UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10−Q

(Mark One)

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

For the quarterly period ended: September 30, 2017

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

For the transition period from ____________to _____________

Commission File Number: 001-34812

THT HEAT TRANSFER TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in Its Charter)

THT Industrial Park
No. 5 Nanhuan Road, Tiexi District
Siping, Jilin Province 136000
People’s Republic of China
(Address of principal executive offices, Zip Code)

86-434-3265241
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  [ X ]  No  [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  [ X ]  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” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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  [ X ]

The number of shares outstanding of each of the issuer’s classes of common stock, as of November 14, 2017 is as follows:

TABLE OF CONTENTS

i

PART I
FINANCIAL INFORMATION

THT HEAT TRANSFER TECHNOLOGY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

ii

THT Heat Transfer Technology, Inc.
Consolidated Balance Sheets
(Stated in US dollars)

The accompanying notes are an integrated part of these unaudited consolidated financial statements

F-1

THT Heat Transfer Technology, Inc.
Consolidated Statements of Income and Comprehensive Loss
(Stated in US dollars)
(Unaudited)

The accompanying notes are an integrated part of these unaudited consolidated financial statements

F-2

THT Heat Transfer Technology, Inc.
Consolidated Statement of Changes in Equity
(Stated in US dollars)

The accompanying notes are an integrated part of these unaudited consolidated financial statements

F-3

THT Heat Transfer Technology, Inc.
Consolidated Statements of Cash Flows
(Stated in US dollars)
(Unaudited)

The accompanying notes are an integrated part of these unaudited consolidated financial statements

F-4

THT Heat Transfer Technology, Inc.
Notes to Unaudited Consolidated Financial Statements
(Unaudited)
(Stated in US Dollars)

1. Corporate information

THT Heat Transfer Technology, Inc. (the “Company” or “THT” or the “Surviving Corporation”) is a Nevada corporation with major operations in the People's Republic of China (the "PRC").

2. Description of business

The Company is a holding company whose primary business are conducted through its subsidiaries, namely SipingJuyuan which is located in the Jilin Province and Beijing Juyuan which is located in Beijing City of the PRC. The Company is engaged in the manufacturing and trading of plate heat exchangers and various related products.

SipingJuyuan was established in the PRC on May 31, 2006 following the division (the “Division”) of Siping City Juyuan Heat Exchange Equipment Co., Ltd. (“Old Juyuan Company”) into three companies, namely SipingJuyuan, Siping City Juyuan Heat Exchange Equipment Co., Ltd. (“New Juyuan Company”) and Siping City JuyuanHanyang Pressure Vessels Co., Ltd (“JuyuanHanyang Pressure Vessels”).

3. Summary of significant accounting policies

Basis of presentation and consolidation

The accompanying unaudited consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with the Company’s consolidated financial statements and accompanying notes thereto for the year ended December 31, 2016 filed with the SEC in the Company’s Form 10-K on April 17, 2017.

In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the nine-month period have been made. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year.

Certain amounts from prior year have been reclassified to conform to the current year presentation. This reclassification has resulted in no change to the Company’s retained earnings or net income presented.

The consolidated financial statements include the financial statements of the Company and its majority owned subsidiaries. All significant inter-company balances and transactions have been eliminated on consolidation.

F-5

Non-controlling Interest

Non-controlling interest on the consolidated balance sheets is resulted from the consolidation of SipingJuyuan, a 98.82% owned subsidiary starting from July 27, 2017. The portion of the income or loss applicable to non-controlling interest in subsidiary is reflected in the consolidated statements of income and comprehensive loss.

Fair value of financial instruments

Accounting Standards Codification (“ASC”) Topic 820 requires the disclosure of the estimated fair value of financial instruments including those financial instruments for which fair value option was not elected. As of September 30, 2017 and December 31, 2016, the carrying amounts of the Company’s financial assets and liabilities approximated their fair values due to short maturities or the applicable interest rates approximated the current market rates.

Recently issued accounting pronouncements

In January 2017, the FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323)”. This pronouncement amends the SEC's reporting requirements for public filers in regard to new accounting pronouncements or existing pronouncements that have not yet been adopted. Companies are to provide qualitative disclosures if they have not yet implemented an accounting standards update. Companies should disclose if they are unable to estimate the impact of a specific pronouncement, and provide disclosures including a description of the effect on accounting policies that the registrant expects to apply. These provisions apply to all pronouncements that have not yet been implemented by registrants. There are additional provisions that relate to corrections to several other prior FASB pronouncements. The Company has incorporated language into other recently issued accounting pronouncement notes, where relevant for the corrections in FASB ASU 2017-03. The Company is implementing the updated SEC requirements on not yet adopted accounting pronouncements with these consolidated financial statements.

4. Non-controlling Interest

On July 27, 2017, Jilin Science and Technology Fund Operation and Service Center (the “Center”), an organization controlled by local government, contributed RMB9,000,000 ($1,335,490) in cash in SipingJuyuan in order to obtain a 1.18% ownership interest in SipingJuyuan.

The following schedule discloses the changes in the Company’s ownership interest in SipingJuyuan on the Company’s equity:

5. Trade receivables, net

An analysis of the allowance for doubtful accounts for the nine months ended September 30, 2017 and 2016 is as follows:

F-6

6. Inventories, net

The Company recognized inventory write-down of $4,717,317 and $nil for the nine months ended September 30, 2017 and 2016, respectively.

7. Income tax

The effective tax rate was 2% and -20% for the three months period ended September 30, 2017 and 2016, respectively. The effective tax rate was -4% and -13% for the nine months period ended September 30, 2017 and 2016, respectively.

8. Property, plant and equipment, net

As of September 30, 2017 and December 31, 2016, property, plant and equipment with net book value of $3,103,924 and $4,949,198, respectively, was pledged as collateral under certain loan arrangements (see Note 10).

During the nine months ended September 30, 2017 and 2016, amount recognized for depreciation of property, plant and equipment was $802,947 and $935,568, respectively.

9. Land use rights, net

As of September 30, 2017 and December 31, 2016, land use rights with net book values of $851,894 and $5,104,121, respectively, were pledged as collateral under certain loan arrangements (see Note 10).

During the nine months ended September 30, 2017 and 2016, amount recognized for amortization of land use rights was $87,509 and $90,522, respectively.

F-7

10. Short-term loans

Short-term bank loans

On May 31, 2016, the Company entered into a one-year loan agreement with Agricultural Bank of China (“ABC”), pursuant to which the Company obtained a loan in the amount of RMB32,000,000, or $4,664,845, payable on May 30, 2017. The loan carries an interest rate of 4.785% per annum and the interest is payable monthly. The loan was repaid in full on May 26, 2017.

On June 6, 2017, the Company entered into another one-year loan agreement with ABC to obtain a loan in the amount of RMB32,000,000, or $4,801,115, payable on June 5, 2018. The loan carries an interest rate of 4.785% per annum and the interest is payable monthly. The loan was paid in full on August 11, 2017.

On August 10, 2017, the Company entered into a one-year loan agreement with Industrial and Commercial Bank of China (“ICBC”), pursuant to which the Company obtaind a loan in the amount of RMB32,000,000, or $4,806,753, payable on August 9, 2018. The loan carries an interest rate of 4.611% per annum and the interest is payable monthly.

The bank loans discussed above were secured by the following assets of the Company:

Short-term loans from unrelated party

During the year ended December 31, 2016, the Company borrowed funds from a third party individual in the amount of RMB53,487,813 (approximately $8,052,000) and repaid RMB93,577,813 (approximately $14,087,000). As of December 31, 2016, the balance of loan from unrelated party was $nil. The Company also advanced RMB2,521,787 (approximately $380,000) to this individual during the year ended December 31, 2016. The advance bears no interest and is due on demand. The net advance was included in other receivables, prepayments and deposits, net.

During the nine months ended September 30, 2017, the Company advanced additional funds to this third party individual in the amount of RMB12,000,000, or $1,742,110 and received RMB14,521,787, or $2,112,475 as repayment for all outstanding advances.

For the nine months ended September 30, 2017 and 2016, the Company included interest expense related to short-term loans of $166,617 and $89,011, respectively, in finance costs.

F-8

11. Segment information

The Company is solely engaged in the manufacturing and trading of plate heat exchangers and various related products. Since the nature of the products, their production processes, and their distribution methods are substantially similar, they are considered as a single reportable segment under ASC 280 “Segment Reporting.”

The Company’s sales revenues by products for the nine months ended September 30, 2017 and 2016 were as follows:

All of the Company’s long-lived assets and revenues classified based on the customers are located in the PRC.

12. Related party transactions

The related parties consist of the following:

F-9

Trade receivables – related party

During the nine months ended September 30, 2017 and 2016, the Company sold products to Tongda in the amount of $8,232 and $42,822, respectively. The corresponding costs of the related party sales were $3,750 and $29,772,, respectively. As of September 30, 2017 and December 31, 2016, the Company had trade receivables from Tongda in the amount of $nil and $1,358,399, respectively.

Due from related parties

As of September 30, 2017 and December 31, 2016, respectively, the Company advanced $nil and $31,978 to Guohong Zhao for handling selling and logistic activities for the Company in the ordinary course of business.

As of September 30, 2017 and December 31, 2016, respectively, the Company advanced $11,481 and $11,003 to Kai Liu for handling selling and logistic activities for the Company in the ordinary course of business.

As of September 30, 2017 and December 31, 2016, respectively, the Company advanced $2,068 and $nil to Zhijun Ma for handling selling and logistic activities for the Company in the ordinary course of business.

As of September 30, 2017 and December 31, 2016, respectively, the Company advanced $457 and $nil to Fucai Zhan for handling selling and logistic activities for the Company in the ordinary course of business.

As of September 30, 2017 and December 31, 2016, respectively, the Company had advance to Hongsheng in the amount of $234,366 and $224,532 for inventory purchase prepayment. The amounts were included in due from related parties in the accompanying consolidation balance sheets.

During the nine months ended September 30, 2017 and 2016, the Company made loans to Tongda in the amount of $440,679 and $418,211, and Tongda repaid to the Company in the amount of $232,751 and $156,097, respectively. The loans were non-secured, non-interest bearing and due on demand.

On December 28, 2016, the Company sold certain used equipment with original cost and net book value of $977,650 and $121,307, respectively, to Tongda in exchange for $1,315,958. During the nine months ended September 30, 2017, the Company collected $60,893 from Tongda for the equipment.

As of September 30, 2017 and December 31, 2016, the aggregated balances, including loans to Tongda and other receivable from Tongda related to sale of property, plant and equipment, of $1,788,731 and $1,572,419, respectively, were included in due from related parties in the accompanying consolidation balance sheets.

Due to related parties

Due to related parties consist of the following:

Amounts owed by the Company represent non-secured and non-interest bearing loans obtained from related parties which are due on demand.

During the nine months ended September 30, 2017, the Company was advanced $6,959,146 from the related parties and made repayment of $1,236,399 against the borrowings.
 

F-10

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2016, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Use of Terms

Except where the context otherwise requires and for the purposes of this report only:

Overview of our Business

We are a leading total solution provider in the heat exchange industry. Our major products are plate heat exchangers, heat exchanger units, air-cooled heat exchangers and shell-and-tube heat exchangers. Unlike most other heat exchanger manufacturers in China, we not only provide heat exchange products, but also provide total solutions to our customers. As a total solutions provider, we analyze the working condition of our customers, provide optimized designs based on analysis and simulation, offer high quality heat exchange products, and continuously assist our customers in improving the heat exchange process.

10

Over the past ten years, we have successfully completed over 3,000 projects in more than 15 industries, including metallurgy, heat and power, petrochemical, food and beverage, pharmaceutical and shipbuilding. We have provided heat exchange solutions to Fortune 500 companies, including Shell, BP, BASF, LG, Sinopec and China Shenhua. We have also provided heat exchange products for important Chinese and international projects such as the Beijing 2008 Olympics Wukesong Sports Center, Guangdong Linao nuclear plant and BASF Chemical plant in Germany.

Our operations are headquartered in Siping, Jilin Province, PRC. Our primary Chinese operating subsidiaries are SipingJuyuan and BeijingJuyuan.

Recent Development

In February 2017, SipingJuyuan signed an agreement with the Center to receive capital funding from the Center of RMB9,000,000, accounted for 1.18% of the ownership interest of SipingJuyuan post-investment. On July 27, 2017, SipingJuyuan received the RMB9,000,000, or $1,335,490, and the transaction was completed.

Third Quarter Financial Performance Highlights

The following summarizes certain key financial information for the third quarter of 2017:

Results of Operations

Comparison of Three Months Ended September 30, 2017 and September 30, 2016

The following table sets forth key components of our results of operations for the periods indicated.

11

Sales revenue. Our sales revenue is generated from sales of heat exchange products. Sales revenue increased by $4.47 million, or 50.59%, to $13.32 million for the three months ended September 30, 2017, from $8.85 million for the same period in 2016. Our sales volume in the three months ended September 30, 2017 amounted to 845 units, an increase of 291 units, from 554 units for the same period in 2016. Such increase was mainly due to increased sales revenue from heat exchanger units and other products in the three months ended September 30, 2017 as compared with the same period in 2016. Sales revenues from heat exchange units increased by $2.03 million, or 78.26%, to $4.62 million for the three months ended September 30, 2017, from $2.59 million for the same period in 2016. Sales revenues from other products increased by $2.14 million, or 146.26%, to $3.60 million for the three months ended September 30, 2017 from $1.46 million for the same period in 2016. We sold more products for the three-month period ended September 30, 2017 because the sales in this period also contained orders made in 2016, which were produced and sold in 2017. We generated more revenue from selling heat exchange unites and other products. This increase concentrates in the third quarter when production has fully begun.

The following table shows our sales revenue by product for the three months ended September 30, 2017 and 2016:

Cost of revenues. Our cost of revenues is primarily comprised of the costs of our raw materials, labor and factory overhead. Our cost of revenues increased by $8.12 million, or 144.85%, to $13.72 million for the three months ended September 30, 2017, from $5.6 million for the three months ended September 30, 2016. Cost of revenues as a percentage of sales revenue were 102.98% and 63.34% for the three months ended September 30, 2017 and 2016, respectively, an increase of 39.64 percentage points. The increase was mainly attributable to increase in percentage of sale of less profitable products and our recognition of inventory write-down to address the continuous decrease of market price of raw materials used in production in the three months ended September 30, 2017, compared to same period in 2016.

12

Gross profit. Our gross profit is equal to the difference between our sales revenue and our cost of revenues. Our gross profit decreased by $3.64 million, or 112.26%, to $(0.40) million for the three months ended September 30, 2017, from $3.24 million for the same period in 2016. The decrease in our gross profit was mainly attributable to increase of cost of revenues. The average unit selling price of our products decreased by 1.27% to $15,763 in the three months ended September 30, 2017 in comparison with $15,966 in the same period in 2016, and the average unit cost increased by 60.53% to $16,234 in the three months ended September 30, 2017 in comparison with $10,113 in the same period in 2016. As a result of these factors, our gross profit margin for the three months ended September 30, 2017 decreased to (2.98)% from 36.66% for the same period in 2016.

General and administrative expenses. Our general and administrative expenses consist of the costs associated with staff and supporting personnel who manage our business activities and cost incurred by business operations. Our general and administrative expenses increased by $0.73 million, or 44.23%, to $2.37 million for the three months ended September 30, 2017, from $1.64 million for the same period in 2016. The increase in general and administrative expenses was primarily due to increase in bad debt allowance for the three months ended on September 30, 2017.

Research and development expenses. Our research and development expenses consist of the costs associated with research and development personnel and expense in research and development projects. Our research and development expenses decreased by $0.20 million, or 32.27%, to $0.41 million for the three months ended September 30, 2017, from $0.61 million for the same period in 2016. The decrease in research and development expenses was mainly attributable to less product research and development to accommodate purchase orders for different products we have received for the three months ended September 30, 2017, compared to same period in 2016.

Selling expenses. Our selling expenses include sales commissions, travel cost, the cost of advertising and promotional materials, salaries and fringe benefits of sales personnel, after-sale support services and other sales-related costs. Our selling expenses increased by $0.57 million, or 71.64%, to $1.36 million for the three months ended September 30, 2017, from $0.79 million for the same period in 2016. As a percentage of sales revenue, selling expenses increased to 10.23% for the three months ended September 30, 2017, as compared to 8.97% for the same period in 2016. The increase was mainly attributable to the Company’s efforts to develop new customers, which led to more travelling and other marketing activities.

Income (Loss) before income taxes. Loss before income taxes increased by $5.11 million, or 4390.27%, to $4.99 million for the three months ended September 30, 2017, from income before income taxes of $0.12 million for the same period in 2016. Such increase was mainly attributable to the decrease in our gross profit.

Income taxes benefits (expense). Our income taxes expense increased to $0.11 million for the three months ended September 30, 2017, from income taxes benefit of $0.02 million for the same period in 2016, as some costs that resulted a net loss position were added back for tax purpose, thus yielded a taxable income in the three months ended September 30, 2017, whereas our operation in the same period in 2016 has yielded a net income that was able to benefit from deferred tax asset recognized from our operations in six months ended June 30, 2016.

Net loss attributable to THT Heat Transfer Technology, Inc. common shareholders. As a result of the cumulative effect of the foregoing factors, our net loss attributable to THT Heat Transfer Technology, Inc. common shareholders increased by $5.18 million, or 3,707.47%, to $5.04 million for the three months ended September 30, 2017, from net income of $0.14 million for the same period in 2016. As a percentage of sales revenue, our net income (loss) was (37.86%) and 1.58% for the three months ended September 30, 2017 and 2016, respectively.

Net loss attributable to non-controlling interest. Non-controlling interest represents the ownership interests the Center holds in SipingJuyuan and the amount recorded as non-controlling interest in our consolidated statements of income and comprehensive loss is computed by multiplying after-tax income (loss) for the three months ended September 30, 2017 by the percentage ownership in SipingJuyuan not directly attributable to us. For the three months ended September 30, 2017 and 2016, the weighted average non-controlling interest attributable to ownership interests in SipingJuyuan not directly attributable to us was 0.85% and 0%, respectively.

Comparison of Nine Months Ended September 30, 2017 and September 30, 2016

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The following table sets forth key components of our results of operations for the periods indicated.

Sales revenue. Our sales revenue increased by $4.11 million, or 19.78%, to $24.87 million for the nine months ended September 30, 2017, from $20.76 million for the same period in 2016. Our sales volume in the nine months ended September 30, 2017 amounted to 1,643 units, an increase of 254 units, from 1,389 units for the same period in 2016. Such increase was mainly due to increased sales revenue from plate heat exchanger, heat exchanger unit, and other products in the nine months ended September 30, 2017 as compared with the same period in 2016. Sales revenue from plate heat exchangers increased by $0.83 million, or 8.31%, to $10.69 million for the nine months ended September 30, 2017, from $9.87 million for the same period in 2016. Sales revenues from heat exchange unit increased by $0.53 million, or 7.7%, to $7.46 million for the nine months ended September 30, 2017, from $6.93 million for the same period in 2016. Sales revenues from other products increased by $2.69 million, or 72.99%, to $6.39 million for the nine months ended September 30, 2017 from $3.70 million for the same period in 2016. We generated more revenue from selling other products as we are trying to sell our aged raw materials and replenish our stock with the newer ones to stable the profit line and respond to supply-side structural reform of by the Chinese government.

The following table shows our sales revenue by product for the nine months ended September 30, 2017 and 2016:

14

Cost of revenues. Our cost of revenues increased by $7.51 million, or 57.44%, to $20.57 million for the nine months ended September 30, 2017, from $13.06 million for the nine months ended September 30, 2016. The increase of cost of revenues is mainly due to increase in sale of other products in which we yield less profit and our recognition of inventory write-down to address the continuous decrease of market price of raw materials used in production. Cost of revenues as a percentage of sales revenue were 82.72% and 62.93% for the nine months ended September 30, 2017 and 2016, respectively, an increase of 19.79 percentage points. Comparing the nine months ended in September 30, 2017 to same period in 2016, we sold more heat exchanger unit, a product that require more material and labor to assemble compared to the rest of our products.

Gross profit. Our gross profit decreased by $3.40 million, or 44.17%, to $4.30 million for the nine months ended September 30, 2017, from $7.70 million for the same period in 2016. The decrease in our gross profit was mainly attributable to increase of cost of revenues. The average unit selling price of our products increased by 1.26% to $15,136 in the nine months ended September 30, 2017 in comparison with $14,948 in the same period in 2016, and the average unit cost increased by 33.10% to $12,521 in the nine months ended September 30, 2017 in comparison with $9,407 in the same period in 2016. As a result of these factors, our gross profit margin for the nine months ended September 30, 2017 decreased to 17.28% from 37.07% for the same period in 2016.

General and administrative expenses. Our general and administrative expenses increased by $0.89 million, or 21.52%, to $5.04 million for the nine months ended September 30, 2017, from $4.15 million for the same period in 2016. As a percentage of sales revenue, general and administrative expenses increased to 39.27% for the nine months ended September 30, 2017, as compared to 20.01% for the same period in 2016. The increase in general and administrative expenses was mainly attributable to increase in bad-debt allowance for the nine months ended September 30, 2017, compared to the same period in 2016.

Research and development expenses. Our research and development expenses increased by $4,468, or 0.39%, to $1.14 million for the nine months ended September 30, 2017, from $1.13 million for the same period in 2016. The research and development activities conducted for the nine months ended September 30, 2017 and the same period in 2016 were generally stable.

Selling expenses. Our selling expenses increased by $1.64 million, or 36.43%, to $6.14 million for the nine months ended September 30, 2017, from $4.50 million for the same period in 2016. As a percentage of sales revenue, selling expenses increased to 24.68% for the nine months ended September 30, 2017, as compared to 21.66% for the same period in 2016. The increase was mainly attributable to the Company’s efforts to develop new customers, which led to more travelling and other marketing activities.

Loss before income taxes. Loss before income taxes increased by $6.44 million, or 306.01%, to $8.54 million for the nine months ended September 30, 2017, from $2.10 million for the same period in 2016. Such increase was mainly attributable to decrease in gross profit.

Income tax benefits. Our income tax benefits increased to $0.36 million for the nine months ended September 30, 2016, from $0.27 million for the same period in 2016, as a result of more net loss was generated in the nine months ended September 30, 2017 compared to the same period in 2016, net off by the tax effect due to costs added back for tax purpose.

Net loss attributable to THT Heat Transfer Technology, Inc. common shareholders. As a result of the cumulative effect of the foregoing factors, our net loss attributable to THT Heat Transfer Technology, Inc. common shareholders increased by $6.28 million, or 343.79%, to $8.11 million for the nine months ended September 30, 2017, from $1.83 million for the same period in 2016. As a percentage of sales revenue, our net loss was 32.62% and 8.80% for the nine months ended September 30, 2017 and 2016, respectively.

Net loss attributable to non-controlling interest. Non-controlling interest represents the ownership interests the Center holds in SipingJuyuan and the amount recorded as non-controlling interest in our consolidated statements of income and comprehensive loss is computed by multiplying after-tax loss for the nine months ended September 30, 2017 by the percentage ownership in SipingJuyuan not directly attributable to us. For the nine months ended September 30, 2017 and 2016, the weighted average non-controlling interest attributable to owcnership interests in SipingJuyuan not directly attributable to us was 0.29% and 0%, respectively.

15

Liquidity and Capital Resources

As of September 30, 2017, we had cash and cash equivalents of $2.63 million. We anticipate that cash on hand and borrowing capacity under our bank loans will be sufficient to satisfy our ongoing obligations.

We believe our allowance for doubtful accounts is appropriate. We have an installment payment arrangement with our customers. The current economic slowdown and China’s tightened credit policy led to delayed payments and delayed delivery schedules by our customers, which in turn caused us to increase our allowance for doubtful accounts from $8.18 million in the nine months ended September 30, 2016 to $10.42 million in the same period in 2017. To control inflation after a massive stimulus plan, the Chinese government tightened its credit policy. As a result, state-owned banks limited their lending to large state-owned corporations and privately held companies continue to have difficulty accessing capital. Most of our customers have been affected by the tightened credit policy and have limited access to capital. The Company records an allowance for doubtful accounts at a rate of 25% for receivables aged between 1 to 2 years, 50% for receivables aged between 2 to 3 years and 100% for receivables aged over 3 years.

Our allowance of obsolete inventory is also appropriate because we purchase raw materials after we receive purchase orders. Although our customers may delay their payment or delivery schedules, which increase our inventories, they do not cancel their orders so as to cause us to classify the delayed inventories as obsolete inventories.

We expect that the trend of delayed customer payments and delayed delivery schedules will continue in the future. We have been taking the following measures to mitigate the situation: 1) send the collection letters or call the customers to request payment; 2) appoint specialists to visit our customers to collect payment; 3) file law suits.

PRC legal restrictions permit payments of dividends by our PRC subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries are also required under PRC laws and regulations to allocate at least 10% of their annual after-tax profits determined in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of our registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in the form of loans, advances, or cash dividends. Given that the Company and the PRC subsidiaries do not intend to pay dividends for the foreseeable future, we consider the impact of restrictions on our liquidity, financial condition and results of operations is not significant.

The following table provides a summary of our net cash flows from operating, investing, and financing activities.

Cash Flow

Operating Activities

Net cash used in operating activities was $10.77 million for the nine months ended September 30, 2017, compared to $1.80 million for the same period in 2016. The increase in net cash used in operating activities was mainly due to the increase in net loss of $6.34 million, deferred tax assets of $0.09 million, outflow of inventories, net of $10.68 million, other receivables, prepayments and deposits of $8.71 million, and decrease in income taxes payable of $0.51 million, offset by increase of allowance for doubtful accounts of $1.38 million and inventory write-down of $4.72 million, trade receivables of $2.05 million, trade receivables from a related party of $1.37 million, accounts payable of $3.16 million, and decrease of due from related parties of $4.94 million.

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Investing Activities

Net cash used in investing activities was $0.51 million for the nine months ended September 30, 2017, compared with $1.40 million in the same period in 2016. The decrease of net cash used in investing activities during the nine months ended September 30, 2017 was primarily due to increase in repayment from others of $2.11 million, offset by increase in loans made to others of $0.77 million and related parties of $0.44 million, payments to acquire property, plant and equipment of $0.44 million.

Financing Activities

Net cash provided by financing activities was $7.11 million for the nine months ended September 30, 2017, compared with $1.26 million net cash used in financing activities for the same period in 2016. The increase in net cash provided by financing activities resulted from an increase in proceeds from related parties of $6.91 million and increase in proceeds from non-controlling interest of $1.34 million, decrease in repayment of short-term loans of $4.54 million, offset by decrease in proceeds from short-term loan of $3.26 million and increase in repayment to related parties of $1.16 million.

Capital Expenditures

Our capital expenditures were used primarily for the purchase of equipment to expand our production capacity and deposits for land use rights. The table below sets forth the breakdown of our capital expenditures by use for periods indicated.

We estimate that our total capital expenditures in fiscal year 2017 will reach approximately $0.85 million to buy the equipment for necessary products used in the nuclear power industry.

Obligations under Material Contracts

Except with respect to the loan obligations disclosed above, we have no material obligations to pay cash or deliver cash to any other party.

Seasonality

Our operating results and operating cash flows historically have been subject to seasonal variations. Our revenues usually increase over each quarter of the calendar year with the third quarter usually the slowest quarter because fewer projects are undertaken during and around the Chinese spring festival.

Inflation

Inflation and changing prices have not had a material effect on our business, and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in the Chinese economy and our industry and continually maintain effective cost controls in operations.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in our securities.

Critical Accounting Policies

Critical accounting policies are those we believe are most important to portraying our financial conditions and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

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Recent Accounting Pronouncements

See Note 3 to our unaudited condensed consolidated financial statements included elsewhere in this report.

Not Applicable.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer, Mr. Guohong Zhao, and Interim Chief Financial Officer, Mr. Zhigang Xu, of the effectiveness of the design and operation of our disclosure controls and procedures, as of September 30, 2017. Based upon, and as of the date of this evaluation, Messrs. Zhao and Xu determined that because of the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2016, which we are still in the process of remediating as of September 30, 2017, our disclosure controls and procedures were not effective. Investors are directed to Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2016 for the description of these weaknesses.

Changes in Internal Control over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

During its evaluation of the effectiveness of internal control over financial reporting as of December 31, 2016, our management identified material weakness related to inadequate segregation of duties relative to key financial reporting functions, and our lack of: (1) sufficient and adequately trained accounting and finance personnel; (2) qualified resources to perform the internal audit functions properly; (3) an internal audit department which renders ineffective our ability to prevent and detect control lapses and errors in the accounting of certain key areas; (4) skills and understanding to operate, review, and supervise the process of bookkeeping under newly implemented ERP system; and (5) well-established procedures to identify, approve, and report related party transactions. As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016, our management has identified the steps necessary to address the material weaknesses, and in the third quarter of 2017, we continued to implement these remedial procedures.

Other than in connection with the implementation of the remedial measures described above, there were no changes in our internal controls over financial reporting during the third quarter of 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II
OTHER INFORMATION

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

Not applicable.

None.

Not applicable.

We have no information to disclose that was required to be in a report on Form 8-K during the third quarter of 2017, but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

The list of exhibits in the Exhibit Index to this report is incorporated herein by reference.

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SIGNATURES

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

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EXHIBIT INDEX

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