	$	12,247,508
Restricted cash-current		517,073		550,206
Trade receivables, net		38,058,713		42,882,993
Bills receivable		726,224		2,016,646
Other receivables, prepayments and deposits, net		10,088,586		9,843,238
Due from related parties		39,552		37,338
Inventories, net		19,830,029		27,926,555
Deferred tax assets		159,960		168,932
Total Current Assets		79,100,430		95,673,416
Restricted cash, non-current		369,263		738,168
Retention receivable		1,589,313		1,909,731
Property, plant and equipment, net		9,666,773		8,890,946
Land use rights, net		5,582,690		6,025,000
TOTAL ASSETS	$	96,308,469	$	113,237,261
LIABILITIES & SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable		7,095,303		8,903,510
Other payables and accrued liabilities		19,745,852		24,362,343
Income tax payable		20,097		652,859
Short-term loans		6,176,529		12,691,181
Current maturity of long-term loan		539,233		-
Due to related parties		415,980		813,537
Total Current Liabilities		33,992,994		47,423,430
Non-current liabilities
Long-term loan		-		569,476
Total Long-term Liabilities		-		569,476
Total Liabilities		33,992,994		47,992,906
SHAREHOLDERS’ 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, 2015 and December 31, 2014		20,454		20,454
Additional paid-in capital		26,524,324		26,524,324
Statutory reserve		3,943,474		3,879,564
Retained earnings		29,446,126		28,944,535
Accumulated other comprehensive income		2,381,097		5,875,478
TOTAL SHAREHOLDERS’ EQUITY		62,315,475		65,244,355
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	96,308,469		113,237,261

We have audited the accompanying consolidated balance sheets of THT Heat Transfer Technology, Inc. and its subsidiaries (collectively, the "Company") as of December 31, 2016 and 2015, and the related consolidated 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 ~~accompanying~~Company is ~~notes~~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 ~~integrated~~opinion ~~part~~on the effectiveness of ~~these~~the Company‘s internal control ~~consolidated~~ 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-2~~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 subsidiaries as of December 31, 2016 and 2015, 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.

~~THT~~/s/ ~~Heat Transfer Technology~~MaloneBailey, ~~Inc~~LLP www.malonebailey.com ~~Consolidated~~ ~~Statements~~ Houston, Texas of April ~~Income~~17, ~~and Comprehensive Income (Stated in US dollars)~~2017

		For the Years Ended December 31,
		2015			2014
Sales revenue	$	45,964,045		$	61,097,433
Cost of revenue		(34,462,534	)		(42,243,326	)
Gross Profit		11,501,511			18,854,107
Operating expenses
Administrative expenses		4,929,870			7,200,530
Research and development expenses		2,054,740			2,852,228
Selling expenses		4,626,004			5,676,816
Total Operating Expenses		11,610,614			15,729,574
Income (loss) from operations		(109,103	)		3,124,533
Other Income (Expenses)
Interest income		12,418			11,860
Other income		683,771			632,246
Finance costs		(84,331	)		(741,111	)
Investment income		91,604			128,779
Other expense		(28,858	)		(77,008	)
Total Other Income (Expenses)		674,604			(45,234	)
Income before income taxes		565,501			3,079,299
Income tax expenses		-			(951,376	)
Net Income		565,501			2,127,923
Comprehensive Income
Net Income		565,501			2,127,923
Other Comprehensive Income (Loss)
Foreign currency translation adjustments		(3,494,381	)		(270,039	)
Comprehensive Income (Loss)		(2,928,880	)		1,857,884
Earnings per common share
Basic and diluted	$	0.03		$	0.10
Weighted average number of shares outstanding
Basic and diluted		20,453,500			20,453,500

F-2

~~The~~THT ~~accompanying~~Heat ~~notes~~Transfer ~~are~~Technology, anInc. ~~integrated~~ Consolidated Balance ~~part~~Sheets ~~of these~~ ~~consolidated~~ (Stated ~~financial~~in ~~statements~~US dollars)

F-3

		December 31,			December 31,
		2016			2015

ASSETS
Current assets
Cash and cash equivalents	$	6,609,680		$	9,680,293
Restricted cash-current		974,749			517,073
Trade receivables, net		37,074,481			38,058,713
Trade receivables - related party		1,358,399			-
Bills receivable		398,374			726,224
Other receivables, prepayments and deposits, net		8,904,968			9,848,989
Due from related parties		1,839,932			279,149
Inventories, net		21,087,301			19,830,029
Deferred tax assets		149,525			159,960
Total Current Assets		78,397,409			79,100,430

Restricted cash, non-current		514,201			369,263
Retention receivable		1,653,956			1,589,313
Property, plant and equipment, net		8,437,632			9,666,773
Land use rights, net		5,104,121			5,582,690

TOTAL ASSETS	$	94,107,319		$	96,308,469

LIABILITIES & SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable		6,727,206			7,095,303
Other payables and accrued liabilities		20,525,878			19,732,209
Income tax payable		511,314			20,097
Short-term loans		4,608,494			6,176,529
Current maturity of long-term loan		-			539,233
Due to related parties		383,232			429,623
Total Current Liabilities		32,756,124			33,992,994

Total Liabilities		32,756,124			33,992,994

SHAREHOLDERS’ 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, 2016 and December 31, 2015		20,454			20,454
Additional paid-in capital		26,524,324			26,524,324
Statutory reserve		4,270,861			3,943,474
Retained earnings		32,366,400			29,446,126
Accumulated other comprehensive income (loss)		(1,830,844	)		2,381,097
TOTAL SHAREHOLDERS’ EQUITY		61,351,195			62,315,475

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	94,107,319			96,308,469

~~THT~~The ~~Heat~~accompanying ~~Transfer~~notes ~~Technology,~~are ~~Inc.~~an ~~Consolidated Statements~~integrated part of ~~Changes~~these consolidated infinancial ~~Shareholders’~~statements ~~Equity (Stated in US dollars)~~

	Common Stock
									Accumulated Other						Total
					Additional Paid-in				Comprehensive						Shareholders'
	No. of Shares		Amount		Capital		Statutory Reserve		Income			Retained Earnings			Equity
Balance, December 31, 2013	20,453,500	$	20,454	$	26,524,324	$	3,652,538	$	6,145,517		$	27,043,638		$	63,386,471
Net income												2,127,923			2,127,923
Foreign currency translation adjustment									(270,039	)					(270,039	)
Appropriation to reserve							227,026					(227,026	)		-
Balance, December 31, 2014	20,453,500	$	20,454	$	26,524,324	$	3,879,564	$	5,875,478		$	28,944,535		$	65,244,355
Net income												565,501			565,501
Foreign currency translation adjustment									(3,494,381	)					(3,494,381	)
Appropriation to reserve							63,910					(63,910	)		-
Balance, December 31, 2015	20,453,500	$	20,454	$	26,524,324	$	3,943,474	$	2,381,097		$	29,446,126		$	62,315,475

F-3

~~The~~THT ~~accompanying~~Heat ~~notes~~Transfer ~~are~~Technology, anInc. ~~integrated~~ Consolidated Statements ~~part~~ of ~~these~~Income and Comprehensive Loss ~~consolidated~~ (Stated ~~financial~~in ~~statements~~US dollars)

F-4

		For the Years Ended December 31,
		2016			2015

REVENUES:
Sales revenue	$	46,277,202		$	45,706,371
Sales revenue-related party		1,309,522			257,674
Total Revenues		47,586,724			45,964,045

COST OF REVENUES:
Cost of revenue		(31,686,457	)		(34,325,572	)
Cost of revenue-related party		-			(136,962	)
Total Cost of Revenue		(31,686,457	)		(34,462,534	)

Gross Profit		15,900,267			11,501,511

Operating expenses (income)
Administrative expenses		5,578,919			4,929,870
Research and development expenses		1,967,158			2,054,740
Selling expenses		5,949,034			4,626,004
Loss (gain) on disposal of property, plant and equipment		(1,050,322	)		16,102
Total Operating Expenses		12,444,789			11,626,716

Income (loss) from operations		3,455,478			(125,205	)

Other Income (Expenses)
Interest income		16,387			12,418
Other income		456,304			683,771
Finance costs		(157,690	)		(84,331	)
Investment income		79,509			91,604
Other expense		(87,678	)		(12,756	)
Total Other Income		306,832			690,706

Income before income taxes		3,762,310			565,501
Income tax expenses		(514,649	)		-
Net Income		3,247,661			565,501


Comprehensive Income
Net Income		3,247,661			565,501
Other Comprehensive Income (Loss)
Foreign currency translation adjustments		(4,211,941	)		(3,494,381	)
Comprehensive Loss		(964,280	)		(2,928,880	)

Earnings per common share
Basic and diluted	$	0.16		$	0.03
Weighted average number of shares outstanding
Basic and diluted		20,453,500			20,453,500

~~THT~~The ~~Heat~~accompanying ~~Transfer~~notes ~~Technology,~~are ~~Inc.~~an ~~Consolidated Statements~~integrated part of ~~Cash~~these consolidated ~~Flows~~financial ~~(Stated~~statements ~~in US dollars)~~

		For the Year Ended December 31,
		2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	565,501		$	2,127,923
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,108,691			1,091,035
Allowance for doubtful accounts		(109,298	)		1,960,689
Loss (gain) on sale of property, plant and equipment		16,102			(40,299	)
Changes in operating assets and liabilities:
Trade receivables, net		3,046,818			(270,926	)
Bills receivable		1,235,321			(310,379	)
Other receivables, prepayments and deposits		(1,071,793	)		2,298,302
Inventories, net		6,904,035			(2,769,548	)
Retention receivable		228,621			286,240
Due from related parties		(16,912	)		(37,338	)
Accounts payable		(3,530,425	)		(432,103	)
Other payables and accrued expenses		(3,604,692	)		2,160,331
Income taxes payable		(624,371	)		56,555
NET CASH PROVIDED BY OPERATING ACTIVITIES		4,147,598			6,120,482
CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash		348,276			429,991
Payments to acquire property, plant and equipment		(24,235	)		(266,376	)
Proceed from disposal of property, plant and equipment		488			9,763
NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES		324,529			173,378
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans		11,756,305			20,827,570
Repayment of short-term loans		(17,853,612	)		(24,081,878	)
Proceeds from related parties		-			813,577
Repayment of long-term loans		-			(976,292	)
Refund of counter guarantee receivable		-			244,073
Repayment to related parties		(369,924	)		-
NET CASH FLOWS USED IN FINANCING ACTIVITIES		(6,467,231	)		(3,172,950	)
Effect of foreign currency translation on cash and cash equivalents		(572,111	)		44,461
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(2,567,215	)		3,165,371
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	$	12,247,508		$	9,082,137
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	9,680,293		$	12,247,508
Supplementary Disclosures for Cash Flow Information:
Interest paid	$	71,280		$	590,063
Income taxes paid	$	626,444		$	1,105,214
Non-cash investing and financial activities:
PPE transferred from CIP	$	(2,139,192	)	$	-
CIP transferring into PPE	$	2,139,192		$	-
Liabilities assumed in connection with purchase of property, plant and equipment	$	2,279,021		$	2,263,390

F-4

~~The~~THT ~~accompanying~~Heat ~~notes~~Transfer ~~are~~Technology, anInc. ~~integrated~~ Consolidated Statements ~~part~~ of ~~these~~Changes in Shareholders’ Equity ~~consolidated~~ (Stated ~~financial~~in ~~statements~~US dollars)

F-5

	Common Stock

									Accumulated Other						Total
					Additional Paid-in				Comprehensive						Shareholders'
	No. of Shares		Amount		Capital		Statutory Reserve		Income			Retained Earnings			Equity
Balance, December 31, 2014	20,453,500	$	20,454	$	26,524,324	$	3,879,564	$	5,875,478		$	28,944,535		$	65,244,355

Net income												565,501			565,501
Foreign currency translation adjustment									(3,494,381	)					(3,494,381	)
Appropriation to reserve							63,910					(63,910	)		-

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

~~THT~~The ~~Heat~~accompanying ~~Transfer~~notes ~~Technology,~~are ~~Inc.~~an ~~Notes~~integrated topart ~~Consolidated~~of these ~~Financial~~ consolidated ~~Statements~~financial ~~(Stated~~statements ~~in US Dollars)~~

~~1. Corporate information~~ F-5

THT Heat Transfer Technology, Inc. ~~(the “Company” or “THT” or~~ ~~the~~ Consolidated Statements ~~“Surviving~~of ~~Corporation”)~~Cash isFlows ~~the surviving corporation pursuant to the~~ ~~Reincorporation~~ (Stated ~~Merger~~in asUS ~~detailed~~dollars) ~~below.~~

Reincorporation Merger

		For the Year Ended December 31,
		2016			2015



CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	3,247,661		$	565,501
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,339,244			1,108,691
Allowance for doubtful accounts		951,237			(109,298	)
Loss (gain) on sale of property, plant and equipment		(1,050,322	)		16,102
Changes in operating assets and liabilities:
Trade receivables, net		(2,391,199	)		3,046,818
Trade receivables-related party		(1,419,888	)		-
Bills receivable		293,167			1,235,321
Other receivables, prepayments and deposits		568,188			(821,669	)
Inventories, net		(2,666,434	)		6,904,035
Retention receivable		(175,948	)		228,621
Due from related parties		(6,872	)		(267,037	)
Accounts payable		(598,060	)		(3,530,425	)
Other payables and accrued expenses		2,060,496			(3,618,933	)
Income taxes payable		514,823			(624,371	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		666,093			4,133,356

CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash		(690,334	)		348,276
Payments to acquire property, plant and equipment		(26,229	)		(24,235	)
Proceeds from disposal of property, plant and equipment		3,906			488
Loans made to others		(379,616	)		-
Loans to related party		(1,857,761	)		(976,598	)
Repayments from related party		1,589,691			976,598
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES		(1,360,343	)		324,529

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term loans		12,868,857			11,756,305
Repayment of short-term loans		(14,086,680	)		(17,853,612	)
Repayment of long-term loan		(526,870	)		-
Proceeds from related parties		45,160			-
Repayment to related parties		(149,539	)		(355,682	)
NET CASH FLOWS USED IN FINANCING ACTIVITIES		(1,849,072	)		(6,452,989	)


Effect of foreign currency translation on cash and cash equivalents		(527,291	)		(572,111	)



NET DECREASE IN CASH AND CASH EQUIVALENTS		(3,070,613	)		(2,567,215	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	$	9,680,293		$	12,247,508
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	6,609,680		$	9,680,293


Supplementary Disclosures for Cash Flow Information:
Interest paid	$	146,422		$	71,280
Income taxes paid	$	-		$	626,444

Non-cash investing and financial activities:
Property, plant and equipment transferred from construction in progress	$	-		$	2,139,192
Operating expense paid by related parties	$	86,051		$	-
Liabilities assumed in connection with purchase of property, plant and equipment	$	697,144		$	2,279,021

OnThe ~~November~~accompanying ~~24,~~notes ~~2009,~~are ~~BTHC VIII, Inc. (“BTHC”) entered into~~ an ~~Agreement~~ ~~and~~integrated ~~Plan~~part of ~~Merger (the “Merger Agreement”) with THT, a Nevada~~these ~~corporation~~ consolidated ~~and~~financial ~~wholly-owned~~statements subsidiary of BTHC. Pursuant to the Merger Agreement, BTHC agreed to merge with and into THT, with THT continuing as the surviving entity (the “Reincorporation Merger”). The Reincorporation Merger became effective on November 30, 2009 (the “Effective Time”).

As a result of the Reincorporation Merger, the legal domicile of the Surviving Corporation is now Nevada. The Merger Agreement and Reincorporation Merger were duly approved by the written consent of stockholders of BTHC owning at least a majority of the outstanding shares of BTHC's common stock, dated September 16, 2009. F-6

~~Pursuant to the terms of the Merger Agreement, (i) BTHC merged into~~ THT, ~~with THT being the surviving corporation, and BTHC thereby changed its name to THT~~ Heat Transfer Technology, Inc.; ~~(ii) from and after the Effective~~ ~~Time,~~ Notes ~~THT possesses all of the rights, privileges, powers, and franchises of~~to ~~BTHC,~~ Consolidated ~~and~~Financial ~~BTHC's~~Statements ~~debts and liabilities became the debts and liabilities of THT;~~ (~~iii)~~Stated ~~BTHC's~~in ~~existing~~US ~~Board of Directors and officers became the Board of Directors and officers of the Surviving Corporation; and (iv~~Dollars) ~~the Articles of Incorporation and Bylaws of THT now govern the Surviving Corporation.~~

The Reincorporation Merger did not result in any change in headquarters, business, jobs, management, location of any of offices or facilities, number of employees, assets, liabilities or net worth (other than as a result of the costs incident to the Reincorporation Merger, which are immaterial)1. ~~Management,~~Corporate ~~including~~information all directors and officers, remain the same in connection with the Reincorporation Merger. There were no substantive changes in the employment agreements for executive officers or in other direct or indirect interests of the current directors or executive officers as a result of the Reincorporation Merger.

AsTHT aHeat ~~result~~Transfer ~~of the Reincorporation Merger~~Technology, ~~each outstanding share of BTHC’s common stock, par value $0~~Inc.~~001~~ ~~per~~(the ~~share,~~“Company” ~~was~~or ~~automatically converted into one share of~~ “THT's” ~~common stock, par value $0.001 per share. Each~~or ~~outstanding~~ the ~~certificate~~“Surviving ~~representing~~Corporation”) ~~shares of BTHC's common stock~~ is ~~deemed, without~~the ~~any~~surviving ~~action~~corporation bypursuant ~~BTHC's stockholders,~~ to ~~represent~~ the ~~same number of~~ ~~shares~~ Reincorporation ofMerger ~~THT's~~as ~~common~~detailed ~~stock~~below.

~~Reorganization~~Reincorporation Merger

~~Before~~On ~~the~~November ~~Reincorporation~~24, ~~Merger~~2009, ~~and~~BTHC ~~on June 30~~VIII, ~~2009,~~Inc. (“BTHC ”) entered into aan Agreement ~~Share~~and ~~Exchange~~Plan ~~Agreement~~of Merger (the “~~Share~~Merger ~~Exchange~~ Agreement”) with ~~Megaway~~ ~~International Holdings Limited~~THT, a ~~British Virgin Islands corporation~~Nevada ~~(“Megaway”),~~ corporation and ~~its~~wholly-owned ~~sole~~subsidiary ~~shareholder,~~of ~~Wisetop International Holdings Limited, a British Virgin Islands corporation (“Wisetop”)~~BTHC. Pursuant to the ~~Share Exchange~~Merger Agreement, ~~Megaway~~BTHC ~~became~~agreed ato ~~wholly-owned~~merge ~~subsidiary~~with ~~of the Company~~ and ~~Wisetop was~~into ~~issued 14~~THT,~~800,000~~ ~~shares~~with ofTHT ~~the~~continuing ~~Company's~~as ~~common stock, which, after giving~~the ~~effect~~ surviving toentity (the ~~Cancellation~~“Reincorporation ~~Agreement disclosed below, constituted 92~~Merger”).5% ofThe ~~the~~Reincorporation Merger ~~Company’s~~ became ~~issued~~effective ~~and outstanding capital stock~~ on aNovember ~~fully-diluted basis as of and immediately after the consummation of the transactions contemplated by the Share Exchange Agreement~~30, in2009 ~~exchange for 100% of~~ (the ~~issued~~“Effective ~~and outstanding shares of Megaway~~Time”).

~~Megaway~~As ~~was~~a ~~dormant~~result ~~since~~of ~~its~~the ~~incorporation~~Reincorporation ~~until~~Merger, itthe ~~acquired 100%~~legal domicile of the ~~outstanding~~Surviving ~~capital~~Corporation ~~stock~~is ofnow ~~Star~~Nevada. ~~Wealth~~The ~~International~~Merger ~~Holdings~~Agreement and ~~Limited~~ Reincorporation ~~(“Star~~Merger ~~Wealth”),~~were aduly ~~Hong~~approved ~~Kong~~by ~~company,~~the onwritten ~~May~~consent 5,of ~~2009. Star Wealth was~~stockholders ~~also~~ of ~~dormant~~BTHC ~~since~~owning ~~its~~at ~~incorporation~~least ~~until~~a itmajority ~~acquired 100%~~ of the ~~equity interest~~outstanding shares of ~~Siping~~BTHC's ~~City JuyuanHanyang Plate Heat Exchanger Co., Ltd.~~common ~~(“SipingJuyuan”)~~ stock, adated ~~PRC~~September ~~corporation~~16, ~~on May 10,~~ 2009.

OnPursuant ~~May~~to ~~10,~~the ~~2009,~~terms ~~Star~~of ~~Wealth~~the ~~entered~~Merger ~~into~~Agreement, an(i) ~~equity~~BTHC ~~transfer~~merged ~~agreement~~ into THT, with ~~all~~THT ofbeing the ~~shareholders~~surviving ofcorporation, ~~SipingJuyuan~~and toBTHC ~~acquire~~thereby ~~their~~changed ~~entire~~its ~~interests~~ name into ~~SipingJuyuan~~THT atHeat aTransfer ~~total~~Technology, ~~cash~~Inc.; ~~consideration~~(ii) from and after the Effective Time, THT possesses all of ~~RMB60~~the rights,~~000~~ privileges,~~000 ($8~~ powers,~~795,075).~~ ~~The~~and ~~equity~~franchises ~~transfer~~of BTHC, ~~agreement~~and ~~was~~BTHC's ~~approved~~debts byand liabilities became the ~~local~~debts ~~government~~and liabilities of THT; (iii) BTHC's existing Board of Directors and officers became the ~~People’s~~Board ~~Republic~~of Directors and officers of ~~China~~the Surviving Corporation; and (iv) the ~~“PRC”)~~Articles onof Incorporation ~~May~~and ~~31,~~Bylaws ~~2009~~of THT now govern the Surviving Corporation.

~~SipingJuyuan~~The ~~has~~Reincorporation aMerger ~~75%~~did ~~directly~~not ~~owned~~result ~~subsidiary~~in any change in headquarters, ~~Beijing~~business, jobs, management, location of any of offices or ~~JuyuanHanyang~~ facilities, ~~Heat~~number ~~Exchange~~of ~~Equipment~~employees, ~~Co.~~assets, ~~Ltd~~liabilities or net worth (~~“Beijing~~other ~~Juyuan”)~~than ~~prior~~as a result of the costs incident to ~~May~~the 9Reincorporation Merger, which are ~~2013~~ immaterial). Management, including all directors and officers, remain the same in connection with the Reincorporation Merger. There were no substantive changes in the employment agreements for executive officers or in other direct or indirect interests of the current directors or executive officers as a result of the Reincorporation Merger.

~~F-6~~As a result of the Reincorporation Merger, each outstanding share of BTHC’s common stock, par value $0.001 per share, was automatically converted into one share of THT's common stock, par value $0.001 per share. Each outstanding certificate representing shares of BTHC's common stock is deemed, without any action by BTHC's stockholders, to represent the same number of shares of THT's common stock.

AsReorganization a condition precedent to the consummation of the Share Exchange Agreement, on June 30, 2009, the Company entered into a cancellation agreement, or the Cancellation Agreement, with Mr. Gerald Pascale, who was the major stockholder of the Company immediately before the Share Exchange Agreement and served as the Company’s sole director and officer from February 12, 2009 until June 30, 2009 when he was replaced by Guohong Zhao (“Mr. Zhao”), a founder of SipingJuyuan, whereby Mr. Pascale agreed to the cancellation of 4,805,387 shares of the Company’s common stock owned by him.

~~Mr.~~Before ~~Zhao~~the ~~was~~Reincorporation ~~appointed~~Merger asand on June 30, 2009, BTHC entered into a Share Exchange Agreement (the ~~Company‘s~~“Share ~~director~~Exchange Agreement”) with Megaway International Holdings Limited, a British Virgin Islands corporation (“Megaway”), and ~~chief~~its sole shareholder, Wisetop International Holdings Limited, a ~~executive~~ British ~~officer~~Virgin ~~effective~~Islands ~~upon~~corporation (“Wisetop”). Pursuant to the ~~closing~~Share Exchange Agreement, Megaway became a wholly-owned subsidiary of the ~~above~~Company ~~reverse~~and ~~acquisition.~~Wisetop In was ~~addition~~issued 14,800,000 shares of the Company‘'s ~~executive~~common ~~officers~~stock, ~~were~~which, ~~replaced~~after bygiving effect to the ~~executive~~Cancellation Agreement disclosed below, constituted 92.5% of the ~~officers~~ Company’s issued and outstanding capital stock on a fully-diluted basis as of and ~~SipingJuyuan~~immediately ~~upon~~after the ~~closing~~consummation of the ~~reverse~~transactions ~~acquisition~~contemplated by the Share Exchange Agreement, in exchange for 100% of the issued and outstanding shares of Megaway.

OnMegaway ~~June~~was ~~30,~~dormant ~~2009,~~since ~~Mr.~~its ~~Zhao~~incorporation ~~entered~~until ~~into~~it ~~an option agreement~~acquired ~~with~~ 100% ~~Ms.~~of ~~Jinghua Zhao,~~ the ~~sole~~outstanding ~~shareholder~~capital stock of ~~Wisetop,~~Star ~~pursuant~~Wealth toInternational ~~which Mr.~~Holdings ~~Zhao~~ Limited ~~was~~(“Star ~~granted an option~~Wealth”), ~~exercisable~~a ~~after~~Hong ~~180~~Kong ~~days~~company, toon ~~acquire~~May ~~all~~5, ~~of the equity interests of Wisetop owned by Ms~~2009. ~~Jinghua~~Star ~~Zhao~~Wealth ~~at an exercise price of~~was ~~$3,246,160.~~ also ~~This~~dormant ~~option~~since ~~expired~~its onincorporation ~~June~~until ~~30,~~it ~~2011.~~acquired On100% ~~May~~of ~~16,~~the ~~2011, an amendment~~equity ~~was~~ interest ~~signed~~of bySiping ~~both~~City ~~parties~~JuyuanHanyang ~~extending~~Plate ~~the~~Heat ~~exercise~~Exchanger ~~period until June 30~~Co., ~~2012~~Ltd. ~~The~~ (“SipingJuyuan”), ~~options~~a ~~were~~PRC ~~fully~~corporation, ~~exercised~~ on ~~November~~May 1110, ~~2011~~2009.

~~Also~~On onMay ~~June 30~~10, 2009, ~~Wisetop~~Star Wealth entered into ~~separate~~an ~~option~~equity transfer ~~agreements~~ agreement with ~~the~~all ~~other~~of ~~original~~the ~~stockholders~~shareholders of SipingJuyuan, ~~pursuant~~ to ~~which~~ ~~such~~acquire ~~stockholders~~their ~~were~~entire interests ~~granted~~in ~~options,~~SipingJuyuan ~~exercisable~~at ~~after~~a 90total ~~days,~~cash ~~to purchase~~consideration ~~an aggregate~~ of 10RMB 60,~~240~~000,~~786~~000 ($8,795,075). ~~shares~~The ofequity ~~the~~transfer ~~Company‘s~~agreement ~~common~~was ~~stock~~approved ~~owned~~ by ~~Wisetop~~the atlocal ~~total~~government of ~~exercise~~the ~~price~~People’s Republic of ~~$7,291,440.~~China ~~The~~(the ~~stockholders~~“PRC”) ~~exercised these options~~ on ~~December~~May 1731, ~~2010~~2009.

OnSipingJuyuan ~~November~~has ~~30,~~a ~~2010~~75% directly owned subsidiary, ~~Juyuan~~Beijing JuyuanHanyang Heat Exchange Equipment ~~(Tianjin)~~ Co., Ltd. (“~~Tianjin~~Beijing Juyuan”) ~~was~~prior ~~established in the PRC, of which SipingJuyuan and Mr. Zhao contributed $1,467,555 and $37,630, respectively,~~ to ~~its~~May ~~registered capital~~9, ~~representing 99.5% and 0.5% equity interest in Tianjin Juyuan,~~ ~~respectively~~ 2013. ~~On September 22, 2011, Tianjin Juyuan was formally dissolved with the approval of the Tianjin Industrial and Commercial Administrative Bureau Baodi Branch.~~

SipingJuyuan entered into a share transfer agreement dated May 10, 2012 to acquire the remaining 25% equity ownership interest in Beijing Juyuan from Hanyang International GmbH (“Hanyang”). The acquisition transaction was completed on May 9, 2013. F-7

2As a condition precedent to the consummation of the Share Exchange Agreement, on June 30, 2009, the Company entered into a cancellation agreement, or the Cancellation Agreement, with Mr. ~~Description~~Gerald Pascale, who was the major stockholder of ~~business~~the Company immediately before the Share Exchange Agreement and served as the Company’s sole director and officer from February 12, 2009 until June 30, 2009 when he was replaced by Guohong Zhao (“Mr. Zhao”), a founder of SipingJuyuan, whereby Mr. Pascale agreed to the cancellation of 4,805,387 shares of the Company’s common stock owned by him.

~~The~~Mr. ~~Company~~Zhao iswas aappointed ~~holding~~as ~~company~~the ~~whose~~Company‘s ~~primary~~director ~~business~~and ~~are~~chief ~~conducted~~ executive ~~through~~officer ~~its~~effective ~~subsidiaries,~~upon ~~namely~~the ~~SipingJuyuan~~closing ~~which~~of isthe ~~located~~above inreverse ~~the~~acquisition. ~~Jilin~~ In ~~Province~~addition, ~~and~~the ~~Beijing~~Company‘s ~~Juyuan~~executive ~~which~~officers iswere ~~located~~replaced inby ~~Beijing City of~~ the ~~PRC.~~executive ~~The~~ officers ~~Company~~of isSipingJuyuan ~~engaged~~upon in the ~~manufacturing~~closing ~~and trading~~ of ~~plate~~the ~~heat~~reverse ~~exchangers and various related products~~acquisition.

~~SipingJuyuan~~On ~~was~~June ~~established~~30, in2009, ~~the~~Mr. ~~PRC~~Zhao onentered ~~May~~into ~~31,~~an ~~2006~~option agreement ~~following~~ with ~~the~~Ms. ~~division~~Jinghua ofZhao, ~~Siping~~the ~~City~~sole ~~Juyuan~~shareholder ~~Heat~~of ~~Exchange~~Wisetop, ~~Equipment~~pursuant ~~Co.,~~to ~~Ltd~~which Mr. ~~(“Old~~ Zhao ~~Juyuan~~was ~~Company”)~~granted ~~into~~an ~~three companies~~option, ~~namely~~exercisable ~~SipingJuyuan~~after 180 days, ~~Siping~~to ~~City~~acquire all of the ~~Juyuan~~ equity ~~Heat~~interests ~~Exchange~~of ~~Equipment~~Wisetop Coowned by Ms. Jinghua Zhao at an exercise price of $3,246,160. ~~Ltd~~This option expired on June 30, 2011. ~~(“New~~On ~~Juyuan~~May ~~Company”)~~16, ~~and~~2011, ~~Siping~~an ~~City~~amendment ~~JuyuanHanyang~~ was ~~Pressure~~signed ~~Vessels~~by ~~Co.~~both parties extending the exercise period until June 30, ~~Ltd~~2012. The ~~(“JuyuanHanyang~~options ~~Pressure~~were ~~Vessels”)~~fully exercised on November 11, 2011.

~~Beijing~~Also ~~Juyuan~~on isJune ~~solely~~30, ~~engaged~~2009, inWisetop entered into separate option agreements with the ~~sales~~other original stockholders of SipingJuyuan’, pursuant to which such stockholders were granted options, exercisable after 90 days, to purchase an aggregate of 10,240,786 shares of the Company‘s common stock owned ~~products~~ by Wisetop at total exercise price of $7,291,440. ~~and~~The ~~carries~~stockholders noexercised these ~~production~~options ~~activities~~on December 17, 2010.

3On November 30, 2010, Juyuan Heat Equipment (Tianjin) Co., ~~Summary~~Ltd. (“Tianjin Juyuan”) was established in the PRC, of ~~significant~~which ~~accounting~~SipingJuyuan ~~policies~~and Mr. Zhao contributed $1,467,555 and $37,630, respectively, to its registered capital, representing 99.5% and 0.5% equity interest in Tianjin Juyuan, respectively. On September 22, 2011, Tianjin Juyuan was formally dissolved with the approval of the Tianjin Industrial and Commercial Administrative Bureau Baodi Branch.

~~Basis~~SipingJuyuan ofentered ~~presentation~~into ~~and~~a ~~consolidation~~share transfer agreement dated May 10, 2012 to acquire the remaining 25% equity ownership interest in Beijing Juyuan from Hanyang International GmbH (“Hanyang”). The acquisition transaction was completed on May 9, 2013.

~~The~~2. ~~consolidated~~Description ~~financial statements have been prepared in accordance with accounting principles generally accepted in the United States~~ of ~~America~~ ~~(“US~~business ~~GAAP”).~~

The ~~consolidated~~Company ~~financial~~is ~~statements~~a ~~include~~holding ~~the~~company ~~financial~~whose primary business are ~~statements~~ conducted ofthrough its subsidiaries, namely SipingJuyuan which is located in the Jilin ~~Company~~Province and ~~its~~Beijing ~~subsidiaries.~~Juyuan ~~All~~which ~~significant~~is ~~inter-company~~located in Beijing City of the PRC. ~~balances~~ The Company is engaged in the manufacturing and ~~transactions~~trading ~~have~~of ~~been~~plate ~~eliminated~~heat onexchangers and ~~consolidation~~various related products.

~~Use~~SipingJuyuan was established in the PRC on May 31, 2006 following the division of ~~estimates~~Siping City Juyuan Heat Exchange Equipment Co., Ltd. (“Old Juyuan Company”) into three companies, namely SipingJuyuan, Siping City Juyuan Heat Exchange Equipment Co., Ltd. (“New Juyuan Company”) and Siping City JuyuanHanyang Pressure Vessels Co., Ltd (“JuyuanHanyang Pressure Vessels”).

InBeijing ~~preparing~~Juyuan ~~financial~~is ~~statements~~solely engaged in ~~conformity with US GAAP, management makes estimates and assumptions that affect~~ the ~~reported~~sales ~~amounts~~ of ~~assets~~ ~~and liabilities and disclosures of contingent assets and liabilities at~~SipingJuyuan’s ~~the dates of the financial statements~~ products, ~~as well as the reported amounts of revenues~~ and ~~expenses~~carries ~~during~~no ~~the~~production ~~reporting periods~~activities. These accounts and estimates include, but are not limited to, the valuation of trade receivables, other receivables, prepayments and deposit, inventories, deferred income taxes and the estimation on useful lives and residual values of property, plant and equipment and land use right. Actual results could differ from those estimates.

~~F-7~~3. Summary of significant accounting policies

~~Concentration~~Basis of ~~credit~~presentation ~~risk~~and consolidation

~~Financial~~The ~~instruments~~consolidated ~~that~~financial ~~potentially~~statements ~~subject~~have ~~the~~been ~~Company~~prepared toin ~~significant~~ accordance ~~concentration~~with ofaccounting ~~credit~~principles ~~risk~~generally ~~consist~~accepted principally of cash and cash equivalents, bills receivable, restricted cash, and trade and other receivables. As of December 31, 2015 and 2014, substantially all of the Company’s cash and cash equivalents and restricted cash were held by major financial institutions located in the ~~PRC,~~United ~~which~~States ~~management believes are~~ of ~~high credit quality. With~~ ~~respect~~ America to(“US ~~trade receivables, the Company extends credit based on an evaluation of the customer’s financial condition~~GAAP”). ~~The Company generally does not require collateral for trade receivables and maintains an allowance for doubtful accounts of trade and other receivables.~~

~~During~~The ~~the~~consolidated ~~years~~financial ~~ended~~statements ~~December~~include ~~31,~~the ~~2015~~financial statements ~~and~~of ~~2014,~~ the Company ~~did~~ ~~not~~and ~~have~~its ~~any~~subsidiaries. ~~customers~~All ~~that~~significant ~~contributed~~inter-company balances ~~10%~~and ortransactions ~~more~~have tobeen ~~the~~eliminated ~~Company’s~~on ~~sales revenue~~consolidation.

AsCertain ofamounts ~~December~~from ~~31,~~prior ~~2015~~year ~~and~~have ~~2014,~~been ~~the~~reclassified ~~Company did not have any~~to ~~balance~~ conform ofto ~~gross~~the ~~trade~~current ~~receivable~~year ~~due~~presentation. ~~from~~This ~~individual~~reclassification ~~customer~~has ~~that represented~~resulted ~~10%~~ in orno ~~more~~changes ofto the Company’s ~~gross~~retained ~~trade~~earnings ~~receivables~~or net income presented.

~~Cash~~Use ~~and~~of ~~cash~~estimates ~~equivalents~~

~~Cash~~In preparing financial statements in conformity with US GAAP, management makes estimates and ~~cash~~assumptions ~~equivalents~~that ~~consist~~affect the reported amounts of assets ~~cash~~and onliabilities ~~hand~~and disclosures of contingent assets and ~~highly~~liabilities at ~~liquid,~~ the ~~short-term~~dates ~~investments~~of ~~that~~the ~~are~~financial ~~readily~~statements, ~~convertible~~as towell ~~known~~as ~~amount~~the reported amounts of ~~cash~~ revenues and ~~have~~expenses ~~original~~during ~~maturities~~the ofreporting ~~three~~periods. ~~months~~These oraccounts ~~less~~and ~~when~~estimates include, ~~purchased.~~but ~~The cash~~are ~~equivalent~~not limited to, the valuation of $3trade receivables,~~889~~ other receivables,~~674~~ prepayments and $9deposit,~~240~~ inventories,~~390~~ ~~were~~deferred ~~included~~income intaxes and the estimation ~~balance~~on ~~of cash~~useful lives and ~~cash~~residual ~~equivalents~~values as of ~~December 31~~property, ~~2015~~plant and ~~2014,~~equipment and ~~respectively~~land use right. Actual results could differ from those estimates.

~~Restricted cash~~ F-8

~~Restricted~~Concentration ~~cash~~of iscredit ~~recorded~~risk as an asset when the Company deposits cash in bank to pledge the performance bonds issued by the banks when requested by the Company’s customers under their sales contracts, separately from cash and cash equivalents.

~~Receivables~~Financial 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 ~~debts~~of trade and other receivables.

~~Receivables~~During ~~are stated at cost, net of an allowance for doubtful debts. The Company establishes an allowance for doubtful debts based on management’s assessment of~~ the ~~collectability~~years ofended ~~trade~~December ~~receivables~~31, ~~and~~2016 ~~other receivables. A considerable amount of judgment is required in assessing the amount of the allowance~~ and ~~the~~2015, ~~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~~ did onnot ~~ongoing~~have ~~credit~~any ~~evaluations,~~customers ~~and monitors current economic trends~~ that ~~might~~ ~~impact~~contributed ~~the~~10% ~~level~~or ofmore ~~credit~~to ~~losses in~~ the ~~future.~~Company’s ~~If the financial~~sales ~~condition of the debtors were to deteriorate, resulting in their inability to make payments, a larger allowance may be required~~ revenue.

~~Bad~~As ~~debts~~of ~~are~~December ~~written~~31, ~~off~~2016 ~~when~~and ~~identified.~~2015, ~~The~~the Company ~~extends unsecured~~did ~~credit~~not tohave ~~customers~~any balance ~~ranging~~of ~~from~~gross ~~three~~trade toreceivable ~~six~~due ~~months~~from inindividual ~~the~~customer ~~normal~~that represented ~~course~~ 10% ofor ~~business.~~more ~~The~~of the Company’s ~~does~~gross ~~not accrue interest on~~ trade receivables.

~~Historically,~~Cash ~~losses from uncollectible accounts have not significantly deviated from the general allowance estimated by the management~~ and nocash ~~significant~~equivalents additional bad debts have been written off directly to the profit and loss. This general provisioning policy has not changed in the past since establishment and the management considers that the aforementioned general provisioning policy is adequate and not too excessive and does not expect to change this established policy in the near future.

~~Retention~~Cash ~~receivable~~and cash equivalents consist of cash on hand and highly liquid, short-term investments that are readily convertible to known amount of cash and have original maturities of three months or less when purchased. The cash equivalent of $474,422 and $3,889,674 were included in the balance of cash and cash equivalents as of December 31, 2016 and 2015, respectively.

~~Retention~~Restricted ~~receivable~~cash 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 $10,533,304 and $11,462,128 were included in the balance of trade receivables as of December 31, 2015 and 2014, respectively. Retention receivables which were expected to be collected after one year were presented separately as a non-current asset.

~~Inventories~~Restricted cash is recorded as an asset when the Company deposits cash in bank to pledge the performance bonds issued by the banks when requested by the Company’s customers under their sales contracts, separately from cash and cash equivalents.

~~Inventories~~Receivables ~~are stated at the lower of cost or market value. Cost is determined on a weighted average basis~~ and ~~includes~~allowance ~~all~~for ~~expenditures incurred~~doubtful indebts 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.

~~F-8~~Receivables are stated at cost, net of 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.

~~Property,~~Bad ~~plant~~debts ~~and~~are ~~equipment~~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.

~~Property~~Historically, ~~plant~~losses from uncollectible accounts have not significantly deviated from the general allowance estimated by the management and ~~equipment~~no ~~are~~significant ~~stated~~additional atbad ~~cost~~debts ~~less~~have been written off directly to the ~~accumulated~~ profit ~~depreciation~~and loss. ~~Cost~~This ~~represents~~general ~~the~~provisioning ~~purchase~~policy ~~price~~has ofnot changed in the ~~asset~~past since establishment and the management considers that the aforementioned general ~~other~~ provisioning ~~costs~~policy ~~incurred~~is adequate and not too excessive and does not expect to change ~~bring~~this ~~the~~established ~~asset~~policy ~~into~~in ~~its~~the ~~existing~~near ~~use~~future.

~~Depreciation~~Retention isreceivable provided on the straight-line basis (after taking into account the respective estimated residual values) over the estimated useful lives of property, plant and equipment. The principal useful lives and residual value are as follows:

	Estimated useful	Residual value
	lives
Buildings	20 years	5%
Plant and machinery	6 years	5%
Office equipment	2 - 5 years	Nil - 5%
Motor vehicles	3 - 5 years	5%

Retention 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.

~~Maintenance~~Inventories or repairs are charged to expense as incurred. Upon sale or disposition, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount less proceeds from disposal is charged or credited to income.

~~Construction~~Inventories inare ~~progress~~stated ~~mainly~~at ~~represents~~the ~~expenditures~~lower inof cost or market value. ~~respect~~ Cost ofis ~~the~~determined ~~Company’s~~on ~~corporate~~a ~~campus~~weighted average basis and ~~factories,~~includes ~~including~~all ~~offices,~~expenditures ~~factories~~ incurred in bringing the goods to the point of sale and ~~research~~putting ~~center,~~them ~~under~~in ~~construction~~a saleable condition. ~~All~~In ~~direct~~assessing ~~costs~~the ~~relating~~ultimate to realization of inventories, the management ~~acquisition~~makes judgments as to future demand requirements compared to current or ~~construction~~committed ofinventory ~~the~~levels. The Company’s ~~corporate~~reserve ~~campus~~requirements ~~and~~generally increase ~~factories~~with its projected demand requirements; decrease due to market ~~are~~ conditions ~~capitalized~~and asproduct ~~construction~~life incycle ~~progress~~changes. NoThe ~~depreciation~~Company isestimates ~~provided~~the indemand ~~respect~~ requirements ofbased ~~construction~~on market conditions, forecasts prepared by its customers, sales contracts and orders in ~~progress~~hand.

~~Land use rights~~ F-9

~~Land~~Property, ~~use~~plant ~~right represents the exclusive right to occupy~~ and ~~use a~~equipment piece of land in the PRC for a specific contract term. Land use rights are stated at cost less accumulated amortization. Amortization is provided using the straight-line method over the terms of the lease of 50 years obtained from the relevant PRC land authority.

~~Impairment~~Property, plant and equipment are stated at cost less accumulated depreciation. Cost represents the purchase price of ~~long-lived~~the ~~assets~~asset and other costs incurred to bring the asset into its existing use.

~~Long-lived~~Depreciation ~~assets~~is ~~are~~provided ~~tested~~on ~~for~~the ~~impairment in accordance with ASC 360~~straight-~~10-45~~line ~~“Impairment~~basis ~~or Disposal of Long-Lived Assets”. The Company~~(after ~~periodically~~ taking ~~evaluates~~into ~~potential~~account ~~impairment whenever events or changes in circumstances indicate that~~ the ~~carrying~~respective ~~amount~~estimated ofresidual ~~the~~values) ~~assets~~over ~~may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment,~~ the ~~Company first compares undiscounted cash~~estimated ~~flows~~ useful ~~expected~~lives ~~to be generated by that asset or asset group to its carrying value. If the carrying value~~ of ~~the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis~~property, anplant ~~impairment~~and ~~is recognized to the extent that the carrying value exceeds its fair value~~equipment. ~~Fair~~The ~~value~~principal ~~is determined~~useful ~~through~~lives ~~various valuation techniques including discounted cash flow~~and ~~models,~~ residual ~~quoted~~value ~~market~~are ~~values and third-party independent appraisals,~~ as ~~considered~~ ~~necessary.~~follows: ~~No impairment of long-lived assets was recognized for the years ended December 31, 2015 and 2014.~~

Government grants

	Estimated useful lives	Residual value

Buildings	20 years	5%
Plant and machinery	6 years	5%
Office equipment	2 - 5 years	Nil - 5%
Motor vehicles	3 - 5 years	5%

~~Government~~Maintenance ~~grants~~or ~~include~~repairs ~~cash~~are ~~subsidies~~charged asto ~~well~~expense as ~~other~~incurred. Upon ~~subsidies~~ sale ~~received~~or ~~from~~disposition, the ~~PRC~~applicable ~~government~~amounts byof ~~the~~asset ~~subsidiaries~~cost ofand ~~the Company.~~accumulated ~~Such~~ depreciation ~~subsidies~~ are ~~generally~~removed ~~provided as incentives~~ from the ~~local~~accounts ~~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~~net ~~criteria~~amount ~~specified~~less inproceeds ~~the grant are met. Grants applicable to~~from ~~purchase~~ disposal ofis ~~property,~~charged ~~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~~Construction ~~recognition~~in progress mainly represents expenditures in respect of the Company’s plant and workshop under construction. All direct costs relating to the acquisition or construction of the Company’s plant and workshop are capitalized as construction in progress. No depreciation is provided in respect of construction in progress.

~~Revenue~~Land ~~from~~use ~~sales~~rights of the Company’s products is recognized when products are delivered and customer acceptance is made, the sales price is fixed or determinable, no other significant obligations of the Company exist and collection is reasonably assured.

~~There~~Land ~~were~~use noright ~~sales~~represents ~~returns~~the ~~and~~exclusive ~~allowances~~right ~~for~~to ~~the~~occupy ~~years~~and ~~ended~~use ~~December~~ a ~~31,~~piece ~~2015~~of ~~and~~land ~~2014.~~in ~~The~~the ~~Company~~PRC ~~does~~for ~~not~~a ~~provide~~specific ~~unconditional~~contract ~~right~~term. ~~of return,~~Land ~~pricing~~use ~~protection~~rights orare stated ~~any~~at ~~other~~cost ~~concessions~~less toaccumulated ~~its customers~~amortization. ~~Generally, the~~Amortization ~~Company~~is ~~provides~~provided ~~free~~using ~~after~~the straight-~~sale~~line ~~service~~method ~~for~~over athe ~~period~~terms ~~ranging~~of ~~from~~the ~~half~~lease ~~year to~~of 150 ~~year.~~years ~~After-sale~~obtained ~~expense~~from ~~was $51,050 and $46,877 for~~ the ~~years ended~~ ~~December~~ relevant ~~31,~~PRC ~~2015~~land ~~and 2014, respectively~~authority.

FImpairment of long-9lived assets

~~Cost~~Long-lived assets are tested for impairment in accordance with ASC 360-10-45 “Impairment or Disposal of ~~sales~~Long-Lived Assets”. The Company periodically evaluates potential impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairment of long-lived assets was recognized for the years ended December 31, 2016 and 2015.

~~Cost~~Government ofgrants sales 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.

~~Administrative~~Government ~~expenses~~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.

~~Administrative~~ ~~expenses~~Revenue ~~consist~~recognition primarily of bad debt expenses, rental expenses, office expenses, entertainment, traveling expenses, staff welfare, consumables, labor protection and salaries and wages which are incurred at the administrative level.

~~Rental~~Revenue ~~expenses~~from ~~under~~sales ~~operating~~of ~~leases~~the ~~were~~Company’s ~~$10,054~~products is recognized when products are delivered and ~~$17~~customer acceptance is made,~~291 for~~ the sales ~~years~~price ~~ended~~is ~~December~~fixed 31or determinable, ~~2015~~no other significant obligations of the Company exist and ~~2014,~~collection ~~respectively~~is reasonably assured.

~~Selling~~The ~~expenses~~Company 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.

~~Selling expenses consist primarily of advertising, salaries and transportation costs incurred during the selling activities.~~ F-10

~~Advertising~~Cost ~~and~~of ~~transportation~~sales ~~expenses are charged to expense as incurred.~~

~~Advertising~~Cost ~~costs~~of ~~amounting~~sales toconsists ~~$nil~~primarily ~~and~~of $1materials costs,~~220~~ ~~for~~freight charges, ~~the~~purchasing ~~years ended~~and ~~December~~receiving 31costs, ~~2015~~inspection ~~and~~costs, ~~2014~~employee compensation, ~~respectively~~depreciation and related costs, which are ~~included~~directly inattributable ~~selling~~to ~~expenses~~ production. Write-down of inventories to lower of cost or market is also recorded in cost of sales, if any.

~~Transportation~~Administrative expenses ~~amounting to $924,953 and $1,334,990 for the years ended December 31, 2015 and 2014, respectively, are included in selling expenses.~~

~~Research~~Administrative ~~and~~expenses ~~development~~consist primarily of bad debt expenses, rental expenses, office expenses, entertainment, traveling expenses, staff welfare, consumables, labor protection and salaries and wages which are incurred at the administrative level.

~~Research~~Rental ~~and~~expenses ~~development~~under ~~costs~~operating ~~are~~leases ~~charged~~were to$8,545 ~~expense as incurred. Research~~ and ~~development costs~~ $10,054 for the ~~year~~years ended December 31, ~~2015 and~~2016 ~~2014 were $2,054,740~~ and $22015,~~852,228,~~ respectively.

~~Income~~ ~~taxes~~Selling expenses

~~The~~Selling ~~Company~~expenses ~~uses~~consist ~~the~~primarily ~~asset and liability method~~ of ~~accounting for income taxes pursuant to ASC 740 “Income Taxes”. Under the asset and liability method of ASC 740~~advertising, ~~deferred~~salaries ~~tax assets~~ and ~~liabilities are recognized~~ ~~for~~ transportation ~~the~~costs ~~future~~incurred ~~tax~~during ~~consequences attributable to temporary differences between~~ the ~~financial~~selling ~~statements carrying amounts of existing assets and liabilities and loss carryforwards and their respective tax bases~~activities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or 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.

~~Comprehensive~~Advertising ~~income~~and transportation expenses are charged to expense as incurred.

~~ASC~~Advertising ~~220~~costs ~~“Comprehensive~~amounting ~~Income”~~to ~~established standards for reporting and display of comprehensive income~~$2,362 ~~its components~~ and ~~accumulated balances.~~$nil ~~Components~~for ofthe ~~comprehensive income include net income and foreign~~years ~~currency~~ ended ~~translation adjustments. As of~~ December 31, ~~2015~~2016 and ~~2014~~2015, ~~the~~respectively, ~~only component~~are ofincluded ~~accumulated~~in ~~other comprehensive income was foreign currency~~selling ~~translation adjustments~~ expenses.

~~Foreign~~Transportation ~~currency~~expenses ~~translation~~amounting to $1,715,015 and $924,953 for the years ended December 31, 2016 and 2015, respectively, are included in selling expenses.

~~The~~Research ~~functional currencies of the Company~~ and ~~its~~development ~~subsidiaries include~~expenses 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.

~~For~~Research ~~financial reporting purposes, the financial statements of the subsidiaries that are prepared using RMB have been translated into USD. Assets~~ and ~~liabilities~~development ~~are~~costs ~~translated at the exchange rates at the balance sheet date and revenue and expenses~~ are ~~translated~~charged at the average exchange rates and stockholders’ 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 ~~accumulated~~expense ~~other~~as ~~comprehensive income, a component of stockholders’ equity~~ incurred. ~~The~~Research ~~exchange rates in effect as of December 31, 2015~~ and ~~2014~~development ~~were~~costs ~~RMB1~~ for ~~$0.1541 and $0.1627, respectively. The average exchange rates for~~ the ~~years~~ year ended December 31, ~~2015~~ 2016 and ~~2014~~2015 were ~~RMB1 for~~ $~~0.1608~~1,967,158 and $~~0.1627~~2, 054,740, respectively. ~~There was no significant fluctuation in the exchange rates for conversion of RMB to USD after the balance sheet date.~~

~~F-10~~Income taxes

~~Fair~~The ~~value~~Company uses the asset and liability method of accounting for income taxes pursuant to ASC 740 “Income Taxes”. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial ~~instruments~~statements carrying 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 temporary differences are expected to be recovered or 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.

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

AsASC of220 ~~December~~“Comprehensive ~~31,~~Income” ~~2015~~established standards for reporting and ~~2014,~~display ~~the~~of ~~carrying~~comprehensive ~~amounts~~income, ofits ~~the~~components and accumulated ~~Company’s~~ balances. ~~financial~~Components ~~assets~~of ~~and~~comprehensive ~~liabilities~~income ~~(including~~include ~~the~~net ~~current~~income ~~maturity~~and offoreign ~~long-term~~ currency ~~loan)~~translation ~~approximated~~adjustments. ~~their~~As ~~fair~~of ~~values~~December ~~due~~31, to2016 ~~short~~and ~~maturities~~2015, or the only ~~applicable~~ component ~~interest~~of ~~rates~~accumulated ~~approximate~~other ~~the~~comprehensive ~~current~~income ~~market~~was ~~rates~~foreign currency translation adjustments.

~~Basic~~Foreign ~~and~~currency ~~diluted~~translation ~~earnings per share~~

The ~~Company~~functional ~~reports~~currencies ~~earnings~~of ~~per~~the ~~share~~Company inand ~~accordance~~its ~~with ASC~~subsidiaries ~~260~~ include United States dollars “~~Earnings~~USD” ~~Per~~and ~~Share~~Renminbi “RMB”. ~~Basic~~The ~~earnings~~Company ~~per~~and ~~share~~its subsidiaries ismaintain ~~computed~~their byfinancial ~~dividing~~statements ~~net~~in their respective functional ~~income~~ currency. ~~attributable~~Monetary toassets and liabilities denominated in currencies other than the ~~Company’s~~functional ~~common~~currency ~~stockholders~~are bytranslated into the ~~weighted~~functional ~~average number~~currency ofat ~~common~~rates ~~stock~~of exchange ~~outstanding~~prevailing ~~during~~at the ~~period.~~balance ~~Diluted~~sheet ~~earnings~~date. ~~per~~Transactions ~~share~~denominated in is currencies ~~computed~~other bythan ~~dividing~~the ~~net~~functional ~~income~~currency ~~attributable~~are totranslated into the ~~Company’s common~~functional ~~stockholders~~ currency byat the ~~sum~~exchange rates prevailing at the dates of the ~~weighted~~transactions. Exchange ~~average~~gains ~~number~~or oflosses ~~common~~arising ~~stock~~from foreign currency transactions are included ~~outstanding~~ in ~~and~~the ~~dilutive~~determination ~~potential~~of ~~common~~net ~~stock~~income ~~during~~or loss for the ~~period~~respective periods.

~~There~~For financial reporting purposes, the financial statements of the subsidiaries that are prepared using RMB have been translated into USD. Assets and liabilities are translated at the exchange rates at the balance sheet date and revenue and expenses are translated at the average exchange rates and stockholders’ 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 accumulated other comprehensive income, a component of stockholders’ equity. The exchange rates in effect as of December 31, 2016 and 2015 were noRMB1 ~~dilutive~~for ~~instruments~~$0.1440 and $0.1541, respectively. The average exchange rates for the years ended December 31, 2016 and 2015 ~~and~~were ~~2014~~RMB1 for $0.1505 ~~Accordingly~~and $0.1608, ~~the~~respectively. ~~basic~~There ~~and~~was ~~diluted~~no significant ~~earnings~~fluctuation ~~per~~in ~~share~~the ~~are~~exchange ~~the same~~rates for ~~both~~conversion ~~reporting~~of ~~periods~~RMB to USD after the balance sheet date.

~~Related parties transactions~~ F-11

AFair ~~related~~value ~~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~~instruments operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary course of business. Related parties may be individuals or corporate entities.

~~Recently~~ASC ~~issued~~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.

InAs ~~July~~of ~~2015~~December 31, ~~The~~2016 ~~FASB~~and ~~issued ASU~~ 2015~~-11~~, ~~“Simplifying~~ the ~~Measurement~~ ofcarrying ~~Inventory”.~~amounts ~~The amendments in ASU 2015-11 require an entity to measure in scope inventory at the lower~~ of ~~cost and net realizable value. Net realizable value is~~ the ~~estimated selling prices in the ordinary course of~~ ~~business,~~ Company’s ~~less~~financial ~~reasonably~~assets ~~predictable costs of completion, disposal,~~ and ~~transportation.~~ ~~Subsequent~~liabilities ~~measurement~~(including ~~is unchanged for inventory measured using LIFO or~~ the ~~retail~~current ~~inventory~~maturity ~~method. The amendments do not apply to inventory~~of ~~that is measured using last~~ long-~~in,~~term ~~first-out (LIFO~~loan) orapproximated ~~the~~their ~~retail~~fair ~~inventory~~values ~~method. The~~due ~~amendments apply~~ to ~~all~~short ~~other~~maturities ~~inventory, which includes inventory that is measured using first-in, first-out (FIFO)~~ or ~~average cost. For public business entities,~~ the ~~amendments are effective for fiscal years beginning after December~~ ~~15,~~ applicable ~~2016,~~interest ~~including~~rates ~~interim~~approximate ~~periods within those fiscal years. For all other entities,~~ the ~~amendments~~current ~~are~~market ~~effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017~~rates. The amendments should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of ASU 2015-11 is not expected to have a material impact on the Company’s consolidated financial statements.

In It ~~August~~is ~~2015~~not, ~~the FASB issued ASU 2015-14~~however, ~~“Revenue~~practical ~~from Contracts~~to ~~with~~determine ~~Customers (Topic 606): Deferral of~~ the ~~Effective~~fair ~~Date”.~~value ~~The amendments in ASU 2015-14 defer the effective date~~ of ~~ASU~~amounts ~~2014-09~~due ~~for~~from/to ~~all entities~~related byparties ~~one~~due ~~year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09~~ to ~~annual~~ ~~reporting~~their ~~periods~~related ~~beginning~~party ~~after December 15, 2017, including interim reporting periods within that reporting period~~nature. ~~Earlier application is permitted~~ only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

InBasic ~~September~~and ~~2015,~~diluted the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments”. The amendments in ASU 2015-16 require that an acquirer recognize adjustments to estimated amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period’s financial statements, the effect on earnings ofper ~~changes~~share in depreciation, amortization, or other income effects, if any, as a result of the change to the estimated amounts, calculated as if the accounting had been completed at the acquisition date. The amendments also require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the estimated amounts had been recognized as of the acquisition date. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The adoption of ASU 2015-16 is not expected to have a material impact on the Company’s consolidated financial statements.

~~F-11~~The Company 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 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.

InThere ~~November~~were ~~2015,~~no ~~the~~dilutive ~~FASB~~instruments ~~issued~~for ~~ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. The amendments in ASU 2015-17 eliminates~~ the ~~current~~years ~~requirement~~ended ~~for organizations to present~~December ~~deferred~~31, ~~tax~~2016 ~~liabilities~~ and ~~assets as current and noncurrent in a classified balance sheet~~2015. ~~Instead~~Accordingly, ~~organizations~~the ~~will~~basic ~~be required to classify all deferred tax assets~~ and ~~liabilities~~diluted asearnings ~~noncurrent.~~per ~~The~~share ~~amendments in this ASU~~ are the ~~effective~~same for ~~public~~both ~~business~~reporting ~~entities for financial statements issued for annual~~ periods ~~beginning after December 15, 2016, and interim periods within those annual periods~~. The amendments may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

InRelated ~~January~~parties ~~2016,~~transactions the FASB issued ASU 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. The amendments in ASU 2016-01, among other things, requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; Requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables); Eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The new guidance permits early adoption of the own credit provision. In addition, the new guidance permits early adoption of the provision that exempts private companies and not-for-profit organizations from having to disclose fair value information about financial instruments measured at amortized cost. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

InA ~~February~~related ~~2016,~~party ~~the~~is ~~FASB~~generally ~~issued~~defined ~~ASU~~as ~~2016-02, “Leases~~ (~~Topic 842~~i)”. ~~Among~~any ~~other~~person ~~things, in the amendments in ASU 2016-02, lessees will be~~that ~~required~~ holds to10% ~~recognize~~or ~~the~~more ~~following for all leases (with the exception~~ of ~~short-term~~ ~~leases) at~~ the ~~commencement date: A lease liability, which is a lessee‘~~Company’s ~~obligation~~securities ~~to make lease payments arising from a lease, measured on a discounted basis;~~ and Atheir ~~right-of-use~~immediate ~~asset~~families, ~~which is an asset that represents~~(ii) the ~~lessee~~Company’s ~~right to use~~management, or(iii) ~~control~~someone ~~the~~that ~~use~~directly ~~of,~~or aindirectly ~~specified asset for the lease term. Under the new guidance~~controls, ~~lessor accounting~~ is ~~largely unchanged.~~ ~~Certain~~ controlled ~~targeted~~by ~~improvements~~or ~~were~~is ~~made~~under tocommon ~~align,~~control ~~where necessary, lessor accounting~~ with the ~~lessee accounting model and Topic 606~~Company, ~~Revenue~~or ~~from Contracts~~(iv) ~~with~~anyone ~~Customers. The amendments in this ASU are effective for public~~who ~~business~~ can ~~entities~~significantly ~~for~~influence ~~fiscal~~the ~~years~~financial ~~beginning~~and ~~after~~operating ~~December~~decisions ~~15,~~of ~~2018, including~~the ~~interim periods within those fiscal years~~ Company. ~~Early~~A ~~application~~transaction is ~~permitted~~considered ~~for all~~to ~~public~~be ~~business~~a ~~entities~~related ~~and~~party ~~all~~transaction ~~nonpublic business entities upon issuance.~~when ~~Lessees~~ there ~~(for~~is ~~capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply~~ a ~~modified~~transfer ~~retrospective~~of ~~transition approach~~resources ~~for leases existing at,~~ or ~~entered~~obligations ~~into~~between ~~after,~~related ~~the beginning of the earliest comparative period presented in the financial statements~~parties. The ~~modified~~ ~~retrospective~~ Company ~~approach~~conducts ~~would~~business ~~not~~with ~~require~~its ~~any~~related ~~transition~~parties ~~accounting~~in ~~for leases that expired before~~ the ~~earliest~~ordinary ~~comparative~~course ~~period presented~~of business. ~~Lessees~~Related ~~and lessors~~parties may ~~not~~be ~~apply~~individuals aor ~~full~~corporate ~~retrospective transition approach~~entities. ~~The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.~~

InTransactions ~~March~~involving related ~~2016,~~parties ~~the~~cannot ~~FASB~~be ~~issued~~presumed ~~ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)”. The amendments in this ASU are intended~~ to ~~improve~~be ~~the~~carried ~~operability~~out ~~and understandability of the implementation guidance~~ on ~~principal~~an ~~versus~~arm's-length agent considerations by amending certain existing illustrative examples and adding additional illustrative examples to assist in the application of the guidance. The effective date and transition of these amendments is the same basis, as the ~~effective~~requisite ~~date~~conditions ~~and transition~~ of ~~ASU 2014-09~~competitive, ~~“Revenue~~ ~~from~~freemarket ~~Contracts~~dealings ~~with~~may ~~Customers~~not ~~(Topic 606)”~~exist. Representations ~~Public~~about ~~entities~~transactions ~~should apply~~with ~~the~~related ~~amendments~~parties, inif ~~ASU~~made, ~~2014-09~~shall ~~for~~not imply ~~annual~~that ~~reporting~~the ~~periods~~related ~~beginning~~party ~~after December~~transactions ~~15,~~were ~~2017,~~consummated ~~including~~on ~~interim~~terms ~~reporting~~equivalent to ~~periods~~those ~~therein.~~that ~~The~~prevail ~~Company is currently~~ in ~~the~~arm's-length ~~process~~transactions ofunless ~~evaluating~~such ~~the~~representations can ~~impact~~be ~~of the adoption on its consolidated financial statements~~substantiated.

~~F-12~~ Recently issued accounting pronouncements

4In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”. ~~Restricted~~The ~~cash~~amendments add further guidance on identifying performance obligations and also to improve the operability and understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

		As of December 31,
		2015		2014
Bank deposits held as collateral for performance bonds issued by the banks to customers	$	886,336	$	1,288,374
Less: current portion		517,073		550,206
Non-current portion	$	369,263	$	738,168

In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”. The amendments, among other things: (1) clarify the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The effective date of these amendments is at the same date that Topic 606 is effective. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

When the Company’s customers request to receive performance bonds issued by the banks in relation to the Company’s performance under the sales contracts, the Company has to place deposits with banks equal to 100% of the bonds amount at the time of issuance. F-12

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. These amendments provide cash flow statement classification guidance for: 1. Debt Prepayment or Debt Extinguishment Costs; 2. Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; 3. Contingent Consideration Payments Made after a Business Combination; 4. Proceeds from the Settlement of Insurance Claims; 5. ~~Trade~~Proceeds from ~~receivables~~the Settlement of Corporate-Owned Life Insurance Policies, ~~net~~including Bank-Owned Life Insurance Policies; 6. Distributions Received from Equity Method Investees; 7. Beneficial Interests in Securitization Transactions; and 8. Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early application is permitted, including adoption in an interim period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

		As of December 31,
		2015			2014
Trade receivables	$	45,747,802		$	51,395,843
Allowance for doubtful accounts		(7,689,089	)		(8,512,850	)
	$	38,058,713		$	42,882,993

In October 2016, the FASB issued ASU 2016-17, “Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control”. These amendments change the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity treats indirect interests in the entity held through related parties that are under common control with the reporting entity. If a reporting entity satisfies the first characteristic of a primary beneficiary (such that it is the single decision maker of a variable interest entity), the amendments require that reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a variable interest entity and, on a proportionate basis, its indirect variable interests in a variable interest entity held through related parties, including related parties that are under common control with the reporting entity. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity adopts the pending content that links to this paragraph in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

AnIn ~~analysis~~November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”. These amendments require that a statement of cash flows explain the ~~allowance~~change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents. The amendments in this ASU are effective for ~~doubtful~~public ~~accounts~~business entities for ~~the~~fiscal years ~~ended~~beginning after December 3115, ~~2015~~2017, and ~~2014~~interim periods within those fiscal years. Early adoption is aspermitted. ~~follows:~~The amendments should be applied using a retrospective transition method to each period presented. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

		Year ended December 31,
		2015			2014
Balance at beginning of year	$	8,512,850		$	7,106,345
Addition (recovery) of bad debt expense, net		(388,002	)		1,447,738
Translation adjustments		(435,759	)		(41,233	)
Balance at end of year	$	7,689,089		$	8,512,850

In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers”. The amendments in ASU 2016-20 affect narrow aspects of the guidance issued in ASU 2014-09 including Loan Guarantee Fees, Contract Costs, Provisions for Losses on Construction-Type and Production-Type Contracts, Disclosure of Remaining Performance Obligations, Disclosure of Prior Period Performance Obligations, Contract Modifications, Contract Asset vs. Receivable, Refund Liabilities, Advertising Costs, Fixed Odds Wagering Contracts in the Casino Industry, and Costs Capitalized for Advisors to Private Funds and Public Funds. The effective date of these amendments are at the same date that Topic 606 is effective. Topic 606 is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

~~6. Other receivables, prepayments and deposits~~ F-13

		As of December 31,
		2015			2014
Advances to employees	$	6,211,955		$	5,827,744
Deposits for public bid		967,887			442,696
Prepayments to suppliers		3,959,590			4,580,119
Other receivables		235,924			69,672
		11,375,356			10,920,231
Allowance for doubtful accounts		(1,286,770	)		(1,076,993	)
	$	10,088,586		$	9,843,238

4. Restricted cash

The advances to employees mainly represent advances for handling selling and logistic activities for the Company in the ordinary course of business.

		As of December 31,
		2016		2015

Bank deposits held as collateral for performance bonds issued by the banks to customers	$	1,488,950	$	886,336
Less: current portion		974,749		517,073

Non-current portion	$	514,201	$	369,263

AnWhen ~~analysis~~the ofCompany’s ~~the~~customers ~~allowance~~request ~~for~~to ~~doubtful~~receive ~~accounts~~performance bonds ~~related~~issued by the banks in relation to the Company’s performance under the ~~other~~ sales ~~receivables~~contracts, ~~prepayments~~the toCompany ~~suppliers~~has ~~and~~to place deposits ~~for~~with ~~the~~banks ~~years~~equal ~~ended~~to 100% of ~~December~~ the ~~31,~~bonds ~~2015~~amount ~~and~~at ~~2014~~the istime asof ~~follows:~~issuance.

		Year ended December 31,
		2015			2014
Balance at beginning of year	$	1,076,993		$	567,328
Addition of bad debt expense, net		278,704			512,951
Translation adjustments		(68,927	)		(3,286	)
Balance at end of year	$	1,286,770		$	1,076,993

5. Trade receivables, net

F-13

		As of December 31,
		2016			2015

Trade receivables	$	45,050,908		$	45,747,802
Allowance for doubtful accounts		(7,976,427	)		(7,689,089	)
	$	37,074,481		$	38,058,713

7.An ~~Inventories~~analysis of the allowance for doubtful accounts for the years ended December 31, 2016 and 2015 is as follows:

		As of December 31,
		Year ended December 31,
		2014			2014
		2016			2015
Raw materials	$	7,920,917		$	4,874,061
Balance at beginning of year	$	7,689,089		$	8,512,850
Work-in-progress		1,224,069			22,887,134
Addition (recovery) of bad debt expense, net		824,679			(388,002	)
Finished goods		10,703,842			185,212
Translation adjustments		(537,341	)		(435,759	)
		19,848,828			27,946,407
Balance at end of year	$	7,976,427		$	7,689,089
Allowance for obsolete inventories		(18,799	)		(19,852	)
	$	19,830,029		$	27,926,555

No6. ~~allowance~~Other ~~for obsolete inventories was provided during the years ended December 31~~receivables, ~~2015~~prepayments and ~~2014.~~deposits

8. Income tax

		As of December 31,
		2016			2015

Advances to employees	$	5,731,137		$	6,211,955
Deposits for public bid		461,565			967,887
Prepayments to suppliers		3,272,792			3,719,993
Other receivables		763,374			235,924

		10,228,868			11,135,759
Allowance for doubtful accounts		(1,323,900	)		(1,286,770	)

	$	8,904,968		$	9,848,989

~~United~~The ~~States~~advances to employees mainly represent advances for handling selling and logistic activities for the Company in the ordinary course of business.

~~The~~An ~~Company~~analysis isof ~~subject to~~ the ~~United~~allowance ~~States Federal and state income tax at a statutory rate of 34%. No provision~~ for ~~the~~doubtful ~~U.S.~~accounts ~~Federal~~related ~~income~~to ~~taxes~~ other ~~has~~receivables, ~~been~~prepayments and ~~made~~deposits for as the ~~Company~~years ~~had~~ended noDecember ~~taxable~~31, ~~income~~2016 inand ~~this~~2015 ~~jurisdiction for~~is ~~the~~as ~~reporting~~follows: ~~periods.~~

No provision for U.S. federal and state incomes taxes has been made in our consolidated financial statements for those non-U.S. subsidiaries whose earnings are considered to be reinvested. The amount of undistributed earnings considered to be “reinvested” which may be subject to tax upon distribution was approximately $29.5 million and $28.9 million at December 31, 2015 and 2014, respectively. A distribution of these non-U.S. earnings in the form of dividends, or otherwise, would subject the Company to both U.S. federal and state income taxes, as adjusted for non-U.S. tax credits, and withholding taxes payable to the various non-U.S. countries. Determination of the amount of any unrecognized deferred income tax liability on these undistributed earnings is not practicable.

		Year ended December 31,
		2016			2015

Balance at beginning of year	$	1,286,770		$	1,076,993
Addition of bad debt expense, net		126,558			278,704
Translation adjustments		(89,428	)		(68,927	)

Balance at end of year	$	1,323,900		$	1,286,770

~~BVI~~ F-14

~~Megaway was incorporated in the BVI and, under the current laws of the BVI, is not subject to income taxes~~7. Inventories

		As of December 31,
		2016			2015

Raw materials	$	7,626,337		$	7,920,917
Work-in-progress		2,831,115			1,224,069
Finished goods		10,647,422			10,703,842

		21,104,874			19,848,828
Allowance for obsolete inventories		(17,573	)		(18,799	)

	$	21,087,301		$	19,830,029

~~Star Wealth was incorporated in Hong Kong and is subject to Hong Kong profits tax at a tax rate of 16.5%.~~ No ~~provision~~allowance for ~~Hong~~obsolete ~~Kong profits~~inventories ~~tax~~was ~~has~~provided ~~been~~during ~~made~~the years asended ~~Star~~December ~~Wealth~~31, ~~had~~2016 noand ~~taxable income during the reporting periods~~2015.

~~PRC~~8. Income tax

~~SipingJuyuan~~United ~~and~~States Beijing Juyuan are subject to PRC enterprise income tax (“EIT”) at the statutory rate of 25%. As SipingJuyuan was qualified as a “High-tech Enterprise”, it was entitled to a preferential EIT rate of 15% during the reporting periods. Beijing Juyuan ceased to be a sino joint venture after SipingJuyuan acquired 25% equity interest in Beijing Juyuan from Hanyang, the minority foreign business partner, in May 2013. As a result, Beijing Juyuan was subject to EIT at the standard rate of 25% during the years ended December 31, 2015 and 2014.

~~F-14~~The Company is subject to the United States Federal and state income tax at a statutory rate of 34%. No provision for the U.S. Federal income taxes has been made as the Company had no taxable income in this jurisdiction for the reporting periods.

No provision for U.S. federal and state incomes taxes has been made in our consolidated financial statements for those non-U.S. subsidiaries whose earnings are considered to be reinvested. The ~~components~~amount of undistributed earnings considered to be “reinvested” which may be subject to tax upon distribution was approximately $32.4 million and $29.5 million at December 31, 2016 and 2015, respectively. A distribution of these non-U.S. earnings in the form ~~provision~~of ~~for~~dividends, or otherwise, would subject the Company to both U.S. federal and state income taxes, ~~are:~~as adjusted for non-U.S. tax credits, and withholding taxes payable to the various non-U.S. countries. Determination of the amount of any unrecognized deferred income tax liability on these undistributed earnings is not practicable.

		Year ended December 31,
		2015		2014
Current taxes	$	-	$	951,376
Deferred taxes		-		-
	$	-	$	951,376

BVI

~~Reconciliations~~Megaway ~~between~~was ~~the~~incorporated ~~statutory~~in ~~tax~~the ~~rate~~BVI and, under the current laws ~~Company’s~~ of ~~effective~~the ~~tax~~BVI, ~~rate~~is ~~are~~not assubject ~~follows:~~to income taxes.

	Year Ended December 31,
	2015	2014
U.S. statutory rate	34.00%	34.00%
Foreign income not recognized in the U.S.	-34.00%	-34.00%
PRC enterprise income tax rate	25.00%	25.00%
Effect of tax exemptions and relief granted to the subsidiary	0.00%	-15.73%
Effect of additional deduction on R&D expenses	-23.73%	-13.06%
Effect of expenses not deductible (income taxable) for tax purposes	-4.52%	26.24%
Effect of valuation allowance on deferred income tax assets	3.25%	8.45%
Effective tax rate	0.00%	30.90%

~~The~~Star ~~amount~~Wealth ofwas ~~benefit~~incorporated ~~from~~in ~~Preferential~~Hong ~~Tax~~Kong ~~Rate~~and ~~was~~is ~~$nil~~subject ~~and~~to ~~$484,521~~ Hong ~~for~~Kong ~~the~~profits ~~years~~tax ~~ended~~at ~~December~~a ~~31,~~tax ~~2015~~rate ~~and~~of ~~2014,~~16.5% ~~respectively,~~. ~~and~~No ~~the~~provision for Hong Kong ~~effect~~ profits ontax ~~earnings~~has ~~per~~been ~~share~~made ~~was~~as ~~$nil~~Star ~~and~~Wealth ~~$0.02,~~had ~~respectively~~no taxable income during the reporting periods.

~~ASC~~PRC 740 requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The management evaluated the Company’s tax positions and considered that no provision for uncertainty in income taxes was necessary as of December 31, 2015 and 2014.

~~Deferred~~SipingJuyuan and Beijing Juyuan are subject to PRC enterprise income tax ~~assets~~(“EIT”) at the statutory rate of 25%. As SipingJuyuan was qualified as a “High-tech Enterprise”, it was entitled to a preferential EIT rate of ~~December~~15% during 31the reporting periods. Beijing Juyuan ceased to be a sino joint venture after SipingJuyuan acquired 25% equity interest in Beijing Juyuan from Hanyang, the ~~2015~~minority ~~and~~foreign ~~2014~~business ~~are~~partner, in May 2013. As a result, Beijing Juyuan ~~composed~~ was subject to EIT at the standard rate of 25% during the ~~following:~~years ended December 31, 2016 and 2015.

		As of December 31,
		2015			2014
Short-term
Allowance for doubtful accounts	$	1,260,570		$	1,361,534
Allowance for obsolete inventories		2,820			2,978
Valuation allowance		(1,103,430	)		(1,195,580	)
		159,960			168,932
Long-term
Net operating loss carried forward		313,660			367,340
Valuation allowance		(313,660	)		(367,340	)
Total deferred tax assets	$	159,960		$	168,932

F-15

~~In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.~~ The ~~ultimate~~components ~~realization~~ of ~~deferred~~ ~~tax assets is dependent upon~~ the ~~generation~~provision offor ~~future taxable~~ income ~~during~~ ~~the~~taxes ~~periods in which those temporary differences become deductible or~~ are ~~utilized.~~:

F-15

		Year ended December 31,
		2016		2015

Current taxes	$	514,649	$	-
Deferred taxes		-		-

	$	514,649	$	-

9.Reconciliations ~~Property,~~between ~~plant~~the statutory tax rate and ~~equipment,~~the Company’s ~~net~~effective tax rate are as follows:

		As of December 31,
		Year Ended December 31,
		2015			2014
		2016			2015
Cost :
U.S. statutory rate		34.00%			34.00%
Buildings	$	8,063,661		$	6,351,835
Foreign income not recognized in the U.S.		(34.00)%			(34.00)%
Plant and machinery		7,119,539			5,743,654
PRC enterprise income tax rate		25.00%			25.00%
Office equipment		1,162,023			1,175,590
Effect of tax exemptions and relief granted to the subsidiary		(9.12)%			0.00%
Motor vehicles		572,237			492,233
Effect of additional deduction on R&D expenses		(9.62)%			(32.55)%
		16,917,460			13,763,312
Effect of expenses not deductible for tax purposes		7.24%			4.30%
Accumulated depreciation		(7,250,687	)		(6,990,277	)
Effect of Income tax difference under different tax jurisdictions		0.06%			2.80%
Construction in progress		-			2,117,911
Effect of valuation allowance on deferred income tax assets		0.12%			0.45%
Net	$	9,666,773		$	8,890,946
Effective tax rate		13.68%			0.00%

~~During~~ASC 740 requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The management evaluated the ~~reporting~~Company’s ~~periods,~~tax ~~depreciation~~positions isand ~~included~~considered that no provision for uncertainty in: income taxes was necessary as of December 31, 2016 and 2015.

		Year ended December 31,
		2015		2014
Cost of sales and overheads of inventories	$	587,628	$	477,610
Research and development expenses		111,407		144,685
General and administrative expenses		281,938		339,531
	$	980,973	$	961,826

Deferred tax assets as of December 31, 2016 and 2015 are composed of the following:

During the years ended December 31, 2015 and 2014, depreciation expense amounted to $980,973 and $961,826, respectively.

		As of December 31,
		2016			2015
Short-term
Allowance for doubtful accounts	$	1,322,955		$	1,260,570
Allowance for obsolete inventories		2,636			2,820
Valuation allowance		(1,176,066	)		(1,103,430	)
		149,525			159,960
Long-term
Net operating loss carried forward		297,785			313,660
Valuation allowance		(297,785	)		(313,660	)
Total deferred tax assets	$	149,525		$	159,960

AsIn assessing the realizability of ~~December~~deferred 31tax assets, management ~~2015~~considers ~~and~~whether ~~2014,~~it ~~property,~~is ~~plant~~more ~~and~~likely ~~equipment~~than not that some portion or all ~~with~~ of ~~net~~the ~~book~~deferred ~~values~~tax assets will not be realized. The ultimate realization of deferred ~~$5,642,506~~tax ~~and~~assets ~~$4,621,156,~~is ~~respectively,~~dependent ~~were~~upon ~~pledged~~the asgeneration of future taxable income ~~collateral~~ during ~~under~~the ~~certain~~periods ~~loan~~in ~~arrangements~~which ~~(see~~those ~~Note~~temporary ~~12)~~differences become deductible or are utilized.

~~10. Intangible assets~~ F-16

		As of December 31,
		2015			2014
Land use rights	$	6,107,870		$	6,450,432
Accumulated amortization		(525,180	)		(425,432	)
	$	5,582,690		$	6,025,000

9. Property, plant and equipment, net

The Company obtained the right from the relevant PRC land authority for a period of fifty years to use the land on which the Company’s office premises, production facilities and warehouse are situated. As of December 31, 2015 and 2014, certain land use rights were pledged as collateral under certain loan arrangements, respectively (see Note 12).

		As of December 31,
		2016			2015
Cost :
Buildings	$	7,537,596		$	8,063,661
Plant and machinery		6,072,381			7,119,539
Office equipment		1,118,292			1,162,023
Motor vehicles		527,288			572,237

		15,255,557			16,917,460
Accumulated depreciation		(7,043,693	)		(7,250,687	)
Construction in progress		225,768			-

Net	$	8,437,632		$	9,666,773

During the ~~years~~reporting ~~ended December 31~~periods, ~~2015~~depreciation ~~and 2014, amortization expense amounted to $127,718 and $129,209, respectively. The estimated amortization expense for each of the five succeeding years from 2015~~ is ~~approximately~~ ~~$128,000~~included ~~each~~in: ~~year.~~

11. Other payables and accrued expenses

		Year ended December 31,
		2016		2015

Cost of sales and overheads of inventories	$	597,743	$	587,628
Research and development expenses		302,903		111,407
General and administrative expenses		319,061		281,938

Total depreciation expense	$	1,219,707	$	980,973

		As of December 31,
		2015		2014
Receipt in advance from customers	$	9,532,334	$	15,464,184
Pension payable		553,543		584,589
Salaries payable		347,497		346,196
Deferred income		5,747,896		4,173,603
Other payables and accrued expenses		3,564,582		3,793,771
	$	19,745,852	$	24,362,343

As of December 31, 2016 and 2015, property, plant and equipment with net book values of $4,949,198 and $5,642,506, respectively, were pledged as collateral under certain loan arrangements (see Note 12).

~~F-16~~ 10. Intangible assets

Pension payable represents accrued staff medical, industry injury claims, labor and unemployment insurances, all of which are third party insurances and the insurance premiums are based on certain percentage of salaries. The obligations of the Company are limited to those premiums contributed by the Company.

		As of December 31,
		2016			2015

Land use rights	$	5,709,399		$	6,107,870
Accumulated amortization		(605,278	)		(525,180	)

	$	5,104,121		$	5,582,690

~~Deferred~~The ~~income~~Company ~~represents~~obtained ~~cash~~the ~~subsidies~~right ~~received~~ from ~~government~~ ~~grants, of which,~~ the ~~amount~~relevant ofPRC ~~$1,124,686~~land authority ~~and~~for ~~$1,187,764~~a asperiod of ~~December~~ ~~31,~~fifty ~~2015~~years ~~and~~to ~~2014,~~use ~~respectively,~~the island ~~related~~on towhich ~~several~~the ~~projects that~~Company’s ~~have~~ office ~~been~~premises, ~~completed~~production ~~but~~facilities ~~are~~and ~~still~~warehouse ~~subject~~are tosituated. ~~the~~As ~~government’s~~of December ~~inspection.~~31, ~~The Company~~2016 ~~did~~and ~~not~~2015, ~~recognize~~certain ~~any~~land ~~income~~use ~~for~~rights ~~those~~were ~~projects~~pledged as ~~whether the~~collateral ~~government~~ under ~~support~~certain isloan ~~repayable~~arrangements or(see ~~not~~Note ~~is subject to the inspection results~~12).

12During the years ended December 31, 2016 and 2015, amortization expense amounted to $119,537 and $127,718, respectively. ~~Short-term~~The ~~loans~~estimated amortization expense for each of the five succeeding years from 2016 is approximately $120,000 each year.

~~Short-term~~11. ~~loans~~Other ~~include~~payables ~~the~~and ~~following:~~accrued expenses

		As of December 31,
		2015		2014
		2016		2015
Loan from unrelated party	$	6,176,529	$	6,508,298
Receipt in advance from customers	$	12,658,303	$	9,532,334
Secured bank loans		-		6,182,883
Pension payable		517,431		553,543
	$	6,176,529	$	12,691,181
Salaries payable		334,237		347,497
Deferred income		5,193,164		5,747,896
Other payables and accrued expenses		1,822,743		3,550,939
	$	20,525,878	$	19,732,209

~~Short~~F-~~term loans from unrelated party~~ 17

InPension ~~April~~payable ~~2014,~~represents ~~the~~accrued ~~Company~~staff ~~obtained~~medical, aindustry injury ~~loan~~claims, ~~amounting~~labor ~~to $6~~and unemployment insurances,~~176,529,~~ ~~from~~all aof which are third party insurances ~~individual~~and the insurance premiums are based on certain percentage of salaries. The ~~loan~~obligations isof ~~unsecured,~~the ~~bearing~~Company ~~no interest~~are ~~rate~~limited ~~and~~to ~~due~~those onpremiums contributed ~~demand~~by the Company.

OnDeferred ~~March~~income ~~30,~~represents ~~2015,~~cash ~~the~~subsidies ~~Company~~received ~~obtained~~from government agrants, ~~loan~~of inwhich, the amount of ~~RMB~~ 23$1,~~094~~051,~~830~~313 ~~(approximately~~and $31,~~635~~124,~~000),~~686 ~~bearing~~as noof December ~~interest~~31, ~~rate~~2016 and ~~due~~2015, ~~on demand~~respectively, ~~from~~is arelated ~~third~~to ~~party~~several ~~individual.~~projects Onthat have ~~April~~been 2,completed ~~2015,~~but are still subject to the government’s inspection. The Company ~~repaid~~did not recognize any income for those projects as whether the ~~loan~~ government insupport ~~full~~is repayable or not is subject to the inspection results.

~~On September 2, 2015, the Company obtained a loan in the amount of RMB~~ 12~~,000,000 (approximately $1,930,000) from a third party individual~~. ~~The loan~~Short-term isloans ~~unsecured, bearing no interest rate and due on demand. In December 2015, the Company repaid the loan in the amount of RMB11,910,000 (approximately $1,916,000).~~

Short-term ~~bank~~ loans include the following:

The Company’s bank loans carry annual interest from 100% to 120% of the benchmark interest rate published by the People’s Bank of China (the “PBOC”).

		As of December 31,
		2016		2015

Loan from unrelated party	$	-	$	6,176,529
Secured bank loans		4,608,494		-
	$	4,608,494	$	6,176,529

~~The~~Short-term ~~secured bank~~ loans ~~were~~from ~~secured~~unrelated byparty ~~the following assets of the Company:~~

		As of December 31,
		2015		2014
Property, plant and equipment (Note 9)	$	5,642,506	$	4,621,156
Land use rights (Note 10)		5,582,690		986,145
	$	11,225,196	$	5,607,301

In April 2014, the Company obtained a loan, amounting to $6,176,529, from a third party individual. The loan is unsecured, bearing no interest rate and due on demand.

AsOn ofMarch ~~December 31~~30, 2015, the Company ~~has~~obtained ~~repaid~~a loan in the ~~secured~~amount of ~~short-term~~ RMB ~~bank~~23,094,830 ~~loan~~(approximately in$3,635,000), ~~full~~bearing no interest rate and due on demand, from a third party individual. ~~The~~On ~~related~~April ~~pledge~~2, ~~agreements~~2015, ~~continue~~the toCompany ~~remain~~repaid the ~~effective~~ loan ~~until~~in ~~September 2018~~full.

13On September 2, 2015, the Company obtained a loan in the amount of RMB 12,000,000 (approximately $1,930,000) from a third party individual. ~~Long-term~~The ~~loans~~loan is unsecured, bearing no interest rate and due on demand. In December 2015, the Company repaid the loan in the amount of RMB 11,910,000 (approximately $1,916,000).

~~Long-term~~During ~~loans~~the ~~include~~year ended December 31, 2016, the ~~following:~~Company borrowed additional funds from this third party individual in the amount of RMB 53,487,813 (approximately $8,052,000) and repaid RMB 93,577,813 (approximately $14,087,000). As of December 31, 2016, the balance of loan from unrelated party was $nil. The Company also advanced RMB 2,521,787 (approximately $380,000) to this individual during the year ended December 31, 2016. The advance bears no interest and is due on demand, which was included in other receivables, prepayments and deposits, net.

		As of December 31,
		2015		2014
Unsecured loan		539,233		569,476
Total	$	539,223	$	569,476

Short-term bank loans

In ~~December~~September ~~2013~~2015, the Company ~~obtained~~entered into a 3one-year loan ~~entrusted~~agreement ~~loan from~~with aAgricultural ~~non-financial~~Bank ~~institution~~of China, pursuant to which the Company obtained a loan in the amount of RMB 38,000,000 ($~~572~~6,~~794~~111,781), ~~bearing~~payable on September 10, 2016. The loan carries an interest ~~at 3~~rate of 5.060% per annum ~~granted~~and the byinterest ~~local~~is ~~government~~payable monthly. The ~~entrusted~~Company ~~unsecured~~repaid the loan ~~will~~in ~~be matured~~full onas of December 2431, ~~2016~~2015.

FOn May 31, 2016, the Company entered into a one-17year loan agreement with Agricultural Bank of China, pursuant to which the Company obtained a loan in the amount of RMB 32,000,000 (approximately $4,817,000), payable on May 30, 2017. The loan carries an interest rate of 4.785% per annum and the interest is payable monthly.

AsThe ofbank ~~December~~loans ~~31,~~are ~~2015,~~also ~~the~~secured ~~principal~~by ~~payments~~the ~~for~~following ~~long-term loans~~assets ~~for~~ of the ~~next five years are as follows~~Company:

2016	$	539,233
		As of December 31,
Thereafter		-
		2016		2015
Total long-term loans	$	539,233
Property, plant and equipment (Note 9)	$	4,949,198	$	5,642,506
Land use rights (Note 10)		5,104,121		5,582,690
	$	10,053,319	$	11,225,196

1413. ~~Statutory~~Long-term ~~reserve~~loans

The statutory reserve in the consolidated balance sheets comprises SipingJuyuan’s statutory reserve. In accordance with the relevant laws and regulations of the PRC, SipingJuyuan and Beijing Juyuan are required to set aside at least 10% of their respective afterLong-~~tax~~term ~~net~~loans ~~profits~~include ~~each year determined in accordance with PRC GAAP and if any, to fund~~ the ~~statutory~~following: reserve until the balance of the reserve reaches 50% of their respective registered capital. The statutory reserve is not distributable in the form of cash dividends and can be used to make up cumulative prior year losses. Beijing Juyuan did not make any appropriation to statutory reserve as it incurred losses for the years.

15. Other income

		As of December 31,
		2016		2015
Unsecured loan		-		539,233
Total	$	-	$	539,223

		Year ended December 31,
		2015		2014
Investment income	$	91,604	$	128,779
Government grants		683,771		464,363
Other income		-		167,883
	$	775,375	$	761,025

In December 2013, the Company obtained a 3-year entrusted loan from a non-financial institution in the amount of $572,794 bearing interest at 3% per annum granted by local government. The entrusted unsecured loan has been repaid in full on December 26, 2016.

~~16. Finance costs~~ F-18

		Year ended December 31,
		2015		2014
Interest expense	$	72,077	$	590,063
Bank charges and net exchange loss		12,254		151,048
	$	84,331	$	741,111

14. Statutory reserve

17The statutory reserve in the consolidated balance sheets comprises SipingJuyuan’s statutory reserve. ~~Defined~~In ~~contribution~~accordance ~~plan~~with the relevant laws and regulations of the PRC, SipingJuyuan and Beijing Juyuan are required to set aside at least 10% of their respective after-tax net profits each year determined in accordance with PRC GAAP and if any, to fund the statutory reserve until the balance of the reserve reaches 50% of their respective registered capital. The statutory reserve is not distributable in the form of cash dividends and can be used to make up cumulative prior year losses. Beijing Juyuan did not make any appropriation to statutory reserve as it incurred losses for the years.

~~Pursuant to the relevant PRC regulations, the Company is required to make contributions at a rate of 30~~15.6% toOther 31.2% of employees’ salaries and wages to a defined contribution retirement scheme organized by a state-sponsored social insurance plan in respect of the retirement benefits for the Company’s employees in the PRC. The only obligation of the Company with respect to the retirement scheme is to make the required contributions under the plan. No forfeited contribution is available to reduce the contribution payable in the future years. The defined contribution plan contributions were charged to the consolidated statements of income ~~and comprehensive income. The Company contributed $63,910 and $288,132 for the years ended December 31, 2015 and 2014, respectively.~~

18. Commitments and contingencies

		Year ended December 31,
		2016		2015

Investment income	$	79,509	$	91,604
Government grants		448,758		683,771
Other income		7,546		-

	$	535,813	$	775,375

~~As of December 31, 2015 and 2014, the Company had contingencies arising from the division of Old Juyuan Company into SipingJuyuan, New Juyuan Company and JuyuanHanyang Pressure Vessels~~16. ~~According~~Finance tocosts ~~the division agreement of Old Juyuan Company (“Division Agreement”), all parties to the Division Agreement undertook joint and several liabilities for the indebtedness of Old Juyuan Company.~~

In accordance with ASC 450 “Contingencies”, the Company records a liability in the consolidated financial statements for these contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded.

		Year ended December 31,
		2016		2015
Interest expense	$	146,422	$	72,077
Bank charges and net exchange loss		11,268		12,254

	$	157,690	$	84,331

~~The Company’s loss in respect of this undertaking is possible but not known or probable~~17. ~~Accordingly,~~Defined nocontribution ~~liability~~plan was recognized as of December 31, 2015 and 2014 respectively. The Company believes that a reasonable estimate of the possible loss range from $Nil to approximately $1,757,000 as of December 31, 2015 (2014: from $Nil to approximately $1,757,000).

FPursuant to the relevant PRC regulations, the Company is required to make contributions at a rate of 30.6% to 31.2% of employees’ salaries and wages to a defined contribution retirement scheme organized by a state-18sponsored social insurance plan in respect of the retirement benefits for the Company’s employees in the PRC. The only obligation of the Company with respect to the retirement scheme is to make the required contributions under the plan. No forfeited contribution is available to reduce the contribution payable in the future years. The defined contribution plan contributions were charged to the consolidated statements of income and comprehensive income. The Company contributed $265,444 and $63,910 for the years ended December 31, 2016 and 2015, respectively.

The Company's operations are subject to the laws and regulations in the PRC relating to the generation, storage, handling, emission, transportation and discharge of certain materials, substances and waste into the environment, and various other health and safety matters18. ~~Governmental authorities~~Commitments ~~have the power to enforce compliance with their regulations,~~ and ~~violators~~ ~~may~~contingencies be subject to fines, injunctions or both. The Company must devote substantial financial resources to ensure compliance and believes that it is in substantial compliance with all the applicable laws and regulations.

~~The~~As ~~Company~~of isDecember ~~currently~~31, ~~not~~2016 ~~involved~~and in2015, ~~any~~the ~~environmental~~Company had contingencies ~~remediation~~ arising ~~and~~from ~~has~~the ~~not~~division ~~accrued~~of ~~any~~Old ~~amounts~~Juyuan ~~for~~Company ~~environmental~~into ~~remediation~~SipingJuyuan, New Juyuan ~~relating~~ Company toand ~~its~~JuyuanHanyang ~~operations~~Pressure Vessels. ~~Under~~According ~~existing~~to ~~legislation,~~the ~~management~~division ~~believes that~~agreement ~~there~~ of ~~are~~Old noJuyuan ~~probable~~Company ~~liabilities~~(“Division ~~that~~Agreement”), ~~will~~all ~~have~~parties ato ~~material~~the ~~adverse effect on~~Division ~~the~~ Agreement ~~financial~~undertook ~~position,~~joint ~~operating~~and ~~results~~several orliabilities ~~cash~~for ~~flows~~the indebtedness of ~~the~~Old Juyuan Company.

19In accordance with ASC 450 “Contingencies”, the Company records a liability in the consolidated financial statements for these contingencies when a loss is known or considered probable and the amount can be reasonably estimated. ~~Segment~~If ~~information~~the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed. In most cases, significant judgment is required to estimate the amount and timing of a loss to be recorded.

The Company’s isloss ~~solely~~in ~~engaged~~respect inof ~~the~~this ~~manufacturing~~undertaking ~~and~~is ~~trading~~possible of but ~~plate~~not ~~heat~~known ~~exchangers~~or ~~and~~probable. ~~various~~Accordingly, ~~related~~no ~~products.~~liability ~~Since~~was ~~the~~recognized ~~nature~~as of ~~the~~ ~~products,~~ December ~~their production processes~~31, 2016 and ~~their~~2015 ~~distribution~~respectively. ~~methods~~The ~~are substantially~~Company ~~similar,~~believes ~~they~~that ~~are considered as~~ a ~~single reportable segment under~~reasonable ~~ASC~~ estimate ~~280~~of ~~“Segment~~the ~~Reporting”.~~possible ~~The~~loss ~~Company’s~~range ~~sales~~from ~~revenues~~$Nil byto ~~products~~approximately ~~for~~$1,757,000 ~~the years~~as ~~ended~~ of December 31, 2016 (2015: ~~and~~from ~~2014~~$Nil ~~were~~to asapproximately ~~follows:~~$1,757,000).

		Year ended December 31,
		2015	%		2014	%
Plate heat exchanger	$	20,900,957	45	$	18,066,105	30
Heat exchange unit		15,787,022	34		28,609,928	47
Air-cooled heat exchanger		509,975	1		1,252,547	2
Shell-and-tube heat exchanger		2,569,986	6		3,026,746	5
Others		6,196,105	14		10,142,107	16
	$	45,964,045	100	$	61,097,433	100

F-19

~~All~~The Company's operations are subject to the laws and regulations in the PRC relating to the generation, storage, handling, emission, transportation and discharge of certain materials, substances and waste into the environment, ~~Company’s~~and ~~long-lived~~various ~~assets~~other health and ~~revenues~~safety ~~classified~~matters. Governmental ~~based~~ authorities onhave the ~~customers~~power ~~are~~to ~~located~~enforce compliance with their regulations, and violators may be subject to fines, injunctions or both. The Company must devote substantial financial resources to ensure compliance and believes that it is in substantial compliance with all the ~~PRC~~applicable laws and regulations.

2019. ~~Related~~Segment ~~party~~information ~~transactions~~

The Company is solely engaged in the manufacturing and trading of plate heat exchangers and various related ~~parties~~products. ~~consist~~Since the nature of the products, their production processes, and their distribution methods are substantially similar, they are considered as ~~following~~a single reportable segment under ASC 280 “Segment Reporting”. The Company’s sales revenues by products for the years ended December 31, 2016 and 2015 were as follows:

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

		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	14

	$	47,586,724	100	$	45,964,045	100

~~Due~~All ~~from~~of ~~related~~the ~~parties~~Company’s long-lived assets and revenues classified based on the customers are located in the PRC.

As20. ofRelated ~~December~~party ~~31,~~transactions ~~2015 and 2014, respectively, the Company advanced $26,896 and $24,663 to Guohong Zhao for handling selling and logistic activities for the Company in the ordinary course of business.~~

AsThe ofrelated ~~December~~parties ~~31,~~consist ~~2015 and 2014, respectively, the Company advanced $886 and $244 to Fucai Zan for handling selling and logistic activities for the Company in the ordinary course~~ of ~~business.~~as following:

AsName of ~~December~~Related 31Party Nature of Relationship Guohong Zhao Chairman, ~~2015~~Chief Executive Officer and ~~2014,~~President ~~respectively,~~Zhigang ~~the~~Xu ~~Company advanced~~Interim ~~$11~~Chief Financial Officer,~~770~~ Treasurer and ~~$12,431~~Secretary toFucai Zhan Vice President of R&D and Director Kai Liu ~~for~~Chief ~~handling~~Engineer, ~~selling~~Manager ~~and~~of ~~logistic activities~~Market ~~for~~development ~~the~~Zhijun ~~Company~~Ma inSales ~~the~~Director ~~ordinary~~Yongfu ~~course~~Tian Vice Sales Director Feng Xu Factory Director, Manager of ~~business.~~production Yue Cui Vice President 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

~~F-19~~Trade receivables – related party

~~Due~~During the years ended December 31, 2016 and 2015, the Company sold products to Tongda in the amount of $1,309,522 and $257,674, respectively. The corresponding cost for the related ~~parties~~party sales was $953,827 and $212,873, respectively. As of December 31, 2016 and 2015, the Company had trade receivables from Tongda in the amount of $1,358,399 and $nil, respectively.

Due tofrom related parties ~~consist of the following:~~

		Year ended December 31,
		2015		2014
Zhigang Xu	$	77,033	$	81,354
Kai Liu		154,067		162,707
Zhijun Ma		-		162,707
Yongfu Tian		77,033		162,707
Feng Xu		-		81,354
Fucai Zan		107,847		162,708
	$	415,980	$	813,537

~~Amounts~~As ~~owed~~of byDecember 31, 2016 and 2015, respectively, the Company advanced ~~represent~~$nil ~~non-secured~~ and ~~non-interest~~ ~~bearing~~$886 ~~loans~~to ~~obtained~~Fucai ~~from~~Zhan ~~related~~for ~~parties~~handling ~~which~~selling ~~are~~and ~~due~~logistic onactivities ~~demand~~ for the Company in the ordinary course of business.

~~F-20~~As of December 31, 2016 and 2015, respectively, the Company advanced $11,003 and $11,771 to Kai Liu for handling selling and logistic activities for the Company in the ordinary course of business.

~~EXHIBIT~~On ~~INDEX~~June 1, 2016, the Company advanced RMB32,000,000 (approximate $4,817,000) to Hongsheng for the inventory purchase. As of December 31, 2016, the advance was returned to the Company in full due to the change in purchase plan. During the years ended December 31, 2016 and 2015, the Company purchased inventory from Hongsheng in the amount of $nil 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 included in due from related parties in the accompanying consolidation balance sheets.

Exhibit No.		Description
2.1		Share Exchange Agreement, dated as of June 30, 2009, by and among the Company, Megaway International Holdings Limited and its sole shareholder [incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on July 7, 2009]
2.2		Share Exchange Agreement, dated as of February 12, 2009, by and among the Company, Sino- America Ventures, Inc. and its shareholders [incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on February 13, 2009]
2.3		First Amended Joint Plan of Reorganization dated September 29, 2004 [incorporated by reference to Exhibit 2.1 of the Company’s Registration Statement on Form 10-SB filed on September 21, 2006]
2.4		Order Confirming First Amended Joint Plan of Reorganization dated November 29, 2004 [incorporated by reference to Exhibit 2.2 of the Company’s Registration Statement on Form 10 filed on September 21, 2006]
2.5		Agreement and Plan of Merger, dated as of November 24, 2009, between BTHC VIII, Inc. and THT Heat Transfer Technology, Inc. [incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on December 4, 2009]
3.1		Articles of Incorporation of the Company, as amended to date [incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on December 4, 2009]
3.2		Bylaws of the Company, as amended to date [incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on December 4, 2009]
4.1		Form of Registration Rights Agreement [incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.1		Form of Securities Purchase Agreement [incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.2		Form of Lockup Agreement [incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.3		Form of Make Good Escrow Agreement [incorporated herein by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.4		Form of Right of Co-Sale Agreement [incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.5		Form of Closing Escrow Agreement [incorporated herein by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.6		Independent Director Agreement, dated as of September 25, 2009, by and between the Company and Wenquan Tao [incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on September 28, 2009]
10.7		Independent Director Agreement, dated as of September 25, 2009, by and between the Company and To Tsang [incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on September 28, 2009]
10.8		Indemnification Agreement, dated as of September 25, 2009, by and between the Company and Wenquan Tao [incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on September 28, 2009]
10.9		Indemnification Agreement, dated as of September 25, 2009, by and between the Company and To Tsang [incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed on September 28, 2009]
14		Code of Ethics [incorporated by reference to Exhibit 14.1 of the Company’s Current Report on Form 8-K filed on September 28, 2009]

Exhibit No.		Description
31.1*		Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		Interactive data files pursuant to Rule 405 of Regulation S-T (furnished herewith).

F-20

*FiledDue ~~herewith.~~to related parties

Due to 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 Zhan		148,498		108,733
	$	383,232	$	428,737

Amounts owed by the Company represent loans obtained from related parties and expenses paid by related parties, which are non-secured, non-interest bearing, and due on demand.

F-21

EXHIBIT INDEX

Exhibit No.		Description

2.1		Share Exchange Agreement, dated as of June 30, 2009, by and among the Company, Megaway International Holdings Limited and its sole shareholder [incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on July 7, 2009]
2.2		Share Exchange Agreement, dated as of February 12, 2009, by and among the Company, Sino- America Ventures, Inc. and its shareholders [incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on February 13, 2009]
2.3		First Amended Joint Plan of Reorganization dated September 29, 2004 [incorporated by reference to Exhibit 2.1 of the Company’s Registration Statement on Form 10-SB filed on September 21, 2006]
2.4		Order Confirming First Amended Joint Plan of Reorganization dated November 29, 2004 [incorporated by reference to Exhibit 2.2 of the Company’s Registration Statement on Form 10 filed on September 21, 2006]
2.5		Agreement and Plan of Merger, dated as of November 24, 2009, between BTHC VIII, Inc. and THT Heat Transfer Technology, Inc. [incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on December 4, 2009]
3.1		Articles of Incorporation of the Company, as amended to date [incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on December 4, 2009]
3.2		Bylaws of the Company, as amended to date [incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on December 4, 2009]
4.1		Form of Registration Rights Agreement [incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.1		Form of Securities Purchase Agreement [incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.2		Form of Lockup Agreement [incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.3		Form of Make Good Escrow Agreement [incorporated herein by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.4		Form of Right of Co-Sale Agreement [incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.5		Form of Closing Escrow Agreement [incorporated herein by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed on November 3, 2010]
10.6		Independent Director Agreement, dated as of September 25, 2009, by and between the Company and Wenquan Tao [incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on September 28, 2009]
10.7		Independent Director Agreement, dated as of September 25, 2009, by and between the Company and To Tsang [incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on September 28, 2009]
10.8		Indemnification Agreement, dated as of September 25, 2009, by and between the Company and Wenquan Tao [incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on September 28, 2009]
10.9		Indemnification Agreement, dated as of September 25, 2009, by and between the Company and To Tsang [incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed on September 28, 2009]
14		Code of Ethics [incorporated by reference to Exhibit 14.1 of the Company’s Current Report on Form 8-K filed on September 28, 2009]

Exhibit No.		Description
31.1*		Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1		Audit Committee Charter [incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on September 28, 2009]
99.2		Compensation Committee Charter [incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on September 28, 2009]
99.3		Governance and Nominating Committee Charter [incorporated by reference to Exhibit 99.3 of the Company’s Current Report on Form 8-K filed on September 28, 2009]
101*		Interactive data files pursuant to Rule 405 of Regulation S-T (furnished herewith).

*Filed herewith.

Filing Compare · THT Heat Transfer Technology, Inc.