10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549   

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-34246

LITHIUM & BORON TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

Nevada	98-0514768
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

60 East Ren-Min Road
Dachaidan

(Da Qaidam Administrative Committee)
XaiXi, Qinghai Province 817000

(Address of principal executive offices)

 +86 (24) 2519-7699

(Registrant’s telephone number, including area code)

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

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).       YES  ☐     NO  ☒

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (do not check if a smaller reporting company)	Smaller reporting company ☒
Emerging Growth Company ☐

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS

As of November 13, 2020 there were 185,986,370 shares of common stock outstanding.  

Lithium & Boron Technology, Inc.

Table of Contents

		Page
Note about Forward-Looking Statements
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	34
	Exhibit Index	34
	Signatures	35

NOTE ABOUT FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which include, but are not limited to, statements concerning our projected revenues, expenses, gross profit and income, mix of revenue, demand for our products, the benefits and potential applications for our products, the need for additional capital, our ability to obtain and successfully perform additional new contract awards and the related funding and profitability of such awards, the competitive nature of our business and markets and product qualification requirements of our customers. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by us. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “potential,” “believes,” “seeks,” “hopes,” “estimates,” “should,” “may,” “will,” “with a view to” and variations of these words or similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Such factors include, but are not limited to the following:

● our goals and strategies;

● our expansion plans;

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

● our expectations regarding demand for our products;

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

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

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

● our ability to attract and retain quality employees;

● our ability to pursue strategic acquisitions and alliances;

● competition in our industry in China;

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

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

● market acceptance of our products.

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

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

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

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

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LITHIUM & BORON TECHNOLOGY, INC

CONSOLIDATED BALANCE SHEETS

	SEPTEMBER 30, 2020 (UNAUDITED)			DECEMBER 31, 2019
ASSETS
CURRENT ASSETS
Cash and equivalents	$	1,173,571		$	160,024
Accounts receivable		137,808			577,387
Notes receivable		366,258			79,478
Other receivables		19,857			354
Prepaid expense		3,133			-
Advances to suppliers, net		92,938			7,490
Due from related parties		1,807,187			554,527
Inventories		720,196			1,802,647
Total current assets		4,320,948			3,181,907
NONCURRENT ASSETS
Long-term prepaid expense		16,006			-
Due from related party		1,352,763			-
Property and equipment, net		1,504,706			1,403,681
Construction in progress		33,264			1,635,912
Total noncurrent assets		2,906,739			3,039,593
TOTAL ASSETS	$	7,227,687		$	6,221,500
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	300,971		$	332,706
Unearned revenue		54,026			117,188
Accrued liabilities and other payables		1,479,909			1,095,698
Taxes payable		352,888			295,255
Due to related party		1,029,355			678,533
Total current liabilities		3,217,149			2,519,380
DEFERRED INCOME		1,248,880			1,360,626
TOTAL LIABILITIES		4,466,029			3,880,006
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 500,000,000 shares authorized, 185,968,370 shares issued and outstanding		185,968			185,968
Paid-in capital deficiency		(6,666,351	)		(6,666,351	)
Statutory reserve		146,650			71,252
Accumulated other comprehensive income (loss)		31,071			(14,600	)
Retained earnings		8,338,898			8,765,225
TOTAL COMPANY STOCKHOLDERS' EQUITY		2,036,236			2,341,494
Noncontrolling interest		725,422			-
TOTAL EQUITY		2,761,658			2,341,494
TOTAL LIABILITIES AND EQUITY	$	7,227,687		$	6,221,500

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

5

LITHIUM & BORON TECHNOLOGY, INC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	NINE MONTHS ENDED SEPTEMBER 30,						THREE MONTHS ENDED SEPTEMBER 30,
	2020			2019			2020			2019
Sales	$	5,458,052		$	4,979,227		$	2,229,722		$	1,866,027
Sales - related party		202,130			112,855			100,570			17,300
Total sales		5,660,182			5,092,082			2,330,292			1,883,327
Cost of sales		5,031,305			4,233,772			2,126,770			1,533,599
Gross profit		628,877			858,310			203,522			349,728
Operating expenses
Selling		125,407			279,755			39,858			85,568
General and administrative		922,681			550,506			308,686			159,339
Total operating expenses		1,048,088			830,261			348,544			244,907
Income (loss) from operations		(419,211	)		28,049			(145,022	)		104,821
Non-operating income
Financial expense		(3,365	)		(3,893	)		(2,974	)		(2,800	)
Other income		39,651			-			26,246			-
Interest income		1,833			-			999			-
Subsidy income		143,726			365,327			48,091			271,680
Total non-operating income, net		181,845			361,434			72,362			268,880
Income (loss) before income tax		(237,366	)		389,483			(72,660	)		373,701
Income tax expense		47,117			106,127			21,184			73,605
Income (loss) from continuing operations		(284,483	)		283,356			(93,844	)		300,096
Gain on disposal of discontinued entities, net of tax		-			5,666,187			-			5,666,187
Loss from operations of discontinued entities, net of tax		-			(215,835	)		-			(93,299	)
Income (loss) before noncontrolling interest		(284,483	)		5,733,708			(93,844	)		5,872,984
Less: loss attributable to noncontrolling interest from continuing operations		(8,554	)		-			(5,809	)		-
Net income (loss) to the Company		(275,929	)		5,733,708			(88,035	)		5,872,984
Other comprehensive item
Foreign currency translation gain attributable to discontinued operations		-			118,877			-			112,142
Foreign currency translation gain (loss) attributable to the Company		45,671			(176,065	)		162,633			(166,446	)
Foreign currency translation gain attributable to noncontrolling interest		29,234			-			27,692			-
Comprehensive income (loss) attributable to the Company	$	(230,258	)	$	5,676,520		$	74,598		$	5,818,680
Comprehensive gain attributable to noncontrolling interest	$	20,680		$	-		$	21,883		$	-
Basic and diluted weighted average shares outstanding		185,968,370			185,968,370			185,968,370			185,968,370
Basic and diluted income (loss) per share from continuing operations	$	(0.00	)	$	0.00		$	(0.00	)	$	0.00
Basic and diluted income per share from discontinued operations	$	-		$	0.03		$	-		$	0.03
Basic and diluted net income (loss) per share	$	(0.00	)	$	0.03		$	(0.00	)	$	0.03

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

6

LITHIUM & BORON TECHNOLOGY, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	NINE MONTHS ENDED SEPTEMBER 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) including noncontrolling interest	$	(284,483	)	$	5,733,708
Adjustments to reconcile income (loss) including noncontrolling interest to net cash provided by operating activities:
Depreciation and amortization		236,026			235,286
Provision for bad debts		-			30,113
Gain on sale of subsidiaries		-			(5,666,187	)
Changes in deferred income		(141,167	)		(73,532	)
(Increase) decrease in assets and liabilities:
Accounts receivable		164,434			52,587
Other receivables		(18,997	)		10,255
Advances to suppliers		(83,051	)		54,710
Inventories		1,097,154			(216,528	)
Prepaid expense		(18,642	)		-
Accounts payable		(38,817	)		166,955
Unearned revenue		(64,304	)		66,269
Accrued liabilities and other payables		248,051			(209,794	)
Taxes payable		49,122			85,478
Net cash provided by operating activities		1,145,326			269,320
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(301,080	)		-
Construction in progress		(32,400	)		-
Cash disposed in disposal of subsidiaries		-			(149,928	)
Net cash used in investing activities		(333,480	)		(149,928	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution from noncontrolling interest		715,130			-
Changes in due from related parties		(892,286	)		1,348,508
Changes in due to related parties		348,724			(1,285,575	)
Net cash provided by financing activities		171,568			62,933
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND EQUIVALENTS		30,133			(15,972	)
NET INCREASE IN CASH AND EQUIVALENTS		1,013,547			166,353
CASH AND EQUIVALENTS, BEGINNING OF PERIOD		160,024			163,145
CASH AND EQUIVALENTS, END OF PERIOD	$	1,173,571		$	329,498
Supplemental cash flow data:
Income tax paid	$	-		$	-
Interest paid	$	-		$	-
Supplemental disclosures of non-cash investing and financing activities:
Sale of the construction in progress to a related party company	$	1,632,277		$	-

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

7

LITHIUM & BORON TECHNOLOGY, INC

STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIT)

NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019

(UNAUDITED)

	Common Stock				Paid-in capital			Statutory		Accumulated other			Retained						Noncontrolling
	Shares		Amount		(deficiency)			reserves		comprehensive loss			earnings			Total			interest
Balance at January 1, 2020		185,968,370	$	185,968	$	(6,666,351	)	$	71,252	$	(14,600	)	$	8,765,225		$	2,341,494		$	-
Net loss		-		-		-			-		-			(230,628	)		(230,628	)		-
Dividend accrued		-		-		-			-		-			(25,000	)		(25,000	)		-
Foreign currency translation loss		-		-		-			-		(59,196	)		-			(59,196	)		-
Balance at March 31, 2020		185,968,370		185,968		(6,666,351	)		71,252		(73,796	)		8,509,597			2,026,670			-
Net loss		-		-		-			-		-			42,734			42,734			(2,745	)
Capital contribution		-		-		-			-		-			-			-			704,742
Dividend accrued		-		-		-			-		-			(25,000	)		(25,000	)		-
Statutory reserve		-		-		-			64,424		-			(64,424	)		-			-
Foreign currency translation loss		-		-		-			-		(57,766	)		-			(57,766	)		1,542
Balance at June 30, 2020		185,968,370		185,968		(6,666,351	)		135,676		(131,562	)		8,462,907			1,986,638			703,539
Net loss		-		-		-			-		-			(88,035	)		(88,035	)		(5,809	)
Dividend accrued		-		-		-			-		-			(25,000	)		(25,000	)		-
Statutory reserve		-		-		-			10,974		-			(10,974	)		-			-
Foreign currency translation gain		-		-		-			-		162,633			-			162,633			27,692
Balance at September 30, 2020		185,968,370	$	185,968	$	(6,666,351	)	$	146,650	$	31,071		$	8,338,898		$	2,036,236		$	725,422

	Common Stock				Paid-in capital			Statutory			Accumulated other			Retained
	Shares		Amount		(deficiency)			reserves			comprehensive loss			earnings			Total
Balance at January 1, 2019		185,968,370	$	185,968	$	(7,645,727	)	$	780,682		$	(11,951	)	$	1,828,717		$	(4,862,311	)
Net loss		-		-		-			-			-			(95,686	)		(95,686	)
Dividend accrued		-		-		-			-			-			(25,000	)		(25,000	)
Foreign currency translation loss		-		-		-			-			(44,874	)		-			(44,874	)
Balance at March 31, 2019		185,968,370		185,968		(7,645,727	)		780,682			(56,825	)		1,708,031			(5,027,871	)
Net loss		-		-		-			-			-			(43,590	)		(43,590	)
Dividend accrued		-		-		-			-			-			(25,000	)		(25,000	)
Foreign currency translation gain		-		-		-			-			41,990			-			41,990
Balance at June 30, 2019		185,968,370		185,968		(7,645,727	)		780,682			(14,835	)		1,639,441			(5,054,471	)
Net loss		-		-		-			-			-			5,872,984			5,872,984
Disposal of subsidiaries		-		-		979,376			(780,682	)		-			-			198,694
Dividend accrued		-		-		-			-			-			(25,000	)		(25,000	)
Foreign currency translation loss		-		-		-			-			(54,304	)		-			(54,304	)
Balance at September 30, 2019		185,968,370	$	185,968	$	(6,666,351	)	$	-		$	(69,139	)	$	7,487,425		$	937,903

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

8

LITHIUM & BORON TECHNOLOGY, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2020 (UNAUDITED) AND DECEMBER 31, 2019

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

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

The Company formerly sold plate heat exchangers and heat pumps and sold these operations on September 30, 2019 recording them as discontinued operations.

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

The Acquisition was structured as a tax-free reorganization. As a result of the Share Exchange Agreement, Mid-heaven BVI’s shareholders own approximately 57% of the combined company.  For accounting purposes, the transaction was accounted for as a reverse acquisition of the Company by Mid-heaven BVI.

The main operating entity, Qinghai Technology was incorporated December 18, 2018. The business of Qinghai Technology was carved out of the business of Qinghai Zhongtian Boron & Lithium Mining Co., Ltd (“Qinghai Mining”) on December 20, 2018. Qinghai Mining was founded March 6, 2001 and engaged in manufacture and wholesale of boric acid and related compounds for industrial and consumer usage. Qinghai Technology obtains its raw material minerals exclusively from Qinghai Mining and currently processes boric acid by crushing and processing ore. 

On September 30, 2019, Heat HP, Inc. and Heat PHE, Inc, wholly owned subsidiaries of the Company, sold all of their respective equity interests in Jinhui, SmartHeat Investment, SmartHeat Trading, SmartHeat Pump and Heat Exchange for $353. The equity interests were sold to individuals and businesses in the PRC. Each subsidiary was sold for nominal cash consideration as below and, as the transactions were structured as purchases of equity interests, the subsidiary companies retained all liabilities when purchased. Heat HP, Inc. and Heat PHE, Inc. did not have any operations and mainly serve the purpose as holding companies.

SmartHeat Jinhui (Beijing) Energy Technology Ltd - 100 RMB ($15)

SmartHeat (China) Investment Ltd - 400 RMB ($56)

SmartHeat (Shanghai) Trading Co., Ltd - 400 RMB ($56)

SmartHeat (Shenyang) Heat Pump Technology Co., Ltd - 400 RMB ($56)

SanDeKe Co., Ltd - 600 RMB ($85)

SmartHeat Heat Exchange Equipment Co - 600 RMB ($85)

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

9

In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China. The World Health Organization declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which continues to spread to additional countries, and disrupts supply chains and affecting production and sales across a range of industries as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak. The COVID-19 outbreak impacted the Company’s operations for the first quarter of 2020.  The Company had less production in the first quarter of 2020; the Company’s factory was reopened one month later than originally planned, and it did not resume production one week after the factory reopened due to the shortage of master liquid pool resulting from the longer period of shutdown of the machine.  The cost of coal increased during the first quarter of 2020 due to the overall lockdown in China. The Company’s sales also decreased for the first quarter of 2020 due to logistics restrictions put into place to curb travel. To facilitate sales, the Company reduced its selling price by RMB 50 ($7) per tonne to certain customers.  The availability of transportation vehicles increased to meet the market’s needs since April 2020.  In addition, the Company was able to procure sulfuric acid, a major raw material, from a local supplier at lower prices than usual due to excess supplies on the market.  The Company’s production and sales has been increasing since April 2020. Since April 2020, there were some new COVID-19 cases discovered in a few provinces of China as of today, however, the number of new cases are not significant due to PRC government’s strict control, and the Company does not believe the new cases would have a significant impact on the Company’s operations.

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern

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

As reflected in the accompanying consolidated financial statements, the Company had net loss of $275,929 and $88,035 for the nine and three months ended September 30, 2020, respectively, which raise substantial doubt about the Company’s ability to continue as a going concern.

In addition to current boric acid production business, the Company plans to produce lithium carbonate electric vehicle batteries through a recently established JV from brine that is provided by Qinghai Technology for free. The cost for the brine is immaterial as it is pumped out directly from the nearby Salt Lake without any charge. Management also intends to raise additional funds by way of a private or public offering, or by obtaining loans from banks or others.  While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

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

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Basis of Presentation

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

The interim consolidated financial information as of September 30, 2020 and for the nine and three-month periods ended September 30, 2020 and 2019 were prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP were not included. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, previously filed with the SEC.

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

Principles of Consolidation 

For the nine and three months ended September 30, 2020, the accompanying consolidated financial statements include the accounts of the Company’s US parent, and Mid-heaven BVI and its subsidiaries, Sincerity, Salt-Lake, Qinghai Technology and Qinghai Zhongli, which are collectively referred to as the “Company.” For the nine and three months ended September 30, 2019, the accompanying consolidated financial statements include the accounts of the Company’s US parent, and its subsidiaries Heat HP and Heat PHE, and their subsidiaries SanDeKe, Jinhui, SmartHeat Investment, SmartHeat Trading, SmartHeat Pump, and Heat Exchange and Mid-heaven BVI and its subsidiaries, Sincerity, Salt-Lake and Qinghai Technology, which are collectively referred to as the “Company.” All significant intercompany accounts and transactions were eliminated in consolidation. The consolidated balance sheet at December 31, 2019 did not include the balance sheets of the Company’s subsidiaries that were sold on September 30, 2019.

Use of Estimates

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

Cash and Equivalents

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

Accounts Receivable, net

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Based on historical collection activity, the Company had allowance of $0 at September 30, 2020 and December 31, 2019.

Advances to Suppliers, net

The Company makes advances to certain vendors to purchase raw material, tools and equipment for production. The advances are interest-free and unsecured. As of September 30, 2020, and December 31, 2019, the Company had gross advance to suppliers of $95,570 and $7,490, respectively, and the Company had allowance for advances to suppliers of $2,632 and $0, respectively. In addition, as of September 30, 2020, advances to suppliers also included a prepayment of $29,368 to a third party company for purchasing equipment and a land use right; total purchase price is $161,525, the remaining $132,157 will be paid within three days after the completion of the land certificate and related deed, or the prepayment will be returned to the Company it failure to obtain the land use certificate and related deed.

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Inventories, net

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

Property and Equipment, net

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

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

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

Impairment of Long-Lived Assets

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

Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized based on the excess of the carrying amount over the fair value of the assets. Fair value generally is determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company believes that, as of September 30, 2020 and December 31, 2019, there was no significant impairments of its long-lived assets.

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

Deferred Income

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

Unearned Revenue

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

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Revenue Recognition

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

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

Cost of Sales

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

Research and Development Costs

Research and development (“R&D”) costs are expensed as incurred and included in general and administrative expenses. These costs primarily consist of cost of materials used, salaries paid for the Company’s development department and fees paid to third parties. R&D costs for the nine and three months ended September 30, 2020 and 2019 were immaterial.

Share-Based Compensation

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

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

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

Income Taxes

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

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

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Under the provisions of FASB ASC Topic 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statement of income.  At September 30, 2020 and December 31, 2019, the Company did not take any uncertain positions that would necessitate recording a tax related liability.  

Noncontrolling Interests

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

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

On April 15, 2020, Qinghai Technology and Xi’an Jinzang formed a JV company Qinghai Zhongli to process brine supplied by Qinghai Technology. Qinghai Technology owns 51% of the JV and Xi’ Jinzang owns the remaining 49%. During the nine and three months ended September 30, 2020, the Company had loss of $8,554 and $5,809 attributable to the noncontrolling interest. 

Concentration of Credit Risk

Cash includes cash on hand and demand deposits in accounts maintained within China. Balances at financial institutions within China are not covered by insurance. The Company has not experienced any losses in such accounts.

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

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

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

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

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Foreign Currency Translation and Comprehensive Income (Loss)

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

Statement of Cash Flows

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

Fair Value of Financial Instruments

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

Fair Value Measurements and Disclosures

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

● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

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

As of September 30, 2020 and December 31, 2019, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value. 

Leases

On January 1, 2019, the Company adopted ASU  No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet for all leases with terms longer than 12 months and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company concluded the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements since the Company does not have any lease that is longer than 12 months. 

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Segment Reporting

FASB ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Management determined the Company’s operations constitute a single reportable segment in accordance with ASC 280. The Company currently operates in one business and industry segment: manufacture and sale of boric acid. 

Reclassification

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

New Accounting Pronouncements 

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

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within FASB ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is evaluating the impact this update will have on its consolidated financial statements.

3. INVENTORIES, NET 

Inventories at September 30, 2020 and December 31, 2019, respectively, were as follows: 

	2020		2019
Raw materials	$	280,018	$	311,049
Finished goods		440,178		1,491,598
Total	$	720,196	$	1,802,647

4. NOTES RECEIVABLE – BANK ACCEPTANCES

The Company sold goods to its customers and received notes (bank acceptances) from them in lieu of payment. These bank acceptances were issued by customers to the Company and would be honored by the applicable bank. The Company may hold a bank acceptance until the maturity for full payment, or have the bank acceptance cashed out by the bank at a discount at an earlier date, or transfer the bank acceptance to its vendors in lieu of payment for their own obligations. As of September 30, 2020 and December 31, 2019, the Company had notes receivable of $366,258 and $79,478, respectively; and at September 30, 2020, the Company had $1.30 million notes receivable that were endorsed to its vendors, in lieu of payment. The Company was contingently liable for these notes receivable until paid.

5. OTHER RECEIVABLES

Other receivables consisted of the following at September 30, 2020 and December 31, 2019:

	2020		2019
VAT tax receivable	$	19,503	$	-
Other receivable – sale of discontinued operations		354		354
Total	$	19,857	$	354

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6. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following at September 30, 2020 and December 31, 2019, respectively:

	2020			2019
Structures and improvements	$	461,115		$	450,136
Production equipment		2,752,902			2,451,859
Vehicle		67,869			-
Equipment		254,758			248,692
Total		3,536,644			3,150,687
Less: accumulated depreciation		(2,031,938	)		(1,747,006	)
Property and equipment, net	$	1,504,706		$	1,403,681

Depreciation for the nine months ended September 30, 2020 and 2019 was $236,026 and $235,286, respectively.

Depreciation for the three months ended September 30, 2020 and 2019 was $84,483 and $76,141, respectively.

7. CONSTRUCTION IN PROGRESS

As of September 30, 2020 and December 31, 2019, the Company had construction in progress of $33,264 and $1,635,912, respectively. As of December 31, 2019, the construction in progress was mainly for Test and Experimental Plant I, which has no production currently; due to the existing coal-supported boiler in Plant I not meet the environment protection standard, and the delay of the government’s installing and connecting a natural gas pipeline to implement a Coal-to-Gas conversion project resulting from various factors including the Coronavirus outbreak, Qinghai Technology sold the Test and Experimental Plant I to Qinghai Mining at cost of RMB 11.41 million ($1.63 million) (Note 10) in September 2020. The payment term is five years with annual interest of 4.75%.  The first payment of $323,050 is due September 30, 2021. Qinghai Mining uses its accounts receivable as the pledge for the repayment, and  has the right to repay the purchase price in full any time before the maturity date.

8. TAXES PAYABLE

Taxes payable consisted of the following September 30, 2020 and December 31, 2019, respectively:

	2020		2019
Other	$	39,361	$	29,350
VAT		313,527		265,905
Taxes payable	$	352,888	$	295,255

9. ACCRUED LIABILITIES AND OTHER PAYABLES 

Accrued liabilities and other payables consisted of the following at September 30, 2020 and December 31, 2019, respectively:

	2020		2019
Advances from third parties	$	4,720	$	1,049
Other		524,000		534,275
Accrued salary		951,189		560,374
Total	$	1,479,909	$	1,095,698

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

As of September 30, 2020 and December 31, 2019, other mainly consisted of 1) dividend payable to Northtech of $475,000 and $400,000, respectively; and 2) payables for professional fees and other miscellaneous expenses of $49,000 and $134,275, respectively. 

As of September 30, 2020, accrued salary also included $840,000 accrued salary for three senior officers. As of December 31, 2019, accrued salary also included $480,000 accrued salary for three senior officers.

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10. RELATED PARTY TRANSACTIONS

Qinghai Technology purchased raw material boron rock from Qinghai Mining (owned by three major shareholders of the Company); in addition, Qinghai Technology sometimes received no-interest short-term advances from Qinghai Mining for daily operational needs. As of September 30, 2020 and December 31, 2019, due from Qinghai Mining (representing the net amount of intercompany transactions between Qinghai Technology and Qinghai Mining) was $3.16 million and $0.55 million, respectively. Qinghai Technology purchased $1,188,802 and $1,113,250 boron ore from Qinghai Mining during the nine months ended September 30, 2020 and 2019, respectively. Qinghai Technology purchased $594,276 and $518,870 boron ore from Qinghai Mining during the three months ended September 30, 2020 and 2019, respectively.

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

In September 2020, Qinghai Technology sold the Test and Experimental Plant I to Qinghai Mining at cost of RMB 11.41 million ($1.68 million) (see Note 7). The payment term is five years with annual interest of 4.75%.  The first payment of $323,050 is due September 30, 2021. As of September 30, 2020, the future minimum payment for next five years is: $323,050, $323,050, $323,050, $323,050 and $383,612.  Qinghai Mining uses its accounts receivable as the pledge for the repayment, and  has the right to repay the purchase price in full any time before the maturity date.

Qinghai Technology used equipment for production that belongs to Qinghai Province Dachaidan Zhongtian Resources Development Co., Ltd (“Zhongtian Resources”, and is owned by the Chairman and his brother who are also two major shareholders of the Company). The depreciation of these fixed assets had an impact on the production costs of boric acid of the Company and was included in the Company’s cost of sales. The depreciation of these fixed assets for the nine months ended September 30, 2020 and 2019 was $19,547 and $25,658, respectively. The depreciation of these fixed assets for the three months ended September 30, 2020 and 2019 was $6,927 and $8,059, respectively. Due to Zhongtian Resources resulting from using its equipment and payment of worker’s compensation made by Zhongtian Resource for Qinghai Technology was $69,871 and $49,125 at September 30, 2020 and December 31, 2019, respectively.

Qinghai Technology sold boric acid to Qinghai Dingjia Zhixin Trading Co., Ltd (“Dingjia”), 90% owned by the son of the Company’s major shareholder (also the Chairman of the Company). For the nine months ended September 30, 2020 and 2019, the Company’s sales to Dingjia was $202,130 and $112,855, respectively. For the three months ended September 30, 2020 and 2019, the Company’s sales to Dingjia was $100,570 and $17,300, respectively. At September 30, 2020 and December 31, 2019, payable to Dingjia was $19,893 and $56,144, respectively.

In addition, at September 30, 2020 and December 31, 2019, the Company had $939,591 and $573,264 due to another major shareholder of the Company (also the Company’s CEO), resulting from certain Company operating expenses of the US parent company such as legal and audit fees that were paid by this major shareholder on behalf of the Company. This short term advance bore no interest, and was payable upon demand. 

The following table summarized the due from (to) related parties as of September 30, 2020 and December 31, 2019, respectively:

	Related party name	2020			2019
Due from	Qinghai Mining including $1.68 million sale of CIP	$	3,534,790		$	1,173,881
Due to	Qinghai Mining		(374,840	)		(619,354	)
Due from, net (current and noncurrent)		$	3,159,950		$	554,527
Due to	Dingjia	$	19,893		$	56,144
Due to	Zhongtian Resources		69,871			49,125
Due to	A major shareholder		939,591			573,264
Due to, total		$	1,029,355		$	678,533

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11. DEFERRED INCOME

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

The detail of deferred income for the Company’s special projects at September 30, 2020 is:

	Government subsidy amount		Project completion date	Useful life in years		Accumulated amortization		Net
Technology upgrade for using lean ore to produce magnesium sulfate	$	323,050	8/1/2013		10	$	231,519	$	91,531
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		73,420	5/1/2015		10		39,769		33,651
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		1,468,407	1/1/2018		10		403,812		1,064,595
Project of high value utilization of magnesium-rich waste liquid		293,681	7/9/2019		10		234,578		59,103
Total	$	2,158,558				$	909,678	$	1,248,880

The detail of deferred income for the Company’s special projects at December 31, 2019 is:

	Government subsidy amount		Project completion date	Useful life in years		Accumulated amortization		Net
Technology upgrade for using lean ore to produce magnesium sulfate	$	315,358	8/1/2013		10	$	202,355	$	113,003
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		71,672	5/1/2015		10		33,447		38,225
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		1,433,445	1/1/2018		10		286,689		1,146,756
Project of high value utilization of magnesium-rich waste liquid		286,689	7/9/2019		10		224,047		62,642
Total	$	2,107,164				$	746,538	$	1,360,626

12. SUBSIDY INCOME

Subsidy income consisted of amortization of deferred income for declared special projects and government’s general incentive fund (recorded as income upon receipt) for the nine and three months ended September 30, 2020 and 2019, respectively:

	Nine Months Ended September 30,
	2020		2019
Technology upgrade for using lean ore to produce magnesium sulfate	$	23,599	$	24,073
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		5,364		5,471
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		107,270		109,424
Project of high value utilization of magnesium-rich waste liquid		4,934		226,359
Subsidy for resuming work		2,559		-
Total	$	143,726	$	365,327

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	Three Months Ended September 30,
	2020		2019
Technology upgrade for using lean ore to produce magnesium sulfate	$	7,956	$	7,851
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		1,809		1,784
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		36,165		35,686
Project of high value utilization of magnesium-rich waste liquid		1,663		226,359
Subsidy for resuming work		498		-
Total	$	48,091	$	271,680

13. DEFERRED TAX ASSETS

As of September 30, 2020 and December 31, 2019, respectively, deferred tax assets consisted of the following:

	2020			2019
Deferred tax asset –NOL of US parent company	$	1,063,574		$	941,203
Less: valuation allowance		(1,063,574	)		(941,203	)
Deferred tax assets, net	$	-		$	-

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

14. INCOME TAXES

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

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

The US parent company, was incorporated in the US and has net operating losses for income tax purposes, under the 2018 Tax Reform, the net operating losses arising in tax years beginning after 2017 may reduce 80% of a taxpayer’s taxable income, and be carried forward indefinitely. However, the coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) issued in March 2020, provides tax relief to both corporate and noncorporate taxpayers by adding a five-year carryback period and temporarily repealing the 80% limitation for NOLs arising in 2018, 2019 and 2020. The U.S. parent Company has net operating losses carry forwards for income taxes of approximately $5.06 million at September 30, 2020. Management believes the realization of benefits from these losses remains uncertain due to the parent Company’s limited operating history and continuing losses. Accordingly, a 100% deferred tax asset valuation allowance was provided. 

The disposed entities - SanDeKe, Jinhui, SmartHeat Investment, SmartHeat Pump, SmartHeat Trading and Heat Exchange are subject to the regular 25% PRC income tax rate.

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

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The following is a reconciliation of the difference between the actual provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income before income taxes for the nine months ended September 30, 2020 and 2019, respectively:

	2020			2019
Tax benefit at U.S. federal statutory rates	$	(49,847	)	$	81,791
Foreign income taxed at different rates		13,815			28,301
Tax holiday in PRC		(34,536	)		(70,751	)
Valuation allowance		117,685			66,786
Tax expense per financial statements	$	47,117		$	106,127

The income tax expense for the nine months ended September 30, 2020 and 2019, respectively, consisted of the following:

	2020		2019
Income tax expense – current	$	47,117	$	106,127
Income tax benefit – deferred		-		-
Total income tax benefit, net	$	47,117	$	106,127

The following is a reconciliation of the difference between the actual provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income before income taxes for the three months ended September 30, 2020 and 2019, respectively:

	2020			2019
Tax benefit at U.S. federal statutory rates	$	(15,258	)	$	78,478
Foreign income taxed at different rates		5,135			19,628
Tax holiday in PRC		(12,834	)		(49,070	)
Valuation allowance		44,141			24,569
Tax expense per financial statements	$	21,184		$	73,605

The income tax expense for the three months ended September 30, 2020 and 2019, respectively, consisted of the following:

	2020		2019
Income tax expense – current	$	21,184	$	73,605
Income tax benefit – deferred		-		-
Total income tax benefit, net	$	21,184	$	73,605

15. MAJOR CUSTOMERS AND VENDORS 

For the nine months ended September 30, 2020, three customers accounted for 14%, 12% and 10% of Company’s total sales. For the three months ended September 30, 2020, four customers accounted for 15%, 12%, 11% and 10% of Company’s total sales. Total accounts receivable from those major customers was $118,865 as of September 30, 2020.

Two customers accounted for 15% and 14%, respectively, of the Company’s sales for the nine months ended September 30, 2019. Two customers accounted for 13% and 13%, respectively, of the Company’s sales for the three months ended September 30, 2019.

Qinghai Technology purchased $1,188,802 and $1,113,250 boron ore (the main raw material) from Qinghai Mining during the nine months ended September 30, 2020 and 2019, respectively. Qinghai Technology purchased $594,276 and $518,870 boron ore (the main raw material) from Qinghai Mining during the three months ended September 30, 2020 and 2019, respectively.

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16. STATUTORY RESERVES AND RESTRICTED NET ASSETS

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

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

Additionally, in accordance with the Company Laws of the PRC, a domestic enterprise is required to provide surplus reserve at least 10% of its annual after-tax profit until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. A domestic enterprise is also required to provide discretionary surplus reserve, at the discretion of the BOD, from the profits determined in accordance with the enterprise’s PRC statutory accounts. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. Qinghai Technology was established as domestic enterprises and therefore are subject to the above-mentioned restrictions on distributable profits.

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

According to Administrative Measures for the Collection and Utilization of Enterprise Work Safety Funds issued by the PRC Ministry of Finance and the State Administration of Work Safety, for the companies with dangerous goods production or storage, the company is required to make a special reverse for the use of enhancing and improving its safe production conditions. Under PRC GAAP, the reserve is recorded as cost of sales; however, under US GAAP, since the expense has not been incurred and the Company already recorded cost of sales for safety related expenses when incurred, this special reserve was recorded as an appropriation of its after-tax income. At September 30, 2020, the Company had $48,698 production safety related reserve, which was included in $146,650 statutory reserve in the balance sheet. The reserve is calculated at regressive rates levied on revenue in excess of specific amounts as follows: 

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

17. COMMITMENTS

Capital Contribution

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

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18. CONTINGENCIES

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

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

19. SUBSEQUENT EVENTS

The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company has no material subsequent events.

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

Overview

The Company currently produces boric acid in the PRC and plans to expand its manufacturing facilities through a JV to produce up to 30,000 tonnes of lithium carbonate for the electric vehicle battery market in China, subject to funding. We formerly sold plate heat exchangers and heat pumps and sold those operations on September 30, 2019.

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

The Acquisition was structured as a tax-free reorganization. As a result of the share exchange agreement, Mid-heaven BVI’s shareholders own approximately 57% of the combined company.  For accounting purposes, the transaction was accounted for as a reverse acquisition of the Company by Mid-heaven BVI.

The main operating entity, Qinghai Technology was incorporated on December 18, 2018. The business of Qinghai Technology was carved out of the business of Qinghai Zhongtian Boron & Lithium Mining Co., Ltd (“Qinghai Mining”) on December 20, 2018. Qinghai Mining was founded March 6, 2001, and manufactures and wholesales boric acid and related compounds for industrial and consumer usage. Qinghai Technology obtains its raw material minerals exclusively from Qinghai Mining and currently processes boric acid by crushing and processing ore.

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

SmartHeat Jinhui (Beijing) Energy Technology Ltd - 100 RMB

SmartHeat (China) Investment Ltd - 400 RMB

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

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

SanDeKe Co., Ltd - 600 RMB

SmartHeat Heat Exchange Equipment Co - 600 RMB

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

In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China. The World Health Organization declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which continues to spread to additional countries, and disrupts supply chains and affecting production and sales across a range of industries as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak. The COVID-19 outbreak impacted the Company’s operations for the first quarter of 2020.  The Company had less production in the first quarter of 2020; the Company’s factory was reopened one month later than originally planned, and it did not resume the production one week after the factory reopened due to the shortage of master liquid pool resulting from the longer period of shutdown of the machine.  The cost of our coal increased during the first quarter of 2020 due to the overall lockdown in China. The Company’s sales also decreased for the first quarter of 2020 due to logistics restrictions put into place to curb travel. To facilitate sales, the Company reduced its selling price by RMB 50 ($7) per tonne to certain customers.   The number of transportation vehicles has increased to meet the market’s shipping needs since April 2020.  In addition, the Company was able to procure sulfuric acid, a major raw material, from a local supplier at lower prices than usual due to excess supplies on the market.  The Company’s production and sales has been gradually increasing since April 2020. There was also a delay by the government’s planned installation and connection of a natural gas pipeline necessary to implement a Coal-to-Gas conversion project resulted from various factors including the Coronavirus outbreak. Since April 2020, there were some new COVID-19 cases discovered in a few provinces of China as of today, however, the number of new cases are not significant due to PRC government’s strict control, and, except with respect to the increase in the average cost of sales as disclosed in Results of Operations – Cost of Sales below, the Company does not believe the new cases would have a significant impact on the Company’s operations.

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

Related Party Transactions 

Qinghai Technology purchased raw material boron rock from Qinghai Mining (owned by three major shareholders of the Company); in addition, Qinghai Technology sometimes received no-interest short-term advances from Qinghai Mining for daily operational needs. As of September 30, 2020 and December 31, 2019, due from Qinghai Mining (was the net amount of intercompany transactions between Qinghai Technology and Qinghai Mining) was $3.16 million and $0.55 million, respectively. Qinghai Technology purchased $1,188,802 and $1,113,250 boron ore from Qinghai Mining during the nine months ended September 30, 2020 and 2019, respectively. Qinghai Technology purchased $594,276 and $518,870 boron ore from Qinghai Mining during the three months ended September 30, 2020 and 2019, respectively.

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

In September 2020, Qinghai Technology sold the Test and Experimental Plant I to Qinghai Mining at cost of RMB 11.41 million ($1.63 million) (see Note 7). The payment term is five years with annual interest of 4.75%.  The first payment of $323,050 is due September 30, 2021. Qinghai Mining uses its accounts receivable as the pledge for the repayment, and  has the right to repay the purchase price in full any time before the maturity date.

Qinghai Technology used equipment that belongs to Qinghai Province Dachaidan Zhongtian Resources Development Co., Ltd (“Zhongtian Resources”, and is owned by the Chairman and his brother who ae also two major shareholders of the Company) for production. The depreciation of these fixed assets had an impact on the production costs of boric acid of the Company and was included in the Company’s cost of sales. The depreciation of these fixed assets for the nine months ended September 30, 2020 and 2019 was $19,547 and $25,658, respectively. The depreciation of these fixed assets for the three months ended September 30, 2020 and 2019 was $6,927 and $8,059, respectively. Due to Zhongtian Resources resulting from using its equipment and payment of worker’s compensation made by Zhongtian Resource for Qinghai Technology was $69,871 and $49,125 at September 30, 2020 and December 31, 2019, respectively.

Qinghai Technology sold boric acid to Qinghai Dingjia Zhixin Trading Co., Ltd (“Dingjia”), 90% owned by the son of the Company’s major shareholder (also the Chairman of the Company). For the nine months ended September 30, 2020 and 2019, the Company’s sales to Dingjia was $202,130 and $112,855, respectively. For the three months ended September 30, 2020 and 2019, the Company’s sales to Dingjia was $100,570 and $17,300, respectively. At September 30, 2020 and December 31, 2019, outstanding payable to Dingjia was $19,893 and $56,144, respectively.

In addition, at September 30, 2020 and December 31, 2019, the Company had $939,591 and $573,263 due to another major shareholder of the Company (also the Company’s CEO), resulting from the certain of the Company’s operating expenses such as legal and audit fees that were paid by this major shareholder on behalf of the Company. This short term advance bore no interest, and payable upon demand.

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The following table summarized the due from (to) related parties as of September 30, 2020 and December 31, 2019, respectively:

		2020			2019
	Related party name
Due from	Qinghai Mining	$	3,534,790		$	1,173,881
Due to	Qinghai Mining		(374,840	)		(619,354	)
Due from, net		$	3,159,950		$	554,527
Due to	Dingjia	$	19,893		$	56,144
Due to	Zhongtian Resources		69,871			49,125
Due to	A major shareholder		939,591			573,264
Due to, total		$	1,029,355		$	678,533

Going Concern

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

As reflected in the accompanying CFS, the Company had net loss of $275,929 and $88,035 for the nine and three months ended September 30, 2020, respectively, which raise substantial doubt about the Company’s ability to continue as a going concern.

In addition to current boric acid production business, the Company plans to produce lithium carbonate for the electric vehicle batteries through a recently established JV from brine that is provided by Qinghai Technology for free. The cost for the brine is immaterial as it is pumped out directly from the nearby Salt Lake without any charge. Management also intends to raise additional funds by way of a private or public offering, or by obtaining loans from banks or others. While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering. The CFS do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.  

Significant Accounting Policies

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

Basis of Presentation

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

Principles of Consolidation

For the nine and three months ended September 30, 2020, the accompanying CFS include the accounts of the Company’s US parent, and Mid-heaven BVI and its subsidiaries, Sincerity, Salt-Lake, Qinghai Technology and Qinghai Zhongli, which are collectively referred to as the “Company.” For the nine and three months ended September 30, 2019, the accompanying CFS include the accounts of the Company’s US parent, and its subsidiaries Heat HP and Heat PHE, and their subsidiaries SanDeKe, Jinhui, SmartHeat Investment, SmartHeat Trading, SmartHeat Pump, and Heat Exchange, and Mid-heaven BVI and its subsidiaries, Sincerity, Salt-Lake and Qinghai Technology, which are collectively referred to as the “Company.” All significant intercompany accounts and transactions were eliminated in consolidation.

Use of Estimates

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

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Accounts Receivable

We maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Based on historical collection activity, we had bad debt allowance for accounts receivable of $0 at September 30, 2020 and December 31,2019.

Revenue Recognition

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

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

Deferred Income

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

Foreign Currency Translation and Comprehensive Income (Loss)

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

Noncontrolling Interests

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

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

On April 15, 2020, Qinghai Technology and Xi’an Jinzang formed a joint venture company Qinghai Zhongli to process brine supplied by Qinghai Technology. Qinghai Technology owns 51% of the JV and Xi’ Jinzang owns the remaining 49%. During the nine and three months ended September 30, 2020, the Company had loss of $8,554 and $5,809 that were attributable to the noncontrolling interest.

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Recent Accounting Pronouncements

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

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within FASB ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is evaluating the impact this update will have on its CFS.

Results of Operations

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

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

	2020			% of Sales			2019			% of Sales
Sales	$	5,660,182					$	5,092,082
Cost of sales		5,031,305			88.9	%		4,233,772			83.1	%
Gross profit		628,877			11.1	%		858,310			16.9	%
Selling expenses		125,407			2.2	%		279,755			5.5	%
General and administrative expenses		922,681			16.3	%		550,506			10.8	%
Total operating expenses		1,048,088			18.5	%		830,261			16.3	%
Income (loss) from operations		(419,211	)		(7.4	%)		28,049			0.6	%
Other income		181,845			3.2	%		361,434			7.1	%
Income (loss) before income taxes		(237,366	)		(4.2	%)		389,483			7.6	%
Income tax expense		47,117			0.8	%		106,127			2.1	%
Income (loss) from continuing operations		(284,483	)		(5.0	%		283,356			5.6	%
Gain on disposal of discontinued operation, net of tax								5,666,187			111.3	%
Loss from operations of discontinued entities, net of tax		-			-	%		(215,835	)		(4.2	%)
Income (loss) before noncontrolling interest		(284,483	)		(5.0	%)		5,733,708			112.6	%
Less: loss attributable to noncontrolling interest from continuing operation		(8,554	)		(0.1	%)		-			-	%
Net income (loss)	$	(275,929	)		(4.9	%)	$	5,733,708			112.6	%

Sales

Sales for the nine months ended September 30, 2020 and 2019 was $5,660,182 and $5,092,082, respectively, an increase of $568,100 or 11.2%. For the nine months ended September 30, 2020 and 2019, the Company’s sales to Dingjia, a related party company 90% owned by the son of the major shareholder of the Company (also the Chairman of the Company), was $202,130 and $112,855, respectively. Due to the outbreak of COVID19 and related logistic restriction, our sales was decreased during the first quarter of 2020; to facilitate sales, we reduced our selling price by RMB 50 ($7) per tonne to certain customers, and we developed new customers during the second and third quarter of 2020, which mitigated the decreased sales from the first quarter. In addition, in September 2020, we increased our selling price by RMB 50-150 ($7.3 - $22) per tonne due to increased market prices, these factors resulted an overall increased sales by 11.2% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

28

Cost of sales

Cost of sales for the nine months ended September 30, 2020 and 2019 was $5,031,305 and $4,233,772, respectively, an increase of $797,533 or 18.8%. The increase was mainly due to increased sales. The cost of sales as a percentage of sales was 88.9% for the nine months ended September 30, 2020 compared with 83.1% for 2019. The increase in cost of sales as a percentage of sales was mainly due to increased average cost of production. Due to COVID-19 outbreak, our factory was reopened one month later than originally planned, and we did not resume the production one week after the factory reopened due to the drought of master liquid pool resulting from the longer period of shutdown of the machine, we spent additional days and had extra acid and mineral consumption to cultivate the concentration level of master liquid pool. In addition, from July to September 2020, we started acquiring boron rock from Tibet to produce boric acid to increase our productivity. The Tibet boron rock has higher grade of the mineral deposit and thus the high unit cost, which resulted the increased raw material cost of boric acid production. However, since we are in the beginning and testing stage for using the Tibet boron rock, increased output has not yet occurred thus causing a higher cost per tonne refined. 

Gross profit

Gross profit for the nine months ended September 30, 2020 and 2019 was $628,877 and $858,310, respectively, a decrease of $229,433 or 26.7%. The profit margin was 11.1% for the nine months ended September 30, 2020 compared to 16.9% for the nine months ended September 30, 2019, the decrease in profit margin was mainly due to increase production cost per tonne as described above.

Operating expenses

Selling expenses consist mainly of salespersons’ salaries and freight out. Selling expense were $125,407 for the nine months ended September 30, 2020, compared to $279,755 for the nine months ended September 30, 2019, a decrease of $154,348 or 55.2%, mainly resulting from decreased freight out expense of $56,000 and decreased salespersons’ salaries of $98,500.

General and administrative expenses consist mainly of salary, R&D, office, welfare, business meeting, maintenance, and utilities. General and administrative expenses were $922,681 for the nine months ended September 30, 2020, compared to $550,506 for the nine months ended September 30 2019, an increase of $372,175 or 67.6%, mainly resulting from increased officer salary of $360,000.

Other income

Other income was $181,845 for the nine months ended September 30, 2020, compared to $361,434 for the nine months ended September 30, 2019, a decrease of $179,589 or 49.7%. For the nine months ended September 30, 2020, other income mainly consisted of subsidy income of $143,726 and other income of $39,651. For the nine months ended September 30, 2019, other income mainly consisted of subsidy income of $365,327.

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

Income (loss) from continuing operations

Loss from continuing operations was $284,483 loss for the nine months ended September 30, 2020, compared to net income of $283,356 for the nine months ended September 30, 2019. The $567,839 or 200.4% increase in loss from continuing operations was mainly due to decreased gross profit by $229,433 and increased operating expense by $217,827. 

Gain on disposal of discontinued entities

Gain from disposal of subsidiaries was $5,666,187 for the nine months ended September 30, 2019. On September 30, 2019, Heat HP, Inc. and Heat PHE, Inc, our wholly owned subsidiaries, sold their respective equity interests in Jinhui, SmartHeat Investment, SmartHeat Trading, SmartHeat Pump and Heat Exchange for $353.  

Loss from operations of discontinued entities

Loss from operations of discontinued entities was $215,835 for the nine months ended September 30, 2019, which was the operations from Jinhui, SmartHeat Investment, SmartHeat Trading, SmartHeat Pump and Heat Exchange, the Company sold these entities on September 30, 2019.

29

Net loss

We had a net loss of $275,929 for the nine months ended September 30, 2020, compared to net income $5,733,708 for the nine months ended September 30, 2019, an increase of net loss by $6,009,637 or 104.8%. The increase in our net loss mainly resulted from the reasons described above. 

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

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

	2020			% of Sales			2019			% of Sales
Sales	$	2,330,292					$	1,883,327
Cost of sales		2,126,770			91.3	%		1,533,599			81.4	%
Gross profit		203,522			8.7	%		349,728			18.6	%
Selling expenses		39,858			1.7	%		85,568			4.5	%
General and administrative expenses		308,686			13.2	%		159,339			8.5	%
Total operating expenses		348,544			14.9	%		244,907			13.0	%
Income (loss) from operations		(145,022	)		(6.2	)%		104,821			5.6	%
Other income		72,362			3.1	%		268,880			14.3	%
Income (loss) before income taxes		(72,660	)		(3.1	)%		373,701			19.9	%
Income tax expense		21,184			0.9	%		73,605			3.9	%
Income (loss) from continuing operations		(93,844	)		(4.0	)%		300,096			16.0	%
Gain on disposal of discontinued operations, net of tax								5,666,187			300.9	%
Income (loss) from operations of discontinued entities, net of tax		-			-	%		(93,299	)		(5.0	)%
Income (loss) before noncontrolling interest		(93,844	)		(4.0	)%		5,872,984			(311.9	)%
Less: loss attributable to noncontrolling interest from continuing operation		(5,809	)		(0.2	)%		-			-	%
Net income (loss)	$	(88,035	)		(3.8	)%	$	5,872,984			(311.9	)%

Sales

Sales for the three months ended September 30, 2020 and 2019 was $2,330,292 and $1,883,327, respectively, an increase of $446,965 or 23.7%. For the three months ended September 30, 2020 and 2019, the Company’s sales to Dingjia, a related party company 90% owned by the son of the major shareholder of the Company (also the Chairman of the Company), was $100,570 and $17,300, respectively. The increase in sales for the three months ended September 30, 2020 was mainly due to our effort of developing new customers and increased selling price by RMB 50-150 ($7.3 - $22) per tonne due to increased market prices in September 2020.

Cost of sales

Cost of sales (“COS”) for the three months ended September 30, 2020 and 2019 was $2,126,770 and $1,533,599, respectively, an increase of $593,171 or 38.7%. The increase was mainly due to increased sales. The COS as a percentage of sales was 91.3% for the three months ended September 30, 2020 compared to 81.4% for 2019. The increase in COS as a percentage of sales was mainly due to increased production cost. From July to September 2020, we started trying boron rock from Tibet to produce boric acid to increase our productivity. The Tibet boron rock has higher grade of the mineral deposit and thus the high unit cost, which resulted the increased raw material cost of boric acid production. However, since we are in the beginning and testing stage for trying the Tibet boron rock, the significant increased output has not yet appeared. 

Gross profit

Gross profit for the three months ended September 30, 2020 and 2019 was $203,522 and $349,728, respectively, a decrease of $146,206 or 41.8%. The profit margin was 8.7% for the three months ended September 30, 2020 compared to 18.6% for the three months ended September 30, 2019, the decrease in profit margin was mainly due to increased production cost.

30

Operating expenses

Selling expenses consist mainly of salespersons’ salaries and freight out. Selling expense were $39,858 for the three months ended September 30, 2020, compared to $85,568 for the three months ended September 30, 2019, a decrease of $45,710 or 53.4%, mainly resulting from decreased freight out expense of $9,800 and decreased salespersons’ salaries of $38,500, but partly offset with decreased certain other selling expenses.

General and administrative expenses consist mainly of bad debt expense, R&D, office, welfare, business meeting, maintenance, and utilities. General and administrative expenses were $308,686 for the three months ended September 30, 2020, compared to $159,339 for the three months ended September 30 2019, an increase of $149,347 or 93.7%, mainly resulting from increased officer salary expense by $120,000, and other G&A expenses of $30,000.

Other income

Other income was $72,362 for the three months ended September 30, 2020, compared to $268,880 for the three months ended September 30, 2019, a decrease of $196,518 or 73.1%. For the three months ended September 30, 2020, other income mainly consisted of subsidy income of $48,091 and other income of $26,246. For the three months ended September 30, 2019, other income mainly consisted of subsidy income of $271,680.

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

Income (loss) from continuing operations

Loss from continuing operations was $93,844 for the three months ended September 30, 2020, compared to income of $300,096 for the three months ended September 30, 2019. The $393,940 or 131.3% increase in loss from continuing operations was mainly due to decreased gross profit, decreased other income, and increased G&A expenses as described above. 

Gain on disposal of discontinued operations

Gain from disposal of subsidiaries was $5,666,187 for the three months ended September 30, 2019, resulting from the disposal of equity interests in Jinhui, SmartHeat Investment, SmartHeat Trading, SmartHeat Pump and Heat Exchange.

Loss from operations of discontinued entities

Loss from operations of discontinued entities was $93,299 for the three months ended September 30, 2019, which was the operations from Jinhui, SmartHeat Investment, SmartHeat Trading, SmartHeat Pump and Heat Exchange, the Company sold these entities on September 30, 2019.

Net (income) loss

We had a net loss of $88,035 for the three months ended September 30, 2020, compared to net income of $5,872,984 for the three months ended September 30, 2019, an increase of net loss by $5,961,019 or 101.5%. The increase in our net loss mainly resulted from the reasons described above.  

Liquidity and Capital Resources

As of September 30, 2020, we had cash and equivalents of $1.17 million. Working capital was $1.10 million at September 30, 2020. The ratio of current assets to current liabilities was 1.34:1 at September 30, 2020.  

The following is a summary of cash provided by or used in each of the indicated types of activities during nine months ended September 30, 2020 and 2019:

	2020			2019
Cash provided by (used in):
Operating activities	$	1,145,326		$	269,320
Investing activities		(333,480	)		(149,928	)
Financing activities	$	171,568		$	62,933

31

Net cash provided by operating activities was $1,145,326 for the nine months ended September 30, 2020, compared to $269,320 for the nine months ended September 30, 2019. The increase of cash inflow from operating activities for 2020 was principally attributable to increased cash inflow from inventory by $1,313,682, which was partly offset by decreased cash inflow from advances to suppliers by $137,761, decreased cash inflow from accounts payable by $205,772 and decreased cash inflow from unearned revenue by $130,573. 

Net cash used in investing activities was $333,480 for the nine months ended September 30, 2020, compared to $149,928 for the nine months ended September 30, 2019. Net cash used in investing activities in 2020 was mainly consist of purchase of property and equipment. Net cash used in investing activities in 2019 was mainly consist of cash disposed at disposal of subsidiaries.

Net cash provided by financing activities was $171,568 for the nine months ended September 30, 2020, compared to $62,933 for the nine months ended September 30, 2019. The net cash provided by financing activities in 2020 consisted of capital contribution from noncontrolling interest of Qinghai Zhongli by $715,130, and increase in amount owing to other related parties of $348,724, but partly offset by increase in due from Qinghai Mining of $892,286. The net cash used in financing activities in 2019 consisted of decrease in due from Qinghai Mining of $1,348,508, but partly offset by decreased amount owing to other related parties of $1,285,575.  

Dividend Distribution

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

Off-Balance Sheet Arrangements

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

32

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, our principal executive officer and principal financial officer, respectively, evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2020, our disclosure controls and procedures were not effective as of such date because of a material weakness identified in our internal control over financial reporting related to our internal level of US GAAP expertise. We lack sufficient personnel with the appropriate level of knowledge, experience and training in US GAAP for the preparation of financial statements in accordance with US GAAP. None of our internal accounting staff, including our Chief Financial Officer, that are primarily responsible for the preparation of our books and records and financial statements in compliance with US GAAP holds a license such as Certified Public Accountant in the US, nor have any attended US institutions or extended educational programs that would provide enough of the relevant education relating to US GAAP.

Changes in Internal Control over Financial Reporting.

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended June 20, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

33

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

You should consider carefully the factors discussed in the “Risk Factors” in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2019, as amended, which could materially affect our business.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

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

EXHIBIT INDEX

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

† Filed herewith

‡ Furnished herewith

34

SIGNATURES

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

		LITHIUM & BORON TECHNOLOGY, INC.
		(Registrant)
Date:  November 16, 2020	By:	/s/ Jimin Zhang
		Mr. Jimin Zhang Chief Executive Officer (Principal Executive Officer and Duly Authorized Signatory)

35

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302(a)

OF THE SARBANES-OXLEY ACT OF 2002

I, Jimin Zhang, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2020, of Lithium & Boron Technology, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 16, 2020	By:	/s/ Jimin Zhang
		Mr. Jimin Zhang Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302(a)

OF THE SARBANES-OXLEY ACT OF 2002

I, Xudong Wang, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2020, of Lithium & Boron Technology, Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 16, 2020	By:	/s/ Xudong Wang
		Xudong Wang Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Jimin Zhang, hereby certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of Lithium & Boron Technology, Inc. for the quarterly period ended September 30, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Lithium & Boron Technology, Inc.

Date: November 16, 2020	By:	/s/ Jimin Zhang
		Mr. Jimin Zhang Chief Executive Officer

I, Xudong Wang, hereby certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of Lithium & Boron Technology, Inc. for the quarterly period ended September 30, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Lithium & Boron Technology, Inc.

Date: November 16, 2020	By:	/s/ Xudong Wang
		Xudong Wang Chief Financial Officer

The foregoing certifications are not deemed filed with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are not to be incorporated by reference into any filing of Lithium & Boron Technology, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Nov. 13, 2020
Document Information Line Items
Entity Registrant Name	Lithium & Boron Technology, Inc.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		185,986,370
Amendment Flag	false
Entity Central Index Key	0001384135
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Sep. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Interactive Data Current	Yes

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CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2020	Dec. 31, 2019
CURRENT ASSETS
Cash and equivalents	$ 1,173,571	$ 160,024
Accounts receivable	137,808	577,387
Notes receivable	366,258	79,478
Other receivables	19,857	354
Prepaid expense	3,133	0
Advances to suppliers, net	92,938	7,490
Due from related parties	1,807,187	554,527
Inventories	720,196	1,802,647
Total current assets	4,320,948	3,181,907
NONCURRENT ASSETS
Long-term prepaid expense	16,006	0
Due from related party	1,352,763	0
Property and equipment, net	1,504,706	1,403,681
Construction in progress	33,264	1,635,912
Total noncurrent assets	2,906,739	3,039,593
TOTAL ASSETS	7,227,687	6,221,500
CURRENT LIABILITIES
Accounts payable	300,971	332,706
Unearned revenue	54,026	117,188
Accrued liabilities and other payables	1,479,909	1,095,698
Taxes payable	352,888	295,255
Due to related party	1,029,355	678,533
Total current liabilities	3,217,149	2,519,380
DEFERRED INCOME	1,248,880	1,360,626
TOTAL LIABILITIES	4,466,029	3,880,006
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 500,000,000 shares authorized, 185,968,370 shares issued and outstanding	185,968	185,968
Paid-in capital deficiency	(6,666,351)	(6,666,351)
Statutory reserve	146,650	71,252
Accumulated other comprehensive income (loss)	31,071	(14,600)
Retained earnings	8,338,898	8,765,225
TOTAL COMPANY STOCKHOLDERS' EQUITY	2,036,236	2,341,494
Noncontrolling interest	725,422	0
TOTAL EQUITY	2,761,658	2,341,494
TOTAL LIABILITIES AND EQUITY	$ 7,227,687	$ 6,221,500

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CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	185,968,370	185,968,370
Common stock, shares outstanding	185,968,370	185,968,370

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Sales	$ 2,229,722	$ 1,866,027	$ 5,458,052	$ 4,979,227
Sales - related party	100,570	17,300	202,130	112,855
Total sales	2,330,292	1,883,327	5,660,182	5,092,082
Cost of sales	2,126,770	1,533,599	5,031,305	4,233,772
Gross profit	203,522	349,728	628,877	858,310
Operating expenses
Selling	39,858	85,568	125,407	279,755
General and administrative	308,686	159,339	922,681	550,506
Total operating expenses	348,544	244,907	1,048,088	830,261
Income (loss) from operations	(145,022)	104,821	(419,211)	28,049
Non-operating income
Financial expense	(2,974)	(2,800)	(3,365)	(3,893)
Other income	26,246	0	39,651	0
Interest income	999	0	1,833	0
Subsidy income	48,091	271,680	143,726	365,327
Total non-operating income, net	72,362	268,880	181,845	361,434
Income (loss) before income tax	(72,660)	373,701	(237,366)	389,483
Income tax expense	21,184	73,605	47,117	106,127
Income (loss) from continuing operations	(93,844)	300,096	(284,483)	283,356
Gain on disposal of discontinued entities, net of tax	0	5,666,187	0	5,666,187
Loss from operations of discontinued entities, net of tax	0	(93,299)	0	(215,835)
Income (loss) before noncontrolling interest	(93,844)	5,872,984	(284,483)	5,733,708
Less: loss attributable to noncontrolling interest from continuing operations	(5,809)	0	(8,554)	0
Net income (loss) to the Company	(88,035)	5,872,984	(275,929)	5,733,708
Foreign currency translation gain attributable to discontinued operations	0	112,142	0	118,877
Foreign currency translation gain (loss) attributable to the Company	162,633	(166,446)	45,671	(176,065)
Foreign currency translation gain attributable to noncontrolling interest	27,692	0	29,234	0
Comprehensive income (loss) attributable to the Company	74,598	5,818,680	(230,258)	5,676,520
Comprehensive gain attributable to noncontrolling interest	$ 21,883	$ 0	$ 20,680	$ 0
Basic and diluted weighted average shares outstanding (in Shares)	185,968,370	185,968,370	185,968,370	185,968,370
Basic and diluted income (loss) per share from continuing operations (in Dollars per share)	$ 0.00	$ 0.00	$ 0.00	$ 0.00
Basic and diluted income per share from discontinued operations (in Dollars per share)	0	0.03	0	0.03
Basic and diluted net income (loss) per share (in Dollars per share)	$ 0.00	$ 0.03	$ 0.00	$ 0.03

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) including noncontrolling interest	$ (284,483)	$ 5,733,708
Adjustments to reconcile income (loss) including noncontrolling interest to net cash provided by operating activities:
Depreciation and amortization	236,026	235,286
Provision for bad debts	0	30,113
Gain on sale of subsidiaries	0	(5,666,187)
Changes in deferred income	(141,167)	(73,532)
Accounts receivable	164,434	52,587
Other receivables	(18,997)	10,255
Advances to suppliers	(83,051)	54,710
Inventories	1,097,154	(216,528)
Prepaid expense	(18,642)	0
Accounts payable	(38,817)	166,955
Unearned revenue	(64,304)	66,269
Accrued liabilities and other payables	248,051	(209,794)
Taxes payable	49,122	85,478
Net cash provided by operating activities	1,145,326	269,320
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(301,080)	0
Construction in progress	(32,400)	0
Cash disposed in disposal of subsidiaries	0	(149,928)
Net cash used in investing activities	(333,480)	(149,928)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution from noncontrolling interest	715,130	0
Changes in due from related parties	(892,286)	1,348,508
Changes in due to related parties	348,724	(1,285,575)
Net cash provided by financing activities	171,568	62,933
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND EQUIVALENTS	30,133	(15,972)
NET INCREASE IN CASH AND EQUIVALENTS	1,013,547	166,353
CASH AND EQUIVALENTS, BEGINNING OF PERIOD	160,024	163,145
CASH AND EQUIVALENTS, END OF PERIOD	1,173,571	329,498
Supplemental cash flow data:
Income tax paid	0	0
Interest paid	0	0
Supplemental disclosures of non-cash investing and financing activities:
Sale of the construction in progress to a related party company	$ 1,632,277	$ 0

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STATEMENTS OF CHANGES IN CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIT) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings, Appropriated [Member]	AOCI Attributable to Parent [Member]	Retained Earnings [Member]	Noncontrolling Interest [Member]	Total
Balance at Dec. 31, 2018	$ 185,968	$ (7,645,727)	$ 780,682	$ (11,951)	$ 1,828,717		$ (4,862,311)
Balance (in Shares) at Dec. 31, 2018	185,968,370
Net loss					(95,686)		(95,686)
Dividend accrued					(25,000)		(25,000)
Foreign currency translation gain (loss)				(44,874)			(44,874)
Balance at Mar. 31, 2019	$ 185,968	(7,645,727)	780,682	(56,825)	1,708,031		(5,027,871)
Balance (in Shares) at Mar. 31, 2019	185,968,370
Balance at Dec. 31, 2018	$ 185,968	(7,645,727)	780,682	(11,951)	1,828,717		(4,862,311)
Balance (in Shares) at Dec. 31, 2018	185,968,370
Net loss							5,733,708
Balance at Sep. 30, 2019	$ 185,968	(6,666,351)		(69,139)	7,487,425		937,903
Balance (in Shares) at Sep. 30, 2019	185,968,370
Balance at Mar. 31, 2019	$ 185,968	(7,645,727)	780,682	(56,825)	1,708,031		(5,027,871)
Balance (in Shares) at Mar. 31, 2019	185,968,370
Net loss					(43,590)		(43,590)
Dividend accrued					(25,000)		(25,000)
Foreign currency translation gain (loss)				41,990			41,990
Balance at Jun. 30, 2019	$ 185,968	(7,645,727)	780,682	(14,835)	1,639,441		(5,054,471)
Balance (in Shares) at Jun. 30, 2019	185,968,370
Net loss					5,872,984		5,872,984
Disposal of subsidiaries		979,376	(780,682)				198,694
Dividend accrued					(25,000)		(25,000)
Foreign currency translation gain (loss)				(54,304)			(54,304)
Balance at Sep. 30, 2019	$ 185,968	(6,666,351)		(69,139)	7,487,425		937,903
Balance (in Shares) at Sep. 30, 2019	185,968,370
Balance at Dec. 31, 2019	$ 185,968	(6,666,351)	71,252	(14,600)	8,765,225		$ 2,341,494
Balance (in Shares) at Dec. 31, 2019	185,968,370						185,968,370
Net loss					(230,628)		$ (230,628)
Dividend accrued					(25,000)		(25,000)
Foreign currency translation gain (loss)				(59,196)			(59,196)
Balance at Mar. 31, 2020	$ 185,968	(6,666,351)	71,252	(73,796)	8,509,597		2,026,670
Balance (in Shares) at Mar. 31, 2020	185,968,370
Balance at Dec. 31, 2019	$ 185,968	(6,666,351)	71,252	(14,600)	8,765,225		$ 2,341,494
Balance (in Shares) at Dec. 31, 2019	185,968,370						185,968,370
Net loss							$ (275,929)
Statutory reserve							48,698
Balance at Sep. 30, 2020	$ 185,968	(6,666,351)	146,650	31,071	8,338,898	$ 725,422	$ 2,036,236
Balance (in Shares) at Sep. 30, 2020	185,968,370						185,968,370
Balance at Mar. 31, 2020	$ 185,968	(6,666,351)	71,252	(73,796)	8,509,597		$ 2,026,670
Balance (in Shares) at Mar. 31, 2020	185,968,370
Net loss					42,734	(2,745)	42,734
Capital contribution						704,742
Dividend accrued					(25,000)		(25,000)
Statutory reserve			64,424		(64,424)
Foreign currency translation gain (loss)				(57,766)		1,542	(57,766)
Balance at Jun. 30, 2020	$ 185,968	(6,666,351)	135,676	(131,562)	8,462,907	703,539	1,986,638
Balance (in Shares) at Jun. 30, 2020	185,968,370
Net loss					(88,035)	(5,809)	(88,035)
Dividend accrued					(25,000)		(25,000)
Statutory reserve			10,974		(10,974)
Foreign currency translation gain (loss)				162,633		27,692	162,633
Balance at Sep. 30, 2020	$ 185,968	$ (6,666,351)	$ 146,650	$ 31,071	$ 8,338,898	$ 725,422	$ 2,036,236
Balance (in Shares) at Sep. 30, 2020	185,968,370						185,968,370

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ORGANIZATION AND DESCRIPTION OF BUSINESS

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Nature of Operations [Text Block]

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

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

The Company formerly sold plate heat exchangers and heat pumps and sold these operations on September 30, 2019 recording them as discontinued operations.

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

The Acquisition was structured as a tax-free reorganization. As a result of the Share Exchange Agreement, Mid-heaven BVI’s shareholders own approximately 57% of the combined company.  For accounting purposes, the transaction was accounted for as a reverse acquisition of the Company by Mid-heaven BVI.

The main operating entity, Qinghai Technology was incorporated December 18, 2018. The business of Qinghai Technology was carved out of the business of Qinghai Zhongtian Boron & Lithium Mining Co., Ltd (“Qinghai Mining”) on December 20, 2018. Qinghai Mining was founded March 6, 2001 and engaged in manufacture and wholesale of boric acid and related compounds for industrial and consumer usage. Qinghai Technology obtains its raw material minerals exclusively from Qinghai Mining and currently processes boric acid by crushing and processing ore. 

On September 30, 2019, Heat HP, Inc. and Heat PHE, Inc, wholly owned subsidiaries of the Company, sold all of their respective equity interests in Jinhui, SmartHeat Investment, SmartHeat Trading, SmartHeat Pump and Heat Exchange for $353. The equity interests were sold to individuals and businesses in the PRC. Each subsidiary was sold for nominal cash consideration as below and, as the transactions were structured as purchases of equity interests, the subsidiary companies retained all liabilities when purchased. Heat HP, Inc. and Heat PHE, Inc. did not have any operations and mainly serve the purpose as holding companies.

SmartHeat Jinhui (Beijing) Energy Technology Ltd - 100 RMB ($15)

SmartHeat (China) Investment Ltd - 400 RMB ($56)

SmartHeat (Shanghai) Trading Co., Ltd - 400 RMB ($56)

SmartHeat (Shenyang) Heat Pump Technology Co., Ltd - 400 RMB ($56)

SanDeKe Co., Ltd - 600 RMB ($85)

SmartHeat Heat Exchange Equipment Co - 600 RMB ($85)

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

In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China. The World Health Organization declared the outbreak to constitute a “Public Health Emergency of International Concern.” This contagious disease outbreak, which continues to spread to additional countries, and disrupts supply chains and affecting production and sales across a range of industries as a result of quarantines, facility closures, and travel and logistics restrictions in connection with the outbreak. The COVID-19 outbreak impacted the Company’s operations for the first quarter of 2020.  The Company had less production in the first quarter of 2020; the Company’s factory was reopened one month later than originally planned, and it did not resume production one week after the factory reopened due to the shortage of master liquid pool resulting from the longer period of shutdown of the machine.  The cost of coal increased during the first quarter of 2020 due to the overall lockdown in China. The Company’s sales also decreased for the first quarter of 2020 due to logistics restrictions put into place to curb travel. To facilitate sales, the Company reduced its selling price by RMB 50 ($7) per tonne to certain customers.  The availability of transportation vehicles increased to meet the market’s needs since April 2020.  In addition, the Company was able to procure sulfuric acid, a major raw material, from a local supplier at lower prices than usual due to excess supplies on the market.  The Company’s production and sales has been increasing since April 2020. Since April 2020, there were some new COVID-19 cases discovered in a few provinces of China as of today, however, the number of new cases are not significant due to PRC government’s strict control, and the Company does not believe the new cases would have a significant impact on the Company’s operations.

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

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern

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

As reflected in the accompanying consolidated financial statements, the Company had net loss of $275,929 and $88,035 for the nine and three months ended September 30, 2020, respectively, which raise substantial doubt about the Company’s ability to continue as a going concern.

In addition to current boric acid production business, the Company plans to produce lithium carbonate electric vehicle batteries through a recently established JV from brine that is provided by Qinghai Technology for free. The cost for the brine is immaterial as it is pumped out directly from the nearby Salt Lake without any charge. Management also intends to raise additional funds by way of a private or public offering, or by obtaining loans from banks or others.  While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

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

Basis of Presentation

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

The interim consolidated financial information as of September 30, 2020 and for the nine and three-month periods ended September 30, 2020 and 2019 were prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP were not included. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, previously filed with the SEC.

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

Principles of Consolidation 

For the nine and three months ended September 30, 2020, the accompanying consolidated financial statements include the accounts of the Company’s US parent, and Mid-heaven BVI and its subsidiaries, Sincerity, Salt-Lake, Qinghai Technology and Qinghai Zhongli, which are collectively referred to as the “Company.” For the nine and three months ended September 30, 2019, the accompanying consolidated financial statements include the accounts of the Company’s US parent, and its subsidiaries Heat HP and Heat PHE, and their subsidiaries SanDeKe, Jinhui, SmartHeat Investment, SmartHeat Trading, SmartHeat Pump, and Heat Exchange and Mid-heaven BVI and its subsidiaries, Sincerity, Salt-Lake and Qinghai Technology, which are collectively referred to as the “Company.” All significant intercompany accounts and transactions were eliminated in consolidation. The consolidated balance sheet at December 31, 2019 did not include the balance sheets of the Company’s subsidiaries that were sold on September 30, 2019.

Use of Estimates

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

Cash and Equivalents

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

Accounts Receivable, net

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Based on historical collection activity, the Company had allowance of $0 at September 30, 2020 and December 31, 2019.

Advances to Suppliers, net

The Company makes advances to certain vendors to purchase raw material, tools and equipment for production. The advances are interest-free and unsecured. As of September 30, 2020, and December 31, 2019, the Company had gross advance to suppliers of $95,570 and $7,490, respectively, and the Company had allowance for advances to suppliers of $2,632 and $0, respectively. In addition, as of September 30, 2020, advances to suppliers also included a prepayment of $29,368 to a third party company for purchasing equipment and a land use right; total purchase price is $161,525, the remaining $132,157 will be paid within three days after the completion of the land certificate and related deed, or the prepayment will be returned to the Company it failure to obtain the land use certificate and related deed.

Inventories, net

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

Property and Equipment, net

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

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

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

Impairment of Long-Lived Assets

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

Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized based on the excess of the carrying amount over the fair value of the assets. Fair value generally is determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company believes that, as of September 30, 2020 and December 31, 2019, there was no significant impairments of its long-lived assets.

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

Deferred Income

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

Unearned Revenue

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

Revenue Recognition

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

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

Cost of Sales

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

Research and Development Costs

Research and development (“R&D”) costs are expensed as incurred and included in general and administrative expenses. These costs primarily consist of cost of materials used, salaries paid for the Company’s development department and fees paid to third parties. R&D costs for the nine and three months ended September 30, 2020 and 2019 were immaterial.

Share-Based Compensation

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

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

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

Income Taxes

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

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

Under the provisions of FASB ASC Topic 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statement of income.  At September 30, 2020 and December 31, 2019, the Company did not take any uncertain positions that would necessitate recording a tax related liability.  

Noncontrolling Interests

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

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

On April 15, 2020, Qinghai Technology and Xi’an Jinzang formed a JV company Qinghai Zhongli to process brine supplied by Qinghai Technology. Qinghai Technology owns 51% of the JV and Xi’ Jinzang owns the remaining 49%. During the nine and three months ended September 30, 2020, the Company had loss of $8,554 and $5,809 attributable to the noncontrolling interest. 

Concentration of Credit Risk

Cash includes cash on hand and demand deposits in accounts maintained within China. Balances at financial institutions within China are not covered by insurance. The Company has not experienced any losses in such accounts.

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

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

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

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

Foreign Currency Translation and Comprehensive Income (Loss)

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

Statement of Cash Flows

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

Fair Value of Financial Instruments

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

Fair Value Measurements and Disclosures

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

● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

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

As of September 30, 2020 and December 31, 2019, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value. 

Leases

On January 1, 2019, the Company adopted ASU  No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet for all leases with terms longer than 12 months and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company concluded the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements since the Company does not have any lease that is longer than 12 months. 

Segment Reporting

FASB ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Management determined the Company’s operations constitute a single reportable segment in accordance with ASC 280. The Company currently operates in one business and industry segment: manufacture and sale of boric acid. 

Reclassification

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

New Accounting Pronouncements 

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

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within FASB ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is evaluating the impact this update will have on its consolidated financial statements.

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INVENTORIES, NET

9 Months Ended

Sep. 30, 2020

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

3. INVENTORIES, NET 

Inventories at September 30, 2020 and December 31, 2019, respectively, were as follows: 

	2020		2019
Raw materials	$	280,018	$	311,049
Finished goods		440,178		1,491,598
Total	$	720,196	$	1,802,647

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NOTES RECEIVABLE - BANK ACCEPTANCES

9 Months Ended

Sep. 30, 2020

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

4. NOTES RECEIVABLE – BANK ACCEPTANCES

The Company sold goods to its customers and received notes (bank acceptances) from them in lieu of payment. These bank acceptances were issued by customers to the Company and would be honored by the applicable bank. The Company may hold a bank acceptance until the maturity for full payment, or have the bank acceptance cashed out by the bank at a discount at an earlier date, or transfer the bank acceptance to its vendors in lieu of payment for their own obligations. As of September 30, 2020 and December 31, 2019, the Company had notes receivable of $366,258 and $79,478, respectively; and at September 30, 2020, the Company had $1.30 million notes receivable that were endorsed to its vendors, in lieu of payment. The Company was contingently liable for these notes receivable until paid.

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OTHER RECEIVABLES

9 Months Ended

Sep. 30, 2020

Disclosure Text Block Supplement [Abstract]

Other Current Assets [Text Block]

5. OTHER RECEIVABLES

Other receivables consisted of the following at September 30, 2020 and December 31, 2019:

	2020		2019
VAT tax receivable	$	19,503	$	-
Other receivable – sale of discontinued operations		354		354
Total	$	19,857	$	354

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PROPERTY AND EQUIPMENT, NET

9 Months Ended

Sep. 30, 2020

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

6. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following at September 30, 2020 and December 31, 2019, respectively:

	2020			2019
Structures and improvements	$	461,115		$	450,136
Production equipment		2,752,902			2,451,859
Vehicle		67,869			-
Equipment		254,758			248,692
Total		3,536,644			3,150,687
Less: accumulated depreciation		(2,031,938	)		(1,747,006	)
Property and equipment, net	$	1,504,706		$	1,403,681

Depreciation for the nine months ended September 30, 2020 and 2019 was $236,026 and $235,286, respectively.

Depreciation for the three months ended September 30, 2020 and 2019 was $84,483 and $76,141, respectively.

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CONSTRUCTION IN PROGRESS (“CIP”)

9 Months Ended

Sep. 30, 2020

Disclosure Text Block Supplement [Abstract]

Other Assets Disclosure [Text Block]

7. CONSTRUCTION IN PROGRESS

As of September 30, 2020 and December 31, 2019, the Company had construction in progress of $33,264 and $1,635,912, respectively. As of December 31, 2019, the construction in progress was mainly for Test and Experimental Plant I, which has no production currently; due to the existing coal-supported boiler in Plant I not meet the environment protection standard, and the delay of the government’s installing and connecting a natural gas pipeline to implement a Coal-to-Gas conversion project resulting from various factors including the Coronavirus outbreak, Qinghai Technology sold the Test and Experimental Plant I to Qinghai Mining at cost of RMB 11.41 million ($1.63 million) (Note 10) in September 2020. The payment term is five years with annual interest of 4.75%.  The first payment of $323,050 is due September 30, 2021. Qinghai Mining uses its accounts receivable as the pledge for the repayment, and  has the right to repay the purchase price in full any time before the maturity date.

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TAXES PAYABLE

9 Months Ended

Sep. 30, 2020

Tax Disclosure [Abstract]

Tax Disclosure [Text Block]

8. TAXES PAYABLE

Taxes payable consisted of the following September 30, 2020 and December 31, 2019, respectively:

	2020		2019
Other	$	39,361	$	29,350
VAT		313,527		265,905
Taxes payable	$	352,888	$	295,255

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ACCRUED LIABILITIES AND OTHER PAYABLES

9 Months Ended

Sep. 30, 2020

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

9. ACCRUED LIABILITIES AND OTHER PAYABLES 

Accrued liabilities and other payables consisted of the following at September 30, 2020 and December 31, 2019, respectively:

	2020		2019
Advances from third parties	$	4,720	$	1,049
Other		524,000		534,275
Accrued salary		951,189		560,374
Total	$	1,479,909	$	1,095,698

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

As of September 30, 2020 and December 31, 2019, other mainly consisted of 1) dividend payable to Northtech of $475,000 and $400,000, respectively; and 2) payables for professional fees and other miscellaneous expenses of $49,000 and $134,275, respectively. 

As of September 30, 2020, accrued salary also included $840,000 accrued salary for three senior officers. As of December 31, 2019, accrued salary also included $480,000 accrued salary for three senior officers.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

10. RELATED PARTY TRANSACTIONS

Qinghai Technology purchased raw material boron rock from Qinghai Mining (owned by three major shareholders of the Company); in addition, Qinghai Technology sometimes received no-interest short-term advances from Qinghai Mining for daily operational needs. As of September 30, 2020 and December 31, 2019, due from Qinghai Mining (representing the net amount of intercompany transactions between Qinghai Technology and Qinghai Mining) was $3.16 million and $0.55 million, respectively. Qinghai Technology purchased $1,188,802 and $1,113,250 boron ore from Qinghai Mining during the nine months ended September 30, 2020 and 2019, respectively. Qinghai Technology purchased $594,276 and $518,870 boron ore from Qinghai Mining during the three months ended September 30, 2020 and 2019, respectively.

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

In September 2020, Qinghai Technology sold the Test and Experimental Plant I to Qinghai Mining at cost of RMB 11.41 million ($1.68 million) (see Note 7). The payment term is five years with annual interest of 4.75%.  The first payment of $323,050 is due September 30, 2021. As of September 30, 2020, the future minimum payment for next five years is: $323,050, $323,050, $323,050, $323,050 and $383,612.  Qinghai Mining uses its accounts receivable as the pledge for the repayment, and  has the right to repay the purchase price in full any time before the maturity date.

Qinghai Technology used equipment for production that belongs to Qinghai Province Dachaidan Zhongtian Resources Development Co., Ltd (“Zhongtian Resources”, and is owned by the Chairman and his brother who are also two major shareholders of the Company). The depreciation of these fixed assets had an impact on the production costs of boric acid of the Company and was included in the Company’s cost of sales. The depreciation of these fixed assets for the nine months ended September 30, 2020 and 2019 was $19,547 and $25,658, respectively. The depreciation of these fixed assets for the three months ended September 30, 2020 and 2019 was $6,927 and $8,059, respectively. Due to Zhongtian Resources resulting from using its equipment and payment of worker’s compensation made by Zhongtian Resource for Qinghai Technology was $69,871 and $49,125 at September 30, 2020 and December 31, 2019, respectively.

Qinghai Technology sold boric acid to Qinghai Dingjia Zhixin Trading Co., Ltd (“Dingjia”), 90% owned by the son of the Company’s major shareholder (also the Chairman of the Company). For the nine months ended September 30, 2020 and 2019, the Company’s sales to Dingjia was $202,130 and $112,855, respectively. For the three months ended September 30, 2020 and 2019, the Company’s sales to Dingjia was $100,570 and $17,300, respectively. At September 30, 2020 and December 31, 2019, payable to Dingjia was $19,893 and $56,144, respectively.

In addition, at September 30, 2020 and December 31, 2019, the Company had $939,591 and $573,264 due to another major shareholder of the Company (also the Company’s CEO), resulting from certain Company operating expenses of the US parent company such as legal and audit fees that were paid by this major shareholder on behalf of the Company. This short term advance bore no interest, and was payable upon demand. 

The following table summarized the due from (to) related parties as of September 30, 2020 and December 31, 2019, respectively:

	Related party name	2020			2019
Due from	Qinghai Mining including $1.68 million sale of CIP	$	3,534,790		$	1,173,881
Due to	Qinghai Mining		(374,840	)		(619,354	)
Due from, net (current and noncurrent)		$	3,159,950		$	554,527
Due to	Dingjia	$	19,893		$	56,144
Due to	Zhongtian Resources		69,871			49,125
Due to	A major shareholder		939,591			573,264
Due to, total		$	1,029,355		$	678,533

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DEFERRED INCOME

9 Months Ended

Sep. 30, 2020

Deferred Income [Abstract]

Deferred Income [Text Block]

11. DEFERRED INCOME

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

The detail of deferred income for the Company’s special projects at September 30, 2020 is:

	Government subsidy amount		Project completion date	Useful life in years		Accumulated amortization		Net
Technology upgrade for using lean ore to produce magnesium sulfate	$	323,050	8/1/2013		10	$	231,519	$	91,531
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		73,420	5/1/2015		10		39,769		33,651
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		1,468,407	1/1/2018		10		403,812		1,064,595
Project of high value utilization of magnesium-rich waste liquid		293,681	7/9/2019		10		234,578		59,103
Total	$	2,158,558				$	909,678	$	1,248,880

The detail of deferred income for the Company’s special projects at December 31, 2019 is:

	Government subsidy amount		Project completion date	Useful life in years		Accumulated amortization		Net
Technology upgrade for using lean ore to produce magnesium sulfate	$	315,358	8/1/2013		10	$	202,355	$	113,003
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		71,672	5/1/2015		10		33,447		38,225
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		1,433,445	1/1/2018		10		286,689		1,146,756
Project of high value utilization of magnesium-rich waste liquid		286,689	7/9/2019		10		224,047		62,642
Total	$	2,107,164				$	746,538	$	1,360,626

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SUBSIDY INCOME

9 Months Ended

Sep. 30, 2020

Other Income and Expenses [Abstract]

Other Income and Other Expense Disclosure [Text Block]

12. SUBSIDY INCOME

Subsidy income consisted of amortization of deferred income for declared special projects and government’s general incentive fund (recorded as income upon receipt) for the nine and three months ended September 30, 2020 and 2019, respectively:

	Nine Months Ended September 30,
	2020		2019
Technology upgrade for using lean ore to produce magnesium sulfate	$	23,599	$	24,073
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		5,364		5,471
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		107,270		109,424
Project of high value utilization of magnesium-rich waste liquid		4,934		226,359
Subsidy for resuming work		2,559		-
Total	$	143,726	$	365,327

	Three Months Ended September 30,
	2020		2019
Technology upgrade for using lean ore to produce magnesium sulfate	$	7,956	$	7,851
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		1,809		1,784
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		36,165		35,686
Project of high value utilization of magnesium-rich waste liquid		1,663		226,359
Subsidy for resuming work		498		-
Total	$	48,091	$	271,680

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DEFERRED TAX ASSETS

9 Months Ended

Sep. 30, 2020

Deferred Tax Assets (Liabilities), Net Disclosure [Abstract]

Deferred Tax Assets (Liabilities), Net Disclosure [Text Block]

13. DEFERRED TAX ASSETS

As of September 30, 2020 and December 31, 2019, respectively, deferred tax assets consisted of the following:

	2020			2019
Deferred tax asset –NOL of US parent company	$	1,063,574		$	941,203
Less: valuation allowance		(1,063,574	)		(941,203	)
Deferred tax assets, net	$	-		$	-

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

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INCOME TAXES

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

14. INCOME TAXES

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

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

The US parent company, was incorporated in the US and has net operating losses for income tax purposes, under the 2018 Tax Reform, the net operating losses arising in tax years beginning after 2017 may reduce 80% of a taxpayer’s taxable income, and be carried forward indefinitely. However, the coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) issued in March 2020, provides tax relief to both corporate and noncorporate taxpayers by adding a five-year carryback period and temporarily repealing the 80% limitation for NOLs arising in 2018, 2019 and 2020. The U.S. parent Company has net operating losses carry forwards for income taxes of approximately $5.06 million at September 30, 2020. Management believes the realization of benefits from these losses remains uncertain due to the parent Company’s limited operating history and continuing losses. Accordingly, a 100% deferred tax asset valuation allowance was provided. 

The disposed entities - SanDeKe, Jinhui, SmartHeat Investment, SmartHeat Pump, SmartHeat Trading and Heat Exchange are subject to the regular 25% PRC income tax rate.

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

The following is a reconciliation of the difference between the actual provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income before income taxes for the nine months ended September 30, 2020 and 2019, respectively:

	2020			2019
Tax benefit at U.S. federal statutory rates	$	(49,847	)	$	81,791
Foreign income taxed at different rates		13,815			28,301
Tax holiday in PRC		(34,536	)		(70,751	)
Valuation allowance		117,685			66,786
Tax expense per financial statements	$	47,117		$	106,127

The income tax expense for the nine months ended September 30, 2020 and 2019, respectively, consisted of the following:

	2020		2019
Income tax expense – current	$	47,117	$	106,127
Income tax benefit – deferred		-		-
Total income tax benefit, net	$	47,117	$	106,127

The following is a reconciliation of the difference between the actual provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income before income taxes for the three months ended September 30, 2020 and 2019, respectively:

	2020			2019
Tax benefit at U.S. federal statutory rates	$	(15,258	)	$	78,478
Foreign income taxed at different rates		5,135			19,628
Tax holiday in PRC		(12,834	)		(49,070	)
Valuation allowance		44,141			24,569
Tax expense per financial statements	$	21,184		$	73,605

The income tax expense for the three months ended September 30, 2020 and 2019, respectively, consisted of the following:

	2020		2019
Income tax expense – current	$	21,184	$	73,605
Income tax benefit – deferred		-		-
Total income tax benefit, net	$	21,184	$	73,605

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MAJOR CUSTOMERS AND VENDORS

9 Months Ended

Sep. 30, 2020

Risks and Uncertainties [Abstract]

Concentration Risk Disclosure [Text Block]

15. MAJOR CUSTOMERS AND VENDORS 

For the nine months ended September 30, 2020, three customers accounted for 14%, 12% and 10% of Company’s total sales. For the three months ended September 30, 2020, four customers accounted for 15%, 12%, 11% and 10% of Company’s total sales. Total accounts receivable from those major customers was $118,865 as of September 30, 2020.

Two customers accounted for 15% and 14%, respectively, of the Company’s sales for the nine months ended September 30, 2019. Two customers accounted for 13% and 13%, respectively, of the Company’s sales for the three months ended September 30, 2019.

Qinghai Technology purchased $1,188,802 and $1,113,250 boron ore (the main raw material) from Qinghai Mining during the nine months ended September 30, 2020 and 2019, respectively. Qinghai Technology purchased $594,276 and $518,870 boron ore (the main raw material) from Qinghai Mining during the three months ended September 30, 2020 and 2019, respectively.

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STATUTORY RESERVES AND RESTRICTED NET ASSETS

9 Months Ended

Sep. 30, 2020

Statutory Reserves Disclosure [Abstract]

Statutory Reserves Disclosure [Text Block]

16. STATUTORY RESERVES AND RESTRICTED NET ASSETS

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

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

Additionally, in accordance with the Company Laws of the PRC, a domestic enterprise is required to provide surplus reserve at least 10% of its annual after-tax profit until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. A domestic enterprise is also required to provide discretionary surplus reserve, at the discretion of the BOD, from the profits determined in accordance with the enterprise’s PRC statutory accounts. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. Qinghai Technology was established as domestic enterprises and therefore are subject to the above-mentioned restrictions on distributable profits.

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

According to Administrative Measures for the Collection and Utilization of Enterprise Work Safety Funds issued by the PRC Ministry of Finance and the State Administration of Work Safety, for the companies with dangerous goods production or storage, the company is required to make a special reverse for the use of enhancing and improving its safe production conditions. Under PRC GAAP, the reserve is recorded as cost of sales; however, under US GAAP, since the expense has not been incurred and the Company already recorded cost of sales for safety related expenses when incurred, this special reserve was recorded as an appropriation of its after-tax income. At September 30, 2020, the Company had $48,698 production safety related reserve, which was included in $146,650 statutory reserve in the balance sheet. The reserve is calculated at regressive rates levied on revenue in excess of specific amounts as follows: 

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

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COMMITMENTS

9 Months Ended

Sep. 30, 2020

Disclosure Text Block Supplement [Abstract]

Commitments Disclosure [Text Block]

17. COMMITMENTS

Capital Contribution

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

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CONTINGENCIES

9 Months Ended

Sep. 30, 2020

Loss Contingency [Abstract]

Contingencies Disclosure [Text Block]

18. CONTINGENCIES

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

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

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

Subsequent Events [Text Block]

19. SUBSEQUENT EVENTS

The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined the Company has no material subsequent events.

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Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Going Concern [Policy Text Block]

Going Concern

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

As reflected in the accompanying consolidated financial statements, the Company had net loss of $275,929 and $88,035 for the nine and three months ended September 30, 2020, respectively, which raise substantial doubt about the Company’s ability to continue as a going concern.

In addition to current boric acid production business, the Company plans to produce lithium carbonate electric vehicle batteries through a recently established JV from brine that is provided by Qinghai Technology for free. The cost for the brine is immaterial as it is pumped out directly from the nearby Salt Lake without any charge. Management also intends to raise additional funds by way of a private or public offering, or by obtaining loans from banks or others.  While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds on reasonable terms and conditions, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

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

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

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

The interim consolidated financial information as of September 30, 2020 and for the nine and three-month periods ended September 30, 2020 and 2019 were prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP were not included. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, previously filed with the SEC.

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

Consolidation, Policy [Policy Text Block]

Principles of Consolidation 

For the nine and three months ended September 30, 2020, the accompanying consolidated financial statements include the accounts of the Company’s US parent, and Mid-heaven BVI and its subsidiaries, Sincerity, Salt-Lake, Qinghai Technology and Qinghai Zhongli, which are collectively referred to as the “Company.” For the nine and three months ended September 30, 2019, the accompanying consolidated financial statements include the accounts of the Company’s US parent, and its subsidiaries Heat HP and Heat PHE, and their subsidiaries SanDeKe, Jinhui, SmartHeat Investment, SmartHeat Trading, SmartHeat Pump, and Heat Exchange and Mid-heaven BVI and its subsidiaries, Sincerity, Salt-Lake and Qinghai Technology, which are collectively referred to as the “Company.” All significant intercompany accounts and transactions were eliminated in consolidation. The consolidated balance sheet at December 31, 2019 did not include the balance sheets of the Company’s subsidiaries that were sold on September 30, 2019.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

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

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Equivalents

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

Receivable [Policy Text Block]

Accounts Receivable, net

The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Based on historical collection activity, the Company had allowance of $0 at September 30, 2020 and December 31, 2019.

Advances to Suppliers [Policy Text Block]

Advances to Suppliers, net

The Company makes advances to certain vendors to purchase raw material, tools and equipment for production. The advances are interest-free and unsecured. As of September 30, 2020, and December 31, 2019, the Company had gross advance to suppliers of $95,570 and $7,490, respectively, and the Company had allowance for advances to suppliers of $2,632 and $0, respectively. In addition, as of September 30, 2020, advances to suppliers also included a prepayment of $29,368 to a third party company for purchasing equipment and a land use right; total purchase price is $161,525, the remaining $132,157 will be paid within three days after the completion of the land certificate and related deed, or the prepayment will be returned to the Company it failure to obtain the land use certificate and related deed.

Inventory, Policy [Policy Text Block]

Inventories, net

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

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment, net

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

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

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

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Long-Lived Assets

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

Recoverability of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized based on the excess of the carrying amount over the fair value of the assets. Fair value generally is determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company believes that, as of September 30, 2020 and December 31, 2019, there was no significant impairments of its long-lived assets.

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

Deferred Charges, Policy [Policy Text Block]

Deferred Income

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

Long-Duration Contracts Revenue Recognition, Policy [Policy Text Block]

Unearned Revenue

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

Revenue [Policy Text Block]

Revenue Recognition

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

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

Cost of Goods and Service [Policy Text Block]

Cost of Sales

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

Research and Development Expense, Policy [Policy Text Block]

Research and Development Costs

Research and development (“R&D”) costs are expensed as incurred and included in general and administrative expenses. These costs primarily consist of cost of materials used, salaries paid for the Company’s development department and fees paid to third parties. R&D costs for the nine and three months ended September 30, 2020 and 2019 were immaterial

Share-based Payment Arrangement [Policy Text Block]

Share-Based Compensation

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

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

Effective January 1, 2020, the Company adopted ASU 2018-07, "Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting," which expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. An entity should apply the requirements of FASB ASC 718 to non-employee awards except for specific guidance on inputs to an option pricing model and the attribution of cost. The amendments specify that FASB ASC 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards.

Income Tax, Policy [Policy Text Block]

Income Taxes

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

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

Under the provisions of FASB ASC Topic 740, when tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in selling, general and administrative expenses in the statement of income.  At September 30, 2020 and December 31, 2019, the Company did not take any uncertain positions that would necessitate recording a tax related liability.

Consolidation, Subsidiaries or Other Investments, Consolidated Entities, Policy [Policy Text Block]

Noncontrolling Interests

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

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

On April 15, 2020, Qinghai Technology and Xi’an Jinzang formed a JV company Qinghai Zhongli to process brine supplied by Qinghai Technology. Qinghai Technology owns 51% of the JV and Xi’ Jinzang owns the remaining 49%. During the nine and three months ended September 30, 2020, the Company had loss of $8,554 and $5,809 attributable to the noncontrolling interest.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk

Cash includes cash on hand and demand deposits in accounts maintained within China. Balances at financial institutions within China are not covered by insurance. The Company has not experienced any losses in such accounts.

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

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

Earnings Per Share, Policy [Policy Text Block]

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

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

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation and Comprehensive Income (Loss)

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

Statement of Cash Flows [Policy Text Block]

Statement of Cash Flows

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

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

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

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements and Disclosures

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

● Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

● Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

● Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

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

As of September 30, 2020 and December 31, 2019, the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at fair value.

Lessee, Leases [Policy Text Block]

Leases

On January 1, 2019, the Company adopted ASU  No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use (ROU) assets on the balance sheet for all leases with terms longer than 12 months and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company concluded the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements since the Company does not have any lease that is longer than 12 months.

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

FASB ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. Management determined the Company’s operations constitute a single reportable segment in accordance with ASC 280. The Company currently operates in one business and industry segment: manufacture and sale of boric acid.

Reclassification, Comparability Adjustment [Policy Text Block]

Reclassification

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

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements 

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

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within FASB ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is evaluating the impact this update will have on its consolidated financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2020

Property and Equipment, Useful Lives [Member]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) [Line Items]

Property, Plant and Equipment [Table Text Block]

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

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

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INVENTORIES, NET (Tables)

9 Months Ended

Sep. 30, 2020

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories at September 30, 2020 and December 31, 2019, respectively, were as follows:

	2020		2019
Raw materials	$	280,018	$	311,049
Finished goods		440,178		1,491,598
Total	$	720,196	$	1,802,647

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OTHER RECEIVABLES (Tables)

9 Months Ended

Sep. 30, 2020

Disclosure Text Block Supplement [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Other receivables consisted of the following at September 30, 2020 and December 31, 2019:

	2020		2019
VAT tax receivable	$	19,503	$	-
Other receivable – sale of discontinued operations		354		354
Total	$	19,857	$	354

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PROPERTY AND EQUIPMENT, NET (Tables)

9 Months Ended

Sep. 30, 2020

Property, Plant and Equipment, Net [Member]

PROPERTY AND EQUIPMENT, NET (Tables) [Line Items]

Property, Plant and Equipment [Table Text Block]

Property and equipment consisted of the following at September 30, 2020 and December 31, 2019, respectively:

	2020			2019
Structures and improvements	$	461,115		$	450,136
Production equipment		2,752,902			2,451,859
Vehicle		67,869			-
Equipment		254,758			248,692
Total		3,536,644			3,150,687
Less: accumulated depreciation		(2,031,938	)		(1,747,006	)
Property and equipment, net	$	1,504,706		$	1,403,681

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TAXES PAYABLE (Tables)

9 Months Ended

Sep. 30, 2020

Tax Disclosure [Abstract]

Schedule of Taxes Payable [Table Text Block]

Taxes payable consisted of the following September 30, 2020 and December 31, 2019, respectively:

	2020		2019
Other	$	39,361	$	29,350
VAT		313,527		265,905
Taxes payable	$	352,888	$	295,255

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ACCRUED LIABILITIES AND OTHER PAYABLES (Tables)

9 Months Ended

Sep. 30, 2020

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]

Accrued liabilities and other payables consisted of the following at September 30, 2020 and December 31, 2019, respectively:

	2020		2019
Advances from third parties	$	4,720	$	1,049
Other		524,000		534,275
Accrued salary		951,189		560,374
Total	$	1,479,909	$	1,095,698

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RELATED PARTY TRANSACTIONS (Tables)

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

Schedule of Related Party Transactions [Table Text Block]

The following table summarized the due from (to) related parties as of September 30, 2020 and December 31, 2019, respectively:

	Related party name	2020			2019
Due from	Qinghai Mining including $1.68 million sale of CIP	$	3,534,790		$	1,173,881
Due to	Qinghai Mining		(374,840	)		(619,354	)
Due from, net (current and noncurrent)		$	3,159,950		$	554,527
Due to	Dingjia	$	19,893		$	56,144
Due to	Zhongtian Resources		69,871			49,125
Due to	A major shareholder		939,591			573,264
Due to, total		$	1,029,355		$	678,533

XML

DEFERRED INCOME (Tables)

9 Months Ended

Sep. 30, 2020

Deferred Income [Abstract]

Schedule of Other Nonoperating Income, by Component [Table Text Block]

The detail of deferred income for the Company’s special projects at September 30, 2020 is:

	Government subsidy amount		Project completion date	Useful life in years		Accumulated amortization		Net
Technology upgrade for using lean ore to produce magnesium sulfate	$	323,050	8/1/2013		10	$	231,519	$	91,531
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		73,420	5/1/2015		10		39,769		33,651
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		1,468,407	1/1/2018		10		403,812		1,064,595
Project of high value utilization of magnesium-rich waste liquid		293,681	7/9/2019		10		234,578		59,103
Total	$	2,158,558				$	909,678	$	1,248,880

	Government subsidy amount		Project completion date	Useful life in years		Accumulated amortization		Net
Technology upgrade for using lean ore to produce magnesium sulfate	$	315,358	8/1/2013		10	$	202,355	$	113,003
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		71,672	5/1/2015		10		33,447		38,225
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		1,433,445	1/1/2018		10		286,689		1,146,756
Project of high value utilization of magnesium-rich waste liquid		286,689	7/9/2019		10		224,047		62,642
Total	$	2,107,164				$	746,538	$	1,360,626

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SUBSIDY INCOME (Tables)

9 Months Ended

Sep. 30, 2020

Other Income and Expenses [Abstract]

Schedule of Other Nonoperating Income (Expense) [Table Text Block]

Subsidy income consisted of amortization of deferred income for declared special projects and government’s general incentive fund (recorded as income upon receipt) for the nine and three months ended September 30, 2020 and 2019, respectively:

	Nine Months Ended September 30,
	2020		2019
Technology upgrade for using lean ore to produce magnesium sulfate	$	23,599	$	24,073
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		5,364		5,471
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		107,270		109,424
Project of high value utilization of magnesium-rich waste liquid		4,934		226,359
Subsidy for resuming work		2,559		-
Total	$	143,726	$	365,327

	Three Months Ended September 30,
	2020		2019
Technology upgrade for using lean ore to produce magnesium sulfate	$	7,956	$	7,851
Technical transformation for boric acid and magnesium sulfate produced from low grade ore		1,809		1,784
Project of comprehensive utilization of DaChaiDan Solid Boron Mine		36,165		35,686
Project of high value utilization of magnesium-rich waste liquid		1,663		226,359
Subsidy for resuming work		498		-
Total	$	48,091	$	271,680

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DEFERRED TAX ASSETS (Tables)

9 Months Ended

Sep. 30, 2020

Deferred Tax Assets (Liabilities), Net Disclosure [Abstract]

Summary of Deferred Tax Liability Not Recognized [Table Text Block]

As of September 30, 2020 and December 31, 2019, respectively, deferred tax assets consisted of the following:

	2020			2019
Deferred tax asset –NOL of US parent company	$	1,063,574		$	941,203
Less: valuation allowance		(1,063,574	)		(941,203	)
Deferred tax assets, net	$	-		$	-

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INCOME TAXES (Tables)

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

The following is a reconciliation of the difference between the actual provision for income taxes and the (benefit) provision computed by applying the federal statutory rate on income before income taxes for the nine months ended September 30, 2020 and 2019, respectively:

	2020			2019
Tax benefit at U.S. federal statutory rates	$	(49,847	)	$	81,791
Foreign income taxed at different rates		13,815			28,301
Tax holiday in PRC		(34,536	)		(70,751	)
Valuation allowance		117,685			66,786
Tax expense per financial statements	$	47,117		$	106,127

	2020			2019
Tax benefit at U.S. federal statutory rates	$	(15,258	)	$	78,478
Foreign income taxed at different rates		5,135			19,628
Tax holiday in PRC		(12,834	)		(49,070	)
Valuation allowance		44,141			24,569
Tax expense per financial statements	$	21,184		$	73,605

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

The income tax expense for the nine months ended September 30, 2020 and 2019, respectively, consisted of the following:

	2020		2019
Income tax expense – current	$	47,117	$	106,127
Income tax benefit – deferred		-		-
Total income tax benefit, net	$	47,117	$	106,127

	2020		2019
Income tax expense – current	$	21,184	$	73,605
Income tax benefit – deferred		-		-
Total income tax benefit, net	$	21,184	$	73,605

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STATUTORY RESERVES AND RESTRICTED NET ASSETS (Tables)

9 Months Ended

Sep. 30, 2020

Statutory Reserves Disclosure [Abstract]

Reserve [Table Text Block]

According to Administrative Measures for the Collection and Utilization of Enterprise Work Safety Funds issued by the PRC Ministry of Finance and the State Administration of Work Safety, for the companies with dangerous goods production or storage, the company is required to make a special reverse for the use of enhancing and improving its safe production conditions. Under PRC GAAP, the reserve is recorded as cost of sales; however, under US GAAP, since the expense has not been incurred and the Company already recorded cost of sales for safety related expenses when incurred, this special reserve was recorded as an appropriation of its after-tax income. At September 30, 2020, the Company had $48,698 production safety related reserve, which was included in $146,650 statutory reserve in the balance sheet. The reserve is calculated at regressive rates levied on revenue in excess of specific amounts as follows:

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

XML

ORGANIZATION AND DESCRIPTION OF BUSINESS (Details)							1 Months Ended
	Mar. 27, 2020 USD ($)	Mar. 27, 2020 CNY (¥)	Sep. 30, 2019 USD ($)	Sep. 30, 2019 CNY (¥)	Dec. 31, 2018 shares	Aug. 23, 2013	Apr. 30, 2020 USD ($)	Apr. 30, 2020 CNY (¥)
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Number of Wholly Owned Subsidiaries Created						2
Qinghai Technology [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Equity Method Investment, Ownership Percentage	51.00%	51.00%
Agreement, Description	Investment Cooperation Agreement, Memorandum of Cooperation and Licensing Agreement with Xi'an Jinzang Membrane Environmental Protection Technology Co., Ltd. (Xi’an Jinzang) to produce up to 30,000 tonnes of battery grade lithium carbonate annually, subject to funding	Investment Cooperation Agreement, Memorandum of Cooperation and Licensing Agreement with Xi'an Jinzang Membrane Environmental Protection Technology Co., Ltd. (Xi’an Jinzang) to produce up to 30,000 tonnes of battery grade lithium carbonate annually, subject to funding
Proceeds from Contributed Capital	$ 19,746,000	¥ 140,000,000					$ 710,000	¥ 5,000,000
Xi'an Jinzang Membrane Environmental Protection Technology Co., Ltd. (Xi'an Jinzang) [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Equity Method Investment, Ownership Percentage	49.00%	49.00%
Mid-Haven Sincerity International Resources Investment Co., Ltd (Mid-Haven) [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Stock Issued During Period, Shares, Acquisitions (in Shares) | shares					106,001,971
Number of Subsidiaries					2
Equity Method Investment, Ownership Percentage					57.00%
Mid-Haven Sincerity International Resources Investment Co., Ltd (Mid-Haven) [Member] | Qing Hai Mid-Haven Boron & Lithium Technology Company, Ltd. ("Qing Hai Technology") [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Equity Method Investment, Ownership Percentage					100.00%
Heat HP, Inc. and Heat PHE, Inc. [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Proceeds from Sales of Business, Affiliate and Productive Assets | $			$ 353
Heat HP, Inc. and Heat PHE, Inc. [Member] | SmartHeat Jinhui (Beijing) Energy Technology Ltd. [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Proceeds from Sales of Business, Affiliate and Productive Assets			15	¥ 100
Heat HP, Inc. and Heat PHE, Inc. [Member] | SmartHeat (China) Investment Ltd. [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Proceeds from Sales of Business, Affiliate and Productive Assets			56	400
Heat HP, Inc. and Heat PHE, Inc. [Member] | SmartHeat (Shanghai) Trading Co., Ltd. [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Proceeds from Sales of Business, Affiliate and Productive Assets			56	400
Heat HP, Inc. and Heat PHE, Inc. [Member] | SmartHeat (Shenyang) Heat Pump Technology Co., Ltd. [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Proceeds from Sales of Business, Affiliate and Productive Assets			56	400
Heat HP, Inc. and Heat PHE, Inc. [Member] | SanDeke Co., Ltd. [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Proceeds from Sales of Business, Affiliate and Productive Assets			85	600
Heat HP, Inc. and Heat PHE, Inc. [Member] | SmartHeat Heat Exchange Equipment Co. [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Proceeds from Sales of Business, Affiliate and Productive Assets			$ 85	¥ 600
Date of Registration and Establishment of JV [Member] | Qinghai Technology [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Proceeds from Contributed Capital	$ 5,077,000	¥ 36,000,000
Payment before July 31, 2020 [Member] | Qinghai Technology [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Proceeds from Contributed Capital	10,155,000	72,000,000
Payment before October 31, 2020 [Member] | Qinghai Technology [Member]
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) [Line Items]
Proceeds from Contributed Capital	$ 4,513,000	¥ 32,000,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	3 Months Ended						9 Months Ended
	Sep. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)	Mar. 31, 2020 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Net Income (Loss) Attributable to Parent	$ (88,035)	$ 42,734	$ (230,628)	$ 5,872,984	$ (43,590)	$ (95,686)	$ (275,929)	$ 5,733,708
Accounts Receivable, Allowance for Credit Loss	0						0		$ 0
Allowance for Doubtful Other Receivables, Current	95,570						95,570		7,490
Allowance for Advances to Suppliers	2,632						2,632		$ 0
Increase (Decrease) in Prepaid Expenses, Other							29,368
Property, Plant and Equipment, Additions							161,525
Payments to Acquire Property, Plant, and Equipment							301,080	0
Income (Loss) from Continuing Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	$ 5,809			$ 0			$ 8,554	$ 0
Number of Operating Segments							1
Qinghai Technology [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Noncontrolling Interest, Ownership Percentage by Parent	51.00%						51.00%
Xi'an Jinzang Membrane Environmental Protection Technology Co., Ltd. (Xi'an Jinzang) [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	49.00%						49.00%
Minimum [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Property, Plant and Equipment, Salvage Value, Percentage	3.00%						3.00%
Maximum [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Property, Plant and Equipment, Salvage Value, Percentage	10.00%						10.00%
Use Rights [Member]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Payments to Acquire Property, Plant, and Equipment							$ 132,157

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Estimated Useful Lives of Property, Plant and Equipment	9 Months Ended
	Sep. 30, 2020
Building [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	20 years
Building and Building Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	4 years
Building and Building Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	20 years
Vehicles [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	4 years
Vehicles [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	8 years
Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	5 years
Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	5 years
Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	3 years
Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	10 years

XML

INVENTORIES, NET (Details) - Schedule of Inventories - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Schedule of Inventories [Abstract]
Raw materials	$ 280,018	$ 311,049
Finished goods	440,178	1,491,598
Total	$ 720,196	$ 1,802,647

XML

NOTES RECEIVABLE - BANK ACCEPTANCES (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Receivables [Abstract]
Financing Receivable, after Allowance for Credit Loss, Current	$ 366,258	$ 79,478
Bank Acceptances Executed and Outstanding	$ 1,300,000

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OTHER RECEIVABLES (Details) - Schedule of Receivables, Prepayments and Deposits - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Schedule of Receivables, Prepayments and Deposits [Abstract]
VAT tax receivable	$ 19,503	$ 0
Other receivable – sale of discontinued operations	354	354
Total	$ 19,857	$ 354

XML

PROPERTY AND EQUIPMENT, NET (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Property, Plant and Equipment [Abstract]
Depreciation	$ 84,483	$ 76,141	$ 236,026	$ 235,286

XML

PROPERTY AND EQUIPMENT, NET (Details) - Schedule of Property, Plant and Equipment - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Property, Plant and Equipment [Line Items]
Property & equipment, gross	$ 3,536,644	$ 3,150,687
Less: accumulated depreciation	(2,031,938)	(1,747,006)
Property and equipment, net	1,504,706	1,403,681
Building and Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Property & equipment, gross	461,115	450,136
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property & equipment, gross	2,752,902	2,451,859
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property & equipment, gross	67,869	0
Equipment [Member]
Property, Plant and Equipment [Line Items]
Property & equipment, gross	$ 254,758	$ 248,692

XML

CONSTRUCTION IN PROGRESS (“CIP”) (Details) ¥ in Thousands		1 Months Ended	9 Months Ended
	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2020 CNY (¥)	Dec. 31, 2019 USD ($)
Disclosure Text Block Supplement [Abstract]
Construction in Progress, Gross		$ 33,264	$ 33,264		$ 1,635,912
Property, Plant and Equipment, Disposals			$ 1,630,000	¥ 11,410
Related Party Transaction, Rate		4.75%
Proceeds from Collection of Notes Receivable	$ 323,050

XML

TAXES PAYABLE (Details) - Schedule of Taxes Payable - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Schedule of Taxes Payable [Abstract]
Other	$ 39,361	$ 29,350
VAT	313,527	265,905
Taxes payable	$ 352,888	$ 295,255

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ACCRUED LIABILITIES AND OTHER PAYABLES (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
ACCRUED LIABILITIES AND OTHER PAYABLES (Details) [Line Items]
Accrued Salaries, Current	$ 840,000
Northtech [Member]
ACCRUED LIABILITIES AND OTHER PAYABLES (Details) [Line Items]
Dividends Payable	475,000	$ 400,000
Accounts Payable, Other	$ 49,000	134,275
Qinghai Technology [Member]
ACCRUED LIABILITIES AND OTHER PAYABLES (Details) [Line Items]
Accrued Salaries, Current		$ 480,000
Number of Officers	3	3

XML

ACCRUED LIABILITIES AND OTHER PAYABLES (Details) - Schedule of Accrued Liabilities and Other Payables - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Schedule of Accrued Liabilities and Other Payables [Abstract]
Advances from third parties	$ 4,720	$ 1,049
Other	524,000	534,275
Accrued salary	951,189	560,374
Total	$ 1,479,909	$ 1,095,698

XML

RELATED PARTY TRANSACTIONS (Details)				1 Months Ended		3 Months Ended						9 Months Ended
	Sep. 30, 2021 USD ($)	Jul. 01, 2019 USD ($)	Jul. 01, 2019 CNY (¥)	Sep. 30, 2020 USD ($)	Sep. 30, 2020 CNY (¥)	Sep. 30, 2020 USD ($)	Mar. 31, 2020 USD ($)	Mar. 31, 2020 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2020 CNY (¥)	Sep. 30, 2019 USD ($)
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Property, Plant and Equipment, Disposals												$ 1,630,000	¥ 11,410,000
Related Party Transaction, Rate				4.75%	4.75%
Proceeds from Collection of Notes Receivable	$ 323,050
Due from Related Parties				$ 3,159,950		$ 3,159,950			$ 554,527			3,159,950
Depreciation						84,483					$ 76,141	236,026		$ 235,286
Revenue from Related Parties						100,570					17,300	202,130		112,855
Due to Related Parties				1,029,355		1,029,355			678,533			1,029,355
Qinghai Technology and Qinghai Mining Boron Ore Purchase Contract [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Description of Transaction		Qinghai Mining is to supply Qinghai Technology boron ore based on Qinghai Technology’s monthly production plan at RMB 62 ($9.10) per tonne. The price is adjustable in the future if there is a significant fluctuation of the market price for the boron ore.	Qinghai Mining is to supply Qinghai Technology boron ore based on Qinghai Technology’s monthly production plan at RMB 62 ($9.10) per tonne. The price is adjustable in the future if there is a significant fluctuation of the market price for the boron ore.
Related Party Transaction, Amounts of Transaction		$ 9.10	¥ 62				$ 11.10	¥ 77.5	10.21	¥ 70.46
Qinghai Technology and Qinghai Mining Slag Purchase Contract [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Amounts of Transaction							$ 4.41	¥ 30
Property, Plant and Equipment, Disposals				$ 1,680,000	¥ 11,410,000
Related Party Transaction, Rate				4.75%	4.75%
Due from Related Parties				$ 323,050		323,050						$ 323,050
Qinghai Mining [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Number of Investors												3	3
Due to Related Parties, Current				3,160,000		3,160,000			550,000			$ 3,160,000
Related Party Transaction, Purchases from Related Party						594,276					518,870	1,188,802		1,113,250
Due from Related Parties				3,534,790		3,534,790			1,173,881			3,534,790
Due to Related Parties				374,840		374,840			619,354			374,840
Zhongtian Resources [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Depreciation						6,927					8,059	19,547		25,658
Related Party Transaction, Due from (to) Related Party				(69,871)		(69,871)			(49,125)			(69,871)
Due to Related Parties				69,871		69,871			49,125			69,871
Dingjia [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Related Party Transaction, Due from (to) Related Party				$ (19,893,000,000)		$ (19,893,000,000)			(56,144,000,000)			$ (19,893,000,000)
Equity Method Investment, Ownership Percentage				90.00%		90.00%						90.00%
Revenue from Related Parties						$ 100,570					$ 17,300	$ 202,130		$ 112,855
Due to Related Parties				$ 19,893		19,893			56,144			19,893
Majority Shareholder [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Due to Related Parties				939,591		939,591			$ 573,264			939,591
Due Year One [Member] | Qinghai Technology and Qinghai Mining Slag Purchase Contract [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Due from Related Parties				323,050		323,050						323,050
Due Year Two [Member] | Qinghai Technology and Qinghai Mining Slag Purchase Contract [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Due from Related Parties				323,050		323,050						323,050
Due Year Three [Member] | Qinghai Technology and Qinghai Mining Slag Purchase Contract [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Due from Related Parties				323,050		323,050						323,050
Due Year Four [Member] | Qinghai Technology and Qinghai Mining Slag Purchase Contract [Member]
RELATED PARTY TRANSACTIONS (Details) [Line Items]
Due from Related Parties				$ 383,612		$ 383,612						$ 383,612

XML

RELATED PARTY TRANSACTIONS (Details) - Schedule of Related Party Transactions - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Related Party Transaction [Line Items]
Due from	$ 3,159,950	$ 554,527
Due to	1,029,355	678,533
Due to	(1,029,355)	(678,533)
Qinghai Mining [Member]
Related Party Transaction [Line Items]
Due from	3,534,790	1,173,881
Due to	374,840	619,354
Due to	(374,840)	(619,354)
Dingjia [Member]
Related Party Transaction [Line Items]
Due to	19,893	56,144
Due to	(19,893)	(56,144)
Zhongtian Resources [Member]
Related Party Transaction [Line Items]
Due to	69,871	49,125
Due to	(69,871)	(49,125)
Majority Shareholder [Member]
Related Party Transaction [Line Items]
Due to	939,591	573,264
Due to	$ (939,591)	$ (573,264)

XML

DEFERRED INCOME (Details) - Schedule of Other Nonoperating Income, by Component - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
DEFERRED INCOME (Details) - Schedule of Other Nonoperating Income, by Component [Line Items]
Government subsidy amount	$ 2,158,558	$ 2,107,164
Amortization	909,678	746,538
Net	1,248,880	1,360,626
Technology upgrade for using lean ore to produce magnesium sulfate [Member]
DEFERRED INCOME (Details) - Schedule of Other Nonoperating Income, by Component [Line Items]
Government subsidy amount	$ 323,050	$ 315,358
Project completion date	Aug. 01, 2013	Aug. 01, 2013
Useful life in years	10 years	10 years
Amortization	$ 231,519	$ 202,355
Net	91,531	113,003
Technical transformation for boric acid and magnesium sulfate produced from low grade ore [Member]
DEFERRED INCOME (Details) - Schedule of Other Nonoperating Income, by Component [Line Items]
Government subsidy amount	$ 73,420	$ 71,672
Project completion date	May 01, 2015	May 01, 2015
Useful life in years	10 years	10 years
Amortization	$ 39,769	$ 33,447
Net	33,651	38,225
Project of comprehensive utilization of DaChaiDan Solid Boron Mine [Member]
DEFERRED INCOME (Details) - Schedule of Other Nonoperating Income, by Component [Line Items]
Government subsidy amount	$ 1,468,407	$ 1,433,445
Project completion date	Jan. 01, 2018	Jan. 01, 2018
Useful life in years	10 years	10 years
Amortization	$ 403,812	$ 286,689
Net	1,064,595	1,146,756
Project of high value utilization of magnesium-rich waste liquid [Member]
DEFERRED INCOME (Details) - Schedule of Other Nonoperating Income, by Component [Line Items]
Government subsidy amount	$ 293,681	$ 286,689
Project completion date	Jul. 09, 2019	Jul. 09, 2019
Useful life in years	10 years	10 years
Amortization	$ 234,578	$ 224,047
Net	$ 59,103	$ 62,642

XML

SUBSIDY INCOME (Details) - Schedule of Other Nonoperating Income (Expense) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
SUBSIDY INCOME (Details) - Schedule of Other Nonoperating Income (Expense) [Line Items]
Other income	$ 48,091	$ 271,680	$ 143,726	$ 365,327
Technology upgrade for using lean ore to produce magnesium sulfate [Member]
SUBSIDY INCOME (Details) - Schedule of Other Nonoperating Income (Expense) [Line Items]
Other income	7,956	7,851	23,599	24,073
Technical transformation for boric acid and magnesium sulfate produced from low grade ore [Member]
SUBSIDY INCOME (Details) - Schedule of Other Nonoperating Income (Expense) [Line Items]
Other income	1,809	1,784	5,364	5,471
Project of comprehensive utilization of DaChaiDan Solid Boron Mine [Member]
SUBSIDY INCOME (Details) - Schedule of Other Nonoperating Income (Expense) [Line Items]
Other income	36,165	35,686	107,270	109,424
Project of high value utilization of magnesium-rich waste liquid [Member]
SUBSIDY INCOME (Details) - Schedule of Other Nonoperating Income (Expense) [Line Items]
Other income	1,663	226,359	4,934	226,359
Subsidy for resuming work [Member]
SUBSIDY INCOME (Details) - Schedule of Other Nonoperating Income (Expense) [Line Items]
Other income	$ 498	$ 0	$ 2,559	$ 0

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DEFERRED TAX ASSETS (Details)	9 Months Ended
	Sep. 30, 2020
Deferred Tax Assets (Liabilities), Net Disclosure [Abstract]
Deferred Tax Assets Valuation Allowance, Percentage	100.00%

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DEFERRED TAX ASSETS (Details) - Schedule of Deferred Tax Liability - USD ($)	Sep. 30, 2020	Dec. 31, 2019
DEFERRED TAX ASSETS (Details) - Schedule of Deferred Tax Liability [Line Items]
Less: valuation allowance	$ (1,063,574)	$ (941,203)
Deferred tax assets, net	0	0
Foreign Tax Authority [Member]
DEFERRED TAX ASSETS (Details) - Schedule of Deferred Tax Liability [Line Items]
Deferred tax asset –NOL of US parent company	$ 1,063,574	$ 941,203

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INCOME TAXES (Details) - USD ($)			9 Months Ended	12 Months Ended
	Jan. 01, 2018	Dec. 31, 2017	Sep. 30, 2020	Dec. 31, 2019
INCOME TAXES (Details) [Line Items]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	35.00%
Reduction to Taxable Income, Percent				80.00%
Operating Loss Carryforwards (in Dollars)			$ 5.06
Deferred Tax Assets Valuation Allowance, Percentage			100.00%
SmartHeat (Shanghai) Trading Co., Ltd. [Member] | Foreign Tax Authority [Member]
INCOME TAXES (Details) [Line Items]
Effective Income Tax Rate Reconciliation, Percent			25.00%
Mid-Haven Sincerity International Resources Investment Co., Ltd (Mid-Haven) [Member] | Foreign Tax Authority [Member]
INCOME TAXES (Details) [Line Items]
Effective Income Tax Rate Reconciliation, Percent			25.00%
Qing Hai Mid-Haven Boron & Lithium Technology Company, Ltd. ("Qing Hai Technology") [Member] | Foreign Tax Authority [Member]
INCOME TAXES (Details) [Line Items]
Effective Income Tax Rate Reconciliation, Foreign Income Tax Rate Differential, Percent			15.00%

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INCOME TAXES (Details) - Schedule of Effective Income Tax Rate Reconciliation - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Schedule of Effective Income Tax Rate Reconciliation [Abstract]
Tax at US federal statutory rates	$ (15,258)	$ 78,478	$ (49,847)	$ 81,791
Foreign income taxed at different rates	5,135	19,628	13,815	28,301
Tax holiday in PRC	(12,834)	(49,070)	(34,536)	(70,751)
Valuation allowance	44,141	24,569	117,685	66,786
Tax expense per financial statements	$ 21,184	$ 73,605	$ 47,117	$ 106,127

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INCOME TAXES (Details) - Schedule of Components of Income Tax Expense (Benefit) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Schedule of Components of Income Tax Expense (Benefit) [Abstract]
Income tax expense – current	$ 21,184	$ 73,605	$ 47,117	$ 106,127
Income tax benefit – deferred	0	0	0	0
Total income tax benefit, net	$ 21,184	$ 73,605	$ 47,117	$ 106,127

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MAJOR CUSTOMERS AND VENDORS (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Customer Concentration Risk [Member] | Accounts Receivable [Member]
MAJOR CUSTOMERS AND VENDORS (Details) [Line Items]
Accounts Receivable, after Allowance for Credit Loss, Current (in Dollars)	$ 118,865		$ 118,865
Customer Concentration Risk [Member] | Customer One [Member] | Revenue Benchmark [Member]
MAJOR CUSTOMERS AND VENDORS (Details) [Line Items]
Concentration Risk, Percentage	15.00%	13.00%	14.00%	15.00%
Customer Concentration Risk [Member] | Customer Two [Member] | Revenue Benchmark [Member]
MAJOR CUSTOMERS AND VENDORS (Details) [Line Items]
Concentration Risk, Percentage	12.00%	13.00%	12.00%	14.00%
Customer Concentration Risk [Member] | Customer Three [Member] | Revenue Benchmark [Member]
MAJOR CUSTOMERS AND VENDORS (Details) [Line Items]
Concentration Risk, Percentage	11.00%		10.00%
Customer Concentration Risk [Member] | Customer Four [Member] | Revenue Benchmark [Member]
MAJOR CUSTOMERS AND VENDORS (Details) [Line Items]
Concentration Risk, Percentage	10.00%
Supplier Concentration Risk [Member] | Accounts Payable [Member]
MAJOR CUSTOMERS AND VENDORS (Details) [Line Items]
Payments for Purchase of Other Assets (in Dollars)	$ 594,276	$ 518,870	$ 1,188,802	$ 1,113,250

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STATUTORY RESERVES AND RESTRICTED NET ASSETS (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
STATUTORY RESERVES AND RESTRICTED NET ASSETS (Details) [Line Items]
After-Tax Income, Percentage, Appropriations	10.00%
	$ 48,698
Retained Earnings, Appropriated	$ 146,650	$ 71,252
Foreign Invested Enterprise [Member]
STATUTORY RESERVES AND RESTRICTED NET ASSETS (Details) [Line Items]
Statutory Reserves, Description	An FIE is required to allocate at least 10% of its annual after-tax profit to the surplus reserve until such reserve has reached 50% of its respective registered capital based on the FIE’s PRC statutory accounts.
Domestic Enterprise [Member]
STATUTORY RESERVES AND RESTRICTED NET ASSETS (Details) [Line Items]
Statutory Reserves, Description	Additionally, in accordance with the Company Laws of the PRC, a domestic enterprise is required to provide surplus reserve at least 10% of its annual after-tax profit until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts.

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STATUTORY RESERVES AND RESTRICTED NET ASSETS (Details) - Reserve	9 Months Ended
	Sep. 30, 2020
Less than RMB 10 million ($1.41 million) [Member]
STATUTORY RESERVES AND RESTRICTED NET ASSETS (Details) - Reserve [Line Items]
Reserve Ratio	4.00%
Over RMB 10 million ($1.41 million), but less than RMB 100 million ($14.13 million) [Member]
STATUTORY RESERVES AND RESTRICTED NET ASSETS (Details) - Reserve [Line Items]
Reserve Ratio	2.00%
Over RMB 100 million ($14.13 million), but less than RMB 1 billion ($141.25 million) [Member]
STATUTORY RESERVES AND RESTRICTED NET ASSETS (Details) - Reserve [Line Items]
Reserve Ratio	0.50%
Over RMB 1 billion ($141.25 million) [Member]
STATUTORY RESERVES AND RESTRICTED NET ASSETS (Details) - Reserve [Line Items]
Reserve Ratio	0.20%

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COMMITMENTS (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Qinghai Mid-Haven Sincerity Technology Co., Ltd ("Sincerity") [Member]
COMMITMENTS (Details) [Line Items]
Registered Capital	$ 1,000
Qinghai Mid-Haven Sincerity Salt-Lake R&D Co., Ltd ("Salt-Lake") [Member]
COMMITMENTS (Details) [Line Items]
Registered Capital	$ 880