UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

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

For the transition period from ___________ to ___________

Commission file number 000-52339

Huixin Waste Water Solutions, Inc.

(Exact name of registrant as specified in its charter)

Cayman Islands		N/A
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
#99 Jianshe Road 3, Pengjiang District, Jiangmen City Guangdong Province, 529000 People’s Republic of China
(Address of principal executive offices and Zip Code)

+86 (750) 395-9988

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class registered:	Name of each exchange on which registered:
None	None

Securities registered pursuant to Section 12(g) of the Exchange Act:
Ordinary Shares, par value $ 0.00018254172 per share (Title of class)

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

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an 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 (Do not check if a smaller reporting company)	o	Smaller reporting company	x

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

State the aggregate market value of the voting and non-voting common equity held non-affiliates: none.

As of March 29, 2013 the registrant has 21,126,695 ordinary shares, par value $0.00018254172 per share, issued and outstanding.

Documents Incorporated by Reference

None.

TABLE OF CONTENTS

Item Number and Caption		Page

PART I

Item 1.	Business	1

Item 1A.	Risk Factors	16

Item 1B.	Unresolved Staff Comments	34

Item 2.	Properties	34

Item 3.	Legal Proceedings	47

Item 4.	Mine Safety Disclosures	47

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	48

Item 6.	Selected Financial Data	50

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	51

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	59

Item 8.	Financial Statements and Supplementary Data	59

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	59

Item 9A.	Controls and Procedures	59

Item 9B.	Other Information	60

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	61

Item 11.	Executive Compensation	66

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	67

Item 13.	Certain Relationships and Related Transactions, and Director Independence	69

Item 14.	Principal Accountant Fees and Services	73

PART IV

Item 15.	Exhibits, Financial Statement Schedules	F-1

SIGNATURES		76

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K 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 Annual Report on Form 10-K 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 Annual Report on Form 10-K. All subsequent written and oral forward-looking statements concerning other matters addressed in this Annual Report on Form 10-K 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 Annual Report on Form 10-K.

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.

USE OF CERTAIN DEFINED TERMS

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. (“Huixin”) and its consolidated subsidiaries, Wealth Environmental Protection, Wealth Environmental Technology, 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

●	“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;
●	“PRC”, “China”, and “Chinese” refer to the People’s Republic of China;
●	“PRC Operating Company” /”PRC Subsidiary” or “PRC Operating Companies” /”PRC Subsidiaries” refers to each of Jiangmen Huiyuan, Jiangmen Wealth Water, Guizhou Yufeng and Shanxi Wealth, individually or collectively;
●	“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;
●	“Star Prince” refers to Star Prince Limited, a British Virgin Island company and a shareholder of Wealth Environmental Protection;
●	“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;
●	“Wealth Environmental Protection Shareholders” refers to all shareholders of Wealth Environmental Protection, a British Virgin Islands company; and
●	“Wealth Environmental Technology” refers to Wealth Environmental Technology Holding, Ltd., a Hong Kong company.

PART I

ITEM 1.

BUSINESS.

Overview

We are a leading producer and distributer of water purifying agents and High-performance Aluminate Calcium (“HAC”) powder, the core component of water purifying agents.

Jiangmen Wealth Water, our PRC Operating Company, is solely engaged in the production and sale of water purifying agents, while Guizhou Yufeng and Shanxi Wealth, the subsidiaries of Jiangmen Wealth Water, specialize in the production and sale of HAC powder. The core raw material of our water purifying agent is HAC powder, exclusively supplied by Guizhou Yufeng. Guizhou Yufeng manufactures HAC powder using the raw materials of aluminum ore and limestone from its own mines. While selling 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 its products are sold to other customers.

Jiangmen Wealth Water’s self-owned production facilities are located at Jiangmen City, Guangdong Province, southeast China, covering an aggregate area of 36.84 mu (approximately 264,361.63 square feet). To expand our sales network and avoid high transportation costs arising from the delivery of liquid purifying agents to customers located in different geographic areas, Jiangmen Wealth Water has established production entrustment agreements with four water purifying agent production lines located at Zhaoqing City, Guangdong Province, Yibin City, Sichuan Province, Nanchang City, Jiangxi Province and Hangzhou City, Zhejiang Province (individually, the “Entrusted Production Line,” and collectively, the “Entrusted Production Lines”), that solely produce water purifying agents using our raw materials and pursuant to our production guidance and quality control standards.

Corporate History and Background

We were organized under the laws of the Cayman Islands on September 27, 2006 as a blank check development stage company formed for the purpose of acquiring an operating business, through a stock exchange, asset acquisition or similar business combination. On December 15, 2010, we completed a reverse acquisition transaction through a share exchange with Wealth Environmental Protection whereby we acquired 100% of the issued and outstanding capital stock of Wealth Environmental Protection. As a result of the reverse acquisition, Wealth Environmental Protection became our wholly-owned subsidiary. As a result of our reverse acquisition of Wealth Environmental Protection, we have assumed the business and operations of Jiangmen Huiyuan with our principle activities engaged in the manufacture of water purifying agents which are distributed in the southern, south-western, mid-eastern, and eastern part of China.

Wealth Environmental Protection was incorporated under the laws of British Virgin Islands on June 3, 2010 to serve as an investment holding company, and Wealth Environmental Technology was incorporated under the laws of Hong Kong by Wealth Environmental Protection on June 18, 2010. Jiangmen Huiyuan was incorporated under the laws of PRC on July 22, 2010, as wholly-owned subsidiary of Wealth Environmental Technology.

On September 29, 2010, Jiangmen Huiyuan entered into a series of contractual agreements with Jiangmen Wealth Water, a company incorporated under the laws of the PRC, 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. On December 27, 2010, Mr. Tan transferred all of his interest in Shanxi Wealth to Jiangmen Wealth Water, pursuant a share transfer agreement between Mr. Tan and Jiangmen Wealth Water, and Jiangmen Wealth Water became the sole shareholder of Guizhou Yufeng and Shanxi Wealth. As all of the companies are under common control, this has been accounted for as a reorganization of entities and the financial statements have been prepared as if the reorganization had occurred retroactively. We have consolidated the operating results, assets and liabilities of Jiangmen Wealth Water within our financial statements.

In August, 2010, Jiangmen Wealth Environmental Protection Co., Ltd. transferred (i) all its equity interests in Jiangmen Wealth Water to Mr. Minzhuo Tan and Ms. Hongyu Du and (ii) all its equity interests in Guizhou Yufeng to Jiangmen Wealth Water and, Jiangmen Wealth Water became the sole shareholder of Guizhou Yufeng. In September, 2010, Jiangmen Wealth Environmental Protection Stock Co., Ltd. and other minority shareholders of Shanxi Wealth transferred all their equity interests in Shanxi Wealth to Jiangmen Wealth Water and Jiangmen Wealth Water therefore became the 62% shareholder of Shanxi Wealth of which 38% equity interest were held by Mr. Mingzhuo Tan. In December 2010, Jiangmen Wealth Water became the 100% shareholder of Shanxi Wealth. Upon the completion of the said transfers, Jiangmen Wealth Environmental Protection Stock Co., Ltd. no longer held any equity interests in our PRC subsidiaries in the Corporate Structure.

As a result of our reverse acquisition of Wealth Environmental Protection, we have assumed the business and operations of Jiangmen Huiyuan with our principles activities engaged in the manufacture of water purifying agents which are distributed in the southern, south-western, mid-eastern, and eastern part of China.

Our Corporate Structure

All of our business operations are conducted through our PRC subsidiaries. The chart below presents our corporate structure:

● Wealth Environmental Protection was incorporated under the laws of British Virgin Islands on June 3, 2010 to serve as an investment holding company.

● Wealth Environmental Technology was incorporated under the laws of Hong Kong by Wealth Environmental Protection on June 18, 2010.

● Jiangmen Huiyuan was incorporated under the laws of PRC on July 22, 2010 as a wholly foreign owned enterprise.

(1)	On September 29, 2010, Jiangmen Huiyuan entered into an Exclusive Business Cooperation Agreement with Jiangmen Wealth Water, pursuant to which Jiangmen Huiyuan will provide Jiangmen Wealth Water with exclusive and complete business support, and technical and consulting services related to the principal business of Jiangmen Wealth Water.
(2)	On September 29, 2010, each of Jiangmen Huiyuan and Jiangmen Wealth Water entered into an Equity Interest Pledge Agreement with Mr. Mingzhuo Tan and Ms. Hongyu Du, respectively, pursuant to which Mr. Tan and Ms. Du pledged all of their equity interest in Jiangmen Wealth Water to Jiangmen Huiyuan to secure Jiangmen Water Wealth’s obligations under the Exclusive Business Cooperation Agreement. On September 29, 2010, the pledges were registered with the Pengjiang Branch of Jiangmen Administration of Industry and Commerce.
(3)	On September 29, 2010, Jiangmen Huiyuan and Jiangmen Wealth Water entered into an Exclusive Option Agreement with Mr. Tan and Ms. Du, respectively, pursuant to which Jiangmen Huiyuan obtained the exclusive option to purchase or designate another qualified person to purchased part or all of the equity interest that Mr. Tan and Ms. Du hold in Jiangmen Wealth Water to the extent permitted by the PRC law.
(4)	On September 29, 2010, each of Mr. Tan and Ms. Du signed a power of attorney which provides that Jiangmen Huiyuan has the power to act as his/her exclusive agent with respect to all matters related to his/her equity interest in Jiangmen Wealth Water while he or she is a shareholder of Jiangmen Wealth Water.
(5)	On December 27, 2010, pursuant a share transfer agreement between Mr. Tan and Jiangmen Wealth Water, Mr. Tan transferred all of his interest in Shan Xi Wealth to Jiangmen Wealth Water for the consideration of a cash payment of RMB 1.9 million (representing $290,520, based upon a conversion rate of 6.54.)

Recent Development

Share Exchange

On December 15, 2010 (the “Closing Date”), we entered into a share exchange agreement (the “Exchange Agreement”) with Wealth Environmental Protection, and Wealth Environmental Protection Shareholders. Pursuant to the terms of the Exchange Agreement, Wealth Environmental Protection Shareholders transferred to us all of the issued and outstanding ordinary shares of Wealth Environmental Protection, in exchange for the issuance of a total of 17,500,000 ordinary shares, par value $0.00018254172 per share (after giving effect to the Reverse Split as defined below), or 96.15% of the ordinary shares of the Company issued and outstanding after the Closing Date (such transaction is hereinafter referred to as the “Share Exchange”). Pursuant to the Exchange Agreement, Wealth Environmental Protection became our wholly-owned subsidiary. Wealth Environmental Protection holds all of the issued and outstanding capital stock of Wealth Environmental Technology, a company incorporated under the laws of Hong Kong, which is the holding company of Jiangmen Huiyuan which controls Jiangmen Wealth Water, a company organized under the laws of PRC by a series of contractual agreements and arrangements with Jiangmen Wealth Water and/or its shareholders. As a result of the Share Exchange, we are now the holding company of Jiangmen Huiyuan, an indirect wholly-owned subsidiary of Wealth Environmental Protection organized in the PRC.

Private Placement

On December 15, 2010, we completed a private placement transaction with a group of accredited investors. Pursuant to the subscription agreement with the investors (the “Subscription Agreement”), we issued to the investors an aggregate of 222,402 units for a purchase price of $6,672,031, or $30.00 per unit (the “Unit”) (such transaction is hereinafter referred to as the “Private Placement”). Each Unit consists of two preference shares with each preference share convertible into five (5) (after giving effect to the Reverse Split as defined below and subject to customary adjustments for stock splits, combinations, or equity dividends on ordinary shares) ordinary shares (the “Preference Shares”) and a warrant to purchase five (5) ordinary shares (the “Warrants”) (after giving effect to the Reverse Split as defined below). The Warrants have a term of five (5) years, bear an exercise price of $4.50 per share (after giving effect to the Reverse Split as defined below and subject to customary adjustments), are exercisable on a net exercise or cashless basis and are exercisable by investors at any time after the Closing Date.

Registration Statement

Pursuant to the Subscription Agreement, we filed a registration statement on Form S-1 (the “Registration Statement”) covering the resale of the ordinary shares underlying the Preference Shares and the Warrants with the SEC. The Registration Statement was declared effective on February 13, 2012. No liquidated damages were due and payable related to registration rights under the Subscription Agreement as of December 31, 2012 and 2011.

Make Good Escrow Agreement

In connection with the Private Placement, we entered into a make good escrow agreement with Star Prince, and Access America Investments, LLC (“AAI”) as representative of the investors (the “Make Good Escrow Agreement”), pursuant to which Star Prince delivered into an escrow account share certificates evidencing 4,500,000 ordinary shares held by it (after giving effect to the Reverse Split defined below), to be held in favor of the investors in order to secure certain make good obligations (the “Escrow Shares”). Under the Make Good Escrow Agreement, we established minimum after tax net income thresholds (as determined in accordance with the United States Generally Accepted Accounting Principles (the “US GAAP”) and excluding any non-cash charges incurred related to the Share Exchange and the Private Placement as described here above) of $13.2 million for fiscal year 2010 and $18.09 million for fiscal year 2011 and minimum earnings per share thresholds (calculated on a fully diluted basis and including adjustment for any stock splits, stock combinations, stock dividends or similar transactions, and for shares issued in one public offering or pursuant to the exercise of any warrants, options, or other securities issued during or prior to the calculation period) of $0.58 for fiscal year 2010 and $0.66 for fiscal year 2011. If our after tax net income or earnings per share for either fiscal year 2010 or fiscal year 2011 is less than 90% of the applicable performance threshold, then the performance threshold will be deemed not to have been achieved, and the investors pro rata based on the number of units purchased by each Investor in the Offering, will be entitled to receive ordinary shares based upon a pre-defined formula which shall equate to the product of (A) the percentage difference between the applicable performance threshold and actual performance (if both applicable performance thresholds have not been achieved, then the applicable performance threshold yielding the greater difference from actual performance shall be used) times (B) the total number of the Escrow Shares. The parties agreed that, for purposes of determining whether or not any of the performance thresholds are met, the release of any of the escrowed shares and any related expense recorded under the GAAP shall not be deemed to be an expense, charge, or any other deduction from revenues even if the GAAP requires contrary treatment or the annual report for the respective fiscal years filed with the SEC by the Company may report otherwise. For the years ended December 31, 2011 and 2010, the Company achieved the performance thresholds, and none was due to investors under such Make Good Escrow Agreement.

Holdback Escrow Agreement

In connection with the Private Placement, on December 15, 2010, we entered into a Holdback Escrow Agreement with Anslow & Jaclin, LLP (“A&J”), the escrow agent, and 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, the $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 $667,203.20 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, $667,203.20 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 December 31, 2012, all funds were released from the escrow account.

IR Escrow Agreement

On December 15, 2010, we also entered into an investor relations escrow agreement with A&J, the escrow agent, and AAI, as representative of the investors (the “IR Escrow Agreement”), 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 AAI, which approval cannot be unreasonably withheld. On November 14, 2012, the IR Escrow Agreement was amended to change the escrow agent to Dai & Associates, P.C. Pursuant to the original IR Escrow Agreement, the entire IR Escrow Amount shall be returned to the Company within two years of the date of the IR Escrow Agreement if the funds have not been disbursed to hire any investor relations firm. As of December 31, 2012, all funds were released from the IR escrow account.

Lockup Agreements

In connection with the Private Placement, we also entered into lockup agreements, with Wealth Environmental Protection Shareholders, pursuant to which each of Wealth Environmental Protection Shareholders agreed not to transfer any of our capital stock held directly or indirectly by them for an eighteen-month period following the closing of the Private Placement, unless it is approved otherwise by AAI.

The foregoing description of the terms of the Exchange Agreement, the Warrant, the Subscription Agreement, the Make Good Escrow Agreement, the Holdback Escrow Agreement, the IR Escrow Agreement and the Lockup Agreement are qualified in their entirety by reference to the provisions of the agreements filed as Exhibits 2.1, 4.1, 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6, respectively, to this report, which are incorporated by reference herein.

Reverse Split

On December 15, 2011 , we effectuated a 1:1.42610714 reverse stock split of the Company’s issued and outstanding ordinary shares such that the share capital of the Company was consolidated and increased from US $5,100 divided into 39,062,500 Ordinary Shares of US$0.000128 par value each and 781,250 Preference Shares of US$0.000128 par value each, to US $7,230.536 divided into 39,062,500 Ordinary Shares of US$0.00018254172 par value each and 781,250 Preference Shares of US$0.000128 par value each (the “Reverse Split”). After the adjustment for such Reverse Split, each Preference Shares will be convertible into 5 ordinary shares and the holder of each Warrant will be entitled to purchase 5 ordinary shares at an exercise price of $4.50 per share.

Industry and Market Overview

The annual amount of wastewater discharge in China has increased from 2006 to 2011 at a 2.9%- 5.6% growth rate per year. In 2011, the amount of wastewater discharge in China reached 65.21 billion tons (Source: China Environment Condition Report, 2011, released by PRC Environmental Protection Department in June 2012, available at http://jcs.mep.gov.cn/hjzl/zkgb/2011zkgb/201206/t20120606_231040.htm). Due to deterioration in both water quantity and quality, water resource protection became a concern on the top of the agenda for both the Chinese government and the Chinese public. The Chinese government has adopted regulations and policies listing waste water disposal and drinking water safety as two issues of priority importance for the mid-term and long-term national development plans. The Chinese government is focused on controlling wastewater disposal rates, increasing the wholesome water coverage rate, raising discharge standards for nitrogen and phosphorus, and raising standards for drinking water.

As an expected result from the above-mentioned governmental endeavors, the demand for water purifying products has increased over the years and is expected to continue to increase in the future for a relatively long period of time, considering China’s large population and the severity of China’s current environmental situation. Accordingly, we believe that there will be increasing market need for our water purifying products.

Current Products

Water Purifying Agents

Jiangmen Wealth Water manufactures a variety of water purification products, including dyeing purifying agent, purifying for paper making waste water, purifying agent of phosphorus removal, and discoloring agent, for industries such as printing and dyeing, paper making, municipal wastewater, phosphorus removal, and oil removal from washing water.

Traditional water purifying agents are usually produced for general purposes without tailoring to the needs of particular industrial requirements. Our water purifying agents, on the other hand, are specially developed by our research and development team and the institutions Tongji University and Chongqing University, with whom we work toward the goal of satisfying particular industrial situations and requirements. We entered into a technology development agreement with Tongji University in October 2003 (the “Tongji Agreement”) and, pursuant to the agreement, we have completed the research and development of the HAC powder which has been used in our water purifying agents. A copy of the Tongji Agreement was filed with the SEC on the Company’s current report on the amendment No. 1 to Form 8-K dated February 28, 2010. We have also been working with Chongqing University since 2005 on the research and development of water purifying technology, including developing flocculent for enhanced coagulation for drinking water, and we have not entered into any agreement in connection with such cooperation. With the technologies derived from our research and development, our products have been demonstrated satisfactory performance.

●

Dyeing Purifying Agent: The product is developed for the active dyes, acid dyes and direct dyes of the printing and dyeing wastewater, which is a polymeric flocculant made by a special synthetic polymer technology and added auxiliary decolorization agent. This product has a good decolorization and chemical oxygen demand (COD) removal effects, and is widely used in the treatment process of dyeing industrial wastewater. COD refers to the consumption of oxidizer when using strong oxidizer in water treatment process and indicates the amount of reducing substance in water which is the target to be removed by the purifying agent. COD removal effect refers to the performance of a purifying agent or equipment in removing reducing substance and is considered as an evaluating method of water treatment effect.

●

Purifying Agent for Paper Making Wastewater: The product is a new inorganic polymer flocculant, specially developed for purifying papermaking wastewater, which usually has a high concentration of micro fiber. It not only separates the water from pulp, but also kills the microorganism in the waste water and pulp, thus preventing the wastewater from turning stunk and waste pulp from nigrescence. The water and pulp are recyclable after the treatment.

●	Purifying Agent for Phosphorus Removal: Purifying agent for phosphorus removal is an inorganic polymer flocculant made by a special synthetic polymer technology with a good phosphorus removal effect for phosphorus-containing industrial and residential wastewater.

●

Discoloring Agent: The product is a cationic organic macromolecular compound with functions of discoloring, flocculating, COD degrading. The special cationic group of the dyeing discoloring agent can combine with the color substance anion group of the wastewater to form a hydrophobic insoluble salt, thereby eliminate the colors, and because of the polymer adsorption bridging role, it also has a great coagulation & sedimentation effect. The decolorization rate to the dyeing water is more than 95 %, the COD removal ratio is between 50% to 85%.

HAC Powder

Our HAC powder has high aluminum content.

We employ HAC powder to produce water purifying agent, while American and European water purifying agent manufacturers use aluminum hydroxide to produce water purifying agents. Aluminum hydroxide provides a similar level of efficiency for water purifying agent but generally has a higher cost than HAC powder. Using HAC powder as our core raw material, we believe our products possess quality similar to the comparable products produced by our American and European counterparts but with lower cost. Those cost savings, in turn, provide us a significant price advantage.

The main differences between HAC and aluminum hydroxide are as follows:

1)	Components. The main components of HAC that are effective component in water purifying agent are Al2O3、CaO、SiO2、Fe2O3 while the main components of Aluminum Hydroxide are Al2O3、H2O. CaO、SiO2、Fe2O3;

High reaction activity. When HAC reacts with hydrochloric acid proportionally at normal temperature and pressure, aluminium polychlorid is produced as a result of the reaction. The heating process is quick and there is no need of external energy to react (one step to produce aluminium polychlorid). Aluminum hydroxide reacts with hydrochloric acid under the conditions of heating and pressurizing, and aluminium polychlorid is only produced after using alkali to adjust the basicity. External energy is needed in the reaction (two step to produce aluminium polychlorid) when using alumnmum hydroxide;

Reaction conditions. The production of aluminium polychlorid from HAC can happen on the regular acid reaction pool by one step. There is no pressure requirement for the producing equipment and it is easy to operate. Comparatively, the production of aluminium polychlorid from aluminum hydroxide bases on the pressure-proof high temperature reactor and the reaction time is long. Moreover, alkali is needed to adjust the basicity. The production is comparatively complicated.

Raw Material and Suppliers

HAC powder is the core ingredient of water purifying agent. In Shanxi and Guizhou provinces, there are abundant bauxite resources. In 2010, we acquired 100% of all the equity interest of Guizhou Yufeng and Shanxi Wealth. Guizhou Yufeng and Shanxi Wealth each own one bauxite mine and one limestone mine.

●

Guizhou Yufeng is located in Xinghong Village, Zhazuo Town, Xiuwen County, Guizhou Province. As a PRC limited liability company, it has satisfied each of the enterprise annual inspections during the years from 2005 to 2012. The local business department granted Guizhou Yufeng operation rights from March 2005 to April 2018.

●

Shanxi Wealth is located in Dong Jia Bi Village, Sanquan Town Industrial Zone, Fenyang City of Shanxi Province. As a PRC limited liability company, it has satisfied each of the enterprise annual inspections during the years from the years of 2004 to 2012. The local business department granted Shanxi Wealth operation rights from April 2004 to January 2016.

Development of New Technologies

We are developing new technologies to enhance the quality of our current products and to introduce new products based upon our anticipation of the future market needs. We intend to introduce the following products and technologies to the market in the future:

Flocculent for Enhanced Coagulation for Drinking Water

In 2010 the Chinese government raised the standard for drinking water regarding turbidity, organic matter and a number of other indicators. Anticipating the future implementation of the stricter new drinking water standards, most Chinese water companies contemplate upgrading their technologies to meet the government’s requirements. Flocculent for enhanced coagulation is widely accepted in the industry as the response to the stricter requirements and solution to the upgrading. We were working with Chongqing University to develop flocculent for enhanced coagulation for drinking water. We have not entered into any agreement in connection with the cooperation with Chongqing University. We started our cooperation with Chongqing University in 2005 and have not paid considerations to Chongqing University in connection with such cooperation. We initially expected to put this new product on the market in mid-2011. However since the developed product did not have an outcome as expected. We did not officially launch this product.

HAC Powder with High Purity

With our current HAC powder technology, we can develop HAC powder with higher purity without compromising cost-efficiency. The purpose is to replace high-cost aluminum hydroxide currently used by European and American producers. Currently we have completed an initial testing of this technology and are in the process of second round testing. We expect to apply this technology to our production in the near future. However, since the developed product did not have an outcome as expected, we did not officially launch this product.

Sewage-source Heat Pump High-speed Water-purifying Technology

The development of renewable energy is among those on the top of the agenda for China’s mid-term and long-term science and technology planning programs. Currently a number of cities in China have used sewage water as conduit for cooling and heating. To meet this market demand, we are performing research on using flocculent and sewage-source heat pump in treating sewage and generating renewable energy. Currently we have completed the initial testing of this technology and are in the process of a second round testing. We expect to apply this technology to our production on a small scale in the near future. However, since the developed product did not have an outcome as expected, we did not officially launch this product.

High-concentration Organic Wastewater Treatment

Backed by the joint efforts of our research and development team and Tongji University in Shanghai, PRC, we are able to use the hydrothermal technology to transform organic matter in the wastewater into useful industrial materials such as H2, DME, and C2H5OH. H2 is the chemical formula of hydrogen which is the basic component of many chemicals and is used for combinations of carbinol, artificial petroleum, plastic resin etc. DME is short for DiMethyl Ether, which is a basic chemical raw material and, due to its specialties in compression, condensation and evaporation, it serves a unique role in production of medicine, fuel, pesticides and etc. C2H5OH is the chemical formula of ethanol which is mainly used to produce acetaldehyde, diethyl ether, ethyl acetate, ethylamine and to produce dyes, painting and detergent and etc. As of the date hereof, we have completed the initial testing of this technology and are in the process of second round testing. We expect to apply this technology to our production later in 2013.

Microbial Flocculent

Microbial flocculent is a highly efficient, non-toxic, pollution-free, self-degradable, and broadly applicable new generation of flocculent. It incarnates the latest development in modern biology and water treatment technology, and represents the trend of flocculent development. Our research and development on this subject focuses on wastewater discoloration and industrial water reuse for the food industry. Traditional flocculents have the issue of secondary pollution when used in water treatment process. Therefore, it is meaningful for people’s health and environmental protection to develop a new micro-organic flocculent that is non-toxic, highly active and without secondary pollution. However, this technology is in an initial testing phase and may have issues of instability and high cost. We expect to market this technology on a small scale in 2014.

Research & Development Activities

We incurred $622,684 and $604,549 of research and development cost during the years ended December 31, 2012 and 2011, respectively.

Research and development is critical to our business development. We have built a strong independent research team that includes 5 members with Ph.D. degrees, and 20 members with M.A. degrees. We have sophisticated laboratory facilities covering 1,000 square meters of land (1 square meter ≈ 10.78 square feet). The subjects of our research include, among others, HAC powder, bio-flocculent, industrial waste water purifying agent.

In addition to our independent research, we also collaborate with renowned research institutes in developing water purifying agents and other environment protection products. For example, we work with the College of Environmental Science and Engineering of Tongji University in setting up a post-doctoral research center focused on developing pollution prevention technology; and we work with Chongqing University on several environment-related research projects. Through collaboration with these institutions, we have further bolstered the research ability of our research and development team, expanded our experimental experience, and we expect to maintain our position in the water purifying industry in China. We have no expenses on research and development activities during each of the last two fiscal years.

Customer Concentration

Our customers place orders on an annual basis. It is our business practice to ascertain demand from our customers at the beginning of each year, pursuant to the annual needs placed in purchase agreements. Actual sales revenues generated from each customer may vary from the annual need thereto provided in such purchase agreements. No single customers accounted for more than 10% of our net revenues for the fiscal year of 2012. The following summarizes the net revenue of our largest ten customers for each of our two products, Water Purifying Agent, and HAC Powder for the year of 2012.

Water Purifying Agent

The following table sets forth the largest ten customers of our water purifying agent based upon the percentage of our water purifying agent net revenue for the year of 2012:

Rank	Amount (US Dollar)		% of Revenue
Customer 1	$	4,201,735.51		9.51	%
Customer 2		3,160,499.67		7.15	%
Customer 3		3,084,465.77		6.98	%
Customer 4		3,006,854.42		6.80	%
Customer 5		2,636,115.61		5.97	%
Customer 6		2,142,840.28		4.85	%
Customer 7		2,029,665.26		4.59	%
Customer 8		2,001,917.26		4.53	%
Customer 9		1,895,975.60		4.29	%
Customer 10		1,788,109.87		4.05	%
Total	$	25,948,179.25		58.72	%

HAC Powder

The following table sets forth customer concentration of HAC Powder based upon the percentage of our HAC Powder net revenue for the year of 2012:

Rank	Amount (US Dollar)		% of Revenue
Customer 1 *	$	4,945,563.08		10.14	%
Customer 2		2,330,538.69		4.77	%
Customer 3		2,207,173.13		4.52	%
Customer 4		2,147,096.30		4.41	%
Customer 5		1,921,314.53		3.94	%
Customer 6		1,884,712.50		3.87	%
Customer 7		1,758,685.90		3.61	%
Customer 8		1,481,471.45		3.04	%
Customer 9		1,435,632.04		2.95	%
Customer 10		1,246,104.84		2.56	%
Total	$	21,358,292.46		43.81	%

* This is Jiangmen Wealth Water, one of our operating subsidiaries in PRC, purchasing HAC powder from another subsidiaries of ours, Guizhou Yufeng,.

Sales Network and Sales Model

Water Purifying Agent

Our current sales network of water purifying agent covers four geographic areas of China, including the Southwest, South, Central, and East of China. These geographic regions include some of the most developed economic areas in China and, accordingly, the local governments pay great attention to environmental issues, such as purifying waste water. We adopt a “regional production and sales” model with each of our self-owned production facilities in Jiangmen City, Guangdong Province, and the four Entrusted Production Lines responsible for meeting the market demand within its covered selling areas in order to minimize transportation costs.

HAC Powder

Given that preservation and delivery of HAC powder does not generate high transportation costs compared to delivery of liquid water purifying agent, our sales of HAC powder adopt a “direct distribution” model with Guizhou Yufeng and Shanxi Wealth directly delivering HAC powder to our distribution centers which in turn deliver HAC powder to customers. Currently, we have approximately 6 HAC powder distribution centers covering 13 provinces in China, consisting of Guangdong, Guangxi, Guizhou, Hainan, Henan, Hunan, Jiangsu, Zhejiang, Jiangxi, Shandong, Sichuan, Tianjin and Yunnan.

Market

Market Opportunity

Currently, China is in the process of rapid economic growth and market reform led by nation-wide industrial development. Unfortunately, following in the footsteps of many mature economies, China’s rapid industrial expansion has brought with it an almost inevitable by-product: industrially generated pollution of water, air and the environment as a whole. It is estimated that approximately 80% of China’s environmental pollution results from industry-produced solid waste, waste water and waste gas emissions. During the 1990’s the degree of and the dangers posed by China’s increasing levels of environmental pollution became widely perceived both inside and outside China, and drew concerns from the Central Chinese Government. A nation-wide awakening to the environmental crisis has pushed the reduction and elimination of waste water and airborne pollutants to matters of priority importance in China’s next five-year economic plan. (For more information, please see http://zfs.mep.gov.cn/fg/gwyw/201202/t20120216_223549.htm)

With only approximately 2,200 cubic meters per person, or one-fourth the world average, China is a country with limited water resources. Conservation through the improvement of usage efficiency has been the fundamental way to resolve the tension between water supply and demand. China’s very high rate of industrial water consumption (as compared to that of developed countries) demands water conservation and water re-use programs. For example, the industries involved in the discharge of industrial waste water, our principal target market, consume large quantities of water and thereby call for new technology and products to increase efficiency in water usage, reduce water consumption, decrease environmental cleaning costs and thereby avoid possible governmental penalties that arise when they fail to meet one or more standards.

Marketing Plan for the Next Three Years

●	Expand the distribution coverage of our products;

●	Establish contract with clients in operating their wastewater treatment systems, and develop long term business relationship by sharing with them our pollution treatment experiences;

●	Take priority in addressing the market in the severely polluted, economically developed coastal areas, set up local factories for the largest purchasers, and cover the clients in the surrounding area; and

●

Establish and develop our presence in the oversea markets. As mentioned above, with access to lower-cost raw materials, we are positioned to compete with European and American companies in the same industry. We may consider acquiring foreign companies in the following years for the purpose of producing and distributing high calcium aluminate powder and water purifying agents locally to achieve cost-efficiency.

Competition

In China, there are various companies producing water purifying agents, which are mainly located in Guangdong, Jiangsu, Shandong, Henan, Shanghai, Beijing, Tianjin and Hebei. Generally speaking, these areas are more economically developed than the rest of the country. Most companies currently in the industry are generally small in scale. Since there has not been any official statistic report issued relating to the water purifying agent industry in China, no quantified description of the competitive conditions in the industry is currently available. Compared to other companies in the industry, our company has a complete production chain from raw material procurement to production and to sales and distribution, strong management team and specialized research and development team. Our management believes that we are in the leading position with respect to both of our products in domestic market of China. Our principle methods of competition are cost saving, scale effect and technology advancement, which methods enable us to gain competitive advantages set forth below.

Competitive Advantages

●

Cost advantages: In China, we are a high-tech enterprise possessing a complete industrial chain for the production of water purifying agent, with two subsidiaries, one in Guizhou province and the other in Shanxi province supplying aluminum and calcium carbonate. At the same time, we have unique technology for high aluminate calcium powder production to decease the cost by approximately 8% compared with other competitors in the same industry.

●

Scale advantages: We are a leading producer of water purifying agents and HAC powder in China, with an annual production and distribution of approximately 322,000 and 290,000 tons of water purifying agent and approximately 288,000 and 277,000 tons of HAC powder for the years ended December 31, 2012 and 2011, respectively. Our operating scale has given us considerable competitive advantages by reducing costs and developing new products to accommodate the ever-evolving demands of the market.

●

Technological advantages: we are applying our own “special addition” in HAC powder production, improving the traditional process to lower the purchasing and production cost and to enhance the aluminum content and activity. In addition, collaborating with Tongji University, we have spent substantial capital and more than one year developing high purity aluminate calcium production technology. The technology uses a heavy metal separation process to generate a high content of alumina, to meet international standards. The technology lowers production costs by 50 percent when compared to aluminum hydroxide.

●

Customized products: We have developed a series of industry-specific purifying agent to implement targeted treatment for different type of water qualities, which produce a better effect than universal products and can reduce water treatment cost by 20 percent or more per ton.

Employees

As of December 31, 2012, we have 429 employees and all of the 429 employees are full-time employees, among whom 396 employees hold a Bachelor’s Degree or lower degrees, 27 employees have a Master’s Degree, 5 employees have a Ph.D degree and 1 employee holds a Post-doctoral degree. Our employees are not represented by any collective bargaining agreement, and we have never experienced a work stoppage. We believe we have good relations with our employees.

Insurance

The Company has not carried any insurance as of the filing of this Form 10-K.

Environmental Protection, Quality Control, and Safety Measure

We strive to meet the requirements provided in environmental protection regulations, and regulations related to facility safety and quality control, throughout the design, maintenance and growth of our operation facilities and manufacturing process.

Environmental Protection

Our manufacturing facilities are subject to a series of pollution control regulations with respect to noise, water and air pollution and the disposal of waste and hazardous materials. We are also subject to periodic inspections by local environmental protection authorities. To date, we have not been advised of any violations of any environmental regulations. We are not currently subject to any pending actions alleging any violations of applicable PRC environmental laws.

Quality Control

All of our factories have set up internal quality control systems to make sure our products meet IS09000 standards. ISO9000 is an international quality management standard made by Technical Committee of Quality Management and Insurance of International Standardization Organization, which is used to approve that an organization has the capability to provide products that can meet the customers’ requirements and applicable legal regulations.

Safety Measures

Guizhou Yufeng and Shanxi Wealth have set up specific production policy and principles to ensure workplace safety, including, but not limited to, onsite safety surveillance, mining safety training, regular worker health and skill inspection, site-specific hazard awareness training, overtime restriction, ventilation inspection, and damage control exercise. With full implementation of our safety policy, Guizhou Yufeng and Shanxi Wealth have had no significant workplace accidents since inception.

Litigation

From time to time, we may become involved in various lawsuits and legal proceedings. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

CHINA REGULATIONS

This section sets forth a summary of the most significant China regulations or requirements that may affect our business activities operated in China or our shareholders’ right to receive dividends and other distributions of profits from the PRC subsidiaries.

Foreign Investment in PRC Operating Companies

The current effective Foreign Investment Industrial Catalogue jointly promulgated by the China’s Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC) in December 2011 classified various industries/businesses into three different categories: (i) encouraged for foreign investment; (ii) restricted to foreign investment; and (iii) prohibited from foreign investment. For any industry/business not covered by any of these three categories, they will be deemed industries/businesses permitted for foreign investment. Except for those expressly provided with restrictions, encouraged and permitted industries/businesses are usually 100% open to foreign investment and ownership. With regard to those industries/businesses restricted to or prohibited from foreign investment, there is always a limitation on foreign investment and ownership. The PRC Subsidiaries’ business does not fall under the industry categories that are restricted to, or prohibited from foreign investment and is not subject to limitation on foreign investment and ownership.

Regulation of Foreign Currency Exchange

Foreign currency exchange in the PRC is governed by a series of regulations, including the Foreign Currency Administrative Rules (1996), as amended, and the Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange (1996), as amended. Under these regulations, the Renminbi is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loans or investments in securities outside the PRC without the prior approval of State Administration of Foreign Exchange (SAFE). Pursuant to the Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange (1996), foreign investment enterprises, or FIEs may purchase foreign exchange without the approval of SAFE for trade and service-related foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange, subject to a cap approved by SAFE, to satisfy foreign exchange liabilities or to pay dividends. However, the relevant Chinese government authorities may limit or eliminate the ability of FIEs to purchase and retain foreign currencies in the future. In addition, foreign exchange transactions for direct investment, loan and investment in securities outside the PRC are still subject to limitations and require approvals from SAFE.

Regulation of FIEs’ Dividend Distribution

The principal laws and regulations in the PRC governing distribution of dividends by FIEs include:

(i)	The Sino-foreign Equity Joint Venture Law (1979), as amended, and the Regulations for the Implementation of the Sino-foreign Equity Joint Venture Law (1983), as amended;

(ii)	The Sino-foreign Cooperative Enterprise Law (1988), as amended, and the Detailed Rules for the Implementation of the Sino-foreign Cooperative Enterprise Law (1995), as amended;

(iii)	The Foreign Investment Enterprise Law (1986), as amended, and the Regulations of Implementation of the Foreign Investment Enterprise Law (1990), as amended.

(iv)	The Company Law (2005).

Under these regulations, FIEs in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, the wholly owned foreign enterprises in the PRC are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds unless such reserve funds have reached 50% of their respective registered capital. These reserves are not distributable as cash dividends.

Regulation of a Foreign Currency’s Conversion into RMB and Investment by FIEs

On August 29, 2008, SAFE issued a Notice of the General Affairs Department of the State Administration of Foreign Exchange on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises or Notice 142, to further regulate the foreign exchange of FIEs. According to Notice 142, FIEs shall obtain a verification report from a local accounting firm before converting its registered capital of foreign currency into Renminbi, and the converted Renminbi shall be used for the business within its permitted business scope. The Notice 142 explicitly prohibits FIEs from using RMB converted from foreign capital to make equity investments in the PRC, unless the domestic equity investment is within the approved business scope of the FIE and has been approved by SAFE in advance. In addition, SAFE strengthened its oversight over the flow and use of Renminbi funds converted from the foreign currency-dominated capital of a FIE. The use of such Renminbi may not be changed without approval from SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Violations of Notice 142 may result in severe penalties, including substantial fines as set forth in the SAFE rules.

Regulations on Offshore Financing

On October 21, 2005, SAFE issued Circular 75, which became effective as of November 1, 2005. Under Circular 75, prior registration with the local SAFE branch is required for PRC residents to establish or to control an offshore company for the purposes of financing that offshore company with assets or equity interests in an onshore enterprise located in the PRC. An amendment to registration or filing with the local SAFE branch by such PRC resident is also required for the injection of equity interests or assets of an onshore enterprise in the offshore company or overseas funds raised by such offshore company, or any other material change involving a change in the capital of the offshore company.

Under the relevant rules, failure to comply with the registration procedures set forth in Circular 75 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the increase of its registered capital, the payment of dividends and other distributions to its offshore parent or affiliate and the capital inflow from the offshore entity, and may also subject relevant PRC residents to penalties under PRC foreign exchange administration regulations. Moreover, failure to comply with the various foreign exchange registration requirements described above could result in liabilities for such PRC subsidiary under PRC laws for evasion of applicable foreign exchange restrictions and individuals managing such PRC subsidiary who are held directly liable for any violation may be subject to criminal sanctions.

Regulation on Overseas Listing

On August 8, 2006, the PRC Ministry of Commerce (“MOFCOM”), joined by the State-owned Assets Supervision and Administration Commission of the State Council, the State Administration of Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission and SAFE, released a substantially amended version of the Provisions for Foreign Investors to Merge with or Acquire Domestic Enterprises (the “New M&A Regulations”), which took effect on September 8, 2006 and was further amended on June 22, 2009. These new rules significantly revised China’s regulatory framework governing onshore-to-offshore restructurings and foreign acquisitions of domestic enterprises. These new rules signify greater PRC government attention to cross-border merger, acquisition and other investment activities, by confirming MOFCOM as a key regulator for issues related to mergers and acquisitions in China and requiring MOFCOM approval of a broad range of merger, acquisition and investment transactions. Further, the new rules establish reporting requirements for acquisition of control by foreigners of companies in key industries, and reinforce the ability of the Chinese government to monitor and prohibit foreign control transactions in key industries. Among other things, the New M&A Regulations include new provisions that purport to require that an offshore special purpose vehicle, or SPV, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals must obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange.

Regulations on Mineral Resources

Under the current Mineral Resources Law of the PRC (the “Mineral Resources Law”) promulgated on March 19, 1986 and amended on August 29, 1996, all mineral resources in China are owned by the State. The PRC Ministry of Land and Resources and its local counterparts are responsible for the supervision and administration of the mining and exploration of mineral resources nationwide and in the respective local area. Enterprises engaged in the exploitation of mineral resources must obtain mining rights. In addition to the mining right usage fees paid annually based on the size of the licensed area (i.e., RMB1,000 per square kilometer per year), an applicant who applies for the state-contributed exploration and has ascertained the mining right within the tenement area shall pay the purchase price for the mining rights which is formed by the state-contributed exploration and determined through an evaluation process.

A holder of a mining license has the right to and is also obligated to conduct mining activities in the area and within the time period designated in the mining license. A holder of a mining license has certain additional rights including, among others, rights to (i) set up necessary production and living facilities within the designated area; and (ii) acquire the land use rights necessary for production. A holder of a mining license has certain additional obligations including, among others, obligations to (i) conduct reasonable exploitation, and protect and fully utilize mineral resources; (ii) pay resources tax and resources compensation levy; (iii) comply with the laws and regulations relating to occupational safety, soil and water conservation, reclamation and environmental protection; and (iv) submit mineral resource reserve and utilization reports to relevant government authorities as required. Mining rights are transferable subject to the approvals of relevant geological and mineral resources and land bureaus of the PRC and upon satisfaction of other conditions as stipulated under PRC law and regulations.

Exploitation of mineral resources is subject to supervision by the PRC Ministry of Land and Resources and the relevant local mineral resource bureaus. Annual reports are required to be filed by the holders of mining license with the relevant administrative authorities that issue the permits.

It is unlawful for an entity or individual to conduct mining operations in areas previously authorized for exploitation by other mining operators. An entity whose mining operations cause harm to others in terms of production or living standards is liable to compensate the affected parties and to take necessary remedial measures. Pursuant to the Provisions for Implementation of the Mineral Resources Law, a mine operator must follow certain procedures in closing a mine, including, among other things, submitting a mine closure geology report to the regulatory authority that originally approved the opening of the mine.

Regulations on Work Safety

On June 29, 2002, the Work Safety Law (“WSL”) of the PRC was adopted by the Standing Committee of the 9th National People’s Congress and came into effect on November 1, 2002, as amended on August 27, 2009. The WSL provides general work safety requirements for entities engaging in manufacturing and business activities within the PRC. Additionally, Regulation on Work Safety Licenses (“RWSL”), as adopted by the State Council on January 7, 2004 and became effective on January 13, 2004, requires enterprises engaging in the manufacture of dangerous chemicals to obtain a work safety license with a term of three years. If a work safety license needs to be extended, the enterprise must go through extension procedures with authorities three months prior to its expiration. In addition, on August 5, 2011, the Measures for Implementation of Work Safety Licenses of Dangerous Chemicals Production was promulgated as implementing measures to the Regulation on Work Safety Licenses which provides that entities producing dangerous chemicals are required to obtain work safety licenses pursuant to specific requirements. Without work safety licenses, no entity may engage in the formal manufacture of dangerous chemicals.

The Regulations on the Safety Administration of Dangerous Chemicals (“RSADC”) was promulgated by the State Council on January 26, 2002 and amended in March 2011, effective as of December 1, 2011. It sets forth general requirements for manufacturing and storage of dangerous chemicals in China. The RSADC requires that companies manufacturing dangerous chemicals establish and strengthen their internal regulations and rules on safety control and fulfill the national standards and other relevant provisions of the State. In addition, according to the RSADC, companies that manufacture, store, transport or use dangerous chemicals shall be required to obtain corresponding approvals or licenses with the State Administration of Work Safety and its local branches and other proper authorities. Companies that manufacture or store dangerous chemicals without approval or registration with the proper authorities can be shut down, ordered to stop manufacturing or ordered to destroy the dangerous chemicals. Such companies can also be subject to fines. If criminal law is violated, the persons chiefly liable, along with other personnel directly responsible for such impropriety, shall be subject to relevant criminal liability.

Regulations on Environmental Protection

According to the Prevention and Control of Water Pollution Law, as adopted by the Standing Committee of the 10th National People’s Congress on February 28, 2008 and effective on June 1, 2008, China adopted a licensing system for pollutant discharge. Companies directly or indirectly responsible for discharge of industrial waste water or medical sewage to waters shall be required to obtain a pollutant discharge license. All companies are prohibited from discharging wastewater and sewage to waters without or in violation of the terms of the pollutant discharge license.

The Regulations on the Administration of Construction Projects Environmental Protection (“RACPEP”), as adopted by the State Council on November 18, 1998 and effective on November 29, 1998, governs construction projects and the impact such projects will have on the environment. Pursuant to the RACPEP, the governing body is responsible for supervising the implementation of a three tiered system that includes (i) reviewing and approving a construction project, (ii) overseeing the construction project, and (iii) to inspect the finished construction project and ensure that all harmful pollutants are disposed of correctly. Manufacturing companies are required to apply for inspection with environmental protection authorities upon completion of a construction project.

ITEM 1A.

RISK FACTORS.

You should carefully consider the risks described below together with all of the other information included in this Form 10-K before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.

You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.

Risks Relating to Our Business

OUR LIMITED OPERATING HISTORY MAKES EVALUATION OF OUR BUSINESS DIFFICULT.

We have a limited operating history and have encountered and expect to continue to encounter many of the difficulties and uncertainties often faced by early stage companies. Jiangmen Wealth, our PRC Operating Company, was incorporated in 2003. Our limited operating history makes it difficult to evaluate our future prospects, including our ability to develop a wide customer and distribution network for our services, to expand our operations to include additional services and to control raw material costs, all of which are critical to our success. An investor must consider our business and our prospects in light of the risks, uncertainties and difficulties common to early stage companies. We may encounter unanticipated problems, expenses and delays in developing and marketing our services and securing additional blending and storage facilities. We may not be able to successfully address these risks. If we are unable to address these risks, our business may not grow, our stock price may suffer, and we may be unable to stay in business.

WE NEED TO MANAGE GROWTH IN OPERATIONS TO MAXIMIZE OUR POTENTIAL GROWTH AND ACHIEVE OUR EXPECTED REVENUES AND OUR FAILURE TO MANAGE GROWTH WILL CAUSE A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE REVENUE AT LEVELS WE EXPECT.

In order to maximize potential growth in our current and potential markets, we believe that we must expand our producing and marketing operations. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth and investment failure could disrupt our operations and ultimately prevent us from generating the revenues we expect.

KEY EMPLOYEES ARE ESSENTIAL TO GROWING OUR BUSINESS. IN ADDITION WE NEED ADDITIONAL SKILLED MANAGEMENT AND TECHNICAL PERSONNEL AND OTHER EMPLOYEES.

Key employees, especially Mr. Mingzhuo Tan, our Chief Executive Officer, are essential to our ability to continue to grow our business. They have established relationships within the industries in which we operate. If they were to leave us, our growth strategy might be hindered, which could limit our ability to increase revenue.

Our future success also depends upon its continuing ability to attract and retain highly qualified personnel. Expansion of our business and the management and operation will require additional managers and employees with industry experience, and the success of the Company will be highly dependent on the Company’s ability to attract and retain skilled management and technical personnel, and other employees. There can be no assurance that the Company will be able to attract or retain highly qualified personnel. Competition for skilled personnel in the environmental protection industry is significant. This competition may make it more difficult and expensive to attract, hire and retain qualified managers and employees.

OUR FUTURE PERFORMANCE IS DEPENDENT ON RESEARCHING AND DEVELOPING NEW PRODUCTS, THE INABILITY TO DO SO COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.

Our performance in the future is dependent on our ability to develop and launch new products. Changes in technologies may render our products obsolete and our performance in the future is thus significantly dependent on our ability to develop and launch new products. There can be no assurance that our research and development efforts will be successful or completed within the anticipated timeframe and results. Moreover, there can be no assurance that any research and development project undertaken by us will result in commercially viable products. Unsuccessful development and release of new products could adversely affect our performance and our ability to compete.

OUR MANUFACTURING TECHNOLOGIES AND MANUFACTURING DESIGN ARE NOT PROTECTED BY PATENT OR TRADEMARK. ANY UNAUTHORIZED USE COULD CAUSE MATERIAL DAMAGE TO OUR BUSINESS AND LEAVE US VERY LIMITED REMEDIES.

We consider our manufacturing technologies and manufacturing design critical to our business. While we are not protected by patent or trademark law, if our technologies or designs are utilized by a third party without our permission, we have very limited legal remedies to force such third party to restrain from using the technologies or design, and therefore we cannot guarantee we will recover the damages that could have been done to our business or to re-gain the advantage our technologies and designs have afforded us.

WE WILL ENCOUNTER SUBSTANTIAL COMPETITION IN OUR BUSINESS AND ANY FAILURE TO COMPETE EFFECTIVELY COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

Although currently we do not have any significant competitors in the HAC powder and water purifying agent business, more water purifying agents producers are entering into the market with the economic development and growing public awareness on environmental issues in China. In addition, some multi-national companies have entered or prepared to enter the Chinese water purifying market, such as General Veolia Water Solutions & Technologies. Our Company is facing fierce competition. We anticipate that other companies in the industry will continue to improve their products and introduce new products with competitive price and qualities. This could pose a threat to our current market share. Some of our international competitors have stronger brand names, greater access to capital, longer operating histories, longer or more established relationships with their customers, stronger research and development capabilities and greater marketing and other resources than we do.

Some of our domestic competitors have stronger distribution networks and end-user customer bases, better access to government authorities and stronger industry-based backgrounds than us. Due to the evolving markets in which we compete, additional competitors with significant market presence and financial resources may enter those markets, and thereby intensify competition. Existing and potential competitors may also develop relationships with our distributors in a manner that could significantly harm our ability to sell, market and develop our products. Our major competitors may be better able than we to successfully endure downturns in our industrial sector. Our competitors could develop a more efficient product or undertake more aggressive and costly marketing campaigns than ours, which may adversely affect our marketing strategies and could have a material adverse effect on our business, results of operations and financial condition.

We expect that we will be required to continue to invest in product development and productivity improvements to compete effectively in our markets. In periods of reduced demand for our products, we can either choose to maintain market share by reducing our selling prices to meet competition or maintain selling prices, which would likely sacrifice our market share. Sales and overall profitability would be reduced in either case. In addition, we cannot assure you that additional competitors will not enter our existing markets, or that we will be able to compete successfully against existing or new competition.

WE MAY EXPERIENCE MAJOR ACCIDENTS IN THE COURSE OF OUR OPERATIONS, WHICH MAY CAUSE SIGNIFICANT PROPERTY DAMAGE AND PERSONAL INJURIES.

We may experience major accidents in the course of our operations, which may cause significant property damage and personal injuries. Significant industry-related accidents and natural disasters may cause interruptions to various parts of our operations, or could result in property or environmental damage, increase in operating expenses or loss of revenue. The occurrence of such accidents and the resulting consequences may not be covered adequately, or at all, by the insurance policies we carry. In accordance with customary practice in China, we do not carry any business interruption insurance or third party liability insurance for personal injury or environmental damage arising from accidents on our property or relating to our operations other than our automobiles. Losses or payments incurred may have a material adverse effect on our operating performance if such losses or payments are not fully insured.

MINERAL EXPLORATION AND DEVELOPMENT IS SUBJECT TO EXTRAORDINARY OPERATING RISKS. WE DO NOT CURRENTLY INSURE AGAINST THESE RISKS. IN THE EVENT OF A CAVE-IN OR SIMILAR OCCURRENCE, OUR LIABILITY MAY EXCEED OUR RESOURCES, WHICH WOULD HAVE AN ADVERSE IMPACT ON OUR COMPANY.

Mineral exploration, development and production involve many risks which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Our operations will be subject to all of the hazards and risks inherent in these activities, including liability for pollution, cave-ins or similar hazards against which we cannot insure or against which we may elect not to insure. Any such event could result in work stoppages and damage to property, including damage to the environment. We do not currently maintain any insurance coverage against these operating hazards. The payment of any liabilities that arise from any such occurrence would have a material adverse impact on our company.

OUR PLANNED EXPANSION AND TECHNICAL IMPROVEMENT PROJECTS COULD BE DELAYED OR ADVERSELY AFFECTED BY, AMONG OTHER THINGS, DIFFICULTIES IN OBTAINING SUFFICIENT FINANCING, TECHNICAL DIFFICULTIES, OR HUMAN OR OTHER RESOURCE CONSTRAINTS.

Our planned expansion and technical improvement projects could be delayed or adversely affected by, among other things, difficulties in obtaining sufficient financing, technical difficulties, or human or other resource constraints. Moreover, the costs involved in these projects may exceed those originally contemplated. Costs savings and other economic benefits expected from these projects may not materialize as a result of any such project delays, cost overruns or changes in market circumstances. Failure to obtain intended economic benefits from these projects could adversely affect our business, financial condition and operating performances.

WE MAY ENCOUNTER RAW MATERIAL SUPPLY SHORTAGE BECAUSE WE DO NOT POSSESS QUALIFIED TECHNICAL INFORMATION TO SUPPORT THE ESTIMATE OF CONTINUITY OR IN-PLACE TONNAGE OF OUR MINES THAT HAVE BEEN EXCLUSIVELY PROVIDING THE RAW MATERIAL FOR OUR PRODUCTS.

One main raw material for our products is calcium and aluminate. We rely on our four mines to provide the raw materials for our products. However, we do not possess qualified technical information to support the estimate of continuity and in-place tonnage of our mines. As such, we face the risk of exhausting our raw material without being given a warning that allows us sufficient time to find substitute sources. If we cannot locate substitute sources in a given time, our production capacity could be impaired, or in a worsen situation, our production may be discontinued. Even if where we are able to quickly locate a substitute source, the quality of raw material may fall short of our standard, in which case, we may be required to adjust our raw material to finish goods ratio to better work with the materials and components provided by new, alternative suppliers. If any of the above events relating to our obtaining qualified raw materials occurs, our ability to produce and/or market our products can undergo difficulties, and we could suffer loss.

FROM TIME TO TIME, WE NEED TO IDENTIFY NEW SOURCE OF RAW MATERIAL OR SUPPLIER OF RAW MATERIAL. IF WE CANNOT OBTAIN SUFFICIENT RAW MATERIALS AND COMPONENTS THAT MEET OUR PRODUCTION STANDARDS AT A REASONABLE COST OR AT ALL, OUR ABILITY TO PRODUCE AND MARKET OUR PRODUCTS, AND THUS OUR BUSINESS, COULD SUFFER.

While our raw materials are generally available in the market, we cannot assure that the necessary raw materials will continue to be available or in the sense of prices, accessible to us. In Shanxi and Guizhou Provinces there are abundant aluminum deposits, but the level of mining technology is relatively low, which means these provinces cannot produce nearly enough aluminum to satisfy the market needs. As a result, the price for aluminum has soared in the recent years. Beside aluminum, we also use coal as a raw material for the production of alumina calcium powder. With the prices of different kinds of energy all rising on the horizon, the fuel coal has also become more and more expensive. All these pose problems for us to reduce cost. The prices for these raw materials have been fluctuating significantly and are likely to continue to do so in the future. Numerous factors, most of which are beyond our control, can influence the prices of our raw material. These factors include, to name a few, general economic conditions, industry capacity utilization, vendor backlogs and transportation delays, and other uncertainties.

If we experience a general insufficiency of our raw material in the market in future, we may not be able to adjust our product prices, especially in the short-term, to recover cost increases in such raw materials, and our profitability may be challenged if and when we are unable to pass on the higher raw material costs to our customers.

OUR MANAGEMENT INTENDS TO EXPAND OUR PRODUCTION IN NEAR FUTURE AND IF WE TAKE STEPS TO IMPLEMENT EXPANSION, WE WILL REQUIRE CAPITAL EXPENDITURES.

If we take actions to expand our production in near future, we will require capital expenditures. We cannot assure you that cash generated from our operations will be sufficient to fund these development plans, or that our actual capital expenditures will not significantly exceed our current planned amounts. If either of these conditions arises, we may have to seek external financing to satisfy our capital needs. Our ability to obtain external financing at reasonable costs is subject to a variety of uncertainties, and failure to obtain sufficient external funds when we take actions to expand our production could have adverse effect on the development of business.

WE MAY UNDERTAKE ACQUISITIONS, WHICH MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR ABILITY TO MANAGE OUR BUSINESS, AND MAY END UP BEING UNSUCCESSFUL.

Our growth strategy may involve the acquisition of new technologies, businesses, products or services or the creation of strategic alliances in areas in which we do not currently operate. These acquisitions could require that our management develop expertise in new areas, manage new business relationships and attract new types of customers. Furthermore, acquisitions may require significant attention from our management, and the diversion of our management’s attention and resources could have a material adverse effect on our ability to manage our business. We may also experience difficulties integrating acquisitions into our existing business and operations. Future acquisitions may also expose us to potential risks, including risks associated with:

●	the integration of new operations, services and personnel;

●	unforeseen or hidden liabilities;

●	the diversion of resources from our existing businesses and technologies;

●	our inability to generate sufficient revenue to offset the costs of acquisitions; and

●	potential loss of, or harm to, relationships with employees or customers, any of which may have a material adverse effect on our ability to manage our business.

IF WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS.

If adequate additional financing is not available on reasonable terms, we may not be able to undertake plant expansion, purchase additional machinery and purchase equipment for our operations and we would have to modify our business plans accordingly. If the equipment investment is not enough, it will cause low level of production automation in producing alumina calcium powder and series purifying agent, thus affecting our production quality. There is no assurance that additional financing will be available to us.

In connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our Ordinary Shares can also be expected to be subject to volatility resulting from purely market forces over which we will have no control. If we need additional funding, we will, most likely, seek such funding in the United States (although we may be able to obtain funding in the P.R.C.). However, market fluctuations, which may affect our stock price, could limit our ability to obtain equity financing.

If we cannot obtain additional funding, we may be required to: (i) limit our plant expansion; (ii) limit our marketing efforts; and (iii) decrease or eliminate capital expenditures.

Such reductions could materially adversely affect our business and our ability to compete.

IF OUR END-USER CUSTOMERS THAT USE OUR PRODUCTS SUCCESSFULLY ASSERT PRODUCT LIABILITY CLAIMS AGAINST US DUE TO DEFECTS IN OUR PRODUCTS, OUR RESULTS OF OPERATIONS MAY SUFFER AND OUR REPUTATION MAY BE HARMED.

Our products are used for various purposes, such as treating municipal sewage and industrial wastewater and purifying water for food and beverage and pharmaceutical production. These uses tend to affect large geographic areas and significant numbers of people, and often have serious impact on the environment and people’s health and safety and daily lives. Consequently, the malfunctioning of our products could potentially cause tremendous damage. If our products are not properly designed or manufactured or if they do not perform adequately in the treatment of water, we could be subject to claims for damages based on theories of product liability and other legal theories. The costs and resources to defend such claims could be substantial and, if such claims are successful, we could be responsible for paying some or all of the damages. We do not have product liability insurance for our products. In addition, negative publicity from such claims may also damage our reputation, regardless of whether such claims are successful. Any of these consequences resulting from defects in our products would harm our results of operations, adversely affect our safety reputation among customers and potential customers, decrease our overall market share and increase our costs by requiring us to take additional measures to ensure our safety precautions are even more visible and effective.

OUR LACK OF ACCOUNTING PERSONNEL WITH EDUCATION AND EXPERIENCE IN US GAAP CREATES A MATERIAL WEAKNESS IN OUR INTERNAL CONTROL OVER FINANCIAL REPORTING AND COULD CAUSE AN OVERLOOK OR DELAY IN DETECTING A MATERIAL MISSTATEMENT OF THE COMPANY’S ANNUAL OR INTERIM FINANCIAL STATEMENTS.

Our books and records are maintained in accordance with Chinese GAAP and later converted into financial statements in accordance with the U.S. GAAP. Our Chief Financial Officer, Mr. Lui, and the accountants under his supervision are primarily responsible for preparing our books and records and converting such books and records into financial statements in accordance with the U.S. GAAP. Mr. Lui and other accountants have limited knowledge and experience in preparing financial statements in accordance with U.S. GAAP and preparing financial reporting pursuant to the SEC rules and regulations. In this regard, Mr. Lui and the other accountants are not a certified public accountants or certified management accountants in the U.S., and have not attended U.S. academic institutions or extended educational programs that would provide a sufficiently relevant education in U.S. GAAP. Our management concluded this deficiency or deficiencies creates a material weakness in internal control over financial reporting as of December 31, 2012 and 2011, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

WE MAY INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH UNITED STATES CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.

We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

GOVERNMENTAL REGULATIONS REGARDING THE IMPORT OR EXPORT OF PRODUCTS COULD NEGATIVELY IMPACT OUR REVENUES.

We plan to expand to over-sea market based on our price advantage, however, the United States and various foreign governments have imposed controls, export license requirements, and restrictions on the import of some of our products. We do not currently export the Company’s water purifying agent directly or indirectly out of the PRC. However, if we were to begin exporting our products in the future, governmental regulation of exports, or our failure to obtain required export approval for our products, could harm our international and domestic sales and adversely affect our revenues. In addition, failure to comply with such regulations could result in penalties, costs, and restrictions on export privileges.

WE RELY ON CONTRACTUAL ARRANGEMENTS WITH CONSOLIDATED PRC SUBSIDIARY JIANGMEN WEALTH WATER AND ITS SHAREHOLDERS FOR THE OPERATION OF OUR BUSINESS, WHICH MAY NOT BE AS EFFECTIVE AS DIRECT OWNERSHIP. IF JIANGMEN WEALTH WATER AND ITS SHAREHOLDERS FAIL TO PERFORM THEIR OBLIGATIONS UNDER THESE CONTRACTUAL ARRANGEMENTS, WE MAY HAVE TO RESORT TO LITIGATION TO ENFORCE OUR RIGHTS, WHICH MAY BE TIME-CONSUMING, UNPREDICTABLE, EXPENSIVE AND DAMAGING TO OUR OPERATIONS AND REPUTATION.

We operate our business through our consolidated PRC Subsidiary, Jiangmen Wealth Water through a series of contractual arrangements. These contractual arrangements are intended to provide us with effective control over this entity and allow us to obtain economic benefits from it. Although we have been advised by our PRC counsel, Han Kun Law Offices, that these contractual arrangements are valid, binding and enforceable under current PRC laws, these contractual arrangements may not be as effective in providing control as direct ownership. For example, Jiangmen Wealth Water and its shareholders could breach their contractual arrangements with us by, among other things, failing to operate our business in an acceptable manner or taking other actions that are detrimental to our interests. If we were the controlling shareholder of Jiangmen Wealth Water with direct ownership, we would be able to exercise our rights as shareholders to effect changes to its board of directors, which in turn could implement changes at the management and operational level. However, under the current contractual arrangements, as a legal matter, if Jiangmen Wealth Water or its shareholders fail to perform their obligations under these contractual arrangements, we may have to incur substantial costs to enforce such arrangements, and rely on legal remedies under PRC law, including contract remedies, which may not be sufficient or effective. If we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, our business and operations could be severely disrupted, which could materially and adversely affect our results of operations and damage our reputation.

THE CONTRACTUAL ARRANGEMENTS ENTERED INTO BETWEEN US AND JIANGMEN WEALTH WATER MAY RESULT IN ADVERSE TAX CONSEQUENCES TO US.

Under Chinese laws and regulations, arrangements and transactions among affiliated parties may be subject to audit or challenge by the Chinese tax authorities. We could face material and adverse tax consequences if the Chinese tax authorities determine that the contractual arrangements between us and Jiangmen Wealth Water do not represent arm’s-length prices and as a result, adjust any of the income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions for Chinese tax purposes recorded by us or our PRC Subsidiaries or an increase in taxable income, all of which could increase our tax liabilities. In addition, the Chinese tax authorities may impose late payment fees and other penalties on us or our Chinese subsidiaries for under-paid taxes.

Risks Relating to the People’s Republic of China

CERTAIN POLITICAL AND ECONOMIC CONSIDERATIONS RELATING TO THE PRC COULD ADVERSELY EFFECT OUR COMPANY.

The PRC is transitioning from a planned economy to a market economy. While the PRC government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion of the PRC economy is still operating under five-year plans and annual state plans. Through these plans and other economic measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various industries, the PRC government exerts considerable direct and indirect influence on the economy. Many of the economic reforms carried out by the PRC government are unprecedented or experimental, and are expected to be refined and improved. Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment process may not necessarily have a positive effect on our operations or future business development. Our operating results may be adversely affected by changes in the PRC’s economic and social conditions as well as by changes in the policies of the PRC government, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced to control inflation, changes in the interest rate or method of taxation, and the imposition of restrictions on currency conversion in addition to those described below.

THE RECENT NATURE AND UNCERTAIN APPLICATION OF MANY PRC LAWS APPLICABLE TO US CREATE AN UNCERTAIN ENVIRONMENT FOR BUSINESS OPERATIONS AND THEY COULD HAVE A NEGATIVE EFFECT ON US.

The PRC legal system is a civil law system. Unlike the common law system, the civil law system is based on written statutes in which decided legal cases have little value as precedents. In 1979, the PRC began to promulgate a comprehensive system of laws and has since introduced many laws and regulations to provide general guidance on economic and business practices in the PRC and to regulate foreign investment. Progress has been made in the promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by national laws could have a negative impact on our business and business prospects.

WE ARE REQUIRED TO MAINTAIN VARIOUS LICENSES AND PERMITS REGARDING OUR MANUFACTURING BUSINESS, AND THE LOSS OF OR FAILURE TO RENEW ANY OR ALL OF THESE LICENSES AND PERMITS MAY REQUIRE THE TEMPORARY OR PERMANENT SUSPENSION OF SOME OR ALL OF OUR OPERATIONS.

In accordance with the laws and regulations of the PRC, we are required to maintain various licenses and permits in order to operate our manufacturing business. Failure to maintain these licenses, or the loss of or failure to renew such licenses and production permits, could result in the temporary or permanent suspension of some or all of our production or distribution operations and could adversely affect our revenues and profitability.

SUBSTANTIALLY ALL OF OUR BUSINESS, ASSETS AND OPERATIONS ARE LOCATED IN PRC.

Substantially all of our business, assets and operations are located in PRC. The economy of PRC differs from the economies of most developed countries in many respects. The economy of PRC has been transitioning from a planned economy to a market-oriented economy. Although in recent years the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in PRC is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry by imposing industrial policies. It also exercises significant control over PRC’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Some of these measures benefit the overall economy of PRC, but may have a negative effect on us.

WE DERIVE SUBSTANTIALLY ALL OF OUR REVENUES FROM SALES IN THE PRC AND ANY DOWNTURN IN THE CHINESE ECONOMY COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND FINANCIAL CONDITION.

Substantially all of our revenues are generated from sales in the PRC. We anticipate that revenues from sales of our products in the PRC will continue to represent the substantial portion of our total revenues in the near future. Our sales and earnings can also be affected by changes in the general economy. Our success is influenced by a number of economic factors which affect disposable consumer income, such as employment levels, business conditions, interest rates, oil and gas prices and taxation rates. Adverse changes in these economic factors, among others, may restrict consumer spending, thereby negatively affecting our sales and profitability.

POTENTIAL ENVIRONMENTAL LIABILITY COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR OPERATIONS AND FINANCIAL CONDITION.

To the knowledge of our management team, neither the production nor the sale of our products constitutes activities, or generates materials that create any environmental hazards or requires our business operations to comply with PRC environmental laws. Although it has not been alleged by PRC government officials that we have violated any current environmental regulations, we cannot assure you that the PRC government will not amend the current PRC environmental protection laws and regulations. Our business and operating results may be materially and adversely affected if we were to be held liable for violating existing environmental regulations or if we were to increase expenditures to comply with environmental regulations affecting our operations.

CURRENCY CONVERSION COULD ADVERSELY EFFECT OUR FINANCIAL CONDITION.

The PRC government imposes control over the conversion of Renminbi into foreign currencies. Under the current unified floating exchange rate system, the People’s Bank of China publishes an exchange rate, which we refer to as the PBOC exchange rate, based on the previous day’s dealings in the inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency may enter into foreign exchange transactions at exchange rates within an authorized range above or below the PBOC exchange rate according to market conditions.

Pursuant to the Foreign Exchange Control Regulations of the PRC issued by the State Council which came into effect on April 1, 1996, and the Regulations on the Administration of Foreign Exchange Settlement, Sale and Payment of the PRC which came into effect on July 1, 1996, regarding foreign exchange control, conversion of Renminbi into foreign exchange by Foreign Investment Enterprises, or FIEs, for use on current account items, including the distribution of dividends and profits to foreign investors, is permissible. FIEs are permitted to convert their after-tax dividends and profits to foreign exchange and remit such foreign exchange to their foreign exchange bank accounts in the PRC. Conversion of Renminbi into foreign currencies for capital account items, including direct investment, loans, and security investment, is still under certain restrictions. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations and added, among other things, an important provision, which provides that the PRC government shall not impose restrictions on recurring international payments and transfers under current account items.

Enterprises in the PRC (including FIEs) which require foreign exchange for transactions relating to current account items, may, without approval of the State Administration of Foreign Exchange, or SAFE, effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks by providing valid receipts and proofs.

Convertibility of foreign exchange in respect of capital account items, such as direct investment and capital contribution, is still subject to certain restrictions, and prior approval from the SAFE or its relevant branches must be sought.

Furthermore, the Renminbi is not freely convertible into foreign currencies nor can it be freely remitted abroad. Under the PRC’s Foreign Exchange Control Regulations and the Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, Foreign Invested Enterprises are permitted either to repatriate or distribute its profits or dividends in foreign currencies out of its foreign exchange accounts, or exchange Renminbi for foreign currencies through banks authorized to conduct foreign exchange business. The conversion of Renminbi into foreign exchange by Foreign Invested Enterprises for recurring items, including the distribution of dividends to foreign investors, is permissible. The conversion of Reminbi into foreign currencies for capital items, such as direct investment, loans and security investment, is subject, however, to more stringent controls.

Jiangmen Huiyuan is a FIE to which the Foreign Exchange Control Regulations are applicable. Accordingly, we will have to maintain sufficient foreign exchange to pay dividends and/or satisfy other foreign exchange requirements.

EXCHANGE RATE VOLATILITY COULD ADVERSELY EFFECT OUR FINANCIAL CONDITION.

Since 1994, the exchange rate for Renminbi against the United States dollar has remained relatively stable, most of the time in the region of approximately RMB8.28 to $1.00. However, in 2005, the Chinese government announced that it would begin pegging the exchange rate of the Chinese Renminbi against a number of currencies, rather than just the U.S. dollar and, the exchange rate for the Renminbi against the U.S. dollar became RMB8.02 to $1.00. If we decide to convert Chinese Renminbi into United States dollars for other business purposes and the United States dollar appreciates against this currency, the United States dollar equivalent of the Chinese Renminbi we convert would be reduced. There can be no assurance that future movements in the exchange rate of Renminbi and other currencies will not have an adverse effect on our financial condition.

INFLATION IN THE PRC COULD NEGATIVELY EFFECT OUR PROFITABILITY AND GROWTH.

While the PRC economy has experienced rapid growth, it has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our products do not rise at a rate that is sufficient to fully absorb inflation-driven increases in our costs of supplies, our profitability can be adversely affected.

In order to control inflation in the past, the PRC government has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending. The implementation of these and other similar policies can impede economic growth. In October 2004, the People’s Bank of China, the PRC’s central bank, raised interest rates for the first time in nearly a decade and indicated in a statement that the measure was prompted by inflationary concerns in the Chinese economy. Repeated rises in interest rates by the central bank would likely slow economic activity in China which could, in turn, materially increase our costs and also reduce demand for our products.

THE SLOWDOWN OF CHINA’S ECONOMY CAUSED IN PART BY THE RECENT CHALLENGING GLOBAL ECONOMIC CONDITIONS MAY ADVERSELY EFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

China’s economy has experienced a slowdown in recent years. A number of factors have contributed to this slowdown, including appreciation of the Renminbi, which has adversely affected China’s exports, and tightening macroeconomic measures and monetary policies adopted by the Chinese government aimed at preventing overheating of China’s economy and controlling China’s high level of inflation. The booming real estate market helped the explosive growth of China’s economy in the past decade. The recent government control policy significantly cools down the overheated real estate market. The slowdown has been further exacerbated by the challenging global economic conditions in the financial services and credit markets, which in recent months has resulted in extreme volatility and dislocation of the global capital and credit markets.

It is uncertain how long the challenging global economic conditions in the financial services and credit markets will continue and how much of an adverse impact it will have on the global economy in general and the Chinese economy specifically. The slowdown of the Chinese economy could lead to a decrease in business and construction activity nationwide, which could reduce demand for our products and adversely affect our business, results of operations and financial condition.

SINCE MOST OF OUR ASSETS ARE LOCATED IN PRC, ANY DIVIDENDS OF PROCEEDS FROM LIQUIDATION IS SUBJECT TO THE APPROVAL OF THE RELEVANT CHINESE GOVERNMENT AGENCIES.

Our assets are predominantly located inside PRC. Under the laws governing Foreign Invested Enterprises in PRC, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to the relevant government agency’s approval and supervision as well as the foreign exchange control. This may generate additional risk for our investors in case of dividend payment and liquidation.

IT MAY BE DIFFICULT TO AFFECT SERVICE OF PROCESS AND ENFORCEMENT OF LEGAL JUDGMENTS UPON OUR COMPANY AND OUR OFFICERS AND DIRECTORS BECAUSE THEY RESIDE OUTSIDE THE UNITED STATES.

As our operations are presently based in PRC and our director and officer resides in PRC, service of process on our company and such director and officer may be difficult to effect within the United States. Also, our main assets are located in PRC and any judgment obtained in the United States against us may not be enforceable outside the United States.

OUR LABOR COSTS HAVE INCREASED AND ARE LIKELY TO FURTHER INCREASE AS A RESULT OF CHANGES IN CHINESE LABOR LAWS.

We expect to experience an increase in our cost of labor due to recent changes in Chinese labor laws which are likely to increase costs further and impose restrictions on our relationship with our employees. In June 2007, the National People’s Congress of the PRC enacted new labor law legislation called the Labor Contract Law and more strictly enforced existing labor laws. The new law, which became effective on January 1, 2008, amended and formalized workers’ rights concerning overtime hours, pensions, layoffs, employment contracts and the role of trade unions. As a result of the new law, we have had to increase the salaries of our employees, provide additional benefits to our employees, and revise certain other of our labor practices. The increase in labor costs has increased our operating costs, which increase we have not always been able to pass through to our customers. In addition, under the new law, employees who either have worked for us for ten years or more or who have had two consecutive fixed-term contracts must be given an “open-ended employment contract” that, in effect, constitutes a lifetime, permanent contract, which is terminable only in the event the employee materially breaches our rules and regulations or is in serious dereliction of his or her duties. Such non-cancelable employment contracts will substantially increase our employment related risks and limit our ability to downsize our workforce in the event of an economic downturn. No assurance can be given that we will not in the future be subject to labor strikes or that we will not have to make other payments to resolve future labor issues caused by the new laws. Prior to 2010, our PRC Subsidiaries have not purchased sufficient social insurance for all of their employees. If the local labor authorities order our PRC Subsidiaries to do so, we may become obligated to pay unpaid insurance premiums thereby increasing our labor costs. Please refer to the risk factor captioned “OUR PRC OPERATING COMPANIES ARE DELIQUENT ON PAYING SOCIAL INSURANCE PREMIUMS AND HOUSING PROVIDENT FUNDS FOR THEIR EMPLOYEES IN ACCORDANC WITH APPLICABLE LAWS.” Furthermore, there can be no assurance that the labor laws will not change further or that their interpretation and implementation will vary, which may have a negative effect upon our business and results of operations.

OUR PRC OPERATING COMPANIES ARE DELIQUENT ON PAYING SOCIAL INSURANCE PREMIUMS AND HOUSING PROVIDENT FUNDS FOR THEIR EMPLOYEES IN ACCORDANC WITH APPLICABLE LAWS.

Prior to 2010, neither Jiangmen Wealth, Shanxi Wealth, nor Guizhou Yufeng, our operating subsidiaries under the PRC laws, have not paid sufficient social insurance premiums and housing provident funds for their employees pursuant to the applicable PRC laws. The competent government authorities may require them not only to rectify their incompliance by paying the due and unpaid social insurance premiums and housing provident, but also impose fines. We estimated our exposure related to unpaid social insurance premiums and housing provident funds and believe the cumulated amount, including potential penalties, be approximately $300,000 for underpayments from inception of their operations through December 31, 2009. Beginning 2010, we accrued and remitted full amounts of social insurance premiums and housing provident funds for employees of our PRC Subsidiaries pursuant to the applicable PRC laws. The underpayment amount of $300,000 was included in accrued expenses in our financial statements as of December 31, 2012 and 2011.

WE MAY BE EXPOSED TO MONETARY FINES BY THE LOCAL HOUSING AUTHORITY AND CLAIMS FROM OUR EMPLOYEES IN CONNECTION WITH OUR PRC OPERATING COMPANIES’ NON-COMPLIANCE WITH REGULATIONS WITH RESPECT TO CONTRIBUTION OF HOUSING PROVIDENT FUNDS FOR EMPLOYEES.

According to the relevant PRC regulations on housing provident funds, PRC enterprises are required to contribute housing provident funds for their employees. The monthly contributions must be at least 5% of each employee’s average monthly income in the previous year. Our PRC Operating Companies have not paid sufficient housing provident funds for their employees prior to 2010. Under local regulations on collection of housing provident funds in Jiangmen, Guiyang and Fenyang where our PRC Subsidiaries are located, the local housing authorities may require our PRC Operating Companies to rectify its non-compliance by setting up bank accounts and making payment and relevant filings for the underpaid housing provident funds for their employees within a specified time period. If our PRC Operating Companies fail to do so within the specified time period, the local housing authority may impose a monetary fine on it and may also apply to the local people’s court for enforcement. Employees of our PRC Operating Companies may also be entitled to claim payment of such funds individually. If we receive any notice from the local housing authority or any claim from our current and former employees regarding our non-compliance with the regulations, we will be required to respond to the notice and pay all amounts due to the government, including any administrative penalties imposed, which would require us to divert our financial resources and/or impact our cash reserves, if any, to make such payments. Additionally, any administrative costs in excess of the payments, if material, may impact our operating results.

A FAILURE BY OUR SHAREHOLDERS OR BENEFICIAL OWNERS WHO ARE PRC CITIZENS OR RESIDENTS TO COMPLY WITH CERTAIN PRC FOREIGN EXCHANGE REGULATIONS COULD RESTRICT OUR ABILITY TO DISTRIBUTE PROFITS, RESTRICT OUR OVERSEAS AND CROSS-BORDER INVESTMENT ACTIVITIES OR SUBJECT US TO LIABILITY UNDER PRC LAWS, WHICH COULD ADVERSELY AFFECT OUR BUSINESS AND FINANCIAL CONDITION.

In October 2005, SAFE issued the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents Engaging in Financing and Roundtrip Investments via Overseas Special Purpose Vehicles (“Circular 75”). Circular 75 regulates the foreign exchange matters in relation to the use of a “special purpose vehicle” by PRC residents to seek offshore equity financing and conduct “round trip investment” in China. Under Circular 75, a “special purpose vehicle” refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or PRC entities for the purpose of seeking offshore equity financing using assets or interests owned by such PRC residents or PRC entities in onshore companies, while “round trip investment” refers to the direct investment in China by the PRC residents through the “special purpose vehicles,” including without limitation establishing foreign invested enterprises and using such foreign invested enterprises to purchase or control (by way of contractual arrangements) onshore assets. Circular 75 requires that, before establishing or controlling a “special purpose vehicle”, PRC residents and PRC entities are required to complete foreign exchange registration with the local offices of SAFE for their overseas investments. In addition, any PRC resident that is the shareholder of an offshore special purpose company is required to amend his or her SAFE registration with the SAFE or its competent local branch, with respect to that offshore special purpose company in connection with any of its increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China. To further clarify the implementation of Circular 75, SAFE also requires the PRC subsidiaries of an offshore company governed by Circular 75 to coordinate the filing and updating of the SAFE registrations in a timely manner regarding major capital changes of the offshore special purpose company. If our direct or indirect shareholders who are PRC citizens or residents do not complete their registration with the local SAFE authorities, our PRC Operating Companies will be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC Operating Companies.

Because of uncertainty in how Circular 75 will be interpreted and enforced, we cannot be sure how it will affect our business operations or future plans. For example, our PRC operating companies’ ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC resident beneficial holders over whom we have no control. We attempt to comply, and attempt to ensure that our shareholders, who are PRC citizens or residents, comply with Circular 75 requirements. We have requested Mr. Mingzhuo Tan who is PRC resident to make the necessary applications, filings and amendments as required under Circular 75 and other related rules. However, some or all of our shareholders who are PRC residents may not comply with our request to make or obtain any applicable registrations or approvals required by Circular 75. Furthermore, we may not at all times be fully aware or informed of the identities of all of our beneficial owners who are PRC citizens or residents, and we may not always be able to compel beneficial owners of our securities to comply with Circular 75 requirements. As a result, some or all of our shareholders or beneficial owners who are PRC citizens or residents may not at all times comply with, or in the future make or obtain any applicable registrations or approvals required by, Circular 75 or other related regulations. Failure by any such shareholders or beneficial owners to comply with Circular 75 could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, or limit our subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

WE MAY BE REQUIRED TO OBTAIN PRIOR APPROVAL OF THE CHINA SECURITIES REGULATORY COMMISSION, OR CSRC FOR THE LISTING AND TRADING OF OUR ORDINARY SHARES.

Among other things, the New M&A Regulations include new provisions that purport to require that an offshore special purpose vehicle, or SPV, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals must obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. However, the application of this PRC regulation remains unclear with no consensus currently existing among the leading PRC law firms regarding the scope and applicability of the CSRC approval requirement. Our PRC legal counsel, Han Kun Law Offices, believes that it is uncertain whether the transaction is subject to CSRC’s approval prior CSRC approval for the transaction (i) Jiangmen Huiyuan was incorporated by the means of direct investment by Wealth Environmental Technology, and there was no acquisition of the equity or assets of a “PRC domestic company” as such term is defined under the New M&A Rules; and (ii) there is no provision in the New M&A Rules that clearly classifies the contractual arrangements between Jiangmen Huiyuan and Jiangmen Wealth Water as a kind of transaction falling under the New M&A Rules; and in reality, many other similar companies have completed similar transactions like the share exchange and private placement contemplated under the Exchange Agreement without CSRC’s approval and our PRC legal counsel is not aware of any situation in which the CSRC has imposed a punishment or penalty in connection with any such transactions. However, if the CSRC or other PRC Government Agencies subsequently determine that CSRC approval is required for the share exchange contemplated under the Exchange Agreement, we may face material regulatory actions or other sanctions from the CSRC or other PRC Government Agencies. These regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares.

RECENTLY ENACTED REGULATIONS IN CHINA MAY MAKE IT MORE DIFFICULT FOR US TO PURSUE GROWTH THROUGH ACQUISITIONS.

The New M&A Regulations established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council on August 3, 2008, were triggered. In addition, PRC national security review rules which became effective on September 1, 2011 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

UNDER THE NEW EIT LAW, WE, WEALTH ENVIRONMENTAL PROTECTION OR WEALTH ENVIRONMENTAL TECHNOLOGY, MAY BE CLASSIFIED AS “RESIDENT ENTERPRISES” OF CHINA FOR TAX PURPOSE, WHICH MAY SUBJECT US, WEALTH ENVIRONMENTAL PROTECTION OR WEALTH ENVIRONMENTAL TECHNOLOGY TO PRC INCOME TAX ON TAXABLE GLOBAL INCOME.

Under Enterprise Income Tax Law of the PRC (“EIT Law”) that became effective on January 1, 2008, enterprises are classified as “resident enterprises” and “non-resident enterprises.” Enterprises established outside of China whose “de facto management bodies” are located in China are considered PRC “tax resident enterprises” and will generally be subject to the uniform 25% PRC enterprise income tax rate on their global income. In addition, a tax circular issued by the State Administration of Taxation on April 22, 2009 regarding the standards used to classify certain Chinese-invested enterprises established outside of China as “resident enterprises” clarified that dividends and other income paid by such “resident enterprises” will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized by non-PRC enterprise shareholders. This recent circular also subjects such “resident enterprises” to various reporting requirements with the PRC tax authorities. Under the implementation rules to the Enterprise Income Tax Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and other assets of an enterprise. In addition, the tax circular mentioned above details that certain Chinese-invested enterprises will be classified as “resident enterprises” if the following are located or resident in China: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights.

Given the short history of the EIT Law and lack of applicable legal precedent, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of a non-PRC company such as us. Our management is substantially based in the PRC and expected to be based in the PRC in the future. If the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable tax consequences could follow. First, we could be subject to the enterprise income tax at a rate of 25% on our global taxable income, as well as PRC enterprise tax reporting obligations. Second, although under the New EIT Law and its implementing rules dividends paid to us from our PRC Subsidiaries would qualify as “tax-exempted income”, we cannot assure you that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC EIT purposes. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a withholding tax of 10% for our non-PRC enterprise shareholders or a potential withholding tax of 20% for non-PRC individual shareholders is imposed on dividends we pay to them and with respect to gains derived by our non-PRC shareholders from transferring our shares. In addition to the uncertainty in how the new “resident enterprise” classification could apply, it is also possible that the rules may change in the future, possibly with retroactive effect. We are actively monitoring the “resident enterprise” classification rules and are evaluating appropriate organization changes to avoid this treatment, to the extent possible.

Currently, there has not been a definitive determination as to the “resident enterprise” or “non-resident enterprise” status of us. However, since it is not anticipated that we would receive dividends or generate other income in the near future, we are not expected to have any income that would be subject to the 25% enterprise income tax on global income in the near future. We will consult with the PRC tax authorities and make any necessary tax payment if we (based on future clarifying guidance issued by the PRC), or the PRC tax authorities, determine that we are a resident enterprise under the EIT Law, and if we were to have income in the future.

WE FACE UNCERTAINTY FROM CHINA’S CIRCULAR ON STRENGTHENING THE ADMINISTRATION OF ENTERPRISE INCOME TAX ON NON-RESIDENT ENTERPRISES’ SHARE TRANSFER INCOME (“CIRCULAR 698”) THAT WAS RELEASED IN DECEMBER 2009 WITH RETROACTIVE EFFECT FROM JANUARY 1, 2008.

The Chinese State Administration of Taxation (SAT) released a circular (Guoshuihan No. 698 – Circular 698) on December 10, 2009 that addresses the transfer of shares of Chinese resident companies by nonresident companies. Circular 698, which is effective retroactively to January 1, 2008, may have a significant impact on many companies that use offshore holding companies to invest in China. Circular 698, which provides parties with a short period of time to comply its requirements, indirectly taxes foreign companies on gains derived from the indirect sale of a Chinese company. Where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise by selling the shares in an offshore holding company, and the latter is located in a country or jurisdiction where the effective tax burden is less than 12.5% or where the offshore income of his, her, or its residents is not taxable, the foreign investor is required to provide the tax authority in charge of that Chinese resident enterprise with the relevant information within 30 days of the transfers. Moreover, where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC tax authority will have the power to re-assess the nature of the equity transfer in accordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holding company that is used for tax planning purposes.

There is uncertainty as to the application of Circular 698. For example, while the term “indirectly transfer” is not defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the country or jurisdiction and to what extent and the process of the disclosure to the tax authority in charge of that Chinese resident enterprise. In addition, there are no formal declarations with regard to how to decide “abuse of form of organization” and “reasonable commercial purpose”. Due to the short history of the New EIT law and lack of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of our holding companies, Huixin, a Cayman Island corporation, Wealth Environmental Protection, a company organized under the laws of the British Virgin Islands and Wealth Environmental Technology, a company organized under the laws of Hong Kong. As a result, we may become at risk of being taxed under Circular 698 and we may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations.

WE RELY PRINCIPALLY ON DIVIDENDS AND OTHER DISTRIBUTIONS ON EQUITY PAID BY OUR WHOLLY-OWNED SUBSIDIARY TO FUND ANY CASH AND FINANCING REQUIREMENTS WE MAY HAVE, AND ANY LIMITATION ON THE ABILITY OF OUR SUBSIDIARY TO PAY DIVIDENDS TO US COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR ABILITY TO CONDUCT OUR BUSINESS.

As a holding company, we rely principally on dividends and other distributions on equity paid by Jiangmen Huiyuan, for our cash requirements, including the funds necessary to service any debt we may incur or for operating a public company. Jiangmen Huiyuan’s sole operations consist of providing technical and consulting services to Jiangmen Wealth Water pursuant to the contractual arrangements and all of Jiangmen Huiyuan’s revenue is generated from the service fees paid to it by Jiangmen Wealth Water pursuant to the contractual arrangements. As all of Jiangmen Huiyuan’s revenues consist of the annual service fee that Jiangmen Wealth Water pays to Jiangmen Huiyuan pursuant to the contractual arrangements, the amount of cash that Jiangmen Huiyuan has to distribute to us is entirely dependent on the operations of Jiangmen Wealth Water and the amount of annual service fee, which can vary from time to time. The payment of the service fee can be delayed by the Company, which could negatively affect its cash and financing requirements.

If Jiangmen Huiyuan incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements Jiangmen Huiyuan currently has in place with Jiangmen Wealth Water in a way that would materially and adversely affect Jiangmen Huiyuan’s ability to pay dividends and other distributions to us. Furthermore, relevant PRC laws, rules and regulations permit payments of dividends by Jiangmen Huiyuan only out of its retained earnings, if any, determined in accordance with PRC accounting standards and regulations. Under PRC laws, rules and regulations, Jiangmen Huiyuan is also required to set aside a portion of its net profit each year to meet the statutory general reserve fund requirement. These reserves are not distributable as cash dividends. The statutory general reserve fund requires annual appropriations of 10% of after-tax profit to be set aside prior to payment of dividends until the cumulative fund reaches 50% of the registered capital. As a result Jiangmen Huiyuan is restricted in its ability to transfer a portion of its net assets to us whether in the form of dividends, loans or advances. Any limitation on the ability of Jiangmen Huiyuan to pay dividends to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from the Company’s profits.

THE CHINESE GOVERNMENT EXERTS SUBSTANTIAL INFLUENCE OVER THE MANNER IN WHICH WE MUST CONDUCT OUR BUSINESS ACTIVITIES.

We are dependent on our relationship with the local government in the province in which we operate our business. Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

Future inflation in China may inhibit our ability to conduct business in China. In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may have an adverse effect on profitability. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products.

IF OUR LAND USE RIGHTS ARE REVOKED, WE WOULD HAVE NO OPERATIONAL CAPABILITIES.

Under Chinese law, land is owned by the state or rural collective economic organizations. The state issues to the land users the land use right certificate. Land use rights can be revoked and the land user forced to vacate at any time when redevelopment of the land is in the public interest. The public interest rationale is interpreted quite broadly and the process of land appropriation may be less than transparent. Each of Jiangmen Wealth Water, Guizhou Yufeng and Shanxi Wealth relies on these land use rights as the cornerstone of their operations, and the loss of such rights would have a material adverse effect on our company.

Risks Associated with Our Securities

RESTRICTED SECURITIES; NO ACTIVE TRADING MARKET.

Our Ordinary Shares have not been registered under the Securities Act, and cannot be sold without registration under the Securities Act or any exemption from registration. In addition, our Ordinary Shares are not registered under any state securities laws that would permit their transfer. There is no active public trading market for our Ordinary Shares. Our Ordinary Shares is quoted on the OTC Bulletin Board. There can be no assurance that a regular trading market will develop or that if developed, will be sustained. The development of an active trading market will depend on the existence of willing buyers and sellers, the presence of which is not within our control, or the control of any market maker or specialist. The number of active buyers and sellers of our Ordinary Shares at any particular time may be limited. Under such circumstances, our shareholders could have difficulty selling our shares on short notice, and, therefore, our stock should not be viewed as a short-term or liquid investment. In the absence of a trading market, a shareholder will be unable to liquidate his investment except by private sale.

WE ARE NOT LIKELY TO PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.

We currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect to pay any cash dividends in the foreseeable future, but will review this policy as circumstances dictate. Should we determine to pay dividends in the future, our ability to do so will depend upon the receipt of dividends or other payments from Wealth Protection may, from time to time, be subject to restrictions on its ability to make distributions to us, including restrictions on the conversion of RMB into U.S. dollars or other hard currency and other regulatory restrictions.

WE MAY BE SUBJECT TO THE PENNY STOCK RULES WHICH WILL MAKE THE OUR ORDINARY SHARES MORE DIFFICULT TO SELL.

If we are not able to obtain a listing of our Ordinary Shares on a national securities exchange, we may be subject in the future to the SEC’s “penny stock” rules if our Ordinary Shares sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation.

In addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for our Ordinary Shares. As long as our Ordinary Shares are subject to the penny stock rules, the holders of such Ordinary Shares may find it more difficult to sell their securities.

OUR ORDINARY SHARES ARE QUOTED FOR TRADING ON THE OTC BULLETIN BOARD, HAVE NOT BEEN LISTED ON ANY STOCK EXCHANGE AND THERE CAN BE NO ASSURANCE THAT A LIQUID TRADING MARKET WILL BE DEVELOPED FOR OUR ORDINARY SHARES IN THE FUTURE.

Our ordinary shares are being quoted and traded on OTC Bulletin Board under the symbol of “HXWWF”. The OTC Bulletin Board is an inter-dealer, over-the-counter market that provides significantly less liquidity than the New York Stock Exchange or NASDAQ Stock Market. The quotation of our shares on the OTC Bulletin Board may result in a less liquid market available for existing and potential stockholders to trade our shares, and could depress the trading price of our ordinary shares and have a long-term adverse impact on our ability to raise capital in the future.

Item 1B.

Unresolved Staff Comments.

Not applicable.

ITEM 2.

PROPERTIES.

Executive Offices

All land in China is owned by the State. Individuals and companies are permitted to acquire rights to use land or land use rights for specific purposes. In the case of land used for industrial purposes, the land use rights are granted for a period of 50 years. This period may be renewed at the expiration of the initial and any subsequent terms. Granted land use rights are transferable and may be used as security for borrowings and other obligations.

Jiangmen Huiyuan and Jiangmen Wealth Water

The principal executive offices of Jiangmen Huiyuan and Jiangmen Wealth Water are located at, No, 99 Third Jian She Road, Peng Jiang District, Jiangmen City, Guangdong Province, China. The property at this location is leased by Jiangmen Wealth Water from Mr. Mingzhuo Tan, our Chairman and Chief Executive Officer, at monthly rental expenses of RMB80,000, approximately $12,696, and for a term of 5 years ending December 31, 2015.

In additional we leased additional office space for our administrative team at a monthly rent of RMB14,178, approximately $2,250 from an unrelated party for the term from August 16, 2012 through November 15, 2013 .

The following table summarizes the land use rights owned by Jiangmen Wealth Water.

Item		Address		Size (m2) (1 square meter ≈ 10.78 square feet)
1		Sanya Industrial Park, Muzhou Town, Xinhui District, Jiangmen City, Guangdong Province		24,560.12

Guizhou Yufeng

The principal executive offices of Guizhou Yufeng are located in Xinghong Village, Zhazuo Town, Xiuwen County, Guizhou Province. Guizhou Yufeng owns mining licenses of two mines (described in more details below) at the following location:

1tem	Address	Size (m2) (1 square meter ≈ 10.78 square feet)
1.	Limestone Mine, Dashan Village, Zhaozuo Town, Xiuwen County, Guizhou Province	19,400
2.	Bauxite Mine, Gaocang Village, Zhaozuo Town, Xiuwen County, Guizhou Province	387,900

In addition, Guizhou Yufeng also owns the land use right to 20,880.1 square meters (1 square meter ≈ 10.78 square feet) industrial land located in Xinghong Village, Zhaozuo Town, Xiuwen County, Guizhou Province.

Shanxi Wealth

The principal executive offices of Shanxi Wealth are located in East Jia Bi Village, Industrial Area, San Quan Town, Fenyang City, Shanxi Province. The following table summarizes the location of the mines, to which Shanxi Wealth owns mining licenses:

Name	Address	Size (m2) (1 square meter ≈ 10.78 square feet)
1.	Limestone Mine, Sang Zao Po Village, Li Jia Zhuang Township, Fenyang City, Shanxi Province	21,400
2.	Bauxite Mine, Luo Tuo Ju Village, Wang Jia Guo Township, Liu Lin County, Lvliang City, Shanxi Province	518,000
3.	Industrial Area, Sanquan Town, Fenyang, Shanxi Province	34,826.84

Mines

We acquire the rights to exploit the mines through mining rights transfer agreements in connection with a limestone mine and a bauxite mine located in Guizhou Province which was entered into by and between the transferee Guizhou Yufeng and the transferor Xiuwen Rongxiang Building Materials Co,. Ltd. in July 2005 and mining rights transfer agreements in connection with a limestone mine and a bauxite mine located in Shanxi Province which was entered into by and between the transferee Shanxi Wealth and each of the transferors Shanxi Fenyang Hongsen Construction Stone Co., Ltd. and Shanxi Liulin Changsheng Aluminumore Co., Ltd. in November 2005. The transfer prices of the limestone mine and the bauxite mine located in Guizhou Province were RMB 3 million, approximately USD $0.5 million, and RMB 18 million, approximately USD$2.7 million, all of which had been duly settled. The transfer prices of the limestone mine and the bauxite mine located in Shanxi Province were RMB 8 million, approximately USD$ 1.2 million, and RMB 28 million, approximately USD$ 4.3 million, all of which had been duly settled.

Set forth below are detailed description of our mining properties held by Guizhou Yufeng and Shanxi Wealth:

Guizhou Bauxite Mine

Guizhou Yufeng holds a mining license for bauxite mine (No.5200000238714) (“Guizhou Bauxite Mine”), issued by the Guizhou Provincial Department of Land and Resource on September 6, 2005, with a term from October, 2005 to October, 2020. Guizhou Bauxite Mine license has passed the annual governmental examinations from 2005 to 2011. Guizhou Bauxite Mine is located at Gaocang Village, Zhazuo Town, Xiuwen County, Guizhou Province, covering an area of 0.3879 square kilometers. Effective February 6, 2013, Guizhou Yufeng transferred the mining license of Guizhou Baxite Mine to Longchang Mineral pursuant to a transfer agreement, in exchange for the mining right of another aluminum bauxite mine.

Location and Range

The aluminum mine of Guizhou Yufeng Melt Co., Ltd is located about 11km away from Xiuwen county town and 13km away from Guiyang city. The geographic coordinates of the centre of the mining area are E106°39′33″，N26°47′23″, the total area of the mine is 0.3879km2, mining designed elevation is 1400m to 1150m. There are many simply-built highways around the mining area, and the traffic is very convenient.

Traffic Conditions

Roads to the mine are accessible for large and small vehicles. The mine is about 11km away from Xiuwen and 13km away from Guiyang. The traffic conditions are sufficient to support the ordinary operations of the mine.

The mine consists of the following seven inflection points. Inflection points coordinates, mining area and mining depth can be seen in the table below:

Inflection Points Coordinates in Mining Area

No.	X coordinate	Y coordinate
1	2965220	36366465
2	2964625	36366790
3	2964410	36366550
4	2964410	36366150
5	2964630	36366200
6	2964820	36366055
7	2965055	36366110
Mining area: 0.3879km2 Mining depth: 1400m to 1150m

Note: The coordinates in the table follow Beijing Coordinates System and Yellow Sea Height.

Map

The following sets forth a small-scale map showing the location of the mine.

Mineralized Materials

We do not have proven or probable reserve in our Guizhou Bauxite mine. To our knowledge, this mine has a non-reserve deposit of mineralized bauxite materials. We are presently not able to provide information of the continuity, tonnage and grade of this mine because we do not possess qualified technical documentation to support the estimates we made.

Rock Formations & Mineralization

Our mineralized materials contents aluminum, MgO, TiO2, SiO2 and Fe2O3, and other coexisting components such as Cu, WO3, Sn, Mo, Bi, As, Hg, Co, Ni, Au, Ag, Pt, etc. The following sets forth statistics on the major chemical components.

Major Chemical Components

Sample numbers	Analyses Results（%）
	Al2O3		MgO		TiO2		SiO2		Fe2O3
	Analytical value	Average value	Analytical value	Average Value	Analytical value	Average value	Analytical Value	Average value	Analytical value	Average value
Y1	75.52	75.21	1.04	0.97	2.78	2.93	4.35	4.86	1.25	1.35
Y2	74.45		1.12		2.84		5.23		1.46
Y3	72.87		1.15		3.83		5.75		1.56
Y4	76.46		0.85		2.54		4.78		1.24
Y5	76.75		0.71		2.68		4.23		1.23

Production

For Guizhou Bauxite Mine and other three mines that we own, our extraction contractors conduct the extraction on a by-order basis. To track our actual production, we record our demand before we send the orders to the extraction contractors, and we examine the quantity and the quality of extracts against the order on site. After the extracts pass the examination, our extraction contractors make regular interval deliveries to our warehouse, and we weigh in, record the tonnage, and stock in the warehouse. The actual bauxite production for the past three years is set forth below.

Aluminum Ore Actual Production (Ton)
2010	2011	2012
65,214	79,792	89,227

Current Costs & Future Investment

The mine was purchased Guizhou Yufeng from the former right holder after the expropriation, design, civil engineering, mine construction and installation were completed. The total amount of investment is calculated as RMB 18 million, approximately USD $2.7 million, according to the current purchase rate. When the mine was purchased in 2005, the exactable non- reserve storation is 1.6 million tons after evaluation. The average investment is RMB11.5 per ton. Right now, there is no plan for future investment.

Source of Power & Water

There are several sources of water. However, we seldom use water during the mining process. The mine has sufficient electricity supplied by the national electricity network.

Guizhou Limestone Mine

Guizhou Yufeng holds a mining license for limestone mine (for construction usage) (No.5201023052207) (“Guizhou Limestone Mine”), which was issued by Xiuwen Land and Resource Bureau on September 8, 2005, with a term from September 2005 to September 2023. Our Guizhou Limestone Mine license has passed the annual governmental examinations from 2005 to 2012. Guizhou Limestone Mine is located at Dashan Village, Zhazuo Town, Xiuwen County, Guizhou Province, covering an area of 0.0194 square kilometers.

Location and Range

The limestone mine of Guizhou Yufeng is located about 10km from Xiuwen county and 12km from Guiyang city. The geographic coordinates of the centre of the mining area are E106°40′29″, N26°48′04″, the total area of the mine is 0.0194 km2, mining designed elevation is 1403.6m to 1350m. There are many simply-built highways around the mining area, and the traffic is very convenient.

The mine is delineated by four inflexion points. The coordinates of the inflexion points, the mine area and the mining depth are given the table below.

Inflexion points coordinates in mining area

No.	X coordinate	Y coordinate
1	2966360	36368290
2	2966290	36368290
3	2966230	36368130
4	2966350	36368140
The Mine Area：0.0194km2 The Mining Depth：1403.6m～1350m

Note：The coordinates in the table belong to Beijing coordinate system and Yellow Sea Height.

Traffic Conditions

There are highways between the mining area and the county and Guiyang city, providing a very convenient transportation condition.

Map

The following sets forth a small-scale map showing the location of the mine.

Mineralized Materials

We do not have proven or probable reserve in our Guizhou Limestone mine. We applied opencast mining to this mine and to our knowledge this mine has a non-reserve deposit of mineralized limestone materials. We are presently not able to provide information of the continuity, tonnage and grade of this mine because we do not possess qualified technical documentation to support the estimates we made.

Rock Formations & Mineralization

Set forth below is a brief analysis on the chemical compositions of the mine:

Chemical Compositions

The Sample Number	The Analytical Results（%）
	CaO		MgO		Al2O3		SiO2		Fe2O3
	The Analytical Value	The Mean Value	The Analytical Value	The Mean Value	The Analytical Value	The Mean Value	The Analytical Value	The Mean Value	The Analytical Value	The Mean Value
Y1	54.50	53.17	1.14	1.06	3.85	2.93	5.25	5.13	1.42	1.45
Y2	53.05		0.95		2.14		4.23		1.36
Y3	52.80		1.05		2.83		5.15		1.51
Y4	51.30		1.08		2.94		5.78		1.44
Y5	54.20		1.10		2.88		5.23		1.53

The Proportion: 2.60t/ m3.

The Moh’s Hardness: around 3.50.

The Loose Coefficient : 1.4～1.5.

The Compressive Strength: 1250～1300kg/cm2 in vertical layers and 1080 to 1100kg/cm2 in the parallel layers.

The Ore Type: the carbonate type

Production

Using the same method as Guizhou Bauxite Mine to track our actual production, the actual limestone production for the past three years is set forth below.

Limestone Quarries Actual Production (Ton)
2010	2011	2012
27,324	33,727	37,011

Current Costs & Future Investment

The mine was obtained from the former right holder after the prophase investment and construction were completed. The amount of investment is RMB 3 million, approximately USD $0.5 million, the contract value of the purchase.

Extractable non-reserve deposit was estimated to be 3 million tons and the average investment was RMB 1 per ton when the mine was purchased in 2005. There is no such plan for as future investment.

Shanxi Bauxite Mine

Shanxi Wealth holds a mining license for bauxite mine (No.1400000512847) (“Shanxi Bauxite Mine”), issued by the Shanxi Provincial Department of Land and Resource on January 10, 2006 with a term from January, 2006 to January 2020. Shanxi Bauxite Mine license has passed the annual examinations from 2006 and 2012. Shanxi Bauxite Mine is located at Luo Tuo Ju Village, Wang Jia Gou Township, Liu Lin County, Lvliang City, covering an area of 0.5180 square kilometers.

Location and Range

The Bauxite Mine of Shanxi Wealth Aluminate Material Co., Ltd. is located in Luotuoju Village, Wangjiagou County, which is 30km north to the Liuling County. Its administrative divisions are under the jurisdiction of Wangjiagou County (see the Location Map). The geographic coordinates of the centre of the mining area are E110°55′19.5″，N37°36′55.0″, the total area of the mine is 0.518km2 Quasi-mining elevation is 1200-850m. There are simple roads connecting the mine and the x446Road for 1.5km long, the traffic is convenient.

Assess the inflection point coordinates of the mining areas

Turning Point No.	Coordinate
Turning Point No.	X	Y
1	3688710545.800	41145806197.528
2	3688710545.800	41145804864.935
3	3688708925.132	41145804818.707
4	3688709304.069	41145806250.567

Map

The following sets forth a small-scale map showing the location of the mine.

Mineralized Materials

We do not have proven or probable reserve in our Shanxi Bauxite mine. To our knowledge, this mine has a non-reserve deposit of mineralized bauxite materials. We are not able to provide information of the continuity, tonnage and grade of this mine because we do not possess qualified technical documentation to support the estimates we made.

Rock Formations & Mineralization

Set forth below is a brief analysis on the chemical compositions of the mine:

The ore mine highest grade Al2O3 is 75.08%, A / S, 31.42. Minimum value of Al2O3, 41.26%, A / S is 2.66. The ore mine average grade Al2O3 is 62.10%, coefficient of variation 10.04%; SiO2 11.25%, coefficient of variation 37.04%; Fe203 6.64%, coefficient of variation 60.13%. On the roof was mostly clay rock, with Al2O3 content of 32% ~ 40%, SiO2 around 40%. Rock boundary is not obvious from its surrounding. Floor is limestone, dolomitic limestone, argillaceous limestone.

Production

Using the same method as Guizhou Bauxite Mine to track our actual production, the actual bauxite production for the past three years is set forth below.

Aluminum Ore Actual Production (Ton)
2010	2011	2012
139,379	167,021	169,440

Current Costs & Future Investment

The total amount of investment is calculated as RMB 28 million, approximately USD $4.3 million, according to the buying rate. There is no such plan for as future investment.

Shanxi Limestone Mine

Shanxi Wealth holds a mining license for limestone for construction usage (No. 1400000631218) (“Shanxi Limestone Mine”), issued by Fenyang Land and Resource Bureau on January 10, 2006, with a term from January, 2006 to January 2025. Shanxi Limestone Mine license has passed the annual examinations from 2006 to 2012. Shanxi Limestone Mine is located at Sang Zao Po Village, Li Jia Zhuang Township, Fenyang City, covering an area of 0.0214 square kilometers.

Location and Range

The Limestone Mine of Shanxi Huixin Aluminate Materials Co., Ltd. is located at Sangzaopo Village, LIjiazhuang Town, Fenyang City, Shanxi Province. The geographic coordinates of the centre of the mining area are E111°39′～111°40′，N37°16′～37°17′. The mine is defined by 4 inflection points, the total area of the mine is 0.0214 km2, Open-pit mining designed elevation is 980m to 800m.

Range of Inflection Point Coordinates

Number of inflection points	X coordinate	Y coordinate
1	558862	374126468
2	559009	374126500
3	559010	374126377
4	558838	374126376

Map

The following sets forth a small-scale map showing the location of the mine.

Mineralized Materials

We do not have proven or probable reserve in our Shanxi Bauxite mine. To our knowledge, this mine has a non-reserve deposit of mineralized limestone materials. We are not able to provide information of the continuity, tonnage and grade of the mine because we do not possess qualified technical documentation to support the estimates we made.

Rock Formations & Mineralization

Chemical Features in this report is referred from sample test result of Shanxi Gongye University Non-ferrous metal laboratory, from February 3rd, 2006 to October 18th, 2009. Chemical composition of the ore is stable with high levels of beneficial components and low levels of harmful components, among which: CaO 60.13%. MgO l.43 ~ 2.41%, SiO2 0.16 ~ 2.33%, Al2O3 0.008 ~ 0.022%, Fe2O3 0.035 ~ 0.048%, Loss 41.91 ~ 43.28%.

Production

Using the same method as Guizhou Bauxite Mine to track our actual production, the actual limestone production for the past three years is set forth below.

Limestone Quarries Actual Production (Ton)
2010	2011	2012
58,810	69,054	60,284

Current Costs & Future Investment

The total amount of investment is calculated as RMB 8 million, approximately USD $1.2 million, according to the current purchase rate. Right now there is no plan for future investment.

Source of Power & Water

Fenyang Lijiazhuang 35KV Transformer Station provides stable and sufficient electricity for the mine. There is no water needed during the mine’s production process. Water for daily life purposes is supplied by Sangzaopo Water Reservoir.

Equipment, Infrastructure and other Facilities

For each of the four mines we own, we entrust independent extraction contractors to conduct the extraction. The independent contractors use their own equipment for the extraction, primarily including electricity generation system, transportation vehicles, air ventilation system, air compressors and drilling machines. We own the facilities and infrastructure at each mine, primarily including outdoor bauxite reserve facilities, executive buildings, and dormitory buildings. Copies of form limestone entrusting extraction contract and form bauxite entrusting extraction contract are included as Exhibit 10.31 in our Amendment to Form 8-K filed on April 18, 2011 and Exhibit 10.32 in our Amendment to Form 8-K filed on June 6, 2011, respectively.

Mining Rights and Licenses

Guizhou Yufeng obtained the respective mining licenses in relation to the limestone mine (license No.5201023052207) in September 2005 and to the bauxite mine (license No.5200000238714) in October 2005 and registered as the concessionaire thereof. Shanxi Wealth obtained the respective mining licenses regarding the bauxite mine (license No.140000512847) and limestone mine (license No.140000631218) in January 2006, and accordingly, has become the registered concessionaire of the two said mines since then. In addition, as specified on the respective mining licenses, the duration for the mining rights regarding the limestone mine and bauxite mine to which Guizhou Yufeng is entitled are from September 2005 until September 2023 and from October 2005 until October 2020 respectively. As far as Shanxi Wealth is concerned, Shanxi Wealth, based on its mining licenses, is entitled to enjoy the mining rights regarding the bauxite mine from January 2006 until January 2020 and the limestone mine from January 2006 until January 2025, respectively. In accordance with the Measures for Registration Administration of Mineral Resources Exploitation, if there is a need to continue mining minerals on the expiration of the period of validity of the mining license, the mining concessionaire shall complete the procedures for extension of registration with the registration authority 30 days prior to the expiration of the period of validity of the mining license.

On February 6, 2013, Guizhou Yufeng received a mining right to an aluminum bauxite mine (license No. [C5200002010103120077204]) located at Xiuwen County Longchang Town Ganba 25th Group (the “Ganba Mine”), pursuant to a transfer agreement. On August 28, 2012, Guizhou Yufeng entered into a transfer, pursuant to which, Longchang Mineral transfers its mining right to Ganba Mine to Guizhou Yufeng for consideration of RMB520 million (approximately $83 million) and Guizhou Yufeng transfers its mining right to a Guizhou Yufeng aluminum bauxite mine, also known as Xiuwen Zhongxue Mine (the “Xiuwen Zhongxue Mine”) to Longchang Mineral for consideration of RMB 18 million (approximately $2.87 million) (the “Transfer Agreement”). Upon receipt of the permit, on February 7, 2013, both parties entered into a supplement agreement to confirm the terms in the Transfer Agreement (the “Supplement Agreement”). According to the terms of the Transfer Agreement and the Supplement Agreement, the payment of RMB 18 million of the mining right to Xiuwen Zhongxue Mine will be credited to the payment of RMB 520 million for the mining right to Ganba Mine, proportionally based on the installment schedule of the payment; and all payments prior to the approval of Guizhou National Land and Resource are considered as security deposit with applicable interest should the transaction be rejected by the Ministry of Land and Resources of the PRC. Both parties shall make preparation for the deliveries of Ganba mine and Wiuwen Zhongxue Mine and once Guizhou Yufeng receives the mining right license, both parties shall start the procedures of the deliveries of Ganba mine and Xiuwen Zhongxue Mine formally and transfer all the technical documents and licenses of their mines to each other within 3 days. As the date of this filing, Guizhou Yufeng has paid the full consideration for the transfer of the mining rights to Ganba mine to Longchang Mineral. The Ganba Mine has an available reserve of 4,936,200 tons of aluminum bauxite, from which the aluminum for production of our products is derived. Management believes obtaining mining rights to Ganba Mine allows the Company to expand its mineral reserves for High-performance Aluminate Calcium (HAC) powder, the core component of water purifying agent and possible profitable sales of aluminum products in the future.

Pursuant to the revised PRC Mineral Resources Law, effective on January 1, 1997 and the Implementation Rules of the PRC Resources Law, effective on March 26, 1994, all mineral resources shall be owned by the PRC government. The State ownership of the mineral resources, either near the earth's surface or underground, shall not change with the ownership of the land or the right to the use of the land to which the mineral resources are attached. Accordingly, the PRC government adopts a license system for the exploration and exploitation of the mineral resources. Under the PRC laws and regulations, "exploration right" means the right to explore the mineral resources within the scope provided by the exploration license which is legally obtained and the units or individuals that have obtained the exploration licenses are called exploration licensees, while "exploitation right" or “mining right” means the right to exploit the mineral resources and own the products within the scope provided by the exploitation license which is legally obtained and the units or individuals that have obtained the exploitation licenses are called concessionaires. Any concessionaires are granted the rights to conduct the mining activities within the term and the exploitation area prescribed by the mining license; sell the mineral products by themselves, except for those minerals which the PRC State Council has prescribed for a unified purchase by the designated units only; construct within the mine area production and living facilities; obtain in accordance with law the right to use the land required for the production; and other rights provided by laws and regulations. The concessionaires shall fulfill the obligations of conducting mine construction or mining within the term approved; conducting efficient protection, rational mining and comprehensive utilization of the mineral resources; paying the resources tax and the mineral resources compensation fees pursuant to law; complying with the State laws and regulations regarding the labor safety for production, water and soil conservancy, land recovery and environmental protection; and accepting the supervision and administration from both the competent departments in charge of geology and mineral resources and the other relevant competent departments, and filling out and presenting the mineral resources forms and mineral resources development and utilization statistics reports according to the relevant provisions.

Pursuant to the Measures for Control of Transfer of Exploration Rights or Mining Rights, promulgated by the State Council and effective on February 12, 1998, a mining concessionaire is entitled to apply with the competent examining and approving authority regarding transferring its mining rights to a transferee under the transfer contract executed thereby. After receipt of the application, the examining and approving authority will make a decision of approval or disapproval within 40 days as of the date of receipt of the application for transfer, and notify the transferor and the transferee. If the transfer is approved, the transferor and the transferee are required to go through the formalities for registration modification with the original licensing authority within 60 days as of the date of receipt of the approval notice of transfer. The transferee will obtain the mining license and become an exploration licensee or a mining concessionaire after paying the relevant required fees.

We have full mining rights over the bauxite mines and limestone mines concerned. As a concessionaire under the mining licenses, we are required to pay certain taxes and fees to the PRC government as royalties for our mining activities and sale of mineral products, such as the resource tax of bauxite at the rate of RMB20 or approximately $3.17, per ton in Guizhou and Shanxi, and the resource tax of limestone at the rate of RMB2 or approximately $0.32, per ton in Guizhou and Shanxi; the mineral compensation fees, which is computed and collected at a certain ratio of the sales income of mineral products; the mining fees, which shall be paid year by year according to the acreage of the scope of the mining zone at a rate of RMB1,000 per square kilometer per year; and the price for the mining. As Guizhou Yufeng and Shanxi Wealth acquired the mining rights through the means of transfer, the transfer price has included the mining fees, and Guizhou Yufeng and Shanxi Wealth have paid off the mineral compensation fees. As of December, 2012 and 2011, Guizhou Yufeng and Shanxi Wealth have paid all the requisite fees as required.

In order to retain the mining rights, the mining concessionaire shall conduct mine construction or mining within the term and area approved, conduct efficient protection, rational mining and comprehensive utilization of the mineral resources, accept supervision and inspection from both the competent departments in charge of geology and mineral resources, submit annual reports including the mineral resource forms and mineral resources development and utilization statistics reports, pay the fees as required by relevant laws and regulations, such as Measures for Registration Administration of Mineral Resources Exploitation (effective on February 12, 1998), and Provisions on Administration of Collection of Mineral Resources Compensation Fees (effective on February 27, 1994), and complete the registration procedures for the modification (if applicable). As of December 2012 and 2011, each of Guizhou Yufeng and Shanxi Wealth holds their respective mining rights in good standing.

Reconciliation between limestone and bauxite production tonnage and HAC Powder production tonnage

Production & Raw material use quantity
		2010 (Unit: Ton)						2011 (Unit: Ton)						2012 (Unit: Ton)
Company	Raw Material	Raw Material Received		Used quantity		Finished Goods Quantity		Current incoming		Used quantity		Finished Goods Quantity		Current incoming		Used quantity		Finished Goods Quantity
Guizhou Yufeng Melt Co., Ltd	Aluminium Ore		65,214		64,759		72,581		79,792		80,003		89,734		89,807		89,227		99,947
Guizhou Yufeng Melt Co., Ltd	Limestone Quarries		27,324		26,862				33,727		33,185				37,499		37,011		187,384
Shanxi Wealth Aluminate Material Co., Ltd	Aluminium Ore		139,379		138,892		155,563		167,021		167,005		187,357		176,562		169,440
Shanxi Wealth Aluminate Material Co., Ltd	Limestone Quarries		58,810		57,612				69,054		69,273				70,932		70,283
Total			290,727		288,125		228,125		349,594		349,466		277,091		374800		365,961		287,331

Raw Materials through Finished Goods Manufacturing Process

Average Production Cost and Average Sales Price

For the year ended December 31, 2012, our average production cost and average sales price per ton for water purifying agent are respectively approximately $83.46 (RMB525.80) and approximately $137.45 (RMB865.96).

For the year ended December 31, 2011, our average production cost and average sales price per ton for water purifying agent are respectively approximately $60.67 (RMB470.57) and approximately $129.35 (RMB834.86).

For the year ended December 31, 2012, our average production cost and average sales price per ton for HAC powder are respectively approximately $88.37 (RMB556.72) and approximately $198.42 (RMB1,250).

For the year ended December 31, 2011, our average production cost and average sales price per ton for HAC powder are respectively approximately $85.21 (RMB550.01) and approximately $147.54 (RMB952.25).

Intellectual Property

Our management considers our manufacturing technologies and manufacturing design critical to our business. Our research and development team has mastered the following know-how:

●

HAC powder: our HAC powder is produced using our proprietary technology and contains higher than normal aluminum with high heat releasing rate, high dissolution rate, high activity, and low cost. The content of alumina is up to 58%, 5% higher than other similar products. The powder is very active and can produce high quality water purifying products without heating.

●

Heavy metal collecting agent: the heavy metal collecting agent produced by using multiple unit hydrolysis and mutual polymerization can chelate with heavy metal ions and take chemical reaction in normal temperature and wide pH value range, and form insoluble, low water content and easily filtered flocs in a short time that can be removed from wastewater;

●

Purifying agent of phosphorus removal: the purifying agent of phosphorus removal is an inorganic polymer flocculent made by a special synthetic polymer technology, it has a satisfying phosphorus removal effect for phosphorus-containing industrial wastewater and sewage, can be applied to the phosphorus removal after an individual physical, chemical or biochemical treatment.

●

Dyeing purifying agent: the dyeing purifying agent made by a special synthetic polymer technology is a polymer flocculent adding auxiliary discoloration agent. This product has an excellent discoloration effect for the dyeing industry’s wastewater of active dyes, acid dyes, direct dyes, and is widely used in the treatment process of dyeing industrial wastewater.

●

Papermaking purifying agent: purifying agent for paper making wastewater is made with polymerization by adding cross linking agent, disinfection agent and pimping water solvent large molecule chemicals into PAC. It can enhance the bridging and adsorption ability, improve the removal rate of fine fiber matters and make the pulp to separate from the water. It can also strengthen the intensity of aquatic fine fiber, so as to achieve a better recycling effect of the pulp.

We rely primarily on a combination of patent, trademark trade secrets and administrative protections, as well as employee and third-party confidentiality agreements to safeguard our intellectual property. As of December 31, 2012, the Company has three patents officially granted by State Intellectual Property Office of PRC, and there are 15 patents pending. For details, please see http://www.sipo.gov.cn/zljs/ and http://search.cnipr.com/index.jsp

ITEM 3.

LEGAL PROCEEDINGS.

ITEM 4.

MINE SAFETY DISCLOSURES.

The Company is not required to provide the information required by this item.

PART II

ITEM 5.

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

Market information

Holders

As of March 29, 2013, there are 21,126,695 ordinary shares issued and outstanding. There are approximately 473 shareholders of our ordinary shares and 17 shareholders of our preference shares.

Transfer Agent and Registrant

Our independent stock transfer agent is Corporate Stock Transfer, located in 3200 Cherry Creek Dr. South, Suite 430, Denver, Co 80209. Their phone number is (303) 282-4800.

Dividends

During the year ended December 31, 2011, we declared and paid dividends to Mr. Tan in the amount of $294,373 as consideration to acquire his remaining 38% equity interest in Shanxi Wealth.

On October 30, 2012, Access America Fund, LP (holder of 52.46% of our Preference Shares, “AAF”) and Taylor International Fund, Ltd (14.99% of our Preference Shares, “Taylor Fund”) collectively as holders of greater than two-thirds of all of the Company’s issued Preference Shares adopted a written resolution to modify and amend Section 3.2 of the Rights, Privileges and Restrictions of the Preference Shares (the “Amendment”). Pursuant to the Amendment, dividends of the Preference Shares shall be paid in kind instead of in cash, effective as of the date of the Amendment. From October 2012 to December 2012, three shareholders of our Preference Shares (AAF, Taylor Fund, and Precise Skill Holding) agreed to accept dividend in kind accrued from December 25, 2010, and received a total number of 37,188 Preference Shares as payment of dividend in kind.

We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors has complete discretion on whether to pay dividends. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

In addition, due to various restrictions under PRC laws on the distribution of dividends by our PRC operating companies, we may not be able to pay dividends to our shareholders. The Wholly-Foreign Owned Enterprise Law (1986), as amended and The Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended and the Company Law of the PRC (2006) contain the principal regulations governing dividend distributions by wholly foreign owned enterprises. Under these regulations, wholly foreign owned enterprises may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, such companies are required to set aside a certain amount of their accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from the Company’s profits. Furthermore, if our subsidiaries and affiliates in China incur debt on their own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. If we or our subsidiaries and affiliates are unable to receive all of the revenues from our operations through the current contractual arrangements, we may be unable to pay dividends on our ordinary shares.

Further, recent regulations promulgated by SAFE, regarding offshore financing activities by PRC residents have undergone a number of changes which may increase the administrative burden we face. The failure by our shareholders and affiliates who are PRC residents to make any required applications and filings pursuant to such regulations may prevent us from being able to distribute profits and could expose us and our PRC resident shareholders to liability under PRC law.

In 2005, SAFE promulgated regulations in the form of public notices, which require registrations with, and approval from, SAFE on direct or indirect offshore investment activities by PRC resident individuals. The SAFE regulations require PRC resident individuals to register with the relevant SAFE branch before establishing or acquiring control over an offshore special purpose company, known as “SPC”, for the purpose of engaging in an equity financing outside of PRC on the strength of domestic PRC assets originally held by those resident individuals. Without registration, the PRC entity cannot remit any of its profits out of the PRC as dividends or otherwise. This could have a material adverse effect on us given that we are a publicly traded company in the U.S.

Securities Authorized for Issuance Under Equity Compensation Plans

As of the end of the fiscal year ended December 31, 2012, we do not have any compensation plan under which equity securities of the Company are authorized for issuance. In future, we may establish and adopt equity-based compensation plan(s) if it is in the best interest of the Company and our stockholders to do so.

ITEM 6.

SELECTED FINANCIALDATA

Not applicable.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATION.

Company Overview

We are a leading manufacturer of water purifying agents in the PRC, specializing in manufacturing and distributing water purifying agents, dehydrating agents, papermaking auxiliary agents, printing and dyeing auxiliary agents, fine chemical materials, textile materials, steel, stainless steel, construction materials, aluminum alloy materials, electrical appliances and fittings, hardware for AC power, air-conditioning equipment, and plastic products. Our products are distributed in the southern, south-western, mid-eastern, and eastern part of China.

The annual amount of wastewater discharge in mainland China has been on the rise from the years of 2006 to 2012 with a 2.9%-5.6% growth rate per year. (http://jcs.mep.gov.cn/hjzl/zkgb/2011zkgb/201206/t20120606_231040.htm) Due to water deterioration in both quantity and quality, its protection becomes a concern on the top of the agenda for the Chinese government and the Chinese public. The Chinese government has adopted regulations and policies listing waste water disposal and drinking water safety as two issues of priority importance for Chinese mid-term and long-term national development plans. The Chinese government is making every effort to increase the wastewater disposal rate and wholesome water coverage rate, and at the same time raising the discharge standard for organic substances, nitrogen and phosphorus nutrient content, together with the standard for drinking water. Given the above-mentioned governmental endeavors, the demand for water purifying products has increased over the years and is expected to continue to increase in the future, considering Chinese large population and the severity of China’s current environmental challenges. As a result, we believe that there will be continuing there has been increasing market demand for our water purifying products.

Production Capacity

As of December 31, 2012, our PRC Operating Companies, Guizhou Yufeng and Shanxi Wealth, respectively reached production capability of 100,000 tons and 200,000 tons. As of December 31, 2012, our water purifying agent producing company, Jiangment Wealth Water, maintains a production capacity between 350,000 and 400,000 tons.

Our management will continue to maintain its current production capacity, and is considering the prospect of expanding the production capacity of HAC powder at Guizhou Yufeng and Shanxi Wealth in the near future. However, we presently do not have a concrete plan with respect to expansion, and therefore we are not able to estimate capital expenditures associated with such expansion with reasonable certainty.

Current Products and Manufacturing Facilities

Our major products include water purifying agents and high calcium aluminate powder. As a leading producer of water purifying agents and high calcium aluminate powder in China, we reached an annual production and distribution of approximately 322,000 tons and 290,000 tons of water purifying agent, for the years ended December 31, 2012 and 2011, respectively, and approximately 288,000 tons and 277,000 tons of HAC powder for years ended December 31, 2012 and 2011, respectively. Our operating scale has given us considerable competitive advantage in the aspects of reducing costs and developing new products to accommodate to the ever-evolving demands of the market.

We supply water purifying products for industries such as printing and dyeing, paper making, municipal wastewater, phosphorus removal, and oil removal from washing water. We employ high calcium aluminate powder to produce water purifying agent, while American and European water purifying agent manufacturers use higher-cost aluminum hydroxide. Aided by our unique and advanced technologies, the quality of our water purifying agent is similar to that produced by our American and European counterparts, and better than the products of most of our Chinese competitors. The cost of using HAC powder as raw material is only half of that of aluminum hydroxide, which gives Jiangsu Huiyuan a significant price advantage.

Realizing the popularity of customization of our products, and to further buttress our services, we have designed a mechanism to manufacture polyaluminum chloride production lines for large purchasers. These facilities are architected to produce water purifying agent to be used in treating wastewater with specific physical and chemical qualities, and located on the property of the customers for their convenience and cost-saving purposes. The implementation of this system requires substantial research and development investment, which is not available for our PRC competitors, due to their comparatively limited business scale.

Recent Events

On December 15, 2011, we effectuated a 1:1.42610714 reverse stock split of the Company’s issued and outstanding ordinary shares such that the share capital of the Company was consolidated and increased from US $5,100 divided into 39,062,500 Ordinary Shares of US$0.000128 par value each and 781,250 Preference Shares of US$0.000128 par value each, to US $7,230.536 divided into 39,062,500 Ordinary Shares of US$0.00018254172 par value each and 781,250 Preference Shares of US$0.000128 par value each. After the adjustment for such Reverse Split, each Preference Shares will be convertible into 5 ordinary shares and the holder of each Warrant will be entitled to purchase 5 ordinary shares at an exercise price of $4.50 per share. See “Description of Securities – Preference Shares” below for a description of our Preference Shares.

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. Sales 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 raw materials and finished goods 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 direct labor, direct materials, and production overhead before the goods are ready for sale. Inventory costs do not exceed net realizable value. We did not record any inventory reserve at the end of each of the reporting periods.

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 33.0%, which included a 30.0% state income tax and a 3.0% 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 25.0% 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. 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 Adopted Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). This pronouncement was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU No. 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements, particularly for Level 3 fair value measurements. ASU No. 2011-04 is effective for reporting periods beginning after December 15, 2011 with application on a prospective basis. The adoption of ASU No. 2011-04, effective January 1, 2012, did not have a significant impact on the Company’s consolidated financial statements or disclosures.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU No. 2011-08 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more likely than not threshold is defined as having a likelihood of more than 50 percent. Under ASU No. 2011-08, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. ASU No. 2011-08 is effective for annual periods beginning after December 15, 2011. The adoption of ASU 2011-08, effective January 1, 2012, did not have a significant impact on the Company’s consolidated financial statements or disclosures.

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU No. 2011-11 was issued to provide enhanced disclosures that will enable users of the financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. The amendments under ASU No. 2011-11 require enhanced disclosures by requiring entities to disclose both gross information and net information about both instruments and transactions subject to an agreement similar to a master netting arrangement. This scope would include derivatives, sale and repurchase agreements, reverse sale and repurchase agreements, and securities borrowing and lending arrangements. ASU No. 2011-11 is effective retrospectively for annual periods beginning on or after January 1, 2013, and interim periods within those periods. The adoption of ASU No. 2011-11 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.

In December 2011, the FASB issued ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU No. 2011-12 defers the effective date for provisions of ASU No. 2011-05 requiring entities to present the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income on the face of the financial statements for all periods presented. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12. ASU No. 2011-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011 and reinstates the requirement that reclassifications must be either disclosed on the face of the financial statements or in the notes. The adoption of ASU No. 2011-12, effective January 1, 2012, did not have a significant impact on the Company’s consolidated financial statements or disclosures.

In July 2012, the FASB issued ASU No. 2012-02, Intangible - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. ASU No. 2012-02 permits an entity to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles – Goodwill and Other – General Intangibles Other than Goodwill. The more likely than not threshold is defined as having a likelihood of more than 50 percent. Under ASU No. 2012-02, an entity is not required to calculate the fair value of an indefinite-lived intangible asset unless the entity determines it is more likely than not that its fair value is less than its carrying value. ASU No. 2012-02 is effective for annual periods beginning after September 15, 2012. The adoption of ASU No. 2012-02 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.

RESULTS OF OPERATIONS

The following table shows key components of our results of operations during the fiscal years ended December 31, 2012 and 2011.

	Years ended December 31,
	2012			% of Revenue			2011			% of Revenue
Net revenue	$	80,459,992			100.00	%	$	68,900,075			100.00	%
Cost of revenue		44,411,319			55.20	%		37,342,469			54.20	%
Gross profit		36,048,673			44.80	%		31,557,606			45.80	%
Operating expenses:
Selling and marketing		2,953,258			3.67	%		2,174,688			3.16	%
General and administrative		6,300,847			7.83	%		5,169,298			7.50	%
Research and development		622,684			0.77	%		604,549			0.88	%
Total operating expenses		9,876,789			12.27	%		7,948,535			11.54	%
Income from operations		26,171,884			32.53	%		23,609,071			34.26	%

Other income (expenses):
Interest expense		(495,997	)		(0.62	)%		-			-	%
Interest income		753,301			0.94	%		553,107			0.80	%
Miscellaneous		14,278			0.02	%		(38	)		-	%
Total other income		271,582			0.34	%		553,069			0.80	%

Income before provision for income taxes		26,443,466			32.87	%		24,162,140			35.06	%
Provision for income taxes		6,739,279			8.38	%		6,148,633			8.92	%
Net income	$	19,704,187			24.49	%	$	18,013,507			26.14	%

Revenue:

Revenue increased by $11,559,917 or 17%, to $80,459,992 for the year ended December 31, 2012 from $68,900,075 for the year ended December 31, 2011. The increase in revenue was primarily due to the increased sales contributed by sale unit price increase, 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 year ended December 31, 2012 was $42,882,342 and for the year ended December 31, 2011 was $36,388,733, representing an increase of $6,493,609 or approximately 18%. The increase was due to continuous increase of the sales of our water purifying agents through expansion of our customer base and increased orders from our existing customers.

Our revenue from sales of HAC powder for the year ended December 31, 2012 was $37,577,650 and for the year ended December 31, 2011 was $32,511,342, representing an increase of $5,066,308 or approximately 16%. This increase was primarily due to unit prices increased by 13% during the year ended December 31, 2012 compared to same period in 2011.

Cost of Revenue:

Cost of revenue increased by $7,068,850, or 19%, to $44,411,319 for the year ended December 31, 2012 from $37,342,469 for the year ended December 31, 2011. The increase in the cost of revenue was mainly due to the increase in sales of our products and was in line with the increase of our revenue. However since the increases of raw materials and overhead cost have increased at a faster pace than the increases of our sales prices, the cost of revenue ratio to revenue increased in the current year as compared to the prior year.

Cost of revenue from sales of water purifying agents for the year ended December 31, 2012 was $17,438,109, an increase of $3,986,999 or 30%, from $13,451,110 for the year ended December 31, 2011. As a percentage of net revenue, cost of revenue from sales of water purifying agents was 41% and 37% for the years ended December 31, 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 caused by both increases in sales prices and volume.

Cost of revenue from sales of HAC powder for the year ended December 31, 2012 was $26,973,210, an increase of $3,081,851 or 13%, from $23,891,359 for the year ended December 31, 2011. As a percentage of net revenue, cost of revenue from sales of HAC powder approximated 72% and 73% for the years ended December 31, 2012 and 2011, respectively. 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.

Gross profit:

Our gross profit increased by $4,491,067or 14% to $36,048,673 for the year ended December 31, 2012 from $31,557,606 for the year ended December 31, 2011. Our gross profit margin (gross profit divided by net revenue) decreased to 44.80% for 2012 from 45.8% for 2011. The decrease in gross profit margin was primarily due to the increases in the price of raw materials and overhead costs, which increased at a faster pace than our sales prices.

Selling and Marketing Expenses:

Our selling and marketing expenses increased by $778,570 or 36% to $2,953,258 for the year ended December 31, 2012 from $2,174,688 for the year ended December 31, 2011. The increase in our selling and marketing expenses in 2012 was primarily attributable to increase in head counts in the sales and marketing department and increase of sales commission expenses, as a result of increase of sales, which was in line with the increase of our revenue.

General and Administrative Expenses:

Our general and administrative expenses increased by $1,131,549 or 22% to $6,300,847 for the year ended December 31, 2012 from $5,169,298 for the year ended December 31, 2011. The increase in our general and administrative expenses was primarily attributable to the increase of professional expense resulting from being a public reporting company in United States, increase of payroll expenses due to increase of our head count and pay increase, increase of rent expenses and increase in sponsorship for Champion of the Earth Award we entered into with the United Nations Environment Program (“UNEP”) during the year of 2012.

Research and Development Cost:

Our research and development cost increased by $18,135 or 3% to $622,684 for the year ended December 31, 2012 from $604,549 for the year ended December 31, 2011 to develop new products in order to continue to launch new products in the future. We expect to continue to increase our research and development efforts to enhance the competitiveness of our products.

Other income (expenses):

Interest expense:

Interest expense increased by $495,997, or 100% for the year ended December 31, 2012 from $0 for the year ended December 31, 2011. The increase was primarily due to interest expense of $495,997 for short-term loans obtained during the year 2012 for use in our business operations and mining right acquisition.

Interest income:

Interest income increased by $200,194, or 36% to $753,301 for the year ended December 31, 2012 from $553,107 for the year ended December 31, 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 from a secured short-term note receivable with a non-related party. The note receivable carries an annual interest rate of 9% which generated an interest income of approximately $540,000 for the year ended December 31, 2012.

Net Income:

Net income increased by $1,690,680 or 9% to $19,704,187 for the year ended December 31, 2012 from $18,013,507 for the year ended December 31, 2011. The increase of our net income was primarily due to price increase and strong demand of our products as a result of our marketing efforts while we can continue keep our cost of revenue and other operating costs at a reasonable level.

LIQUIDITY AND CAPITAL RESOURCES

We had a restricted cash balance of approximately $0 as of December 31, 2012, as compared to $670,000 as of December 31, 2011. Our restricted cash held by our Escrow Agent pursuant to Investor Relations Escrow Agreement entered in December 2010, amended in November 2012, was released in December 2012 according to the terms of the escrow agreement. As of December 31, 2012, both the Holdback Escrow Agreement and Investor Relations Escrow Agreement had been expired and all funds were released.

Our funds are kept in financial institutions located in China, and banks and other financial institutions in the PRC do not provide insurance for funds held on deposit, and in the event of a bank failure, we may not have access to 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 $12.1 million and $54.3 million as of December 31, 2012 and 2011, respectively. The decrease of working capital was largely caused by cash flows used in investing activities in mining right acquisition of approximately $63.5 million.

Our accounts receivable has been a small portion of our current assets, representing $2.7 million and $2.4 million, or 7.1% and 4.0% of current assets, as of December 31, 2012 and 2011, respectively. 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 the year ended December 31, 2012 and December 31, 2011. As of December 31, 2012, we believed it was appropriate not to record any allowance for doubtful accounts against our accounts receivable 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 years ended December 31, 2012 and 2011.

As of December 31, 2012, inventories amounted to $1.45 million, compared to $1 million as of December 31, 2011. We have experienced steady growth of our sales. Our supplies of raw material have been very stable since we own the mining rights of mines which supply the majority of our raw material. Therefore we do not need to maintain large amounts of raw material. We expect our inventories including raw material and finished goods will continue to increase in order to meet the market demands as our sales increase.

We are required to contribute a portion of our employees’ total salaries to the Chinese government’s social insurance funds, including pension insurance, medical insurance, unemployment insurance, and job injuries insurance, and maternity insurance, in accordance with relevant regulations. Total contributions to the funds are approximately $652,767 and $384,882 for the years ended December 31, 2012, and 2011, respectively. We expect that the amount of our contribution to the government’s social insurance funds will increase in the future as we expand our workforce and operations and commence contributions to an employee housing fund.

According to the relevant PRC regulations on housing provident funds, PRC enterprises are required to contribute housing provident funds for their employees. The monthly contributions for Jiangmen City must be at least 5% of each employee’s average monthly income in the previous year. Prior to 2010, neither Jiangmen Wealth, Shanxi Wealth, nor Guizhou Yufeng, our operating subsidiaries under the PRC laws, have paid sufficient social insurance premiums and housing provident funds for their employees pursuant to the applicable PRC laws. The competent government authorities may require them not only to rectify their incompliance by paying the due and unpaid social insurance premiums and housing provident, but also impose fines. We estimated our exposure related to unpaid social insurance premiums and housing provident funds and believe the cumulated amount, including potential penalties, be approximately $300,000 for underpayments from inception of its operations through December 31, 2009. Beginning 2010, we accrued and remitted full amounts of social insurance premiums and housing provident funds for their employees pursuant to the applicable PRC laws. The underpayment amount of $300,000 was included in accrued expenses in our financial statements as of December 31, 2012 and 2011.

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 Expenditure

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. However, we presently do not have a concrete plan with respect to expansion, and therefore we are not able to estimate capital expenditures associated with expansion with reasonable certainty.

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.

Cash Flow

	Year Ended December 31,
	2012			2011
Net cash provided by operating activities	$	25,926,157		$	15,193,667
Net cash used for investing activities		(38,362,053	)		(25,008,333	)
Net cash provided by financing activities		19,707,466			1,323,986
Effect of exchange rate changes on cash and cash equivalents		216,180			963,760
Cash and cash equivalents at the beginning of year		26,383,537			33,910,457
Cash and cash equivalents at the end of year	$	33,871,287		$	26,383,537

Net cash provided by operating activities was $25.9 million for the year ended December 31, 2012, compared to $15.2 million for the year ended December 31, 2011, an increase of $10.7 million. The net cash provided by operating activities for 2012 was primarily attributable to net profits of $19.2 million, increased by non-cash item, depreciation and amortization of $1.4 million, and shares issued as in kind payment for preferred shares dividend of $0.56 million and advance payment to supplier of 3.9 million; partially offset by an increase of accounts receivable of $0.38 million. The net cash provided by operating activities for 2011 was primarily attributable to net profits of $18 million, increased by non-cash items of $1.3 million, partially offset by an increase of accounts receivable of $1.67 million and advances from suppliers of $3.76 million.

Investing activity during the years ended December 31, 2012 and 2011 included the purchasing of equipment of $287,122 and $219,042, respectively. 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 $63,480,677 (RMB400,000,000) security deposit for the transaction as of December 31, 2012. The transaction has been completed and approved by the Ministry of Land and Resources of the PRC in January 2013. On August 29, 2011, we entered into a secured note receivable agreement with a non-related party in the amount of $14 million (RMB90,000,000) which was increased to approximately $25 million (RMB160,000,000) in December 2011. The note carries an annual interest rate of 9%. This note originally expired on November 28, 2011 but was extended to March 31, 2012, and is secured by the debtor’s land use right, certain tangible assets and all the business operation rights. As of March 28, 2012, the note receivable was fully repaid.

Net cash provided by financing activities amounted to $19.7 million for the year ended December 31, 2012, compared to $1.3 million for the year ended December 31, 2011, an increase of $18.4 million. The net cash provided by financing activities was primarily from various short-term note agreements we entered into during the year of 2012. 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. All short-term note agreements 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. During the year ended December 31, 2012, $670,000 of restricted cash was released by our investors group as we fulfilled certain conditions set forth in the Holdback Escrow Agreements and the expiration of Inventor Escrow Agreement.

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 for our operations for this year will result from cash flow from operations to fund our operations during this year. However, our ability to maintain sufficient liquidity depends partially on our ability to achieve anticipated levels of revenue, while continuing to control costs. If we did not have sufficient available cash, we would have to seek additional debt 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:

	Year Ended December 31,
	2012			2011

Effect on beginning cash at period end exchange rate	$	213,701		$	1,119,733
Effect from operating activities during the year		9,319			250,715
Effect from investing activities during the year		(13,577	)		(401,957	)
Effect from financing activities during the year		6,737			(4,731	)
Effect of exchange rate changes on cash	$	216,180		$	963,760

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK.

Smaller reporting companies are not required to provide the information required by this item.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements begin on page F-1.

ITEM 9

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE

Except the changes in our independent auditors that were previously reported on the Annual Report on Form 10-K filed with the SEC on April 15, 2011, as amended, there is no change in and disagreements with accountants on accounting and financial occurred during the two most recent fiscal years or any subsequent interim period.

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. 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, the Company’s 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 rules and forms, due to a material weakness consisting of 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, 2012.

Management’s Annual Report on Internal Control over Financial Reporting.

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2012. The framework used by management in making that assessment was the criteria set forth in the document entitled “ Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has determined that as of December 31, 2012, the Company’s internal control over financial reporting was ineffective for the purposes for which it is intended.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In assessment of the effectiveness of internal control over financial reporting as of December 31, 2012, our management determined that a lack of accounting personnel with sufficient experience in maintaining books and records and preparing financial statements in accordance with U.S. GAAP constituted a material weakness.

We implemented or are 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 in May 2011 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, the implementation of the above remedial measures has not fully cured such identified material weakness. We are not able to estimate with reasonable certainty the costs that we will incur in continuing to implement the above and other measures designed to improve our internal control over financial reporting. If we fail to establish an effective system of internal controls, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market value of our equity and/or debt may be adversely impacted.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the fourth fiscal quarter of the year ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.

OTHERINFORMATION.

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Directors and Executive Officers

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

Name	Age	Position
Mingzhuo Tan (1)	42	Chairman, President, Chief Executive Officer, Treasurer and Secretary
Hongyu Du (2)	41	Director
Siqi Kang (2)	55	Director
Joseph Levinson (2)	36	Director
Huaili Zheng (2)	55	Director
Tin Nang (Chris) Lui (3)	55	Chief Financial Officer

(1)	Mr. Tan, our Chief Executive Officer, was appointed as the Chairman of our board of directors on December 15, 2010 upon the closing of the Share Exchange.

(2)	On March 1, 2011, the Board of Directors of the Company, comprising its sole director, Mingzhuo Tan, in accordance with Section 86 of the Company’s Articles of Associations, appointed Ms. Hongyu Du, Mr. Siqi Kang, Mr. Joseph Levinson and Mr. Huaili Zheng as directors of the Company. Mr. Siqi Kang, Mr. Joseph Levinson and Mr. Huaili Zheng (the “Independent Directors”) were each elected to serve on the Board of Directors as an “independent director” as defined by Rule 4200(a)(15) of the Marketplace Rules of The Nasdaq Stock Market, Inc..

(3)	Mr. Tin Nang (Chris) Lui was appointed as our Chief Financial Officer on June 28, 2011.

Mr. Mingzhuo Tan, Age 42, Chairman, President, Chief Executive Officer

Mr. Tan is the Chairman, President, Chief Executive Officer and the founder of the Company and has served the Company since April 2003. From July 1994 to October 1998, Mr. Tan worked for Xinhui Environmental Service Co. From November 1998 to March 2003, he served as the general manager of Jiangmen Pengjiang Huixin Chemical Industry Co., Ltd. Mr. Tan is currently the vice chairman of Guangdong Council for the Development Promotion of Small and Middle Size Enterprises, a director of Guangdong Association of Environmental Protection Industry, vice director of Guangdong Chamber of Commerce in Guizhou and vice director of Jiangmen Chamber of Commerce, etc. Mr. Tan received his B.A. in Environmental Engineering from Chongqing University in 1994. He received an EMBA degree from the Business School of South China University of Technology in 2010.

Mr. Tan’s experience as the founder of the PRC operation companies and his experience with Xinhui Environmental Service Co. and Jiangmen Pengjiang Huixin Chemical Industry Co., Ltd., and his qualifications and comprehensive skills in business management accumulated from such prior experience led to the conclusion that Mr. Tan qualifies to serve as our director in light of our business and structure.

Hongyu Du, 41, Director. Ms. Du is the co-founder of the Jiangmen Wealth Environmental Protection Company Limited and has worked as the vice president since April 2003, being responsible for the administrative operations, personnel and financial records. From July 1994 to April 2002, Ms. Du served as the section chief in Jinling Electrical Appliance Co., Ltd., Mitsubishi Heavy Industries. Ms. Du is experienced in corporate finance, enterprise interior operation and financial management. She graduated from Chongqing University in 1994, with a Bachelor degree in heating ventilation and air conditioning.

Ms. Du’s experience as the founder of the PRC operation companies and her experience with Jinling Electrical Appliance Co., Ltd., and Mitsubishi Heavy Industries (China) Co., Ltd., and her qualifications and attributes in corporate finance and operation management accumulated from such prior experience led to the conclusion that Ms. Du qualifies to serve as our director in light of our business and structure.

Siqi Kang, 55, Director. Mr. Kang has been the Vice Chancellor and a professor in Guangdong Science and Technology Vocational College since March 2004. He was the Vice Chancellor and a professor in Wuyi University from May 1996 to March 2004, and a professor in Department Director of Central South University from September 1988 to May 1996. Mr. Kang has extensive teaching and researching experience in the universities in China. He also worked as a project leader for nine national and provincial projects, and forty research and development projects for enterprises in related to environmental protection issues. He published over thirty papers in environmental protection and wastewater treatment areas. Additionally, Mr. Kang participated in assessment and evaluation of environmental engineering projects. Mr. Kang received his PhD degree in non-ferrous metallurgy and environmental protection, Central South University in 1988.

Mr. Kang’s experience in environmental protection research and studies in China, his qualification as an scholar in environmental protection, in particular wastewater treatment areas, and his skills in assessment and evaluation of environmental engineering projects led to the conclusion that Mr. Kang qualifies to serve as our director in light of our business and structure.

Joseph Levinson, 36, Director. Mr. Levinson has been a director of the Company since March, 2011. He has been a United States Certified Public Accountant for more than 15 years. From January 2006 until the present, he has been principally engaged as an independent consultant to Chinese companies involved in overseas transactions. He speaks, reads and writes Chinese fluently and has vast experience in China working with Chinese companies. He was previously a Manager in the banking practice of the New York office of Deloitte and Touche and was involved in numerous transactions involving complex financial structures. He also previously worked at KPMG in New York and Hong Kong. In the 1990s, Mr. Levinson served as an executive of Hong Kong Stock Exchange-listed China Strategic Holdings, where his major responsibilities included its subsidiary, China Tire, one of the first Mainland Chinese companies to list on the NYSE. He is also the editor of Wall Street Guanxi: How Chinese Companies Can Maximize Their Value in the U.S. Capital Markets, a trade paperback published in Chinese by Beijing University Press in 2007. Mr. Levinson graduated summa cum laude from the University at Buffalo in 1994 with a double major in accounting and finance.

Mr. Levinson’s experience as directors in various Chinese companies involved in overseas transactions, and his qualification and skills in financial management led to the conclusion that Mr. Levinson qualifies to serve as our director in light of our business and structure.

Huaili Zheng, 55, Director. Mr. Zheng has been a professor in Chongqing University, Institute of Urban Construction and Environmental Engineering since October 2007. From December 2000 to September 2007, he was a director of Materials Chemistry Department and a professor at Chongqing University. From December 1995 to November 2000, he was an associate professor, the laboratory director and the department director in Chongqing Architecture University. From July 1988 to November 1995, he was an assistant professor and a department deputy director in Chongqing Architecture University, Science and Technology Application Department. Mr. Zheng is a water treatment specialist in China and he is familiar with the application of water treatments and environmental protection area. Mr. Zheng graduated from Chongqing University with a PhD degree in chemistry/municipal engineering in 2003. He received his Master degree in analytical chemistry from Sichuan University in 1988 and his Bachelor degree in analytical chemistry from Sichuan University in 1982.

Mr. Zheng’s experience and qualification as professors in chemistry and environmental protection field at universities in China and his specific knowledge and academic capability in water treatment field led to the conclusion that Mr. Zheng qualifies to serve as our director in light of our business and structure.

Tin Nang (Chris) Lui, Age 55, Chief Financial Officer. Mr. Lui is the owner and founder of T.N. Lui & Co., a Hong Kong company established in January 1997, which provides advisory services in tax, insolvency and audit matters for small to medium sized businesses in a variety of industries. Mr. Lui is a fellow member of the Institute of Chartered Accountants in England & Wales and the Hong Kong Institute of Certified Public Accountants. Mr. Lui is also a member of the Chartered Institute of Management Accountants in the United Kingdom. Mr. Lui graduated from University of Bradford in the United Kingdom with a Masters Degree in Business Administration. Mr. Lui also received a Bachelor of Science Degree in Accounting and Data Processing from the University of Leeds in the United Kingdom.

Advisory Board

We engage experts in the fields of water treatment and chemistry to act as our advisory and constitute our advisory board. Our advisors are engaged and compensated on an annual basis and may vary from year to year. As of the filing of this report, prior engagement of advisors has expired, and we are seeking to renew or engage new addition to our advisory board.

Term of Office

Our directors hold office until the next annual general meeting of our stockholders and until their successors have been duly elected and qualified or until removed from office in accordance with our bylaws. Our officers are elected by and serve at the discretion of the board of directors.

Family Relationships

Except that Mr. Tan, our chairman, Chief Executive Officer and President, and Mrs. Du, our director are related by marriage, there are no family relationships between any of our directors or executive officers.

Employment Agreements

We entered into an employment agreement that the Company with Mr. Lui on June 28, 2011, pursuant to which Mr. Lui’s employment commences on July 1, 2011 and will expire on June 30, 2013. Mr. Lui’s employment may be terminated by the Company upon thirty (30) days’ notice by the Company if Mr. Lui is unable to fulfill his duties as the Chief Financial Officer or breaches his obligations under the Employment Agreement. However, either party may terminate the Employment Agreement upon fifteen (15) days’ notice to the other party during the first three months of the employment term. Mr. Lui is entitled to receive an annual salary of $60,000 before taxes and may receive a discretionary bonus at the year-end during the employment.

As of the filing of this report, we have not entered into employment agreements with other executive officers and directors other than Mr. Lui.

Involvement in Certain Legal Proceedings

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

●	been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
●	had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
●	been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

●	been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
●	been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
●	been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Potential Conflict of Interest

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

Board Committees

We have not formed an Audit Committee, Compensation Committee or Nominating and Corporate Governance Committee as of the filing of this Annual Report. Our Board of Directors performs the principal functions of an Audit Committee. We currently do not have an audit committee financial expert on our Board of Directors. We believe that an audit committee financial expert is not required because the cost of hiring an audit committee financial expert to act as one of our directors and to be a member of an Audit Committee outweighs the benefits of having an audit committee financial expert at this time.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, officers and persons who beneficially own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC and are required to furnish us with copies of these reports. Based solely on our review of the reports filed with the SEC, we believe that all persons subject to Section 16(a) of the Exchange Act timely filed all required reports in fiscal year of 2012 as of the date of this filing.

Code of Ethics

We currently do not have a code of ethics that applies to our officers, employees and director, including our Chief Executive Officer, however, we are in the process of formulating a code of ethics and intend to adopt one in the near future.

ITEM 11.

EXECUTIVE COMPENSATION.

Summary Compensation Table— Fiscal Years Ended December 31, 2012 and 2011

Summary Compensation of Named Executive Officers

Name and Principal Position	Fiscal Year	Salary ($)		Bonus ($)		Option Awards ($)		All Other Compensation ($)		Total ($)
Mingzhuo Tan	2012		57,132		79,351		-		-		136,483
Chairman, President and Chief Executive Officer	2011		55,700		-		-		-		55,700

Patrick S.H. Chan	2012		-		-		-		-		-
Former Interim Chief Financial Officer (1)	2011(2)		8,900		-		-		-		8,900

Tin Nang (Chris) Lui	2012		60,000		-		-		-		60,000
Chief Financial Officer (3)	2011(4)		30,000		-		-		-		30,000

(1)	Mr. Chan, was appointed as our interim Chief Financial Officer on December 15, 2010 upon the closing of the Share Exchange, and was later dismissed by us from such position on June 28, 2011. Mr. Chan’s dismissal is not a result of any disagreement with the Company on any matters relating to the Company’s operations, policies or practices.
(2)	Represents compensation that Mr. Chan received from January 1, 2011 through June 28, 2011.
(3)	Mr. Tin Nang (Chris) Lui was appointed as our Chief Financial Officer on June 28, 2011.
(4)	Represents compensation that Mr. Lui received from June 28, 2011 through December 31, 2011

Outstanding Equity Awards at Fiscal Year End

None of our executive officers received any equity awards, including, options, restricted stock or other equity incentives during the fiscal year ended December 31, 2012.

Compensation of Directors

Our director Mr. Mingzhuo Tan was not compensated for serving on the board of directors in fiscal year 2012 and 2011. Our directors Ms. Hongyu Du, Mr. Joe Levinson, Mr. Huaili Zheng, and Mr. Siqi Kang, were appointed to serve on the board of directors on March 1, 2011. Mr. Joe Levinson receives compensation for $30,000 each year and Mr. Huaili Zheng receives compensation for $20,000 each year for serving on the board of directors. Ms. Hongyu Du and Siqi Kang are not compensated for serving on the board of directors. Ms. Du received $28,500 and $27,800, in fiscal years of 2012 and 2011, respectively, in connection with services provided to our Operating Companies as a financial manager.

Compensation Committee Interlocks and Insider Participation

During the fiscal year of 2012, we did not have a standing compensation committee. Our board of directors was responsible for the functions that would otherwise be handled by the compensation committee. All directors participated in deliberations concerning executive officer compensation, including directors who were also executive officers, however, none of our executive officers received any compensation during the last fiscal year. None of our executive officers has served on the board of directors or compensation committee (or other committee serving an equivalent function) of any other entity, any of whose executive officers served on our Board or Compensation Committee.

Indemnification of Directors and Executive Officers and Limitation of Liability

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our articles of association provide for indemnification of our officers and directors for any liability incurred in their capacities as such, except through their own willful negligence or default.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is theretofore unenforceable.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS.

The following table sets forth certain information as of the date hereof with respect to the beneficial ownership of our ordinary shares, the sole outstanding class of our voting securities, by (i) each stockholder known to be the beneficial owner of 5% or more of the outstanding ordinary shares of the Company, (ii) each executive officer and director, and (iii) all executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. ordinary shares subject to options, warrants or convertible securities exercisable or convertible within 60 days as of the date hereof are deemed outstanding for computing the percentage of the person or entity holding such options, warrants or convertible securities but are not deemed outstanding for computing the percentage of any other person and is based on 21,126,695 ordinary shares and 177,530 preference shares issued and outstanding as of March 29, 2013.

	Amount and Nature of Beneficial Ownership
	Ordinary Shares (1)						Preference Shares (2)					% Total Voting Power (3)
Name and Address of Beneficial Owner	No. of Shares			% of Class			No. of Shares		% of Class			% Total Voting Power (3)
Directors and Officers
Mingzhuo Tan, Chairman, President, and CEO (4)		9,000,000			42.68	%		0		*			42.68	%
Hongyu Du, Director		0			*			0		*			*
Siqi Kang, Director		0			*			0		*			*
Joseph Levinson, Director		0			*			0		*			*
Huaili Zheng, Director		0			*			0		*			*
Tin Nang (Chris) Lui, CFO		0			*			0		*			*
All officers and directors as a group (6 persons)		9,000,000			42.68	%		0		*			42.68	%

5% Security Holders
Access America Fund, LP 800 Town & Country Blvd., Suite 420 Houston, TX 77024		4,025,841	(5)		19.09	%		-		*	%		19.09	%
Taylor International Fund, Ltd. 714 S. Dearborn 2nd Floor Chicago, IL 60605		574,995	(6)		2.73	%		59,394		32.24	%		2.73	%
Feinberg Family Trust 25220 Walker Road Hidden Hills, CA 91302		250,005	(7)		1.19	%		33,334		18.10	%		1.19	%

(1)

Based on 21,126,695 ordinary shares issued and outstanding as of March 29, 2013. For each beneficial owner above, the number of ordinary shares into which preference shares held by such beneficial owner are convertible within 60 days of March 29, 2013 have been included in the number of ordinary shares owned by such beneficial owner.

(2)	Based on 177,530 Preference Shares issued and outstanding as of March 29, 2013. Each Preference Share is convertible into 5 ordinary shares (subject to customary adjustments for stock splits, combinations, or equity dividends on ordinary shares). Holders of Preference Shares vote with the holders of ordinary shares on all matters on an “as converted” basis.
(3)	Percentage Total Voting Power represents total voting power for each beneficial owner with respect to all shares of our ordinary shares and Preference Shares beneficially owner as of March 29, 2013 and voting as a single class on an “as converted” basis.
(4)	Includes 9,000,000 ordinary shares held by Star Prince Limited. Mr. Mingzhuo Tan is the sole director of Star Prince Limited and has voting and dispositive control over the securities held by it. Pursuant to the Lock-up Agreement, all of the ordinary shares held by Star Prince Limited are subject to an eighteen-month lock-up period following the closing of the private placement on December 15, 2010. In addition, pursuant to the Make Good Escrow Agreement, Star Prince Limited deposited 4,500,000 ordinary shares held by it into an escrow account for the benefit of the investors in the event that we fail to meet certain financial performance thresholds.
(5)	Includes 583,335 ordinary shares issuable upon exercise of a warrant. Access America Investments LLC is the General Partner of Access America Fund, LP and has voting and dispositive control over securities held by Access America Fund, LP. Christopher Efird is the Managing Director of Access America Fund, LP and has voting and dispositive control over securities held by it.
(6)	Includes 166,665 ordinary shares issuable upon exercise of a warrant and 296,970 ordinary shares issuable upon conversion of 59,394 Preference Shares. Stephan Taylor has voting and dispositive control over securities held by Taylor International Fund Ltd..
(7)	Includes 83,335 ordinary shares issuable upon exercise of a warrant and 166,670 ordinary shares issuable upon conversion of 33,334 Preference Shares. Jeffrey Feinberg has voting and dispositive control over securities held by Feinberg Family Trust.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE.

Transactions with Related Persons

Wealth Environmental Protection and its Subsidiaries

The following sets forth a summary of transactions since the beginning of the fiscal year of 2010, or any currently proposed transaction, in which the Company was to be a participant and the amount involved exceeded or exceeds $120,000 and in which any related person had or will have a direct or indirect material interest (other than compensation described under “Executive Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

●

On August 23, 2012, the Company entered into a $12.70 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% at December 31, 2012). Interest under the short term note is paid monthly at the ended of each month. As of December 31, 2012, all interest was fully paid.

●

On December 3, 2012, the Company entered into a $6.35 million (RMB40,000,000) 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% at December 31, 2012). Interest under the short term note is paid monthly at the ended of each month. As of December 31, 2012, all interest was fully paid.

●	During the year ended December 31, 2011, the Company declared and paid a dividend in the amount of $294,373 to Mr. Ming Zhou Tan (“Mr. Tan”) to acquire his remaining 38% equity interest in Shanxi Wealth.

●	During the year ended December 31, 2012, Mr. Tan loaned $0 to the Company. As of December 31, 2012 and 2011, amount due to Mr. Tan and Ms. Du totaled $15,290 and $15,226, respectively. The advances are payable on demand and are non-interest bearing.

●

During the year ended December 31, 2010, the Company executed a lease agreement for its corporate office space owned by Mr. Tan. The lease is for a term of 5 years from January 1, 2011 to December 31, 2015 with monthly lease payments of $11,833. The Company incurred rent expense approximately of $152,140 and $148,736 related to this office lease during the years ended December 31, 2012 and 2011, respectively.

●

On September 29, 2010, Jiangmen Huiyuan entered into an Exclusive Business Cooperation Agreement with Jiangmen Wealth Water, pursuant to which Jiangmen Huiyuan will provide Jiangmen Wealth Water with exclusive and complete business support, and technical and consulting services related to the principal business of Jiangmen Wealth Water.

●

On September 29, 2010, each of Jiangmen Huiyuan and Jiangmen Wealth Water entered into an Equity Interest Pledge Agreement with Mr. Mingzhuo Tan and Ms. Hongyu Du, respectively, pursuant to which Mr. Tan and Ms. Du pledged all of their equity interest in Jiangmen Wealth Water to Jiangmen Huiyuan to secure Jiangmen Water Wealth’s obligations under the Exclusive Business Cooperation Agreement. On September 29, 2010, the pledges were registered with the Pengjiang Branch of Jiangmen Administration of Industry and Commerce.

●

On September 29, 2010, Jiangmen Huiyuan and Jiangmen Wealth Water entered into an Exclusive Option Agreement with Mr. Tan and Ms. Du, respectively, pursuant to which Jiangmen Huiyuan obtained the exclusive option to purchase or designate another qualified person to purchased part or all of the equity interest that Mr. Tan and Ms. Du hold in Jiangmen Wealth Water to the extent permitted by the PRC law.

●

On September 29, 2010, each of Mr. Tan and Ms. Du signed a power of attorney which provides that Jiangmen Huiyuan has the power to act as his/her exclusive agent with respect to all matters related to his/her equity interest in Jiangmen Wealth Water while he or she is a shareholder of Jiangmen Wealth Water.

●	In May 2010 and September 2010, Wealth Environmental Protection issued two note for a total of $500,000 to Huixin, The notes pay interest at 10% and are due at the earlier of a) the one year anniversary form the date of issuance, or b) a change of control of Huixin.

●

For the year ended December 31, 2010, the Company loaned $115,163, on a non-interest bearing basis, to an affiliated company, which is owned by the Company’s shareholders, Mr. Ming Zhou Tan (“Mr. Tan”) and Ms. Hong Yu Du (“Ms Du”). On December 30, 2010, the Company declared and paid dividends to Mr. Tan, Ms. Du, and Mr. Pan in the amount of $115,163 which was used as a full repayment of the aforementioned loan.

●

In August and September 2010, through a restructuring process, Jiangmen Wealth paid $74,705 and $463,160 to acquire 100% equity interest of Guizhou Yufeng and 62% equity interest of Shainxi Wealth, respectively. Upon completion of this restructuring, the remaining 38% of Shainxi Wealth was owned by Mr. Tan who assigned all the ownership rights including voting rights to Jiangmen Wealth. Mr. Tan and Ms. Du collectively owned 100% of Jiangmen Wealth and its subsidiaries after this restructuring.

●	In May 2010, Mr. Tan paid on behalf of the Company, cash collateral of $250,000, pursuant to the terms of the Convertible Note Payable Agreement between us and Jiangmen Wealth.

Policies and Procedures for Review, Approval or Ratification of Transactions with Related Persons

We expect to prepare and adopt a written related-person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration and approval or ratification of “related-persons transactions.” For purposes of our policy only, a “related-person transaction” will be a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any “related person” are participants involving an amount that exceeds $120,000. Transactions involving compensation for services provided to us as an employee, director, consultant or similar capacity by a related person will not be covered by this policy. A related person will be any executive officer, director or a holder of more than five percent of our ordinary shares, including any of their immediate family members and any entity owned or controlled by such persons.

We anticipate that, where a transaction has been identified as a related-person transaction, the policy will require management to present information regarding the proposed related-person transaction to our audit committee (or, where approval by our audit committee would be inappropriate, to another independent body of our board of directors) for consideration and approval or ratification. Management’s presentation will be expected to include a description of, among other things, the material facts, the direct and indirect interests of the related persons, the benefits of the transaction to us and whether any alternative transactions are available.

To identify related-person transactions in advance, we are expected to rely on information supplied by our executive officers, directors and certain significant shareholders. In considering related-person transactions, our board of directors will take into account the relevant available facts and circumstances including, but not limited to:

●	the risks, costs and benefits to us;

●	the effect on a director’s independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated;

●	the terms of the transaction;

●	the availability of other sources for comparable services or products; and

●	the terms available to or from, as the case may be, unrelated third parties or to or from our employees generally.

We also expect that the policy will require any interested director to excuse himself or herself from deliberations and approval of the transaction in which the interested director is involved.

Promoters and Certain Control Persons

Promoter within the definition of 12b-2 includes (i) any person who, acting alone or in conjunction with one or more other persons, directly or indirectly takes initiative in founding and organizing the business or enterprise of an issuer; or (ii) any person who, in connection with the founding and organizing of the business or enterprise of an issuer, directly or indirectly receives in consideration of services or property, or both services and property, 10 percent or more of any class of securities of the issuer or 10 percent or more of the proceeds from the sale of any class of such securities.

We have no knowledge of any person who would be deemed a “promoter” of our company during the past five years within the meaning of Rule 405 under the Securities Act, except as follows:

Mr. David Richardson, who was a director at the inception of Huixin, may come into the definition of promoter as person taking initiative in founding and organizing the business of the company. On September 27, 2006, Huixin issued 78,125 ordinary shares (adjusted to reflect consolidation effectuated On March 1, 2008.) or 9.1% of the number of the outstanding ordinary shares at the time of the issuance, at par value of 0.000128 to Mid-Ocean Consulting Limited, for aggregate consideration of $10 at a purchase price of $.0001 per share. Mr. Richardson is the owner and the President and CEO of Mid-Ocean Consulting Limited and has voting and investment control over such shares, and therefore may be deemed to be the beneficial owner of the shares issued by the company. The shares Mr. Richardson beneficially owns may be deemed an item of value received from the Company as a promoter.

Mr. Joseph Rozelle, who was a director at the inception of Huixin, may come into the definition of promoter as person taking initiative in founding and organizing the business of the company. On September 27, 2006, the company issued 781,250 ordinary shares (adjusted to reflect consolidation effectuated On March 1, 2008.) or 90.9% of the number of outstanding ordinary shares at the time of the issuance, at par value of 0.000128 to Nautilus Global Partners, LLC, for aggregate consideration of $100 at a purchase price of $.0001 per share. Mr. Rozelle is the President of Nautilus Global Partners but does not have voting or investment control over such shares, and the shares issued by Huixin may not be deemed to be beneficially owned by Mr.Rozelle, and therefore will not be deemed as item of value received by Mr. Rozelle from Huixin.

Director Independence

Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

ooo	the director is, or at any time during the past three years was, an employee of the company;
ooo	the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
ooo	a family member of the director is, or at any time during the past three years was, an executive officer of the company;
ooo	the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);

ooo	the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
ooo	the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

Only Mr. Siqi Kang, Mr. Joseph Levinson and Mr. Huaili Zheng are considered independent in light of the NASDAQ Listing Rule 5605(a)(2) and the standards established by the SEC.

We do not currently have a separately designated audit, nominating or compensation committee.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES ANDSERVICES.

(1) Audit Fees

The aggregate fees paid for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-K or 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was $219,773 and $218,869 for the fiscal years ended December 31, 2012 and 2011, respectively.

(2) Audit-Related Fees

There were no fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the Company’s financial statements.

(3) Tax Fees

There were no fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.

(4) All Other Fees

There were no other fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported above.

(5) Pre-Approval Policies and Procedures

Before the accountant is engaged by the issuer to render audit or non-audit services, the engagement is approved by the Company’s the board of directors acting as the audit committee.

ITEM 15.

EXHIBITS, FINANCIAL STATEMENTSCHEDULES.

HUIXIN WASTE WATER SOLUTIONS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2012 and 2011


		Page

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets as of December 31, 2012 and 2011		F-3

Consolidated Statements of Income for the years ended December 31, 2012 and 2011		F-4

Consolidated Statements of Comprehensive Income ended December 31, 2012 and 2011		F-5

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2012 and 2011		F-6 - 7

Notes to Consolidated Financial Statements		F-9 - 30

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Huixin Waste Water Solutions, Inc.:

We have audited the accompanying consolidated balance sheets of Huixin Waste Water Solutions, Inc. (the “Company”), as of December 31, 2012 and 2011, and the consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2012 and 2011, and the results of its operations and its cash flows the years ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Ham, Langston & Brezina, L.L.P.

Houston, Texas

March 29, 2013

F-2

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	As of December 31,
	2012		2011
ASSETS

Current assets:
Cash and cash equivalents	$	33,871,287	$	26,383,537
Restricted cash		-		670,000
Accounts receivable		2,729,778		2,372,832
Note receivable		-		25,187,727
Interest receivable		-		156,085
Inventories		1,447,570		957,509
Advances to suppliers		-		3,825,386
Other current assets		31,479		14,168

Total current assets		38,080,114		59,567,244

Property, plant and equipment and land use and mining rights, net		13,618,082		14,627,533
Deposit for mining right acquisition		63,480,677		-

Total assets	$	115,178,873	$	74,194,777

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Short-term debt	$	19,044,203	$	-
Accounts payable		2,444,555		1,855,530
Accrued expenses		2,335,342		1,533,878
Due to an officer/stockholder		15,290		15,226
Value added taxes payable		646,743		497,581
Other taxes payable		160,605		90,150
Income tax payable		1,332,804		1,286,537

Total current liabilities		25,979,542		5,278,902

Deferred income taxes		311,425		311,339

Total liabilities		26,290,967		5,590,241

Commitments and contingencies

Shareholders’ equity:
Preferred stock, $0.000128 par value, 781,250 shares
authorized, 184,198 and 444,804 shares issued and outstanding at
December 31, 2012 and 2011, respectively		24		57
Common stock: $0.00018254172 par value, 39,062,500 shares
authorized, 21,089,275 and 19,600,305 shares issued and outstanding
at December 31, 2012 and 2011, respectively		3,850		3,578
Additional paid-in capital		24,840,803		24,283,222
Accumulated other comprehensive income		7,071,841		6,492,658
Retained earnings (the restricted portion of retained earnings
is $496,396 at December 31, 2012 and 2011)		56,971,388		37,825,021

Total shareholders’ equity		88,887,906		68,604,536

Total liabilities and shareholders’ equity	$	115,178,873	$	74,194,777

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

F-3

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
	2012			2011

Net revenue	$	80,459,992		$	68,900,075
Cost of revenue		44,411,319			37,342,469

Gross profit		36,048,673			31,557,606

Operating expenses:
Selling and marketing		2,953,258			2,174,688
General and administrative		6,300,847			5,169,298
Research and development		622,684			604,549

Total operating expenses		9,876,789			7,948,535

Income from operations		26,171,884			23,609,071

Other income and (expenses):

Interest expense		(495,997	)		-
Interest income		753,301			553,107
Miscellaneous		14,278			(38	)

Total other income		271,582			553,069

Income before provision for income taxes		26,443,466			24,162,140

Provision for income taxes		6,739,279			6,148,633

Net income		19,704,187			18,013,507
Less: cumulative dividends on preferred stock		386,809			400,324
Net income attributable to common shareholders	$	19,317,378		$	17,613,183

Net income per common share - basic	$	0.97		$	0.90
Net income per common share - diluted	$	0.90		$	0.83

Weighted average number of common shares outstanding - basic		19,815,857			19,600,305
Weighted average number of common shares outstanding - diluted		21,824,325			21,824,325

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

F-4

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Year Ended December 31,
	2012		2011

Net income	$	19,704,187	$	18,013,507
Other comprehensive income:		579,183		1,889,067
foreign currency translation adjustments
Comprehensive income	$	20,283,370	$	19,902,574

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

F-5

HUIXIN WASTE WATER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Years Ended December 31, 2012 and 2011

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

Balance as of
January 1, 2011		444,804		$	57			19,600,305	$	3,578	$	24,283,222
Dividend declared		-			-			-		-		-
Net income		-			-			-		-		-
Other comprehensive income – foreign
currency translation adjustment		-			-			-		-		-
Balance as of
December 31, 2011		444,804			57			19,600,305		3,578		24,283,222
Net income
Shares issued in kind for the payment
of preferred stock dividend		37,188			5			-		-		557,815
Preferred stock and related dividends in arrears converted to common stock		(297,794	)		(38	)		1,488,970		272		(234	)
Other comprehensive income - foreign
currency translation adjustment		-			-			-		-		-
Balance as of
December 31, 2012		184,198		$	24			21,089,275	$	3,850	$	24,840,803

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

F-6

HUIXIN WASTE WATER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

For the Years Ended December 31, 2012 and 2011

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

Balance as of	$	4,603,591	$	496,396	$	19,605,190		$	48,992,034
January 1, 2011
Dividend declared		-		-		(290,072	)		(290,072	)
Net income		-		-		18,013,507			18,013,507
Other comprehensive income – foreign
currency translation adjustment		1,889,067		-		-			1,889,067
Balance as of
December 31, 2011		6,492,658		496,396		37,328,625			68,604,536
Net income		-		-		19,704,187			19,704,187
Shares issued in kind for the payment
of preferred stock dividend		-		-		(557,820	)		-
Preferred stock and related dividends in arrears converted to common stock		-		-		-			-
Other comprehensive income – foreign
currency translation adjustment		579,183		-		-			579,183
Balance as of
December 31, 2012	$	7,071,841	$	496,396	$	56,474,992		$	88,887,906

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

F-7

HUIXIN WASTE WATER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2012			2011
Cash flows from operating activities:
Net income	$	19,704,187		$	18,013,507
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization		1,414,963			1,309,577
Deferred income taxes		(2,573	)		96,971
Changes in operating assets and liabilities:
Accounts receivable		(337,557	)		(1,666,107	)
Interest receivable		157,297			(153,616	)
Inventories		(482,114	)		(229,997	)
Advances to suppliers		3,855,087			(3,764,874	)
Other current assets		(17,190	)		7,027
Accounts payable		574,745			1,107,137
Accrued expenses		808,741			182,667
Value added taxes payable		159,755			92,376
Other taxes payable		55,010			62,266
Income tax payable		35,806			136,733

Net cash provided by operating activities		25,926,157			15,193,667

Cash flows from investing activities:
Promissory note from non related party		25,383,288			(24,789,291	)
Purchase of property, equipment and improvements		(287,122	)		(219,042	)
Deposite for mining right acquisition		(63,458,219	)		-

Net cash used for investing activities		(38,362,053	)		(25,008,333	)

Cash flows from financing activities:
Decrease in restricted cash		670,000			1,617,203
Proceeds from short term debt		41,565,134			-
Repayment on short term debt		(22,527,668	)		-
Advances from a shareholder		-			1,156
Dividend paid to a shareholder		-			(294,373	)

Net cash provided by financing activities		19,707,466			1,323,986

Effect of exchange rate changes on cash and cash equivalents		216,180			963,760

Net increase/(decrease) in cash and cash equivalents		7,487,750			(7,526,920	)

Cash and cash equivalents at the beginning of year		26,383,537			33,910,457

Cash and cash equivalents at the end of year	$	33,871,287		$	26,383,537

Supplemental disclosure of cash flow information:
Interest paid	$	495,997		$	-
Income taxes paid	$	6,703,473		$	5,904,419
Non-cash financing activities:
Preferred stocks issued in kind of payment for dividend	$	557,820		$	-

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

F-8

HUIXIN WASTE WATER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 treated as the acquirer from a financial reporting standpoint. Prior to the recapitalization, the 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 accompanying consolidated financial statements have been restated on a retroactive basis to present the capital structure of WEP as though it were the reporting entity at the beginning of the reporting period. 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 Shangxi 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

F-9

HUIXIN WASTE WATER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

On September 29, 2010, Jiangmen Huiyuan entered into a series of contractual arrangements 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 services 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 interests in Jiangmen Wealth Water as security for Jiangmen Huiyuan to collect consulting and services fees provided to Jiangmen Wealth Water through the Equity Interest 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 62% of the issued and outstanding capital stock of Shanxi Wealth. The remaining 38% of the issued and outstanding capital stock of Shanxi Wealth is held by Mingzhuo Tan (“Mr. Tan”), our Chief Executive Officer. During the year ended December 31, 2009 and through the date of restructuring, 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 Shanixi 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. Upon completion of this restructuring, the remaining 38% of Shanxi Wealth was owned by Mr. Tan who assigned all the ownership rights including voting rights to Jiangmen Wealth Water. 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, its subsidiaries and variable interest entities, which are collectively referred to as the “Company”.

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

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. The accompanying consolidated financial statements and notes have been retroactively adjusted to reflect the effects of the reverse stock split.

(2)	Summary of Significant Accounting Policies

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

Consolidated Financial Statements

These financial statements present the consolidated accounts of the Company and its subsidiaries, WEP, Wealth Technology, and its variable interest entities, Jiangmen Huiyan, Jiangmen Wealth Water, Guizhou Yufeng 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 consolidated financial statements.

F-10

HUIXIN WASTE WATER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2)	Summary of Significant Accounting Policies, continued

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses in the consolidated financial statements and accompanying notes. Significant accounting estimates reflected in the Company’s consolidated financial statements include collectability 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 years ended December 31, 2012 and 2011, the Company’s operations have been broken down into segments based on production facility, which represents the manner that management reviews operations on a regular basis. All of the Company’s 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

Amounts reported are stated in U.S. Dollars (“USD”), unless stated otherwise. The Company’s functional currency is Renminbi (“RMB”). Foreign currency transactions (outside the PRC) are translated into RMB according to the prevailing exchange rate at the transaction dates. Assets and liabilities denominated in foreign currencies at the balance sheet dates are translated into RMB at period-end exchange rates. For the purpose of preparing the consolidated financial statements, the consolidated balance sheets of the Company have been translated into USD at the current rates as of the end of the respective periods and the consolidated statements of income have been translated into USD at the weighted average rates during the periods the transactions were recognized. The resulting translation adjustments are recorded as other comprehensive income in the consolidated comprehensive income and as a separate component of the consolidated balance sheets and consolidated statements of shareholders’ equity.

Following is an analysis of exchange rates used in translating the Company’s financial statements from the RMB to USD as of and for the years ended December 31, 2012 and 2011 (amounts of RMB to equal 1 USD):

F-11

HUIXIN WASTE WATER SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2)	Summary of Significant Accounting Policies, continued

	2012		2011

Year-end exchange rate		6.3011		6.3523
Average exchange rate for the year		6.3034		6.4544

Cash and Cash Equivalents

Cash and cash equivalents consist of cash held in banks and on hand and highly liquid investments which are unrestricted as to withdrawal or use, and which have maturities of three months or less when purchased. Substantially all of the Company’s cash is deposited in the banks located in the People’s Republic of China, where there is currently no rule or regulation in place for obligatory insurance of accounts with banks and financial institutions. As of December 31, 2012, the Company had uninsured deposits in banks of approximately $33.9 million.

Restricted Cash

The restricted cash represents cash deposits in the bank which are restricted until the Company fulfills certain requirements established under the Holdback Escrow Agreement and the Investor Relations Escrow Agreement as described in Note 9. At December 31, 2012 and 2011, the Company had restricted cash of $0 and $670,000, respectively

Note Receivable

Note receivable is carried at amortized cost less an allowance for bad debt of $0. Interest income is accrued and calculated based on the stated interest rate and the principal balance of the promissory note. The Company periodically evaluates the collectability of the note receivable in order to determine whether an allowance should be recorded. As of December 31, 2012 and 2011, no allowance was recorded against the balance of the note receivable balance.

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 carries an annual interest rate of 9%. This note originally expired on November 28, 2011 but was extended to March 31, 2012, and is 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.

Fair Value Disclosures of Financial Instruments

The Company has estimated the fair value amounts of its financial instruments using the available market information and valuation methodologies considered to be appropriate and has determined that the book value of the Company’s accounts receivable, note receivable, interest receivable, inventories, advances to suppliers, accounts payable, accrued expenses, due to officer/stockholder, value added taxes payable, other taxes payable, and income tax payable as of December 31, 2012 and 2011 approximate fair value.

Comprehensive Income

Comprehensive income is defined to include all changes in equity except those resulting from investments by or distributions to shareholders. Among other disclosures, items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The changes in other comprehensive income of $579,183 and $1,889,067 for the years ended December 31, 2012 and 2011, respectively, are foreign curren

Huixin Waste Water Solutions, Inc. 10-K