Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 16, 2018 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Trading Symbol | thti | |
Entity Registrant Name | THT Heat Transfer Technology, Inc. | |
Entity Central Index Key | 1,375,686 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 20,453,500 | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well Known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 3,241,750 | $ 6,297,546 |
Restricted cash, current | 569,519 | 571,918 |
Trade receivables, net | 34,300,914 | 46,311,537 |
Trade receivables - related party | 0 | 27,676 |
Bills receivable | 3,184,665 | 394,242 |
Other receivables, prepayments and deposits, net | 10,022,882 | 7,371,301 |
Due from related parties | 363,752 | 2,192,446 |
Inventories, net | 40,870,746 | 28,521,552 |
Total Current Assets | 92,554,228 | 91,688,218 |
Restricted cash, non-current | 1,067,919 | 1,112,408 |
Retention receivables | 1,440,169 | 3,200,117 |
Property, plant and equipment, net | 8,575,567 | 8,825,346 |
Land use rights, net | 4,959,127 | 5,325,127 |
Deferred tax assets | 3,297 | 159,574 |
TOTAL ASSETS | 108,600,307 | 110,310,790 |
Current Liabilities | ||
Accounts payable | 10,811,126 | 8,954,475 |
Other payables and accrued liabilities | 27,450,551 | 25,305,594 |
Advance from customers - related parties | 4,679,141 | 0 |
Income tax payable | 144,763 | 55,756 |
Short-term loan | 2,912,692 | 4,918,234 |
Due to related parties | 2,391,591 | 7,207,603 |
Total Current Liabilities | 48,389,864 | 46,441,662 |
Long-term loan | 873,808 | 0 |
TOTAL LIABILITIES | 49,263,672 | 46,441,662 |
EQUITY | ||
Preferred stock, $.001 par value, 10,000,000 shares authorized, no shares issued and outstanding | 0 | 0 |
Common stock, $.001 par value, 190,000,000 shares authorized, 20,453,500 shares issued and outstanding at September 30, 2018 and December 31, 2017 | 20,454 | 20,454 |
Additional paid-in capital | 27,136,310 | 27,136,310 |
Statutory reserve | 4,270,861 | 4,270,861 |
Retained earnings | 28,364,651 | 29,486,561 |
Accumulated other comprehensive income (loss) | (1,159,629) | 2,202,886 |
Total THT Heat Transfer Technology, Inc. shareholders' equity | 58,632,647 | 63,117,072 |
Non-controlling interest | 703,988 | 752,056 |
Total Equity | 59,336,635 | 63,869,128 |
TOTAL LIABILITIES AND EQUITY | $ 108,600,307 | $ 110,310,790 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Preferred Stock, Par Value Per Share | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | ||
Preferred Stock, Shares Outstanding | ||
Common Stock, Par Value Per Share | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 190,000,000 | 190,000,000 |
Common Stock, Shares, Issued | 20,453,500 | 20,453,500 |
Common Stock, Shares, Outstanding | 20,453,500 | 20,453,500 |
Consolidated Statements of Inco
Consolidated Statements of Income and Comprehensive Loss - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
REVENUES | ||||
Sales revenue | $ 14,428,365 | $ 13,320,129 | $ 32,459,614 | $ 24,861,019 |
Sales revenue - related party | 59,559 | 0 | 167,217 | 8,232 |
Total Revenues | 14,487,924 | 13,320,129 | 32,626,831 | 24,869,251 |
COST OF REVENUES | (9,133,004) | (13,717,671) | (21,938,230) | (20,572,238) |
Gross Profit | 5,354,920 | (397,542) | 10,688,601 | 4,297,013 |
Operating Expenses | ||||
General and administrative expenses | 2,694,781 | 2,369,915 | 5,507,631 | 5,047,734 |
Research and development expenses | 312,842 | 411,866 | 1,282,615 | 1,144,441 |
Selling expenses | 1,613,039 | 1,362,191 | 4,366,228 | 6,136,642 |
Total Operating Expenses | 4,620,662 | 4,143,972 | 11,156,474 | 12,328,817 |
Income (Loss) from Operations | 734,258 | (4,541,514) | (467,873) | (8,031,804) |
Other Income (Expenses) | ||||
Interest income | 2,520 | 3,233 | 8,460 | 9,742 |
Other income | 1,223 | 69,130 | 116,150 | 119,475 |
Finance costs | (46,230) | (59,378) | (172,617) | (178,942) |
Investment income | 2,426 | 292 | 23,714 | 29,235 |
Other expense | (375,206) | (464,561) | (386,009) | (483,087) |
Total Other Expenses | (415,267) | (451,284) | (410,302) | (503,577) |
Income (Loss) before Income Taxes | 318,991 | (4,992,798) | (878,175) | (8,535,381) |
Income tax benefit (expense) | (103,583) | (109,784) | (252,830) | 363,587 |
Net Income (Loss) | 215,408 | (5,102,582) | (1,131,005) | (8,171,794) |
Net income (loss) attributable to non-controlling interest | 6,791 | (60,209) | (9,095) | (60,209) |
Net Income (Loss) Attributable to THT Heat Transfer Technology, Inc. Common Shareholders | 208,617 | (5,042,373) | (1,121,910) | (8,111,585) |
Comprehensive Loss | ||||
Net income (loss) | 215,408 | (5,102,582) | (1,131,005) | (8,171,794) |
Other Comprehensive Income (Loss) | ||||
Foreign currency translation adjustments | (2,275,900) | 1,047,592 | (3,401,488) | 2,488,178 |
Comprehensive Loss | (2,060,492) | (4,054,990) | (4,532,493) | (5,683,616) |
Less: comprehensive loss attributable to non-controlling interest | (19,983) | (60,209) | (48,068) | (60,209) |
Comprehensive Loss Attributable to THT Heat Transfer Technology, Inc. Common Shareholders | $ (2,040,509) | $ (3,994,781) | $ (4,484,425) | $ (5,623,407) |
Earnings (loss) per share attributable to THT Heat Transfer Technology, Inc. common shareholders | ||||
Basic and diluted | $ 0.01 | $ (0.25) | $ (0.05) | $ (0.40) |
Weighted average number of shares outstanding | ||||
Basic and diluted | 20,453,500 | 20,453,500 | 20,453,500 | 20,453,500 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |||||
Net loss | $ 215,408 | $ (5,102,582) | $ (1,131,005) | $ (8,171,794) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||
Loss on sales of property, plant and equipment | 0 | 340 | |||
Depreciation and amortization | 951,503 | 890,456 | |||
Deferred tax assets | 155,920 | (364,130) | |||
Allowance for doubtful accounts | 2,645,778 | 2,190,140 | |||
Inventory write-down | 178,929 | 4,717,317 | |||
Changes in operating assets and liabilities: | |||||
Trade receivables, net | 7,555,445 | 6,670,507 | |||
Trade receivables - related party | 27,645 | 1,385,944 | |||
Bills receivable | (2,963,356) | (1,036,480) | |||
Other receivables, prepayments and deposits, net | (3,229,028) | (5,577,630) | |||
Inventories, net | (14,773,761) | (20,324,121) | |||
Retention receivables | 1,678,359 | 473,758 | |||
Due from related parties | 0 | 30,083 | |||
Advance from customers - related parties | 4,932,577 | 0 | |||
Accounts payable | 2,180,704 | 6,153,971 | |||
Other payables and accrued liabilities | 3,546,962 | 2,761,179 | |||
Income tax payable | 96,910 | (472,448) | |||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 1,853,582 | (10,672,908) | |||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Proceeds from disposal of property, plant and equipment | 1,370,150 | 61,221 | |||
Payments to acquire property, plant and equipment | (887,135) | (483,803) | |||
Loans made to others | 0 | (1,742,110) | |||
Loans made to related party | (147,995) | (782,941) | |||
Repayments from others | 0 | 2,112,475 | |||
Repayments from related parties | 628,632 | 481,072 | |||
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES | 963,652 | (354,086) | |||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Proceed from bank loan | 2,892,431 | 9,516,833 | |||
Repayment to bank loan | (4,673,034) | (9,465,974) | |||
Proceed from long-term loan | 885,021 | 0 | |||
Proceeds from related parties | 1,208,751 | 6,959,146 | |||
Contribution from non-controlling investor | 0 | 1,335,490 | |||
Repayments to related parties | (5,906,580) | (1,236,399) | |||
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES | (5,593,411) | 7,109,096 | |||
Effect of foreign currency translation on cash, cash equivalents, and restricted cash | (326,507) | 198,611 | |||
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (3,102,684) | (3,719,287) | |||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | 7,981,872 | 8,098,630 | $ 8,098,630 | ||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | 4,879,188 | 4,379,343 | 4,879,188 | 4,379,343 | 7,981,872 |
Supplementary Disclosures for Cash Flow Information: | |||||
Interest paid | 159,411 | 166,617 | |||
Income taxes paid | 0 | 543,601 | |||
Non-cash investing and financing activities: | |||||
Operating expense paid by related party | 0 | 64,460 | |||
Liabilities assumed in connection with purchase of property, plant and equipment | 271,542 | 107,581 | |||
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets | |||||
Cash and cash equivalents | 3,241,750 | 2,631,367 | 3,241,750 | 2,631,367 | 6,297,546 |
Restricted cash, current | 569,519 | 633,427 | 569,519 | 633,427 | $ 571,918 |
Restricted cash, non-current | 1,067,919 | 1,114,549 | 1,067,919 | 1,114,549 | |
Total cash, cash equivalents, and restricted cash at end of period | $ 4,879,188 | $ 4,379,343 | $ 4,879,188 | $ 4,379,343 |
Corporate information
Corporate information | 9 Months Ended |
Sep. 30, 2018 | |
Corporate information [Text Block] | 1. Corporate information THT Heat Transfer Technology, Inc. (the “Company” or “THT” or the “Surviving Corporation”) is a Nevada corporation with major operations in the People's Republic of China (the "PRC"). |
Description of business
Description of business | 9 Months Ended |
Sep. 30, 2018 | |
Description of business [Text Block] | 2. Description of business The Company is a holding company whose primary business are conducted through its subsidiaries, namely Siping Juyuan which is located in the Jilin Province and Beijing Juyuan which is located in Beijing City of the PRC. The Company is engaged in the manufacturing and trading of plate heat exchangers and various related products. Siping Juyuan was established in the PRC on May 31, 2006 following the division (the “Division”) of Siping City Juyuan Heat Exchange Equipment Co., Ltd. (“Old Juyuan Company”) into three companies, namely Siping Juyuan, Siping City Juyuan Heat Exchange Equipment Co., Ltd. (“New Juyuan Company”) and Siping City JuyuanHanyang Pressure Vessels Co., Ltd (“JuyuanHanyang Pressure Vessels”). |
Summary of significant accounti
Summary of significant accounting policies | 9 Months Ended |
Sep. 30, 2018 | |
Summary of significant accounting policies [Text Block] | 3. Summary of significant accounting policies Basis of presentation and consolidation and going concern The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with the Company’s consolidated financial statements and accompanying notes thereto for the year ended December 31, 2017 filed with the SEC in the Company’s Form 10-K on April 17, 2018. In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the nine-month period have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. The Company has suffered from recurring losses from operations since 2017. The Company needs to secure additional funds to meet future cash flow requirements given the Company’s current cash position and amount of short-term borrowings outstanding. The Company has taken various actions to conserve cash, procure additional financing and improve the liquidity, including reducing capital spending. The Company’s ability in meeting future cash flow requirements is dependent on many events outside of its direct control, including, among other things, successful renewal of bank borrowings and additional financing from banks and related parties. The accompanying consolidated financial statements have been prepared assuming a substantial doubt about the Company's ability to continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business. Certain amounts from prior year have been reclassified to conform to the current year presentation. The reclassification has resulted in no change to the Company’s retained earnings or net income presented. The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated on consolidation. Fair value of financial instruments Accounting Standards Codification (“ASC”) Topic 820 requires the disclosure of the estimated fair value of financial instruments including those financial instruments for which fair value option was not elected. As of September 30, 2018 and December 31, 2017, the carrying amounts of the Company’s financial assets and liabilities approximated their fair values due to short maturities or the applicable interest rates approximated the current market rates. Recent accounting pronouncements In July 2018, the FASB issued ASU 2018-09, “ Codification Improvements . In July 2018, the FASB issued ASU 2018-10, “ Codification Improvements to Topic 842, Leases In July 2018, the FASB issued ASU 2018-11, “ Leases (Topic 842): Targeted Improvements Leases (Topic 842) In August 2018, the FASB issued ASU 2018-13, “ Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements Recently adopted accounting pronouncements In May 2014, the FASB issued ASU 2014-09, “ Revenue from Contracts with Customers (ASC 606) In November 2016, the FASB issued ASU 2016-18, “ Statement of Cash Flows (ASC 230): Restricted Cash |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2018 | |
Revenue Recognition [Text Block] | 4. Revenue Recognition Adoption of ASU 2014-09 "Revenue from Contracts with Customers (ASC 606)" On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method applied to those contracts that were not completed or substantially complete as of January 1, 2018. Results for the reporting period beginning after January 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the Company's historic accounting under Topic 605. Management has determined that the impact of the transition to the new standard is immaterial to the Company’s revenue recognition model since the Company’s revenue recognition is based on point in time transfer of control. Accordingly, the Company has not made any adjustment to the opening retained earnings. Revenue for sale of products is derived from contracts with customers, which primarily include the sale of heat exchanger products. The Company’s sales arrangements do not contain variable consideration and are short-term in nature. The Company recognizes revenue at a point in time based on management’s evaluation of when all performance obligations under the terms of a contract with the customer are satisfied and control of the products has been transferred to the customer. For vast majority of the Company’s product sales, the performance obligations and control of the products transfer to the customer when products are delivered and customer acceptance is made. Management has determined after-sale expense was immaterial to the Company’s operations. Accordingly, the Company does not establish provision for estimated warranty liabilities. Disaggregation of Revenue In accordance with ASC 606, the Company disaggregates revenue from contracts with customers by products. The Company determined that disaggregating revenue into these categories meets the disclosure objective in ASC 606 which is to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors. Refer to Note 11 for information regarding revenue disaggregation by product. Contract Assets and Liabilities Contract assets, such as costs to obtain or fulfill contracts, are an insignificant component of the Company’s revenue recognition process. Contract liabilities are mainly receipt in advance from customers. As of September 30, 2018, receipt in advance from customers was $24.6 million, which includes advance from related parties for product purchases of $4.7 million, refer to Note 12 for more information. $5.2 million was recognized as net revenues in the nine months ended September 30, 2018 that was included in the balance of receipt in advance from customers as of December 31, 2017. Receipt in advance from customers is included in other payables and accrued liabilities and advance from customers - related parties, based on the customer categories, in the consolidated balance sheets. |
Trade receivables, net
Trade receivables, net | 9 Months Ended |
Sep. 30, 2018 | |
Trade receivables, net [Text Block] | 5. Trade receivables, net September 30, December 31, 2018 2017 (Unaudited) Trade receivables $ 47,657,579 $ 57,859,135 Less: Allowance for doubtful accounts (13,356,665 ) (11,547,598 ) $ 34,300,914 $ 46,311,537 An analysis of the allowance for doubtful accounts for the nine months ended September 30, 2018 and 2017 is as follows: Nine months ended September 30, (Unaudited) 2018 2017 Balance at beginning of period $ 11,547,598 $ 7,976,427 Adjustment of bad debt expense 2,545,443 2,050,522 Translation adjustments (736,376 ) 393,240 Balance at end of period $ 13,356,665 $ 10,420,189 |
Inventories, net
Inventories, net | 9 Months Ended |
Sep. 30, 2018 | |
Inventories, net [Text Block] | 6. Inventories, net September 30, December 31, 2018 2017 (Unaudited) Raw materials $ 12,574,608 $ 9,368,647 Work-in-progress 8,494,870 4,229,841 Finished goods 21,457,985 16,492,343 42,527,463 30,090,831 Allowance for obsolete inventories (1,656,717 ) (1,569,279 ) $ 40,870,746 $ 28,521,552 The Company recognized inventory write-down of $178,929 and $4,717,317, net of utilization of obsolete inventory for the amount of $210,257 and $nil for the nine months ended September 30, 2018 and 2017, respectively. |
Income tax
Income tax | 9 Months Ended |
Sep. 30, 2018 | |
Income tax [Text Block] | 7. Income tax The effective tax rate was - 32% and 2% for the three-month period ended September 30, 2018 and 2017, respectively. The effective tax rate was 29% and - 4% for the nine-month period ended September 30, 2018 and 2017, respectively. The Company assesses the need for any deferred tax asset valuation allowance at the end of each reporting period. The determination of whether a valuation allowance for deferred tax assets is needed is subject to considerable judgment and requires an evaluation of all available positive and negative evidence. The Company’s assessment concluded that maintaining valuation allowance on deferred tax assets was appropriate, as the Company currently believes that it is more likely than not that the deferred tax assets resulted from net operating losses will not be realized. During the nine months ended September 30, 2018, the Company adopted a new tax regulation released by the State Administration of Taxation and Ministry of Finance of the PRC on May 7, 2018, pursuant to which the Company is allowed to deduct the proceeds spent on property, plant and equipment, excluding building, purchased from January 1, 2018 to December 31, 2020 for tax purpose, given the value of each qualified purchase is below RMB5 million. As a result, the Company recorded $147,909 of deferred tax liability under the new tax regulation for the nine months ended September 30, 2018. For the purpose of presentation of the consolidated balance sheets, certain deferred income tax assets and liability have been offset. As of September 30, 2018 and December 31, 2017, the balance of deferred tax assets was $3,297 and $159,574, respectively. In December 2017, the Tax Cuts and Jobs Act (the “2017 Act”) was enacted into law and the new legislation contains several key tax provisions that affected the Company, including, among others, a reduction of the federal corporate income tax rate to 21% effective January 1, 2018, and a recognition of the U.S. corporate income tax based on the deemed repatriation to the United States of the Company’s share of previously deferred earnings of certain non-U.S. subsidiaries of the Company upon enactment of the 2017 Act. The Company is required to recognize the effect of the 2017 Act in the period of enactment. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the 2017 Act, which allows the Company to recognize the provisional amounts during a measurement period not to extend beyond one year of the enactment date. The Company’s management is in the process of gathering information and evaluating the amount of the one-time transition tax mandated by the 2017 Act, and a reasonable estimate cannot be determined at this point in time. The Company expects to finalize its calculation of the one-time transition tax in the fourth quarter of fiscal year ended December 31, 2018. Tax Contingencies The Company has not completed the measurement of the one-time transition tax and is in the process of gathering information and evaluating the impact of the one-time transition tax as of the date of this interim report due to the size and length of operating history of the Company. The Company might be subject to possible interest and penalty in relation to the late filing of tax return and reports. |
Property, plant and equipment,
Property, plant and equipment, net | 9 Months Ended |
Sep. 30, 2018 | |
Property, plant and equipment, net [Text Block] | 8. Property, plant and equipment, net As of September 30, 2018 and December 31, 2017, property, plant and equipment with net book values of $2,772,356 and $3,112,380, respectively, were pledged as collateral under certain loan arrangements (see Note 10). During the nine months ended September, 2018 and 2017, amount recognized for depreciation of property, plant and equipment was $860,071 and $802,947, respectively. |
Land use rights, net
Land use rights, net | 9 Months Ended |
Sep. 30, 2018 | |
Land use rights, net [Text Block] | 9. Land use rights, net As of September 30, 2018 and December 31, 2017, land use rights with net book values of $804,900 and $865,825, respectively, were pledged as collateral under certain loan arrangements (see Note 10). During the nine months ended September 30, 2018 and 2017, amount recognized for amortization of land use rights was $91,432 and $87,509, respectively. |
Short-term loans and long-term
Short-term loans and long-term loan | 9 Months Ended |
Sep. 30, 2018 | |
Short-term loans and long-term loan [Text Block] | 10. Short-term loans and long-term loan Short-term bank loans On August 10, 2017, the Company entered into a one-year loan agreement with Industrial and Commercial Bank of China, pursuant to which the Company obtained a loan in the amount of RMB32,000,000 (approximately $4,806,000), payable on August 9, 2018. The loan carries an interest rate of 4.611% per annum and the interest is payable monthly. The loan was repaid in full on August 3, 2018. On August 15, 2018, the Company entered into another one-year loan agreement with Industrial and Commercial Bank of China, pursuant to which the Company obtained a loan in the amount of RMB20,000,000 (approximately $2,892,000), payable on August 14, 2019. The loan carries an interest rate of 4.611% per annum and the interest is payable monthly. The loan was repaid in full on October 24, 2018 (See Note 13) The bank loans discussed above were secured by the following assets of the Company: September 30, December 31, 2018 2017 (Unaudited) Property, plant and equipment (Note 8) $ 2,772,356 $ 3,112,380 Land use rights (Note 9) 804,900 865,825 $ 3,577,256 $ 3,978,205 Long-term loan On July 26, 2018, the Company obtained a three-year entrusted loan from a non-financial institution in the amount of RMB6,000,000 (approximately $885,000). The loan is non-secured, carries a preferential interest rate of 2.25%, and matures on July 25, 2021. Interest is payable quarterly. For the nine months ended September 30, 2018 and 2017, the Company included interest expense related to short-term loans of $159,411 and $166,617, respectively, in finance costs in the consolidated statements of income and comprehensive loss. |
Segment information
Segment information | 9 Months Ended |
Sep. 30, 2018 | |
Segment information [Text Block] | 11. Segment information The Company is solely engaged in the manufacturing and trading of plate heat exchangers and various related products. Since the nature of the products, their production processes, and their distribution methods are substantially similar, they are considered as a single reportable segment under ASC 280 “Segment Reporting”. The Company’s sales revenues by products for the nine months ended September 30, 2018 and 2017 were as follows: Nine months ended September 30, 2018 % 2017 % (Unaudited) (Unaudited) Plate heat exchanger $ 15,743,254 48 $ 10,694,395 43 Heat exchange unit 9,248,163 28 7,463,516 30 Air-cooled heat exchanger 211,574 1 133,511 1 Shell-and-tube heat exchanger 44,264 - 185,818 1 Others 7,379,576 23 6,392,011 25 $ 32,626,831 100 $ 24,869,251 100 All of the Company’s long-lived assets and revenues classified based on the customers are located in the PRC. |
Related party transactions
Related party transactions | 9 Months Ended |
Sep. 30, 2018 | |
Related party transactions [Text Block] | 12. Related party transactions The related parties consist of the following: Name of Related Party Nature of Relationship Guohong Zhao Chairman, Chief Executive Officer and President Fucai Zhan Vice President of R&D and Director Kai Liu Chief Engineer, Manager of Market development Others Individuals who have significant influence on the Company Jilin Tongda Heat Transfer System Integration, Ltd (“Tongda”) The Company has significant influence on Tongda Liaoning Hongsheng Heat Energy Technology, Ltd (“Hongsheng”) The Company has significant influence on Hongsheng Siping Juyuan Heat Exchange Service Technology, Co., Ltd. (“Fuwu”) The Company has significant influence on Fuwu Trade receivables – related party During the nine months ended September 30, 2018 and 2017, the Company sold products and provided rent service to Tongda in the amount of $167,217 and $8,232, respectively. The corresponding costs of the related party sales were $81,955 and $3,750, respectively. As of September 30, 2018 and December 31, 2017, the Company had trade receivables from Tongda in the amount of $nil and $27,676, respectively. Advance from customers - related parties The Company received prepayment from Tongda and Hongsheng pursuant to sales agreements signed in the nine months ended September 30, 2018. As of September 30, 2018 and December 31, 2017, the Company had advance from customers – related parties in the amount of $4,679,141 and $nil, respectively. Due from related parties As of September 30, 2018 and December 31, 2017, respectively, the Company had advance to Guohong Zhao in the amount of $13,337 and $14,075 for handling selling and logistic activities for the Company in the ordinary course of business. During the nine months ended September 30, 2018 and 2017, Kai Liu paid back $10,654 and $nil to the Company, respectively. As of September 30, 2018 and December 31, 2017, respectively, the Company had advance to Kai Liu in the amount of $1,019 and $11,742 for handling selling and logistic activities for the Company in the ordinary course of business. During the nine months ended September 30, 2018 and 2017, Hongsheng repaid to the Company in the amount of $244,965 and $nil, respectively. As of September 30, 2018 and December 31, 2017, the Company had advance to Hongsheng in the amount of $nil and $239,701, respectively, included in due from related parties in the consolidated balance sheets. During the nine months ended September 30, 2018 and 2017, the Company made loans to Tongda in the amount of $145,635 and $440,679, and Tongda repaid to the Company in the amount of $273,392 and $235,097, respectively. The loans were non-secured, non-interest bearing and due on demand. On December 28, 2016, the Company sold certain used equipment with original cost and net book value of $977,650 and $121,307, respectively, to Tongda in exchange for $1,315,958 including VAT. During the nine months ended September 30, 2018, the Company collected $1,370,150 from Tongda for the equipment sold. As of September 30, 2018 and December 31, 2017, the Company had loans to Tongda in the amount of $349,396 and $488,737, respectively, and receivable from Tongda regarding sale of equipment in the amount of $nil and $1,340,710, respectively, both of which were included in due from related parties in the consolidated balance sheets. During the nine months ended September 30, 2018 and 2017, the Company advanced $nil and $342,262 and received repayment of $99,622 and $248,321, respectively, from Fuwu. In addition, Fuwu paid operating expense on behalf of the Company in the amount of $nil and $37,185, respectively, during the nine months ended September 30, 2018 and 2017. As of September 30, 2018 and December 31, 2017, the amount due from Fuwu was $nil and $97,481, respectively, which were included in due from related parties in the consolidated balance sheets. Due to related parties Due to related parties consist of the following: September 30, December 31, 2018 2017 (Unaudited) Others $ 2,347,901 $ 7,050,268 Fucai Zhan 43,690 138,325 Guohong Zhao - 19,010 $ 2,391,591 $ 7,207,603 Amounts owed by the Company represent non-secured and non-interest bearing loans obtained from related parties which are due on demand. During the nine months ended September 30, 2018 and 2017, the Company was advanced $1,208,751 and $6,959,146 from, and made repayment of $5,795,477 and $1,236,399, to, a related party, respectively. During the nine months ended September 30, 2018 and 2017, Guohong Zhao paid $nil and $27,275 operating expense on behalf of the Company, respectively. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events [Text Block] | 13. Subsequent Events On October 24, 2018, the Company repaid the loan borrowed from ICBC on August 15, 2018 in full of RMB20,000,000 (approximately $2,882,000). |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Basis of presentation and consolidation and going concern [Policy Text Block] | Basis of presentation and consolidation and going concern The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with the Company’s consolidated financial statements and accompanying notes thereto for the year ended December 31, 2017 filed with the SEC in the Company’s Form 10-K on April 17, 2018. In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the nine-month period have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. The Company has suffered from recurring losses from operations since 2017. The Company needs to secure additional funds to meet future cash flow requirements given the Company’s current cash position and amount of short-term borrowings outstanding. The Company has taken various actions to conserve cash, procure additional financing and improve the liquidity, including reducing capital spending. The Company’s ability in meeting future cash flow requirements is dependent on many events outside of its direct control, including, among other things, successful renewal of bank borrowings and additional financing from banks and related parties. The accompanying consolidated financial statements have been prepared assuming a substantial doubt about the Company's ability to continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business. Certain amounts from prior year have been reclassified to conform to the current year presentation. The reclassification has resulted in no change to the Company’s retained earnings or net income presented. The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company balances and transactions have been eliminated on consolidation. |
Fair value of financial instruments [Policy Text Block] | Fair value of financial instruments Accounting Standards Codification (“ASC”) Topic 820 requires the disclosure of the estimated fair value of financial instruments including those financial instruments for which fair value option was not elected. As of September 30, 2018 and December 31, 2017, the carrying amounts of the Company’s financial assets and liabilities approximated their fair values due to short maturities or the applicable interest rates approximated the current market rates. |
Recent accounting pronouncements [Policy Text Block] | Recent accounting pronouncements In July 2018, the FASB issued ASU 2018-09, “ Codification Improvements . In July 2018, the FASB issued ASU 2018-10, “ Codification Improvements to Topic 842, Leases In July 2018, the FASB issued ASU 2018-11, “ Leases (Topic 842): Targeted Improvements Leases (Topic 842) In August 2018, the FASB issued ASU 2018-13, “ Fair Value Measurement (Topic 820), – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements Recently adopted accounting pronouncements In May 2014, the FASB issued ASU 2014-09, “ Revenue from Contracts with Customers (ASC 606) |
Trade receivables, net (Tables)
Trade receivables, net (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Schedule of Accounts Receivable [Table Text Block] | September 30, December 31, 2018 2017 (Unaudited) Trade receivables $ 47,657,579 $ 57,859,135 Less: Allowance for doubtful accounts (13,356,665 ) (11,547,598 ) $ 34,300,914 $ 46,311,537 |
Schedule of Allowance for Doubtful Account [Table Text Block] | Nine months ended September 30, (Unaudited) 2018 2017 Balance at beginning of period $ 11,547,598 $ 7,976,427 Adjustment of bad debt expense 2,545,443 2,050,522 Translation adjustments (736,376 ) 393,240 Balance at end of period $ 13,356,665 $ 10,420,189 |
Inventories, net (Tables)
Inventories, net (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Schedule of Inventories, net [Table Text Block] | September 30, December 31, 2018 2017 (Unaudited) Raw materials $ 12,574,608 $ 9,368,647 Work-in-progress 8,494,870 4,229,841 Finished goods 21,457,985 16,492,343 42,527,463 30,090,831 Allowance for obsolete inventories (1,656,717 ) (1,569,279 ) $ 40,870,746 $ 28,521,552 |
Short-term loans and long-ter_2
Short-term loans and long-term loan (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Schedule of Assets Used to Secure Short-Term Bank Loans [Table Text Block] | September 30, December 31, 2018 2017 (Unaudited) Property, plant and equipment (Note 8) $ 2,772,356 $ 3,112,380 Land use rights (Note 9) 804,900 865,825 $ 3,577,256 $ 3,978,205 |
Segment information (Tables)
Segment information (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Schedule of Segment Reporting Information, by Products [Table Text Block] | Nine months ended September 30, 2018 % 2017 % (Unaudited) (Unaudited) Plate heat exchanger $ 15,743,254 48 $ 10,694,395 43 Heat exchange unit 9,248,163 28 7,463,516 30 Air-cooled heat exchanger 211,574 1 133,511 1 Shell-and-tube heat exchanger 44,264 - 185,818 1 Others 7,379,576 23 6,392,011 25 $ 32,626,831 100 $ 24,869,251 100 |
Related party transactions (Tab
Related party transactions (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Schedule of Related Party Transactions - Due from related parties [Table Text Block] | Name of Related Party Nature of Relationship Guohong Zhao Chairman, Chief Executive Officer and President Fucai Zhan Vice President of R&D and Director Kai Liu Chief Engineer, Manager of Market development Others Individuals who have significant influence on the Company Jilin Tongda Heat Transfer System Integration, Ltd (“Tongda”) The Company has significant influence on Tongda Liaoning Hongsheng Heat Energy Technology, Ltd (“Hongsheng”) The Company has significant influence on Hongsheng Siping Juyuan Heat Exchange Service Technology, Co., Ltd. (“Fuwu”) The Company has significant influence on Fuwu |
Schedule of Related Party Transactions- Due to related parties [Table Text Block] | September 30, December 31, 2018 2017 (Unaudited) Others $ 2,347,901 $ 7,050,268 Fucai Zhan 43,690 138,325 Guohong Zhao - 19,010 $ 2,391,591 $ 7,207,603 |
Summary of significant accoun_3
Summary of significant accounting policies (Narrative) (Details) | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Decrease in net cash used in investing activities | $ 189,999 |
Revenue Recognition (Narrative)
Revenue Recognition (Narrative) (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Contract liabilities | $ 24.6 | |
Deferred Revenue, Revenue Recognized | $ 4.7 | $ 5.2 |
Inventories, net (Narrative) (D
Inventories, net (Narrative) (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Inventory write-down | $ 178,929 | $ 4,717,317 | |
Inventory Adjustments | 1,656,717 | $ 1,569,279 | |
Utilization in Production [Member] | |||
Inventory Adjustments | $ 210,257 | $ 0 |
Income tax (Narrative) (Details
Income tax (Narrative) (Details) ¥ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018USD ($) | Sep. 30, 2017 | Sep. 30, 2018CNY (¥) | Sep. 30, 2017 | Dec. 31, 2017USD ($) | |
Effective Income Tax Rate, Continuing Operations | 32.00% | 2.00% | 29.00% | 4.00% | |
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate | 21.00% | ||||
Maximum purchase price for tax deduction | ¥ | ¥ 5 | ||||
Deferred Income Tax Liabilities, Net | $ 147,909 | ||||
Deferred Tax Assets, Net | $ 3,297 | $ 159,574 |
Property, plant and equipment_2
Property, plant and equipment, net (Narrative) (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Property, Plant and Equipment, Net | $ 8,575,567 | $ 8,825,346 | |
Depreciation | 860,071 | $ 802,947 | |
Pledged as collateral [Member] | |||
Property, Plant and Equipment, Net | $ 2,772,356 | $ 3,112,380 |
Land use rights, net (Narrative
Land use rights, net (Narrative) (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Amortization | $ 91,432 | $ 87,509 | |
Land use rights pledged as collateral [Member] | |||
Land Use Rights, Net | $ 804,900 | $ 865,825 |
Short-term loans and long-ter_3
Short-term loans and long-term loan (Narrative) (Details) | 9 Months Ended | |||||||
Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Aug. 15, 2018USD ($) | Aug. 15, 2018CNY (¥) | Jul. 26, 2018USD ($) | Jul. 26, 2018CNY (¥) | Aug. 10, 2017USD ($) | Aug. 10, 2017CNY (¥) | |
Interest expense, short-term loans | $ 159,411 | $ 166,617 | ||||||
Short-term Debt [Member] | ||||||||
Notes Payable to Bank, Current | $ 2,892,000 | ¥ 20,000,000 | $ 4,806,000 | ¥ 32,000,000 | ||||
Debt Instrument, Interest Rate, Stated Percentage | 4.611% | 4.611% | 4.611% | 4.611% | ||||
Long-term Debt [Member] | ||||||||
Notes Payable to Bank, Current | $ 885,000 | ¥ 6,000,000 | ||||||
Debt Instrument, Interest Rate, Stated Percentage | 2.25% | 2.25% |
Related party transactions (Nar
Related party transactions (Narrative) (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Dec. 28, 2016 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Revenue from Related Parties | $ 59,559 | $ 0 | $ 167,217 | $ 8,232 | ||
Due from related parties | 363,752 | 363,752 | $ 2,192,446 | |||
Proceeds from Related Party Debt | 1,208,751 | 6,959,146 | ||||
Proceeds from disposal of property, plant and equipment | 1,370,150 | 61,221 | ||||
Repayments of Related Party Debt | 5,906,580 | 1,236,399 | ||||
Tongda [Member] | ||||||
Revenue from Related Parties | 167,217 | 8,232 | ||||
Related Party Transaction, Expenses from Transactions with Related Party | 81,955 | 3,750 | ||||
Trade Receivables, Related Parties | 0 | 0 | 27,676 | |||
Due from related parties | 349,396 | 349,396 | 488,737 | |||
Payments to Fund Loans to Related Parties | 145,635 | 440,679 | ||||
Proceeds from Related Party Debt | 273,392 | 235,097 | ||||
Proceeds from disposal of property, plant and equipment | $ 1,315,958 | 1,370,150 | ||||
Due from Related Parties Other | 0 | 0 | 1,340,710 | |||
Tongda [Member] | Equipment at cost [Member] | ||||||
Property, Plant and Equipment, Disposals | 977,650 | |||||
Tongda [Member] | Equipment, net book value [Member] | ||||||
Property, Plant and Equipment, Disposals | $ 121,307 | |||||
Guohong Zhao [Member] | ||||||
Revenue from Related Parties | 0 | 27,275 | ||||
Due from related parties | 13,337 | 13,337 | 14,075 | |||
Kai Liu [Member] | ||||||
Due from related parties | 1,019 | 1,019 | 11,742 | |||
Proceeds from Related Party Debt | 10,654 | 0 | ||||
Hongsheng [Member] | ||||||
Due from related parties | 0 | 0 | 239,701 | |||
Proceeds from Related Party Debt | 244,965 | 0 | ||||
Fuwu [Member] | ||||||
Revenue from Related Parties | 0 | 37,185 | ||||
Due from related parties | 0 | 0 | 97,481 | |||
Payments to Fund Loans to Related Parties | 0 | 342,262 | ||||
Proceeds from Related Party Debt | 99,622 | 248,321 | ||||
Others [Member] | ||||||
Due from related parties | $ 1,208,751 | $ 6,959,146 | 1,208,751 | 6,959,146 | ||
Proceeds from Related Party Debt | 4,679,141 | $ 0 | ||||
Repayments of Related Party Debt | $ 5,795,477 | $ 1,236,399 |
Subsequent Events (Narrative) (
Subsequent Events (Narrative) (Details) | 9 Months Ended | ||
Sep. 30, 2018USD ($) | Sep. 30, 2018CNY (¥) | Sep. 30, 2017USD ($) | |
Repayments of Related Party Debt | $ 5,906,580 | $ 1,236,399 | |
Subsequent Event [Member] | |||
Repayments of Related Party Debt | $ 2,882,000 | ¥ 20,000,000 |
Schedule of Accounts Receivable
Schedule of Accounts Receivable (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Trade receivables | $ 47,657,579 | $ 57,859,135 |
Allowance for doubtful accounts | (13,356,665) | (11,547,598) |
Trade receivables, net | $ 34,300,914 | $ 46,311,537 |
Schedule of Allowance for Doubt
Schedule of Allowance for Doubtful Account (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Balance at beginning of year | $ 11,547,598 | $ 7,976,427 |
Adjustment of bad debt expense | 2,545,443 | 2,050,522 |
Translation adjustments | (736,376) | 393,240 |
Balance at end of year | $ 13,356,665 | $ 10,420,189 |
Schedule of Inventories, net (D
Schedule of Inventories, net (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Raw materials | $ 12,574,608 | $ 9,368,647 |
Work-in-progress | 8,494,870 | 4,229,841 |
Finished goods | 21,457,985 | 16,492,343 |
Inventory, Gross | 42,527,463 | 30,090,831 |
Allowance for obsolete inventories | (1,656,717) | (1,569,279) |
Inventory, Net | $ 40,870,746 | $ 28,521,552 |
Schedule of Assets Used to Secu
Schedule of Assets Used to Secure Short-Term Bank Loans (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Debt Instrument, Collateral Amount | $ 3,577,256 | $ 3,978,205 |
Property, plant and equipment [Member] | ||
Debt Instrument, Collateral Amount | 2,772,356 | 3,112,380 |
Land use rights [Member] | ||
Debt Instrument, Collateral Amount | $ 804,900 | $ 865,825 |
Schedule of Segment Reporting I
Schedule of Segment Reporting Information, by Products (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Revenues | $ 14,487,924 | $ 13,320,129 | $ 32,626,831 | $ 24,869,251 |
Segment reporting, percentage of revenue | 100.00% | 100.00% | ||
Plate heat exchanger [Member] | ||||
Revenues | $ 15,743,254 | $ 10,694,395 | ||
Segment reporting, percentage of revenue | 48.00% | 43.00% | ||
Heat exchange unit [Member] | ||||
Revenues | $ 9,248,163 | $ 7,463,516 | ||
Segment reporting, percentage of revenue | 28.00% | 30.00% | ||
Air-cooled heat exchanger [Member] | ||||
Revenues | $ 211,574 | $ 133,511 | ||
Segment reporting, percentage of revenue | 1.00% | 1.00% | ||
Shell-and-tube heat exchanger [Member] | ||||
Revenues | $ 44,264 | $ 185,818 | ||
Segment reporting, percentage of revenue | 0.00% | 1.00% | ||
Others [Member] | ||||
Revenues | $ 7,379,576 | $ 6,392,011 | ||
Segment reporting, percentage of revenue | 23.00% | 25.00% |
Schedule of Related Party Trans
Schedule of Related Party Transactions- Due to related parties (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Due to related parties | $ 2,391,591 | $ 7,207,603 |
Others [Member] | ||
Due to related parties | 2,347,901 | 7,050,268 |
Fucai Zhan [Member] | ||
Due to related parties | 43,690 | 138,325 |
Guohong Zhao [Member] | ||
Due to related parties | $ 0 | $ 19,010 |