UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2013

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

For the transition period from ______to______.

HUIXIN WASTE WATER SOLUTIONS, INC.

 (Exact name of registrant as specified in its charter)

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

#99 Jianshe Road 3, Pengjiang District, Jiangmen City

Guangdong Province, 529000

People’s Republic of China

 (Address of principal executive offices, Zip Code)

 (86) (750) 395-9988

 (Issuer Telephone number)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No o

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

Yes x No o

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common equity: As of November 14, 2013, there are 22,456,695 common shares, par value $0.00018254172 per share, and 177,530 preferred shares, par value $0.000128 per share, are issued and outstanding.

HUIXIN WASTE WATER SOLUTIONS, INC.

QUARTERLY REPORT ON FORM 10-Q

SEPTEMBER 30, 2013

TABLE OF CONTENTS

PART 1 - FINANCIAL INFORMATION
		PAGE
Item 1.	Financial Statements (Unaudited)	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II -  OTHER INFORMATION
Item 1A.	Risk Factors	31
Item 6.	Exhibits	31
SIGNATURES		32

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

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

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

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

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

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

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

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

● “Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

● “PRC,” “China,” and “Chinese,” refer to the People’s Republic of China;

● “Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;

● “Jiangmen Huiyuan” refers Jiangmen Huiyuan Environmental Protection Technology Consultancy Co. Ltd ., a wholly foreign owned enterprise organized under the PRC laws;

● “Guangdong Huixin” refers to Guangdong Huixin Environmental Protection Co., Ltd., a PRC limited liability company, (formerly “Jiangmen Wealth Water Purifying Agent Co., Ltd”).

● “Operating Company” or  “Operating Companies” refers to Jiangmen Huiyuan, Guangdong Huixin, Guizhou Yufeng and Shanxi Wealth;

● “Guizhou Yufeng” refers to Guizhou Yufeng Melt Co., Ltd., a PRC limited company;

● “Renminbi” and “RMB” refer to the legal currency of China;

● “SEC” refers to the United States Securities and Exchange Commission;

● “Securities Act” refers to the Securities Act of 1933, as amended;

● “Shanxi Wealth” refers to Shanxi Wealth Aluminate Materials Co., Ltd., a PRC limited company;

● “U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States of America;

● “Wealth Environmental Protection” or “WEP” refers to Wealth Environmental Protection Group, Inc., a British Virgin Islands company; and

● “Wealth Technology” refers to Wealth Environmental Technology Holding, Ltd., a Hong Kong company.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Page
Condensed Consolidated Balance Sheets as of September 30, 2013 (Unaudited) and December 31, 2012	2
Condensed Consolidated Statements of Income for the three months and nine months ended September 30, 2013 and 2012 (Unaudited)	3
Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended  September 30, 2013 and 2012 (Unaudited)	4
Condensed Consolidated Statement of Shareholders' Equity for the nine months ended September 30, 2013 (Unaudited)	5-6
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (Unaudited)	7
Notes to Condensed Consolidated Financial Statements (Unaudited)	8-21

1

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
	September 30,		December 31,
	2013		2012
	(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents	$	35,809,292	$	33,871,287
Accounts receivable		3,122,104		2,729,778
Inventories		1,221,626		1,447,570
Other current assets		20,200		31,479
Total current assets		40,173,222		38,080,114
Property, plant and equipment and land and mining rights, net		93,533,987		13,618,082
Deposit for mining right acquisition		-		63,480,677
Total assets	$	133,707,209	$	115,178,873
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short –term debt	$	19,555,344	$	19,044,203
Accounts payable		2,077,240		2,444,555
Accrued expenses		1,108,939		2,335,342
Due to shareholders		15,290		15,290
Value added taxes payable		821,333		646,743
Other taxes payable		149,941		160,605
Income tax payable		170,719		1,332,804
Total current liabilities		23,898,806		25,979,542
Deferred income taxes		468,736		311,425
Total liabilities		24,367,542		26,290,967
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.000128 par value, 781,250 shares
authorized, 177,530 and 184,198 shares
issued and outstanding on September 30, 2013
and December 31, 2012		23		24
Common stock: $0.00018254172 par value, 39,062,500
shares authorized, 22,456,695 and 21,089,275 shares issued
and outstanding on September 30, 2013 and December 31, 2012		4,099		3,850
Additional paid-in capital		31,502,795		24,840,803
Accumulated other comprehensive income		9,652,056		7,071,841
Retained earnings (the restricted portion of retained earnings
is $496,396 on September 30, 2013 and December 31, 2012)		68,180,694		56,971,388
Total shareholders’ equity		109,339,667		88,887,906
Total liabilities and shareholders’ equity	$	133,707,209	$	115,178,873

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

2

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Net revenue	$	21,361,331		$	22,407,329		$	64,002,554		$	61,298,540
Cost of revenue		11,575,232			12,308,208			34,875,014			33,746,528
Gross profit		9,786,099			10,099,121			29,127,540			27,552,012
Operating expenses:
Selling and marketing		744,583			797,674			2,161,603			2,218,268
General and administrative		1,382,882			1,490,942			10,590,151			3,826,647
Research and development		179,432			151,176			533,787			470,722
Total operating expenses		2,306,897			2,439,792			13,285,541			6,515,637
Income from operations		7,479,202			7,659,329			15,841,999			21,036,375
Other income/(expense):
Interest income		29,879			79,596			78,483			708,023
Interest expense		(298,621	)		(228,123	)		(882,000	)		(284,243	)
Total other income/(expense)		(268,742	)		(148,527	)		(803,517	)		423,780
Income before provision for income taxes		7,210,460			7,510,802			15,038,482			21,460,155
Provision for income taxes		1,811,743			1,901,646			3,816,936			5,454,958
Net income		5,398,717			5,609,156			11,221,546			16,005,197
Less cumulative dividends on preferred stock		43,227			100,081			129,560			300,243
Net income attributable to common shareholders	$	5,355,490		$	5,509,075		$	11,091,986		$	15,704,954
Net income per common share  - basic	$	0.24		$	0.28		$	0.51		$	0.80
Net income per common share  - diluted	$	0.23		$	0.26		$	0.49		$	0.73
Weighted average number of common shares outstanding - basic		22,456,695			19,600,305			21,842,586			19,600,305
Weighted average number of common shares outstanding - diluted		23,340,265			21,824,325			22,726,987			21,824,325

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

3

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013		2012			2013		2012
Net income	$	5,398,717	$	5,609,156		$	11,221,546	$	16,005,197
Other comprehensive income/(loss)
- foreign currency translation adjustments		627,540		(127,092	)		2,580,215		350,325
Comprehensive income	$	6,026,257	$	5,482,064		$	13,801,761	$	16,355,522

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

4

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

											Additional
	Preferred Stock						Common Stock				Paid-In
	Shares			Amount			Shares		Amount		Capital
Balance as of December 31, 2012		184,198		$	24			21,089,275	$	3,850	$	24,840,803
Net income		-			-			-		-		-
Shares issued in kind for the payment of preferred stock dividends		816			-			-		-		12,240
Preferred stock and related dividends in arrears converted to common stock		(7,484	)		(1	)		37,420		7		(6	)
Common stock issued for services		-			-			1,330,000		242		6,649,758
Other comprehensive income foreign currency translation adjustment		-			-			-		-		-
Balance as of September 30, 2013		177,530		$	23			22,456,695	$	4,099	$	31,502,795

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

5

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

	Accumulated
	Other										Total
	Comprehensive			Retained Earnings							Shareholders’
	Income			Restricted			Unrestricted				Equity
Balance as of December 31, 2012		$	7,071,841		$	496,396		$	56,474,992			$	88,887,906
Net income			-			-			11,221,546				11,221,546
Shares issued in kind for the payment of preferred stock dividends			-			-			(12,240	)			-
Preferred stock and related dividends in arrears converted to common stocks			-			-			-				-
Common stock issued for services			-			-			-				6,650,000
Other comprehensive income - foreign currency translation adjustments			2,580,215			-			-				2,580,215
Balance as of September 30, 2013		$	9,652,056		$	496,396		$	67,684,298			$	109,339,667

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

6

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended
	September 30,
	2013			2012
Cash flows from operating activities:
Net income	$	11,221,546		$	16,005,197
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,320,151			1,047,465
Deferred income taxes		145,125			(453	)
Issuance of common stock for services		6,650,000			-
Changes in operating assets and liabilities:
Accounts receivable		(315,119	)		(873,048	)
Interest receivable		-			157,171
Inventories		261,526			(230,512	)
Advance to suppliers		-			3,852,007
Other assets		11,975			(4,495	)
Accounts payable		(429,362	)		690,404
Accrued expenses		(1,273,155	)		(305,160	)
Value added taxes payable		140,392			264,967
Other taxes payable		112			64,453
Income tax payable		(1,203,594	)		655,406
Net cash provided by operating activities		17,529,597			21,323,402
Cash flows from investing activities:
Purchase of property, plant and equipment		(91,888	)		(209,113	)
Mining right acquisition		(16,250,008	)		(31,703,760	)
Promissory note receivable from non related party		-			25,363,008
Net cash used in investing activities		(16,341,896	)		(6,549,865	)
Cash flows from financing activities:
Principal payments on short-term debt		(12,989,543	)		(22,509,670	)
Proceeds received from short-term debt		12,989,543			35,191,174
Decrease in restricted cash		-			550,000
Net cash provided by financing activities		-			13,231,504
Effect of exchange rate changes on cash and cash equivalents		750,304			91,887
Net increase in cash and cash equivalents		1,938,005			28,096,928
Cash and cash equivalents at the beginning of period		33,871,287			26,383,537
Cash and cash equivalents at the end of period	$	35,809,292		$	54,480,465
Supplemental disclosure of cash flow information:
Income taxes paid	$	4,875,404		$	4,799,533
Interest paid	$	882,000		$	284,243
Non-cash investing and financing activities:
Reclassify deposit for mining rights acquisition to property, plant and equipment and land and mining rights	$	63,480,677		$	-
Preferred stock issued in kind for payment of dividends	$	12,240		$	-

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

7

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

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

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

	Domicile and
	Date of	Paid -In		Effective
Name and Location	Incorporation	Capital		Ownership	Activities
Wealth Environmental Protection Group, Inc  (“WEP”)	British Virgin Islands June 3, 2010	$	7,000	100% Owned	Holding Company
Wealth Environmental Technology Holding Ltd. (“Wealth Technology”) Hong Kong	Hong Kong June 18, 2010	$	1,299	100% Owned	Holding Company
Jiangmen Huiyuan Environmental Protection Technology Consultancy Co. (“Jiangmen Huiyuan”) Jiangmen, Guandong Province	People’s Republic Of China (“PRC”) July 22, 2010	$	15,082	100% Owned - Wholly Foreign Owned Entity (“WFOE”)	Holding Company
Guangdong Huixin Environmental Protection Co., Ltd. (formerly “Jiangmen Wealth Water Purifying Agent Co., Ltd”) (“Guangdong Huixin”)  Jiangmen, Guandong Province	PRC April 25, 2003	$	4,049,060	100% Control  Through Contractual Arrangements	Manufacturer of water purifying agents
Guizhou Yufeng Melt Co., Ltd. (“Guizhou Yufeng”) Guizhou Province	PRC  March 25, 2005	$	4,233,854	100% Control Through Contractual Arrangements	Manufacturer of HAC Powder (defined below) using bauxite and limestone from mines controlled under mining rights agreements
Shanxi Wealth Aluminate Materials Co., Ltd (“Shanxi Weath”) Shanxi Province	PRC April 8, 2004	$	6,786,056	100% Control Through Contractual Arrangements	Manufacturer of HAC Powder (defined below) using bauxite and limestone from mines controlled under mining rights agreements

8

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

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

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

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

The accompanying condensed consolidated balance sheet as of December 31, 2012, which has been derived from the audited consolidated financial statements and the accompanying unaudited condensed consolidated financial statements, has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations and the Company believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, these condensed consolidated financial statements reflect all adjustments which are of a normal recurring nature and which are necessary to present fairly the financial position of Huixin as of September 30, 2013, the results of operations, and cash flows for the three and nine-month periods ended September 30, 2013 and September 30, 2012. These condensed consolidated financial statements and related notes should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2012, filed with the SEC on March 29, 2013. The results of operations for the three and nine months ended September 30, 2013 are not necessarily indicative of the results which may be expected for the entire fiscal year.

9

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(2) Summary of Significant Accounting Policies, continued

Principles of Consolidation

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

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

Use of Estimates

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

Segments

For the three and nine months ended September 30, 2013 and 2012, the Company’s operations have been broken down into 3 segments based on production facility, consistent with the manner that management reviews operations on a regular basis. All our operations revolve around the production of water purification agents made to similar specifications. All of the Company’s segments have similar assets, customers and distribution methods, and their economic characteristics are similar with regard to their gross margin percentages.

Currency Reporting

The Company’s operations in the PRC use the local currency, Renminbi (“RMB”), as their functional currency, whereas amounts reported in the accompanying condensed consolidated financial statements and disclosures are stated in U.S. dollars, the reporting currency of the Company, unless stated otherwise. As such, the condensed consolidated balance sheets of the Company have been translated into U.S. dollars at the current rates as of September 30, 2013 and December 31, 2012 and the condensed consolidated statements of income have been translated into U.S. dollars at the weighted average rates during the periods the transactions were recognized.

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

10

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(2) Summary of Significant Accounting Policies, continued

Revenue Recognition

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

Major Customers

During the three and nine months ended September 30, 2013 and 2012, there was no single customer which accounted for 10% or more of our net revenue.

Major Suppliers

During the three and nine months ended September 30, 2013 and 2012, certain suppliers accounted for more than 10% of the Company’s total net purchases as follows, and none of the major suppliers are related parties to the Company.

	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Supplier 1		16	%		12	%		15	%		12	%
Supplier 2		12	%		18	%		13	%		11	%
Supplier 3		12	%		12	%		11	%		16	%

Value-Added Tax (“VAT”)

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

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

11

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(2) Summary of Significant Accounting Policies, continued

Value-Added Tax (“VAT”), continued

Following is an analysis of VAT billed to the Company on purchases, VAT billed by the Company on sales and VAT remitted to PRC during the nine months ended  September 30, 2013 and 2012, with information related to the liability for uncollected or unremitted VAT as of September 30, 2013 and December 31, 2012:

	Nine Months			Nine Months
	Ended			Ended
	September 30, 2013			September 30, 2012
VAT billed to customers for sales during the period	$	12,613,741		$	12,017,833
Less: VAT billed to the Company for purchases during the period		4,627,436			4,780,061
Net VAT on transactions during the period		7,986,305			7,237,772
Amount remitted to the PRC		(7,811,715	)		(6,970,630	)
VAT payable at beginning of period		646,743			497,581
VAT payable at period end	$	821,333		$	764,723

	As of		As of
	September 30,		December 31,
	2013		2012
Liabilities for taxes collected but not remitted	$	367,694	$	250,109
Liabilities for taxes billed to customers but not collected
from the customers or remitted to PRC		453,639		396,634
VAT payable at period end	$	821,333	$	646,743

12

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(3) Earnings Per Share

Basic net earnings per share is computed using the weighted-average number of common shares outstanding. The dilutive effect of potential common shares outstanding is included in diluted net earnings per share. The computations of basic net earnings per share and diluted net earnings per share for three and nine months ended September 30, 2013 and 2012 are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Net income attributable to common shareholders - Basic	$	5,355,490	$	5,509,075	$	11,091,986	$	15,704,954
Add: cumulative dividends attributable to convertible preferred stock		43,227		100,081		129,560		300,243
Net income attributable to common shareholders - Diluted	$	5,398,717	$	5,609,156	$	11,221,546	$	16,005,197
Weighted average number of common shares outstanding - Basic		22,456,695		19,600,305		21,842,586		19,600,305
Dilutive effect of preferred stock conversion		883,570		2,224,020		884,401		2,224,020
Weighted average number of common shares outstanding - Diluted		23,340,265		21,824,325		22,726,987		21,824,325
Earnings per share:
Basic	$	0.24	$	0.28	$	0.51	$	0.80
Diluted	$	0.23	$	0.26	$	0.49	$	0.73

(4) Inventories

A summary of inventories is as follows:

	September 30,		December 31,
	2013		2012
Raw Materials	$	899,629	$	949,111
Work in progress		40,225		33,228
Finished goods		281,772		465,231
	$	1,221,626	$	1,447,570

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

13

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Property, plant and equipment and land use rights are carried at cost less accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line basis method over the following estimated useful lives:

	Estimated
Category	Useful Life
Land use rights	43 to 48 years
Mining rights	14 to 30 years
Leasehold improvements	20 to 40 years
Production equipment	5 to 30 years
Furniture and fixtures	5 years
Automobiles	5 years

Mining rights, which are for definite terms ranging from 14 to 30 years, are amortized using the units of production method. In applying this method, the numerator is current year production and the denominator is expected production from mines over the life of the individual mining rights, with consideration of production limitations imposed by the mining rights agreements.

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

	September 30,		December 31,
	2013		2012
Leasehold improvement	$	3,437,873	$	3,348,013
Production equipment		7,003,348		6,777,072
Furniture and fixtures		493,943		468,644
Automobiles		624,211		572,900
Land use rights		2,356,426		2,294,833
Mining rights		91,095,311		9,045,997
		105,011,112		22,507,459
Less: Accumulated depreciation and amortization		11,477,125		8,889,377
	$	93,533,987	$	13,618,082

On August 28, 2012, the Company entered into a transfer agreement with Xiuwen Longchang Mineral Industry Co., Ltd (“Longchang Mineral”), pursuant to which, Longchang Mineral transferred its aluminum bauxite mine mining rights located in Xiuwen County, Longchang Town, Ganba, 25th Group, PRC to the Company for consideration of approximately $80 million (RMB502 million) and the Company transferred its aluminum bauxite mine mining rights located in Xiumen, Guizhou, PRC, to Longchang Mineral as in-kind exchange for consideration of approximately $2.87 million (RMB18 million). The Company paid approximately $63.4 million (RMB400 million) as a deposit for the mining rights acquisition.

On February 4, 2013, the Company transferred its Guizhou aluminum bauxite mine mining rights and paid approximately an additional $16.3 million (RMB102 million) to Longchang Mineral to complete the transaction. On February 6, 2013, the Company received a license form Guizhou National Land and Resource, PRC granting the Company a mining right for the aluminum bauxite mine located in Xiuwen County, Longchang Town, Ganba 25th Group.

14

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Depreciation and amortization expense was $833,787 and $370,586 for the three months ended September 30, 2013 and 2012,  and $2,320,151 and $1,047,465 for the nine months ended September 30, 2013 and 2012.  A breakdown of depreciation and amortization expenses is summarized as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Depreciation of plant, equipment and improvements	$	199,994	$	185,403	$	594,444	$	557,403
Amortization of land use rights		12,937		12,612		38,488		37,907
Amortization of mining rights		620,856		172,571		1,687,219		452,155
Total	$	833,787	$	370,586	$	2,320,151	$	1,047,465

As of September 30, 2013 and December 31, 2012, the Company holds mining rights to two limestone mines and two bauxite mines from which they are allowed to produce annually:

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

● 360,000 tons of bauxite, from which the aluminum for production of its products is derived.

During the three and nine months ended September 30, 2013 and 2012, the Company had production from its limestone and bauxite mines as follows (in tons ):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Limestone		27,837		24,211		78,520		74,598
Bauxite		67,045		79,504		186,524		200,981

(6) Short-term debt

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

	September 30,		December 31,
	2013		2012
Short term note (a)	$	13,036,896	$	12,696,135
Short term note (b)		6,518,448		6,348,068
Total	$	19,555,344	$	19,044,203

(a)   On August 28, 2013, the Company extended the $13.04 million (RMB80,000,000) short-term note with Industrial Bank Co., Limited (“IB”) for another 12 months, which are personally guaranteed by Mr. Ming Zhou Tan, CEO of the Company (“Mr. Tan”) and Ms. Hong Yu Du, Director (“Ms. Du”), and contains no financial maintenance covenants. The interest rate under the short-term note is based on the base rate, the interest rate set by the People’s Bank of China (6% as of September 30, 2013 and as of December 31, 2012). Interest under the short term note is paid monthly at the end of each month. As of September 30, 2013, all interest was fully paid.

(b)   On December 3, 2012, the Company entered into a $6.52 million (RMB40,000,000) short-term note agreement with IB with a one-year maturity, which are personally guaranteed by Mr. Tan and Ms. Du, and contains no financial maintenance covenants. The interest rate under the short-term note is based on the base rate, the interest rate set by the People’s Bank of China (6% as of September 30, 2013 and at December 31, 2012). Interest under the short term note is paid monthly at the end of each month. As of September 30, 2013, all interest was fully paid.

Interest expense related to short-term debt was $298,621 and $228,123 for the three months ended September 30, 2013 and 2012, and $882,000 and $284,243 for the nine months ended September 30, 2013 and 2012.

15

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(7) Income Taxes

The Company has not recorded a provision for U.S. federal income tax for the three and nine months ended September 30, 2013 because substantially all of the Company’s operations are conducted in the PRC.

The Company conducts substantially all of its business in PRC and it is subject to PRC income taxes at a 25% standard tax rate in 2013 and 2012.  Following is a reconciliation of the Company’s income tax provision of $1,811,743 and $1,901,646 for the three months ended September 30, 2013 and 2012, and $3,816,936 and $5,454,958 for the nine months ended September 30, 2013 and 2012,  to the expected US statutory rate of 34%:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Computed tax at the U.S. federal statutory rate of 34%	$	2,463,956		$	2,553,673		$	5,190,826		$	7,296,453
Tax rate difference between the US and PRC on foreign earnings		(652,224	)		(675,972	)		(1,374,042	)		(1,931,414	)
Change in valuation allowance		12,401			32,563			267,590			122,215
Other		(12,390	)		(8,618	)		(267,438	)		(32,296	)
	$	1,811,743		$	1,901,646		$	3,816,936		$	5,454,958

16

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(7) Income Taxes, continued

At September 30, 2013 and December 31, 2012, differences between the basis of assets and liabilities reported in the accompanying financial statements and those recognized for tax reporting purposes in the PRC, and the related deferred taxes were as follows:

	As of			As of
	September 30,			December 31,
	2013			2012
Deferred tax assets:
Net operating losses	$	1,507,946		$	1,240,356
Liability for social insurance premiums and provident housing funds		75,000			75,000
Total deferred tax assets		1,582,946			1,315,356
Deferred tax liabilities:
Difference between book and tax amortization on mining rights		(543,736	)		(386,425	)
Total deferred tax liabilities		(543,736	)		(386,425	)
Net deferred tax assets before valuation allowance		1,039,210			928,931
Valuation allowance		(1,507,946	)		(1,240,356	)
Net deferred tax liabilities	$	(468,736	)	$	(311,425	)

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

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

(8) Shareholders’ Equity

General Reserve Fund

In accordance with the PRC Regulations on Enterprises with Foreign Investment, an enterprise established in the PRC with foreign investment is required to provide for certain statutory reserves, namely (i) General Reserve Fund, (ii) Enterprise Expansion Fund and (iii) Staff Welfare and Bonus Fund, which are appropriated from net profit as reported in the enterprise’s PRC statutory accounts. A Wholly Foreign-Owned Enterprise (“WFOE”) is required to allocate at least 10% of its annual after-tax profit to the General Reserve Fund until the balance of such fund has reached 50% of its respective registered capital.  A non-wholly-owned foreign invested enterprise is permitted to provide for the above allocation at the discretion of its board of directors. Appropriations to the Enterprise Expansion Fund and Staff Welfare and Bonus Fund are at the discretion of the board of directors for all foreign invested enterprises. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. As a result, a total amount of $496,396 has been appropriated to the accumulated statutory reserves (included in the retained earnings) by the Company as of September 30, 2013 and December 31, 2012 and the balance represents a fully funded General Reserve Fund:

17

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(8) Shareholders’ Equity

Following is an analysis of the general fund by subsidiary as of September 30, 2013 and December 31, 2012:

	Registered		General
	Capital		Reserve Fund
Jiangmen Huiyuan	$	-	$	-
Jiangmen Wealth Water		61,981		38,801
Guizhou Yufeng		61,981		39,211
Shangxi Wealth		619,806		418,384
	$	743,768	$	496,396

Preferred Stock

During the nine months ended September 30, 2013, the Company paid $12,240 in preferred stock dividends, all of these dividends were paid in-kind at $15 per preferred share based on the pricing of the subscription agreement dated on December 15, 2010 for the total issuance of 816 shares of preferred stock with each of the preferred shares convertible into five common shares.

The cumulative dividends on preferred stock was $43,227 and $100,081 for the three months ended September 30, 2013 and 2012, and $129,560 and $300,243 for the nine months ended September 30, 2013 and 2012.

Common Stock

During the nine months ended September 30, 2013, 7,484 preferred shares were converted into 37,420 common shares per subscription agreement.

During the nine months ended September 30, 2013, the Company issued 1,330,000 shares of common stock to independent consultants and legal representatives in exchange for services rendered to the Company. These shares were valued at $6,650,000 based on the market price of the common stock issued on the date of the grant and are included in general and administrative expenses in the accompanying condensed consolidated statements of income.

(9) Related Party Balances and Transactions

On August 28, 2013, the Company extended the $13.04 million (RMB80,000,000) short-term note with Industrial Bank Co., Limited (“IB”) for another 12 months, which are personally guaranteed by Mr. Ming Zhou Tan, CEO of the Company (“Mr. Tan”) and Ms. Hong Yu Du, Director (“Ms. Du”), and contains no financial maintenance covenants. The interest rate under the short-term note is based on the base rate, the interest rate set by the People’s Bank of China (6% as of September 30, 2013 and as of December 31, 2012). Interest under the short term note is paid monthly at the end of each month. As of September 30, 2013, all interest was fully paid.

On December 3, 2012, the Company entered into a $6.52 million (RMB40,000,000) short-term note agreement with IB with a one year maturity, which are personally guaranteed by Mr. Tan and Ms. Du, and contains no financial maintenance covenants. The interest rate under the short-term note agreement is based on the base rate, the interest rate set by the People’s Bank of China (6% as of September 30, 2013). Interest under the short term note is paid monthly at the end of each month. As of September 30, 2013, all interest was fully paid.

During the year ended December 31, 2010, the Company executed a lease agreement for its corporate office space owned by Mr. Tan. The lease is for a term of 5 years from January 1, 2011 to December 31, 2015 with monthly lease payments of $12,696. The Company incurred rent expense of approximately $38,000 and $114,000 related to this lease during the three and nine months ended September 30, 2013 and 2012.

18

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(10) Segment Information

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

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

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

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

● Other represents the cost of corporate activities and eliminations.

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

For the three months ended September 30, 2013
	Guangdong		Guizhou		Shanxi
	Huixin		Yefeng		Wealth		Corporate			Eliminations			Total
Net revenue	$	11,159,189	$	4,151,771	$	8,519,507	$	-		$	(2,469,136	)	$	21,361,331
Cost of revenue		6,797,757		2,556,186		4,690,425		-			(2,469,136	)		11,575,232
Gross profit		4,361,432		1,595,585		3,829,082		-			-			9,786,099
Selling and marketing		292,626		81,034		370,923		-			-			744,583
General and administrative		646,792		199,986		338,018		198,086			-			1,382,882
Research and development		170,423		9,009		-		-			-			179,432
Income from operations	$	3,251,591	$	1,305,556	$	3,120,141	$	(198,086	)	$	-		$	7,479,202

19

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(10) Segment Information, continued

For the three months ended September 30, 2012
	Guangdong		Guizhou		Shanxi
	Huixin		Yefeng		Wealth		Corporate			Eliminations			Total
Net revenue	$	11,510,345	$	4,596,526	$	9,024,816	$	-		$	(2,724,358	)	$	22,407,329
Cost of revenue		7,307,167		2,459,220		5,266,179		-			(2,724,358	)		12,308,208
Gross profit		4,203,178		2,137,306		3,758,637		-			-			10,099,121
Selling and marketing		331,546		85,957		380,171		-			-			797,674
General and administrative		734,084		159,289		318,260		279,309			-			1,490,942
Research and development		142,394		8,782		-		-			-			151,176
Income from operations	$	2,995,154	$	1,883,278	$	3,060,206	$	(279,309	)	$	-		$	7,659,329

For the nine months ended September 30, 2013
	Guangdong		Guizhou		Shanxi
	Huixin		Yefeng		Wealth		Corporate			Eliminations			Total
Net revenue	$	34,726,702	$	13,438,658	$	23,720,626	$	-		$	(7,883,432	)	$	64,002,554
Cost of revenue		20,974,974		8,223,217		13,560,255		-			(7,883,432	)		34,875,014
Gross profit		13,751,728		5,215,441		10,160,371		-			-			29,127,540
Selling and marketing		823,511		259,935		1,078,157		-			-			2,161,603
General and administrative		7,054,360		541,125		1,002,373		1,992,293			-			10,590,151
Research and development		506,989		26,798		-		-			-			533,787
Income from operations	$	5,366,868	$	4,387,583	$	8,079,841	$	(1,992,293	)	$	-		$	15,841,999

20

HUIXIN WASTE WATER SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(10) Segment Information, continued

For the nine months ended September 30, 2012
	Guangdong		Guizhou		Shanxi
	Huixin		Yefeng		Wealth		Corporate			Eliminations			Total
Net revenue	$	32,700,226	$	12,667,891	$	23,460,362	$	-		$	(7,529,939	)	$	61,298,540
Cost of revenue		20,791,108		6,782,660		13,702,699		-			(7,529,939	)		33,746,528
Gross profit		11,909,118		5,885,231		9,757,663		-			-			27,552,012
Selling and marketing		918,796		240,411		1,059,061		-			-			2,218,268
General and administrative		1,665,657		463,650		921,164		776,176			-			3,826,647
Research and development		443,853		26,869		-		-			-			470,722
Income from operations	$	8,880,812	$	5,154,301	$	7,777,438	$	(776,176	)	$	-		$	21,036,375

As of September 30, 2013
	Guangdong		Guizhou		Shanxi
	Huixin		Yefeng		Wealth		Corporate		Eliminations			Total
Current assets	$	60,651,315	$	8,277,251	$	34,122,174	$	5,359,923	$	(68,237,441	)	$	40,173,222
Property, plant and equipment,
land use and mining rights		2,591,964		84,979,745		5,962,278		-		-			93,533,987
Total assets	$	63,243,279	$	93,256,996	$	40,084,452	$	5,359,923	$	(68,237,441	)	$	133,707,209

As of December 31, 2012
	Guangdong		Guizhou		Shanxi
	Huixin		Yefeng		Wealth		Corporate		Eliminations			Total
Current assets	$	15,217,117	$	16,443,580	$	26,699,097	$	5,697,282	$	(25,976,962	)	$	38,080,114
Property, plant and equipment,
land use and mining rights		2,707,170		4,608,247		6,302,665		-		-			13,618,082
Deposit for mining
right acquisition		63,480,677		-		-		-					63,480,677
Total assets	$	81,404,964	$	21,051,827	$	33,001,762	$	5,697,282	$	(25,976,962	)	$	115,178,873

21

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

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

Company Overview

We are a leading producer and distributer of water purifying agents and High-performance Aluminate Calcium (“HAC”) powder, the core component of water purifying agents. We manufactured and distributed approximately 249,000 and 246,000 tons water purifying agent for the nine months ended September 30, 2013 and 2012, approximately 215,000 and 219,000 tons of high calcium aluminates powder for the nine months ended September 30, 2013 and 2012. Our products are distributed in the southern, south-western, mid-eastern, and eastern part of China. We supply water purifying products for industries such as printing and dyeing, paper making, municipal wastewater, phosphorus removal, and oil removal from washing water.

Our products are manufactured and distributed by our operating companies. Guangdong Huixin is engaged in the production and sale of water purifying agents. Water purifying agents’ core raw material is HAC powder, which is exclusively supplied to us by Guizhou Yufeng, a wholly owned subsidiary of Guangdong Huixin. Although Guizhou Yufeng sells HAC powder to third party customers, it prioritizes the supply to Guangdong Huixin over third party customers and ensures that its supply meets the demand of Guangdong Huixin before products are sold to other unaffiliated customers. Shanxi Wealth also manufactures HAC powder and distributes all of its products to third party customers. HAC powder’s core raw materials are aluminate ore and limestone, both of which can be supplied by the mines operated by the Company with its land use and mining rights agreements.

Results of Operations

The following table shows key components of our results of operations during the three and nine months ended September 30, 2013 and 2012, in both dollars and as a percentage of our total revenue.

	Three Months Ended September 30,
	2013			% of			2012			% of
				Revenue						Revenue
Net revenue	$	21,361,331			100.00	%	$	22,407,329			100.00	%
Cost of revenue		11,575,232			54.19	%		12,308,208			54.93	%
Gross profit		9,786,099			45.81	%		10,099,121			45.07	%
Operating expenses:
Selling and marketing		744,583			3.49	%		797,674			3.56	%
General and administrative		1,382,882			6.47	%		1,490,942			6.65	%
Research and development		179,432			0.84	%		151,176			0.67	%
Total operating expenses		2,306,897			10.80	%		2,439,792			10.88	%
Income from operations		7,479,202			35.01	%		7,659,329			34.19	%
Other income/(expense)
Interest income		29,879			0.14	%		79,596			0.36	%
Interest expense		(298,621	)		(1.40	)%		(228,123	)		(1.02	)%
Total other income/(expense)		(268,742	)		(1.26	)%		(148,527	)		(0. 66	)%
Income before provision for income taxes		7,210,460			33.75	%		7,510,802			33.53	%
Provision for income taxes		1,811,743			8.48	%		1,901,646			8.49	%
Net income	$	5,398,717			25.27	%	$	5,609,156			25.04	%

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	Nine Months Ended September 30,
	2013			% of			2012			% of
				Revenue						Revenue
Net revenue	$	64,002,554			100.00	%	$	61,298,540		100.00	%
Cost of revenue		34,875,014			54.49	%		33,746,528		55.05	%
Gross profit		29,127,540			45.51	%		27,552,012		44.95	%
Operating expenses:
Selling and marketing		2,161,603			3.38	%		2,218,268		3.62	%
General and administrative		10,590,151			16.55	%		3,826,647		6.24	%
Research and development		533,787			0.83	%		470,722		0.77	%
Total operating expenses		13,285,541			20.76	%		6,515,637		10.63	%
Income from operations		15,841,999			24.75	%		21,036,375		34.32	%
Other income /(expense)
Interest income		78,483			0.12	%		708,023		1.16	%
Interest expense		(882,000	)		(1.38	)%		(284,243	)	(0.46	)%
Total other income		(803,517	)		(1.26	)%		423,780		0.70	%
Income before provision for income taxes		15,038,482			23.49	%		21,460,155		35.01	%
Provision for income taxes		3,816,936			5.96	%		5,454,958		8.90	%
Net income	$	11,221,546			17.53	%	$	16,005,197		26.11	%

Three and Nine Months Ended September 30, 2013 and September 30, 2012:

Revenue:

Our consolidated revenue decreased by $1,045,998 or 5%, to $21,361,331 for three months ended September 30, 2013 from $22,407,329 for the three months ended September 30, 2012. The decrease in revenue for the three months ended September 30, 2013 was primarily due to decreased sales volume which resulted lower demand from existing customers and fewer new customers in both water purifying agents and HAC powder product lines, which was partially offset by the increase in sales price and appreciation of the average foreign currency exchange rate of RMB against US dollars, as compared to the same period in 2012. For the nine months ended September 30, 2013, our revenue increased by $2,704,014 or 4% to $64,002,554 from $61,298,540 for the nine months ended September 30, 2012. The increase in revenue for the nine months ended September 30, 2013 was primarily due to overall increase in sales volume from our existing customers in the first half of the year 2013, which was partially offset by the lower demand in the three months ended September 30, 2013 and the appreciation of the average foreign currency exchange rate of RMB against US dollars, as compared to the same period in 2012.

Our revenue from sales of water purifying agents for the three months ended September 30, 2013 was $11,159,189 and for the three months ended September 30, 2012 was $11,510,345, representing a decrease of $351,156 or approximately 3%.  The decrease in revenue for the three months ended September 30, 2013 was primarily due to a decrease in sales volume approximately 7% due to lower demand from existing customers and fewer new customers, which was partially offset by the increase in sales price approximately of 2% and appreciation of the average foreign currency exchange rate of RMB against US dollar, as compared to the same period in 2012. Our revenue from sales of water purifying agents for the nine months ended September 30, 2013 was $34,726,702 and for the nine months ended September 30, 2012 was $32,700,226 representing an increase of $2,026,476 or approximately 6%. The increase in revenue for the nine months ended September 30, 2013 was primarily due to increased sales volume of approximately 3% from expansion of our customer base and increased orders from our existing customers; and sales price increased by approximately 2% and the appreciation of the average foreign currency exchange rate of RMB against US dollars, as compared to the same period in 2012.

Our revenue from sales of HAC powder for the three months ended September 30, 2013 was $10,202,142 and for the three months ended September 30, 2012 was $10,896,984, representing a decrease of $694,842 or approximately 6%. The decrease in revenue for the three months ended September 30, 2013 was primarily due to a decrease of sales volume of approximately 12% due to lower demand from existing customers and fewer of new customers, which was offset by the increase in sales price of approximately 4% and appreciation of the average foreign currency exchange rate of RMB against US dollars, as compared to the same period in 2012. Our revenue from sales of HAC powder was $29,275,852 for the nine months ended September 30, 2013 and was $28,598,314 for the nine months ended September 30, 2012, representing an increase of $677,538 or approximately 2%. The increase in revenue for the nine months ended September 30, 2013 was primarily due to sales price increase of approximately 4% and the appreciation of the average foreign currency exchange rate of RMB against US dollars, which was partially offset by a sales volume decrease of approximately 2% due to lower demand from our customers, as compared to the same period in 2012.

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Cost of Revenue:

Our consolidated cost of revenue decreased by $732,976, or 6%, to $11,575,232 for the three months ended September 30, 2013 from $12,308,208 for the three months ended September 30, 2012. The decrease in the cost of revenue was primarily due to labor and overhead cost in line with our sales decreases; which was partially offset by higher amortization expense from the new mining right acquired during the first quarter of 2013 and decrease in cost of coal, additives and chemicals used in productions. The cost of revenue as a percentage of revenue was approximately the same at 55% during the three and nine months ended September 30, 2013 as compared to that of the same periods in 2012. For the nine months ended September 30, 2013, our consolidated cost of revenue increased by $1,128,486, or 3%, to $34,875,014 from $33,746,528 for the nine months ended September 30, 2013. The increase in the cost of revenue was primarily driven by higher amortization expense from the new mining right acquired during the first quarter of 2013, labor and overhead cost in line with our sales increases; which were offset by decreased cost of coal, additives and chemicals used in production. The cost of revenue as a percentage of revenue was approximately the same at 54% and 55 % during the three and nine months ended September 30, 2013 and 2012.

Cost of revenue from sales of water purifying agents for the three months ended September 30, 2013 was $6,797,757, a decrease of $509,410 or 7%, from $7,307,167 for the same period in 2012.  As a percentage of net revenue, cost of revenue from sales of water purifying agents was 61% and 63% for the three months ended September 30, 2013 and 2012. The decrease of cost of revenue from sales of water purifying agents was primarily attributable to the decrease of our revenue from sales of water purifying agents, the increase of labor and overhead cost, which was offset by decreases in cost of additives and chemicals used in our productions. Cost of revenue from sales of water purifying agents for the nine months ended September 30, 2013 was $13,900,040, an increase of $944,620 or 7%, from $12,955,420 for the same period in 2012.  As a percentage of net revenue, cost of revenue from sales of water purifying agents was 60% and 64% for the nine months ended September 30, 2013 and 2012. The increase of cost of revenue from sales of water purifying agents was primarily attributable to the increase of our revenue from sales of water purifying agents, the increase of labor and overhead cost, which was offset by decreases in cost of additives and chemicals used in our productions.

Cost of revenue from sales of HAC powder for the three months ended September 30, 2013 was $4,777,475, a decrease of $223,566 or 4%, from $5,001,041 for the same period in 2012.   As a percentage of net revenue, cost of revenue from sales of HAC powder approximated 47% and 46% for the three months ended September 30, 2013 and 2012. The decrease of cost of revenue from sales of HAC powder was primarily attributable to the decrease of our revenue from sales of HAC powder, the increase in amortization expense form the new mining right acquired during the first quarter of 2013, and the increase of raw material prices, labor and overhead cost. Cost of revenue from sales of HAC powder for the nine months ended September 30, 2013 was $13,900,040, an increase of $944,620 or 7%, from $12,955,420 for the same period in 2011. As a percentage of net revenue, cost of revenue from sales of HAC powder approximated 47% and 45% for the nine months ended September 30, 2013 and 2012. The increase of cost of revenue from sales of HAC powder was primarily attributable to the increase of our revenue from sales of HAC powder, the increase in amortization expense form the new mining right acquired during the first quarter of 2013, and the increase of raw material prices, labor and overhead cost.

Gross profit and Gross Profit Margin:

Our gross profit decreased by $313,022 or 3% to $9,786,099 for the three months ended September 30, 2013 from $10,099,121 for the three months ended September 30, 2012; the decrease was primarily due to overall decrease in demand of water purifying agents and HAC powder. For the nine months ended September 30, 2013, our gross profit increased by $1,575,528 or 6% to $29,127,540 from $27,552,012 for the nine months ended September 30, 2012; the increase was primarily due to overall increase in sales volume from our existing customers in the first half of the year 2013. Our gross profit margin (gross profit divided by net revenue) increased to 45.81% for the three months ended September 30, 2013 from 45.07% for the three months ended September 30, 2012, increased to 45.51% for the nine months ended September 30, 2013 from 44.95% for the nine months ended September 30, 2012.  The increase in gross margin was primarily due to the increases in sales price and decreases in cost of raw materials and coal used in our production.

Selling and Marketing Expenses:

Our selling and marketing expenses decreased by $53,091 or 7% to $744,583 for the three months ended September 30, 2013 from $797,674 for the three months ended September 30, 2012 and decreased by $56,665 or 3% to $2,161,603 for the nine months ended September 30, 2013 from $2,218,268 for the nine months ended September 30, 2012. The decrease in our selling and marketing expenses in 2013 was primarily attributable to the decrease of commission percentage paid to sales agents that offset the increases of payroll expenses resulting from increase of our head count and pay increase as compared to those in the same period of 2012.

General and Administrative Expenses:

Our general and administrative expenses decreased by $108,060 or 7% to $1,382,882 for the three months ended September 30, 2013 from $1,490,942 for the three months ended September 30, 2012; the decrease was primarily due to decrease in moving expense with no moving activities in 2013, as compared to same period in 2012. For the nine months ended September 30, 2013, our general and administrative expenses increased by $6,763,504 or 177% to $10,590,151 from $3,826,647 for the nine months ended September 30, 2012.  The increase in our general and administrative expenses was primarily attributable to $6,650,000 of stock-based compensation expenses recorded for common stock issued to independent consultants and legal representatives in consideration for their services rendered to the Company, and in our overall expenses including payroll, benefits and other office expenses.

Research and Development Cost:

Our research and development cost increased by $28,256 or 19% to $179,432 for the three months ended September 30, 2013 from $151,176 for the three months ended September 30, 2012 and increased by $63,065 or 13% to $533,787  for the nine months ended September 30, 2013 from $470,722 for the nine months ended September 30, 2012. We continue to incur expenses to improve and develop new products. We expect to continue to increase our research and development efforts to enhance the competitiveness of our products.

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Other income (Expense):

Our other expense increased by $120,215, or 81% to $268,742 for the three months ended September 30, 2013 from $148,527 for the three months ended September 30, 2012; the increase was primarily due to increase in interest expenses of $70,498 on short term loans, and decreased interest income generated from cash in the bank of $49,717. Other expense for the nine months ended September 30, 2013 increased by $1,227,297, or 290% to $803,517 from income of $423,780 for the nine months ended September 30, 2012, the increase was primarily due to increase in interest expense of $597,757 on short term loans, and decrease in interest income of $629,540, which was primarily due to a expired secured note receivable in the amount of $25 million which generated approximately $541,000 in interest income for the nine months ended September 30, 2012.

Net Income:

Net income decreased by $210,439 or 4% to $5,398,717 for the three months ended September 30, 2013 from $5,609,156 for the three months ended September 30, 2012; the decrease was primarily due to decrease in sales which was partially offset by the decrease in selling and marketing and general administrative expenses, as compared to the same period in 2012. For the nine months ended September 30, 2013, our net income decreased by $4,783,651 or 30% to $11,221,546 from $16,005,197 for the nine months ended September 30, 2012. The decrease of our net income was primarily due to increase in general and administrative expense of $6,650,000 related to stock-based compensation recorded for stocks issued to independent consultants and legal representatives during the nine months ended September 30, 2013 and increase in interest expense of $597,757 for the short-term loans anddecrease in interest income from note receivable of approximately $541,000, as compared to that in the same period of 2012.

Liquidity and Capital Resources

We had cash balance of approximately $36 million as of September 30, 2013, as compared to $34 million as of December 31, 2012.  

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

We had working capital of approximately $16.3 million and $12.1 million as of September 30, 2013 and December 31, 2012. The increase in working capital was primarily due to increase in cash flow from operation activities which was offset by cash flow used in mining rights acquisition.

Our accounts receivable has been a small portion of our current assets, representing $3.1 million and $2.7 million, or 7.7% and 7.2% of current assets, as of September 30, 2013 and December 31, 2012.  We began to offer longer credit terms to our good standing customers starting in 2011 per the requests of our customers due to the tightening monetary policies imposed by the PRC Government in 2011.  If customers responsible for a significant amount of accounts receivable were to become insolvent or otherwise unable to pay for our products, or to make payments in a timely manner, our liquidity and results of operations could be adversely affected. An economic or industry downturn could materially adversely affect the servicing of these accounts receivable, which could result in longer payment cycles, increased collections costs and defaults in excess of management’s expectations. A significant deterioration in our ability to collect on accounts receivable could affect our cash flow and working capital position and could also impact the cost or availability of financing available to us.

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

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Our aging of accounts receivables could result in our inability to collect receivables requiring us to increase our doubtful accounts reserve, which would decrease our net income and working capital. We experienced no bad debt expense during nine months ended September 30, 2013 and the year ended December 31, 2012. As of September 30, 2013, we believed it was appropriate not to recognize bad debt expense primarily due to the subsequent collections made on our receivable balance and our historical ability to collect our accounts receivable. Bad debt expense was $0 for the three and nine months ended September 30, 2013 and the year ended December 31, 2012.

Inventories amounted to approximately $1.2 million as of September 30, 2013, as compared to $1.4 million as of December 31, 2012.   Since our mines can provide stable and sufficient supplies of raw materials for our production and our stable relationship with other suppliers, we have not experienced any shortage in raw materials as our sales continue to grow.  We do not need to maintain large amounts of raw materials.  We might expect to experience increase in our inventory levels in future, including both of raw material and finished goods to meet the market demands.

On August 28, 2013, we extended the short-term note with Industrial Bank Co., Limited (“IB”) in the amount of approximately $13,036,896 (RMB80,000,000) for 12 months with the new maturity date on August 27, 2014. The interest rate under the short-term note agreement is based on the base rate, the interest rate set by the People’s Bank of China. This short-term note agreement is personally guaranteed by Mr. Tan and Ms. Du and contains no maintenance covenants.

We are required to contribute for our employees to the Chinese government’s social insurance funds, including pension insurance, medical insurance, unemployment insurance, job injuries insurance, maternity insurance, and housing provident funds in accordance with relevant regulations. Total contributions to the funds were approximately $971,098 for the nine months ended September 30, 2013. We expect that the amount of our contribution to the government’s social insurance funds and housing provident funds will increase in the future as we expand our workforce and operations.  In the years prior to December 31, 2010, we have approximately $300,000 of unpaid social insurance premiums and housing provident funds and potential penalties which are included in the accrued expenses.

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

Future Capital Expenditures

In future years, as we accelerate expansion, we expect continued capital expenditure for adding manufacturing equipment, expanding workshops and harbors, and modernizing existing equipment. We believe that such expansion will have a material impact on liquidity, capital resources and/or results of operation.  However, we believe our existing cash, cash equivalents and cash flows from operations and proceeds from the completed financing in December 15, 2010 will be sufficient to meet our presently anticipated future cash needs to bring all of our facilities into full production. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue.

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

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

Cash Flow

	Nine Months Ended September 30,
	2013			2012
Net cash provided by operating activities	$	17,529,597		$	21,323,402
Net cash used for investing activities		(16,341,896	)		(6,549,865	)
Net cash provided by financing activities		-			13,231,504
Effect of exchange rate changes on cash and cash equivalents		750,304			91,887
Cash and cash equivalents at the beginning of period		33,871,287			26,383,537
Cash and cash equivalents at the end of period	$	35,809,292		$	54,480,465

Net cash provided by operating activities was $17.5 million for the nine months ended September 30, 2013, compared to net cash provided by operating activities of $21.3 million for the nine months ended September 30, 2012. The decrease of net cash provided by operating activities was primarily due to increase of account receivable in the amount approximately of $315,000 and decrease of accrued liabilities in the amount of approximately $1.3 million which was partially offset by the decrease of inventories of approximately $262,000 during the nine months ended September 30, 2013. During the nine months ended September 30, 2012, net cash provided by operating activities was attributable to decrease of advance payment to suppliers in the amount of approximately $3.8 million which was partially offset by increase in accounts receivable of approximately $873,000. 

Investing activity during the nine months ended September 30, 2013 included cash used for the mining rights acquisition in the amount of approximately $16.3 million.  In addition, we purchased equipment of $91,888 and $209,113 during the nine months ended September 30, 2013 and 2012.

Financing activities during the nine months ended September 30, 2013 included short-term note with Industrial Bank Co., Limited (“IB”) in the amount of approximately $12.9 million (RMB80,000,000) extended for 12 months with the new maturity date on August 27, 2014. Financing activities during the nine months ended September 30, 2012 were related to releases of restricted cash pursuant to the Holdback Escrow Agreements and related Amendments to the original agreements in the amounts of $550,000 and net cash provided from short term loans in the amount approximately $12.7 million (RMB80,000,000).  

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

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

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

	Nine Months Ended September 30,
	2013			2012
Effect on beginning cash at period end exchange rate	$	900,068		$	138,594
Effect from operating activities during the period		223,419			(36,401	)
Effect from investing activities during the period		(373,183	)		11,008
Effect from financing activities during the period		-			(21,313	)
Effect of exchange rate changes on cash	$	750,304		$	91,887

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Critical Accounting Policies, Estimates and Assumptions

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

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

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

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

Allowance for doubtful accounts. In estimating the collectability of accounts receivable we analyze historical write-offs, changes in our internal credit policies and customer concentrations when evaluating the adequacy of our allowance for doubtful accounts. Differences may result in the amount and timing of expenses for any period if we make different judgments or use different estimates. Our accounts receivable represent approximately 3% of our current assets and total assets. Our realization on accounts receivable, expressed in terms of United States dollars may be affected by fluctuations in currency rates since the customer’s currency is frequently a currency other than United States dollars.

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

Amortization policy of mining rights. Mining rights, which are for definite terms ranging from 14 to 30 years, are amortized using the units of production method. In applying this method, the numerator is current year production and the denominator is expected production from mines over the life of the individual mining rights, with consideration of production limitations imposed by the mining rights agreements.

 Taxation

Cayman Islands

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

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

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Hong Kong

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

China

Before the implementation of the New CIT Law, Foreign Invested Enterprise (“FIE") established in the PRC, unless granted preferential tax treatments by the PRC government, were generally subject to an earned income tax, or CIT, rate of 33%, which included a 30% state income tax and a 3% local income tax. On March 16, 2007, the National People’s Congress of China passed the New CIT Law, and on November 28, 2007, the State Council of China passed the CIT Law Implementing Rules which took effect on January 1, 2008. The CIT Law and its implementing rules impose a unified CIT of 25% on all domestic-invested enterprises and FIEs, unless they qualify under certain limited exceptions.

In addition to the changes to the current tax structure, under the New CIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a resident enterprise and will normally be subject to a CIT of 25% on its global income. The implementing rules define the term “de facto management bodies” as “an establishment that exercises, in substance, overall management and control over the production, business, personnel, accounting, etc., of a Chinese enterprise.” If the PRC tax authorities subsequently determine that we should be classified as a resident enterprise, then our organization’s global income will be subject to PRC income tax of 25%. For detailed discussion of PRC tax issues related to resident enterprise status, see “Risk Factors – Risks Related to Our Business” in our Form 10-K for the fiscal year ended December 31, 2012, which disclosed that under the New CIT Law, we may be classified as a “resident enterprise” of China for tax purpose. Such classification will likely result in unfavorable tax consequences to us and our non-PRC shareholders.

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

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

Off Balance Sheet Transactions

We do not have any off-balance sheet transactions.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed in our reports filed or submitted to the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms, and that information is accumulated and communicated to management, including the principal executive and financial officer as appropriate, to allow timely decisions regarding required disclosures. Our President and Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures as of September 30, 2013, pursuant to Rule 13a-15(b) under the Exchange Act.  Based on that evaluation, the President and Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were not effective to ensure that information required to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms due to material weakness related to a lack of accounting personnel with sufficient experience in maintaining books and records and preparing financial statements in accordance with U.S. GAAP, which existed as of December 31, 2012, that have not been fully remediated as of September 30, 2013.

Remediation Activities

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

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

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

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

Changes in Internal Control over Financial Reporting

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

During the quarter ended September 30, 2013, the Company's management implemented or continued to implement the steps set forth above under “Remediation Activities” to improve the quality of its Internal Control over Financial Reporting.

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PART II—OTHER INFORMATION

Item 1A. Risk Factors.

There are no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC on March 29, 2013.

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

(a)   Unregistered Sales of Equity Securities

(b)   Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None. 

Item 6. Exhibits.

(a)  Exhibits

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

*Filed with this report.

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

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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.

	HUIXIN WASTE WATER SOLUTIONS, INC.
Dated: November 14, 2013	By:	/s/ Mingzhuo Tan
		Mingzhuo Tan Chief Executive Officer, President and Chairman of the Board of Directors (Duly Authorized Officer and Principal Executive Officer)

Dated: November 14, 2013	By:	/s/ Tin Nang (Chris) Lui
		Tin Nang (Chris) Lui Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer)

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