UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2012

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

For the transition period from ______to______.

HUIXIN WASTE WATER SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Cayman Islands		000-52339		N/A
(State or other jurisdiction of incorporation or organization)		(Commission File Number)		(IRS Employee Identification No.)

#99 Jianshe Road 3, Pengjiang District, Jiangmen City

Guangdong Province, 529000

People’s Republic of China

(Address of principal executive offices, Zip Code)

(86) (750) 395-9988

(Issuer Telephone number)

(Former name, former address and former fiscal year, if changed since last report)

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 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

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

Large accelerated filer o Accelerated filer o

Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company o

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

Indicate the number of shares outstanding of each of the issuer’s classes of common equity: As of November 13, 2012, there are 20,977,230 ordinary shares, par value $0.00018254172 per share, and 204,198 preference shares, par value $0.000128 per share, are issued and outstanding.

HUIXIN WASTE WATER SOLUTIONS, INC.

QUARTERLY REPORT ON FORM 10-Q

SEPTEMBER 30, 2012

TABLE OF CONTENTS

PART 1 - FINANCIAL INFORMATION
		PAGE

Item 1.	Financial Statements (Unaudited)	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

PART II - OTHER INFORMATION

Item 1A.	Risk Factors	32

Item 6.	Exhibits	32

SIGNATURES		33

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” “continue” negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements.

We cannot predict all of the risks and uncertainties. Accordingly, such information should not be regarded as representations that the results or conditions described in such statements or that our objectives and plans will be achieved and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Quarterly Report on Form 10-Q and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

CERTAIN TERMS USED IN THIS QUARTERLY REPORT ON FORM 10-Q

Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company,” or “the Company” are to the combined business of Huixin Waste Water Solutions, Inc. and its consolidated subsidiaries, Wealth Environmental Protection, Wealth Environmental, Jiangmen Huiyuan, and its variable interest entities, Jiangmen Wealth Water, Guizhou Yufeng, and Shanxi Wealth.

In addition, unless the context otherwise requires and for the purposes of this report only, references to the following terms have the meaning assigned to each of them hereof:

●	“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
●	“Guizhou Yufeng” refers to Guizhou Yufeng Melt Co., Ltd., a PRC limited company;
●	“Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;
●	“Jiangmen Huiyuan” refers Jiangmen Huiyuan Environmental Protection Technology Consultancy Co. Ltd ., a wholly foreign owned enterprise organized under the PRC laws;
●	“Jiangmen Wealth Water” refers to Jiangmen Wealth Water Purifying Agent Co., Ltd. , a PRC limited liability company;
●	“Operating Company” or “Operating Companies” refers to Jiangmen Huiyuan, Jiangmen Wealth Water, Guizhou Yufeng and Shanxi Wealth;
●	“PRC,” “China,” and “Chinese,” refer to the People’s Republic of China;
●	“Renminbi” and “RMB” refer to the legal currency of China;
●	“SEC” refers to the United States Securities and Exchange Commission;
●	“Securities Act” refers to the Securities Act of 1933, as amended;
●	“Shanxi Wealth” refers to Shanxi Wealth Aluminate Materials Co., Ltd., a PRC limited company;
●	“U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States;
●	“Wealth Environmental Protection” refers to Wealth Environmental Protection Group, Inc., a British Virgin Islands company; and
●	“Wealth Environmental Technology” refers to Wealth Environmental Technology Holding, Ltd., a Hong Kong company.

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Page

Condensed Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011	2

Condensed Consolidated Statements of Income for the three months and nine months ended September 30, 2012 and 2011 (Unaudited)	3

Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2012 and 2011 (Unaudited)	4

Condensed Consolidated Statement of Shareholders' Equity for the nine months ended September 30, 2012 (Unaudited)	5-6

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (Unaudited)	7

Notes to Condensed Consolidated Financial Statements (Unaudited)	8-21

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
	2012		2011
	(UNAUDITED)
ASSETS

Current assets:
Cash and cash equivalents	$	54,480,465	$	26,383,537
Restricted cash		120,000		670,000
Accounts receivable		3,256,909		2,372,832
Note receivable		-		25,187,727
Interest receivable		-		156,085
Inventories		1,192,677		957,509
Advances to suppliers		-		3,825,386
Other current assets		18,730		14,168

Total current assets		59,068,781		59,567,244

Property, plant and equipment and land and mining rights, net		13,867,629		14,627,533
Deposit for mining right acquisition		31,650,477		-
Total assets	$	104,586,887	$	74,194,777

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Short –term debt	$	12,660,191	$	-
Accounts payable		2,554,309		1,855,530
Accrued expenses		1,217,346		1,533,878
Due to shareholders		15,226		15,226
Value added taxes payable		764,723		497,581
Other taxes payable		154,971		90,150
Income tax payable		1,947,617		1,286,537

Total current liabilities		19,314,383		5,278,902

Deferred income taxes		312,446		311,339

Total liabilities		19,626,829		5,590,241

Commitments and contingencies

Shareholders' equity:
Preferred stock, $0.000128 par value, 781,250 shares authorized, 444,804 shares issued and outstanding on September 30, 2012 and December 31, 2011		57		57
Common stock: $0.00018254172 par value, 39,062,500 shares authorized, 19,600,305 shares issued and outstanding on September 30, 2012 and December 31, 2011		3,578		3,578
Additional paid-in capital		24,283,222		24,283,222
Accumulated other comprehensive income		6,842,983		6,492,658
Retained earnings (the restricted portion of retained earnings is $496,396 on September 30, 2012 and December 31, 2011)		53,830,218		37,825,021

Total shareholders’ equity		84,960,058		68,604,536

Total liabilities and shareholders’ equity	$	104,586,887	$	74,194,777

The accompanying notes form an integral part of these consolidated financial statements

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012			2011		2012			2011

Net revenue	$	22,407,329		$	19,335,053	$	61,298,540		$	52,761,618
Cost of revenue		12,308,208			10,759,594		33,746,528			28,364,739

Gross profit		10,099,121			8,575,459		27,552,012			24,396,879

Operating expenses:
Selling and marketing		797,674			568,573		2,218,268			1,590,600
General and administrative		1,490,942			1,184,947		3,826,647			3,347,284
Research and development		151,176			149,191		470,722			438,936
Total operating expenses		2,439,792			1,902,711		6,515,637			5,376,820

Income from operations		7,659,329			6,672,748		21,036,375			19,020,059

Other income/(expense):
Interest income		79,596			99,281		708,023			163,084
Interest expense		(228,123	)		-		(284,243	)		-
Total other income/(expense)		(148,527	)		99,281		423,780			163,084

Income before provision for income taxes		7,510,802			6,772,029		21,460,155			19,183,143

Provision for income taxes		1,901,646			1,696,209		5,454,958			4,865,974

Net income		5,609,156			5,075,820		16,005,197			14,317,169
Less cumulative dividends on preferred stock		100,081			100,081		300,243			300,243
Net income attributable to common shareholders	$	5,509,075		$	4,975,739	$	15,704,954		$	14,016,926

Net income per common share - basic	$	0.28		$	0.25	$	0.80		$	0.72

Net income per common share - diluted	$	0.26		$	0.23	$	0.73		$	0.66

Weighted average number of common shares outstanding - basic		19,600,305			19,600,305		19,600,305			19,600,305

Weighted average number of common shares outstanding - diluted		21,824,325			21,824,325		21,824,325			21,824,325

The accompanying notes form an integral part of these consolidated financial statements

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012			2011		2012		2011

Net income	$	5,609,156		$	5,075,820	$	16,005,197	$	14,317,169
Other comprehensive income/(loss)
- foreign currency translation adjustments		(127,092	)		633,699		350,325		1,583,689
Comprehensive income	$	5,482,064		$	5,709,519	$	16,355,522	$	15,900,858

The accompanying notes form an integral part of these consolidated financial statements

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

	Preferred Stock				Common Stock				Additional Paid-In
	Shares		Amount		Shares		Amount		Capital

Balance as of
December 31, 2011		444,804	$	57		19,600,305	$	3,578	$	24,283,222
Net income		-		-		-		-		-
Other comprehensive
income - foreign
currency translation
adjustments		-		-		-		-		-

Balance as of
September 30, 2012		444,804	$	57		19,600,305	$	3,578	$	24,283,222

The accompanying notes form an integral part of these consolidated financial statements

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

	Accumulated
	Other									Total
	Comprehensive			Retained Earnings						Shareholders’
	Income			Restricted			Unrestricted			Equity

Balance as of
December 31, 2011		$	6,492,658		$	496,396		$	37,328,625		$	68,604,536
Net income			-			-			16,005,197			16,005,197
Other comprehensive
income - foreign
currency translation
adjustments			350,325			-			-			350,325

Balance as of
September 30, 2012		$	6,842,983		$	496,396		$	53,333,822		$	84,960,058

The accompanying notes form an integral part of these consolidated financial statements

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended
	September 30,
	2012			2011
Cash flows from operating activities:
Net income	$	16,005,197		$	14,317,169
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,047,465			968,021
Deferred income taxes		(453	)		71,515
Changes in operating assets and liabilities:
Accounts receivable		(873,048	)		(4,636,449	)
Interest receivable		157,171			(61,648	)
Inventories		(230,512	)		(391,538	)
Advance to suppliers		3,852,007			(3,745,134	)
Other assets		(4,495	)		5,333
Accounts payable		690,404			1,519,773
Accrued expenses		(305,160	)		(580,371	)
Value added taxes payable		264,967			187,026
Other taxes payable		64,453			105,545
Income tax payable		655,406			586,673
Net cash provided by operating activities		21,323,402			8,345,915

Cash flows from investing activities:
Purchase of property, equipment and improvement		(209,113	)		(194,338	)
Deposit for mining right acquisition		(31,703,760	)
Addition to note receivable		-			(13,870,865	)
Promissory note receivable from non related party		25,363,008			-
Net cash provided by (used in) investing activities		(6,549,865	)		(14,065,203	)

Cash flows from financing activities:
Principle payments on short-term debt		(22,509,670	)		-
Proceeds received from short-term debt		35,191,174			-
Advances from shareholders		-			770
Dividends paid to shareholders		-			(290,829	)
Decrease in restricted cash		550,000			1,417,203
Net cash provided by financing activities		13,231,504			1,127,144

Effect of exchange rate changes on cash and cash equivalents		91,887			856,013

Net increase in cash and cash equivalents		28,096,928			(3,736,131	)

Cash and cash equivalents at the beginning of period		26,383,537			33,910,457
Cash and cash equivalents at the end of period	$	54,480,465		$	30,174,326

Supplemental disclosure of cash flow information:
Income taxes paid	$	4,799,533		$	4,207,463
Interest paid	$	284,243		$	-

The accompanying notes form an integral part of these consolidated financial statements

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1)	Organization, Nature of Business and Basis of Presentation

Huixin Waste Water Solutions, Inc. (“the Company” or “Huixin”) was incorporated in the Cayman Islands on December 7, 2006. The Company was originally organized as a “blank check” shell company to investigate and acquire a target company or business desiring to be a publicly held corporation. Wealth Environmental Protection Group, Inc. (“WEP”) was incorporated under the laws of the British Virgin Islands on June 3, 2010 to serve as an investment holding company. On December 15, 2010, the Company (i) closed a share exchange transaction pursuant to which it became the 100% parent of WEP, and (ii) assumed the operations of WEP and its subsidiaries.

The share exchange transaction has been treated as a recapitalization of WEP, with Huixin emerging as the surviving legal entity and WEP is considered as the acquirer for accounting purpose. Prior to the recapitalization, Huixin had essentially no assets or liabilities and issued approximately 96% of its outstanding shares to the shareholders of WEP and their designees in the recapitalization. The historical consolidated financial statements of WEP are retroactively presented as the financial statements of Huixin. A summary of the Company subsidiaries is currently as follows:

	Domicile and
	Date of	Paid -In		Effective
Name and Location	Incorporation	Capital		Ownership	Activities

Wealth Environmental Protection Group, Inc (“WEP”)	British Virgin Islands June 3, 2010	$	7,000	100% Owned	Holding Company

Wealth Environmental Technology Holding Ltd.(“Wealth Technology”) Hong Kong	Hong Kong June 18, 2010	$	1,299	100% Owned	Holding Company

Jiangmen Huiyuan Environmental Protection Technology Consultancy Co. (“Jiangmen Huiyuan”) Jiangmen, Guandong Province	Peoples Republic Of China (“PRC”) July 22, 2010	$	15,082	100% Owned - Wholly Foreign Owned Entity (“WFOE”)	Holding Company

Jiangmen Wealth Water Purifying Agent Co., Ltd (“Jiangmen Wealth Water”) Jiangmen, Guandong Province	PRC April 25, 2003	$	4,049,060	100% Control Through Contractual Arrangements	Manufacturing of water purifying agents

Guizhou Yufeng Melt Co., Ltd. (“Guizhou Yufeng”) Guizhou Provincre	PRC March 25, 2005	$	4,233,854	100% Control Through Contractual Arrangements	Manufacturer of HAC Powder using bauxite and limestone from mines controlled under mining rights agreements

Shanxi Wealth Aluminate Materials Co., Ltd Shanxi Province	PRC April 8, 2004	$	6,786,056	100% Control Through Contractual Arrangements	Manufacturer of HAC Powder using bauxite and limestone from mines controlled under mining rights agreements

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1)	Organization, Nature of Business and Basis of Presentation, continued

On September 29, 2010, Jiangmen Huiyuan entered into a series of contractual agreements with Jiangmen Wealth Water, and its shareholders, in which Jiangmen Huiyuan effectively assumed management of the business activities of Jiangmen Wealth Water and has the right to appoint all executives and senior management and the members of the board of directors of Jiangmen Wealth Water. The contractual arrangements are comprised of a series of agreements, including an Exclusive Business Cooperation Agreement, Exclusive Option Agreement, Equity Interest Pledge Agreement and Power of Attorney, through which Jiangmen Huiyuan has the right to provide exclusive complete business support and technical and consulting service to Jiangmen Wealth Water for an annual fee in the amount of Jiangmen Wealth Water’s yearly net profits after tax. Additionally, Jiangmen Wealth Water’s shareholders have pledged their rights, titles and equity interest in Jiangmen Wealth Water as security for Jiangmen Huiyuan to collect consulting and services fees provided to Jiangmen Wealth Water through an Equity Pledge Agreement. In order to further reinforce Jiangmen Huiyuan’s rights to control and operate Jiangmen Wealth Water, the shareholders of Jiangmen Wealth Water have granted Jiangmen Huiyuan the exclusive right and option to acquire all of their equity interests in Jiangmen Wealth Water through an Exclusive Option Agreement.

Jiangmen Wealth Water owns all of the issued and outstanding capital stock of Guizhou Yufeng, and Shanxi Wealth. During the years ended December 31, 2009 and 2008, Mr. Tan and his spouse, Ms. Hong Yu Du (“Ms. Du”) directly or through an affiliated company, had controlling equity interests in Jiangmen Wealth Water, Guizhou Yufeng and Shanxi Wealth. In August and September 2010, through a restructuring process, Jiangmen Wealth Water paid $74,705 and $463,160 to acquire 100% equity interest of Guizhou Yufeng and 62% equity interest of Shanxi Wealth, respectively. On December 27, 2010 the Company acquired the remaining 38% equity interest of Shanxi Wealth owned by Mr. Tan through a declared dividend payable of $290,072 to Mr. Tan on January 3, 2011. Mr. Tan and Ms. Du collectively owned 100% of Jiangmen Wealth Water and its subsidiaries after this restructuring.

Based on Jiangmen Huiyuan’s contractual relationship with Jiangmen Wealth, the Company has determined that a variable interest entity has been created and therefore Jiangmen Wealth is considered a consolidated subsidiary of the Company. Additionally, because all of the companies are currently under common control, the series of agreements and restructurings referred to above have been accounted for as a reorganization of the entities and the financial statements have been prepared as if the reorganization had occurred retroactively. Accordingly these financial statements present the consolidated operating results, assets and liabilities of Wealth and its subsidiaries, which are collectively referred to as the “Company”.

The Company produces and sells water purifying agents and high-performance aluminate calcium (HAC) powder, the core ingredient of its water purifying agents in China.

The accompanying condensed consolidated balance sheet as of December 31, 2011, which has been derived from the audited consolidated financial statements and the accompanying unaudited condensed consolidated financial statements, has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations and the Company believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, these condensed consolidated financial statements reflect all adjustments which are of a normal recurring nature and which are necessary to present fairly the financial position of Huixin as of September 30, 2012 and the results of operations for the three-month and nine-month periods ended September 30, 2012 and September 30, 2011, and the cash flows for the nine-month periods ended September 30, 2012 and September 30, 2011. These condensed consolidated financial statements and related notes should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2011. The results of operations for the three months and nine months ended September 30, 2012 are not necessarily indicative of the results which may be expected for the entire fiscal year.

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(2)	Summary of Significant Accounting Policies, continued

Reverse Stock Split

On December 15, 2011, the Board of Directors and the stockholders of the Company approved and implemented a reverse stock split in a ratio of 1 share to 1.42610718 shares of the Company’s common stock. Par value of the common stock has been changed to $0.00018254172 per share. Accordingly, all references to numbers of common shares and per-share data in the accompanying condensed consolidated financial statements and notes have been retroactively adjusted to reflect the effects of the reverse stock split.

Principles of Consolidation

These condensed financial statements present the consolidated accounts of WEP and its subsidiaries, Wealth Technology, Jiangmen Huiyan, and its variable interest entities, Jiangmen Wealth Water, Guizhou Yunfeng and Shanxi Wealth, which are collectively referred to as the “Company”. This presentation is based upon the retroactive treatment of series of agreements and restructurings of companies under common control as described in Note (1).

All inter-company transactions and balances have been eliminated in preparation of the condensed consolidated financial statements.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses in the condensed consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s condensed consolidated financial statements include collectibility of accounts receivable, useful lives and impairment of property and equipment, mineral reserves available for mining production, total expected use of mineral reserves and value and realizability of intangible assets. Actual results could differ from those estimates.

Segments

For the three months and nine months ended September 30, 2012 and 2011, the Company’s operations have been broken down into segment based on production facility, in the manner that management reviews operations on a regular basis. All our operations revolve around the production of water purification agents made to similar specifications. All of the Company’s segments have similar assets, customers and distribution methods, and their economic characteristics are similar with regard to their gross margin percentages.

Currency Reporting

The Company’s operations in the PRC use the local currency, Renminbi (“RMB”), as their functional currency, whereas amounts reported in the accompanying condensed consolidated financial statements and disclosures are stated in U.S. dollars, the reporting currency of the Company, unless stated otherwise. As such, the condensed consolidated balance sheets of the Company have been translated into U.S. dollars at the current rates as of September 30, 2012 and December 31, 2011 and the condensed consolidated statements of income have been translated into U.S. dollars at the weighted average rates during the periods the transactions were recognized.

The resulting translation gain adjustments are recorded as other comprehensive income in the condensed consolidated statements of comprehensive income and as a separate component of equity in the condensed consolidated balance sheets.

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(2)	Summary of Significant Accounting Policies, continued

Revenue Recognition

The Company’s main source of revenue is generated from sales of water purifying agents and high-performance calcium aluminates powder. The Company recognizes revenue when there is persuasive evidence of a sales arrangement, delivery and acceptance by the customer has occurred, the sales price is fixed or determinable, and collection is probable. Under the Company’s typical sales terms for both water purifying agents and HAC powder, the Company recognizes revenue when product is shipped from its production facilities because shipments are made FOB shipping point with the customer bearing all shipping costs and title and risk of loss transferring to the customer upon shipment. Sales terms for water purifying agents and HAC powder do not include customer acceptance provisions, the right of return (unless the product is proven to be defective) or other post-delivery obligations. The Company has not experienced any significant returns associated with defective product.

Value added taxes represent amounts collected on behalf of specific government agencies that require remittance of tax by specified dates. Value added taxes are collected at the time of sales and are detailed on invoices provided to customers. The Company accounts for value added taxes on a net basis. The Company recorded and paid sales related taxes based on a percentage of the value added taxes and reported the revenue net of the sales related taxes.

Major Customers

During the three months and nine months ended September 30, 2012 and 2011, there was no customer accounted for 10% or more of our net revenue.

Major Suppliers

During the three months and nine months ended September 30, 2012 and 2011, certain suppliers accounted for more than 10% of the Company’s total net purchases as follows, and none of the major suppliers are related parties to the Company.

	Three Months Ended						Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011

Supplier 1		12	%		12	%		12	%		11	%
Supplier 2		18	%		17	%		11	%		17	%
Supplier 3		12	%		12	%		16	%		11	%

Value-Added Tax (“VAT”)

Enterprises or individuals, who sell commodities, engage in repair and maintenance or import or export goods in the PRC are subject to a value-added tax in accordance with the PRC laws. The value-added tax standard rate for sales made by the Company is 17% of the gross sales price and the Company records its revenue net of VAT. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on the sales of the finished products. When the Company purchases raw materials, the VAT incurred by the Company, and subject to credit, generally varies from 6% to 17% depending on the type of materials or services purchased. There is a significant difference in the VAT that the Company incurs on purchases and the amount the Company bills to customers for sales of HAC powder and water purifying agents due to the fact that the Company converts raw materials from their mined state to finished product and is responsible for the substantial portion of increased value in its products.

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(2)	Summary of Significant Accounting Policies, continued

Value-Added Tax (“VAT”), continued

Following is an analysis of VAT billed to the Company on purchases, VAT billed by the Company on sales and VAT remitted to PRC during the nine months ended September 30, 2012 and 2011, with information related to the liability for uncollected or unremitted VAT at September 30, 2012 and December 31, 2011:

	Nine Months			Nine Months
	Ended			Ended
	September 30, 2012			September 30, 2011

VAT billed to customers for sales during the period	$	12,017,833		$	10,322,305
Less: VAT billed to the Company for purchases during the period		4,780,061			4,089,441

Net VAT on transactions took place during the period		7,237,772			6,232,864
Amount remitted to the PRC		(6,970,630	)		(6,030,535	)
VAT payable at beginning of period		497,581			389,053

VAT payable at period end	$	764,723		$	591,382

	As of		As of
	September 30,		December 31,
	2012		2011

Liabilities for taxes collected but not remitted	$	291,497	$	152,811
Liabilities for taxes billed to customers but not collected
from the customers or remitted to PRC		473,226		344,770

VAT payable at period end	$	764,723	$	497,581

New Accounting Pronouncements

In December 2011, the FASB issued ASU No. 2011-11, Topic 210 - Balance Sheet: Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU 2011-11 will be effective for fiscal years beginning on or after January 1, 2013, with retrospective application for all comparable periods presented. The Company does not expect the adoption of this guidance to have a material effect on the Company’s consolidated financial statements.

In July 2012, the FASB issued Accounting Standards Update ASU 2012-02, the amendments to ASC 350, Intangibles—Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment ("ASU 2012-02"). The amendments apply to all entities, both public and nonpublic, that have indefinite-lived intangible assets, other than goodwill, reported in their financial statements. In accordance with the amendments an entity has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with Subtopic 350-30. An entity also has the option to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to performing the quantitative impairment test. An entity will be able to resume performing the qualitative assessment in any subsequent period. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, and early adoption is permitted. The Company will apply these amendments for reporting periods beginning after December 31, 2012. The Company does not expect the adoption of the amendments to have a material impact on the Company's financial statements.

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(3)	Note Receivable

On August 29, 2011, the Company entered into a secured note receivable agreement with a non-related party in the amount of $14,087,748 (RMB90,000,000) which was increased to approximately $25,187,727 (RMB160,000,000) in December 2011. The note carried an annual interest rate of 9%. This note originally expired on November 28, 2011 but was extended to March 31, 2012, and was secured by the debtor’s land use right, certain tangible assets and all the business operation rights. Interest receivable related to this note amounted to $156,085 as of December 31, 2011. As of March 28, 2012, the note receivable and interest receivable were fully repaid.

(4)	Earnings Per Share

Basic net earnings per share is computed using the weighted-average number of common shares outstanding. The dilutive effect of potential common shares outstanding is included in diluted net earnings per share. The computations of basic net earnings per share and diluted net earnings per share for three months and nine months ended September 30, 2012 and 2011 are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011


Net income attributable to common shareholders - Basic	$	5,509,075	$	4,975,739	$	15,704,954	$	14,016,926

Add: cumulative dividends attributable to
6% convertible preferred stock		100,081		100,081		300,243		300,243

Net income attributable to
common shareholders - Diluted	$	5,609,156	$	5,075,820	$	16,005,197	$	14,317,169

Weighted average number of common shares		19,600,305		19,600,305		19,600,305		19,600,305
outstanding - Basic

Dilutive effect of preferred stock conversion		2,224,020		2,224,020		2,224,020		2,224,020

Weighted average number of common shares
outstanding - Diluted		21,824,325		21,824,325		21,824,325		21,824,325

Earnings per share:
Basic	$	0.28	$	0.25	$	0.80	$	0.72

Diluted	$	0.26	$	0.23	$	0.73	$	0.66

(5)	Restricted Cash

The Company has certain restricted cash as a result of the execution of the following agreements:

Holdback Escrow Agreement

In connection with the Private Placement took place in December 2010, the Company entered into a Holdback Escrow Agreement with Anslow & Jaclin, LLP (“A&J”), the escrow agent, and Access America Investments, LLC (“AAI”), as investor representative (the “Holdback Escrow Agreement”), pursuant to which $2,167,203 was deposited with the escrow agent to be distributed upon the satisfaction of certain covenants set forth in the Subscription Agreement. Pursuant to the Holdback Escrow Agreement, $1,500,000 shall be released to the Company upon the hiring of a chief financial officer on terms acceptable to AAI (the “Chief Financial Officer Holdback”) and $667,203 shall be released to us upon appointment of the required independent directors to our board of directors. In March 2011, pursuant to the Holdback Escrow Agreement, $667,203 was released to us upon appointment of the required independent directors to our board of directors.

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(5)	Restricted Cash, continued

On May 20, 2011, the Holdback Escrow Agreement was amended to provide that as soon as practicable following the Offering, the Company shall employ a chief financial officer meeting certain requirements and to permit the “Lead Investor” (as defined in the Subscription Amendment) to authorize the escrow agent appointed pursuant to the Holdback Escrow Agreement to disburse a portion of the Chief Financial Officer Holdback, such portion not to exceed $750,000 in the aggregate, to the Company (a “Good Faith Disbursement”). Pursuant to Holdback Escrow Agreement, as amended on May 20, 2011, $750,000 was released to the Company as Good Faith Disbursement. On December 1, 2011, the Holdback Escrow Agreement was further amended to provide for a series of disbursements from the Chief Financial Officer Holdback to the Company of $100,000 commencing on December 1, 2011 and continuing on the first day of each successive month thereafter until the remaining balance of the Chief Financial Officer Holdback is disbursed to the Company (the “Monthly Disbursements”). As of September 30, 2012 and December 31, 2011, $0 and $550,000, respectively, remained unreleased.

Investor Relations Escrow Agreement

The Company entered into an investor relations escrow agreement with Anslow & Jaclin, LLP, the escrow agent, and Access America Investments, LLC, as representative of the investors, pursuant to which $120,000 was deposited with the escrow agent to be distributed in incremental amounts to pay our investor relations firm, the choice of which is subject to the approval of Access America Investments, LLC, which approval cannot be unreasonably withheld. As of September 30, 2012 and December 31, 2011, $120,000 remained unreleased as the Company has not hired any investor relations firm.

(6)	Inventories

A summary of inventories is as follows:

	September 30,		December 31,
	2012		2011

Raw Materials	$	847,060	$	674,114
Work in progress		49,698		-
Finished goods		295,919		283,395

	$	1,192,677	$	957,509

Inventories are stated at the lower of cost or market. The weighted average cost method is used to account for the Company inventories.

(7)	Property, Plant and Equipment and Land and Mining Rights

A summary of property, plant and equipment and land and mining rights is as follows:

	September 30,		December 31,
	2012		2011

Leasehold improvement	$	3,338,534	$	3,321,044
Production equipment		6,757,205		6,715,532
Furniture and fixtures		449,401		441,857
Automobiles		512,225		313,333
Land use rights		2,288,336		2,276,347
Mining rights		9,020,386		8,973,128

		22,366,087		22,041,241
Less: Accumulated depreciation		8,498,458		7,413,708

	$	13,867,629	$	14,627,533

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(7)	Property, Plant and Equipment and Land and Mining Rights, continued

Depreciation and amortization expense was $370,586 and $339,726 for the three months ended September 30, 2012 and 2011, respectively, and $1,047,465 and $968,021 for the nine months ended September 30, 2012 and 2011, respectively. A breakdown of depreciation and amortization expenses is summarized as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011

Depreciation of plant, equipment and improvements	$	185,403	$	176,866	$	557,403	$	520,196
Amortization of land use rights		12,612		12,448		37,907		36,856
Amortization of mining rights		172,571		150,412		452,155		410,969

Total	$	370,586	$	339,726	$	1,047,465	$	968,021

As of September 30, 2012 and December 31, 2011, the Company holds mining rights to two limestone mines and two bauxite mines from which they are allowed to produce:

●	300,000 tons of limestone, from which the calcium needed for production of its products is derived;
●	350,000 tons of bauxite, from which the aluminum for production of its products is derived.

During the three months and nine months ended September 30, 2012 and 2011, the Company had production from its limestone and bauxite mines as follows (in tons):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011

Limestone		24,211		27,461		74,598		76,428
Bauxite		79,504		66,389		200,981		183,788

(8) Other long-term asset

On August 28, 2012, the Company entered into a purchase agreement with a non-related party for an Aluminum Bauxite mining right located in Guizhou Province, PRC in the total amount of approximately $83 million (RMB520,000,000). In accordance with PRC regulations on natural resources, the transaction is subject to the Ministry of Land and Resources of the PRC for final approval. Pursuant to the purchase agreement, the Company paid $31,650,477 (RMB200,000,000) security deposit for the transaction, and is secured by the seller’s Mining Right Certificate. The security deposit is fully refundable with applicable interest should the transaction be rejected by the Ministry of Land and Resources of the PRC.

(9)	Short-term debt

The Company's Short-term debt consisted of the following:

	September 30,		December 31,
	2012		2011

Revolving line-of-credit	$	-	$	-
Short term note (1)		-		-
Short term note (2)		12,660,191		-

Total	$	12,660,191	$	-

In February 2012, the Company entered into a $4.76 million (RMB30,000,000) revolving credit agreement with Industrial and Commercial Bank of China Limited (“ICBC”) with one year maturity, which is personally guaranteed by Mr. Tan and Ms. Du, contains no maintenance covenants. The interest rate under the revolving credit agreement is based on the base rate, the interest rate set by the People’s Bank of China, plus 30% of the base rate. As of September 30, 2012, the available borrowing base under revolving line-of-credit was $4.76 million, with $0 drawn as of that date, leaving $4.76 million (RMB30,000,000) available for general operations use under this revolving credit agreement. Interest under the line-of-credit is paid monthly at the ended of each month. As of September 30, 2012, all interest was fully paid.

In June 2012, the Company entered into a $19 million (RMB120,000,000) short-term note agreement with Industrial Bank Co., Limited (“IB”) with a one year maturity, is personally guaranteed by Mr. Tan and Ms. Du, and contains no maintenance covenants. The interest rate under the short-term note agreement is based on the base rate, the interest rate set by the People’s Bank of China, plus 10% of the base rate. Interest under the short term note is paid monthly at the ended of each month. During the period ended September 30, 2012, the principle and interest of the short term were fully paid.

In August 2012, the Company entered into a $12.66 million (RMB80,000,000) short-term note agreement with Industrial Bank Co., Limited (“IB”) with a one year maturity, is personally guaranteed by Mr. Tan and Ms. Du, and contains no maintenance covenants. The interest rate under the short-term note agreement is based on the base rate, the interest rate set by the People’s Bank of China (6.3% at September 30, 2012). Interest under the short term note is paid monthly at the ended of each month. As of September 30, 2012, all interest was fully paid.

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(10)	Income Taxes

The Company has not recorded a provision for U.S. federal income tax for the three months and nine months ended September 30, 2012 and 2011 because substantially all of the Company’s operations are conducted in the PRC.

On March 16, 2007, the National People’s Congress of China approved the new Corporate Income Tax Law of the PRC (New CIT Law), which is effective from January 1, 2008. Under the New CIT Law, the statutory corporate income tax rate applicable to most companies, including the Company is 25%. In accordance with the New CIT Law, enterprises established under the laws of foreign countries or regions and whose “place of effective management” is located within the PRC territory are considered PRC resident enterprises and subject to the PRC income tax at the rate of 25% on worldwide income. The definition of “place of effective management” refers to an establishment that exercises, in substance, overall management and control over the production and business, personnel, accounting, properties, etc. of an enterprise. As of September 30, 2012, no detailed interpretation or guidance has been issued to define “place of effective management”. Furthermore, as of September 30, 2012, the administrative practice associated with interpreting and applying the concept of “place of effective management” is unclear. However, the Company has analyzed the applicability of this law, as of and for the years ended December 31, 2011 and 2010, and the Company has accrued and paid PRC tax on such basis. The Company will continue to monitor changes in the interpretation or guidance of this law.

The New CIT Law also imposes a 10% withholding income tax for dividends distributed by a foreign invested enterprise to its immediate holding company outside China. Such dividends were exempted from PRC tax under the previous income tax law and regulations.

The tax authority of the PRC Government conducts periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises had completed their relevant tax filings, hence the Company’s tax filings may not be finalized. It is therefore uncertain as to whether the PRC tax authority may take different views about the Company’s tax filings which may lead to additional tax liabilities.

The Company conducts substantially all of its business in PRC and it is subject to PRC income taxes at a 25% standard tax rate in 2012 and 2011. Following is a reconciliation of the Company’s income tax provision of $1,901,646 and $1,696,209 for the three months ended September 30, 2012 and 2011, respectively, and $5,454,958 and $4,865,974 for the nine months ended September 30, 2012 and 2011, respectively, to the expected US statutory rate of 34%:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011

Computed tax at the U.S. federal statutory rate of 34%	$	2,553,673		$	2,302,490		$	7,296,453		$	6,522,268

Tax rate difference between the US and PRC on foreign earnings		(675,972	)		(609,483	)		(1,931,414	)		(1,726,483	)
Change in valuation allowance		32,563			26,221			122,215			116,416
Other		(8,618	)		(23,019	)		(32,296	)		(46,227	)

	$	1,901,646		$	1,696,209		$	5,454,958		$	4,865,974

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(10)	Income Taxes, continued

At September 30, 2012 and December 31, 2011, differences between the basis of assets and liabilities reported in the accompanying financial statements and those recognized for tax reporting purposes in the PRC, and the related deferred taxes were as follows:

	As of			As of
	September 30,			December 31,
	2012			2011
Deferred tax assets:
Net operating losses	$	1,187,946		$	1,065,731
Liability for social insurance premiums and provident housing funds		75,000			75,000
Total deferred tax assets		1,262,946			1,140,731

Deferred tax liabilities:
Difference between book and tax amortization on mining rights		(387,446	)		(386,339	)
Total deferred tax liabilities		(387,446	)		(386,339	)

Net deferred tax assets before valuation allowance		875,500			754,392
Valuation allowance		(1,187,946	)		(1,065,731	)
Net deferred tax liabilities	$	(312,446	)	$	(311,339	)

The Company accounts for uncertainty in income taxes in accordance with applicable accounting standards, which prescribe a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These accounting standards also provide guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Based on the Company’s evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its financial statements.

(11)	Shareholders’ Equity

General Reserve Fund

In accordance with the PRC Regulations on Enterprises with Foreign Investment, an enterprise established in the PRC with foreign investment is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A WOFE is required to allocate at least 10% of its annual after-tax profit to the General Reserve Fund until the balance of such fund has reached 50% of its respective registered capital. A non- wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. Appropriations to the Enterprise Expansion Fund and Staff Welfare and Bonus Fund are at the discretion of the board of directors for all foreign invested enterprises. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. As a result, $496,396 has been appropriated to the accumulated statutory reserves (included in the retained earnings) by the Company as of September 30, 2012 and December 31, 2011 and the balance represents a fully funded General Reserve Fund:

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(11)	Shareholders’ Equity

Following is an analysis of the general fund by subsidiary as of September 30, 2012 and December 31, 2011:

	Registered		General
	Capital		Reserve Fund

Jiangmen Huiyuan	$	-	$	-
Jiangmen Wealth Water		61,981		38,801
Guizhou Yufeng		61,981		39,211
Shangxi Wealth		619,806		418,384

	$	743,768	$	496,396

(12)	Related Party Balances and Transactions

During the nine months ended September 30, 2011, the Company declared and paid a dividend in the amount of $290,072 to Mr. Ming Zhou Tan (“Mr. Tan”) to acquire his remaining 38% equity interest in Shanxi Wealth. As of September 30, 2012 and December 31, 2011, the amount due to shareholders totaled $15,266.

During the nine months ended September 30, 2011, the Company entered into a $4.76 million (RMB30,000,000) revolving credit agreement with Industrial and Commercial Bank of China Limited (“ICBC”); a $19 million (RMB120,000,000) short-term note agreement with Industrial Bank Co., Limited (“IB”), and a $12.66 million (RMB80,000,000) short-term note agreement with Industrial Bank Co., Limited (“IB”), all these debts are personally guaranteed by Mr. Tan and Ms. Du, and contains no maintenance covenants.

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(13)	Segment Information

The Company follows FASB ASC 280-Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance. The Company has three operating segments identified by manufacturing facility and each segment is operated in a separate subsidiary. The Company primarily evaluates performance based on income before income taxes and excluding non-recurring items. The operations and products produced by the Company’s various segments are as follows:

●

Jiangmen Wealth Water produces water purification agents for specific industrial uses such as the treatment of waste water from paper mills, decolorization agent to treat waste water that contains active dyes, acid dyes and direct dyes produced in the textile and printing industry, and other industry specific water purification applications. The Company uses HAC powder produced by the Guizhou Yefeng segment in the production of its water purification agents.

●	Guizhou Yefeng produces HAC powder from calcium and aluminum derived from its limestone and bauxite mines. The HAC powder is used by Jiangmen Wealth Water in the production of its water purification agents and is also sold to outside customers for waste water treatment.

●	Shanxi Wealth produces HAC powder from calcium and aluminum derived from its limestone and bauxite mines. The HAC powder is sold to outside customers for waste water treatment.

●	Other represents the cost of corporate activities and eliminations

The segment data presented below was prepared on the same basis as the Company’s consolidated financial statements:

For the three months ended September 30, 2012

	Jiangmen
	Wealth		Guizhou		Shanxi
	Water		Yefeng		Wealth		Corporate			Eliminations			Total

Net revenue	$	11,510,345	$	4,596,526	$	9,024,816	$	-		$	(2,724,358	)	$	22,407,329
Cost of revenue		7,307,167		2,459,220		5,266,179		-			(2,724,358	)		12,308,208

Gross profit		4,203,178		2,137,306		3,758,637		-			-			10,099,121

Selling and marketing		331,546		85,957		380,171		-			-			797,674
General and administrative		734,084		159,289		318,260		279,309			-			1,490,942
Research and development		142,394		8,782		-		-			-			151,176

Income from operations	$	2,995,154	$	1,883,278	$	3,060,206	$	(279,309	)	$	-		$	7,659,329

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(13)	Segment Information, continued

For the three months ended September 30, 2011

	Jiangmen		Guizhou		Shanxi
	Wealth Water		Yefeng		Wealth		Corporate			Eliminations			Total

Net revenue	$	10,581,290	$	3,731,506	$	7,016,284	$	-		$	(1,994,027	)	$	19,335,053
Cost of revenue		6,223,213		2,060,388		4,470,020		-			(1,994,027	)		10,759,594

Gross profit		4,358,077		1,671,118		2,546,264		-			-			8,575,459

Selling and marketing		306,085		73,388		189,100		-			-			568,573
General and administrative		536,415		157,407		282,547		208,578			-			1,184,947
Research and development		140,543		8,648		-		-			-			149,191

Income from operations	$	3,375,034	$	1,431,675	$	2,074,617	$	(208,578	)	$	-		$	6,672,748

For the nine months ended September 30, 2012

	Jiangmen		Guizhou		Shanxi
	Wealth Water		Yefeng		Wealth		Corporate			Eliminations			Total

Net revenue	$	32,700,226	$	12,667,891	$	23,460,362	$	-		$	(7,529,939	)	$	61,298,540
Cost of revenue		20,791,108		6,782,660		13,702,699		-			(7,529,939	)		33,746,528

Gross profit		11,909,118		5,885,231		9,757,663		-			-			27,552,012

Selling and marketing		918,796		240,411		1,059,061		-			-			2,218,268
General and administrative		1,665,657		463,650		921,164		776,176			-			3,826,647
Research and development		443,853		26,869		-		-			-			470,722

Income from operations	$	8,880,812	$	5,154,301	$	7,777,438	$	(776,176	)	$	-		$	21,036,375

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(13)	Segment Information, continued

For the nine months ended September 30, 2011

	Jiangmen
	Wealth		Guizhou		Shanxi
	Water		Yefeng		Wealth		Corporate			Eliminations			Total

Net revenue	$	28,619,169	$	10,397,210	$	19,753,559	$	-		$	(6,008,320	)	$	52,761,618
Cost of revenue		16,910,098		5,562,590		11,900,371		-			(6,008,320	)		28,364,739

Gross profit		11,709,071		4,834,620		7,853,188		-			-			24,396,879

Selling and marketing		810,449		220,254		559,897		-			-			1,590,600
General and administrative		1,376,876		457,638		826,099		686,671			-			3,347,284
Research and development		416,126		22,810		-		-			-			438,936

Income from operations	$	9,105,620	$	4,133,918	$	6,467,192	$	(686,671	)	$	-		$	19,020,059

As of September 30, 2012

	Jiangmen
	Wealth		Guizhou		Shanxi
	Water		Yefeng		Wealth		Corporate		Eliminations			Total

Current assets	$	26,480,907	$	15,327,185	$	24,955,399	$	5,773,629	$	(13,468,339	)	$	59,068,781
Property, plant and equipment,
land use and mining rights		2,728,966		4,663,300		6,475,363		-		-			13,867,629
Other long-term assets		31,650,477		-		-		-		-			31,650,477

Total assets	$	60,860,350	$	19,990,485	$	31,430,672	$	5,773,629	$	(13,468,339	)	$	104,586,887

Item 2.

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

The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.

Company Overview

We are a leading producer and distributer of water purifying agent and High-performance Aluminate Calcium (HAC) powder, the core component of water purifying agent. We manufactured and distributed approximately 180,000 and 235,000 tons water purifying agent and 178,000 and 227,000 tons of high calcium aluminates powder for the past two years. Our products are distributed in the southern, south-western, mid-eastern, and eastern part of China. We supply water purifying products for industries such as printing and dyeing, paper making, municipal wastewater, phosphorus removal, and oil removal from washing water.

Our products are manufactured and distributed by our Operating Companies. Jiangmen Wealth Water is engaged in the production and sale of water purifying agents. Water purifying agent’s core raw material is HAC powder, which is exclusively supplied by Guizhou Yufeng, a wholly owned subsidiary of Jiangmen Wealth Water. Although Guizhou Yufeng sells HAC powder to third party customers, it prioritizes the supply to Jiangmen Wealth Water over third party customers and ensures that its supply meets the demand of Jiangmen Wealth Water before products being sold to other customers. Shanxi Wealth also manufactures HAC powder and distributes all of its products to third party customers. HAC powder’s core raw materials are aluminates ore and limestone, respectively obtained from their self-owned mines.

Results of Operations

The following table shows key components of our results of operations during the three months and nine months ended September 30, 2012 and 2011, in both dollars and as a percentage of our total revenue.

	Three Months Ended June 30,
	2012			% of			2011		% of
	2012			Revenue			2011		Revenue

Net revenue	$	22,407,329			100.00	%	$	19,335,053		100.00	%
Cost of revenue		12,308,208			54.93	%		10,759,594		55.65	%

Gross profit		10,099,121			45.07	%		8,575,459		44.35	%

Operating expenses:
Selling and marketing		797,674			3.56	%		568,573		2.94	%
General and administrative		1,490,942			6.65	%		1,184,947		6.13	%
Research and development		151,176			0.67	%		149,191		0.77	%
Total operating expenses		2,439,792			10.88	%		1,902,711		9.84	%

Income from operations		7,659,329			34.19	%		6,672,748		34.51	%

Other income/(expense)
Interest income		79,596			0.36	%		99,281		0.51	%
Interest expense		(228,123	)		(1.02	)%		-		0.00	%
Total other income/(expense)		(148,527	)		(0. 66	)%		99,281		0.51	%

Income before provision for income taxes		7,510,802			33.53	%		6,772,029		35.02	%

Provision for income taxes		1,901,646			8.49	%		1,696,209		8.77	%

Net income	$	5,609,156			25.04	%	$	5,075,820		26.25	%

	Nine Months Ended September 30,
	2012			% of			2011		% of
	2012			Revenue			2011		Revenue

Net revenue	$	61,298,540			100.00	%	$	52,761,618		100.00	%
Cost of revenue		33,746,528			55.05	%		28,364,739		53.76	%

Gross profit		27,552,012			44.95	%		24,396,879		46.24	%

Operating expenses:
Selling and marketing		2,218,268			3.62	%		1,590,600		3.01	%
General and administrative		3,826,647			6.24	%		2,347,284		6.34	%
Research and development		470,722			0.77	%		438,936		0.83	%
Total operating expenses		6,515,637			10.63	%		5,376,820		10.18	%

Income from operations		21,036,375			34.32	%		19,020,059		36.06	%

Other income /(expense)
Interest income		708,023			1.16	%		163,084		0.31	%
Interest expense		(284,243	)		(0.46	)%		-		0.00	%
Total other income		423,780			0.70	%		163,084		0.31	%

Income before provision for income taxes		21,460,155			35.01	%		19,183,143		36.37	%

Provision for income taxes		5,454,958			8.90	%		4,865,974		9.22	%

Net income	$	16,005,197			26.11	%	$	14,317,169		27.15	%

Three Months and Nine Months Ended September 30, 2012 and September 30, 2011:

Revenue:

Revenue increased by $3,072,276 or 16%, to $22,407,329 for three months ended September 30, 2012 from $19,335,053 for the three months ended September 30, 2011, and increased by $8,536,922 or 16% to $61,298,540 for the nine months ended September 30, 2012 from $52,761,618 for the nine months ended September 30, 2011. The increase in revenue for the three months and nine months ended September 30, 2012 was primarily due to the appreciation of the average foreign currency exchange rate of RMB against US dollars, the increase of selling prices of purifying agents by approximately 3.5% and increase of selling prices of HAC powder by approximately 15%, the increases of sales contributed by sales generated from new customers and distributers, and overall increase in volume from our existing customers.

Our revenue from sales of water purifying agents for the three months ended September 30, 2012 was $11,510,345 and for the three months ended September 30, 2011 was $10,581,290, representing an increase of $929,055 or approximately 9%. Our revenue from sales of water purifying agents for the nine months ended September 30, 2012 was $32,700,226 and for the nine months ended September 30, 2011 was $28,619,169 representing an increase of $4,081,057 or approximately 14%. The increase in revenue for the three months and nine months ended September 30, 2012 was primarily due to the appreciation of the average foreign currency exchange rate of RMB against US dollars, the increase of selling prices of purifying agents by approximately 3.5% and expansion of our customer base and increased orders from our existing customers.

Our revenue from sales of HAC powder for the three months ended September 30, 2012 was $10,896,984 and for the three months ended September 30, 2011 was $8,753,763, representing an increase of $2,143,221 or approximately 24%. Our revenue from sales of HAC powder was $28,598,314 for the nine months ended September 30, 2012 and was $24,142,449 for the nine months ended September 30, 2011, representing an increase of $4,455,865 or approximately 18%. The increase in revenue for the three months and nine months ended September 30, 2012 was primarily due to the appreciation of the average foreign currency exchange rate of RMB against US dollars, the increase of selling prices of HAC powder by approximately15%, and increased orders from our existing customers.

Cost of Revenue:

Cost of revenue increased by $1,548,614, or 14%, to $12,308,208 for the three months ended September 30, 2012 from $10,759,594 for the three months ended September 30, 2011 and increased by $5,381,789, or 19%, to $33,746,528 for the nine months ended September 30, 2012 from $28,364,739 for the nine months ended September 30, 2011. The increase in the cost of revenue was mainly due to the increase in sales of our products, which was in line with the increase of our revenue, and the increase of raw material prices.

Cost of revenue from sales of water purifying agents for the three months ended September 30, 2012 was $4,582,809, an increase of $353,623 or 8%, from $4,229,186 for the same period in 2011. Cost of revenue from sales of water purifying agents for the nine months ended September 30, 2012 was $13,261,169, an increase of $2,359,391 or 22%, from $10,901,778 for the same period in 2011. As a percentage of net revenue, cost of revenue from sales of water purifying agents was 40% for the three months ended September 30, 2012 and 2011, 41% and 38% for the nine months ended September 30, 2012 and 2011, respectively. The increase of cost of revenue from sales of water purifying agents was primarily attributable to the increase of our revenue from sales of water purifying agents, and the increase of raw material prices, labor and overhead cost.

Cost of revenue from sales of HAC powder for the three months ended September 30, 2012 was $7,725,399, an increase of $1,194,991 or 18%, from $6,530,408 for the same period in 2011. Cost of revenue from sales of HAC powder for the nine months ended September 30, 2012 was $20,485,359, an increase of $3,022,398 or 17%, from $17,462,961 for the same period in 2011. As a percentage of net revenue, cost of revenue from sales of HAC powder approximated 71% and 75% for the three months ended September 30, 2012 and 2011, respectively, and 72% for the nine months ended September 30, 2012 and 2011. The increase of cost of revenue from sales of HAC powder was primarily attributable to the increase of our revenue from sales of HAC powder, and the increase of raw material prices, labor and overhead cost.

Gross profit and Gross Profit Margin:

Our gross profit increased by $1,523,662 or 18% to $10,099,121 for the three months ended September 30, 2012 from $8,575,459 for the three months ended September 30, 2011, and increased by $3,155,133 or 13% to $27,552,012 for the nine months ended September 30, 2012 from $24,396,879 for the nine months ended September 30, 2011. Our gross profit margin (gross profit divided by net revenue) increased to 45.07% for the three months ended September 30, 2012 from 44.35% for the three months ended September 30, 2011. The increase in gross margin for the three months ended September 30, 2012 was primarily due to increase in sales price. Our gross margin decreased to 44.95% for the nine months ended September 30, 2012 from 46.24% for the nine months ended September 30, 2011. The decrease in gross margin for the nine months ended was primarily due to the increases in raw materials, labor and overhead cost, which appreciated at a faster pace than the increase of our sales price.

Selling and Marketing Expenses:

Our selling and marketing expenses increased by $229,101 or 40% to $797,674 for the three months ended September 30, 2012 from $568,573 for the three months ended September 30, 2011 and increased by $627,668 or 39% to $2,218,268 for the nine months ended September 30, 2012 from $1,590,600 for the nine months ended September 30, 2011. The increase in our selling and marketing expenses in 2012 was primarily attributable to increase of commission expense related to the establishment of commission policy in Shanxi Wealth beginning January 2012.

General and Administrative Expenses:

Our general and administrative expenses increased by $305,995 or 26% to $1,490,942 for the three months ended September 30, 2012 from $1,184,947 for the three months ended September 30, 2011 and increased by $479,363 or 14% to $3,826,647 for the nine months ended September 30, 2012 from $3,347,284 for the nine months ended September 30, 2011. The increase in our general and administrative expenses was primarily attributable to the increase in our overall expenses including payroll, benefits and other office expenses.

Research and Development Cost:

Our research and development cost increased by $1,985 or 1% to 151,176 for the three months ended September 30, 2012 from $149,191 for the three months ended September 30, 2011 and increased by $31,786 or 7% to $470,722 for the nine months ended September 30, 2012 from $438,936 for the nine months ended September 30, 2011. We continue to incur expenses to improve and develop new products. We expect to continue to increase our research and development efforts to enhance the competitiveness of our products.

Other income (Expense):

Our other income decreased by $247,808, or 250% to expense of $148,527 for the three months ended September 30, 2012 from income of $99,281 for the three months ended September 30, 2011, the decrease was primarily due to increase in interest expenses on short term loan. Other income for the nine months ended September 30, 2012 increased by $260,696, or 160% to $423,780 from $163,084 for the nine months ended September 30, 2011. The increase was primarily due to the increase in cash balance in banks as a result of our continuous increase in profits and interest income earned at a rate of 9% on a secured note receivable in the amount of $25 million which generated approximately $541,000 in interest income for the nine months ended September 30, 2012, which offset by increased in interest expense for short-term loans in the amount of $284,243.

Net Income:

Net income increased by $533,336 or 11% to $5,609,156 for the three months ended September 30, 2012 from $5,075,820 for the three months ended September 30, 2011, and increased by $1,688,028 or 12% to $16,005,197 for the nine months ended September 30, 2012 from $14,317,169 for the nine months ended September 30, 2011. The increase of our net income was primarily due to the increase in sales price and demand of our products during 2012. Our cost of revenue increased 19% during the nine months ended September 30, 2012 due to the increases in raw material cost, labor and overhead cost which caused our gross profit to be lower than that of the same period of 2011.

Liquidity and Capital Resources

We had an unrestricted cash balance of approximately $55 million as of September 30, 2012, as compared to $26 million as of December 31, 2011. In addition, we also had approximately $120,000 in restricted cash as of September 30, 2012, as compared to $670,000 as of December 31, 2011. Our restricted cash is held by Access America Investments, LLC (“AAI”) as a security deposit for investor relation firm pursuant to a Holdback Escrow Agreement entered into in connection with the Private Placement in December 2010. A total of $2,167,203 was deposited with Anslow & Jaclin, LLP (“A&J”), the escrow agent to be distributed upon the satisfaction of certain covenants set forth in the Subscription Agreement. Pursuant to the Holdback Escrow Agreement, $1,500,000 shall be released to the Company upon the hiring of a chief financial officer on terms acceptable to AAI (the “Chief Financial Officer Holdback”) and $667,203 shall be released to us upon appointment of the required independent directors to our board of directors. In March 2011, pursuant to the Holdback Escrow Agreement, $667,203 was released to us upon appointment of the required independent directors to our board of directors.

On May 20, 2011, the Holdback Escrow Agreement was amended to provide that as soon as practicable following the Offering, the Company shall employ a chief financial officer meeting certain requirements and to permit the “Lead Investor” (as defined in the Subscription Amendment) to authorize the escrow agent appointed pursuant to the Holdback Escrow Agreement to disburse a portion of the Chief Financial Officer Holdback, such portion not to exceed $750,000 in the aggregate, to the Company (a “Good Faith Disbursement”). Pursuant to Holdback Escrow Agreement, as amended on May 20, 2011, $750,000 was released to us as Good Faith Disbursement. On December 1, 2011, the Holdback Escrow Agreement was further amended to provide for a series of disbursements from the Chief Financial Officer Holdback to the Company of $100,000 commencing on December 1, 2011 and continuing on the first day of each successive month thereafter until the remaining balance of the Chief Financial Officer Holdback is disbursed to the Company (the “Monthly Disbursements”). As of September 30, 2012, all funds related to the Holdback Escrow Agreement were released. $120,000 remained unreleased pursuant to a separate Investor Relations Escrow Agreement pending hiring of an investor relations firm by the Company and subject to the consent of AAI as the investor representative.

Our funds are kept in financial institutions located in China, and banks and other financial institutions in the PRC, which do not provide insurance for funds held on deposit. In the event of a bank failure, we may incur loss for our funds on deposit. In addition, we are subject to the regulations of the PRC, which restrict the transfer of cash from China, except under certain specific circumstances. Accordingly, such funds may not be readily available to us to satisfy obligations that have been incurred outside the PRC.

We had working capital of approximately $39.8 million and $54.2 million as of September 30, 2012 and December 31, 2011, respectively. The decrease of working capital was primarily due to the increase in cash flow used in long-term assets as refundable security deposit for assets purchase.

Our accounts receivable has been a small portion of our current assets, representing $3.2 million and $2.4 million, or 5.42% and 3.98% of current assets, as of September 30, 2012 and December 31, 2011, respectively. We began to offer longer credit terms to our good standing customers starting in 2011 per the requests of our customers due to the tightening monetary policies imposed by the Government in 2011. If customers responsible for a significant amount of accounts receivable were to become insolvent or otherwise unable to pay for our products, or to make payments in a timely manner, our liquidity and results of operations could be adversely affected. An economic or industry downturn could materially adversely affect the servicing of these accounts receivable, which could result in longer payment cycles, increased collections costs and defaults in excess of management’s expectations. A significant deterioration in our ability to collect on accounts receivable could affect our cash flow and working capital position and could also impact the cost or availability of financing available to us.

We provide our major customers with payment terms ranging from 30 to 90 days. It takes approximately one day to mine our raw materials and deliver the raw materials to our Guizhou and Shanxi facilities. We can manufacture the HAC powder and water purification agent within one day. Therefore the average time from mining the raw materials to completion of our products is approximately 2 days. Depending on the locations of our customers, delivery time ranges between a few hours to three days. We have frequent communications with our customers about their needs for our products. Our customers send us purchase orders 2 to 4 weeks prior to the requested delivery dates. We typically estimate our required raw materials for production at each month end for the following month based on the purchase orders received at month end. Since our production lead time for HAC powder and purifying agent is very short, we keep relatively small amounts of inventories. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Allowance for doubtful accounts is based on our assessment of the aging of accounts receivable, the collectability of specific customer accounts, our history of bad debts, and the general condition of the industry.

Our aging of accounts receivables could result in our inability to collect receivables requiring us to increase our doubtful accounts reserve, which would decrease our net income and working capital. We experienced no bad debt expense during nine months ended September 30, 2012 and the year ended December 31, 2011. As of September 30, 2012, we believed it was appropriate not to recognize bad debt expense primarily due to the subsequent collections made on our receivable balance and our historical ability to collect our accounts receivable. Bad debt expense was $0 for the nine months ended September 30, 2012 and the year ended December 31, 2011.

On August 29, 2011, we entered into a secured note receivable agreement with a non-related party in the amount of $14,087,748 (RMB90,000,000) which was increased to approximately $25,187,727 (RMB160,000,000) in December 2011. The note carried an annual interest rate of 9%. This note originally expired on November 28, 2011 but was extended to March 31, 2012, and was secured by the debtor’s land use right, certain tangible assets and all the business operation rights. Interest receivable related to this note amounted to $156,085 as of December 31, 2011. As of March 28, 2012, the note receivable was fully repaid. Through this note, we are able to earn interest income with our cash at a much higher interest rate than what is being offered by our banks which is generally less than 1% annual interest rate. During the nine months ended September 30, 2012, we earned approximately $541,000 in interest income on this note receivable.

Inventories amounted to approximately $1.2 million as of September 30, 2012, as compared to $0.96 million as of December 31, 2011. Since our mines can provide stable and sufficient supplies of raw materials for our productions and our stable relationship with other suppliers, we have not experienced any shortage in raw materials as our sales continue to grow. We do not need to maintain large amounts of raw materials. We might expect to experience increase in our inventory levels in future, including both of raw material and finished goods to meet the market demands.

On August 28, 2012, we entered into a purchase agreement with a non-related party for an Aluminum Bauxite mining right located in Guizhou Province, PRC in the total amount of approximately $83 million (RMB520,000,000). In accordance with PRC regulations on natural resources, the transaction is subject to the Ministry of Land and Resources of the PRC for final approval. Pursuant to the purchase agreement, we paid $31,650,477 (RMB200,000,000) security deposit for the transaction, and is secured by the seller’s Mining Right Certificate. The security deposit is fully refundable with applicable interest if the transaction is rejected by the Ministry of Land and Resources of the PRC. Through this purchase, we would be better able to secure our raw materials for our HAC powder productions and maintain our cost in a competitive level.

In February 2012, we entered into a revolving credit agreement with Industrial and Commercial Bank of China Limited (“ICBC”), in the amount of approximately $4,755,209 (RMB30,000,000) with one year maturity, The interest rate under the revolving credit agreement is based on the base rate, the interest rate set by the People’s Bank of China, plus 30% of the base rate. As of September 30, 2012, the available borrowing base under revolving line-of-credit was $4.76 million, with $0 drawn as of that date, leaving $4.76 million available for general operations use under this revolving credit agreement. Loan amount drawn in pervious periods was paid in full as of September 30, 2012.

On June 18, 2012, we entered into a short-term note agreement with Industrial Bank Co., Limited (“IB”) with one year maturity, in the amount of approximately $19,020,839 (RMB120,000,000). The interest rate under the note is based on the base rate, the interest rate set by the People’s Bank of China, plus 10% of the base rate. During the three months ended September 30, 2012, the principle and interest of the note was fully paid.

On August 29, 2012, we entered into a new short-term note agreement with Industrial Bank Co., Limited (“IB”) with lower in interest rate, in the amount of approximately $12,660,191 (RMB80,000,000). The interest rate under the short-term note agreement is based on the base rate, the interest rate set by the People’s Bank of China. Both revolving credit agreement and short-term note agreement are personally guaranteed by Mr. Tan and Ms. Du and contain no maintenance covenants. Through these financing arrangements, we are able to seek new opportunities for investments or acquisitions with lower in interest expense. Interest under the short term note is paid monthly at the ended of each month. As of September 30, 2012, all interest was fully paid.

We are required to contribute for our employees to the Chinese government’s social insurance funds, including pension insurance, medical insurance, unemployment insurance, job injuries insurance, maternity insurance, and housing provident funds in accordance with relevant regulations. Total contributions to the funds are approximately $937,966 for the nine months ended September 30, 2012. We expect that the amount of our contribution to the government’s social insurance funds and housing provident funds will increase in the future as we expand our workforce and operations. In the years prior to December 31, 2010, we have approximately $300,000 of unpaid social insurance premiums and housing provident funds and potential penalties which are included in the accrued expenses.

The ability of the Company to pay dividends may be restricted due to the foreign exchange control policies and availability of cash balance of the Chinese operating subsidiaries. A majority of our revenue being earned and currency received are denominated in RMB, which is subject to the exchange control regulation in China, and, as a result, we may unable to distribute any dividends outside of China due to PRC exchange control regulations that restrict our ability to convert RMB into US Dollars. Accordingly, the Company’s funds may not be readily available to us to satisfy obligations which have been incurred outside the PRC, which could adversely affect our business and prospects or our ability to meet our cash obligations.

Future Capital Expenditures

In future years, as we accelerate expansion, we expect continued capital expenditure for adding manufacturing equipment, expanding workshops and harbors, and modernizing existing equipment. We believe that such expansion will have a material impact on liquidity, capital resources and/or results of operation. However, we believe our existing cash, cash equivalents and cash flows from operations and proceeds from the completed financing in December 2010 will be sufficient to meet our presently anticipated future cash needs to bring all of our facilities into full production. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue.

It is management’s intention to expand our operations as quickly as reasonably practicable to capitalize on the demand opportunity for our products. We regularly review our cash funding requirements and attempt to meet those requirements through a combination of cash on hand, cash provided by operations and available borrowings under bank lines of credit. We believe that we can continue meeting our cash funding requirements for our business in this manner over the next twelve months.

We do not have a present plan with respect to steps to expand our production or a reasonable estimate of the capital expenditures associated with the expansion.

Cash Flow

	Nine Months Ended September 30,
	2012			2011
Net cash provided by operating activities	$	21,323,402		$	8,345,915
Net cash used for investing activities		(6,549,865	)		(14,065,203	)
Net cash provided by financing activities		13,231,504			1,127,144
Effect of exchange rate changes on cash and cash equivalents		91,887			856,013
Cash and cash equivalents at the beginning of period		26,383,537			33,910,457
Cash and cash equivalents at the end of period	$	54,480,465		$	30,174,326

Net cash provided by operating activities was $21.3 million for the nine months ended September 30, 2012, compared to net cash provided by operating activities of $8.3 million for the nine months ended September 30, 2011. The increase of net cash provided by operating activities was primarily due to decrease of advance to suppliers in the amount of $3.9 million in 2012, which offset by increased of account receivable $0.9 million in 2012 compared to $4.6 million in 2011, which such effects from operating activities were partially offset by an increase in our net income to $16 million in 2012 and $14.2 in 2011.

Investing activity during the nine months ended September 30, 2012 included cash collected on the note receivable in the amount of $25.4 million and cash used in security deposit for purchase of mining right in the amount of $31.7 million. In addition, we purchased equipments of $209,113 and $290,829 during the nine months ended September 30, 2012 and 2011, respectively.

Financing activities included releases of restricted cash pursuant to the Holdback Escrow Agreements and related Amendments to the original agreements in the amounts of $550,000 and $1,417,203 during the nine months ended September 30, 2012 and 2011, respectively. In addition, we received proceed from the short-term note and line of credit of $35,191,174 and made repayments of $22,509,670 during the nine months ended of September 30, 2012.

Based upon our present plans, we believe that cash on hand and cash flow from operations will be sufficient to fund our current capital needs. We expect that our primary sources of funding this year will be from cash flow from operations. However, our ability to maintain sufficient liquidity depends partially on our ability to achieve anticipated levels of revenue, while continuing to control our cost of revenue and other operating expenses. If we do not have sufficient cash, we would have to obtain additional debt financing or equity financing through other external sources, which may not be available on acceptable terms, or at all. Failure to maintain financing arrangements on acceptable terms would have a material adverse effect on our business, results of operations and financial condition.

Reconciliation of the Effect of Exchange Rates on Cash and Cash Equivalents

Our cash accounts are denominated in RMB and the absolute amount of RMB that we hold is unaffected by the change in the exchange rate of the RMB, our functional currency, as compared to the US Dollar, our reporting currency. The effect of exchange rate changes on cash represents changes in the value of our cash accounts because the USD to RMB exchange rate has changed during the reporting periods. When the USD declines in value against the RMB, the translation of our financial statements at year end exchange rates yields an increase in the reported amount of cash in USD. A summary of the effect of exchange rates on cash and cash equivalents follows:

	Nine Months Ended September 30,
	2012			2011

Effect on beginning cash at period end exchange rate	$	138,594		$	944,951
Effect from operating activities during the period		(36,401	)		135,562
Effect from investing activities during the period		11,008			(219,921	)
Effect from financing activities during the period		(21,313	)		(4,579	)
Effect of exchange rate changes on cash	$	91,887		$	856,013

Critical Accounting Policies, Estimates and Assumptions

The SEC defines critical accounting policies as those that are, in management’s view, most important to the portrayal of our financial condition and results of operations and those that require significant judgments and estimates.

The discussion and analysis of our financial condition and results of operations is based upon our financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of inventory, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.

Revenue recognition. We recognize revenue from the sales of products. Sales are recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectivity is reasonably assured. Revenue is presented net of value added tax (“VAT”), sales rebates and returns. No return allowance is made as product returns are insignificant based on historical experience.

Allowance for doubtful accounts. In estimating the collectability of accounts receivable we analyze historical write-offs, changes in our internal credit policies and customer concentrations when evaluating the adequacy of our allowance for doubtful accounts. Differences may result in the amount and timing of expenses for any period if we make different judgments or use different estimates. Our accounts receivable represent a significant portion of our current assets and total assets. Our realization on accounts receivable, expressed in terms of United States dollars may be affected by fluctuations in currency rates since the customer’s currency is frequently a currency other than United States dollars.

Inventories. Inventories comprise of raw materials and finished goods which are stated at the lower of cost or market. Substantially all inventory costs are determined using the weighted average basis. Costs of finished goods include materials, direct labor, and manufacturing overhead before the goods are ready for sale. Inventory costs do not exceed net realizable value.

Taxation

Cayman Islands

The Government of the Cayman Islands does not, under existing legislation, impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon us or our shareholders. The Cayman Islands are not party to a double tax treaty with any country that is applicable to any payments made to or by us.

We have received an undertaking from the Governor-in-Cabinet of the Cayman Islands that, in accordance with section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, for a period of 20 years from April 2006 no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable (i) on or in respect of our shares, debentures or other obligations or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by us to our shareholders or a payment of principal or interest or other sums by us due under a debenture or other obligation.

Hong Kong

Our indirect subsidiary, Wealth Environmental Technology, was incorporated in Hong Kong and under the current laws of Hong Kong, is subject to Profits Tax of 16.5%. No provision for Hong Kong Profits Tax has been made as Wealth Environmental Technology has no taxable income.

China

Before the implementation of the New EIT Law, 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%, which included a 30% state income tax and a 3% local income tax. On March 16, 2007, the National People’s Congress of China passed the New EIT Law, and on November 28, 2007, the State Council of China passed the EIT Law Implementing Rules which took effect on January 1, 2008. The EIT Law and its implementing rules impose a unified EIT of 25% on all domestic-invested enterprises and FIEs, unless they qualify under certain limited exceptions.

In addition to the changes to the current tax structure, under the New 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 “Risk Factors – Risks Related to Our Business – Under the New Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China contained in our Current Report on Form 8-K dated December 15, 2010, as amended. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders.

In addition, the New EIT Law and its implementing rules generally provide that a 10% withholding tax applies to China-sourced income derived by non-resident enterprises for PRC enterprise income tax purposes unless the jurisdiction of incorporation of such enterprises’ shareholder has a tax treaty with China that provides for a different withholding arrangement. In this regard, we expect that 10% withholding tax will apply to dividends paid to Wealth Environmental Technology by Jiangmen Huiyuan.

Our future effective income tax rate depends on various factors, such as tax legislation, the geographic composition of our pre-tax income and non-tax deductible expenses incurred. Our management carefully monitors these legal developments and will timely adjust our effective income tax rate when necessary.

Recently Issued Accounting Pronouncements Not Yet Adopted

The Company will apply these amendments for reporting periods beginning after December 31, 2012. The Company does not expect the adoption of the amendments to have a material impact on the Company's consolidated financial.

Off Balance Sheet Transactions

We do not have any off-balance sheet transactions.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange Rates Risk

Substantially all of our operating revenues and expenses are denominated in RMB. We operate using RMB and the effects of foreign currency fluctuations are largely mitigated because local expenses in the PRC are also denominated in the same currency. We do not believe that we currently have any significant direct foreign exchange risk and have not hedged exposures denominated in foreign currencies or any other derivative financial instruments. Because we generally receive cash flows denominated in RMB, our exposure to foreign exchange risks should be limited.

Our assets and liabilities, of which the functional currency is the RMB, are translated into USD using the exchange rates in effect at the balance sheet date, resulting in translation adjustments that are reflected as cumulative translation adjustment in the shareholders’ equity section on our consolidated balance sheets. A portion of our net assets are impacted by changes in foreign currencies translation rates in relation to the U.S. dollar. For the three months ended September 30, 2012, we had unrealized foreign currency translation loss of $127,092 compared to had unrealized gain of $633,699 in the same period in 2011, because of the change in the exchange rate. For the nine months ended September 30, 2012 and 2011, we had unrealized foreign currency translation gain of $350,325 and $1,583,689, because of the change in the exchange rate.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. The conversion of the RMB into foreign currencies, including U.S. dollars, has been based on rates set by the People’s Bank of China.

Interest Rate Risk

We have interest-rate risk exposure for changes in interest rates relating to our outstanding borrowings. We did not use any interest – rate hedging contracts to manage our exposure to changing interest rates. As of September 30, 2012, we had approximately $12.7 million of debt outstanding at a weighted average interest rate of 7.13%. A one percentage change in the weighted average rate would affect annual interest by approximately $127,000.

Inflation risk

According to the National Bureau of Statistics of China, the consumer price index grew 2.7% in 2012. While this rate of inflation represents a decline compared to the rate for the previous quarter, there may be further increased inflation in the future, which could have a material adverse effect on our business.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures. We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Our President and Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures as of September 30, 2012, pursuant to Rule 13a-15(b) under the Exchange Act. Based on that evaluation, the President and Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective to ensure that information required to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms due to material weakness related to a lack of accounting personnel with sufficient experience in maintaining books and records and preparing financial statements in accordance with U.S. GAAP, which existed as of December 31, 2011, that have not been fully remediated as of September 30, 2012.

Remediation Activities

We implemented or in the process of implementing the following steps to remediate the material weakness identified above:

(1) We hired a consultant with extensive experience in U.S. GAAP and SEC reporting to better improve our knowledge of U.S. GAAP and SEC reporting;

(2) We hired a qualified chief financial officer in June 2011 to improve our internal control over financial reporting; and

(3) We plan to provide training to our accounting personnel to improve their knowledge of U.S. GAAP.

However there is no guarantee that such remediation activities can effectively cure our material weakness as identified above.

Changes in Internal Control over Financial Reporting

No changes were made to our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the quarter ended September 30, 2012, the Company's management implemented or continued to implement the steps set forth above under “Remediation Activities” to improve the quality of its Internal Control over Financial Reporting.

PART II—OTHER INFORMATION

Item 1A.

Risk Factors.

There are no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 29, 2012.

Item 6.

Exhibits.

(a) Exhibits

Exhibit Number		Description

31.1*		Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**		XBRL Instance Document
101.SCH**		XBRL Taxonomy Extension Schema Document
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document.
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document.

*Filed with this report.

**Furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise not subject to liability under these sections.

SIGNATURES

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

	HUIXIN WASTE WATER SOLUTIONS, INC.

Dated: November 13, 2012	By:	/s/ Mingzhuo Tan
		Mingzhuo Tan Chief Executive Officer, President and Chairman of the Board of Directors (Duly authorized officer and principal executive officer)

Dated: November 13, 2012	By:	/s/ Tin Nang (Chris) Lui
		Tin Nang (Chris) Lui Chief Financial Officer (Duly authorized officer, principal financial officer and chief accounting officer )

Huixin Waste Water Solutions, Inc. 10-Q