UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

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

For the quarterly period ended ~~June~~September 30, 2021

☐

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

Commission file number: 001-34246

LITHIUM & BORON TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

Nevada

98-0514768

(State or other jurisdiction of incorporation

or organization)

(IRS Employer Identification No.)

60 East Ren-Min Road
Dachaidan

(Da Qaidam Administrative Committee)
XaiXi, Qinghai Province 817000

(Address of principal executive offices)

+86 (24) 2519-7699

(Registrant’s telephone number, including area code)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001		LBTI		Grey

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). YES ☒ NO ☐

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

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☐

(do not check if a smaller reporting company)

Smaller reporting company ☒

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

APPLICABLE ONLY TO CORPORATE ISSUERS

As of ~~August 16,~~November 8, 2021, there were 185,986,370 shares of common stock outstanding.

Lithium & Boron Technology, Inc.

Table of Contents

		Page
Note about Forward-Looking Statements

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2527
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3436
Item 4.	Controls and Procedures	3436

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3537
Item 1A.	Risk Factors	3537
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3537
Item 3.	Defaults Upon Senior Securities	3537
Item 4.	Mine Safety Disclosures	3537
Item 5.	Other Information	3537
Item 6.	Exhibits	3537

	Exhibit Index	3537

	Signatures	3638

~~Table of Contents~~

NOTE ABOUT FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION

This report contains forward-looking statements within the meaning of 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, or the Exchange Act, which include, but are not limited to, statements concerning our projected revenues, expenses, gross profit and income, mix of revenue, demand for our products, the benefits and potential applications for our products, the need for additional capital, our ability to obtain and successfully perform additional new contract awards and the related funding and profitability of such awards, the competitive nature of our business and markets and product qualification requirements of our customers. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “potential,” “believes,” “seeks,” “hopes,” “estimates,” “should,” “may,” “will,” “with a view to” and variations of these words or similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Such factors include, but are not limited to the following:

● our goals and strategies;

● our expansion plans;

● our future business development, financial conditions and results of operations;

● our expectations regarding demand for our products;

● our expectations regarding keeping and strengthening our relationships with key customers;

● our ability to stay abreast of market trends and technological advances;

● our ability to protect our intellectual property rights effectively and not infringe on the intellectual property rights of others;

● our ability to attract and retain quality employees;

● our ability to pursue strategic acquisitions and alliances;

● competition in our industry in China;

● general economic and business conditions in the regions in which we sell our products;

● relevant government policies and regulations relating to our industry; and

● market acceptance of our products.

Additionally, this report contains statistical data we obtained from various publicly available government publications and industry-specific third party reports. Statistical data in these publications also include projections based on a number of assumptions. The changing nature of our customers’ industries results in uncertainties in any projections or estimates relating to the growth prospects or future condition of our markets. Furthermore, if any one or more of the assumptions underlying the market data is later found to be incorrect, actual results may differ from the projections based on these assumptions.

Unless otherwise indicated, information in this report concerning economic conditions and our industry is based on information from independent industry analysts and publications, as well as our estimates. Except where otherwise noted, our estimates are derived from publicly available information released by third party sources, as well as data from our internal research, and are based on such data and our knowledge of our industry, which we believe to be reasonable. None of the market data from independent industry publications cited in this report was prepared on our or our affiliates’ behalf.

Additional information on the various risks and uncertainties potentially affecting our operating results are discussed in this report and other documents we file with the Securities and Exchange Commission, or the SEC, or available upon written request to our corporate secretary at: 60 East Ren-Min Road, Da-Chai Dan Town, Xai Xi County, Qing Hai Province 8100000. We undertake no obligation to revise or update publicly any forward-looking statements for any reason, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements.

Table of Contents

As used in this report, “LBTI,” “Company,” “we,” “our” and similar terms refer to Lithium & Boron Technology, Inc. and its subsidiaries, unless the context indicates otherwise.

Our functional currency is the US Dollar, or USD, while the functional currency of our subsidiaries in China are denominated in Chinese Yuan Renminbi, or RMB, the national currency of the People’s Republic of China, which we refer to as the PRC or China, and the functional currency of our subsidiary in Germany is denominated in Euros, or EUR. The functional currencies of our foreign operations are translated into USD for balance sheet accounts using the current exchange rates in effect as of the balance sheet date and for revenue and expense accounts using the average exchange rate during the fiscal year. See Note 2 of the consolidated financial statements included herein.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

~~LITHIUM & BORON TECHNOLOGY, INC~~

LITHIUM & BORON TECHNOLOGY, INC

CONSOLIDATED BALANCE SHEETS

	JUNE 30,			DECEMBER 31,			SEPTEMBER 30,			DECEMBER 31,
	2021 (UNAUDITED)			2020			2021 (UNAUDITED)			2020
ASSETS

CURRENT ASSETS
Cash and equivalents	$	2,285,657		$	972,066		$	2,192,191		$	972,066
Accounts receivable, net		13,704			223,194			-			223,194
Prepaid expenses		4,028			0			18,342			-
Advances to suppliers, net		117,669			242,311			99,680			242,311
Other receivables		192,004			60,226			196,143			60,226
Notes receivable		32,507			96,367			-			96,367
Due from related parties		2,058,787			1,771,789			-			1,771,789
Inventories		346,084			1,179,387			248,575			1,179,387

Total current assets		5,050,440			4,545,340			2,754,931			4,545,340

NONCURRENT ASSETS
Due from related party		1,426,054			1,411,891
Due from related party, net								-			1,411,891
Property and equipment, net		1,500,522			1,488,783			1,431,741			1,488,783
Intangible asset, net		54,279			0			50,108			-
Construction in progress		1,291,020			141,846			1,516,122			141,846

Total noncurrent assets		4,271,875			3,042,520			2,997,971			3,042,520

TOTAL ASSETS	$	9,322,315		$	7,587,860		$	5,752,902		$	7,587,860

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable	$	334,944		$	525,775		$	339,120		$	525,775
Unearned revenue		641,790			64,190			58,009			64,190
Accrued liabilities and other payables		1,575,431			1,522,347			1,596,269			1,522,347
Taxes payable		158,973			106,651			213,836			106,651
Due to related parties		2,293,123			1,114,662			2,696,884			1,114,662

Total current liabilities		5,004,261			3,333,625			4,904,118			3,333,625

DEFERRED INCOME		1,163,759			1,253,046			1,108,490			1,253,046

TOTAL LIABILITIES		6,168,020			4,586,671			6,012,608			4,586,671

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value; 500,000,000 shares authorized, 185,968,370 shares issued and outstanding		185,968			185,968			185,968			185,968
Paid-in capital deficiency		(6,666,351	)		(6,666,351	)		(6,666,351	)		(6,666,351	)
Statutory reserves		257,742			177,843			243,905			177,843
Accumulated other comprehensive income		271,469			223,922			258,331			223,922
Retained earnings		8,386,855			8,328,736			5,021,088			8,328,736

TOTAL COMPANY STOCKHOLDERS' EQUITY		2,435,683			2,250,118
TOTAL COMPANY STOCKHOLDERS' EQUITY (DEFICIT)								(957,059	)		2,250,118

Noncontrolling interest		718,612			751,071			697,353			751,071

TOTAL EQUITY		3,154,295			3,001,189
TOTAL EQUITY (DEFICIT)								(259,706	)		3,001,189

TOTAL LIABILITIES AND EQUITY	$	9,322,315		$	7,587,860
TOTAL LIABILITIES AND EQUITY (DEFICIT)							$	5,752,902		$	7,587,860

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

Table of Contents

~~LITHIUM & BORON TECHNOLOGY, INC~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)~~

LITHIUM & BORON TECHNOLOGY, INC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	SIX MONTHS ENDED JUNE 30,						THREE MONTHS ENDED JUNE 30,						NINE MONTHS ENDED SEPTEMBER 30,						THREE MONTHS ENDED SEPTEMBER 30,
	2021			2020			2021			2020			2021			2020			2021			2020

Sales	$	4,007,849		$	3,228,330		$	2,179,469		$	2,217,832		$	5,464,652		$	5,458,052		$	1,456,803		$	2,229,722
Sales - related party		0			101,560			0			101,560			-			202,130			-			100,570
Total sales		4,007,849			3,329,890			2,179,469			2,319,392			5,464,652			5,660,182			1,456,803			2,330,292

Cost of sales		3,292,926			2,904,535			1,596,808			1,973,791			4,205,605			5,031,305			912,679			2,126,770

Gross profit		714,923			425,355			582,661			345,601			1,259,047			628,877			544,124			203,522

Operating expenses
Selling		46,057			85,549			23,002			29,344			53,418			125,407			7,361			39,858
Bad debts for due from related party														3,523,085			-			3,523,085			-
General and administrative		531,953			613,995			257,582			326,993			887,718			922,681			355,765			308,686

Total operating expenses		578,010			699,544			280,584			356,337			4,464,221			1,048,088			3,886,211			348,544

Income (loss) from operations		136,913			(274,189	)		302,077			(10,736	)
Loss from operations														(3,205,174	)		(419,211	)		(3,342,087	)		(145,022	)

Non-operating income
Non-operating income (expenses)
Financial expense		(391	)		0			(202	)		0			(3,914	)		(3,365	)		(3,523	)		(2,974	)
Other income		675			13,405			735			27,754
Other income (expense)														(5,037	)		39,651			(5,712	)		26,246
Interest income		1,176			443			699			410			2,998			1,833			1,822			999
Subsidy income		101,672			95,635			50,935			48,494			152,963			143,726			51,291			48,091

Total non-operating income, net		103,132			109,483			52,167			76,658			147,010			181,845			43,878			72,362

Income (loss) before income tax		240,045			(164,706	)		354,244			65,922
Loss before income tax														(3,058,164	)		(237,366	)		(3,298,209	)		(72,660	)

Income tax expense		91,947			25,933			80,489			25,933			166,839			47,117			74,892			21,184

Income (loss) before noncontrolling interest		148,098			(190,639	)		273,755			39,989
Loss before noncontrolling interest														(3,225,003	)		(284,483	)		(3,373,101	)		(93,844	)

Less: loss attributable to noncontrolling interest		(39,920	)		(2,745	)		(29,987	)		(2,745	)		(58,417	)		(8,554	)		(18,497	)		(5,809	)

Net income (loss) to the Company		188,018			(187,894	)		303,742			42,734
Net loss to the Company														(3,166,586	)		(275,929	)		(3,354,604	)		(88,035	)

Other comprehensive items
Foreign currency translation income (loss) attributable to the Company		47,547			(116,962	)		80,904			(57,766	)
Foreign currency translation income attributable to noncontrolling interest		7,461			1,542			12,634			1,542
Foreign currency translation gain (loss) attributable to the Company														34,409			45,671			(13,138	)		162,633
Foreign currency translation gain (loss) attributable to noncontrolling interest														4,699			29,234			(2,762	)		27,692

Comprehensive income (loss) attributable to the Company	$	235,565		$	(304,856	)	$	384,646		$	(15,032	)	$	(3,132,177	)	$	(230,258	)	$	(3,367,742	)	$	74,598

Comprehensive loss attributable to noncontrolling interest	$	(32,459	)	$	(1,203	)	$	(17,353	)	$	(1,203	)
Comprehensive income (loss) attributable to noncontrolling interest													$	(53,718	)	$	20,680		$	(21,259	)	$	21,883

Basic and diluted weighted average shares outstanding		185,968,370			185,968,370			185,968,370			185,968,370			185,968,370			185,968,370			185,968,370			185,968,370

Basic and diluted net income (loss) per share	$	0.00		$	(0.00	)	$	0.00		$	0.00		$	(0.02	)	$	(0.00	)	$	(0.02	)	$	(0.00	)

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

Table of Contents

~~LITHIUM & BORON TECHNOLOGY, INC~~

~~STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY~~

~~SIX MONTHS ENDED JUNE 30, 2021 AND 2020~~

LITHIUM & BORON TECHNOLOGY, INC

STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIT)

NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(UNAUDITED)

Common Stock

Shares

Amount

Paid-in capital deficiency

Statutory reserves

Accumulated other comprehensive income

Retained earnings

Total

Noncontrolling interest

Balance at January 1, 2021
185,968,370 $ 185,968 $ (6,666,351 ) $ 177,843 $ 223,922 $ 8,328,736 $ 2,250,118 $ 751,071

Net loss
- - - - - (115,724 ) (115,724 ) (9,933 )

Statutory reserve
- - - 20,620 - (20,620 ) - -

Dividend accrued
- - - - - (25,000 ) (25,000 ) -

Foreign currency translation loss
- - - - (33,357 ) - (33,357 ) (5,173 )

Balance at March 31, 2021
185,968,370 185,968 (6,666,351 ) 198,463 190,565 8,167,392 2,076,037 735,965

Net income
- - - - - 303,742 303,742 (29,987 )

Statutory reserve
- - - 59,279 - (59,279 ) - -

Dividend accrued
- - - - - (25,000 ) (25,000 ) -

Foreign currency translation gain
- - - - 80,904 - 80,904 12,634

Balance at June 30, 2021
185,968,370 $ 185,968 $ (6,666,351 ) $ 257,742 $ 271,469 $ 8,386,855 $ 2,435,683 $ 718,612

Common Stock

Shares

Amount

Paid-in capital deficiency

Statutory reserves

Accumulated other comprehensive loss

Retained earnings

Total

Noncontrolling interest

Balance at January 1, 2020
185,968,370 $ 185,968 $ (6,666,351 ) $ 71,252 $ (14,600 ) $ 8,765,225 $ 2,341,494 $ -

Net loss
- - - - - (230,628 ) (230,628 ) -

Dividend accrued
- - - - - (25,000 ) (25,000 ) -

Foreign currency translation loss
- - - - (59,196 ) - (59,196 ) -

Balance at March 31, 2020
185,968,370 185,968 (6,666,351 ) 71,252 (73,796 ) 8,509,597 2,026,670 -

Net income
- - - - - 42,734 42,734 (2,745 )

Capital contribution
- - - - - - - 704,741

Dividend accrued
- - - - - (25,000 ) (25,000 ) -

Statutory reserve
- - - 64,424 - (64,424 ) - -

Foreign currency translation loss
- - - - (57,766 ) - (57,766 ) 1,542

Balance at June 30, 2021
185,968,370 $ 185,968 $ (6,666,351 ) $ 135,676 $ (131,562 ) $ 8,462,907 $ 1,986,638 $ 703,538

~~The accompanying notes are an integral part of these consolidated financial statements.~~

	Common Stock
	Shares		Amount		Paid-in capital deficiency			Statutory reserves			Accumulated other comprehensive income			Retained earnings			Total			Noncontrolling interest
Balance at January 1, 2021		185,968,370	$	185,968	$	(6,666,351	)	$	177,843		$	223,922		$	8,328,736		$	2,250,118		$	751,071

Net loss		-		-		-			-			-			(115,724	)		(115,724	)		(9,933	)

Statutory reserve		-		-		-			20,620			-			(20,620	)		-			-

Dividend accrued		-		-		-			-			-			(25,000	)		(25,000	)		-

Foreign currency translation loss		-		-		-			-			(33,357	)		-			(33,357	)		(5,173	)

Balance at March 31, 2021		185,968,370		185,968		(6,666,351	)		198,463			190,565			8,167,392			2,076,037			735,965

Net income		-		-		-			-			-			303,742			303,742			(29,987	)

Statutory reserve		-		-		-			59,279			-			(59,279	)		-			-

Dividend accrued		-		-		-			-			-			(25,000	)		(25,000	)		-

Foreign currency translation gain		-		-		-			-			80,904			-			80,904			12,634

Balance at June 30, 2021		185,968,370		185,968		(6,666,351	)		257,742			271,469			8,386,855			2,435,683			718,612

Net income		-		-		-			-			-			(3,354,604	)		(3,354,604	)		(18,497	)

Statutory reserve		-		-		-			(13,837	)		-			13,837			-			-

Dividend accrued		-		-		-			-			-			(25,000	)		(25,000	)		-

Foreign currency translation gain		-		-		-			-			(13,138	)		-			(13,138	)		(2,762	)

Balance at September 30, 2021		185,968,370	$	185,968	$	(6,666,351	)	$	243,905		$	258,331		$	5,021,088		$	(957,059	)	$	697,353

Table of Contents

~~LITHIUM & BORON TECHNOLOGY, INC~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(UNAUDITED)~~

SIX MONTHS ENDED JUNE 30,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

            Income (loss) including noncontrolling interest
$ 148,098 $ (190,639 )
            Adjustments to reconcile income (loss) including noncontrolling
     interest to net cash provided by operating activities:

            Depreciation and amortization
181,292 151,543
            Changes in deferred income
(101,672 ) (93,573 )
                         (Increase) decrease in assets and liabilities:

                                   Accounts receivable
211,346 133,902
                                   Prepaid expenses
(1,960 ) (15,501 )
                                   Advances to suppliers
95,939 (84,597 )
                                   Other receivables
(133,001 ) (2,526 )
                                   Inventories
843,603 935,004
                                   Accounts payable
(131,038 ) (32,999 )
                                   Unearned revenue
575,912 24,196
                                   Accrued liabilities and other payables
1,869 123,115
                                   Taxes payable
51,159 13,042

            Net cash provided by operating activities
1,741,547 960,967

CASH FLOWS FROM INVESTING ACTIVITIES:

                                   Purchase of property and equipment
(146,967 ) (287,221 )
                                   Purchase of intangible asset
(54,413 ) 0
                                   Construction in progress
(1,145,675 ) (2,202 )

            Net cash used in investing activities
(1,347,055 ) (289,423 )

CASH FLOWS FROM FINANCING ACTIVITIES:

                                  Capital contribution from noncontrolling interest
0 711,044
                                  Changes in due from related parties
(268,739 ) (640,158 )
                                  Changes in due to related parties
1,175,728 256,233

            Net cash provided by financing activities
906,989 327,119

EFFECT OF EXCHANGE RATE CHANGE ON CASH AND EQUIVALENTS
12,110 (9,048 )

NET INCREASE IN CASH AND EQUIVALENTS
1,313,591 989,615

CASH AND EQUIVALENTS, BEGINNING OF PERIOD
972,066 160,024

CASH AND EQUIVALENTS, END OF PERIOD
$ 2,285,657 $ 1,149,639

Supplemental cash flow data:

      Income tax paid
$ 0 $ 0
      Interest paid
$ 0 $ 0

Supplemental disclosure of non-cash investing activities

      Transfer of advance to suppliers to intangible asset
$ 30,903 $ 0

	Common Stock
	Shares			Amount		Paid-in capital deficiency			Statutory reserves		Accumulated other comprehensive loss			Retained earnings			Total			Noncontrolling interest
Balance at January 1, 2020		185,968,370		$	185,968	$	(6,666,351	)	$	71,252	$	(14,600	)	$	8,765,225		$	2,341,494		$	-

Net loss		-			-		-			-		-			(230,628	)		(230,628	)		-

Dividend accrued		-			-		-			-		-			(25,000	)		(25,000	)		-

Foreign currency translation loss		-			-		-			-		(59,196	)		-			(59,196	)		-

Balance at March 31, 2020		185,968,370			185,968		(6,666,351	)		71,252		(73,796	)		8,509,597			2,026,670			-

Net income		-			-		-			-		-			42,734			42,734			(2,745	)

Capital contribution		-			-		-			-		-			-			-			704,742

Dividend accrued		-	��		-		-			-		-			(25,000	)		(25,000	)		-

Statutory reserve		-			-		-			64,424		-			(64,424	)		-			-

Foreign currency translation loss		-			-		-			-		(57,766	)		-			(57,766	)		1,542

Balance at June 30, 2021		185,968,370			185,968		(6,666,351	)		135,676		(131,562	)		8,462,907			1,986,638			703,539

Net income		-			-		-			-		-			(88,035	)		(88,035	)		(5,809	)

Dividend accrued		-			-		-			-		-			(25,000	)		(25,000	)		-

Statutory reserve		-			-		-			10,974		-			(10,974	)		-			-

Foreign currency translation loss		-			-		-			-		162,633						162,633			27,692

Balance at September 30, 2020		185,968,370		$	185,968	$	(6,666,351	)	$	146,650	$	31,071		$	8,338,898		$	2,036,236		$	725,422

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

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LITHIUM & BORON TECHNOLOGY, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	NINE MONTHS ENDED SEPTEMBER 30,
	2021			2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Loss including noncontrolling interest	$	(3,225,003	)	$	(284,483	)
Adjustments to reconcile loss including noncontrolling interest to net cash provided by operating activities:
Depreciation and amortization		272,855			236,026
Bad debt expense for due from related party		3,523,085			-
Changes in deferred income		(152,516	)		(141,167	)
(Increase) decrease in assets and liabilities:
Accounts receivable		225,036			164,434
Prepaid expenses		(16,321	)		(18,642	)
Advances to suppliers		113,513			(83,051	)
Other receivables		(137,906	)		(18,997	)
Inventories		940,019			1,097,154
Accounts payable		(93,104	)		(38,817	)
Unearned revenue		(6,586	)		(64,304	)
Accrued liabilities and other payables		(1,994	)		248,051
Taxes payable		106,765			49,122

Net cash provided by operating activities		1,547,843			1,145,326

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(175,156	)		(301,080	)
Purchase of intangible asset		(50,759	)		-
Construction in progress		(1,376,376	)		(32,400	)

Net cash used in investing activities		(1,602,291	)		(333,480	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution from noncontrolling interest		-			715,130
Changes in due from related parties		(313,101	)		(892,286	)
Changes in due to related parties		1,584,374			348,724

Net cash provided by financing activities		1,271,273			171,568

EFFECT OF EXCHANGE RATE CHANGE ON CASH AND EQUIVALENTS		3,300			30,133

NET INCREASE IN CASH AND EQUIVALENTS		1,220,125			1,013,547

CASH AND EQUIVALENTS, BEGINNING OF PERIOD		972,066			160,024

CASH AND EQUIVALENTS, END OF PERIOD	$	2,192,191		$	1,173,571

Supplemental cash flow data:
Income tax paid	$	-		$	-
Interest paid	$	-		$	-

Supplemental disclosure of non-cash investing activities
Transfer of advance to suppliers to intangible asset	$	30,905		$	-
Sale of the construction in progress to related party company	$	-		$	1,632,277

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

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LITHIUM & BORON TECHNOLOGY, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~JUNE~~SEPTEMBER 30, 2021 (UNAUDITED) AND DECEMBER 31, 2020

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Lithium & Boron Technology, Inc., (the “Company” or “Lithium Tech”), formerly known as SmartHeat, Inc. (“SmartHeat”), was incorporated August 4, 2006, in the State of Nevada. The Company currently produces boric acid in the PRC and plans to expand its manufacturing facilities through a joint venture (“JV”) to produce up to 30,000 tonnes of lithium carbonate annually for the electric vehicle battery market in China, subject to funding.

On December 31, 2018 (the “Closing Date”), the Company entered into and closed a Share Exchange Agreement and Plan of Reorganization, as amended on January 24, 2019 (the “Share Exchange Agreement”) with Mid-Heaven Sincerity International Resources Investment Co., Ltd (Mid-heaven BVI) and its shareholders Mao Zhang, Jian Zhang, and Ying Zhao, constituting all the shareholders of Mid-heaven BVI (the “Mid-heaven Shareholders”). Pursuant to the terms of the Share Exchange Agreement, the shareholders of Mid-Heaven BVI delivered all issued and outstanding shares of capital stock of Mid-Heaven BVI to the Company, for 106,001,971 shares of the Company’s Common Stock. Mid-heaven BVI, through 2 subsidiaries, Qinghai Mid-Heaven Sincerity Technology Co., Ltd (“Sincerity”) and Qinghai Mid-Heaven Sincerity Salt-Lake R&D Co., Ltd (“Salt-Lake”) owns 100% of Qing Hai Mid-Heaven Boron & Lithium Technology Company, Ltd. (“Technology”).

~~The acquisition was structured as~~ On November 4, 2021, Mr. Jimin Zhang purchased a ~~tax-free reorganization. As a result~~total of ~~the Share Exchange Agreement, Mid-heaven BVI’s shareholders own approximately 57%~~106,001,971 shares of ~~the combined company. For accounting purposes, the transaction was accounted for as a reverse acquisition~~common stock of the Company ~~by Mid-heaven BVI.~~at a purchase price of $.001 per share (80,625,099 shares from Mao Zhang, 22,165,012 shares from Jian Zhang, and 3,211,860 shares from Ying Zhao). After giving effect to the purchases, Mr. Jimin Zhang now holds, directly or indirectly, a total of 152,769,779 shares of Common Stock which represents approximately 82% of the Company’s issued and outstanding Common Stock.

The main operating entity, Technology was incorporated December 18, 2018. The business of Technology was carved out of the business of Qinghai Zhongtian Boron & Lithium Mining Co., Ltd (“Qinghai Mining”) on December 20, 2018. Qinghai Mining was founded March 6, 2001, and manufactures and wholesales boric acid and related compounds for industrial and consumer use. Technology obtains its raw material brine exclusively from Qinghai Mining and currently processes boric acid by crushing and processing ore from third party suppliers. Technology previously purchased ore from Qinghai Mining; however, Technology recently shifted suppliers to third parties in order to ~~fulfil~~fulfill what management believes will be a ~~short term~~short-term reliance on ore for the production of boric acid. Management of Technology expects that it will source all material that will be used for both boric acid and lithium carbonate production from Qinghai Mining once the brine processing process receives approval from the relevant governmental ~~authorities.~~authorities, the Company expected to receive the approval in the end of 2021.

In December 2019, a novel strain of coronavirus (COVID-19) was reported, and the World Health Organization declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which continues to spread to additional countries, and disrupts supply chains and affecting production and sales across a range of industries as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak. The COVID-19 outbreak impacted the Company’s operations for the first quarter of 2020. However, as a result of PRC government’s effort on disease control, most cities in China were reopened in April 2020, the outbreak in China is under the control; and the Company’s production and sales started back to normal since April 2020. Since April 2020 to date, there were some new COVID-19 cases discovered in a few provinces of China, however, the number of new cases are not significant due to PRC government’s strict control, and the Company but has noted the impact of COVID-19 in this report where applicable.

On March 27, 2020, Technology entered into an Investment Cooperation Agreement, Memorandum of Cooperation and Licensing Agreement with Xi'an Jinzang Membrane Environmental Protection Technology Co., Ltd. (“Xi’an Jinzang”) to produce up to 30,000 tonnes of battery grade lithium carbonate annually, subject to funding. On April 15, 2020, the parties formed a joint Venture (“JV”) Zhonglixinmo Technology Co., Ltd (“Qinghai Zhongli” or JV) to process brine supplied by Technology. Technology owns 51% of the JV and Xi’ Jinzang owns the remaining 49%. The JV cooperation agreement calls for a capital contribution of RMB 140 million ($19,746,000), to be paid in three phases according to the project construction progress: RMB 36 million ($5,077,000) to be paid within 10 days from the date of registration and establishment of the JV, RMB 72 million ($10,155,000) to be paid before July 31, 2020, and RMB 32 million ($4,513,000) to be paid before October 31, 2020. The JV’s shareholders are required to contribute capital in accordance with their respective shareholding ratio. Each party made an initial capital contribution of RMB 5 million ($0.71 million) in April 2020. As of the date of this report, the parties have not made all capital contributions on the dates due, pending financing by the Company, as the capital contribution amount and timing can be adjusted anytime upon both parties’ mutual consent. During the construction and operation of the project, all parties agree to raise construction funds by means of bank loans, self-owned funds, etc. if the funds are not raised in time, the term of capital contribution can be extended upon agreement of all parties.

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In order to maintain the normal operation of the Company; in July 2021, Technology Company entered a processing contract to provide boric acid commissioned processing service at processing fee of RMB 2,000 ($308) per ton with boron provided by the customer. On August 31, 2021, two parties signed the supplement agreement, the final settlement price was RMB 2450 ($375) per ton. In September 2021, Technology Company entered a new agreement with the same customer, where the Company provide the boric acid manufacturing facility, equipment, auxiliary equipment, necessary utilities, and workers for the customer to produce the boric acid by themselves. The customer was required to pay RMB 400,000 ($61,680) per month for a facility usage fee to the Company, or RMB 500,000 ($77,090) per month if the customer wants to use the Company’s low-grade abandoned slag.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern

The accompanying consolidated financial statements (“CFS”) were prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the accompanying CFS, the Company had net loss of $3.17 million and $0.28 million for the nine months ended September 30, 2021 and 2020, respectively; the Company had net loss of $3.35 million and $88,035 for the three months ended September 30, 2021 and 2020, respectively; the Company stopped produce and selling boron acid starting from September 2021 due to decreased mine production resulting from rectifying the mines in the area by the authority for environment protection, which raise substantial doubt about the Company’s ability to continue as a going concern.

Because the Company ceased obtaining ore for the production of boric acid from its affiliate, the Company leased out the boric acid manufacturing facility, equipment and auxiliary equipment for a monthly fee in order to provide interim cash flow and maintain revenues from boric acid operations. The Company plans to produce lithium carbonate that can be sold for the electric vehicle battery use and is currently at test production stage. The Company expects to generate additional revenues and cash flow once it receives government approval of the official production process which is expected by late fourth quarter 2021 or early first quarter 2022. Management also intends to raise additional funds by way of a private or public offerings, by obtaining loans from banks or form other sources of debt or equity capital. While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

The CFS do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

Basis of Presentation

The ~~Consolidated financial statements (“CFS”)~~CFS were prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

The interim consolidated financial information as of ~~June~~September 30, 2021 and for the ~~six~~nine and three-month periods ended ~~June~~September 30, 2021 and 2020 was prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, which are normally included in CFS prepared in accordance with U.S. GAAP were not included. The interim consolidated financial information should be read in conjunction with the CFS and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on April 15, 2021.

In the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present a fair statement of the Company’s consolidated financial position as of ~~June~~September 30, 2021, its consolidated results of operations and cash flows for the ~~six~~nine and three months ended ~~June~~September 30, 2021 and 2020, as applicable, were made.

Principles of Consolidation

For the ~~six~~nine and three months ended ~~June~~September 30, 2021 and 2020, the accompanying CFS include the accounts of the Company’s US parent, and Mid-heaven BVI and its subsidiaries, Sincerity, Salt-Lake, Technology and Qinghai Zhongli, which are collectively referred to as the “Company.” All significant intercompany accounts and transactions were eliminated in consolidation.

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Use of Estimates

In preparing financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates, required by management, include the recoverability of long-lived assets, allowance for doubtful accounts and the reserve for obsolete and slow-moving inventories. Actual results could differ from those estimates.

Cash and Equivalents

Cash includes cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

Accounts Receivable, net

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Based on historical collection activity, the Company had allowance of ~~$19,969~~$19,891 and $19,770 at ~~June~~September 30, 2021 and December 31, 2020, respectively.

Advances to Suppliers, net

The Company makes advances to certain vendors to purchase raw material, tools and equipment for production. The advances are interest-free and unsecured. As of ~~June~~September 30, 2021 and December 31, 2020, the Company had gross advance to suppliers of ~~$120,443~~$102,443 and $245,058 respectively, and the Company had allowance for advances to suppliers of ~~$2,774~~$2,763 and $2,747, respectively.

Inventories, net

Inventories are stated at the lower of cost or net realizable value with cost determined on a weighted-average basis. Management compares the cost of inventories with the net realizable value and an allowance is made to write down inventories to market value, if lower.

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Property and Equipment, net

Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are expensed as incurred; major additions, repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method with a 3% - 10% salvage value and estimated lives as follows:

Buildings	20 years
Structures and improvements	4-20 years
Vehicles	4-8 years
Office equipment	5 years
Production equipment	3-10 years
Equipment upgrade	5 years

Depreciation of plant, property and equipment attributable to manufacturing is capitalized as part of inventories, and expensed to cost of sales when inventories are sold.

Impairment of Long-Lived Assets

Long-lived assets, which include tangible assets, such as property and equipment, goodwill and other intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable, but at least annually.

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Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized based on the excess of the carrying amount over the fair value of the assets. Fair value generally is determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company believes that, as of ~~June~~September 30, 2021 and December 31, 2020, there was no significant impairments of its long-lived assets.

Effective January 1, 2020, the Company adopted ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.

Deferred Income

Deferred income consists primarily of government grants and subsidies for supporting the Company’s technology innovation and transformation of boric acid, lithium and magnesium sulfate projects. The Company uses most of the subsidies to purchase machinery and equipment. Deferred income is amortized to revenue (other income) over the life of the assets for which the grant and subsidy was used. Subsidies for declared project fund require government inspection to ensure proper use of the funds for the designated project.

Unearned Revenue

The Company records payments received from customers in advance of their orders as unearned revenue. These orders normally are delivered (usually within one month) based upon contract terms and customer demand.

Revenue Recognition

The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive for those goods. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

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Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs typically upon receipts of the goods by customers. Sales and purchases are recorded net of VAT collected and paid as the Company acts as an agent for the government. VAT taxes are not affected by the income tax holiday. The Company also provides boric acid commissioned processing service with boron material provided by the customer; the Company recognizes revenue when the final products are picked up by the customer at the Company’s warehouse, where the control transfers to the customer.

Cost of Sales

Cost of sales consists primarily of material costs and direct labor and manufacturing overhead attributable to the production of the products. Write-down of inventory to lower of cost or net realizable value is also recorded in cost of sales.

Research and Development Costs

Research and development (“R&D”) costs are expensed as incurred and included in general and administrative expenses. These costs primarily consist of cost of materials used, salaries paid for the Company’s development department and fees paid to third parties. R&D costs for the ~~six~~nine and three months ended ~~June~~September 30, 2021 and 2020 were immaterial.

Share-Based Compensation

The Company accounts for share-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period.

The Company accounts for share-based compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-employees”. Share-based compensation associated with the issuance of equity instruments to non-employees is measured at the fair value(“FV”) of the equity instrument issued or committed to be issued, as this is more reliable than the FV of the services received. The FV is measured at the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete.

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Effective January 1, 2020, the Company adopted ASU 2018-07, "Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting," which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. An entity should apply the requirements of FASB ASC 718 to non-employee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. The amendments specify that FASB ASC 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards. The adoption of ASU 2018-07 did not have an impact on the Company’s CFS.

Income Taxes

Income taxes are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company follows FASB ASC Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FASB ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.

Under the provisions of FASB ASC Topic 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statement of operations. At ~~June~~September 30, 2021 and December 31, 2020, the Company did not take any uncertain positions that would necessitate recording a tax related liability.

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Noncontrolling Interests

The Company follows FASB ASC Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCI (previously referred to as minority interests) be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to non-controlling interests even when such allocation might result in a deficit balance.

The net income (loss) attributed to NCI was separately designated in the accompanying statements of operations and comprehensive income (loss). Losses attributable to NCI in a subsidiary may exceed a NCIs interests in the subsidiary’s equity. The excess attributable to NCI is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCIs balance.

On April 15, 2020, Technology and Xi’an Jinzang formed a JV, Qinghai Zhongli, to process brine supplied by Technology. Technology owns 51% of the JV and Xi’an Jinzang owns the remaining 49%. During the ~~six~~nine and three months ended ~~June~~September 30, 2021, the Company had loss of ~~$39,920~~$58,417 and ~~$29,987~~$18,497 attributable to the NCI. During the ~~six~~nine and three months ended ~~June~~September 30, 2020, the Company had loss of ~~$2,745~~$8,554 and ~~$2,745~~$5,809 attributable to the NCI.

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Concentration of Credit Risk

Cash includes cash on hand and demand deposits in accounts maintained within China. Balances at financial institutions and state-owned banks within the PRC are covered by insurance up to RMB 500,000 ($77,000) per bank. Any balance over RMB 500,000 ($77,000) per PRC bank will not be covered. The Company has not experienced any losses in such accounts.

Certain other financial instruments, which subject the Company to concentration of credit risk, consist of accounts and other receivables. The Company does not require collateral or other security to support these receivables. The Company conducts periodic reviews of its customers’ financial condition and customer payment practices to minimize collection risk on accounts receivable.

The operations of the Company are primarily in China. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in China, as well as by the general state of the PRC economy.

Basic and Diluted Earnings (Loss) per Share (EPS)

Basic EPS is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similarly, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted EPS are based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to have been exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

Foreign Currency Translation and Comprehensive Income (Loss)

The accounts of the US parent company are maintained in USD. The functional currency of the Company’s China subsidiaries is the Chinese Yuan Renminbi (“RMB”). The accounts of the China subsidiaries were translated into USD in accordance with FASB ASC Topic 830, “Foreign Currency Matters.” According to FASB ASC Topic 830, all assets and liabilities were translated at the exchange rate on the balance sheet date, stockholders’ equity was translated at the historical rates and statement of operations items were translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with FASB ASC Topic 220, “Comprehensive Income.”

Statement of Cash Flows

In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies. As a result, amounts shown on the statement of cash flows may not necessarily agree with changes in the corresponding asset and liability on the balance sheet.

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Fair Value of Financial Instruments

Certain of the Company’s financial instruments, including cash and equivalents, notes receivable, accrued liabilities and accounts payable, carrying amounts approximate their FV due to their short maturities. FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the FV of financial instruments held by the Company. The carrying amounts reported in the balance sheets for current liabilities each qualify as financial instruments and are a reasonable estimate of their FV because of the short period of time between the origination of such instruments and their expected realization and the current market rate of interest.

Fair Value Measurements and Disclosures

FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” defines FV, and establishes a three-level valuation hierarchy for disclosures of FV measurement that enhances disclosure requirements for FV measures. The three levels are defined as follow:

	●	Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
	●	Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
	●	Level 3 inputs to the valuation methodology are unobservable and significant to the FV measurement.

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Effective January 1, 2020, the Company adopted ASU 2018-13, Fair Value Measurement: Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the FV hierarchy.

As of ~~June~~September 30, 2021 and December 31, 2020, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at FV.

Leases

The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit in the lease is not readily determinable for the operating lease, the Company generally uses an incremental borrowing rate based on information available at the commencement date to determine the present value of future lease payments. Operating lease right-of-use (“ROU assets”) assets represent the Company’s right to control the use of an identified asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized based on the amount of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term. The Company ~~will elect~~has elected the package of practical expedients permitted under the transition guidance to combine the lease and non-lease components as a single lease component for operating leases, and will keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term.

ROU assets are reviewed for impairment when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC 360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets.

ROU assets are tested for impairment individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

Operating leases are included in operating lease ROU assets and operating lease liabilities (current and non-current), on the consolidated balance sheets. The Company did not have any leases as of ~~June~~September 30, 2021.

Related Parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related party transactions.

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Segment Reporting

FASB ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Management determined the Company’s current operations constitute a single reportable segment in accordance with ASC 280. The Company currently operates in 1 business and industry segment: manufacture and sale of boric acid. The Company plans to expand its manufacturing facilities through a newly formed JV with Qinghai Zhongli in which the Company owns 51% to produce lithium carbonate for the electric vehicle battery market in China. Qinghai Zhongli is currently constructing the production workshop but has no production yet.

~~Reclassification~~

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~~Certain prior period balance sheet accounts were reclassified for the purpose of consistency with the current year’s presentation.~~

New Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its CFS.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its FV, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis. As a smaller reporting company, the standard will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its CFS.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. The Company continues to evaluate the impact of the guidance and may apply the elections as applicable as changes in the market occur.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Entities should adopt the guidance as of the beginning of the fiscal year of adoption and cannot adopt the guidance in an interim reporting period. The Company is currently evaluating the impact that ASU 2020-06 may have on its CFS.

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Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future CFS.

3. INVENTORIES, NET

Inventories at ~~June~~September 30, 2021 and December 31, 2020, respectively, were as follows:

	2021		2020		2021		2020
Raw materials	$	221,837	$	275,416	$	164,681	$	275,416
Finished goods		124,247		903,971		83,894		903,971
Total	$	346,084	$	1,179,387	$	248,575	$	1,179,387

4. NOTES RECEIVABLE – BANK ACCEPTANCES

The Company sold goods to its customers and received notes (bank acceptances) from them in lieu of payment. These bank acceptances were issued by customers to the Company and would be honored by the applicable bank. The Company may hold a bank acceptance until maturity for full payment or have the bank acceptance cashed by the bank at a discount at an earlier date, or transfer the bank acceptance to its vendors in lieu of payment for their own obligations. As of ~~June~~September 30, 2021 and December 31, 2020, the Company had notes receivable of ~~$32,507~~$0 and $96,367, respectively; and at ~~June~~September 30, 2021, the Company had ~~$0.65~~$0.23 million notes receivable endorsed to its vendors, in lieu of payment. The Company was contingently liable for these notes receivable until paid.

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5. OTHER RECEIVABLES

Other receivables consisted of the following at ~~June~~September 30, 2021 and December 31, 2020:

	2021		2020		2021		2020
VAT receivable	$	175,920	$	57,364	$	179,195	$	57,364
Prepaid rent (short term)		774		2,043		1,696		2,043
Other		15,310		819		15,252		819
Total	$	192,004	$	60,226	$	196,143	$	60,226

6. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following at ~~June~~September 30, 2021 and December 31, 2020, respectively:

	2021			2020			2021			2020
Building structures and improvements	$	601,862		$	481,270		$	627,633		$	481,270
Production equipment		2,937,119			2,880,146			2,925,661			2,880,146
Vehicle		105,892			70,836			105,479			70,836
Equipment		269,915			267,235			268,863			267,235
Total		3,914,788			3,699,487			3,927,636			3,699,487
Less: accumulated depreciation		(2,414,266	)		(2,210,704	)		(2,495,895	)		(2,210,704	)
Property and equipment, net	$	1,500,522		$	1,488,783		$	1,431,741		$	1,488,783

In May 2021, the Company acquired RMB 1.1 million ($170,270) of land and building structures from a bankrupt company, of which, $115,760 was for building structures including workshop and office, $54,510 was for the land use right (see Note 7). The Company prepaid RMB 200,000 ($30,960) in March 2020, and paid remaining balance of RMB 900,000 ($139,310) in May 2021.

Depreciation for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was ~~$181,059~~$272,313 and ~~$151,543,~~$236,026, respectively. Depreciation for the three months ended ~~June~~September 30, 2021 and 2020 was ~~$90,525~~$91,254 and ~~$75,197,~~$84,483, respectively.

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7. INTANGIBLE ASSET, NET

Intangible asset consisted of the following at ~~June~~September 30, 2021:

Land use right	$	54,512		$	50,649
Less: accumulated amortization		(233	)		(541	)
Intangible asset, net	$	54,279		$	50,108

The Company acquired land use right of ~~$54,512~~$50,649 from a bankrupt company in May 2021, the transfer of Land Use Right Certificate was in process as of this report date. The Company has the right to use the land for 37 years and eight months and is amortizing such rights on a straight-line basis.

Amortization for the ~~six~~nine months and three months ended ~~June~~September 30, 2021 was ~~$233~~$541 and ~~$233,~~$308, respectively. Annual amortization for the next five years from ~~June~~September 30, 2021, is expected to be ~~$1,442~~$1,348 for each year.

8. CONSTRUCTION IN PROGRESS (“CIP”)

As of ~~June~~September 30, 2021 and December 31, 2020, the Company had CIP of ~~$1,291,020~~$1,516,122 and $141,846, respectively. The CIP was mainly for Qinghai Zhongli’s Adsorption Station Project, which is the early stage of an integrated lithium carbonate production system. The adsorption station is equipped with a liquid storage tank for the adsorption material to be placed inside, and its function is to preliminarily extract lithium mother solution from brine for initial purification; the lithium mother solution will go into evaporation shed for refining and concentration; and the concentrated mother solution (also called lithium water saturated solution) is then sent to the production workshop for precipitation and drying to form the finished product of lithium carbonate. As of ~~June~~September 30, 2021, the Company spent ~~$1,291,020~~$1.52 million for constructing the adsorption station; as of this report date, the Company completed the construction of No. 1 adsorption stations, and is currently doing the technological transformation for No. 2 refining station for adding the adsorption tank to increase daily ~~production.~~production and installation of the heating equipment. The Company was committed to pay ~~$196,000~~$0.20 million based on the various construction - related contracts entered as of ~~June~~September 30, 2021.

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9. TAXES PAYABLE

Taxes payable consisted of the following ~~June~~September 30, 2021 and December 31, 2020, respectively:

	2021		2020		2021		2020
Income tax payable					$	120,860	$	-
Other	$	22,395	$	18,331		14,014		18,331
VAT		136,578		88,320		78,962		88,320
Taxes payable	$	158,973	$	106,651	$	213,836	$	106,651

10. ACCRUED LIABILITIES AND OTHER PAYABLES

Accrued liabilities and other payables consisted of the following at ~~June~~September 30, 2021 and December 31, 2020, respectively:

	2021		2020		2021		2020
Advances from third parties	$	17,194	$	6,035	$	13,747	$	6,035
Other		615,000		561,000		717,000		561,000
Accrued salary		943,237		955,312		865,522		955,312
Total	$	1,575,431	$	1,522,347	$	1,596,269	$	1,522,347

Advances from third parties were short term, non-interest-bearing and due on demand.

As of ~~March 31,~~September 30, 2021 and December 31, 2020, other mainly consisted of 1) dividend payable to Northtech of ~~$550,000~~$575,000 and $500,000, respectively; and 2) payables for professional fees and other miscellaneous expenses of ~~$65,000~~$142,000 and $61,000, respectively.

As of ~~June~~September 30, 2021, accrued salary of ~~$943,237~~$865,522 included $840,000 accrued salary for the 3 senior officers. As of December 31, 2020, accrued salary of $955,312 included $840,000 accrued salary for 3 senior officers.

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11. RELATED PARTY TRANSACTIONS

Due from related parties, net

Technology purchased raw material boron rock from Qinghai Mining (owned by 3 former major shareholders of the Company); in addition, Technology received no-interest short-term advances from Qinghai Mining for daily operational needs. As of ~~June~~September 30, 2021 and December 31, 2020, due from Qinghai Mining was ~~$3.48 million~~$0 and $3.11 million (the net amount of intercompany transactions between Technology and Qinghai Mining), respectively. Technology purchased boron ore of ~~$648,840~~$725,052 and ~~$594,526~~$1,188,802 from Qinghai Mining during the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. Technology purchased boron ore of ~~$387,582~~$76,212 and ~~$480,998~~$594,276 from Qinghai Mining during the three months ended ~~June~~September 30, 2021 and 2020, respectively. During the three months ended September 30, 2021, the Company wrote off the receivable of $ 3.5 million from Qinghai Mining, because Qinghai mining ceased production of boron rock sold to the Company. This halt in production has impaired the Mining Company’s ability to repay the receivable to the Company.

On July 1, 2019, Technology and Qinghai Mining entered a boron ore purchase contract for one year. Qinghai Mining was to supply Technology boron ore based on Technology’s monthly production plan at RMB 62 ($9.10) per tonne. The price was adjustable if there a significant fluctuation of the market price for boron ore. In the fourth quarter of 2019, this price was adjusted to RMB 70.46 ($10.21) per tonne. In the first quarter of 2020, Technology and Qinghai Mining entered a ~~new~~ purchase contract, the price for boron ore was ~~adjusted to~~ RMB 77.5 ($11.10) per tonne, and the price for slag was RMB 30 ($4.41) per tonne. This purchase contract will be in effect until a replacement contact with a new purchase price is entered.

In September 2020, Technology sold the Test and Experimental Plant I to Qinghai Mining at cost of RMB 11.41 million ($1.77 million). The payment term is five years with annual interest of 4.75%. The first payment of $340,552 is due September 30, 2021. As of June 30, 2021, the future minimum payments for next five years is: $340,552, $340,552, $340,552, $340,552 and $404,398. Qinghai Mining guarantees payment with its accounts receivables, and has the right to repay the purchase price in full any time before the maturity date.

During the fourth quarter 2020, the Company made a short-term cash advance of RMB 500,000 ($76,630) to Xi’an Jinzang (49% NCI of the JV) with no interest and payable upon demand. Xi’an Jinzang repaid the amount in full in January 2021.

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Due to related parties

Technology used equipment for production that belongs to Qinghai Province Dachaidan Zhongtian Resources Development Co., Ltd (“Zhongtian Resources”, which is owned by the Chairman and his brother who ~~are also~~were formerly two major shareholders of the Company). The depreciation of these fixed assets had an impact on the production costs of boric acid of the Company and was included in the Company’s cost of sales. The depreciation of these fixed assets for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was ~~$10,122~~$12,504 and ~~$12,620,~~$19,547, respectively. The depreciation of these fixed assets for the three months ended ~~June~~September 30, 2021 and 2020 was ~~$4,536~~$2,382 and ~~$6,357,~~$6,927, respectively. Due to Zhongtian Resources resulting from using its equipment and payment of worker’s compensation made by Zhongtian Resource for Technology was ~~$90,245~~$92,269 and $79,309 at ~~June~~September 30, 2021 and December 31, 2020, respectively.

Technology sold boric acid to Qinghai Dingjia Zhixin Trading Co., Ltd (“Dingjia”) which is 90% owned by the son of the Company’s major shareholder and Chairman. For the ~~six~~nine months and three months ended ~~June~~September 30, 2021, the Company’s sales to Dingjia was $0. For the ~~six~~nine and three months ended ~~June~~September 30, 2020, the Company’s sales to Dingjia was ~~$101,560~~$202,130 and ~~$101,560,~~$100,570, respectively. At ~~June~~September 30, 2021 and December 31, 2020, payable to Dingjia was ~~$20,970~~$20,888 and $20,762, respectively.

During the first quarter of 2021, Qinghai Zhongli and Xi’an Jinzang entered three loan contracts for Qinghai Zhongli borrowing RMB 4 million ($619,185) with an annual interest of 6.8% from Xi’an Jinzang. The fund was used for the production and operation activities and construction of Adsorption Station Project of Qinghai Zhongli. The Company was to repay RMB 2.5 million ($380,442) with accrued interest by June 30, 2021 and repay the remaining RMB 1.5 million ($228,266) with accrued interest by December 31, 2021. A late fee of 1/1000 of outstanding balance per day will be charged if the Company is not able to repay the loan on time. The Company did not repay the RMB 2.5 million ($380,442) at ~~June~~September 30, 2021; in addition, the Company borrowed additional RMB 2 million ($309,593) with the same terms during the second quarter of 2021 under the oral agreement. The Company borrowed additional RMB 2 million ($309,593) with the same terms during the third quarter of 2021 under the oral agreement. The Company recorded ~~$16,539~~$33,595 capitalized interest on CIP of Adsorption Station as of ~~June~~September 30, 2021.

In addition, at ~~June~~September 30, 2021 and December 31, 2020, the Company had ~~$1,236,591~~$1,316,591 and $1,014,591 due to another major shareholder of the Company and Chief Executive Officer, resulting from certain Company operating expenses of the US parent company such as legal and audit fees that were paid by him on behalf of the Company. This short-term advance bore no interest, and was payable upon demand.

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The following table summarized the due from (to) related parties as of ~~June~~September 30, 2021 and December 31, 2020, respectively:

	Related party name	2021			2020			Related party name	2021			2020
Due from	Qinghai Mining including $1.77 million sale of CIP	$	4,613,977		$	3,457,488		Qinghai Mining including $1.77 million sale of CIP (Test and Experimental Plant I)	$	4,542,738		$	3,457,488
Due to	Qinghai Mining		(1,129,136	)		(350,438	)	Qinghai Mining		(1,027,241	)		(350,438	)
Due from Xi'an Jinzang (NCI of the JV)	Due from Xi'an Jinzang (NCI of the JV)		0			76,630				-			76,630
Less: bad debt allowance for Qinghai Mining										(3,515,497	)		-
Due from, net (current and noncurrent)	Due from, net (current and noncurrent)	$	3,484,841		$	3,183,680			$	-		$	3,183,680

Due to	Dingjia	$	20,970		$	20,762		Dingjia	$	20,888		$	20,762
Due to	Xi'an Jinzang (NCI of the JV) with 6.8% interest		945,317			0		Xi'an Jinzang (NCI of the JV) with 6.8% interest		1,267,136			-
Due to	Zhongtian Resources		90,245			79,309		Zhongtian Resources		92,269			79,309
Due to	A major shareholder		1,236,591			1,014,591		A major shareholder		1,316,591			1,014,591
Due to, total	Due to, total	$	2,293,123		$	1,114,662		Due to, total	$	2,696,884		$	1,114,662

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12. DEFERRED INCOME

Deferred income consisted mainly of the government subsidy to the Company’s special projects.

The detail of deferred income for the Company’s special projects at ~~June~~September 30, 2021 is:

	Government subsidy amount		Project completion date	Useful life in years		Accumulated amortization		Net		Government subsidy amount		Project completion date	Useful life in years	Accumulated amortization		Net

Technology upgrade for using lean ore to produce magnesium sulfate	$	340,552	8/1/2013		10	$	269,604	$	70,948	$	339,224	8/1/2013	10	$	277,033	$	62,191
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		77,398	5/1/2015		10		47,729		29,669		77,096	5/1/2015	10		49,470		27,626
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		1,547,964	1/1/2018		10		541,787		1,006,177		1,541,295	1/1/2018	10		578,222		963,703
Project of high value utilization of magnesium-rich waste liquid		309,593	7/9/2019		10		252,628		56,965		308,385	7/9/2019	10		253,415		54,970
Total	$	2,275,507				$	1,111,748	$	1,163,759	$	2,266,630			$	1,158,140	$	1,108,490

The detail of deferred income for the Company’s special projects at December 31, 2020 is:

	Government subsidy amount		Project completion date	Useful life in years	Accumulated amortization		Net

Technology upgrade for using lean ore to produce magnesium sulfate	$	337,170	8/1/2013	10	$	250,068	$	87,102
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		76,629	5/1/2015	10		43,422		33,207
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		1,532,591	1/1/2018	10		459,778		1,072,813
Project of high value utilization of magnesium-rich waste liquid		306,518	7/9/2019	10		246,594		59,924
Total	$	2,252,908			$	999,862	$	1,253,046

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13. SUBSIDY INCOME

Subsidy income consisted of amortization of deferred income for declared special projects and government’s general incentive fund (recorded as income upon receipt) for the ~~six~~nine and three months ended ~~June~~September 30, 2021 and 2020, respectively:

	Six Months Ended June 30				Nine Months Ended September 30
	2021		2020		2021		2020
Technology upgrade for using lean ore to produce magnesium sulfate	$	16,997	$	15,643	$	25,497	$	23,599
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		3,863		3,555		5,795		5,364
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		77,258		71,105		115,895		107,270
Project of high value utilization of magnesium-rich waste liquid		3,554		3,271		5,330		4,934
Subsidy for resuming work		0		2,061		446		2,559
Total	$	101,672	$	95,635	$	152,963	$	143,726

	Three Months Ended June 30,				Three Months Ended September 30,
	2021		2020		2021		2020
Technology upgrade for using lean ore to produce magnesium sulfate	$	8,515	$	7,762	$	8,500	$	7,956
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		1,935		1,764		1,931		1,809
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		38,704		35,283		38,637		36,165
Project of high value utilization of magnesium-rich waste liquid		1,781		1,624		1,777		1,663
Subsidy for resuming work		0		2,061		446		498
Total	$	50,935	$	48,494	$	51,291	$	48,091

14. DEFERRED TAX ASSETS

As of ~~June~~September 30, 2021 and December 31, 2020, respectively, deferred tax assets consisted of the following:

	2021			2020			2021			2020
Deferred tax asset –NOL of US parent company	$	1,129,304		$	1,081,844		$	127,890		$	47,460
Less: valuation allowance		(1,129,304	)		(1,081,844	)		(127,890	)		(47,460	)
Deferred tax assets, net	$	0		$	0		$	-		$	-

The Company recorded a 100% valuation allowance for deferred tax assets due to the uncertainty of its realization.

15. INCOME TAXES

The Company is subject to income taxes by entity on income arising in or derived from the tax jurisdiction in which each entity is domiciled. The Company’s PRC subsidiaries file their income tax returns online with PRC tax authorities.

The H.R. 1 (the “Tax Reform”), effective for tax years beginning on or after January 1, 2018, except for certain provisions, resulted in changes to existing U.S. tax law, including various provisions that are expected to impact the Company. The Tax Reform Law reduced the federal corporate tax rate from 35% to 21% effective January 1, 2018 for the U.S. entity of the Company.

The U.S. parent company, was incorporated in the U.S. and has net operating losses (“NOLs”) for income tax purposes, under the 2018 Tax Reform, the NOLs arising in tax years beginning after 2017 may reduce 80% of a taxpayer’s taxable income, and be carried forward indefinitely. However, the coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) issued in March 2020, provides tax relief to both corporate and noncorporate taxpayers by adding a five-year carryback period and temporarily repealing the 80% limitation for NOLs arising in 2018, 2019 and 2020. The U.S. parent Company has NOLs carry forwards for income taxes of approximately ~~$5.38~~$0.61 million at ~~June~~September 30, 2021. Management believes the realization of benefits from these losses remains uncertain due to the parent Company’s limited operating history and continuing losses. Accordingly, a 100% deferred tax asset valuation allowance was provided.

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Mid-Heaven BVI is a BVI company, and there is no income tax for companies domiciled in the BVI. Sincerity and Salt-Lake are governed by the Income Tax Law of the PRC concerning privately-run enterprises, which are generally subject to tax at 25% on income reported in the statutory financial statements after appropriate tax adjustments. Mid-Heaven BVI, Sincerity and Salt-Lake do not have any operations, and are not expected to have any operations in the future. Technology and Qinghai Zhongli have a 15% preferential PRC income tax rate.

The following is a reconciliation of the difference between the actual provision for income taxes and the provision computed by applying the federal statutory rate on income (loss) before income taxes for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively:

	2021			2020			2021			2020
Tax (benefit) at U.S. federal statutory rates	$	50,410		$	(34,588	)	$	(642,214	)	$	(49,847	)
Foreign income taxed at different rates		18,642			8,681			(107,007	)		13,815
Tax holiday in PRC		(46,605	)		(21,701	)		267,516			(34,536	)
Permanent difference								26,699			-
Other		9,820			0			9,909			-
Valuation allowance		59,680			73,541			611,936			117,685
Tax expense per financial statements	$	91,947		$	25,933		$	166,839		$	47,117

The following is a reconciliation of the difference between the actual provision for income taxes and the provision computed by applying the federal statutory rate on income (loss) before income taxes for the three months ended ~~June~~September 30, 2021 and 2020, respectively:

	2021			2020			2021			2020
Tax at U.S. federal statutory rates	$	74,393		$	13,844
Tax (credit) at U.S. federal statutory rates							$	(692,624	)	$	(15,258	)
Foreign income taxed at different rates		17,326			11,858			(125,649	)		5,135
Tax holiday in PRC		(43,315	)		(29,644	)		314,121			(12,834	)
Permanent difference								11,154			-
Other		6,338			0			15,633			-
Valuation allowance		25,747			29,875			552,257			44,141
Tax expense per financial statements	$	80,489		$	25,933		$	74,892		$	21,184

The income tax expense for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively, consisted of the following:

	2021		2020		2021		2020
Income tax expense – current	$	91,947	$	25,933	$	166,839	$	47,117
Income tax expense – deferred		0		0		-		-
Total income tax expense	$	91,947	$	25,933	$	166,839	$	47,117

The income tax expense for the three months ended ~~June~~September 30, 2021 and 2020, respectively, consisted of the following:

	2021		2020		2021		2020
Income tax expense – current	$	80,489	$	25,933	$	74,892	$	21,184
Income tax expense – deferred		0		0		-		-
Total income tax expense	$	80,489	$	25,933	$	74,892	$	21,184

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16. MAJOR CUSTOMERS AND VENDORS

The following table sets forth information as to the Company’s customers that accounted for 10% or more of the Company’s sales for the ~~six~~nine and three months ended ~~June~~September 30, 2021 and 2020.

Six Months Ended June 30, 2021				Six Months Ended June 30, 2020
Nine Months Ended September 30, 2021								Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
Customer	Percentage of Total Sales			Customer	Percentage of Total Sales				Percentage of Total Sales			Customer	Percentage of Total Sales
A		13	%	A		12	%			14	%	A		-	%
B		11	%	B		-	%			12	%	B		14	%
C		-	%	C		15	%			10	%	C		-	%
D		-	%	D		12	%			-	%	D		12	%
E		-	%	E		10	%			-	%	E		10	%

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020

Customer

Percentage of
Total Sales

Customer

Percentage of
Total Sales

A
15
%

A
15
%
B
12
%

B
-
%
C
11
%

C
-
%
D
-
%

D
15
%
E
-
%

E
11
%
F
-
%

F
10
%

Three Months Ended September 30, 2021				Three Months Ended September 30, 2020
Customer	Percentage of Total Sales			Customer	Percentage of Total Sales
A		31	%	A		-	%
B		16	%	B		-	%
C		11	%	C		-	%
D		10	%	D		-	%
E		-	%	E		15	%
F		-	%	F		12	%
G		-	%	G		11	%
H		-	%	H		10	%

The Company had no and one customer that accounted for 10% or more of the Company’s accounts receivable as of ~~June~~September 30, 2021 and December 31, ~~2020.~~2020, respectively. The accounts receivable from this customer was $0 and $211,134 as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Technology purchased all of its boron ore raw material of ~~$648,840~~$725,052 and ~~$594,526~~$1,188,802 from Qinghai Mining during the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. Technology purchased boron ore of ~~$387,582~~$76,212 and ~~$480,998~~$594,276 from Qinghai Mining during the three months ended ~~June~~September 30, 2021 and 2020, respectively.

Beginning in July 2021, Management of Technology began shifting suppliers to third parties in order to fulfill what management believes will be a short term reliance on ore for the production of boric acid. Management of Technology expects that it will source all material and compounds that will be used for both boric acid and lithium carbonate production from Qinghai Mining once the brine processing process receives approval from the relevant governmental authorities.

The following table sets forth information as to the Company’s suppliers that accounted for 10% or more of the Company’s total purchases for the ~~six~~nine and three months ended ~~June~~September 30, 2021 and 2020.

Six Months Ended June 30, 2021				Six Months Ended June 30, 2020
Nine Months Ended September 30, 2021								Nine Months Ended September 30, 2021				Nine Months Ended September 30, 2020
Supplier	Percentage of Total Purchases			Supplier	Percentage of Total Purchases				Percentage of Total Purchases			Supplier	Percentage of Total Purchases
A – Qinghai Mining		42	%	A – Qinghai Mining		29	%			39	%	A – Qinghai Mining		41	%
B		18	%	B		-	%			24	%	B		16	%
C		15	%	C		14	%			15	%	C		-	%
D										12	%	D		10	%
E												E		20	%

Three Months Ended June 30, 2021				Three Months Ended June 30, 2020
Three Months Ended September 30, 2021								Three Months Ended September 30, 2021				Three Months Ended September 30, 2020
Supplier	Percentage of Total Purchases			Supplier	Percentage of Total Purchases				Percentage of Total Purchases			Supplier	Percentage of Total Purchases
A – Qinghai Mining		46	%	A – Qingai Mining		28	%			22	%	A – Qingai Mining		35	%
B		14	%	B		-	%			56	%	B		11	%
C		11	%	C		-	%			12	%	C		-	%
D		16	%	D		14	%			-	%	D		34	%

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The Company had two suppliers that accounted for 10% or more of the Company’s accounts payable as of ~~June~~September 30, 2021. The accounts payable to these suppliers was ~~$77,454~~$77,152 and ~~$31,859~~$26,587 as of ~~June~~September 30, 2021, respectively.

The Company had one supplier that accounted for 10% or more of the Company’s accounts payable as of December 31, 2020. The accounts payable to this supplier was $240,504 as of December 31, 2020.

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17. STATUTORY RESERVES AND RESTRICTED NET ASSETS

The Company’s ability to pay dividends primarily depends on it receiving funds from its subsidiaries. PRC laws and regulations permit payments of dividends by the Company’s PRC subsidiaries only out of the subsidiary’s retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with US GAAP differ from those reflected in the statutory financial statements of the Company’s PRC subsidiaries.

In accordance with the PRC Regulations on Enterprises with Foreign Investment and their articles of association, a foreign-invested enterprise (“FIE”) established in the PRC is required to provide statutory reserves, which are appropriated from net profit as reported in the FIE’s PRC statutory accounts. An FIE is required to allocate at least 10% of its annual after-tax profit to the surplus reserve until such reserve reaches 50% of its respective registered capital based on the FIE’s PRC statutory accounts. Appropriations to other funds are at the discretion of the BOD for all FIEs. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. Additionally, shareholders of an FIE are required to contribute capital to satisfy the registered capital requirement of the FIE. Until such contribution of capital is satisfied, the FIE is not allowed to repatriate profits to its shareholders, unless otherwise approved by the State Administration of Foreign Exchange. Sincerity, incorporated on July 9, 2018 in China as a wholly foreign-owned enterprise (“WFOE”) with registered capital of $1.00 million, has 10 years from the incorporation date to fulfill the registered capital requirement.

Additionally, in accordance with the Company Laws of the PRC, a domestic enterprise is required to provide surplus reserve at least 10% of its annual after-tax profit until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. A domestic enterprise is also required to have a discretionary surplus reserve, at the discretion of the BOD, from the profits determined in accordance with the enterprise’s PRC statutory accounts. Appropriation to such reserve by the Company is based on profit arrived at under PRC accounting standards for business enterprises for each year. The profit arrived at must be set off against any accumulated losses sustained by the Company in prior years, before allocation is made to the statutory reserve. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. Technology was established as domestic enterprises and therefore are subject to the above-mentioned restrictions on distributable profits.

As a result of these PRC laws and regulations that require annual appropriations of 10% of after-tax income to be set aside prior to payment of dividends as general reserve fund, the Company’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Company as a dividend.

According to Administrative Measures for the Collection and Utilization of Enterprise Work Safety Funds issued by the PRC Ministry of Finance and the State Administration of Work Safety, for the companies with dangerous goods production or storage, the company is required to make a special ~~reverse~~reserve for the use of enhancing and improving its safe production conditions. Under PRC GAAP, the reserve is recorded as cost of sales; however, under US GAAP, since the expense has not been incurred and the Company already recorded cost of sales for safety related expenses when incurred, this special reserve was recorded as an appropriation of its after-tax income. At ~~June~~September 30, 2021, the Company had ~~$110,725~~$138,135 production safety related reserve, which was included in ~~$257,742~~$243,905 statutory reserve in the balance sheet. The reserve is calculated at regressive rates levied on revenue in excess of specific amounts as follows:

Annual revenue amount	Reserve ratio
Less than RMB 10 million ($1.41 million)	4.0% of annual revenue
Over RMB 10 million ($1.41 million), but less than RMB 100 million ($14.13 million)	2.0% of annual revenue
Over RMB 100 million ($14.13 million), but less than RMB 1 billion ($141.25 million)	0.5% of annual revenue
Over RMB 1 billion ($141.25 million)	0.2% of annual revenue

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18. COMMITMENTS

Capital Contribution

Both Sincerity and Salt-Lake were incorporated in China in 2018 with registered capital of $1.00 million and $0.88 million, respectively, they have 10 years from the incorporation date to fulfill the registered capital requirement. Under PRC company law, registered capital must be used in the operations of the domestic company within its approved business scope.

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19. CONTINGENCIES

The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments in China and foreign currency exchange. The Company’s results may be adversely affected by changes in PRC government policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad and rates and methods of taxation, among other things.

The Company’s sales, purchases and expense transactions in China are denominated in RMB and all of the Company’s assets and liabilities in China are also denominated in RMB. The RMB is not freely convertible into foreign currencies under the current PRC law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB may require certain supporting documentation in order to affect the remittance.

20. SUBSEQUENT EVENTS

The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company has the following material subsequent ~~events:~~event:

~~Beginning in July~~On November 4, 2021, ~~Management~~Mr. Jimin Zhang purchased a total of ~~Technology began shifting suppliers to third parties in order to fulfil what management believes will be a short term reliance on ore for the production~~106,001,971 shares of boric acid. Management of Technology expects that it will source all material and compounds that will be used for both boric acid and lithium carbonate production from Qinghai Mining once the brine processing process receives approval from the relevant governmental authorities. Managementcommon stock of the Company ~~believes that~~at a purchase price of $.001 per share (80,625,099 shares from Mao Zhang, 22,165,012 shares from Jian Zhang, and 3,211,860 shares from Ying Zhao). After giving effect to the ~~change in suppliers is consistent with~~purchases, Mr. Jimin Zhang now holds, directly or indirectly, a total of 152,769,779 shares of Common Stock which represents approximately 82% of the Company’s ~~long term plans to obtain all raw materials from brine process which will be consistent with environmental policies~~issued and ~~the long term business plan of the Company.~~

outstanding Common Stock.

2426

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

Overview

The Company currently produces boric acid in the Peoples Republic of China (“PRC”) and plans to expand its manufacturing facilities through a Joint Venture (“JV”) to produce up to 30,000 tonnes of lithium carbonate annually for the electric vehicle battery market in China, subject to funding. ~~We sold our plate heat exchangers and heat pump operations on September 30, 2019.~~

On December 31, 2018 (the "Closing Date"), we entered into a Share Exchange Agreement and Plan of Reorganization, as amended January 24, 2019 (the “Share Exchange Agreement”) with Mid-Heaven Sincerity International Resources Investment Co., Ltd (Mid-heaven BVI) and its shareholders Mao Zhang, Jian Zhang, and Ying Zhao, constituting all of the shareholders of Mid-heaven BVI (the “Mid-heaven Shareholders”). Pursuant to the terms of the Share Exchange Agreement, the shareholders of Mid-heaven BVI delivered all of the issued and outstanding shares of capital stock of Mid-Heaven BVI to SmartHeat, for 106,001,971 shares of our Common Stock. Mid-heaven BVI, through two subsidiaries, Qinghai Mid-Heaven Sincerity Technology Co., Ltd (“Sincerity”) and Qinghai Mid-Heaven Sincerity Salt-Lake R&D Co., Ltd (“Salt-Lake”) owns 100% of Qing Hai Mid-Heaven Boron & Lithium Technology Company, Ltd. (“Technology”).

~~The Acquisition was structured as~~ On November 4, 2021, Mr. Jimin Zhang purchased a ~~tax-free reorganization. As a result~~total of ~~the Share Exchange Agreement, Mid-heaven BVI’s shareholders own approximately 57%~~106,001,971 shares of ~~the combined company. For accounting purposes, the transaction was accounted for as a reverse acquisition~~common stock of the Company ~~by Mid-heaven BVI.~~at a purchase price of $.001 per share (80,625,099 shares from Mao Zhang, 22,165,012 shares from Jian Zhang, and 3,211,860 shares from Ying Zhao). After giving effect to the purchases, Mr. Jimin Zhang now holds, directly or indirectly, a total of 152,769,779 shares of Common Stock which represents approximately 82% of the Company’s issued and outstanding Common Stock

The main operating entity, Technology was incorporated on December 18, 2018. The business of Technology was carved out of the business of Qinghai Zhongtian Boron & Lithium Mining Co., Ltd (“Qinghai Mining”) on December 20, 2018. Qinghai Mining was founded March 6, 2001, and manufactures and wholesales boric acid and related compounds for industrial and consumer usage. Technology obtains its brine exclusively from Qinghai Mining and currently processes boric acid by crushing and processing ore from third party suppliers. Technology previously purchased ore from Qinghai Mining; however, Technology recently shifted suppliers to third parties in order to ~~fulfil~~fulfill what management believes will be a short term reliance on ore for the production of boric acid. Management of Technology expects that it will source all material and compounds that will be used for both boric acid and lithium carbonate production from Qinghai Mining once the brine processing process receives approval from the relevant governmental ~~authorities.~~

On September 30, 2019, Heat HP, Inc. and Heat PHE, Inc, our wholly owned subsidiaries, sold their respective equity interests in Jinhui, SmartHeat Investment, SmartHeat Trading, SmartHeat Pump and Heat Exchange for $353. The equity interests were soldauthorities, the Company expected to ~~individuals and businesses~~receive the approval in the ~~PRC. Each subsidiary was sold for nominal cash consideration as below and, as the transactions were structured as purchases~~end of ~~equity interests, the subsidiary companies retained all liabilities when sold.~~

~~SmartHeat Jinhui (Beijing) Energy Technology Ltd - 100 RMB~~

~~SmartHeat (China) Investment Ltd - 400 RMB~~

~~SmartHeat (Shanghai) Trading Co., Ltd - 400 RMB~~

~~SmartHeat (Shenyang) Heat Pump Technology Co., Ltd - 400 RMB~~

~~SanDeKe Co., Ltd - 600 RMB~~

~~SmartHeat Heat Exchange Equipment Co - 600 RMB~~

On October 23, 2019, we filed a certificate of amendment to its certificate of incorporation to change its name from “SmartHeat, Inc.” to “Lithium & Boron Technology, Inc.” to better reflect the operations of the Company.2021.

In December 2019, a novel strain of coronavirus (COVID-19) was reported and the World Health Organization declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which continues to spread to additional countries, and disrupts supply chains and affecting production and sales across a range of industries as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak. The COVID-19 outbreak impacted the Company’s operations for the first quarter of 2020. However, as a result of PRC government’s effort on disease control, most cities in China were reopened in April 2020, the outbreak in China is under the control, and the Company’s production and sales has been gradually increasing since April 2020. Since April 2020 and to date, there were some new COVID-19 cases discovered in a few provinces of China, and we do not believe the number of new cases is significant to our operations due to PRC government’s strict control but have noted its impact where applicable in this report.

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On March 27, 2020 (PRC time), Technology entered into an Investment Cooperation Agreement, Memorandum of Cooperation and Licensing Agreement with Xi'an Jinzang Membrane Environmental Protection Technology Co., Ltd. (“Xi’an Jinzang”) to produce up to 30,000 tonnes of battery grade lithium carbonate annually, subject to funding. On April 15, 2020, the parties formed a JV company Qinghai Zhonglixinmo Technology Co., Ltd (“Qinghai Zhongli” or JV) to process brine supplied by Technology. Technology owns 51% of the JV and Xi’ Jinzang owns the remaining 49%. The JV cooperation agreement calls for a capital contribution of RMB 140 million ($19,746,000), to be paid in three phases according to the project construction progress: RMB 36 million ($5,077,000) to be paid within 10 days from the date of registration and establishment of the JV, RMB 72 million ($10,155,000) to be paid before July 31, 2020, and RMB 32 million ($4,513,000) to be paid before October 31,2020. The JV’s shareholders are required to contribute capital in accordance with their respective shareholding ratio. The capital contribution amount and timing can be adjusted upon both parties’ mutual consent. Each party made an initial capital contribution of RMB 5 million ($0.71 million) in April 2020. As of the date of this report, the parties have not made all capital contributions on the dates due, pending financing by the Company, as the capital contribution amount and timing can be adjusted anytime upon both parties’ mutual consent. During the construction and operation of the project, all parties agree to actively raise construction funds by means of bank loans, self-owned funds, etc. if the funds are not raised in time, the term of paid in capital can be extended accordingly upon agreement of all parties.

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In order to maintain the normal operation of the Company; in July 2021, Technology Company entered a processing contract to provide boric acid commissioned processing service at processing fee of RMB 2,000 ($308) per ton with borax provided by the customer. In September 2021, Technology Company entered a new agreement with the same customer, the Company provided boric acid manufacturing facility, equipment, auxiliary equipment, necessary utilities, and workers to the customer for them to produce the boric acid by themselves. The customer was required to pay RMB 400,000 ($61,680) per month for facility usage fee to the Company, or RMB 500,000 ($77,090) per month if the customer wants to use the Company’s low-grade abandoned slag.

Going Concern

Related Party Transactions

Due from related parties, net

Technology purchased raw material boron rock from Qinghai Mining (owned by three former major shareholders of the Company); in addition, Technology received no-interest short-term advances from Qinghai Mining from time to time for daily operational needs. As of ~~June~~September 30, 2021 and December 31, 2020, due from Qinghai Mining was ~~$3.48 million~~$0 (a 100% bad debt allowance was recorded for due from Qinghai Mining due to the concern of its ability to repay the debt because it ceased production of boron ore sold to us) and $3.11 million, respectively (the net amount of intercompany transactions between Technology and Qinghai Mining). Qinghai Technology purchased boron ore at a cost of ~~$648,840~~$725,052 and ~~$594,526~~$1,188,802 from Qinghai Mining during the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. Qinghai Technology purchased boron ore at a cost of ~~$387,582~~$76,212 and ~~$480,998~~$594,276 from Qinghai Mining during the three months ended ~~June~~September 30, 2021 and 2020, respectively.

On July 1, 2019, Technology and Qinghai Mining entered a boron ore purchase contract for a term of one year. Qinghai Mining was to supply Qinghai Technology boron ore based on Qinghai Technology’s monthly production plan at RMB 62 ($9.10) per tonne. The price was adjustable if there is a significant fluctuation of the market price for the boron ore. In the fourth quarter of 2019, this price was adjusted to RMB 70.46 ($10.21) per tonne. In the first quarter of 2020, Technology and Qinghai Mining entered a new purchase contract, the price for boron ore was adjusted to RMB 77.5 ($11.10) per tonne, and the price for slag was RMB 30 ($4.41) per tonne. The new purchase contract will be in effect until a replacement contact with new purchase price is entered.

In September 2020, Technology sold the Test and Experimental Plant I to Qinghai Mining at cost of RMB 11.41 million ($1.77 million). The payment term is five years with annual interest of 4.75%. The first payment of $340,552 is due September 30, 2021. Qinghai Mining guarantees payment with its accounts receivable, and has the right to repay the purchase price in full any time before the maturity date.

Due to related parties

Technology uses equipment that belongs to Qinghai Province Dachaidan Zhongtian Resources Development Co., Ltd (“Zhongtian Resources”) for production which is owned by our Chairman and his brother who are two major shareholders of the Company. The depreciation of these fixed assets had an impact on the production costs of boric acid of the Company and was included in the Company’s cost of sales. The depreciation of these fixed assets for the ~~six~~nine months ended ~~June~~September 30, 2021and 2020 was ~~$10,122~~$12,504 and ~~$12,620,~~$19,547, respectively. The depreciation of these fixed assets for the three months ended ~~June~~September 30, 2021and 2020 was ~~$4,536~~$2,382 and ~~$6,357,~~$6,927, respectively. Due to Zhongtian Resources resulting from using its equipment and payment of worker’s compensation made by Zhongtian Resource for Technology was ~~$90,245~~$92,269 and $79,309 at ~~June~~September 30, 2021 and December 31, 2020, respectively.

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Technology sold boric acid to Qinghai Dingjia Zhixin Trading Co., Ltd (“Dingjia”) which is 90% owned by the son of the Company’s major shareholder and Chairman. For the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, the Company’s sales to Dingjia was $0 and ~~$101,560,~~$202,130, respectively. For the three months ended ~~June~~September 30, 2021 and 2020, the Company’s sales to Dingjia was $0 and ~~$101,560,~~$100,570, respectively. At ~~June~~September 30, 2021 and December 31, 2020, outstanding payable to Dingjia was ~~$20,970~~$20,888 and $20,762, respectively.

~~Table of Contents~~

During the first quarter of 2021, Qinghai Zhongli and Xi’an Jinzang entered three loan contracts for Qinghai Zhongli borrowing RMB 4 million ($619,185) with an annual interest of 6.8% from Xi’an Jinzang. The fund was used for the production and operation activities and construction of Adsorption Station of Qinghai Zhongli. The Company was to repay RMB 2.5 million ($380,442) with accrued interest by June 30, 2021 and repay the remaining RMB 1.5 million ($228,266) with accrued interest by December 31, 2021. A late fee of 1/1000 of outstanding balance per day will be charged if the Company is not able to repay the loan on time. The Company did not repay the RMB 2.5 million ($380,442) at June 30, 2021; in addition, the Company borrowed additional RMB 2 million ($309,593) with same terms during the second quarter of 2021 under the oral agreement. The Company borrowed additional RMB 2 million ($308,385) with the same terms during the third quarter of 2021 under the oral agreement. The Company recorded ~~$16,539~~$33,595 capitalized interest on CIP of Adsorption Station Project as of ~~June~~September 30, 2021.

In addition, at ~~June~~September 30, 2021 and December 31, 2020, the Company had ~~$1,236,591~~$1,316,591 and $1,014,591 due to another major shareholder and Chief Executive Officer of the Company, resulting from certain of the Company’s operating expenses such as legal and audit fees that were paid by him on behalf of the Company. This short-term advance bore no interest, and payable upon demand.

The following table summarized the due from (to) related parties as of ~~June~~September 30, 2021 and December 31, 2020, respectively:

	Related party name	2021			2020			Related party name	2021			2020
Due from	Qinghai Mining including $1.77 million sale of CIP	$	4,613,977		$	3,457,488		Qinghai Mining including $1.77 million sale of CIP (Test and Experimental Plant I)	$	4,542,738		$	3,457,488
Due to	Qinghai Mining		(1,129,136	)		(350,438	)	Qinghai Mining		(1,027,241	)		(350,438	)
Due from Xi'an Jinzang (NCI of the JV)	Due from Xi'an Jinzang (NCI of the JV)		-			76,630				-			76,630
Bad debt allowance										(3,515,497	)		-
Due from, net (current and noncurrent)	Due from, net (current and noncurrent)	$	3,484,841		$	3,183,680			$	-		$	3,183,680

Due to	Dingjia	$	20,970		$	20,762		Dingjia	$	20,888		$	20,762
Due to	Xi'an Jinzang (NCI of the JV) with 6.8% interest		945,317			-		Xi'an Jinzang (NCI of the JV) with 6.8% interest		1,267,136			-
Due to	Zhongtian Resources		90,245			79,309		Zhongtian Resources		92,269			79,309
Due to	A major shareholder		1,236,591			1,014,591		A major shareholder (CEO)		1,316,591			1,014,591
Due to, total	Due to, total	$	2,293,123		$	1,114,662		Due to, total	$	2,696,884		$	1,114,662

Significant Accounting Policies

While our significant accounting policies are more fully described in Note 2 to our CFS, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis.

Basis of Presentation

Our CFS are prepared in accordance with accounting principles generally accepted in the United States of America, or US GAAP.

Principles of Consolidation

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Use of Estimates

In preparing financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates, required by management, include the recoverability of long-lived assets, allowance for doubtful accounts, and the reserve for obsolete and slow-moving inventories. Actual results could differ from those estimates.

Accounts Receivable

We maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Based on historical collection activity, we had bad debt allowance for accounts receivable of ~~$19,969~~$19,891 and $19,770 at ~~June~~September 30, 2021 and December 31, ~~2020.~~2020, respectively.

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Revenue Recognition

The Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods. The Company recognizes revenues following the five step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon receipts of the goods by customer. Sales and purchases are recorded net of VAT collected and paid as the Company acts as an agent for the government. VAT taxes are not affected by the income tax holiday.

Deferred Income

Deferred income consists primarily of government grants and subsidies for supporting the Company’s technology innovation and transformation of boric acid, lithium and magnesium sulfate projects. The Company used most of the subsidies to purchase machinery and equipment. Deferred income is amortized to revenue (other income) over the life of the assets for which the grant and subsidy was used for. Subsidies for declared project fund require government inspection to ensure proper use of the funds for the designated project.

Foreign Currency Translation and Comprehensive Income (Loss)

The accounts of the US parent company are maintained in USD. The functional currency of the Company’s China subsidiaries is the Chinese Yuan Renminbi (“RMB”). The accounts of the China subsidiaries were translated into USD in accordance with FASB ASC Topic 830, “Foreign Currency Matters.” According to FASB ASC Topic 830, all assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity was translated at the historical rates and statement of operations items were translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with FASB ASC Topic 220, “Comprehensive Income.”

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Noncontrolling Interests

The Company follows FASB ASC Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCIs”) in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate, among other things, that NCIs (previously referred to as minority interests) be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to NCI even when such allocation might result in a deficit balance.

The net income (loss) attributed to NCIs was separately designated in the accompanying statements of operation and comprehensive income (loss). Losses attributable to NCIs in a subsidiary may exceed an NCIs interests in the subsidiary’s equity. The excess attributable to NCIs is attributed to those interests. NCIs shall continue to be attributed their share of losses even if that attribution results in a deficit NCIs balance.

On April 15, 2020, Technology and Xi’an Jinzang formed a JV company Qinghai Zhongli to process brine supplied by Technology. Technology owns 51% of the JV and Xi’an Jinzang owns the remaining 49%. During the ~~six~~nine and three months ended ~~June~~September 30, 2021, the Company had loss of ~~$39,920~~$58,417 and ~~$29,987~~$18,497 that were attributable to the NCI. During the ~~six~~nine and three months ended ~~June~~September 30, 2020, the Company had loss of ~~$2,745~~$8,554 and ~~$2,745~~$5,809 that were attributable to the NCI.

Recent Accounting Pronouncements

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In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis. As a smaller reporting company, the standard will be effective for the Company for interim and annual reporting periods beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its CFS.

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Results of Operations

~~Six~~Nine Months Ended ~~June~~September 30, 2021 Compared to ~~Six~~Nine Months Ended ~~June~~September 30, 2020

The following table sets forth the consolidated results of our operations for the periods indicated as a percentage of net sales, certain columns may not add due to rounding.

2021

% of Sales

2020

% of Sales

Sales
$ 4,007,849 $ 3,329,890
Cost of sales
3,292,926 82.2
%
2,904,535 87.2
%
Gross profit
714,923 17.8
%
425,355 12.8
%
Selling expenses
46,057 1.1
%
85,549 2.6
%
General and administrative expenses
531,953 13.3
%
613,995 18.4
%
Total operating expenses
578,010 14.4
%
699,544 21.0
%
Income (loss) from operations
136,913 3.4
%
(274,189
)
(8.2
)%
Other income
103,132 2.6
%
109,483 3.3
%
Income (loss) before income taxes
240,045 6.0
%
(164,706
)
(4.9
)%
Income tax expense
91,947 2.3
%
25,933 0.8
%
Income (loss) before noncontrolling interest
148,098 3.7
%
(190,639
)
(5.7
)%
Less: loss attributable to noncontrolling interest
(39,920
)
(1.0
)%
(2,745 ) (0.1
)%
Net income (loss) to the Company
$ 188,018 4.7
%
$ (187,894
)
(5.6
)%
29

~~Table of Contents~~

2021

% of Sales

2020

% of Sales

Sales
$ 5,464,652 $ 5,660,182
Cost of sales
4,205,605 77.0
%
5,031,305 88.9
%
Gross profit
1,259,047 23.0
%
628,877 11.1
%
Selling expenses
53,418 1.0
%
125,407 2.2
%
General and administrative expenses
4,410,803 80.7
%
922,681 16.3
%
Total operating expenses
4,464,221 81.7
%
1,048,088 18.5
%
Income (loss) from operations
(3,205,174 ) (58.7
)%
(419,211
)
(7.4
)%
Other income
147,010 2.7
%
181,845 3.2
%
Income (loss) before income taxes
(3,058,164 ) (56.0
)%
(237,366
)
(4.2
)%
Income tax expense
166,839 3.0
%
47,117 0.8
%
Income (loss) before noncontrolling interest
(3,225,003 ) (59.0
)%
(284,483
)
(5.0
)%
Less: loss attributable to noncontrolling interest
(58,417
)
(1.1
)%
(8,554
)
(0.1
)%
Net loss to the Company
$ (3,166,586 ) (57.9
)%
$ (275,929
)
(4.9
)%

Sales

Sales for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was ~~$4,007,849~~$5,464,652 and ~~$3,329,890,~~$5,660,182, respectively, ~~an increase~~a decrease of ~~$677,959~~$195,530 or ~~20.4%~~3.5%. The ~~increase~~decrease in sales was mainly due to an ~~8% increase~~26% decrease in sales quantity, which was partly offset by a 2%4% increase in average unit selling price and a ~~10%~~18.5% increase due to change in exchange rate. ~~In the comparable period of 2020, due to the outbreak of COVID-19 and related logistic restriction, our sales decreased, especially in the first quarter of 2020.~~

Cost of sales

Cost of sales (“COS”) for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was ~~$3,292,926~~$4,205,605 and ~~$2,904,535,~~$5,031,305, respectively, ~~an increase~~a decrease of ~~$388,391~~$825,700 or ~~13.4%~~16.4%. The ~~increase~~decrease was mainly due to ~~increased~~decreased sales and production. The COS as a percentage of sales was ~~82.2%~~77.0% for the ~~six~~nine months ended ~~June~~September 30, 2021 compared with ~~87.2%~~88.9% for 2020. The decrease in COS as a percentage of sales was mainly due to decreased average cost of production. In the comparable period of 2020, we had abnormal high COS as a percentage of sales; due to COVID19 outbreak, our factory was reopened one month later than originally planned, and we did not resume the production one week after the factory reopened due to the drought of master liquid pool resulting from the longer period of shutdown of the machine, we spent additional days and had extra acid and mineral consumption to cultivate the concentration level of master liquid pool.

Gross profit

Gross profit for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 was ~~$714,923~~$1,259,047 and ~~$425,355,~~$628,877, respectively, an increase of ~~$289,568~~$630,170 or ~~68.1%~~100.2%. The profit margin was ~~17.8%~~23.0% for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to ~~12.8%~~11.1% for the ~~six~~nine months ended ~~June~~September 30, 2020, the increase in profit margin was mainly due to decreased production cost as described above.

Operating expenses

Selling expenses consist mainly of salespersons’ salaries and freight out. Selling expense were ~~$46,057~~$53,418 for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to ~~$85,549~~$125,407 for the ~~six~~nine months ended ~~June~~September 30, 2020, a decrease of ~~$39,492~~$71,989 or ~~46.2%~~57.4%, mainly resulting from decreased salespersons’ salaries by ~~$40,980~~$54,620 resulting from restructure of our sales department for improving its efficiency and cost-saving and decreased freights expense by $18,900, which was partly offset by increased other selling expenses by ~~$1480.~~$1,530.

General and administrative expenses consist mainly of salary, R&D, office, welfare, business meeting, maintenance, bad debt expense and utilities. General and administrative expenses were ~~$531,953~~$4,410,803 for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to ~~$613,995~~$922,681 for the ~~six~~nine months ended ~~June~~September 30 2020, a decrease of ~~$82,042~~$3,488,122 or ~~13.4%~~378.0%, mainly resulting from ~~decreased officer salary~~increased bad debt expense by ~~$240,000,~~$3,523,085, which was partly offset by ~~increased business entertainment expense~~decreased maintenance fee by $65,470 increased R&D Expense by $25,120, increased vehicle expense by $16,330, increased consulting expense by $10,480, increased office expense by $9,230, increased welfare expense by $8,470 and increased other G&A expenses by $22,860.$44,080.
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Table of Contents

Other income

Other income was ~~$103,132~~$147,010 for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to ~~$109,483~~$181,845 for the ~~six~~nine months ended ~~June~~September 30, 2020, a decrease of ~~$6,351~~$34,835 or ~~5.8%~~19.2%. For the ~~six~~nine months ended ~~June~~September 30, 2021, other income mainly consisted of subsidy income of ~~$101,672 and~~$152,963, interest income ~~$1,176.~~of $2,998, but offset with financial expense of $3,914 and other expenses of $5,037. For the ~~six~~nine months ended ~~June~~September 30, 2020, other income mainly consisted of subsidy income of ~~$95,635~~$143,726 and other ~~non-operating~~ income of ~~$13,405.~~$39,651.

Government provides grants and subsidies to support the Company’s technology innovation and transformation of boric acid, lithium and magnesium sulfate projects. The Company uses most of the subsidies to purchase machinery and equipment, which is amortized to revenue (other income) over the life of the assets for which the grant and subsidy was used for. Subsidies for declared project fund require government inspection to ensure proper use of the funds for the designated project.

Net ~~income (loss)~~loss

We had net ~~income~~loss of ~~$188,018~~$3,166,586 for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to net loss of ~~$187,894~~$275,929 for the ~~six~~nine months ended ~~June~~September 30, 2020, an increase in net ~~income~~loss by ~~$375,912~~$2,890,657 or ~~200.1%~~1,047.6%. The increase in our net ~~income~~loss mainly resulted from increased ~~sales and decreased operating expenses as~~bad debt expense described above.
30

~~Table of Contents~~

Results of Operations

Three Months Ended ~~June~~September 30, 2021 Compared to Three Months Ended ~~June~~September 30, 2020

The following table sets forth the consolidated results of our operations for the periods indicated as a percentage of net sales, certain columns may not add due to rounding.

2021

% of Sales

2020

% of Sales

2021

% of Sales

2020

% of Sales

Sales
$ 2,179,469 $ 2,319,392 $ 1,456,803 $ 2,330,292
Cost of sales
1,596,808 73.3
%
1,973,791 85.1
%
912,679 62.6
%
2,126,770 91.3
%
Gross profit
582,661 26.7
%
345,601 14.9
%
544,124 37.4
%
203,522 8.7
%
Selling expenses
23,002 1.1
%
29,344 1.3
%
7,361 0.5
%
39,858 1.7
%
General and administrative expenses
257,582 11.8
%
326,993 14.1
%
3,878,850 266.3
%
308,686 13.2
%
Total operating expenses
280,584 12.9
%
356,337 15.4
%
3,886,211 266.8
%
348,544 14.9
%
Income (loss) from operations
302,077 13.9
%
(10,736
)
(0.5
)%
Loss from operations
(3,342,087 ) (229.4
)%
(145,022
)
(6.2
)%
Other income
52,167 2.4
%
76,658 3.3
%
43,878 3.0
%
72,362 3.1
%
Income before income taxes
354,244 16.3
%
65,922 2.8
%
Loss before income taxes
(3,298,209 ) (226.4
)%
(72,660 ) (3.1
)%
Income tax expense
80,489 3.7
%
25,933 1.1
%
74,892 5.1
%
21,184 0.9
%
Income before noncontrolling interest
273,755 12.6
%
39,989 1.7
%
Loss before noncontrolling interest
(3,373,101 ) (231.5
)%
(93,844 ) (4.0
)%
Less: loss attributable to noncontrolling interest
(29,987
)
(1.3
)%
(2,745 ) (0.1
)%
(18,497
)
(1.3
)%
(5,809
)
(0.2
)%
Net income
$ 303,742 13.9
%
$ 42,734 1.8
%
Net loss
$ (3,354,604 ) (230.2
)%
$ (88,035 ) (3.8
)%

Sales

Sales for the three months ended ~~June~~September 30, 2021 and 2020 was ~~$2,179,469~~$1,456,803 and ~~$2,319,392,~~$2,330,292, respectively, a decrease of ~~$139,923~~$873,489 or ~~6.0%~~37.5%. The decrease in sales was mainly due to a decreased sales quantity of ~~16%~~76.0% resulting from 1) less boric acid inventory carried over from prior periods, and 2) temporary decreased mine production resulting from rectifying the mines in the area by the authority for environment ~~protection. but~~protection, 3) In July and August 2021, the remaining stock of boric acid was sold out, which resulting in September 2021, no boric acid was available for sale; however, the decrease in sales quantity was partly offset by a 3%19.0% increase in average unit selling price and a 7%19.5% increase due to change in exchange rate.

Cost of sales

Cost of sales (“COS”) for the three months ended ~~June~~September 30, 2021 and 2020 was ~~$1,596,808~~$912,679 and ~~$1,973,791,~~$2,126,770, respectively, a decrease of ~~$376,983~~$1,214,091 or ~~19.1%~~57.1%. The decrease was mainly due to decreased sales and production. The COS as a percentage of sales was ~~73.3%~~62.6% for the three months ended ~~June~~September 30, 2021 compared with ~~85.1%~~91.3% for 2020. The decrease in COS as a percentage of sales was mainly due to decreased average cost of production. ~~In the second quarter of~~From July to September 2020, we ~~had abnormal~~started acquiring boron rock from Tibet to produce boric acid to increase our productivity. The Tibet boron rock has higher grade of the mineral deposit and thus the high ~~COS as a percentage~~unit cost, which resulted the increased raw material cost of ~~sales resulting~~boric acid production for the quarter ending September 30, 2020; we stopped purchasing boron rock form Tibet from ~~delayed factory reopening~~October 2020 due to ~~COVID-19, and extra cost spent for to cultivating the concentration level~~its higher cost.
33
Table of ~~master liquid pool which was drought due to the longer period of shutdown of the machine.~~
Contents

Gross profit

Gross profit for the three months ended ~~June~~September 30, 2021 and 2020 was ~~$582,661~~$544,124 and ~~$345,601,~~$203,522, respectively, an increase of ~~$237,060~~$340,602 or ~~68.6%~~167.4%. The profit margin was ~~26.7%~~37.4% for the three months ended ~~June~~September 30, 2021 compared to ~~14.9%~~8.7% for the three months ended ~~June~~September 30, 2020, the increase in profit margin was mainly due to decreased production cost as described above.

Operating expenses

Selling expenses consist mainly of salespersons’ salaries and freight out. Selling expense were ~~$23,002~~$7,361 for the three months ended ~~June~~September 30, 2021, compared to ~~$29,344~~$39,858 for the three months ended ~~June~~September 30, 2020, a decrease of ~~$6,342~~$32,497 or ~~21.6%~~81.5%, mainly resulting from decreased freight expense by ~~$7,605 which was partly offset~~$19,140, decreased sales person salary expense by ~~increased~~$11,700 and decreased other selling expenses by ~~$1,260.~~$1,660.

General and administrative expenses consist mainly of salary, R&D, office, welfare, business meeting, maintenance, bad debt expense and utilities. General and administrative expenses were ~~$257,582~~$3,878,850 for the three months ended ~~June~~September 30, 2021, compared to ~~$326,993~~$308,686 for the three months ended ~~June~~September 30 2020, ~~a decrease~~an increase of ~~$69,411~~$3,570,164 or ~~21.2%~~1,256.6%, mainly resulting from ~~decreased salary~~increased bad debt expense by ~~$120,000~~$3,523,085 for due from Qinghai Mining due to its stoppage of boron ore production which it used to sell to us, and ~~decreased~~it caused concern of its ability to generate revenue and make repayment to us, increased business entertainment expense by $5,160, increased advisory expense by $8,740, increased vehicle expense by $10,390 and increased other G&A expenses by ~~$11,050, which was partly offset by increased business entertainment expense by $61,640.~~$22,740.
31

~~Table of Contents~~

Other income

Other income was ~~$52,167~~$43,878 for the three months ended ~~June~~September 30, 2021, compared to ~~$76,658~~$72,362 for the three months ended ~~June~~September 30, 2020, a decrease of ~~$24,491~~$28,484 or ~~31.9%~~39.4%. For the three months ended ~~June~~September 30, 2021, other income mainly consisted of subsidy income of ~~$50,935~~$51,291 and interest income of ~~$699.~~$1,822, but offset with financial expense of $3,523 and other expense of $5,712. For the three months ended ~~June~~September 30, 2020, other income mainly consisted of subsidy income of ~~$48,494~~$48,091 and ~~non-operating~~other income of ~~$27,754.~~$26,246.

Government provides grants and subsidies to support the Company’s technology innovation and transformation of boric acid, lithium and magnesium sulfate projects. The Company uses most of the subsidies to purchase machinery and equipment, which is amortized to revenue (other income) over the life of the assets for which the grant and subsidy was used for. Subsidies for declared project fund require government inspection to ensure proper use of the funds for the designated project.

Net ~~income~~loss

We had net ~~income~~loss of ~~$303,742~~$3,354,604 for the three months ended ~~June~~September 30, 2021, compared to ~~$42,734~~$88,035 for the three months ended ~~June~~September 30, 2020, an increase of ~~$261,008~~$3,266,569 or ~~610.8%~~3,710.5%. The increase in our net ~~income~~loss mainly resulted from increased ~~gross profit and decreased~~ operating expenses including bade debt expense as described above.

Liquidity and Capital Resources

As of ~~June~~September 30, 2021, we had cash and equivalents of ~~$2,285,657.~~$2,192,191. Working capital deficit was ~~$46,179~~$2,149,187 at ~~June~~September 30, 2021. The ratio of current assets to current liabilities was ~~1.01:~~0.56:1 at ~~June~~September 30, 2021.

The following is a summary of cash provided by or used in each of the indicated types of activities during ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:

2021

2020

2021

2020

Cash provided by (used in):

Operating activities
$ 1,741,547 $ 960,967 $ 1,547,843 $ 1,145,326
Investing activities
(1,347,055
)
(289,423
)
(1,602,291
)
(333,480
)
Financing activities
906,989 327,119 1,271,273 171,568

Net cash provided by operating activities was ~~$1,741,547~~$1,547,843 for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to ~~$960,967~~$1,145,326 for the ~~six~~nine months ended ~~June~~September 30, 2020. The increase of cash inflow from operating activities the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the ~~six~~nine months ended ~~June~~September 30, 2020 was principally attributable to ~~increased~~decreased cash ~~inflow~~outflow from unearned revenue by ~~$551,716,~~$57,718, increased cash inflow form taxes payable by ~~$38,117,~~$57,643, increased cash inflow from accounts receivable by ~~$77,444,~~$60,602, and decreased cash outflow from advance to suppliers by ~~$180,536, which was partly offset by decreased cash inflow from inventory by $91,401.~~$196,564.
34
Table of Contents

Net cash used in investing activities was ~~$1,347,055~~$1,602,291 for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to ~~$289,423~~$333,480 for the ~~six~~nine months ended ~~June~~September 30, 2020. Net cash used in investing activities in 2021 mainly consisted of purchase of property and equipment of ~~$146,967,~~$175,156, purchase of intangible asset of ~~$54,413,~~$50,759, and ~~$1,145,675~~$1,376,376 payment for constructing the ~~absorption station for preliminarily extract lithium ion from brine for further concentration and purification.~~adsorption station. Net cash used in investing activities in 2020 was mainly consisted of purchase of property and equipment of ~~$287,221.~~$301,080 and construction in progress of $32,400.

Net cash provided by financing activities was ~~$906,989~~$1,271,273 for the ~~six~~nine months ended ~~June~~September 30, 2021, compared to ~~$327,119~~$171,568 for the ~~six~~nine months ended ~~June~~September 30, 2020. The net cash provided by financing activities in 2021 consisted of amount due to other related parties of ~~$1,175,728~~$1,584,374, include loans from Xi’an Jinzang described below, but partly offset by increase in due from Qinghai Mining of ~~$268,739.~~$313,101. The net cash provided by financing activities in 2020 consisted of capital contribution from noncontrolling interest Qinghai Zhongli by ~~$711,044,~~$715,130, and increase in amount due to other related parties of ~~$256,233,~~$348,724, but partly offset by increase in due from Qinghai Mining of ~~$640,158.~~$892,286.

During the first quarter of 2021, Qinghai Zhongli and Xi’an Jinzang entered three loan contracts for Qinghai Zhongli borrowing RMB 4 million ($619,185) with an annual interest of 6.8% from Xi’an Jinzang. The fund was used for the production and operation activities and construction of adsorption station of Qinghai Zhongli. The Company was to repay RMB 2.5 million ($380,442) with accrued interest by June 30, 2021 and repay the remaining RMB 1.5 million ($228,266) with accrued interest by December 31, 2021. A late fee of 1/1000 of outstanding balance per day will be charged if the Company is not able to repay the loan on time. The Company did not repay the RMB 2.5 million ($380,442) at June 30, 2021; in addition, the Company borrowed additional RMB 2 million ($309,593) with same terms during the second quarter of 2021 under the oral agreement. The Company borrowed additional RMB 2 million ($308,385) with the same terms during the third quarter of 2021 under the oral agreement. The Company recorded ~~$16,539~~$33,595 capitalized interest on CIP of adsorption station as of ~~June~~September 30, 2021.
32

~~Table of Contents~~

Dividend Distribution

We are a US holding company that conducts substantially all of our business through our wholly owned and other consolidated operating entities in China. We rely in part on dividends paid by our subsidiaries in China for our cash needs, including the funds necessary to pay dividends and other cash distributions to our shareholders, to service any debt we may incur and to pay our operating expenses. The payment of dividends by entities organized in China is subject to limitations. In particular, PRC regulations currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China. Our PRC subsidiaries also are required to set aside at least 10% of their after-tax profit based on PRC accounting standards each year to a statutory surplus reserve fund until the accumulative amount of such reserve reaches 50% of registered capital. Appropriation to such reserve by the Company is based on profit arrived at under PRC accounting standards for business enterprises for each year. The profit arrived at must be set off against any accumulated losses sustained by the Company in prior years, before allocation is made to the statutory reserve. These reserves are not distributable as cash dividends. In addition, our PRC subsidiaries, at their discretion, may allocate a portion of their after-tax profit to their staff welfare and bonus fund, which may not be distributed to equity owners except in the event of liquidation. Moreover, if any of our subsidiaries incur debt on its own behalf in the future, the instruments governing the debt may restrict such subsidiary’s ability to pay dividends or make other distributions to us. Any limitation on the ability of one of our subsidiaries to distribute dividends and other distributions to us could materially and adversely limit our ability to make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business.

Off-Balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties other than as described following under “Contractual Obligations.” We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

3335
Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a smaller reporting company, we are not required to provide the information requested by this Item.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, our principal executive officer and principal financial officer, respectively, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~June~~September 30, 2021, our disclosure controls and procedures were not effective as of such date because of a material weakness identified in our internal control over financial reporting related to our internal level of US GAAP expertise. We lack sufficient personnel with the appropriate level of knowledge, experience and training in US GAAP for the preparation of financial statements in accordance with US GAAP. None of our internal accounting staff, including our Chief Financial Officer, that are primarily responsible for the preparation of our books and records and financial statements in compliance with US GAAP holds a license such as Certified Public Accountant in the US, nor have any attended US institutions or extended educational programs that would provide enough of the relevant education relating to US GAAP.

Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended ~~June~~September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We may become involved in various lawsuits and legal proceedings arising in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may have an adverse effect on our business, financial conditions or operating results. Other than the proceedings we have disclosed below, we are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

Item 1A. Risk Factors

You should consider carefully the factors discussed in the “Risk Factors” in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2020, as amended, which could materially affect our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information

None.

Item 6. Exhibits

See the Exhibit Index preceding the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

EXHIBIT INDEX

Exhibit No.

Document Description
31.1 †

Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 †

Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 †

Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS†

Inline XBRL Instance Document
101.SCH†

Inline XBRL Schema Document
101.CAL†

Inline XBRL Calculation Linkbase Document
101.DEF†

Inline XBRL Definition Linkbase Document
101.LAB†

Inline XBRL Label Linkbase Document
101.PRE†

Inline XBRL Presentation Linkbase Document
104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

† Filed herewith

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Table of Contents

SIGNATURES

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

LITHIUM & BORON TECHNOLOGY, INC.

(Registrant)

Date: ~~August 23,~~November 15, 2021
By:
/s/ Jimin Zhang

Mr. Jimin Zhang
Chief Executive Officer
(Principal Executive Officer and Duly Authorized Signatory)

3638
iso4217:USD xbrli:shares

	2021			% of Sales			2020			% of Sales
Sales	$	4,007,849					$	3,329,890
Cost of sales		3,292,926			82.2	%		2,904,535			87.2	%
Gross profit		714,923			17.8	%		425,355			12.8	%
Selling expenses		46,057			1.1	%		85,549			2.6	%
General and administrative expenses		531,953			13.3	%		613,995			18.4	%
Total operating expenses		578,010			14.4	%		699,544			21.0	%
Income (loss) from operations		136,913			3.4	%		(274,189	)		(8.2	)%
Other income		103,132			2.6	%		109,483			3.3	%
Income (loss) before income taxes		240,045			6.0	%		(164,706	)		(4.9	)%
Income tax expense		91,947			2.3	%		25,933			0.8	%
Income (loss) before noncontrolling interest		148,098			3.7	%		(190,639	)		(5.7	)%
Less: loss attributable to noncontrolling interest		(39,920	)		(1.0	)%		(2,745	)		(0.1	)%
Net income (loss) to the Company	$	188,018			4.7	%	$	(187,894	)		(5.6	)%

Exhibit No.		Document Description
31.1 †		Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 †		Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 †		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS†		Inline XBRL Instance Document
101.SCH†		Inline XBRL Schema Document
101.CAL†		Inline XBRL Calculation Linkbase Document
101.DEF†		Inline XBRL Definition Linkbase Document
101.LAB†		Inline XBRL Label Linkbase Document
101.PRE†		Inline XBRL Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	LITHIUM & BORON TECHNOLOGY, INC.
	(Registrant)

Date: ~~August 23,~~November 15, 2021	By:	/s/ Jimin Zhang
		Mr. Jimin Zhang Chief Executive Officer (Principal Executive Officer and Duly Authorized Signatory)