20-F/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 20-F/A

(Amendment No.2)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 

OR

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

For the fiscal year ended December 31, 2021

OR

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

ACT OF 1934 

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934 

Commission file number 000-22113

EURO TECH HOLDINGS COMPANY LIMITED

(Exact name of Registrant as specified in its charter)

(Translation of Registrant’s name into English) 

British Virgin Islands 

(Jurisdiction of incorporation or organization) 

Unit D, 18/F., Gee Chang Hong Centre, 65 Wong Chuk Hang Road, Hong Kong

(Address of principal executive offices) 

David YL Leung

FAX:852-28734887

Unit D, 18/F., Gee Chang Hong Centre

65 Wong Chuk Hang Road

 Hong Kong 

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person) 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Trading Symbol	Name of each exchange on which registered
Ordinary Shares, no par value	CLWT	NASDAQ Capital Market

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None. 

(Title of Class) 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None. 

(Title of Class) 

Indicate the number of issued and outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report 7,732,132 Ordinary Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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 ☐ No

Indicate by check mark whether the registrant has submitted electronically and posed on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

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

Large accelerated filer	☐	Non-accelerated Filer	☒
Accelerated filer	☐	Emerging Growth Company	☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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.

†The term “new or revised financial accounting standards” refers to any update by the Financial Accounting Standards Board to its accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☒ International Financial Reporting Standards as issued by the International Accounting Standards Board ☐  Other ☐ 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes     ☒ No

EXPLANATORY NOTE

Euro Tech Holdings Company Limited (the “Company”) is filing this Amendment No. 2 on Form 20-F/A (this “Amendment”) to the Annual Report on Form 20-F for the fiscal year ended December 31, 2021 (the “Original Filing”), which was originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on May 16, 2022 (the “Original Filing Date”), and subsequently amended by an Amendment No.1 on Form 20-F/A filed with the SEC on September 23, 2022 (as amended, the “Amended Report”), to revise Item 15 “Controls and Procedures” and to file a revised Report of Independent Registered Public Accounting Firm of Union Power HK CPA Limited.   

This Amendment speaks as of the Original Filing Date (unless otherwise noted or as the context otherwise requires). Except as described above, no changes have been made to the Amended Report, and this Amendment does not modify, amend or update the financial or other information contained in the Amended Report. This Amendment does not reflect any events that have occurred on or after the Original Filing Date. Among other things, the Company has not revised forward-looking statements made in the Original Filing to reflect events that occurred or facts that became known to the Company after the Original Filing Date. Accordingly, this Amendment should be read in conjunction with the Original Filing, the Amended Report and the Company’s other filings with the SEC subsequent to the filing of the Original Filing. Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Amendment also includes certifications under the Sarbanes-Oxley Act of 2002.

TABLE OF CONTENTS

Explanatory Note
ITEM 15.	CONTROLS AND PROCEDURES	4
ITEM 18.	FINANCIAL STATEMENTS	5
ITEM 19.	EXHIBITS	5

3

ITEM 15. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) under the Exchange Act, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has 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 Annual Report on Form 20-F/A.

Disclosure controls and procedures are defined under SEC rules as controls and other procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods. Disclosure controls and procedures include controls and procedures designed to ensure that information is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2021, our disclosure controls and procedures were not effective to accomplish their objectives at the reasonable assurance level. In light of this fact, our management has performed additional analyses, and other post-closing procedures and has concluded that, notwithstanding the material weaknesses in our internal control over financial reporting described below, the consolidated financial statements for the periods covered by and included in this Annual Report on Form 20-F/A fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and Rule 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of our consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, they used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, our management have concluded that, as of December 31, 2021, our internal control over financial reporting was ineffective because of the material weakness described below.

The material weakness that was identified is our lack of sufficient financial reporting and accounting personnel with appropriate levels of knowledge, experience and training in the application of U.S. GAAP and SEC reporting requirements commensurate with our financial reporting requirements.

Management is in the process of re-assessing the design of certain control activities and developing its remediation plan for the above identified weaknesses. The Company’s actions are subject to ongoing senior management review, as well as Audit Committee oversight. The Company will implement following remedial measures within its resources as soon as practicable: establishing an internal audit function or engaging an external consulting firm, to assist with assessment of Sarbanes-Oxley compliance requirements and improvement of overall internal controls and implement regular U.S. GAAP accounting and financial reporting training programs for our accounting and financial reporting personnel.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

4

ITEM 18. FINANCIAL STATEMENTS

The consolidated financial statements of each of Euro Tech Holdings Company Limited and Zhejiang Tianlan Environmental Protection Technology Company Limited are included at the end of this annual report.

ITEM 19. EXHIBITS

Lists of Exhibits

Exhibit No.	Description
3.1	Amended and Restated Memorandum and Articles of Association (1)
3.2	Amendments to Exhibit 3.1 ( 2)
4.11	Registrant’s Audit Committee Charter (3)
4.13	Euro Tech Holdings Company Limited 2019 Stock Option and Incentive Plan (4)
8.1	List of Subsidiaries*
12.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
12.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
13.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
13.2	Certification of the 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 Taxonomy Extension Schema Document
101 .CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101 .DBF*	XBRL Taxonomy Extension Definition Linkbase Document
101 .LAB*	XBRL Taxonomy Extension Label Linkbase Document
101 .PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed with this Amendment.

1.	Incorporated by reference, previously filed as an Exhibit to Registrant’s Form 6-K on November 30, 2011.
2.	Incorporated by reference, previously filed as an Exhibit to Registrant’s Form 6-K on February 6, 2012.
3.	Incorporated by reference, previously filed as an Exhibit to Registrant’s Form 20-F filed on August 19, 2002.
4.	Incorporated by reference, previously filed as an Exhibit to Registrant’s Form 6-K on April 25, 2019.

-5-

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorize the undersigned to sign this annual report on its behalf.

	EURO TECH HOLDINGS COMPANY LIMITED
	(REGISTRANT)
February 6, 2023	By:	/s/ David YL Leung
		David YL Leung
		Chief Executive Officer
		(Principal Executive Officer)

-6-

EURO TECH HOLDINGS COMPANY LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 3004)	F-2 to F-3
Consolidated Balance Sheets as of December 31, 2021 and 2020	F-4
Consolidated Statements of Operations and Comprehensive Income / (Loss) for the years ended December 31, 2021, 2020 and 2019	F-5 to F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019	F-7
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2021, 2020 and 2019	F-8
Notes to the Consolidated Financial Statements	F-9 to F-45

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of

Euro Tech Holdings Company Limited

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Euro Tech Holdings Company Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income / (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2021 and 2020, and the results of its consolidated operations and its consolidated cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Restatement of the 2021 Consolidated Financial Statements

As discussed in Note 2 (ai) to the consolidated financial statements, the 2021 consolidated financial statements have been restated to correct a misstatement.

Basis for Opinion

These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on the Group's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

F-2

Report of Independent Registered Public Accounting Firm (Cont’d)

To the Board of Directors and Shareholders of

Euro Tech Holdings Company Limited

Critical Audit Matter (Cont’d)

Revenue Recognition

As described further in Note 2 to the consolidated financial statements, revenues derived from long-term contracts in the engineering segments are recognized as the performance obligations are satisfied over time. The Group uses output method to recognize revenue. The Group’s contracts may include variable consideration related to contract modifications through change orders or claims, and management must also estimate the variable consideration the Group expects to receive in order to estimate the total contract revenue. We identified revenue recognized over time to be a critical audit matter.

The principal considerations for our determination that revenue recognized over time is a critical audit matter is that auditing management’s estimate of the progress toward completion of its projects was complex and subjective. In addition, auditing the Group’s measurement of variable consideration is also complex and highly judgmental and can have a material effect on the amount of revenue recognized.

Our audit procedures related to revenue recognized over time included the following, among others.

· We obtained an understanding and evaluated the design on the operating effectiveness of the Group’s processes and controls related to contract revenue recognition;

· We tested the estimated variable consideration by evaluating the appropriate application of the most likely amount method, and tracing amounts to supporting documentation;

· We evaluated management’s ability to reasonably estimate costs by performing a comparison of the actual costs to prior period estimates, including evaluating the timely identification of circumstances that may warrant a modification to the estimated costs;

· We evaluated management’s methodologies and the consistency of management’s methodologies over the life of the contracts;

· We tested the original estimated costs and profit margins on engineering projects that were commenced and completed during the year ended December 31, 2021, by obtaining the original estimates, compare to the actual costs and profit margin for the completed contracts and investigate significant changes; and

· We tested the estimated costs to complete engineering projects that were not completed during the year ended December 31, 2021 by comparing the estimated cost to complete at December 31, 2021 to actual cost incurred subsequent to December 31, 2021.

/s/ Union Power HK CPA Limited

We have served as the Company’s auditor since 2018.

Hong Kong, the People’s Republic of China

May 13, 2022, except for the effects of the restatement discussed in Note 2 (ai) to the consolidated financial statements, as to which the date is September 23, 2022

F-3

EURO TECH HOLDINGS COMPANY LIMITED

CONSOLIDATED BALANCE SHEETS

	December 31,
	2021			2020
	US$’000			US$’000
Assets
Current assets:
Cash and cash equivalents		5,269			3,519
Restricted cash		1,411			1,672
Accounts receivable, net		3,631			3,199
Prepayments and other current assets		572			1,514
Contract assets		74			202
Inventories		547			342
Total current assets		11,504			10,448
Property, plant and equipment, net		215			259
Investments in affiliates		8,077			8,084
Goodwill		1,071			1,071
Operating lease right-of-use assets		238			233
Deferred tax assets		145			-
Total non-current assets		9,746			9,647
Total assets		21,250			20,095
Liabilities and shareholders’ equity
Current liabilities:
Bank borrowings		376			361
Accounts payable		3,151			2,394
Contract liabilities		1,076			1,063
Other payables and accrued expenses		1,585			1,593
Current portion of long-term operating lease obligations		175			118
Income tax payable		42			4
Total current liabilities		6,405			5,533
Deferred tax liabilities		3			5
Long-term operating lease obligations, net of current maturities		41			94
Total non-current liabilities		44			99
Total liabilities		6,449			5,632
Commitments and contingencies (Note 21)
Shareholders’ equity:
Ordinary share, 20,000,000 shares authorized as of December 31, 2021 and 2020, respectively 7,899,832*no par value shares issued as of December 31, 2021 and 2020		123			123
Additional paid-in capital		9,670			9,615
Treasury stock, 167,700 shares at cost as of December 31, 2021 and 2020, respectively		(786	)		(786	)
PRC statutory reserves		316			316
Accumulated other comprehensive income		787			851
Retained earnings		3,774			3,816
Total shareholders’ equity attributable to Euro Tech Holdings Company Limited		13,884			13,935
Non-controlling interests		917			528
Total shareholders’ equity		14,801			14,463
Total liabilities and shareholders’ equity		21,250			20,095

* Retroactively restated for effect of the stock splits effected in the form of bonus shares

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

F-4

EURO TECH HOLDINGS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)

	Year ended December 31,
	2021			2020			2019
	US$’000			US$’000			US$’000
Revenues
Trading and manufacturing		9,619			9,476			11,877
Engineering		11,769			3,881			5,522
Total revenues		21,388			13,357			17,399
Cost of revenues
Trading and manufacturing		(6,938	)		(7,048	)		(9,285	)
Engineering		(8,755	)		(2,624	)		(3,697	)
Total cost of revenues		(15,693	)		(9,672	)		(12,982	)
Gross profit		5,695			3,685			4,417
Finance costs		(3	)		(12	)		(4	)
Selling and administrative expenses		(4,911	)		(5,374	)		(4,853	)
(Loss) / Gain on disposal of property, plant and equipment		(10	)		1,429			(5	)
Operating income / (loss)		771			(272	)		(445	)
Interest income		23			28			83
Other income , net		127			307			52
Equity in income of affiliates		355			435			137
Net income / (loss) before income taxes		1,276			498			(173	)
Income taxes credit / (expense)		90			(96	)		(37	)
Net income / (loss)		1,366			402			(210	)
Net (income) / loss attributable to non-controlling interests		(377	)		367			64
Net income / (loss) attributable to Euro Tech Holdings Company Limited’s shareholders		989			769			(146	)
Other comprehensive income / (loss)
Net income / (loss)		1,366			402			(210	)
Foreign exchange translation adjustments		(52	)		(31	)		(8	)
Comprehensive income / (loss)		1,314			371			(218	)
Comprehensive (income) / loss attributable to non-controlling interests		(389	)		350			78
Comprehensive income / (loss) attributable to the Company		925			721			(140	)

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

F-5

EURO TECH HOLDINGS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS) (CONT’D)

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Net income / (loss) per ordinary share attributable to Euro Tech Holdings Company Limited’s shareholders*
- Basic	$	US0.13	$	US0.10	$	US(0.02)
- Diluted	$	US0.13	$	US0.10	$	US(0.02)
Weighted average number of ordinary shares outstanding*
- Basic		7,732,132		7,732,132		7,732,132
- Diluted		7,732,132		7,732,132		7,732,132

* Retroactively restated for effect of the stock splits effected in the form of bonus shares

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

F-6

EURO TECH HOLDINGS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year ended December 31,
	2021			2020			2019
	US$’000			US$’000			US$’000
Cash flows from operating activities:
Net income / (loss)		989			769			(146	)
Adjustments to reconcile net income / (loss) to net cash (used in) / provided by operating activities:
Depreciation		38			49			69
Loss / (gain) on disposal of property, plant and equipment		10			(1,429	)		5
Stock-based compensation expense		55			54			10
Non-controlling interests in income / (loss) of subsidiaries		377			(367	)		(64	)
Equity in profit of affiliates		(355	)		(435	)		(137	)
Deferred tax (credit) / expenses		(145	)		92			37
Changes in non-current assets and liabilities:
Long-term operating lease obligations		(53	)		(122	)		216
Operating lease right-of-use assets		(5	)		173			(406	)
Decrease / (increase) in current assets:
Accounts receivable, net		(432	)		387			1,503
Prepayments and other current assets		942			(766	)		(201	)
Contract assets		128			239			458
Inventories		(205	)		244			(185	)
Increase / (decrease) in current liabilities:
Accounts payable		757			(1,520	)		(986	)
Other payables and accrued expenses		(8	)		451			(108	)
Contract liabilities		13			194			(501	)
Income tax payable		38			4			-
Current portion of long-term operating lease obligations		57			(52	)		170
Net cash provided by / (used) in operating activities		2,201			(2,035	)		(266	)
Cash flows from investing activities:
Purchase of property, plant and equipment		(4	)		(11	)		(21	)
Proceeds from sale of property, plant and equipment		-			1,835			-
Dividend received from affiliates		362			71			-
Proceeds from sale of long-term investment		-			148			-
Purchase of long-term investment		-			-			(148	)
Net cash provided by / (used in) investing activities		358			2,043			(169	)
Cash flows from financing activities:
Dividend paid		(1,031	)		(1,299	)		-
Proceeds from bank borrowings		782			804			565
Repayments to bank borrowings		(767	)		(1,008	)		-
Net cash (used in) / provided by financing activities		(1,016	)		(1,503	)		565
Effect of exchange rate changes on cash and cash equivalents		(54	)		(34	)		(7	)
Net increase / (decrease) in cash and cash equivalents and restricted cash		1,489			(1,529	)		123
Cash, cash equivalents and restricted cash at beginning of year		5,191			6,720			6,597
Cash, cash equivalents and restricted cash at end of year		6,680			5,191			6,720
Cash breakdown
Cash and cash equivalents		5,269			3,519			5,991
Restricted cash		1,411			1,672			729
		6,680			5,191			6,720
	US$’000			US$’000			US$’000
Supplemental disclosure of consolidated cash flow information:
Cash paid during the period for income taxes		20			-			-
Cash paid during the period for interest		3			12			4
Operating leases (disclosed in accompanying Note 3)
Non-cash items:
Right-of-use assets obtained in exchange for new operating lease obligations		-			-			460

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

F-7

EURO TECH HOLDINGS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	EURO TECH HOLDINGS COMPANY LIMITED’S SHARHOLDERS
	Number of ordinary Shares*		Ordinary Amount		Additional paid-in capital		Treasury stock			Accumulated other com- prehensive income			PRC statutory reserves		Retained earnings			Non- controlling interests			Total
			US$’000		US$’000		US$’000			US$’000			US$’000		US$’000			US$’000			US$’000
Balance at December 31, 2018		7,899,832		123		9,551		(786	)		893			316		4,492			956			15,545
Net loss		-		-		-		-			-			-		(146	)		(64	)		(210	)
Foreign currency translation adjustments		-		-		-		-			6			-		-			(14	)		(8	)
Stock-based compensation expense		-		-		10		-			-			-		-			-			10
Balance at December 31, 2019		7,899,832		123		9,561		(786	)		899			316		4,346			878			15,337
Net income / (loss)		-		-		-		-			-			-		769			(367	)		402
Foreign currency translation adjustments		-		-		-		-			(48	)		-		-			17			(31	)
Dividend paid		-		-		-		-			-			-		(1,299	)		-			(1,299	)
Stock-based compensation expense		-		-		54		-			-			-		-			-			54
Balance at December 31, 2020		7,899,832		123		9,615		(786	)		851			316		3,816			528			14,463
Net income / (loss)		-		-		-		-			-			-		989			377			1,366
Foreign currency translation adjustments		-		-		-		-			(64	)		-		-			12			(52	)
Dividend paid		-		-		-		-			-			-		(1,031	)		-			(1,031	)
Stock-based compensation expense		-		-		55		-			-			-		-			-			55
Balance at December 31, 2021		7,899,832		123		9,670		(786	)		787			316		3,774			917			14,801

* Retroactively restated for effect of the stock splits effected in the form of bonus shares

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

F-8

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 Organization and business

Euro Tech Holdings Company Limited (the “Company”) was incorporated in the British Virgin Islands on September 30, 1996.

Euro Tech (Far East) Limited (“Far East”) is the principal operating subsidiary of the Company. It is principally engaged in the marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems in Hong Kong and in the People’s Republic of China (the “PRC”).

The Group’s principal subsidiaries at December 31, 2021 and 2020 are set out below.

Name of entity	Ownership interest held by the Group						Place of incorporation and principal place of operation	Principal activities
	2021			2020
Euro Tech (Far East) Limited		100	%		100	%	Hong Kong	Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems
Euro Tech Trading (Shanghai) Limited		100	%		100	%	The PRC	Inactive
Shanghai Euro Tech Limited		100	%		100	%	The PRC	Manufacturing of analytical and testing equipment
Shanghai Euro Tech Environmental Engineering Company Limited		-			100	%	The PRC	Inactive
Euro Tech (China) Limited		-			-		Hong Kong	Inactive

 This company was dissolved on July 2, 2021.

This company was deregistered on April 3, 2020.

F-9

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

1 Organization and business (Cont’d)

The Group’s principal subsidiaries at December 31, 2021 and 2020 are set out below (Cont’d).

Name of entity	Ownership interest held by the Group						Place of incorporation and principal place of operation	Principal activities
	2021			2020
Yixing Pact Environmental Technology Co., Ltd.		58	%		58	%	The PRC	Design, manufacturing and operation of water and waste water treatment machinery and equipment
Pact Asia Pacific Limited		58	%		58	%	The British Virgin Islands	Selling of environmental protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services
Affiliate:
Zhejiang Tianlan Environmental Protection Technology Co. Ltd. (“Blue Sky”)		19.4	%*		19.4	%*	The PRC	Design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted

* The Group’s interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation on both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process and exercise significant influence.

F-10

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2 Summary of significant accounting policies

(a) Basis of presentation 

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

(b) Basis of consolidation 

The accompanying consolidated financial statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated.

(c) Subsidiaries  

Subsidiaries are all entities over which the Group has control; has the power to appoint or remove the majority of the members of the board of directors; has the right to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.

(d) Investments in affiliates 

We account for our interest in an investment using the equity method of accounting per Accounting Standards Codification (“ASC”) No. 323, “Investments - Equity Method and Joint Ventures” if we are not the primary beneficiary of a VIE or do not have a controlling interest. The investment is recorded at cost and the carrying amount is adjusted periodically to recognize our proportionate share of income or loss, additional contributions made and dividends and capital distributions received. We record the effect of any impairment or other than temporary decrease in the value of the investment.

In the event a partially owned equity affiliate were to incur a loss and our cumulative proportionate share of the loss exceeded the carrying amount of the equity method investment, application of the equity method would be suspended and our proportionate share of further losses would not be recognized unless we committed to provide further financial support to the affiliate. We would resume application of the equity method once the affiliate became profitable and our proportionate share of the affiliate’s earnings equals our cumulative proportionate share of losses that were not recognized during the period the application of the equity method was suspended.

F-11

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2 Summary of significant accounting policies (Cont’d)

(e) Revenue recognition 

Our revenue is derived from long-term contracts for customers in our engineering segment, as well as short-term contracts for customers in our trading and manufacturing segment. Accounting treatment for these contracts in accordance with Accounting Standards Update (“ASU”) 2014-09 (Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customer), is as follows:

Performance obligations satisfied over time (Engineering services)

Recognition of performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Engineering service projects typically span between several days to over 5 years. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. Some contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle (engineering).

Revenues are recognized as our obligations are satisfied over time, by reference to the progress towards complete satisfaction of that performance obligation.

If the Group expects the reference to progress certificates issued by the customers, with additional adjustments where necessary, depicts the Group’s performance in transferring control of goods or services promised to customers for individual projects, the Group satisfies the performance obligation over time and therefore, recognizes revenue over time in accordance with the output method for measuring progress. Under output method, revenue recognition is based on the stage of completion of the contracts, provided that the stage of contract completion and the gross billing value of contracting work can be measured reliably. The stage of completion of a contract is established by reference to the construction works certified by customers.

Remaining performance obligations (“RPOs”)

RPOs represent the amount of revenues we expect to recognize in the future from our contract commitments on projects and are hereafter referred to as “Backlog”. Backlog includes the entire expected revenue values for subsidiary we consolidate. Backlog may not be indicative of future operating results, and projects included in Backlog may be canceled, modified or otherwise altered by customers.

The Group had the following backlog:

	2021		2020
	US$’000		US$’000
Engineering segment		5,400		11,581

Unrecognized contract revenue which is expected to be recognized in next 12 months is approximately US$5,400,000 (2020: US$11,581,000).

F-12

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2 Summary of significant accounting policies (Cont’d)

(e) Revenue recognition (Cont’d) 

Performance obligations satisfied over time (Engineering services) (Cont’d)

Variable consideration

Contract modifications through change orders, claims and incentives are routine in the performance of the Group’s contracts to account for changes in the contract specifications or requirements. In most instances, contract modifications are not distinct from the existing contract due to the significant integration service provided in the contract and are accounted for as a modification of the existing contract and performance obligation. Either the Group or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Change orders that are unapproved as to both price and scope are evaluated as claims. The Group considers claims to be amounts in excess of approved contract prices that the Group seeks to collect from its customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.

The Group estimates variable consideration for a performance obligation at the most likely amount to which the Group expects to be entitled (or the most likely amount the Group expects to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which the Group will be entitled (or will be incurred in the case of liquidated damages). The Group includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Group’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Group.

The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in the Group’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.

Performance obligations satisfied at a point-in-time (Trading and manufacturing)

Revenue for our trading and manufacturing contracts is recognized at a point in time. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been delivered to the point of receipt by customer.

F-13

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2 Summary of significant accounting policies (Cont’d)

(e) Revenue recognition (Cont’d) 

Classification of contract assets and liabilities

For revenue recognized associated with its contracts with customers over time, for which the Group has an enforceable right to receive compensation. Many of our contracts contain specific provisions that determine when the Group can bill for its work performed under these contracts.

Any revenue earned on a contract that has not yet been billed to the customer is recorded as a contract asset on the Group’s consolidated balance sheets.

The Group’s consolidated balance sheets present contract liabilities that contain deferred revenue that represent any costs incurred on contracts in process for which revenue has not yet been recognized.

Rental income

Rental income from operating leases is recognized in consolidated statements of operations and comprehensive income /(loss) on a straight-line basis over the term of the relevant lease.

(f) Research and development costs 

Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately US$61,000, US$497,000 and US$35,000 for the years ended December 31, 2021, 2020 and 2019 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss).

(g) Advertising and promotional expenses 

Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately US$7,000, US$7,000 and US$13,000 for the years ended December 31, 2021, 2020 and 2019 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss).

F-14

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2 Summary of significant accounting policies (Cont’d)

(h) Income taxes 

The Group follows the liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Group also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized.

The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Group does not believe it has any uncertain tax positions through the periods ended December 31, 2021, 2020 and 2019 respectively which would have a material impact on the Group’s consolidated financial statements.

Interest and penalties related to uncertain income tax positions are included in income tax expense on the Group’s consolidated statements of operations and comprehensive income / (loss). Interest and penalties actually incurred are charged to interest expense and the other income, respectively if applicable.

The Group files tax returns in Hong Kong and the PRC. The tax returns for 2021, 2020 and 2019 are subject to examination by Hong Kong and PRC taxing authorities, commencing with the first year filed.

(i) Cash and cash equivalents 

Cash and cash equivalents consist of cash on hand, and bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal. There were no cash equivalents as of December 31, 2021 and 2020.

(j) Restricted cash 

Restricted cash represents cash deposits retained with banks in the PRC for issuance of performance bonds and guarantees to the customers and cash deposited by the Group into separate accounts and designated as collateral for standby letters of credit in the same amount in accordance with contractual agreements.

(k) Accounts receivable and allowance for doubtful accounts  

The Group does not charge interest to its customers and carries its customer receivables at their face amounts, less an allowance for doubtful accounts. As is common practice in the industry, the Group classifies all accounts receivable as current assets.

The Group grants trade credit, on a non-collateralized basis, to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Group analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.

F-15

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2 Summary of significant accounting policies (Cont’d)

(l) Inventories 

Inventories are measured using the first-in, first-out method and are stated at the lower of cost or net realizable value. Cost of finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity. Allowance is made for obsolete, slow moving or defective items, where appropriate.

(m) Property, plant and equipment 

Property, plant and equipment is carried at cost. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in consolidated income from operations. The cost of maintenance and repairs is charged to expense as incurred. Property, plant and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property, plant and equipment exceeds its fair value, an impairment charge would be recorded in the consolidated statement of operations.

Depreciation of property, plant and equipment are computed using the straight-line method over the assets’ estimated useful lives as follows:

Office premises	47 to 51 years
Leasehold improvements	over terms of the leases or the useful lives whichever is less
Furniture, fixtures and office equipment	3 to 5 years
Motor vehicles	4 years
Testing equipment	3 years

(n) Long-term investment 

The Group has elected to apply the measurement alternative to equity securities without readily determinable fair values. As such, the Group’s non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the investee.

F-16

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

2 Summary of significant accounting policies (Cont’d)

(o) Leases arrangements 

In the ordinary course of business, the Group enters into a variety of operating lease arrangements.

Operating right-of-use leases are included in operating lease right-of-use assets, current portion of long-term operating lease obligations and long-term operating lease obligations, net of current maturities on the Group’s consolidated balance sheets, as appropriate. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Group’s leases do not provide an implicit rate to calculate present value, the Group determines this rate by estimating the Group’s incremental borrowing rate, utilizing the borrowing rates associated with the Group’s various debt instruments. The operating lease right-of-use asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

(p) Goodwill 

Goodwill is not amortized. The Group performs either a qualitative or quantitative assessment to review goodwill for impairment on an annual basis. This assessment is performed at the beginning of the fourth quarter, or when circumstances change, such as a significant adverse change in the business climate or the decision to sell a business, both of which would indicate that impairment may have occurred.

A qualitative assessment considers financial, industry, segment and macroeconomic factors, if the qualitative assessment indicates a potential for impairment, a quantitative assessment is performed to determine if impairment exists. The quantitative assessment begins with a comparison of the fair value of the reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss would be recognized in an amount equal to that excess, limited to the total amount of the goodwill allocated to the reporting unit. If the carrying value of goodwill exceeds its implied fair value, an impairment charge would be recorded in the consolidated statements of operations and comprehensive income / (loss).

As a result of the annual qualitative review process in 2021 and 2020, the Group determined it was not necessary to perform a quantitative assessment.

(q) Foreign currency translation 

The assets and liabilities of the Group’s subsidiaries denominated in currencies other than U.S. dollars are translated into U.S. dollars using the applicable exchange rates at the consolidated balance sheet date. For consolidated statements of operations and comprehensive income/(loss)’ items, amounts denominated in currencies other than U.S. dollars were translated into U.S. dollars using the average exchange rate during the period. Equity accounts were translated at their historical exchange rates. Net gains and losses resulting from translation of foreign currency on consolidated financial statements are included in the consolidated statements of stockholders’ equity as accumulated other comprehensive income. Foreign currency transaction gains and losses are reflected in the consolidated statements of operations and comprehensive income / (loss).

F-17

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

2 Summary of significant accounting policies (Cont’d)

(r) Comprehensive income / (loss) 

We account for comprehensive income in accordance with ASC No. 220, “Comprehensive Income”, which specifies the computation, presentation and disclosure requirements for comprehensive income / (loss). Comprehensive income / (loss) consists of net income / (loss) and foreign currency translation adjustments, primarily from fluctuations in foreign currency exchange rates of our foreign subsidiaries with a functional currency other than the U.S. dollar.

(s) Ordinary share 

On November 22, 2011, the Company filed Amended and Restated Memorandum and Articles of Association with the Registry of Corporate Affairs of the BVI Financial Services Commission that on November 29, 2011 became effective as of the filing date to amend the Company’s ordinary shares of US$0.01 par value capital stock to no par value capital stock. Treasury stock is accounted for using the cost method. When treasury stock is reissued, the value is computed and recorded using a weighted-average basis.

On October 8, 2019, the Company had stock split in the form of bonus shares at the rate of one ordinary share for every two ordinary shares held, creating 1,030,950 new shares of common stock.

On March 3, 2021, the Company had stock split in the form of  bonus shares at the rate of two ordinary shares for every three ordinary shares held, creating 2,061,900 new shares of common stock.

The effect of the above stock splits have been reflected retroactively in the financial statements and net income per ordinary share computations.

(t) Net income per ordinary share 

The Group computes net income per ordinary share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to Euro Tech Holdings Company Limited are computed by dividing net income attributable to Euro Tech Holdings Company Limited by the weighted average number of ordinary shares outstanding during the period. The Group reports both basic earnings per share, which is based on the weighted average number of ordinary shares outstanding, and diluted earnings per share, which is based on the weighted average number of ordinary shares outstanding and all dilutive potential ordinary shares outstanding.

Outstanding stock options are the only dilutive potential shares of the Company.

(u) Stock-based compensation 

The Group determines compensation expense for stock-based awards based on the estimated fair values at the grant date and recognizes the related compensation expense over the vesting period. The Group uses the straight-line amortization method to recognize compensation expense related to stock-based awards that have only service conditions. This method recognizes stock compensation expense on a straight-line basis over the requisite service period for the entire award.

F-18

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

2 Summary of significant accounting policies (Cont’d)

(v) Use of estimates 

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Group require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from engineering contracts over time, the valuation of goodwill, and contract assets and contract liabilities. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.

(w) Related parties 

Related parties are affiliates of the Group; entities for which investments are accounted for by the equity method by the Group; trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; principal owners of the Group; its management; members of the immediate families of principal owners of the Group and its management; and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Another party also is a related party if it can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

(x) Segment information 

The Group reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Group’s reportable segments. The Group categorises its operations into two business segments: Trading and manufacturing, and Engineering.

(y) Concentration 

Financial instruments that potentially subject the Group to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable, net. The Group maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions.

The Group is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Group’s top customers accounting for more than 5% of the Group’s revenue generated approximately 15%, 23%, and 34% of consolidated revenues for the years ended December 31, 2021, 2020 and 2019, respectively.

The Group grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, general contractors, owners and managers of industrial properties and government departments.

F-19

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

2 Summary of significant accounting policies (Cont’d)

(y) Concentration (Cont’d) 

Consequently, the Group is subject to potential credit risk related to changes in business and economic factors. At December 31, 2021, three (2020: three) of the Group’s customers individually exceeded 10.0% of accounts receivable, net. The Group believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.

(z) Finance costs 

Interest relating to loans repaid is expensed in the period the repayment occurs.

(aa) Warranties 

The suppliers of the Group offer a standard one-year warranty to end customers of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis.

(ab) Shipping and handling costs 

Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues.

(ac) Statutory reserves 

The Group is required to make appropriation to reserve funds, comprising the statutory reserve fund and statutory staff welfare fund, based on after-tax net income determined with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations to the statutory reserve fund is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve fund is equal to 50% of the entities’ registered capital.

(ad) Fair value measurements 

The Group uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of December 31, 2021 and 2020, the Group determined that the carrying values of cash and cash equivalents, restricted cash, accounts receivable, net, prepayments and other current assets, contract assets, bank borrowings, accounts payable, contract liabilities, other payables and accrued expenses approximate their fair values because of the short-term nature of these instruments.

F-20

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2 Summary of significant accounting policies (Cont’d)

(ae) Recent accounting pronouncements 

Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Group considers the applicability and impact of all ASUs. The Group, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Group or may have minimal impact on its consolidated financial statements.

Recently adopted accounting pronouncements

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 ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The Group adopted this ASU in January 2021 and there was no effect on the consolidated financial statements or disclosures.

In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),” an amendment clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivative instruments. The Group adopted this guidance in January 2021 and there was no effect on the consolidated financial statements or disclosures.

Recently issued accounting pronouncements not yet adopted

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” this ASU affects a wide variety of Topics in the Codification. They apply to all reporting entities within the scope of the affected accounting guidance. More specifically, this ASU, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose because the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure Section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). Those amendments are not expected to change current practice. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early application of the amendments is permitted for and varies based on the entity. The amendments should be applied retrospectively and at the beginning of the period that includes the adoption date. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.

(af) Reclassification 

Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

F-21

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

2 Summary of significant accounting policies (Cont’d)

(ag) Non-controlling interests

For entities that are consolidated, but not 100% owned, a portion of the income or loss and equity is allocated to owners other than the Group. The aggregate of the income or loss and corresponding equity that is not owned by the Group is included within non-controlling interests in the consolidated financial statements.

Non-controlling interests is presented as a separate component of equity in the consolidated balance sheets. Net income includes the net income attributable to the holders of non-controlling interests in the consolidated statements of operations and comprehensive income / (loss). Profits and losses are allocated to non-controlling interests in proportion to their relative ownership interests regardless of their basis.

(ah) Impairment of long lived assets

Long-lived assets such as property, plant and equipment with finite lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment for the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Group recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. There was no impairment of long lived assets during 2021, 2020 and 2019, respectively.

(ai) Effect of the Restatement on the Consolidated Financial Statements for the year ended December 31, 2021

Subsequent to the issuance of the Company’s consolidated financial statements for the year ended December 31, 2021 on May 13, 2022, certain errors were identified,

(i)	(loss) / gain on disposal of property, plant and equipment not included in operating income / (loss)
(ii)	bonus share issuances were not accounted for and disclosed as stock splits in the consolidated statements of shareholders' equity, earnings per share computations for all periods presented

The impact of the restatement on the December 31, 2021 financial statements is reflected in the following tables:

CONSOLIDATED BALANCE SHEETS

	December 31, 2021
	As Previously Reported	As Restated
	US$’000	US$’000
Ordinary share	5,322,459 no par value shares issued as of December 31, 2021 (2020: 3,260,559)	7,899,832 no par value shares issued as of December 31, 2021 and 2020

F-22

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

2 Summary of significant accounting policies (Cont’d)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)

	December 31
	As Previously Reported			As Restated
	US$’000			US$’000
Operating income / (loss)
2021		781			771
2020		(1,701	)		(272	)
2019		(440	)		(445	)
Net income / (loss) per ordinary share attributable to Euro Tech Holdings Company Limited’s shareholders
- Basic
2021	$	US0.19		$	US0.13
2020	$	US0.25		$	US0.10
2019	$	US(0.06	)	$	US(0.02	)
- Diluted
2021	$	US0.19		$	US0.13
2020	$	US0.25		$	US0.10
2019	$	US(0.06)		$	US(0.02	)
Weighted average number of ordinary shares outstanding
- Basic
2021		5,154,759			7,732,132
2020		3,092,859			7,732,132
2019		2,301,993			7,732,132
- Diluted
2021		5,154,759			7,732,132
2020		3,092,859			7,732,132
2019		2,301,993			7,732,132

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	December 31
	As Previously Reported		As Restated
	US$’000		US$’000
Number of ordinary share
Balance at December 31, 2018		2,229,609		7,899,832
Balance at December 31, 2019		3,260,559		7,899,832
Balance at December 31, 2020		3,260,559		7,899,832
Balance at December 31, 2021		5,322,459		7,899,832

Commensurate adjustments have been made to Notes 2 (s), 11, 16 and 24 to the consolidated financial statements.  

3 Lease obligations

The Group has operating leases primarily for office space. The Group’s leases have remaining lease terms of several months to two years.

The components of lease expense are as follows:

	Years ended December 31,
	2021		2020
	US$’000		US$’000
Operating lease cost		243		257
Short-term lease cost		62		64
Total lease cost		305		321

F-23

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

3 Lease obligations (Cont’d)

Supplemental consolidated cash flow information related to leases is as follows:

	Years ended December 31,
	2021		2020
	US$’000		US$’000
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		196		195
Right-of-use assets obtained in exchange for lease obligations (noncash):
Operating leases		-		-

Supplemental consolidated balance sheet information related to leases is as follows:

	December 31,
	2021			2020
	US$’000			US$’000
Operating leases
Operating lease right-of-use assets		238			233
Current portion of long-term operating lease obligations		175			118
Long-term operating lease obligations, net of current maturities		41			94
		216			212
Total operating lease liabilities
Weighted average remaining lease term
Operating leases		23 months			16 months
Weighted average discount rate
Operating leases		5	%		5	%

Maturities of lease liabilities are as follows:

	Operating leases
	US$’000
Year ending December 31,
2022		181
2023		42
Total lease payments		223
Less: imputed interest		(7	)
Total		216

F-24

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

4 Accounts receivable, net

Accounts receivable, net consisted of the following at December 31:

	2021			2020
	US$’000			US$’000
Contract receivables		3,661			3,229
Less: allowance for doubtful accounts		(30	)		(30	)
		3,631			3,199

The roll-forward of activity in the allowance for doubtful accounts was as follows for the years ended December 31:

	2021		2020
	US$’000		US$’000
Balance at beginning of period		30		36
Less : reversal in allowances		-		(6	)
Balance at end of period		30		30

The following is an aging analysis of accounts receivable, net at December 31:

	2021		2020
	US$’000		US$’000
Current		1,441		2,014
Past due
1-30 days		1,570		85
31-60 days		495		202
61-90 days		108		41
Greater than or equal to 91 days		17		857
		2,190		1,185
		3,631		3,199

F-25

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

5 Prepayments and other current assets

Prepayment and other current assets mainly represent deposits paid for purchases and services, rental and utilities deposits, and prepaid expenses.

	December 31,
	2021		2020
	US$’000		US$’000
Deposits paid		243		838
Prepayments		104		168
Other receivables		222		250
Other tax recoverable		3		258
		572		1,514

6 Contract assets and liabilities

Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the timing of costs incurred on work performed does not coincide with the billing terms.

The Group’s consolidated balance sheets present contract assets which contains earned unbilled revenue associated with contract work that has been completed but not paid by customers, that are generally due once the job is completed and approved.

Contract assets consisted of the following at December 31:

	2021		2020
	US$’000		US$’000
Unbilled revenue		74		202

The Group’s consolidated balance sheets present contract liabilities which contains deferred revenue (previously identified as billings in excess of costs and estimated earnings on uncompleted contracts).

Contract liabilities consisted of the following at December 31:

	2021		2020
	US$’000		US$’000
Deferred revenue		1,076		1,063

F-26

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

6 Contract assets and liabilities (Cont’d)

The following table provides information about contract assets and contract liabilities from contracts with customers:

	December 31,
	2021			2020
	US$’000			US$’000
Contract assets		74			202
Contract liabilities		(1,076	)		(1,063	)
Net contract liabilities		(1,002	)		(861	)

The difference between the opening and closing balances of the Group’s contract assets and contract liabilities primarily results from the timing of the Group’s billings in relation to its performance of work. The amounts of revenue recognized in the period that were included in the opening contract liability balances were US$79,000 and US$1,214,000 for the years ended December 31, 2021 and 2020, respectively. The revenue consists primarily of work performed on previous billings to customers.

The net liabilities position for contracts in process consisted of the following at December 31:

	2021			2020
	US$’000			US$’000
Costs incurred in contracts in process		169			1,904
Estimated earnings		59			-
Cost and estimated earnings on uncompleted contracts		228			1,904
Less: billings to date		(1,230	)		(2,765	)
		(1,002	)		(861	)

The net liabilities position for contracts in process is included within the contract asset and contract liability in the accompanying consolidated balance sheets as follows at December 31:

	2021			2020
	US$’000			US$’000
Unbilled revenue		74			202
Deferred revenue		(1,076	)		(1,063	)
		(1,002	)		(861	)

F-27

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

6 Contract assets and liabilities (Cont’d)

Disaggregated revenue from contracts

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Revenue
Trading and manufacturing (revenue recognized at point in time)		9,619		9,476		11,877
Engineering (revenue recognized over time)		11,769		3,881		5,522
		21,388		13,357		17,399

7 Inventories

	December 31,
	2021		2020
	US$’000		US$’000
Raw materials		89		63
Work in progress		20		20
Finished goods		438		259
		547		342

Management continuously reviews obsolete and slow moving inventories and assesses the inventory valuation to determine if the write-down of inventories is deemed appropriate. For the years ended December 31, 2021, and 2020, write-down of inventories amounted to US$55,000 and US$13,000, respectively, which were charged to cost of revenue in consolidated statements of operations and comprehensive income / (loss).

F-28

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

8 Property, plant and equipment, net

	December 31,
	2021			2020
	US$’000			US$’000
Office premises*		673			673
Leasehold improvements		125			157
Furniture, fixtures and office equipment		439			557
Motor vehicles		175			175
Testing equipment		37			37
		1,449			1,599
Less: Accumulated depreciation		(1,234	)		(1,340	)
		215			259

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Depreciation charge		38		49		69

* Far East earns rental income from a property in Beijing, PRC for which it does not hold the title. Far East is investigating various ways in which to obtain the title but has not formulated a specific plan as of the date of issuance of these consolidated financial statements. The net book value of the property at December 31, 2021 is approximately US$88,000 (2020: US$92,000).

F-29

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

9 Investments in affiliates

Investments in affiliates are accounted for using the equity method of accounting.

	December 31,
	2021			2020
Zhejiang Tianlan Environmental Protection Technology Co. Ltd.
Interest held		19.4	%		19.4	%
	US$’000			US$’000
Long-term investment, at cost, less impairment		5,540			5,540
Share of undistributed profits		2,537			2,544
		8,077			8,084

Far East is holding 19.4% (2020: 19.4%) equity interests in Blue Sky, a company incorporated in the PRC, with total cost of investment of US$5,540,000. Blue Sky provides a comprehensive service for design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted from various boilers and industrial furnaces of power plants, steel works and chemical plants since 2000.

Blue Sky has listed its shares on the New Third Board in the PRC since November 17, 2015 and suspended trading from August 15, 2017 and resumed trading on February 2, 2018 and suspended trading from November 24, 2020 and resumed trading on January 6, 2021.

The Group’s interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation on both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process and exercise significant influence.

F-30

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

9 Investments in affiliates(Cont’d)

A summary of the financial information of the affiliate, Blue Sky, is set forth below:

	December 31,
	2021			2020
Balance Sheet:	US$’000			US$’000
Current assets		42,510			44,918
Non-current assets		15,172			15,258
Total assets		57,682			60,176
Total liabilities		(27,376	)		(30,889	)
Total shareholders’ equity		30,306			29,287

	Year ended December 31,
	2021		2020
Operating results:	US$’000		US$’000
Net sales		51,280		43,933
Operating income		1,997		2,214
Net income		2,105		1,946

10 Other payables and accrued expenses

Other payables and accrued expenses mainly represent deposits received from customers and accruals for operating expenses.

	December 31,
	2021		2020
	US$’000		US$’000
Dividend payables		86		84
Deposits received from customers		6		-
Rental deposit received		3		4
Accruals for operating expenses		1,360		1,500
Other tax payables		130		5
		1,585		1,593

F-31

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

11 Ordinary share

On October 8, 2019, the Company had stock split in the form of bonus shares at the rate of one ordinary share for every two ordinary shares held, creating 1,030,950 new shares of common stock.

During the year ended December 31, 2020, there was no movement with the Company’s issued ordinary shares and outstanding shares.

On March 3, 2021, the Company had stock split in the form of bonus shares at the rate of two ordinary shares for every three ordinary shares held, creating 2,061,900 new shares of common stock.

On January 24, 2022, the Company had stock split in the form of  bonus shares at the rate of one ordinary shares for every two ordinary shares held, creating 2,577,373 new shares of common stock, as described in Note 24 to the consolidated financial statements.

Number of outstanding shares at year end of:

	2021			2020
Shares issued		7,899,832	*		7,899,832	*
Less: shares under treasury stock		(167,700	)		(167,700	)
		7,732,132			7,732,132

* Retroactively restated for effect of the stock splits effected in the form of bonus shares

12 Goodwill

Reporting units - The Group’s reporting units consist of its trading and manufacturing and engineering segments. Goodwill is not amortized, but instead is reviewed for impairment at least annually during the fourth quarter of each year at the reporting level, absent any interim indicators of impairment or other factors requiring an assessment.

Annual impairment assessment - For our 2021 and 2020 annual impairment test we performed a qualitative assessment, using information as of December 31, 2021 and 2020, respectively. Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. We determined there were no factors indicating the need to perform a quantitative goodwill impairment test and concluded that it is more likely than not the fair value of our reporting units is greater than their carrying value and thus there was no impairment to goodwill. As of December 31, 2019, the Group completed the annual impairment test by comparing the carrying amount of the net assets, including goodwill, with the fair value of Yixing Pact Environmental Technology Co., Ltd and Pact Asia Pacific Limited as of December 31, 2019

In addition to our annual review, we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value of a reporting unit may be greater than fair value. Factors that could trigger an interim impairment review include, but are not limited to, significant adverse changes in the business climate which may be indicated by a decline in our market capitalization or decline in operating results. No impairments were recorded to our goodwill during the years ended December 31, 2021, 2020 and 2019. No material events or changes occurred between the testing date and year end to trigger a subsequent impairment review.

At December 31, 2021 and 2020, we had goodwill for our engineering segment with a carrying amount of US$1,071,000 and US$1,071,000, respectively.

F-32

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

13 PRC statutory reserves

Under the relevant PRC laws and regulations, the PRC subsidiaries are required to appropriate a certain percentage of their respective net income to two statutory funds i.e. the statutory reserve fund and the statutory staff welfare fund. The PRC subsidiaries can also appropriate certain amount of its net income to the enterprise expansion fund.

(i) Statutory reserve fund

Pursuant to applicable PRC laws and regulations, the PRC subsidiaries are required to allocate at least 10% of its net income to the statutory reserve fund until such fund reaches 50% of its registered capital. The statutory reserve fund can be utilised upon the approval by the relevant authorities, to offset accumulated losses or to increase its registered capital, provided that such fund be maintained at a minimum of 25% of its registered capital.

Under the PRC laws and regulations, the PRC subsidiaries are restricted in their ability to transfer certain of its net assets in the form of dividend payments, loans or advances. The amounts restricted include paid-in capital and statutory reserves, as determined pursuant to PRC generally accepted accounting principles, totaling US$2,452,000 as at December 31, 2021 (2020: US$3,174,000 and 2019: US$3,174,000).

(ii) Statutory staff welfare fund

Pursuant to applicable PRC laws and regulations, the PRC subsidiaries are required to allocate a certain amount of its net income to the statutory staff welfare fund determined by it. The statutory staff welfare fund can only be used to provide staff welfare facilities and other collective benefits to its employees. This fund is non-distributable other than upon liquidation of the PRC subsidiaries. The balances as at December 31, 2021 and 2020 include in statutory reserves were US$12,000.

(iii) Enterprise expansion fund

The enterprise expansion fund shall only be used to make up losses, expand the PRC subsidiaries’ production operations, or increase the capital of the subsidiaries. The enterprise expansion fund can be utilised upon approval by relevant authorities, to convert into registered capital and issue bonus capital to existing investors, provided that such fund be maintained at a minimum of 25% of its registered capital. The balances as at December 31, 2021 and 2020 include in statutory reserves were US$408,000.

F-33

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

14 Other income, net

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Exchange gain / (loss), Other income, netnet		77		101		(30	)
Rental income		50		59		82
Government subsidies – Employment Support Scheme *		-		147		-
		127		307		52

* The amount represents salaries and wage subsidies granted under Anti-Epidemic Fund by the Government of the Hong Kong Special Administrative Region for the use of paying wages of employees from June to November 2020.

15 Income taxes

No income tax arose in the United States of America by the Group for the years ended December 31, 2021, 2021 and 2020.

The Company and Pact Asia Pacific Limited are exempt from taxation in the British Virgin Islands (“BVI”).

Far East and Euro Tech (China) Limited provided for Hong Kong profits tax at a rate of 8.25% on assessable profits up to US$256,000; and 16.5% on any part of assessable profits over US$256,000 in year 2021 and 2020 (2019: 16.5%) on the basis of their income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for profits tax purposes.

Euro Tech Trading (Shanghai) Limited (“ETTS”), a subsidiary of Far East, provides for PRC Enterprise Income Tax (“EIT”) at a rate of 25% (2020 and 2019: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2021, ETTS had an assessable loss carried forward of US$18,000 as agreed by the local tax authority to offset its profit for the forth coming years (2020: US$604,778 and 2019: US$518,328). Such loss will expire in 5 years.

Shanghai Euro Tech Limited (“SET”), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2020 and 2019: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2021, SET had an assessable loss carried forward of US$678,000 as agreed by the local tax authority to offset its profit for the forth coming years (2020: US$658,733 and 2019: US$444,192). Such loss will expire in 5 years.

F-34

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

15 Income taxes(Cont’d)

Shanghai Euro Tech Environmental Engineering Company Limited (“SETEE”), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2020 and 2019: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2021, SETEE had an assessable loss carried forward of US$Nil as agreed by the local tax authority to offset its profit for the forth coming years (2019: US$34,032 and 2018: US$380,591).

Yixing Pact Environmental Technology Co. Ltd. (“Yixing”), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2020 and 2019: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2021, Yixing had an assessable loss carried forward of US$1,759,000 as agreed by the local tax authority to offset its profit for the forth coming years (2020: US$2,304,828 and 2019: US$1,664,275). Such loss will expire in 5 years.

Under the New Enterprise Income Tax Law and the implementation rules, profits of the PRC subsidiaries earned on or after January 1, 2008 and distributed by the PRC subsidiaries to foreign holding company are subject to a withholding tax at a rate of 10% unless reduced by tax treaty. Aggregate undistributed earnings of Far East’s subsidiaries located in the PRC that are available for distribution to Far East of approximately US$0.6 million at December 31, 2021 (2020: US$0.6 million and 2019: US$0.6 million) are intended to be reinvested, and accordingly, no deferred taxation has been made for the PRC dividend withholding taxes that would be payable upon the distribution of those amounts to Far East. Distributions made out of pre January 1, 2008 retained earnings will not be subject to the withholding tax.

The Company and its subsidiaries are based in Hong Kong and PRC and file Hong Kong profits tax return and PRC EIT return, respectively. The components of the (provision) / credit for income taxes (expense) / credit were as follows:

	Year ended December 31,
	2021			2020			2019
	US$’000			US$’000			US$’000
Current taxes (expense )
Hong Kong profits tax and the PRC EIT		(57	)		(4	)		-
Income tax expense		(57	)		(4	)		-
Deferred tax credit / (expenses)
Hong Kong and the PRC		147			(92	)		(37	)
Total deferred tax credit / (expenses)		147			(92	)		(37	)
Total credit / (expense)		90			(96	)		(37	)

F-35

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

15 Income taxes (Cont’d)

The items comprising the difference between income taxes computed at the Hong Kong profits tax and PRC EIT statutory tax rates in effect for 2021, 2020 and 2019 and our effective tax rates were as follows:

	Year ended December 31,
	2021			2020			2019
	US$’000			US$’000			US$’000
Income / (loss) before income taxes		1,276			498			(173	)
Computed tax using respective companies’ statutory tax rates		158			133			69
Change in valuation allowances		349			48			30
Under-provision for income taxes in prior years		(12	)		-			(5	)
Non-deductible expenses		(405	)		(277	)		(131	)
Income taxes credit / (expense) at effective tax rate		90			(96	)		(37	)

The components of deferred tax assets / (liabilities) are as follows:

	December 31,
	2021			2020
	US$’000			US$’000
Tax losses		614			901
Temporary differences		(3	)		(5	)
Less: Valuation allowances		(469	)		(901	)
Net deferred tax assets / (liabilities)		142			(5	)

Uncertain tax positions

As a result of the Group’s analysis, management has determined that the Group does not have any material uncertain tax positions.

16        Net income per ordinary share

The calculation of the basic and diluted net income per ordinary share is based on the following data:

	December 31,
	2021		2020		2019
	Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted net income per share		7,732,132		7,732,132		7,732,132

F-36

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

17 Stock options

2019 Stock Option and Incentive Plan

In April 2019, the Board of Directors approved the adoption of the 2019 Stock Option and Incentive Plan (the “Plan”). The Plan was also subsequently approved under a resolution of the Company's shareholders. The Plan provides for the granting of up to 300,000 (500,000 after bonus shares adjustment) Ordinary Shares (the “Share Limit”), in the form of options to Officers, Directors and Key Employees who perform services which contribute to the successful performance of the Company and its subsidiaries. In addition, the Plan provides that, on the first day of each fiscal year commencing on January 1, 2020, the Share Limit shall automatically be increased by that number of shares equal to 5% of the number of Ordinary Shares outstanding as of such date.

The Board of Directors or a committee (the “Committee”) appointed by the Board of Directors administers the Plan.

Appropriate adjustment in the maximum number of Ordinary Shares issuable pursuant to this Plan, the maximum number of Ordinary Shares with respect to which options may be granted within any 12-month period to any participant during the duration of this Plan, the number of shares subject to options granted under this Plan, and the exercise price with respect to options, shall be made to give effect to any increase or decrease in the number of issued Ordinary Shares resulting from a subdivision or consolidation of shares whether through reorganization, recapitalization, division of shares, reverse share split, spin-off, split-off, spin-out, or other distribution of assets to shareholders, issue of bonus shares or combination of shares, assumption and conversion of outstanding options due to an acquisition by the Company of the shares, stock or assets of any other company or corporation, other increase or decrease in the number of such shares outstanding effected, without receipt of consideration by the Company, or any other occurrence for which the Committee determines an adjustment is appropriate.

The purchase price per share of the Ordinary Shares to be paid upon the exercise of the option must be at least 100% of the fair market value of an Ordinary Shares on the date on which the option was granted. Under the Plan, if the Ordinary Shares are principally traded on a national securities exchange or the Nasdaq Global Market or Capital Market at the time of grant, the Company is required to use, at fair market value, the average of the closing prices of the Ordinary Shares for the ten consecutive trading days immediately before the date of grant. If the Ordinary Shares are traded on a national securities exchange or the Nasdaq Stock Global Market or Capital Market, but no closing prices are reported for such ten-day period, or if the Ordinary Shares are principally traded in the over-the-counter market, the Company is required to use, as fair market value, the average of the mean between the bid and asked prices reported for the Company’s Ordinary Shares at the close of trading during such ten-day period before the date of grant. If the Ordinary Shares are traded neither on a national securities exchange, one of the Nasdaq’s Markets nor in the over-the-counter market or if bid and asked prices are otherwise not available, the fair market value of the Ordinary Shares on the date of grant will be determined in good faith by the Committee or the Board of Directors, as the case may be.

F-37

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

17 Stock options (Cont’d)

2019 Stock option and incentive plan (Cont’d)

The Board of Directors or the Committee, as the case may be, determines, at the time of grant, when each option granted under the Plan will become exercisable. Notwithstanding the foregoing, all options held by a key employee of the Company or its subsidiaries become immediately exercisable, whether or not exercisable at the time, upon the death or disability, and shall be exercisable within twelve (12) months after the date of death or disability, but in no event later than the expiration date of such Options.

No option is to be exercisable more than ten years from the date the option is granted.

Payment of Exercise Price for Options. Under the Plans, payment for shares purchased upon exercise of an option may be made by any of the following methods, subject to certain requirements: (i) in cash, (ii) in Ordinary Shares which have been held by the participant for not less than six months prior to the exercise of the option, valued at its Fair Market Value (as defined) on the date of exercise, (iii) in cash by a broker-dealer to whom the holder of the option has submitted an exercise notice consisting of a fully endorsed option, or (iv) by such other medium of payment as the Board or the Committee, as applicable, in its sole discretion, shall authorize, or by any combination of (i), (ii), or (iii), at the sole discretion of the Board or the Committee, as applicable, or in any manner provided in the option agreement, except by directing the Company to withhold Ordinary Shares otherwise issuable upon the exercise of the Option in payment of the exercise price.

Transfer of Options. Under the Plans, an option may not be sold, assigned or otherwise transferred except to:

· the spouse or lineal descendant of a plan participant;

· the trustee of a trust for the primary benefit of a plan participant’s spouse or lineal descendant;

· a partnership of which a plan participant and lineal descendants are the only partners; or

· a tax exempt organization.

These assignments are only permitted if the assigning option holder does not receive any compensation in connection with the assignment and the assignment is expressly approved by the Board or Committee, as the case may be.

F-38

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

17 Stock options (Cont’d)

2019 Stock option and incentive plan (Cont’d)

The Company indemnifies the members of any Committee and its delegates and the Chief Executive Officer against (a) the reasonable expenses (as such expenses are incurred), including attorneys’ fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding (or in connection with any appeal therein), to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any option granted under the Plan; and (b) all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member or delegatee, as applicable, is liable for gross negligence or gross misconduct in the performance of his or her duties; provided that within 60 days after institution of any such action, suit or proceeding a Committee member or delegatee shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same.

The Board may terminate, suspend, or amend the Plan at any time without the authorization of shareholders to the extent allowed by law or the rules of any market on which the Company’s shares are then listed or quoted.

During the year ended December 31, 2019, the Company granted such options to its officers, directors and employees, which allow them to purchase up to 51,000 ordinary shares. The exercise price of all options granted is US$2.60 per share. The stock options granted are exercisable on January 1, 2022 and terminate on April 18, 2029.

The Company estimate the fair value of the options granted under the Binomial pricing model at US$2.324 per share.

Changes in outstanding options under various plans mentioned above were as follows:

	Year ended December 31,
	2021					2020				2019
	Number of options		Weighted average exercise price			Number of options		Weighted average exercise price		Number of options		Weighted average exercise price
			US$					US$				US$
Outstanding, beginning of year		51,000		2.60			51,000		2.60		-		-
Granted		-		-			-		-		51,000		2.60
Bonus shares adjustment		34,000		(1.04	)		-		-		-		-
Outstanding, end of year		85,000		1.56			51,000		2.60		51,000		2.60
Exercisable, end of year		-		-			-		-		-		-

F-39

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

17 Stock options(Cont’d)

As of December 31, 2021, 2020 and 2019, there was no unrecognized stock-based compensation expense related to unvested stock options. The compensation expense for the year is approximately US$55,000 (2020: US$54,000; 2019: US$10,000).

The Group applies the provisions of ASC No. 718-10, which requires to recognise expense related to the fair value of stock-based compensation awards, including employee stock options.

The Binomial option-pricing model is used to estimate the fair value of the options granted. This requires the input of subjective assumptions, including the expected volatility of stock price, expected option term, expected risk-free rate over the expected option term and expected dividend yield rate over the expected option term. Because changes in subjective input assumptions can materially affect the fair value estimate, in directors’ opinion, the existing model may not necessarily provide a realisable measure of the fair value of the stock options. Expected volatility is based on historical volatility in the 180 days prior to the issue of the options. Expected option term and dividend yield rate are based on historical trends. Expected risk-free rate is based on US Treasury securities with similar maturities as the expected terms of the options at the date of grant.

18 Pension plan

Prior to December 1, 2000, Far East had only one defined contribution pension plan for all its Hong Kong employees. Under this plan, all employees were entitled to pension benefits equal to their own contributions plus 50% to 100% of individual fund account balances contributed by Far East, depending on their years of service with Far East. Far East was required to make specific contributions at approximately 10% of the basic salaries of the employees to an independent fund management company.

With the introduction of the Mandatory Provident Fund Scheme (“MPF scheme”), a defined contribution scheme managed by an independent trustee on December 1, 2000, Far East and its employees who joined Far East subsequently make monthly contributions to the scheme at 5% of the employee’s cash income as defined under the Mandatory Provident Fund Schemes Ordinance. Under the MPF scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employees' relevant income, subject to a cap of monthly relevant income of HK$30,000. Contributions to the plan vest immediately.

During the years ended December 31, 2021, 2020 and 2019, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately US$225,000, US$104,000 and US$332,000 respectively.

As stipulated by the rules and regulations in the PRC, the PRC’s subsidiaries contributes to state-sponsored retirement plans for its employees in Mainland China. PRC’s subsidiaries’ contribution approximately 16% of the basic salaries of its employees, and have no further obligations for the actual payment of pension or post-retirement benefits beyond the annual contributions. The state-sponsored retirement plans are responsible for the entire pension obligations payable to retired employees.

F-40

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

19 Risk factors

Financial risk factors

The Group’s activities expose it to a variety of financial risks: credit risk and foreign exchange rate risk.

(i) Credit risk

The Group has no significant concentration of credit risk, cash in banks in Hong Kong and PRC is insured with limit of approximately US$64,000 and US$72,000, respectively per bank per each depositor. Uninsured cash in banks and restricted cash balances in Hong Kong and PRC are of approximately US$5,327,000 (2020: US$4,594,000). Cash transactions are limited to high credit quality banks.

(ii) Foreign exchange rate risk

The Group operates in Hong Kong, the PRC and trades with both local and overseas customers and suppliers, and is exposed to foreign exchange rate risk arising from various currency exposures, primarily with respect to purchases in Hong Kong dollars, Renminbi and Euros. Foreign exchange risk arises from committed and unmatched future commercial transactions, such as confirmed import purchase orders and sales orders, recognized assets and liabilities, and net investment in the PRC operations.

20 Risk and uncertainty

The outbreak of COVID-19 worldwide and the various public health measures put in place in many countries to prevent the spread of COVID-19 have disrupted the overall business of the Group at different levels of time and regions in 2020. After the Chinese new year in February 2020, the Group’s domestic businesses were affected by the lock-down of various cities implemented in PRC, resulting in the forced suspension of some local operations until the gradual resumption of work beginning from late March to early April 2020. Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Group’s consolidated financial position, results of its operations, the specific impact is not readily determinable as of the date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

21 Related party transactions

Other than compensation to directors and stock options available to the directors and disposal of long-term investment to associate Blue Sky for a total consideration of approximately US$148,000 with nil gain or loss on disposal during the year ended December 31, 2020, there were no transactions with other related parties in the years 2021, 2020 and 2019.

F-41

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

22 Commitments and contingencies

(i) Banking facilities

As at December 31, 2021 and 2020, the Group had various banking facilities available for overdraft and import and export credits from which the Group can draw up to approximately US$897,000 and US$897,000 respectively, of which approximately US$605,000 and US$596,000 were utilised for issuance of bank guarantees as security for the performance of various contracts with customers and import loans. The various banking facilities are secured by a bank deposit of approximately US$897,000 and various blanket counter indemnities and counter indemnities. The Group undertakes to maintain its tangible net worth not at any time less than approximately US$3,846,000 and was in compliance with the covenant. The weighted average interest rate for import loans as at December 31, 2021 was 5% per annum (December 31, 2020: 4.9% per annum). For the years ended December 31, 2021 and 2020, the average dollar amount of the bank borrowings was approximately US$219,000 and US$457,000 respectively and average interest rates were approximately 5% and 4.9% per annum respectively for the years ended December 31, 2021 and 2020.

(ii) Non-controlling interest put option

The Group granted the non-controlling interest of Yixing Pact Environmental Technology Co., Ltd. and Pact Asia Pacific Limited a put option, which is effective from 2009, requiring the Group to acquire part or all remaining shares of these two companies at a purchase price per share calculated by 5.2 times of their average net income for the three prior fiscal years divided by total number of shares outstanding at the time of exercise of such option. Such put option did not have an expiry date.

(iii) Insurance

The Group carries insurance policies to cover various risks, primarily general liability, automobile liability, workers’ compensation and employee medical expenses under which we are liable to reimburse the insurance company for a portion of each claim paid.

(iv) Purchase commitments

To manage the risk of changes in material prices and subcontracting costs used in tendering bids for engineering contracts, most of the time, the Group obtains firm quotations from suppliers and subcontractors before submitting a bid. These quotations do not include any quantity guarantees. As soon as the Group is advised that its bid is successful, the Group enters into firm contracts with most of its materials suppliers and sub-contractors, thereby mitigating the risk of future price variations affecting the contract costs.

(v) Litigations

The Group is now and may in the future be involved as a party to various legal proceedings that are incidental to the ordinary course of business. Management, after consultation with legal counsel, does not believe that the outcome of these actions will have a material impact on the consolidated financial statements of the Group. There are no significant unresolved legal issues as of December 31, 2021 and 2020.

F-42

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

22 Commitments and contingencies (Cont’d)

(vi) Contingencies

The Group accounts for loss contingencies in accordance with ASC Topic 450 and other related guidelines. As of December 31, 2021 and 2020, the Group’s management is of the opinion that there are no commitments and contingencies to account for.

23 Segment information

(i) The Group reports under two segments: Trading and manufacturing, and Engineering.

Operating income represents total revenues less operating expenses, excluding other expense, interest and income taxes. The identifiable assets by segment are those used in each segment’s operations. Intersegment transactions are not significant and have been eliminated to arrive at consolidated totals.

	Year ended December 31,
	2021			2020			2019
	US$’000			US$’000			US$’000
Revenue
Trading and manufacturing		9,619			9,476			11,877
Engineering		11,769			3,881			5,522
		21,388			13,357			17,399
Operating income / (loss)
Trading and manufacturing		140			(488	)		(102	)
Engineering		846			(1,027	)		(158	)
Unallocated corporate expenses		(205	)		(186	)		(180	)
		781			(1,701	)		(440	)

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Depreciation:
Trading and manufacturing		32		39		54
Engineering		6		10		15
		38		49		69
Capital expenditures, gross
Trading and manufacturing		1		2		17
Engineering		3		9		4
		4		11		21

F-43

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

23 Segment information (Cont’d)

(i) The Group reports under two segments: Trading and manufacturing, and Engineering. (Cont’d)

	December 31,
	2021		2020
	US$’000		US$’000
Assets
Trading and manufacturing		7,969		7,877
Engineering		13,281		12,218
		21,250		20,095
Liabilities
Trading and manufacturing		3,428		2,645
Engineering		3,021		2,987
		6,449		5,632

(ii) Geographical analysis of revenue by customer location is as follows:

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Revenue -
The PRC		13,217		5,072		6,886
Hong Kong		7,937		8,024		10,169
Others		234		261		344
		21,388		13,357		17,399

(iii) Long-lived assets ⁽¹⁾

Geographical analysis of long-lived assets is as follows:

	December 31,
	2021		2020
	US$’000		US$’000
Hong Kong		25		47
The PRC		190		212
		215		259

⁽¹⁾  Long-lived assets represent property, plant and equipment, net.

F-44

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(CONT’D)

23 Segment information(Cont’d)

(iv) Major suppliers

Details of individual suppliers accounting for more than 5% of the Group’s purchases are as follows:

	Year ended December 31,
	2021			2020			2019
Supplier A		42	%		30	%		53	%
Supplier B		13	%		10	%		7	%
Supplier C		6	%		9	%		6	%
Supplier D		6	%		6	%		6	%
Supplier E		5	%		5	%		-
Supplier F		-			12	%		-

(v) Major customers

Details of individual customers accounting for more than 5% of the Group’s revenue are as follows:

	Year ended December 31,
	2021			2020			2019
Customer A		15	%		9	%		19	%
Customer B		-			8	%		-
Customer C		-			6	%		10	%
Customer D		-			-			5	%

24 Subsequent event

On December 16, 2021, the Company announced that the Company’s board of directors authorized the issuance of bonus shares (the “Bonus Shares”), which are issuable on January 21, 2022 to shareholders of record as of January 7, 2022 (the “Record Date”). Shareholders of record on the Record Date will receive one (1) ordinary share for every two (2) ordinary shares held. All issuances resulting in a fractional share will be rounded down to the next whole share. The common stock began trading on a split-adjusted basis on January 24, 2022. The effect of the stock split in form of bonus shares has been reflected retroactively in the financial statements and net income per ordinary share computations.

F-45

 ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION

TECHNOLOGY COMPANY LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Reports of Independent Registered Public Accounting Firm	F-47 to F-48
Consolidated Balance Sheets as of  December 31, 2021 and 2020	F-49
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019	F-50
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019	F-51
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2021, 2020 and 2019	F-52
Notes to the Consolidated Financial Statements	F-53 to F-76

F-46

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of  

Zhejiang Tianlan Environmental Protection Technology Company Limited

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Zhejiang Tianlan Environmental Protection Technology Company Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) as of December 31, 2021 and 2020, the related consolidated statements of operations, shareholders’ equity and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2021 and 2020, and the results of its consolidated operations and its consolidated cash flows for each of the three years ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Group’s management. Our responsibility is to express an opinion on the Group’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Group is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the management and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

F-47

Report of Independent Registered Public Accounting Firm (Cont’d)

To the Board of Directors and Shareholders of  

Zhejiang Tianlan Environmental Protection Technology Company Limited

Critical Audit Matter (Cont’d)

Revenue Recognition

As described further in Note 2 to the consolidated financial statements, revenues derived from long-term contracts are recognized as the performance obligations are satisfied over time. The Group uses a ratio of project costs incurred to estimated total costs for each contract to recognize revenue. Under the cost-to-cost approach, the determination of the progress towards completion requires management to prepare estimates of the costs to complete. In addition, the Group’s contracts may include variable consideration related to contract modifications through change orders or claims, and management must also estimate the variable consideration the Group expects to receive in order to estimate the total contract revenue. We identified revenue recognized over time to be a critical audit matter.

The principal considerations for our determination that revenue recognized over time is a critical audit matter is that auditing management’s estimate of the progress toward completion of its projects was complex and subjective. This is due to the considerable judgement required to evaluate management’s determination of the forecasted costs to complete its long-term contracts as future results may vary significantly from past estimates due to changes in facts and circumstances. In addition, auditing the Group’s measurement of variable consideration is also complex and highly judgmental and can have a material effect on the amount of revenue recognized.

Our audit procedures related to revenue recognized over time included the following, among others.

· We obtained an understanding, evaluated the design of the operating effectiveness of the Group’s processes and controls related to contract revenue recognition;

· We tested the Group’s cost-to-cost estimates by evaluating the appropriate application of the cost-to-cost method, testing the significant assumptions used to develop the estimated cost to complete and testing the completeness and accuracy of the underlying data;

· We tested the estimated variable consideration by evaluating the appropriate application of the most likely amount method, and tracing amounts to supporting documentation;

· We evaluating management’s ability to reasonably estimate costs by performing a comparison of the actual costs to prior period estimates, including evaluating the timely identification of circumstances that may warrant a modification to the estimated costs;

· We evaluate management’s methodologies and the consistency of management’s methodologies over the life of the contracts;

· We tested the original estimated costs and profit margins on projects that were commenced and completed during the year ended December 31, 2021, by obtaining the original estimates, compare to the actual costs and profit margin for the completed contracts and investigate significant changes; and

· We tested the estimated costs to complete projects that were not completed during the year ended December 31, 2021 by comparing the estimated cost to complete at December 31, 2021 to actual cost incurred subsequent to December 31, 2021

s/ Union Power HK CPA Limited

We have served as the Company’s auditor since 2018.

Hong Kong, the People’s Republic of China

May 13, 2022

F-48

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

CONSOLIDATED BALANCE SHEETS

	December 31,
	2021		2020
	RMB’000		RMB’000
Assets
Current assets:
Cash		54,976		50,969
Accounts receivable, net		106,022		118,621
Prepayments and other current assets		33,498		28,387
Contract assets, net		72,310		94,494
Inventories		3,386		2,389
Total current assets		270,192		294,860
Property, plant and equipment, net		74,063		79,257
Intangible assets, net		1,865		2,120
Land use right, net		4,997		5,147
Deferred tax assets		14,305		13,639
Long-term investments		1,200		-
Total non-current assets		96,430		100,163
Total assets		366,622		395,023
Liabilities and shareholders’ equity
Current liabilities:
Bank borrowings		13,518		20,029
Accounts payable		93,962		97,795
Other payables and accrued expenses		18,428		17,747
Contract liabilities		37,481		47,135
Other taxes payable		6,724		15,169
Total current liabilities		170,113		197,875
Deferred government grant		3,889		4,894
Total non-current liabilities		3,889		4,894
Total liabilities		174,002		202,769
Commitments and contingencies (Note 21)
Shareholders’ equity:
Share capital 82,572,000 no par value shares authorised, issued and outstanding, as of December 31, 2021 and 2020, respectively		82,572		82,572
Capital reserve		35,761		35,761
PRC statutory reserve		16,582		15,670
Retained earnings		52,409		55,248
Total shareholders’ equity attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited		187,324		189,251
Non-controlling interests		5,296		3,003
Total shareholders’ equity		192,620		192,254
Total liabilities and shareholders’ equity		366,622		395,023

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

F-49

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year ended December 31,
	2021			2020			2019
	RMB’000			RMB’000			RMB’000
Revenues		330,841			304,710			277,581
Cost of revenues		(275,455	)		(261,478	)		(227,632	)
Gross profit		55,386			43,232			49,949
Selling and administrative expenses		(52,161	)		(60,393	)		(43,739	)
Operating income / (loss)		3,225			(17,161	)		6,210
Interest income		46			30			50
Interest expense		(747	)		(1,676	)		(2,258	)
Other income		11,594			39,646			6,276
Other losses		(1,238	)		(5,481	)		(5,624	)
Net income before income tax		12,880			15,358			4,654
Income tax credit / (expense)		698			(1,858	)		(296	)
Net income		13,578			13,500			4,358
Net (income) / loss attributable to non-controlling interests		(2,293	)		2,032			484
Net income attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited’s shareholders		11,285			15,532			4,842
Net income per ordinary share attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited’s shareholders		RMB 0.14			RMB 0.19			RMB 0.06
Weighted average ordinary shares outstanding		82,572,000			82,572,000			82,572,000

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

F-50

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year ended December 31,
	2021			2020			2019
	RMB’000			RMB’000			RMB’000
Cash flows from operating activities:
Net income		13,578			13,500			4,358
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets		255			142			152
Amortization of land use right		150			159			149
Bad debts written off		-			-			5,383
Depreciation		6,466			6,359			6,556
Gain on disposal of property, plant and equipment		(39	)		-			(39	)
Impairment loss on contract assets		1,238			1,399			-
Impairment loss on long-term investments		-			1,340			-
Impairment loss on property, plant and equipment		-			2,742			-
Increase in allowance for doubtful accounts		-			-			2,437
Investment loss		-			-			241
Proceeds from deferred government grant		-			-			2,349
Property, plant and equipment written off		-			-			14
Reversal of allowance for doubtful accounts		(183	)		(6,463	)		-
Change in non-current assets and liabilities:
Deferred government grant		(1,005	)		2,545			-
Deferred tax (liabilities) / assets		(666	)		331			268
Decrease / (increase) in current assets:
Accounts receivable, net		12,782			26,620			11,432
Prepayments and other current assets		(5,111	)		24,472			(6,369	)
Contract assets, net		20,946			(14,932	)		20,033
Inventories		(997	)		3,366			6,208
Short-term investments		-			800			-
Increase/(decrease) in current liabilities:
Accounts payable		(3,833	)		8,423			(17,272	)
Other payables and accrued expenses		681			10,164			(8,795	)
Contract liabilities		(9,654	)		(8,763	)		14,852
Other taxes payable		(8,596	)		5,638			(1,577	)
Current portion of long-term finance lease obligations		-			(11,263	)		-
Tax refund / (paid)		151			(9,223	)		(4,299	)
Net cash provided by operating activities		26,163			57,356			36,081
Cash flows from investing activities:
Proceeds from investment		-			295			-
Proceeds from sale of long-term investments		-			-			-
Proceeds from sale of partial shareholding in a subsidiary		-			137			510
Proceeds from sale of property, plant and equipment		148			-			50
Proceeds from sale of subsidiaries		-			-			-
Purchase of intangible assets		-			(1,350	)		-
Purchase of long-term investments		(1,200	)		-			-
Purchase of property, plant and equipment		(1,381	)		(577	)		(1,584	)
Purchase of short-term investments		-			-			(800	)
Purchase of subsidiary		-			(5,100	)		-
Net cash used in investing activities		(2,433	)		(6,595	)		(1,824	)
Cash flows from financing activities:
Repayments of bank borrowings		(20,000	)		(36,800	)		(63,000	)
Payment of principal obligations under long-term finance lease		-			-			(29,668	)
Proceeds from bank borrowings		13,500			30,000			44,841
Dividend paid to shareholders and interest paid		(13,223	)		(4,606	)		-
Net cash used in financing activities		(19,723	)		(11,406	)		(47,827	)
Net increase/(decrease) in cash and cash equivalents		4,007			39,355			(13,570	)
Cash and cash equivalents at beginning of year		50,969			11,614			25,184
Cash and cash equivalents at end of year		54,976			50,969			11,614
	RMB’000			RMB’000			RMB’000
Supplemental disclosure of consolidated cash flow information:
Cash paid during the period for income tax		-			-			5,237
Cash paid during the period for interest		680			1,716			2,258

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

F-51

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED’S SHAREHOLDERS
	Share capital		Capital reserve			PRC statutory reserve			Retained earnings			Non-controlling interests			Total
	RMB’000		RMB’000			RMB’000			RMB’000			RMB’000			RMB’000
Balance at December 31, 2018		82,572		35,566			13,903			42,099			3,862			178,002
Net income / (loss)		-		-			-			4,842			(484	)		4,358
Appropriation of reserves		-		-			518			(518	)		-			-
Others		-		(56	)		-			-			565			509
Balance at December 31, 2019		82,572		35,510			14,421			46,423			3,943			182,869
Net income / (loss)		-		-			-			15,532			(2,032	)		13,500
Dividend paid		-		-			-			(2,890	)		-			(2,890	)
Others		-		251			(436	)		(3,968	)		(269	)		(4,422	)
Appropriation of reserves		-		-			1,685			(1,685	)		-			-
Consolidation of companies under common control		-		3,600			-			1,836			2,122			7,558
Ordinary shares injected by shareholders		-		-			-			-			(761	)		(761	)
Utilization of reserve		-		(3,600	)		-			-			-			(3,600	)
Balance at December 31, 2020		82,572		35,761			15,670			55,248			3,003			192,254
Net income		-		-			-			11,285			2,293			13,578
Dividend paid		-		-			-			(13,212	)		-			(13,212	)
Appropriation of reserves		-		-			912			(912	)		-			-
Balance at December 31, 2021		82,572		35,761			16,582			52,409			5,296			192,620

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

F-52

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1  Organization and business 

Zhejiang Tianlan Environmental Protection Technology Company Limited (the “Company”) was incorporated in Hangzhou City, Zhejiang Province, the People's Republic of China (“PRC”) on May 18, 2000. The Company is a limited liability company limited by shares with an operating period up to long term.

The Company provides a comprehensive service for design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted from various boilers and industrial furnaces of power plants, steel works and chemical plants since 2000.

The Company has listed its shares on the New Third Board in the PRC since November 17, 2015 and suspended trading from August 15, 2017 and resumed trading on February 2, 2018 and suspended trading from November 24, 2020 and resumed trading on January 6, 2021.

The Group’s principal subsidiaries at December 31, 2021 and 2020 are set out below.

Name of entity	Ownership interest held by the Group						Place of incorporation and principal place of operation	Principal activities
	2021			2020
Zhejiang Tianlan Environmental Protection Engineering Company Limited		100	%*		100	%*	PRC	Design, general contract, installation and operating management of environmental protection projects
Hangzhou Tianlan Environmental Protection Equipment Company Limited		51	%		51	%	PRC	Manufacturing and installation services of environmental protection equipment
Hangzhou Tianlan Pure Environmental Protection Technology Company Limited		38.25	%		38.25	%	PRC	Manufacturing of environmental protection equipment
Hangzhou Tiancan Environmental Technology Company Limited		80	%		80	%	PRC	Manufacturing of environmental protection equipment

* This company was acquired in August 2020.

F-53

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

1  Organization and business (Cont’d) 

The outbreak of COVID-19 worldwide and the various public health measures put in place in many countries to prevent the spread of COVID-19 have disrupted the overall business of the Group at different levels of time and regions in 2020. After the Chinese new year in February 2020, the Group’s domestic businesses were affected by the lock-down of various cities implemented in PRC, resulting in the forced suspension of some local operations until the gradual resumption of work beginning from late March to early April 2020. Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Group’s consolidated financial position, results of its operations, the specific impact is not readily determinable as of the date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

2  Summary of significant accounting policies  

(a)  Basis of presentation 

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

(b)  Basis of consolidation 

The accompanying consolidated financial statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated.

(c)  Subsidiaries 

Subsidiaries are all entities over which the Group has control; has the power to appoint or remove the majority of the members of the board of directors; has the right to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.

(d) Revenue recognition 

Our revenue is derived from long-term contracts for customers, as well as short-term contracts for customers. Accounting treatment for these contracts in accordance with Accounting Standards Update (“ASU”) 2014-09 (Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers), is as follows:

F-54

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2  Summary of significant accounting policies (Cont’d)

(d)  Revenue recognition (Cont’d) 

Performance obligations satisfied over time (Design, installation and operation management services)

Recognition of performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Engineering projects typically span between 12 to 36 months. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Some contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle (design, installation and operation management services).

Revenues are recognized as our obligations are satisfied over time, using the ratio of project costs incurred to estimated total costs for each contract because of the continuous transfer of control to the customer as all of the work is performed at the customer’s site and, therefore, the customer controls the asset as it is being installed. This continuous transfer of control to the customer is further supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay the Group for costs incurred plus a reasonable profit and take control of any work in process. This cost-to-cost measure is used because management considers it to be the best available measure of progress on these contracts. Contract costs include all direct material, labor, subcontract and other costs.

Items excluded from cost-to-cost

Pre-contract costs are generally not material and are charged to expense as incurred, but in certain cases pre-contract recognition may be deferred if specific probability criteria are met.

Variable consideration

Contract modifications through change orders, claims and incentives are routine in the performance of the Group’s contracts to account for changes in the contract specifications or requirements. In most instances, contract modifications are not distinct from the existing contract due to the significant integration of services provided in the contract and are accounted for as a modification of the existing contract and performance obligation. Either the Group or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Change orders that are unapproved as to both price and scope are evaluated as claims. The Group considers claims to be amounts in excess of approved contract prices that the Group seeks to collect from its customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.

F-55

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2  Summary of significant accounting policies (Cont’d)  

(d)  Revenue recognition (Cont’d) 

The Group estimates variable consideration for a performance obligation at the most likely amount to which the Group expects to be entitled (or the most likely amount the Group expects to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which the Group will be entitled (or will incur in the case of liquidated damages). The Group includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Group’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Group.

The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in the Group’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.

Performance obligations satisfied at a point-in-time (Sales of equipment)

Revenue for our sales contracts is recognized at a point in time. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been delivered to the point of receipt by customer.

(e)  Research and development costs 

Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately 23,419,000, RMB28,589,000 and RMB19,018,000 for the years ended December 31, 2021, 2020 and 2019 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations.

(f)  Income tax  

The Group follows the liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Group also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized.

The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Group does not believe it has any uncertain tax positions through the periods ended December 31, 2021, 2020 and 2019 respectively which would have a material impact on the Group’s consolidated financial statements.

The Group files tax returns in the PRC. The tax returns for 2021, 2020 and 2019 are subject to examination by the PRC taxing authorities, commencing with the first year filed.

F-56

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2  Summary of significant accounting policies (Cont’d)  

(g)  Cash and cash equivalents 

Cash and cash equivalents consist of bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal and uninsured. There were no cash equivalents as of December 31, 2021 and 2020.

(h)  Accounts receivable and allowance for doubtful accounts  

The Group does not charge interest to its customers and carries its customer receivables at their face amounts, less an allowance for doubtful accounts. As is common practice in the industry, the Group classifies all accounts receivable as current assets.

The Group grants trade credit, on a non-collateralized basis, to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Group analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.

(i)  Classification of contract assets, net and liabilities  

For revenue recognized associated with its contracts with customers over time, for which the Group has an enforceable right to receive compensation. Many of our contracts contain specific provisions that determine when the Group can bill for its work performed under these contracts.

Any revenue earned on a contract that has not yet been billed to the customer is recorded as a contract asset on the Group’s consolidated balance sheets.

The Group’s consolidated balance sheets present contract liabilities that contain deferred revenue that represent any costs incurred on contracts in process for which revenue has not yet been recognized.

(j)  Inventories 

Inventories are measured using the weighted average method and are stated at the lower of cost or net realizable value. Cost of finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity.

(k)  Property, plant and equipment and land use right, net 

Property, plant and equipment is carried at cost. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in consolidated income from operations. The cost of maintenance and repairs is charged to expense as incurred. Property, plant and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property, plant and equipment exceeds its fair value, an impairment charge would be recorded in the consolidated statement of operations.

F-57

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2  Summary of significant accounting policies (Cont’d)  

(k)  Property, plant and equipment and land use right, net (Cont’d) 

Land in the PRC is owned by the PRC government. The government in the PRC, according to PRC Law, may sell the right to use the land for a specific period of time. Thus, all of the Group’s land purchases in the PRC are considered to be leasehold land and are classified as land use right.

Depreciation of property, plant and equipment and amortization of land use right are computed using the straight-line method over the assets’ estimated useful lives as follows:

Land use right	Over terms of the leases
Buildings and leasehold improvements	11 to 50 years, with 5% residual value
Furniture, fixtures and office equipment	5 years, with 5% residual value
Motor vehicles	5 years, with 5% residual value
Plant and machineries	5 to 10 years, with 5% residual value

(l)  Intangible assets, net 

The Group is currently amortizing its acquired intangible assets, consisted of patents and others, with finite-lived over periods generally ranging between three to twenty years.

(m)  Impairment of long lived assets 

Long-lived assets such as property, plant and equipment and intangible assets with finite lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment for the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Group recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. The impairment of long-lived assets amounted to approximately RMB Nil, RMB2,742,000 and RMB Nil for the years ended December 31, 2021, 2020 and 2019 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations.

(n)  Government grant income 

Government grant income consists of receipt of funds to subsidize the investment cost of technical development in China. No present or future obligation arises from the receipt of such amount.

Government grants are recognized in the consolidated balance sheet initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognized as income in the consolidated statement of operations on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognized in the consolidated statements of operations over the useful life of the asset by way of reduced depreciation expenses.

F-58

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2  Summary of significant accounting policies (Cont’d)  

(o)  Leases arrangements  

The Group adopted ASU No. 2016-02, Leases (Topic 842). The Group leases certain equipment under finance leases. The economic substance of the leases is a financing transaction for acquisition of the equipment. Accordingly, the right-of-use assets for these leases are included on the Group’s consolidated balance sheets in property, plant and equipment, net of accumulated depreciation, amortization and impairment losses, with a corresponding amount recorded in current portion of long-term finance lease obligations. The finance lease assets are amortized over the life of the lease or, if shorter, the life of the leased asset, on a straight-line basis and included in depreciation expense. The financing component associated with finance lease obligations is included in interest expense. Generally, for the Group’s finance leases an implicit rate to calculate present value is provided in the lease agreement, however if a rate in not provided the Group determines this rate by estimating the Group’s incremental borrowing rate, utilizing the borrowing rates associated with the Group’s various debt instruments.

The Group determines if an arrangement is a lease at inception. Lease liabilities are the Group’s obligation to make lease payments arising from a lease and are measured on a discounted basis.

(p)  Share capital 

Paid in capital refers to the registered capital paid up by the shareholders of the Company.

At December 31, 2021, there were 82,572,000 shares (2020: 82,572,000 shares) issued.

(q)  Use of estimates 

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Group require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from contracts over time, contract assets, net and contract liabilities. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.

(r)  Related parties 

Entities are considered to be related to the Group if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Group. Related parties also include principal owners of the Group, its management, members of the immediate families of principal owners of the Group and its management and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

F-59

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2  Summary of significant accounting policies (Cont’d)  

(s)  Net income per ordinary share 

The Group computes net income per ordinary share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited are computed by dividing net income attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited by the weighted average number of ordinary shares outstanding during the period.

  (t)  Warranties 

The suppliers of the Group offer a standard one-year warranty to end customer of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis.

  (u)  Shipping and handling costs 

Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues.

  (v)  Finance costs 

Interest relating to loans repaid is expensed in the period the repayment occurs.

  (w)  Concentrations  

Financial instruments that potentially subject the Group to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable, net. The Group maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions.

The Group is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Group’s top five customers accounted for approximately 35%, 39%, and 40% of consolidated revenues for the years ended December 31, 2021, 2020 and 2019, respectively. For the years ended December 31, 2021, 2020 and 2019, one customer accounted for 16%, 16% and 17% of annual revenues, respectively.

The Group grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, general contractors, owners and managers of industrial properties.

Consequently, the Group is subject to potential credit risk related to changes in business and economic factors. At December 31, 2021 and 2020, none of the Group’s customers individually exceeded 10.0% of accounts receivable. The Group believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.

F-60

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2  Summary of significant accounting policies (Cont’d)  

(x)  Statutory reserve 

The Group is required to make appropriation to reserve, comprising the PRC statutory reserve, based on after-tax net income determined with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations to the PRC statutory reserve are required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital.

(y)  Fair value measurements  

The Group uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of December 31, 2021 and 2020, the Group determined that the carrying values of cash, and cash equivalents, accounts receivable, net, prepayments and other current assets, contract assets, bank borrowings, accounts payable, other payables and accrued expenses and contract liabilities approximate their fair values because of the short-term nature of these instruments.

(z)  Short-term and long-term investments  

The Group has elected to apply the measurement alternative to equity securities without readily determinable fair values. As such, the Group’s non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the investee.

(aa)  Recent accounting pronouncements 

Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Group considers the applicability and impact of all ASUs. The Group, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Group or may have minimal impact on its consolidated financial statements.

Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial instruments, including trade receivables and off-balance sheet credit exposures. Under this guidance, an entity is required to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. This ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.

F-61

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2  Summary of significant accounting policies (Cont’d)  

(aa)  Recent accounting pronouncements (Cont’d)  

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The Group adopted this ASU in January 2020 and there was no effect on the consolidated financial statements or disclosures.

Recently issued accounting pronouncements not yet adopted

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 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 Group 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 adoption of this standard is not expected to have a material impact on the Group’s consolidated financial statements or disclosures.

In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),” an amendment clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivative instruments. The guidance is effective for fiscal years beginning after December 15, 2020. ASU 2020-01 will become effective for the Group in fiscal 2022. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” this ASU affects a wide variety of Topics in the Codification. They apply to all reporting entities within the scope of the affected accounting guidance. More specifically, this ASU, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose because the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure Section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). Those amendments are not expected to change current practice. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early application of the amendments is permitted for and varies based on the entity. The amendments should be applied retrospectively and at the beginning of the period that includes the adoption date. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.

F-62

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

2  Summary of significant accounting policies (Cont’d)  

(ab)  Non-controlling interests  

For entities that are consolidated, but not 100% owned, a portion of the income or loss and equity is allocated to owners other than the Group. The aggregate of the income or loss and corresponding equity that is not owned by the Group is included within non-controlling interests in the consolidated financial statements.

Non-controlling interests is presented as a separate component of equity in the consolidated balance sheets. Net income includes the net income attributable to the holders of non-controlling interests in the consolidated statements of operations and comprehensive income / (loss). Profits and losses are allocated to non-controlling interests in proportion to their relative ownership interests regardless of their basis.

3  Lease obligations  

The Group has finance leases primarily for equipment.

The components of lease expense are as follows:

	Years ended December 31,
	2021		2020
	RMB’000		RMB’000
Finance lease cost:
Amortization of right-of-use assets		-		5,837
Interest on lease liabilities included under cost of revenue and selling and administrative expenses		-		1,244
Total finance lease cost		-		7,081

Supplemental consolidated cash flow information related to leases is as follows:

	Years ended December 31,
	2021		2020
	RMB’000		RMB’000
Cash paid for amounts included in the measurement of lease liabilities:
Finance cash flows from finance leases		-		11,263
Right-of-use assets obtained in exchange for lease obligations (noncash):
Finance leases		-		-

F-63

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

3 Lease obligations (Cont’d)

Supplemental consolidated balance sheet information related to leases is as follows:

	December 31,
	2021			2020
	RMB’000			RMB’000
Finance leases
Property, plant and equipment, at cost		-			-
Accumulated depreciation and impairment losses		-			-
Property, plant and equipment, net		-			-
Current maturities of long-term debt		-			-
Total finance lease liabilities		-			-
Weighted average remaining lease term
Finance leases		-			-
Weighted average discount rate
Finance leases		5.9	%		5.9	%

4 Accounts receivable, net

Accounts receivable, net consisted of the following at December 31:

	2021			2020
	RMB’000			RMB’000
Contract receivables		148,889			160,803
Less: allowance for doubtful accounts		(42,867	)		(42,182	)
		106,022			118,621

The roll-forward of activity in the allowance for doubtful accounts was as follows for the years ended December 31:

	2021			2020
	RMB’000			RMB’000
Balance at beginning of period		42,182			26,484
Add: provision for allowances		868			22,161
Less: Reversal of provision for doubtful accounts		(183	)		(6,463	)
Balance at end of period		42,867			42,182

F-64

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

4 Accounts receivable, net (Cont’d)

The following is an aging analysis of accounts receivable, net at December 31:

	2021		2020
	RMB’000		RMB’000
Within 1 year		82,534		76,590
1 year -  2 years		12,144		31,389
2 years - 3 years		5,111		6,128
3 years - 4 years		5,141		3,678
4 years - 5 years		1,092		836
		106,022		118,621

At December 31, 2021, the accounts receivable, net pledged as security for the Company’s bank loans and third party loans amounted to RMB Nil (2020: RMB Nil).

5 Prepayments and other current assets

Prepayments and other current assets mainly represent deposits paid for bidding projects, purchases, services and finance leases and prepaid expenses.

	December 31,
	2021		2020
	RMB’000		RMB’000
Prepayments		22,717		16,632
Deposits paid for bidding projects and temporary payments		7,030		10,448
Other current assets		3,751		1,307
		33,498		28,387

6 Contract assets, net and liabilities

Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the timing of costs incurred on work performed does not coincide with the billing terms.

The Group’s consolidated balance sheets present contract assets, net which contains earned unbilled revenue associated with contract work that has been completed but not paid by customers, that are generally due once the job is completed and approved.

F-65

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

6 Contract assets, net and liabilities (Cont’d)

Contract assets, net consisted of the following at December 31:

	2021		2020
	RMB’000		RMB’000
Unbilled revenue		72,310		94,494

The Group’s consolidated balance sheets present contract liabilities which contain deferred revenue (previously identified as billings in excess of costs and estimated earnings on uncompleted contracts).

Contract liabilities consisted of the following at December 31:

	2021		2020
	RMB’000		RMB’000
Deferred revenue		37,481		47,135

The following table provides information about contract assets, net and contract liabilities from contracts with customers at December 31:

	2021			2020
	RMB’000			RMB’000
Contract assets		72,310			94,494
Contract liabilities		(37,481	)		(47,135	)
Net contract assets		34,829			47,359

The difference between the opening and closing balances of the Group’s contract assets, net and contract liabilities primarily results from the timing of the Group’s billings in relation to its performance of work.

The net asset position for contracts in process consisted of the following at December 31:

	2021			2020
	RMB’000			RMB’000
Estimated earnings on uncompleted contracts		503,434			406,064
Less: billings to date		(468,605	)		(358,705	)
		34,829			47,359

F-66

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

6 Contract assets, net and liabilities (Cont’d)

Contract assets, net consisted of the following at December 31:

	2021			2020
	RMB’000			RMB’000
Gross contract assets		81,198			102,144
Less: allowance for doubtful accounts		(8,888	)		(7,650	)
		72,310			94,494

7 Inventories

	December 31,
	2021		2020
	RMB’000		RMB’000
Raw materials		2,381		341
Finished goods		1,005		2,048
		3,386		2,389

8 Short-term and long-term investments

The Group's short-term investments consist of wealth management products and long-term investments consist of minority ownership interests in Chongqing Zhongtian Haizhi Ecological Environment Technology Co., Ltd (2020: Nil) limited liability company, generally from private equity arrangements. These investments are carried under the equity method of accounting, with changes in the carrying value reported as realized gains or losses in the consolidated financial statements.

F-67

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

9 Property, plant and equipment

	December 31,
	2021			2020
	RMB’000			RMB’000
Building and leasehold improvements		167,874			167,874
Furniture, fixtures and office equipment		3,694			3,658
Motor vehicles		4,647			4,808
Plant and machineries		10,097			9,399
Total		186,312			185,739
Less: Accumulated depreciation and amortization		(76,008	)		(70,241	)
Accumulated impairment losses		(36,241	)		(36,241	)
Total		(112,249	)		(106,482	)
Net		74,063			79,257

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Depreciation charge		6,466		6,359		6,556

At December 31, 2021, the net book value of property, plant and equipment pledged as security for the Company’s bank loans and third party loans amounted to approximately RMB1,524,000 (2020: RMB34,403,000).

F-68

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

10 Intangible assets, net

	December 31,
	2021			2020
	RMB’000			RMB’000
Amortizable intangible assets
Gross carrying amount
Patents		3,750			3,750
Others		165			165
		3,915			3,915
Less: Accumulated amortization		(2,050	)		(1,795	)
Net carrying amount		1,865			2,120

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Amortization expense		255		142		152

At December 31, 2021, estimated future intangible assets amortization expense for each of the next five years and thereafter was as follows:

	Future amortization expense
	RMB’000
2022		255
2023		255
2024		255
2025		255
2026		255
Thereafter		590
Total		1,865

F-69

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

10 Intangible assets, net (Cont’d)

At December 31, 2020, estimated future intangible assets amortization expense for each of the next five years and thereafter was as follows:

	Future amortization expense
	RMB’000
2021		142
2022		142
2023		142
2024		142
2025		142
Thereafter		1,410
Total		2,120

11 Land use right, net

	December 31,
	2021			2020
	RMB’000			RMB’000
Gross carrying amount
Land use right		7,361			7,361
Less: Accumulated amortization		(2,364	)		(2,214	)
Net carrying amount		4,997			5,147

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Amortization expense		150		159		149

At December 31, 2021, the land use right pledged as security for the Company’s bank loans and third party’s loans amounted to approximately RMB 1,463,000 (2020: RMB4,463,000).

F-70

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

11 Land use right, net (Cont’d)

As December 31, 2021, estimated future land use right amortization expense for each of the next five years and thereafter was as follows:

	Future amortization expense
	RMB’000
2022		150
2023		150
2024		150
2025		150
2026		150
Thereafter		4,247
Total		4,997

As December 31, 2020, estimated future land use right amortization expense for each of the next five years and thereafter was as follows:

	Future amortization expense
	RMB’000
2021		159
2022		159
2023		159
2024		159
2025		159
Thereafter		4,352
Total		5,147

F-71

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

12 Bank borrowings

	December 31,
	2021		2020
	RMB’000		RMB’000
Bank loans borrowed by the Company (note i)		8,511		10,014
Bank loans borrowed by subsidiaries of the Company (note ii)		5,007		10,015
		13,518		20,029

(i)

The bank loans are denominated in Renminbi and are repayable within 1 year. The bank loans borrowed by the Company as of December 31, 2021 bears interest at fixed rates of 4.35% to 5% (2020: 4.79%) per annum. Interest paid during the year ended December 31, 2021 was approximately RMB253,000 (2020: RMB1,377,000 and 2019: RMB1,991,000).

(ii)

The bank loans are denominated in Renminbi and are repayable within 1 year. The bank loans borrowed by subsidiaries of the Company as of December 31, 2021 bears interest at a fixed rate ranging from 4.35% to 5% (2020: a fixed rate ranging from 4.5% to 4.79%) per annum and are secured by the subsidiary’s office premises and leasehold improvements and land use right. Interest paid during the year ended December 31, 2021 was approximately RMB427,000 (2020: RMB287,000 and 2019: RMB246,000).

13 Other payables and accrued expenses

	December 31,
	2021		2020
	RMB’000		RMB’000
Accrued expenses		8,315		7,629
Output VAT		5,468		6,529
Deposits received and temporary receipts		4,645		3,589
		18,428		17,747

14 Other taxes payable

Other taxes payable mainly comprise Valued-Added Tax (“VAT”). The Group is subject to output VAT levied at the rate of 3% to 13 % (2020: 3% to 13%) of the revenue from sales of equipment.  The input VAT paid on purchases of materials and other direct inputs can be used to offset the output VAT levied on operating revenue to determine the net VAT payable or recoverable.

F-72

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

15 Capital reserve

Capital reserve represents capital contributions from shareholders in excess of the paid-in capital amount and capitalization of gain on disposal of subsidiaries to the shareholders in previous years.

16 Other income and other losses

Other income

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Compensation income		-		22,548		-
Gain on disposal of property, plant and equipment		39		-		39
Investment income		531		266		-
Amounts waived by payees		3,061		4,535		280
Reversal of allowance for doubtful accounts		183		6,463		-
Subsidy income from PRC government		7,780		5,834		5,957
		11,594		39,646		6,276

Other losses

	Year ended  December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Bad debts written off		-		-		5,383
Impairment loss on contract assets		1,238		1,399		-
Impairment loss on long-term investments		-		1,340		-
Impairment loss on property, plant and equipment		-		2,742		-
Investment loss		-		-		241
		1,238		5,481		5,624

17 Income tax(credit)/expense

According to relevant PRC tax laws and regulations, entities incorporated in the PRC are subject to Enterprise Income Tax (“EIT”) at a statutory rate of 25% or reduced national EIT rates of 15% for certain High and New Technology Enterprises (“HNTE”) on PRC taxable income. Zhejiang Tianlan Environmental Protection Technology Company Limited and Hangzhou Tianlan Environmental Protection Equipment Company Limited are classified as HNTE which enjoy a preferential tax rate of 15%.

F-73

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

17 Income tax(credit)/expense (Cont’d)

During the years ended December 31, 2021 and 2020, the PRC tax laws and regulations have launched a tax reduction scheme for small enterprises, Hangzhou Tianlan Pure Environmental  Protection Technology Company Limited, Hangzhou Tiancan Environmental Technology Company Limited, Zhejiang Tianlan Environmental Engineering and Design Company Limited and Zhejiang Tianlan Environmental Protection Engineering Company Limited are entitled to enjoy this tax benefit. As such, they are subjects to Enterprise Income Tax rate of 20% only.

The Company and its subsidiaries are based in the PRC and file an EIT return. The components of the provision for income tax expense/(credit) were as follows:

	Year ended  December 31,
	2021			2020		2019
	RMB’000			RMB’000		RMB’000
Current tax (credit)/expense
PRC EIT		(32	)		757		28
Income tax (credit)/expense		(32	)		757		28
Deferred tax (credit)/expense		(666	)		1,101		268
Total deferred tax (credit)/expense		(666	)		1,101		268
Total (credit)/expense		(698	)		1,858		296

The items comprising the difference between income tax computed at the EIT statutory rates in effect for 2021, 2020 and 2019 and our effective tax rates were as follows:

	Year ended  December 31,
	2021			2020			2019
	RMB’000			RMB’000			RMB’000
Income before income tax		12,880			15,358			4,654
Computed tax using respective companies’ statutory tax rates		1,932			2,304			642
(Over)-provision for income tax in prior years		(39	)		(48	)		-
Temporary differences		401			182			202
Tax effect of expenses not deductible for tax purposes		286			2,306			693
Tax effect of special deduction for research and development costs		(3,263	)		(3,001	)		(2,103	)
Others		(15	)		115			862
Income taxes (credit)/expense at effective tax rate		(698	)		1,858			296

F-74

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

17 Income tax(credit)/expense (Cont’d)

The components of deferred tax assets are as follows:

	December 31,
	2021		2020
	RMB’000		RMB’000
Allowance for doubtful accounts		6,188		6,184
Deferred government grant		583		750
Impairment losses on assets		6,940		6,705
Tax losses		594		-
Total deferred tax assets		14,305		13,639

Uncertain tax positions

As a result of the Group’s analysis, management has determined that the Group does not have any material uncertain tax positions.

18 Pension plan

As stipulated by the rules and regulations in the PRC, the Group contributes to state-sponsored retirement plans for its employees in Mainland China.  The Group contributes approximately 12% to 14% of the basic salaries of its employees, and has no further obligations for the actual payment of pension or post-retirement benefits beyond the annual contributions.  The state-sponsored retirement plans are responsible for the entire pension obligations payable to retired employees.

During the years ended December 31, 2021, 2020 and 2019, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately RMB6,003,000, RMB5,645,000 and RMB5,449,000 respectively.

19 Risk factors

Financial risk factors

The Group’s activities expose it mainly to credit risk. 

Credit risk

The Group has no significant concentration of credit risk, cash in banks in PRC is insured with limit of approximately RMB500,000, per bank per each depositor. Uninsured cash in banks and restricted cash balances in PRC are of approximately RMB48,855,000 (2020: RMB44,494,000). Cash transactions are limited to high credit quality banks.

F-75

ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION TECHNOLOGY COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)

20 Related party transaction

There were purchase of a subsidiary from shareholders of the Company with total consideration of approximately RMB Nil (2020: RMB4,590,000), engineering service income from an investment of approximately RMB273,000 (2020: RMB2,518,000) and remuneration to key management personnel of approximately RMB1,209,000 (2020: RMB 1,400,000).

21 Commitments and contingencies

(i) Insurance

The Group carries insurance policies to cover various risks, primarily general liability, automobile liability, workers’ compensation and employee medical expenses under which we are liable to reimburse the insurance company for a portion of each claim paid.

(ii) Purchase commitments

To manage the risk of changes in material prices and subcontracting costs used in tendering bids for contracts, most of the time, the Group obtains firm quotations from suppliers and subcontractors before submitting a bid. These quotations do not include any quantity guarantees. As soon as the Group is advised that its bid is successful, the Group enters into firm contracts with most of its materials suppliers and sub-contractors, thereby mitigating the risk of future price variations affecting the contract costs.

(iii) Litigation

The Group is now and may in the future be involved as a party to various legal proceedings that are incidental to the ordinary course of business. Management, after consultation with legal counsel, does not believe that the outcome of these actions will have a material impact on the consolidated financial statements of the Group. There are no significant unresolved legal issues as of December 31, 2021 and 2020.

(v) Contingencies

The Group accounts for loss contingencies in accordance with ASC Topic 450 and other related guidelines. As of December 31, 2021 and 2020, the Group’s management is of the opinion that there are no commitments and contingencies to account for.

(vi) Operating leases

The Group has no operating leases expense during the year ended December 31, 2021 (2020 and 2019: RMB Nil). At December 31, 2021, the Group has no future minimum lease payments under non-cancellable operating leases.

22 Subsequent event

On April 22, 2022, the director of the Company proposed a cash dividend of an aggregate of approximately RMB9,082,000, which dividend was paid to all holders of record subject to approval in shareholders’ annual general meeting.

F-76

EX-8.1

EXHIBIT 8.1

LIST OF SUBSIDIARIES

The Company presently wholly owns Euro Tech (Far East) Limited, a Hong Kong corporation, which, in turn, owns the following corporations:

Wholly-Owned

Euro Tech Trading (Shanghai) Limited — a People’s Republic of China corporation

Shanghai Euro Tech Limited — a People’s Republic of China corporation

Majority Owned

Yixing Pact Environmental Technology Co., Ltd. — a People's Republic of China corporation

Pact Asia Pacific Limited — a BV1 corporation

Other Entities

Zhejiang Tianlan Environmental Protection Technology Co., Ltd. — a People's Republic of China corporation.*

* A 50 percent or less owned person accounted for by the equity method as defined by SEC rules and regulations.

EX-12.1

EXHIBIT 12.1

CERTIFICATIONS

I, David YL Leung, certify that:

1.	I have reviewed this Amendment No.2 on Form 20-F/A to the Annual Report on Form 20-F of Euro Tech Holdings Company Limited (the “Company”);
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 company as of, and for, the periods presented in the report;
4.	The Company’s other certifying officer 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 Company 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 Company, 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 Company’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 Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’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 Company’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 Company’s internal control over financial reporting.

February 6, 2023

/s/ David YL Leung

David YL Leung

Chief Executive Officer (Principal Executive Officer)

EX-12.2

EXHIBIT 12.2

CERTIFICATIONS

I, Jerry Wong, certify that:

1.	I have reviewed this Amendment No.2 on Form 20-F/A to the Annual Report on Form 20-F of Euro Tech Holdings Company Limited (the “Company”);
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 company as of, and for, the periods presented in the report;
4.	The Company’s other certifying officer 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 Company 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 Company, 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 Company’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 Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’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 Company’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 Company’s internal control over financial reporting.

February 6, 2023

/s/ Jerry Wong

Jerry Wong

Chief Financial Officer (Principal Financial & Accounting Officer)

EX-13.1

EXHIBIT 13.1

Certification of the Chief Executive Officer Pursuant to

18 U.S. C. Section 1350, As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this Amendment No.2 on Form 20-F/A to the Annual Report on Form 20-F of Euro Tech Holdings Company Limited (the “Company”) for the year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), David YL Leung, as Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

(a)	The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(b)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 6, 2023

/s/ David YL Leung

David YL Leung

Chief Executive Officer

(Principal Executive Officer)

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

EX-13.2

EXHIBIT 13.2

Certification of the Chief Financial Officer Pursuant to

18 U.S. C. Section 1350, As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this Amendment No.2 on Form 20-F/A to the Annual Report on Form 20-F of Euro Tech Holdings Company Limited (the “Company”) for the year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Jerry Wong, as Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

(a)	The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
(b)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 6, 2023

/s/ Jerry Wong

Jerry Wong

Chief Financial Officer

(Principal Financial & Accounting Officer)

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

XML

Cover - shares	12 Months Ended
	Dec. 31, 2021	May 06, 2022
Document Information Line Items
Entity Registrant Name	EURO TECH HOLDINGS COMPANY LIMITED
Entity Central Index Key	0001026662
Document Type	20-F/A
Amendment Flag	true
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Well Known Seasoned Issuer	No
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Dec. 31, 2021
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2021
Entity Common Stock Shares Outstanding		7,732,132
Document Annual Report	true
Document Transition Report	false
Entity File Number	000-22113
Entity Incorporation State Country Code	D8
Entity Address Address Line 2	Gee Chang Hong Centre
Entity Address City Or Town	65 Wong Chuk Hang Road
Entity Address Country	HK
Entity Address Postal Zip Code	true
Auditor Name	Union Power HK CPA Limited
Auditor Location	Hong Kong
Auditor Firm Id	3004
Security 12b Title	Ordinary Shares, no par value
Trading Symbol	CLWT
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes
Document Shell Company Report	false
Document Registration Statement	false
Entity Other Identification Type	David YL Leung
Document Accounting Standard	U.S. GAAP
Entity Address Address Line 1	Unit D, 18/F.
Amendment Description	Amendment
Business Contact [Member]
Document Information Line Items
Phone Fax Number Description	852-28734887
Entity Address Address Line 2	Gee Chang Hong Centre
Entity Address City Or Town	65 Wong Chuk Hang Road
Entity Address Country	HK
Entity Address Address Line 1	Unit D, 18/F.
Contact Personnel Name	David YL Leung

XML

CONSOLIDATED BALANCE SHEETS ¥ in Thousands	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Current assets:
Cash and cash equivalents	$ 5,269,000		$ 3,519,000
Restricted cash	1,411,000		1,672,000
Accounts receivable, net	3,631,000		3,199,000
Prepayments and other current assets	572,000		1,514,000
Contract assets, net	74,000		202,000
Inventories	547,000		342,000
Total current assets	11,504,000		10,448,000
Property, plant and equipment, net	215,000		259,000
Investments in affiliates	8,077,000		8,084,000
Goodwill	1,071,000		1,071,000
Operating right-of-use assets	238,000		233,000
Deferred tax assets	145,000		0
Total non-current assets	9,746,000		9,647,000
Total assets	21,250,000		20,095,000
Current liabilities:
Bank borrowings	376,000		361,000
Accounts payable	3,151,000		2,394,000
Contract liabilities	1,076,000		1,063,000
Other payables and accrued expenses	1,585,000		1,593,000
Current portion of long-term operating lease obligations	175,000		118,000
Income tax payable	42,000		4,000
Total current liabilities	6,405,000		5,533,000
Non-current liabilities:
Deferred tax liabilities	3,000		5,000
Long-term operating lease obligations, net of current maturities	41,000		94,000
Total non-current liabilities	44,000		99,000
Total liabilities	6,449,000		5,632,000
Shareholders' equity:
Ordinary share, 20,000,000 shares authorized as of December 31, 2021 and 2020, respectively 7,899,832 no par value shares issued as of December 31, 2021 and 2020	123,000		123,000
Additional paid-in capital	9,670,000		9,615,000
Treasury stock, 167,700 shares at cost as of December 31, 2021 and 2020, respectively	(786,000)		(786,000)
PRC statutory reserves	316,000		316,000
Accumulated other comprehensive income	787,000		851,000
Retained earnings	3,774,000		3,816,000
Total shareholders' equity attributable to entity	13,884,000		13,935,000
Non-controlling interest	917,000		528,000
Total shareholders' equity	14,801,000		14,463,000
Total liabilities and shareholders' equity	21,250,000		20,095,000
Long-term investments	$ 5,540,000		$ 5,540,000
ZHEJIANG TIANLAN
Current assets:
Accounts receivable, net | ¥		¥ 106,022		¥ 118,621
Prepayments and other current assets | ¥		33,498		28,387
Contract assets, net | ¥		72,310		94,494
Inventories | ¥		3,386		2,389
Total current assets | ¥		270,192		294,860
Property, plant and equipment, net | ¥		74,063		79,257
Deferred tax assets | ¥		14,305		13,639
Total non-current assets | ¥		96,430		100,163
Total assets | ¥		366,622		395,023
Current liabilities:
Bank borrowings | ¥		13,518		20,029
Accounts payable | ¥		93,962		97,795
Contract liabilities | ¥		37,481		47,135
Other payables and accrued expenses | ¥		18,428		17,747
Total current liabilities | ¥		170,113		197,875
Non-current liabilities:
Total non-current liabilities | ¥		3,889		4,894
Total liabilities | ¥		174,002		202,769
Shareholders' equity:
PRC statutory reserves | ¥		16,582		15,670
Retained earnings | ¥		52,409		55,248
Total shareholders' equity attributable to entity | ¥		187,324		189,251
Non-controlling interest | ¥		5,296		3,003
Total shareholders' equity | ¥		192,620		192,254
Total liabilities and shareholders' equity | ¥		366,622		395,023
Cash | ¥		54,976		50,969
Intangible assets, net | ¥		1,865		2,120
Land use right, net | ¥		4,997		5,147
Long-term investments | ¥		1,200		0
Other taxes payable | ¥		6,724		15,169
Deferred government grant | ¥		3,889		4,894
Share capital 82,572,000 no par value shares authorised, issued and outstanding, as of December 31, 2021 and 2020, respectively | ¥		82,572		82,572
Capital reserve | ¥		¥ 35,761		¥ 35,761

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2021	Dec. 31, 2020
Common stock, authorized	20,000,000	20,000,000
Common stock, issued	7,899,832	7,899,832
Common stock, no par value	$ 0.00	$ 0.00
Treasury stock, shares	167,700	167,700
Common stock, outstanding	7,732,132	7,732,132
ZHEJIANG TIANLAN
Common stock, authorized	82,572,000	82,572,000
Common stock, issued	82,572,000	82,572,000
Common stock, outstanding	82,572,000	82,572,000

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) ¥ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($) $ / shares shares	Dec. 31, 2021 CNY (¥) ¥ / shares shares	Dec. 31, 2020 USD ($) $ / shares shares	Dec. 31, 2020 CNY (¥) ¥ / shares shares	Dec. 31, 2019 USD ($) $ / shares shares	Dec. 31, 2019 CNY (¥) ¥ / shares shares
Revenues
Trading and manufacturing	$ 9,619		$ 9,476		$ 11,877
Engineering	11,769		3,881		5,522
Total revenues	21,388		13,357		17,399
Cost of revenues
Trading and manufacturing	(6,938)		(7,048)		(9,285)
Engineering	(8,755)		(2,624)		(3,697)
Total cost of revenues	(15,693)		(9,672)		(12,982)
Gross profit	5,695		3,685		4,417
Finance costs	(3)		(12)		(4)
Selling and administrative expenses	(4,911)		(5,374)		(4,853)
Gain / (loss) on disposal of property, plant and equipment	(10)		1,429		(5)
Operating (loss) / income	771		(272)		(445)
Interest income	23		28		83
Other income	127		307		52
Equity in income / (loss) of affiliates	355		435		137
Net income / (loss) before income taxes	1,276		498		(173)
Income taxes (expense) / credit	90		(96)		(37)
Net income / (loss)	1,366		402		(210)
Net loss / (income) attributable to non-controlling interests	(377)		367		64
Net (loss) / income attributable to entity shareholders	989		769		(146)
Other comprehensive (loss) / income
Net income / (loss)	1,366		402		(210)
Foreign exchange translation adjustments	(52)		(31)		(8)
Comprehensive (loss) / income	1,314		371		(218)
Comprehensive loss attributable to non-controlling interests	(389)		350		78
Comprehensive (loss) / income attributable to the Company	$ 925		$ 721		$ (140)
Net income / (loss) per ordinary share attributable to entity
- Basic | $ / shares	$ 0.13		$ 0.10		$ (0.02)
- Diluted | $ / shares	$ 0.13		$ 0.10		$ (0.02)
Weighted average number of ordinary shares outstanding
- Basic | shares	7,732,132,000	7,732,132,000	7,732,132,000	7,732,132,000	7,732,132,000	7,732,132,000
- Diluted | shares	7,732,132,000	7,732,132,000	7,732,132,000	7,732,132,000	7,732,132,000	7,732,132,000
ZHEJIANG TIANLAN
Revenues
Total revenues | ¥		¥ 330,841		¥ 304,710		¥ 277,581
Cost of revenues
Total cost of revenues | ¥		(275,455)		(261,478)		(227,632)
Gross profit | ¥		55,386		43,232		49,949
Operating (loss) / income | ¥		3,225		(17,161)		6,210
Interest income | ¥		46		30		50
Other income | ¥		11,594		39,646		6,276
Net income / (loss) before income taxes | ¥		12,880		15,358		4,654
Income taxes (expense) / credit | ¥		698		(1,858)		(296)
Net income / (loss) | ¥		13,578		13,500		4,358
Net loss / (income) attributable to non-controlling interests | ¥		2,293		(2,032)		(484)
Net (loss) / income attributable to entity shareholders | ¥		11,285		15,532		4,842
Weighted average number of ordinary shares outstanding
Selling and administrative expenses | ¥		52,161		60,393		43,739
Interest expense | ¥		747		1,676		2,258
Other losses | ¥		¥ (1,238)		¥ (5,481)		¥ (5,624)
Net income per ordinary share attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited's shareholders | ¥ / shares		¥ 0.14		¥ 0.19		¥ 0.06
Weighted average ordinary shares outstanding | shares	82,572,000	82,572,000	82,572,000	82,572,000	82,572,000	82,572,000

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CONSOLIDATED STATEMENTS OF CASH FLOWS	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)
Cash flows from operating activities:
Net income / (loss) | $	$ 989,000		$ 769,000		$ (146,000)
Adjustments to reconcile net income / (loss) to net cash (used in) / provided by operating activities:
Depreciation | $	38,000		49,000		69,000
Loss / (gain) on disposal of property, plant and equipment | $	10,000		(1,429,000)		5,000
Stock-based compensation expense | $	55,000		54,000		10,000
Non-controlling interests in income / (loss) of subsidiaries | $	377,000		(367,000)		(64,000)
Equity in profit of affiliates | $	(355,000)		(435,000)		(137,000)
Deferred tax (credit) / expenses | $	(145,000)		92,000		37,000
Changes in non-current assets and liabilities:
Long-term operating lease obligations | $	(53,000)		(122,000)		216,000
Operating lease right-of-use assets | $	(5,000)		173,000		(406,000)
Decrease / (increase) in current assets:
Accounts receivable, net | $	(432,000)		387,000		1,503,000
Prepayments and other current assets | $	942,000		(766,000)		(201,000)
Contract assets | $	128,000		239,000		458,000
Inventories | $	(205,000)		244,000		(185,000)
Increase / (decrease) in current liabilities:
Accounts payable | $	757,000		(1,520,000)		(986,000)
Other payables and accrued expenses | $	(8,000)		451,000		(108,000)
Contract liabilities | $	13,000		194,000		(501,000)
Income tax payable | $	38,000		4,000		0
Net cash provided by / (used) in operating activities | $	2,201,000		(2,035,000)		(266,000)
Cash flows from investing activities:
Purchase of property, plant and equipment | $	(4,000)		(11,000)		(21,000)
Proceeds from sale of property, plant and equipment | $	0		1,835,000		0
Dividend received from affiliates | $	362,000		71,000		0
Proceeds from sale of long-term investment | $	0		148,000		0
Purchase of long-term investment | $	0		0		(148,000)
Net cash provided by / (used in) investing activities | $	358,000		2,043,000		(169,000)
Cash flows from financing activities:
Dividend paid | $	(1,031,000)		(1,299,000)
Proceeds from bank borrowings | $	782,000		804,000		565,000
Repayments to bank borrowings | $	(767,000)		(1,008,000)
Net cash (used in) / provided by financing activities | $	(1,016,000)		(1,503,000)		565,000
Effect of exchange rate changes on cash and cash equivalents | $	(54,000)		(34,000)		(7,000)
Net increase / (decrease) in cash and cash equivalents and restricted cash | $	1,489,000		(1,529,000)		123,000
Cash, cash equivalents and restricted cash at beginning of year | $	5,191,000		6,720,000		6,597,000
Cash, cash equivalents and restricted cash at end of year | $	6,680,000		5,191,000		6,720,000
Cash breakdown
Cash and cash equivalents | $	5,269,000		3,519,000		5,591,000
Restricted cash | $	1,411,000		1,672,000		729,000
Cash and Cash Equivalents, at Carrying Value, Total | $	6,680,000		5,191,000		6,720,000
Supplemental disclosure of consolidated cash flow information:
Cash paid during the period for income taxes | $	20,000		0		0
Cash paid during the period for interest | $	3,000		12,000		4,000
Operating leases (disclosed in accompanying Note 3) | $	0		0		0
Non-cash items:
Right-of-use assets obtained in exchange for new operating lease obligations | $	$ 0		$ 0		$ 460,000
ZHEJIANG TIANLAN
Cash flows from operating activities:
Net income / (loss)		¥ 11,285,000		¥ 15,532,000		¥ 4,842,000
Adjustments to reconcile net income / (loss) to net cash (used in) / provided by operating activities:
Depreciation		6,466,000		6,359,000		6,556,000
Loss / (gain) on disposal of property, plant and equipment		(39,000)				(39,000)
Decrease / (increase) in current assets:
Accounts receivable, net		12,782,000		26,620,000		11,432,000
Prepayments and other current assets		(5,111,000)		24,472,000		(6,369,000)
Contract assets		20,946,000		(14,932,000)		20,033,000
Inventories		(997,000)		3,366,000		6,208,000
Increase / (decrease) in current liabilities:
Accounts payable		(3,833,000)		8,423,000		(17,272,000)
Other payables and accrued expenses		681,000		10,164,000		(8,795,000)
Contract liabilities		(9,654,000)		(8,763,000)		14,852,000
Net cash provided by / (used) in operating activities		26,163,000		57,356,000		36,081,000
Cash flows from investing activities:
Purchase of property, plant and equipment		(1,381,000)		(577,000)		(1,584,000)
Proceeds from sale of property, plant and equipment		148,000				50,000
Purchase of long-term investment		(1,200,000)
Net cash provided by / (used in) investing activities		(2,433,000)		(6,595,000)		(1,824,000)
Cash flows from financing activities:
Dividend paid		(13,223,000)		(4,606,000)
Proceeds from bank borrowings		13,500,000		30,000,000		44,841,000
Repayments to bank borrowings		(20,000,000)		(36,800,000)		(63,000,000)
Net cash (used in) / provided by financing activities		(19,723,000)		(11,406,000)		(47,827,000)
Net increase / (decrease) in cash and cash equivalents and restricted cash		4,007,000		39,355,000		(13,570,000)
Cash, cash equivalents and restricted cash at beginning of year		50,969,000		11,614,000		25,184,000
Cash, cash equivalents and restricted cash at end of year		54,976,000		50,969,000		11,614,000
Supplemental disclosure of consolidated cash flow information:
Cash paid during the period for income taxes						5,237,000
Cash paid during the period for interest		680,000		1,716,000		2,258,000
Non-cash items:
Net income / (loss)		13,578,000		13,500,000		4,358,000
Amortization of intangible asset		255,000		142,000		152,000
Amortization of land use right		150,000		159,000		149,000
Bad debts written off		0		0		5,383,000
Impairment loss on contract assets		1,238,000		1,399,000		0
Impairment loss on long-term investments		0		1,340,000		0
Impairment loss on property, plant and equipment		0		2,742,000		0
Increase in allowance for doubtful accounts						2,437,000
Investment loss						241,000
Proceeds from deferred government grant						2,349,000
Property, plant and equipment written off						14,000
Reversal of allowance for doubtful accounts		(183,000)		(6,463,000)		0
Deferred government grant		(1,005,000)		2,545,000
Deferred tax (liabilities) / assets		(666,000)		331,000		268,000
Short-term investments				800,000
Other taxes payable		(8,596,000)		5,638,000		(1,577,000)
Current portion of long-term finance lease obligations				(11,263,000)
Tax refund / (paid)		¥ 151,000		(9,223,000)		(4,299,000)
Proceeds from investment				295,000
Proceeds from sale of partial shareholding in a subsidiary				137,000		510,000
Purchase of intangible assets				1,350,000
Purchase of short-term investments						(800,000)
Purchase of subsidiary				¥ (5,100,000)
Payment of principal obligations under long-term finance lease						¥ (29,668,000)

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Ordinary Share	Additional Paid-In Capital	Treasury Stock	Accumulated other comprehensive loss	PRC Statutory Reserves	Retained Earnings	Non-controlling Interests
Balance, shares at Dec. 31, 2018		7,899,832
Balance, amount at Dec. 31, 2018	$ 15,545	$ 123	$ 9,551	$ (786)	$ 893	$ 316	$ 4,492	$ 956
Net loss	(210)	0	0	0	0	0	(146)	(64)
Foreign currency translation adjustments	(8)	0	0	0	6	0	0	(14)
Stock-based compensation expense	10	0	10	0	0	0	0	0
Balance, amount at Dec. 31, 2019	15,337	$ 123	9,561	(786)	899	316	4,346	878
Balance, shares at Dec. 31, 2019		7,899,832
Net loss	402	$ 0	0	0	0	0	769	(367)
Stock-based compensation expense	54	0	54	0	0	0	0	0
Foreign currency translation adjustments	(31)	0	0	0	(48)	0	0	17
Dividend paid	(1,299)						(1,299)
Balance, amount at Dec. 31, 2020	14,463	$ 123	9,615	(786)	851	316	3,816	528
Balance, shares at Dec. 31, 2020		7,899,832
Net loss	1,366	$ 0	0	0	0	0	989	377
Stock-based compensation expense	55	0	55	0	0	0	0	0
Foreign currency translation adjustments	(52)	0	0	0	(64)	0	0	12
Dividend paid	(1,031)						(1,031)
Balance, amount at Dec. 31, 2021	$ 14,801	$ 123	$ 9,670	$ (786)	$ 787	$ 316	$ 3,774	$ 917
Balance, shares at Dec. 31, 2021		7,899,832,000

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ZHEJIANG TIANLAN CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ¥ in Thousands, $ in Thousands	USD ($)	CNY (¥)	Zhejiang Tianlan PRC Statutory Reserve CNY (¥)	Zhejiang Tianlan Retain Earnings CNY (¥)	Zhejiang Tianlan Non Controling Interests CNY (¥)	Zhejiang Tianlan Shares Capital CNY (¥)	Zhejiang Tianlan Capital Reserve CNY (¥)
Balance, amount at Dec. 31, 2018		¥ 178,002	¥ 13,903	¥ 42,099	¥ 3,862	¥ 82,572	¥ 35,566
Net income / (loss)		4,358	0	4,842	(484)	0	0
Appropriation of reserves		0	518	(518)	0	0	0
Others		509	0	0	565	0	(56)
Balance, amount at Dec. 31, 2019		182,869	14,421	46,423	3,943	82,572	35,510
Net income / (loss)		13,500	0	15,532	(2,032)	0	0
Appropriation of reserves		0	1,685	(1,685)	0	0	0
Others		(4,422)	(436)	(3,968)	(269)	0	251
Dividend paid		(2,890)		(2,890)
Consolidation of companies under common control		7,558	0	1,836	2,122	0	3,600
Ordinary shares injected by shareholders		(761)	0	0	(761)	0	0
Utilization of reserve		(3,600)	0	0	0	0	(3,600)
Balance, amount at Dec. 31, 2020		192,254	15,670	55,248	3,003	82,572	35,761
Balance, amount at Dec. 31, 2020 | $	$ 13,935
Net income / (loss)		13,578	0	11,285	2,293	0	0
Appropriation of reserves		0	912	(912)	0	0	0
Dividend paid		(13,212)		(13,212)
Balance, amount at Dec. 31, 2021		¥ 192,620	¥ 16,582	¥ 52,409	¥ 5,296	¥ 82,572	¥ 35,761

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Organization and business

12 Months Ended

Dec. 31, 2021

Organization and business

1 Organization and business

Euro Tech Holdings Company Limited (the “Company”) was incorporated in the British Virgin Islands on September 30, 1996.

Euro Tech (Far East) Limited (“Far East”) is the principal operating subsidiary of the Company. It is principally engaged in the marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems in Hong Kong and in the People’s Republic of China (the “PRC”).

The Group’s principal subsidiaries at December 31, 2021 and 2020 are set out below.

Name of entity	Ownership interest held by the Group						Place of incorporation and principal place of operation	Principal activities
	2021			2020
Euro Tech (Far East) Limited		100	%		100	%	Hong Kong	Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems
Euro Tech Trading (Shanghai) Limited		100	%		100	%	The PRC	Inactive
Shanghai Euro Tech Limited		100	%		100	%	The PRC	Manufacturing of analytical and testing equipment
Shanghai Euro Tech Environmental Engineering Company Limited		-			100	%	The PRC	Inactive
Euro Tech (China) Limited		-			-		Hong Kong	Inactive

 This company was dissolved on July 2, 2021.

This company was deregistered on April 3, 2020.

The Group’s principal subsidiaries at December 31, 2021 and 2020 are set out below (Cont’d).

Name of entity	Ownership interest held by the Group						Place of incorporation and principal place of operation	Principal activities
	2021			2020
Yixing Pact Environmental Technology Co., Ltd.		58	%		58	%	The PRC	Design, manufacturing and operation of water and waste water treatment machinery and equipment
Pact Asia Pacific Limited		58	%		58	%	The British Virgin Islands	Selling of environmental protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services
Affiliate:
Zhejiang Tianlan Environmental Protection Technology Co. Ltd. (“Blue Sky”)		19.4	%*		19.4	%*	The PRC	Design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted

* The Group’s interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation on both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process and exercise significant influence.

ZHEJIANG TIANLAN

Organization and business

1  Organization and business 

Zhejiang Tianlan Environmental Protection Technology Company Limited (the “Company”) was incorporated in Hangzhou City, Zhejiang Province, the People's Republic of China (“PRC”) on May 18, 2000. The Company is a limited liability company limited by shares with an operating period up to long term.

The Company provides a comprehensive service for design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted from various boilers and industrial furnaces of power plants, steel works and chemical plants since 2000.

The Company has listed its shares on the New Third Board in the PRC since November 17, 2015 and suspended trading from August 15, 2017 and resumed trading on February 2, 2018 and suspended trading from November 24, 2020 and resumed trading on January 6, 2021.

The Group’s principal subsidiaries at December 31, 2021 and 2020 are set out below.

Name of entity	Ownership interest held by the Group						Place of incorporation and principal place of operation	Principal activities
	2021			2020
Zhejiang Tianlan Environmental Protection Engineering Company Limited		100	%*		100	%*	PRC	Design, general contract, installation and operating management of environmental protection projects
Hangzhou Tianlan Environmental Protection Equipment Company Limited		51	%		51	%	PRC	Manufacturing and installation services of environmental protection equipment
Hangzhou Tianlan Pure Environmental Protection Technology Company Limited		38.25	%		38.25	%	PRC	Manufacturing of environmental protection equipment
Hangzhou Tiancan Environmental Technology Company Limited		80	%		80	%	PRC	Manufacturing of environmental protection equipment

* This company was acquired in August 2020.

The outbreak of COVID-19 worldwide and the various public health measures put in place in many countries to prevent the spread of COVID-19 have disrupted the overall business of the Group at different levels of time and regions in 2020. After the Chinese new year in February 2020, the Group’s domestic businesses were affected by the lock-down of various cities implemented in PRC, resulting in the forced suspension of some local operations until the gradual resumption of work beginning from late March to early April 2020. Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Group’s consolidated financial position, results of its operations, the specific impact is not readily determinable as of the date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Summary of significant accounting policies

12 Months Ended

Dec. 31, 2021

Summary of significant accounting policies

2 Summary of significant accounting policies

(a) Basis of presentation 

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

(b) Basis of consolidation 

The accompanying consolidated financial statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated.

(c) Subsidiaries  

Subsidiaries are all entities over which the Group has control; has the power to appoint or remove the majority of the members of the board of directors; has the right to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.

(d) Investments in affiliates 

We account for our interest in an investment using the equity method of accounting per Accounting Standards Codification (“ASC”) No. 323, “Investments - Equity Method and Joint Ventures” if we are not the primary beneficiary of a VIE or do not have a controlling interest. The investment is recorded at cost and the carrying amount is adjusted periodically to recognize our proportionate share of income or loss, additional contributions made and dividends and capital distributions received. We record the effect of any impairment or other than temporary decrease in the value of the investment.

In the event a partially owned equity affiliate were to incur a loss and our cumulative proportionate share of the loss exceeded the carrying amount of the equity method investment, application of the equity method would be suspended and our proportionate share of further losses would not be recognized unless we committed to provide further financial support to the affiliate. We would resume application of the equity method once the affiliate became profitable and our proportionate share of the affiliate’s earnings equals our cumulative proportionate share of losses that were not recognized during the period the application of the equity method was suspended.

(e) Revenue recognition 

Our revenue is derived from long-term contracts for customers in our engineering segment, as well as short-term contracts for customers in our trading and manufacturing segment. Accounting treatment for these contracts in accordance with Accounting Standards Update (“ASU”) 2014-09 (Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customer), is as follows:

Performance obligations satisfied over time (Engineering services)

Recognition of performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Engineering service projects typically span between several days to over 5 years. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. Some contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle (engineering).

Revenues are recognized as our obligations are satisfied over time, by reference to the progress towards complete satisfaction of that performance obligation.

If the Group expects the reference to progress certificates issued by the customers, with additional adjustments where necessary, depicts the Group’s performance in transferring control of goods or services promised to customers for individual projects, the Group satisfies the performance obligation over time and therefore, recognizes revenue over time in accordance with the output method for measuring progress. Under output method, revenue recognition is based on the stage of completion of the contracts, provided that the stage of contract completion and the gross billing value of contracting work can be measured reliably. The stage of completion of a contract is established by reference to the construction works certified by customers.

Remaining performance obligations (“RPOs”)

RPOs represent the amount of revenues we expect to recognize in the future from our contract commitments on projects and are hereafter referred to as “Backlog”. Backlog includes the entire expected revenue values for subsidiary we consolidate. Backlog may not be indicative of future operating results, and projects included in Backlog may be canceled, modified or otherwise altered by customers.

The Group had the following backlog:

	2021		2020
	US$’000		US$’000
Engineering segment		5,400		11,581

Unrecognized contract revenue which is expected to be recognized in next 12 months is approximately US$5,400,000 (2020: US$11,581,000).

(e) Revenue recognition (Cont’d) 

Performance obligations satisfied over time (Engineering services) (Cont’d)

Variable consideration

Contract modifications through change orders, claims and incentives are routine in the performance of the Group’s contracts to account for changes in the contract specifications or requirements. In most instances, contract modifications are not distinct from the existing contract due to the significant integration service provided in the contract and are accounted for as a modification of the existing contract and performance obligation. Either the Group or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Change orders that are unapproved as to both price and scope are evaluated as claims. The Group considers claims to be amounts in excess of approved contract prices that the Group seeks to collect from its customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.

The Group estimates variable consideration for a performance obligation at the most likely amount to which the Group expects to be entitled (or the most likely amount the Group expects to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which the Group will be entitled (or will be incurred in the case of liquidated damages). The Group includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Group’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Group.

The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in the Group’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.

Performance obligations satisfied at a point-in-time (Trading and manufacturing)

Revenue for our trading and manufacturing contracts is recognized at a point in time. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been delivered to the point of receipt by customer.

(e) Revenue recognition (Cont’d) 

Classification of contract assets and liabilities

For revenue recognized associated with its contracts with customers over time, for which the Group has an enforceable right to receive compensation. Many of our contracts contain specific provisions that determine when the Group can bill for its work performed under these contracts.

Any revenue earned on a contract that has not yet been billed to the customer is recorded as a contract asset on the Group’s consolidated balance sheets.

The Group’s consolidated balance sheets present contract liabilities that contain deferred revenue that represent any costs incurred on contracts in process for which revenue has not yet been recognized.

Rental income

Rental income from operating leases is recognized in consolidated statements of operations and comprehensive income /(loss) on a straight-line basis over the term of the relevant lease.

(f) Research and development costs 

Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately US$61,000, US$497,000 and US$35,000 for the years ended December 31, 2021, 2020 and 2019 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss).

(g) Advertising and promotional expenses 

Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately US$7,000, US$7,000 and US$13,000 for the years ended December 31, 2021, 2020 and 2019 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss).

(h) Income taxes 

The Group follows the liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Group also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized.

The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Group does not believe it has any uncertain tax positions through the periods ended December 31, 2021, 2020 and 2019 respectively which would have a material impact on the Group’s consolidated financial statements.

Interest and penalties related to uncertain income tax positions are included in income tax expense on the Group’s consolidated statements of operations and comprehensive income / (loss). Interest and penalties actually incurred are charged to interest expense and the other income, respectively if applicable.

The Group files tax returns in Hong Kong and the PRC. The tax returns for 2021, 2020 and 2019 are subject to examination by Hong Kong and PRC taxing authorities, commencing with the first year filed.

(i) Cash and cash equivalents 

Cash and cash equivalents consist of cash on hand, and bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal. There were no cash equivalents as of December 31, 2021 and 2020.

(j) Restricted cash 

Restricted cash represents cash deposits retained with banks in the PRC for issuance of performance bonds and guarantees to the customers and cash deposited by the Group into separate accounts and designated as collateral for standby letters of credit in the same amount in accordance with contractual agreements.

(k) Accounts receivable and allowance for doubtful accounts  

The Group does not charge interest to its customers and carries its customer receivables at their face amounts, less an allowance for doubtful accounts. As is common practice in the industry, the Group classifies all accounts receivable as current assets.

The Group grants trade credit, on a non-collateralized basis, to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Group analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.

(l) Inventories 

Inventories are measured using the first-in, first-out method and are stated at the lower of cost or net realizable value. Cost of finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity. Allowance is made for obsolete, slow moving or defective items, where appropriate.

(m) Property, plant and equipment 

Property, plant and equipment is carried at cost. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in consolidated income from operations. The cost of maintenance and repairs is charged to expense as incurred. Property, plant and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property, plant and equipment exceeds its fair value, an impairment charge would be recorded in the consolidated statement of operations.

Depreciation of property, plant and equipment are computed using the straight-line method over the assets’ estimated useful lives as follows:

Office premises	47 to 51 years
Leasehold improvements	over terms of the leases or the useful lives whichever is less
Furniture, fixtures and office equipment	3 to 5 years
Motor vehicles	4 years
Testing equipment	3 years

(n) Long-term investment 

The Group has elected to apply the measurement alternative to equity securities without readily determinable fair values. As such, the Group’s non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the investee.

(o) Leases arrangements 

In the ordinary course of business, the Group enters into a variety of operating lease arrangements.

Operating right-of-use leases are included in operating lease right-of-use assets, current portion of long-term operating lease obligations and long-term operating lease obligations, net of current maturities on the Group’s consolidated balance sheets, as appropriate. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Group’s leases do not provide an implicit rate to calculate present value, the Group determines this rate by estimating the Group’s incremental borrowing rate, utilizing the borrowing rates associated with the Group’s various debt instruments. The operating lease right-of-use asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

(p) Goodwill 

Goodwill is not amortized. The Group performs either a qualitative or quantitative assessment to review goodwill for impairment on an annual basis. This assessment is performed at the beginning of the fourth quarter, or when circumstances change, such as a significant adverse change in the business climate or the decision to sell a business, both of which would indicate that impairment may have occurred.

A qualitative assessment considers financial, industry, segment and macroeconomic factors, if the qualitative assessment indicates a potential for impairment, a quantitative assessment is performed to determine if impairment exists. The quantitative assessment begins with a comparison of the fair value of the reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss would be recognized in an amount equal to that excess, limited to the total amount of the goodwill allocated to the reporting unit. If the carrying value of goodwill exceeds its implied fair value, an impairment charge would be recorded in the consolidated statements of operations and comprehensive income / (loss).

As a result of the annual qualitative review process in 2021 and 2020, the Group determined it was not necessary to perform a quantitative assessment.

(q) Foreign currency translation 

The assets and liabilities of the Group’s subsidiaries denominated in currencies other than U.S. dollars are translated into U.S. dollars using the applicable exchange rates at the consolidated balance sheet date. For consolidated statements of operations and comprehensive income/(loss)’ items, amounts denominated in currencies other than U.S. dollars were translated into U.S. dollars using the average exchange rate during the period. Equity accounts were translated at their historical exchange rates. Net gains and losses resulting from translation of foreign currency on consolidated financial statements are included in the consolidated statements of stockholders’ equity as accumulated other comprehensive income. Foreign currency transaction gains and losses are reflected in the consolidated statements of operations and comprehensive income / (loss).

(r) Comprehensive income / (loss) 

We account for comprehensive income in accordance with ASC No. 220, “Comprehensive Income”, which specifies the computation, presentation and disclosure requirements for comprehensive income / (loss). Comprehensive income / (loss) consists of net income / (loss) and foreign currency translation adjustments, primarily from fluctuations in foreign currency exchange rates of our foreign subsidiaries with a functional currency other than the U.S. dollar.

(s) Ordinary share 

On November 22, 2011, the Company filed Amended and Restated Memorandum and Articles of Association with the Registry of Corporate Affairs of the BVI Financial Services Commission that on November 29, 2011 became effective as of the filing date to amend the Company’s ordinary shares of US$0.01 par value capital stock to no par value capital stock. Treasury stock is accounted for using the cost method. When treasury stock is reissued, the value is computed and recorded using a weighted-average basis.

On October 8, 2019, the Company had stock split in the form of bonus shares at the rate of one ordinary share for every two ordinary shares held, creating 1,030,950 new shares of common stock.

On March 3, 2021, the Company had stock split in the form of  bonus shares at the rate of two ordinary shares for every three ordinary shares held, creating 2,061,900 new shares of common stock.

The effect of the above stock splits have been reflected retroactively in the financial statements and net income per ordinary share computations.

(t) Net income per ordinary share 

The Group computes net income per ordinary share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to Euro Tech Holdings Company Limited are computed by dividing net income attributable to Euro Tech Holdings Company Limited by the weighted average number of ordinary shares outstanding during the period. The Group reports both basic earnings per share, which is based on the weighted average number of ordinary shares outstanding, and diluted earnings per share, which is based on the weighted average number of ordinary shares outstanding and all dilutive potential ordinary shares outstanding.

Outstanding stock options are the only dilutive potential shares of the Company.

(u) Stock-based compensation 

The Group determines compensation expense for stock-based awards based on the estimated fair values at the grant date and recognizes the related compensation expense over the vesting period. The Group uses the straight-line amortization method to recognize compensation expense related to stock-based awards that have only service conditions. This method recognizes stock compensation expense on a straight-line basis over the requisite service period for the entire award.

(v) Use of estimates 

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Group require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from engineering contracts over time, the valuation of goodwill, and contract assets and contract liabilities. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.

(w) Related parties 

Related parties are affiliates of the Group; entities for which investments are accounted for by the equity method by the Group; trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; principal owners of the Group; its management; members of the immediate families of principal owners of the Group and its management; and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Another party also is a related party if it can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

(x) Segment information 

The Group reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Group’s reportable segments. The Group categorises its operations into two business segments: Trading and manufacturing, and Engineering.

(y) Concentration 

Financial instruments that potentially subject the Group to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable, net. The Group maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions.

The Group is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Group’s top customers accounting for more than 5% of the Group’s revenue generated approximately 15%, 23%, and 34% of consolidated revenues for the years ended December 31, 2021, 2020 and 2019, respectively.

The Group grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, general contractors, owners and managers of industrial properties and government departments.

(y) Concentration (Cont’d) 

Consequently, the Group is subject to potential credit risk related to changes in business and economic factors. At December 31, 2021, three (2020: three) of the Group’s customers individually exceeded 10.0% of accounts receivable, net. The Group believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.

(z) Finance costs 

Interest relating to loans repaid is expensed in the period the repayment occurs.

(aa) Warranties 

The suppliers of the Group offer a standard one-year warranty to end customers of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis.

(ab) Shipping and handling costs 

Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues.

(ac) Statutory reserves 

The Group is required to make appropriation to reserve funds, comprising the statutory reserve fund and statutory staff welfare fund, based on after-tax net income determined with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations to the statutory reserve fund is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve fund is equal to 50% of the entities’ registered capital.

(ad) Fair value measurements 

The Group uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of December 31, 2021 and 2020, the Group determined that the carrying values of cash and cash equivalents, restricted cash, accounts receivable, net, prepayments and other current assets, contract assets, bank borrowings, accounts payable, contract liabilities, other payables and accrued expenses approximate their fair values because of the short-term nature of these instruments.

(ae) Recent accounting pronouncements 

Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Group considers the applicability and impact of all ASUs. The Group, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Group or may have minimal impact on its consolidated financial statements.

Recently adopted accounting pronouncements

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 ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The Group adopted this ASU in January 2021 and there was no effect on the consolidated financial statements or disclosures.

In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),” an amendment clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivative instruments. The Group adopted this guidance in January 2021 and there was no effect on the consolidated financial statements or disclosures.

Recently issued accounting pronouncements not yet adopted

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” this ASU affects a wide variety of Topics in the Codification. They apply to all reporting entities within the scope of the affected accounting guidance. More specifically, this ASU, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose because the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure Section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). Those amendments are not expected to change current practice. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early application of the amendments is permitted for and varies based on the entity. The amendments should be applied retrospectively and at the beginning of the period that includes the adoption date. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.

(af) Reclassification 

Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

(ag) Non-controlling interests

For entities that are consolidated, but not 100% owned, a portion of the income or loss and equity is allocated to owners other than the Group. The aggregate of the income or loss and corresponding equity that is not owned by the Group is included within non-controlling interests in the consolidated financial statements.

Non-controlling interests is presented as a separate component of equity in the consolidated balance sheets. Net income includes the net income attributable to the holders of non-controlling interests in the consolidated statements of operations and comprehensive income / (loss). Profits and losses are allocated to non-controlling interests in proportion to their relative ownership interests regardless of their basis.

(ah) Impairment of long lived assets

Long-lived assets such as property, plant and equipment with finite lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment for the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Group recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. There was no impairment of long lived assets during 2021, 2020 and 2019, respectively.

(ai) Effect of the Restatement on the Consolidated Financial Statements for the year ended December 31, 2021

Subsequent to the issuance of the Company’s consolidated financial statements for the year ended December 31, 2021 on May 13, 2022, certain errors were identified,

(i)	(loss) / gain on disposal of property, plant and equipment not included in operating income / (loss)
(ii)	bonus share issuances were not accounted for and disclosed as stock splits in the consolidated statements of shareholders' equity, earnings per share computations for all periods presented

The impact of the restatement on the December 31, 2021 financial statements is reflected in the following tables:

CONSOLIDATED BALANCE SHEETS

	December 31, 2021
	As Previously Reported	As Restated
	US$’000	US$’000
Ordinary share	5,322,459 no par value shares issued as of December 31, 2021 (2020: 3,260,559)	7,899,832 no par value shares issued as of December 31, 2021 and 2020

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)

	December 31
	As Previously Reported			As Restated
	US$’000			US$’000
Operating income / (loss)
2021		781			771
2020		(1,701	)		(272	)
2019		(440	)		(445	)
Net income / (loss) per ordinary share attributable to Euro Tech Holdings Company Limited’s shareholders
- Basic
2021	$	US0.19		$	US0.13
2020	$	US0.25		$	US0.10
2019	$	US(0.06	)	$	US(0.02	)
- Diluted
2021	$	US0.19		$	US0.13
2020	$	US0.25		$	US0.10
2019	$	US(0.06)		$	US(0.02	)
Weighted average number of ordinary shares outstanding
- Basic
2021		5,154,759			7,732,132
2020		3,092,859			7,732,132
2019		2,301,993			7,732,132
- Diluted
2021		5,154,759			7,732,132
2020		3,092,859			7,732,132
2019		2,301,993			7,732,132

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	December 31
	As Previously Reported		As Restated
	US$’000		US$’000
Number of ordinary share
Balance at December 31, 2018		2,229,609		7,899,832
Balance at December 31, 2019		3,260,559		7,899,832
Balance at December 31, 2020		3,260,559		7,899,832
Balance at December 31, 2021		5,322,459		7,899,832

Commensurate adjustments have been made to Notes 2 (s), 11, 16 and 24 to the consolidated financial statements.  

ZHEJIANG TIANLAN

Summary of significant accounting policies

2  Summary of significant accounting policies  

(a)  Basis of presentation 

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

(b)  Basis of consolidation 

The accompanying consolidated financial statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated.

(c)  Subsidiaries 

Subsidiaries are all entities over which the Group has control; has the power to appoint or remove the majority of the members of the board of directors; has the right to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.

(d) Revenue recognition 

Our revenue is derived from long-term contracts for customers, as well as short-term contracts for customers. Accounting treatment for these contracts in accordance with Accounting Standards Update (“ASU”) 2014-09 (Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers), is as follows:

The Group estimates variable consideration for a performance obligation at the most likely amount to which the Group expects to be entitled (or the most likely amount the Group expects to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which the Group will be entitled (or will incur in the case of liquidated damages). The Group includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Group’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Group.

The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in the Group’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.

Performance obligations satisfied at a point-in-time (Sales of equipment)

Revenue for our sales contracts is recognized at a point in time. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been delivered to the point of receipt by customer.

(e)  Research and development costs 

Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately 23,419,000, RMB28,589,000 and RMB19,018,000 for the years ended December 31, 2021, 2020 and 2019 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations.

(f)  Income tax  

The Group follows the liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Group also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized.

The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Group does not believe it has any uncertain tax positions through the periods ended December 31, 2021, 2020 and 2019 respectively which would have a material impact on the Group’s consolidated financial statements.

The Group files tax returns in the PRC. The tax returns for 2021, 2020 and 2019 are subject to examination by the PRC taxing authorities, commencing with the first year filed.

(g)  Cash and cash equivalents 

Cash and cash equivalents consist of bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal and uninsured. There were no cash equivalents as of December 31, 2021 and 2020.

(h)  Accounts receivable and allowance for doubtful accounts  

The Group does not charge interest to its customers and carries its customer receivables at their face amounts, less an allowance for doubtful accounts. As is common practice in the industry, the Group classifies all accounts receivable as current assets.

The Group grants trade credit, on a non-collateralized basis, to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Group analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.

(i)  Classification of contract assets, net and liabilities  

For revenue recognized associated with its contracts with customers over time, for which the Group has an enforceable right to receive compensation. Many of our contracts contain specific provisions that determine when the Group can bill for its work performed under these contracts.

Any revenue earned on a contract that has not yet been billed to the customer is recorded as a contract asset on the Group’s consolidated balance sheets.

The Group’s consolidated balance sheets present contract liabilities that contain deferred revenue that represent any costs incurred on contracts in process for which revenue has not yet been recognized.

(j)  Inventories 

Inventories are measured using the weighted average method and are stated at the lower of cost or net realizable value. Cost of finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity.

(k)  Property, plant and equipment and land use right, net 

Property, plant and equipment is carried at cost. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in consolidated income from operations. The cost of maintenance and repairs is charged to expense as incurred. Property, plant and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property, plant and equipment exceeds its fair value, an impairment charge would be recorded in the consolidated statement of operations.

(o)  Leases arrangements  

The Group adopted ASU No. 2016-02, Leases (Topic 842). The Group leases certain equipment under finance leases. The economic substance of the leases is a financing transaction for acquisition of the equipment. Accordingly, the right-of-use assets for these leases are included on the Group’s consolidated balance sheets in property, plant and equipment, net of accumulated depreciation, amortization and impairment losses, with a corresponding amount recorded in current portion of long-term finance lease obligations. The finance lease assets are amortized over the life of the lease or, if shorter, the life of the leased asset, on a straight-line basis and included in depreciation expense. The financing component associated with finance lease obligations is included in interest expense. Generally, for the Group’s finance leases an implicit rate to calculate present value is provided in the lease agreement, however if a rate in not provided the Group determines this rate by estimating the Group’s incremental borrowing rate, utilizing the borrowing rates associated with the Group’s various debt instruments.

The Group determines if an arrangement is a lease at inception. Lease liabilities are the Group’s obligation to make lease payments arising from a lease and are measured on a discounted basis.

(p)  Share capital 

Paid in capital refers to the registered capital paid up by the shareholders of the Company.

At December 31, 2021, there were 82,572,000 shares (2020: 82,572,000 shares) issued.

(q)  Use of estimates 

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Group require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from contracts over time, contract assets, net and contract liabilities. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.

(r)  Related parties 

Entities are considered to be related to the Group if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Group. Related parties also include principal owners of the Group, its management, members of the immediate families of principal owners of the Group and its management and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

(s)  Net income per ordinary share 

The Group computes net income per ordinary share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited are computed by dividing net income attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited by the weighted average number of ordinary shares outstanding during the period.

  (t)  Warranties 

The suppliers of the Group offer a standard one-year warranty to end customer of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis.

  (u)  Shipping and handling costs 

Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues.

  (v)  Finance costs 

Interest relating to loans repaid is expensed in the period the repayment occurs.

  (w)  Concentrations  

Financial instruments that potentially subject the Group to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable, net. The Group maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions.

The Group is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Group’s top five customers accounted for approximately 35%, 39%, and 40% of consolidated revenues for the years ended December 31, 2021, 2020 and 2019, respectively. For the years ended December 31, 2021, 2020 and 2019, one customer accounted for 16%, 16% and 17% of annual revenues, respectively.

The Group grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, general contractors, owners and managers of industrial properties.

Consequently, the Group is subject to potential credit risk related to changes in business and economic factors. At December 31, 2021 and 2020, none of the Group’s customers individually exceeded 10.0% of accounts receivable. The Group believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.

(x)  Statutory reserve 

The Group is required to make appropriation to reserve, comprising the PRC statutory reserve, based on after-tax net income determined with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations to the PRC statutory reserve are required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital.

(y)  Fair value measurements  

The Group uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of December 31, 2021 and 2020, the Group determined that the carrying values of cash, and cash equivalents, accounts receivable, net, prepayments and other current assets, contract assets, bank borrowings, accounts payable, other payables and accrued expenses and contract liabilities approximate their fair values because of the short-term nature of these instruments.

(z)  Short-term and long-term investments  

The Group has elected to apply the measurement alternative to equity securities without readily determinable fair values. As such, the Group’s non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the investee.

(aa)  Recent accounting pronouncements 

Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Group considers the applicability and impact of all ASUs. The Group, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Group or may have minimal impact on its consolidated financial statements.

Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial instruments, including trade receivables and off-balance sheet credit exposures. Under this guidance, an entity is required to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. This ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.

(ab)  Non-controlling interests  

For entities that are consolidated, but not 100% owned, a portion of the income or loss and equity is allocated to owners other than the Group. The aggregate of the income or loss and corresponding equity that is not owned by the Group is included within non-controlling interests in the consolidated financial statements.

Non-controlling interests is presented as a separate component of equity in the consolidated balance sheets. Net income includes the net income attributable to the holders of non-controlling interests in the consolidated statements of operations and comprehensive income / (loss). Profits and losses are allocated to non-controlling interests in proportion to their relative ownership interests regardless of their basis.

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Lease obligations

12 Months Ended

Dec. 31, 2021

Lease obligations

3 Lease obligations

The Group has operating leases primarily for office space. The Group’s leases have remaining lease terms of several months to two years.

The components of lease expense are as follows:

	Years ended December 31,
	2021		2020
	US$’000		US$’000
Operating lease cost		243		257
Short-term lease cost		62		64
Total lease cost		305		321

Supplemental consolidated cash flow information related to leases is as follows:

	Years ended December 31,
	2021		2020
	US$’000		US$’000
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		196		195
Right-of-use assets obtained in exchange for lease obligations (noncash):
Operating leases		-		-

Supplemental consolidated balance sheet information related to leases is as follows:

	December 31,
	2021			2020
	US$’000			US$’000
Operating leases
Operating lease right-of-use assets		238			233
Current portion of long-term operating lease obligations		175			118
Long-term operating lease obligations, net of current maturities		41			94
		216			212
Total operating lease liabilities
Weighted average remaining lease term
Operating leases		23 months			16 months
Weighted average discount rate
Operating leases		5	%		5	%

Maturities of lease liabilities are as follows:

	Operating leases
	US$’000
Year ending December 31,
2022		181
2023		42
Total lease payments		223
Less: imputed interest		(7	)
Total		216

ZHEJIANG TIANLAN

Lease obligations

3  Lease obligations  

The Group has finance leases primarily for equipment.

The components of lease expense are as follows:

	Years ended December 31,
	2021		2020
	RMB’000		RMB’000
Finance lease cost:
Amortization of right-of-use assets		-		5,837
Interest on lease liabilities included under cost of revenue and selling and administrative expenses		-		1,244
Total finance lease cost		-		7,081

Supplemental consolidated cash flow information related to leases is as follows:

	Years ended December 31,
	2021		2020
	RMB’000		RMB’000
Cash paid for amounts included in the measurement of lease liabilities:
Finance cash flows from finance leases		-		11,263
Right-of-use assets obtained in exchange for lease obligations (noncash):
Finance leases		-		-

Supplemental consolidated balance sheet information related to leases is as follows:

	December 31,
	2021			2020
	RMB’000			RMB’000
Finance leases
Property, plant and equipment, at cost		-			-
Accumulated depreciation and impairment losses		-			-
Property, plant and equipment, net		-			-
Current maturities of long-term debt		-			-
Total finance lease liabilities		-			-
Weighted average remaining lease term
Finance leases		-			-
Weighted average discount rate
Finance leases		5.9	%		5.9	%

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Accounts receivable, net

12 Months Ended

Dec. 31, 2021

Accounts receivable, net

4 Accounts receivable, net

Accounts receivable, net consisted of the following at December 31:

	2021			2020
	US$’000			US$’000
Contract receivables		3,661			3,229
Less: allowance for doubtful accounts		(30	)		(30	)
		3,631			3,199

The roll-forward of activity in the allowance for doubtful accounts was as follows for the years ended December 31:

	2021		2020
	US$’000		US$’000
Balance at beginning of period		30		36
Less : reversal in allowances		-		(6	)
Balance at end of period		30		30

The following is an aging analysis of accounts receivable, net at December 31:

	2021		2020
	US$’000		US$’000
Current		1,441		2,014
Past due
1-30 days		1,570		85
31-60 days		495		202
61-90 days		108		41
Greater than or equal to 91 days		17		857
		2,190		1,185
		3,631		3,199

ZHEJIANG TIANLAN

Accounts receivable, net

4 Accounts receivable, net

Accounts receivable, net consisted of the following at December 31:

	2021			2020
	RMB’000			RMB’000
Contract receivables		148,889			160,803
Less: allowance for doubtful accounts		(42,867	)		(42,182	)
		106,022			118,621

The roll-forward of activity in the allowance for doubtful accounts was as follows for the years ended December 31:

	2021			2020
	RMB’000			RMB’000
Balance at beginning of period		42,182			26,484
Add: provision for allowances		868			22,161
Less: Reversal of provision for doubtful accounts		(183	)		(6,463	)
Balance at end of period		42,867			42,182

The following is an aging analysis of accounts receivable, net at December 31:

	2021		2020
	RMB’000		RMB’000
Within 1 year		82,534		76,590
1 year -  2 years		12,144		31,389
2 years - 3 years		5,111		6,128
3 years - 4 years		5,141		3,678
4 years - 5 years		1,092		836
		106,022		118,621

At December 31, 2021, the accounts receivable, net pledged as security for the Company’s bank loans and third party loans amounted to RMB Nil (2020: RMB Nil).

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Prepayments and other current assets

12 Months Ended

Dec. 31, 2021

Prepayments and other current assets

5 Prepayments and other current assets

Prepayment and other current assets mainly represent deposits paid for purchases and services, rental and utilities deposits, and prepaid expenses.

	December 31,
	2021		2020
	US$’000		US$’000
Deposits paid		243		838
Prepayments		104		168
Other receivables		222		250
Other tax recoverable		3		258
		572		1,514

ZHEJIANG TIANLAN

Prepayments and other current assets

5 Prepayments and other current assets

Prepayments and other current assets mainly represent deposits paid for bidding projects, purchases, services and finance leases and prepaid expenses.

	December 31,
	2021		2020
	RMB’000		RMB’000
Prepayments		22,717		16,632
Deposits paid for bidding projects and temporary payments		7,030		10,448
Other current assets		3,751		1,307
		33,498		28,387

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Contract assets and liabilities

12 Months Ended

Dec. 31, 2021

Contract assets and liabilities

6 Contract assets and liabilities

Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the timing of costs incurred on work performed does not coincide with the billing terms.

The Group’s consolidated balance sheets present contract assets which contains earned unbilled revenue associated with contract work that has been completed but not paid by customers, that are generally due once the job is completed and approved.

Contract assets consisted of the following at December 31:

	2021		2020
	US$’000		US$’000
Unbilled revenue		74		202

The Group’s consolidated balance sheets present contract liabilities which contains deferred revenue (previously identified as billings in excess of costs and estimated earnings on uncompleted contracts).

Contract liabilities consisted of the following at December 31:

	2021		2020
	US$’000		US$’000
Deferred revenue		1,076		1,063

The following table provides information about contract assets and contract liabilities from contracts with customers:

	December 31,
	2021			2020
	US$’000			US$’000
Contract assets		74			202
Contract liabilities		(1,076	)		(1,063	)
Net contract liabilities		(1,002	)		(861	)

The difference between the opening and closing balances of the Group’s contract assets and contract liabilities primarily results from the timing of the Group’s billings in relation to its performance of work. The amounts of revenue recognized in the period that were included in the opening contract liability balances were US$79,000 and US$1,214,000 for the years ended December 31, 2021 and 2020, respectively. The revenue consists primarily of work performed on previous billings to customers.

The net liabilities position for contracts in process consisted of the following at December 31:

	2021			2020
	US$’000			US$’000
Costs incurred in contracts in process		169			1,904
Estimated earnings		59			-
Cost and estimated earnings on uncompleted contracts		228			1,904
Less: billings to date		(1,230	)		(2,765	)
		(1,002	)		(861	)

The net liabilities position for contracts in process is included within the contract asset and contract liability in the accompanying consolidated balance sheets as follows at December 31:

	2021			2020
	US$’000			US$’000
Unbilled revenue		74			202
Deferred revenue		(1,076	)		(1,063	)
		(1,002	)		(861	)

Disaggregated revenue from contracts

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Revenue
Trading and manufacturing (revenue recognized at point in time)		9,619		9,476		11,877
Engineering (revenue recognized over time)		11,769		3,881		5,522
		21,388		13,357		17,399

ZHEJIANG TIANLAN

Contract assets and liabilities

6 Contract assets, net and liabilities

Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the timing of costs incurred on work performed does not coincide with the billing terms.

The Group’s consolidated balance sheets present contract assets, net which contains earned unbilled revenue associated with contract work that has been completed but not paid by customers, that are generally due once the job is completed and approved.

Contract assets, net consisted of the following at December 31:

	2021		2020
	RMB’000		RMB’000
Unbilled revenue		72,310		94,494

The Group’s consolidated balance sheets present contract liabilities which contain deferred revenue (previously identified as billings in excess of costs and estimated earnings on uncompleted contracts).

Contract liabilities consisted of the following at December 31:

	2021		2020
	RMB’000		RMB’000
Deferred revenue		37,481		47,135

The following table provides information about contract assets, net and contract liabilities from contracts with customers at December 31:

	2021			2020
	RMB’000			RMB’000
Contract assets		72,310			94,494
Contract liabilities		(37,481	)		(47,135	)
Net contract assets		34,829			47,359

The difference between the opening and closing balances of the Group’s contract assets, net and contract liabilities primarily results from the timing of the Group’s billings in relation to its performance of work.

The net asset position for contracts in process consisted of the following at December 31:

	2021			2020
	RMB’000			RMB’000
Estimated earnings on uncompleted contracts		503,434			406,064
Less: billings to date		(468,605	)		(358,705	)
		34,829			47,359

Contract assets, net consisted of the following at December 31:

	2021			2020
	RMB’000			RMB’000
Gross contract assets		81,198			102,144
Less: allowance for doubtful accounts		(8,888	)		(7,650	)
		72,310			94,494

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Inventories

12 Months Ended

Dec. 31, 2021

Inventories

7 Inventories

	December 31,
	2021		2020
	US$’000		US$’000
Raw materials		89		63
Work in progress		20		20
Finished goods		438		259
		547		342

Management continuously reviews obsolete and slow moving inventories and assesses the inventory valuation to determine if the write-down of inventories is deemed appropriate. For the years ended December 31, 2021, and 2020, write-down of inventories amounted to US$55,000 and US$13,000, respectively, which were charged to cost of revenue in consolidated statements of operations and comprehensive income / (loss).

ZHEJIANG TIANLAN

Inventories

7 Inventories

	December 31,
	2021		2020
	RMB’000		RMB’000
Raw materials		2,381		341
Finished goods		1,005		2,048
		3,386		2,389

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Short-term and long-term investments

12 Months Ended

Dec. 31, 2021

ZHEJIANG TIANLAN

Short-term and long-term investments

8 Short-term and long-term investments

The Group's short-term investments consist of wealth management products and long-term investments consist of minority ownership interests in Chongqing Zhongtian Haizhi Ecological Environment Technology Co., Ltd (2020: Nil) limited liability company, generally from private equity arrangements. These investments are carried under the equity method of accounting, with changes in the carrying value reported as realized gains or losses in the consolidated financial statements.

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Property, plant and equipment, net

12 Months Ended

Dec. 31, 2021

Property, plant and equipment

8 Property, plant and equipment, net

	December 31,
	2021			2020
	US$’000			US$’000
Office premises*		673			673
Leasehold improvements		125			157
Furniture, fixtures and office equipment		439			557
Motor vehicles		175			175
Testing equipment		37			37
		1,449			1,599
Less: Accumulated depreciation		(1,234	)		(1,340	)
		215			259

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Depreciation charge		38		49		69

* Far East earns rental income from a property in Beijing, PRC for which it does not hold the title. Far East is investigating various ways in which to obtain the title but has not formulated a specific plan as of the date of issuance of these consolidated financial statements. The net book value of the property at December 31, 2021 is approximately US$88,000 (2020: US$92,000).

ZHEJIANG TIANLAN

Property, plant and equipment

9 Property, plant and equipment

	December 31,
	2021			2020
	RMB’000			RMB’000
Building and leasehold improvements		167,874			167,874
Furniture, fixtures and office equipment		3,694			3,658
Motor vehicles		4,647			4,808
Plant and machineries		10,097			9,399
Total		186,312			185,739
Less: Accumulated depreciation and amortization		(76,008	)		(70,241	)
Accumulated impairment losses		(36,241	)		(36,241	)
Total		(112,249	)		(106,482	)
Net		74,063			79,257

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Depreciation charge		6,466		6,359		6,556

At December 31, 2021, the net book value of property, plant and equipment pledged as security for the Company’s bank loans and third party loans amounted to approximately RMB1,524,000 (2020: RMB34,403,000).

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Intangible assets, net

12 Months Ended

Dec. 31, 2021

ZHEJIANG TIANLAN

Intangible assets, net

10 Intangible assets, net

	December 31,
	2021			2020
	RMB’000			RMB’000
Amortizable intangible assets
Gross carrying amount
Patents		3,750			3,750
Others		165			165
		3,915			3,915
Less: Accumulated amortization		(2,050	)		(1,795	)
Net carrying amount		1,865			2,120

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Amortization expense		255		142		152

At December 31, 2021, estimated future intangible assets amortization expense for each of the next five years and thereafter was as follows:

	Future amortization expense
	RMB’000
2022		255
2023		255
2024		255
2025		255
2026		255
Thereafter		590
Total		1,865

At December 31, 2020, estimated future intangible assets amortization expense for each of the next five years and thereafter was as follows:

	Future amortization expense
	RMB’000
2021		142
2022		142
2023		142
2024		142
2025		142
Thereafter		1,410
Total		2,120

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Land use right, net

12 Months Ended

Dec. 31, 2021

ZHEJIANG TIANLAN

Land use right, net

11 Land use right, net

	December 31,
	2021			2020
	RMB’000			RMB’000
Gross carrying amount
Land use right		7,361			7,361
Less: Accumulated amortization		(2,364	)		(2,214	)
Net carrying amount		4,997			5,147

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Amortization expense		150		159		149

At December 31, 2021, the land use right pledged as security for the Company’s bank loans and third party’s loans amounted to approximately RMB 1,463,000 (2020: RMB4,463,000).

As December 31, 2021, estimated future land use right amortization expense for each of the next five years and thereafter was as follows:

	Future amortization expense
	RMB’000
2022		150
2023		150
2024		150
2025		150
2026		150
Thereafter		4,247
Total		4,997

As December 31, 2020, estimated future land use right amortization expense for each of the next five years and thereafter was as follows:

	Future amortization expense
	RMB’000
2021		159
2022		159
2023		159
2024		159
2025		159
Thereafter		4,352
Total		5,147

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Bank borrowings

12 Months Ended

Dec. 31, 2021

ZHEJIANG TIANLAN

Bank borrowings

12 Bank borrowings

	December 31,
	2021		2020
	RMB’000		RMB’000
Bank loans borrowed by the Company (note i)		8,511		10,014
Bank loans borrowed by subsidiaries of the Company (note ii)		5,007		10,015
		13,518		20,029

(i)

The bank loans are denominated in Renminbi and are repayable within 1 year. The bank loans borrowed by the Company as of December 31, 2021 bears interest at fixed rates of 4.35% to 5% (2020: 4.79%) per annum. Interest paid during the year ended December 31, 2021 was approximately RMB253,000 (2020: RMB1,377,000 and 2019: RMB1,991,000).

(ii)

The bank loans are denominated in Renminbi and are repayable within 1 year. The bank loans borrowed by subsidiaries of the Company as of December 31, 2021 bears interest at a fixed rate ranging from 4.35% to 5% (2020: a fixed rate ranging from 4.5% to 4.79%) per annum and are secured by the subsidiary’s office premises and leasehold improvements and land use right. Interest paid during the year ended December 31, 2021 was approximately RMB427,000 (2020: RMB287,000 and 2019: RMB246,000).

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Investments in affiliates

12 Months Ended

Dec. 31, 2021

Investments in affiliates

Investments in affiliates

9 Investments in affiliates

Investments in affiliates are accounted for using the equity method of accounting.

	December 31,
	2021			2020
Zhejiang Tianlan Environmental Protection Technology Co. Ltd.
Interest held		19.4	%		19.4	%
	US$’000			US$’000
Long-term investment, at cost, less impairment		5,540			5,540
Share of undistributed profits		2,537			2,544
		8,077			8,084

Far East is holding 19.4% (2020: 19.4%) equity interests in Blue Sky, a company incorporated in the PRC, with total cost of investment of US$5,540,000. Blue Sky provides a comprehensive service for design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted from various boilers and industrial furnaces of power plants, steel works and chemical plants since 2000.

Blue Sky has listed its shares on the New Third Board in the PRC since November 17, 2015 and suspended trading from August 15, 2017 and resumed trading on February 2, 2018 and suspended trading from November 24, 2020 and resumed trading on January 6, 2021.

The Group’s interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation on both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process and exercise significant influence.

A summary of the financial information of the affiliate, Blue Sky, is set forth below:

	December 31,
	2021			2020
Balance Sheet:	US$’000			US$’000
Current assets		42,510			44,918
Non-current assets		15,172			15,258
Total assets		57,682			60,176
Total liabilities		(27,376	)		(30,889	)
Total shareholders’ equity		30,306			29,287

	Year ended December 31,
	2021		2020
Operating results:	US$’000		US$’000
Net sales		51,280		43,933
Operating income		1,997		2,214
Net income		2,105		1,946

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Other payables and accrued expenses

12 Months Ended

Dec. 31, 2021

Other payables and accrued expenses

10 Other payables and accrued expenses

Other payables and accrued expenses mainly represent deposits received from customers and accruals for operating expenses.

	December 31,
	2021		2020
	US$’000		US$’000
Dividend payables		86		84
Deposits received from customers		6		-
Rental deposit received		3		4
Accruals for operating expenses		1,360		1,500
Other tax payables		130		5
		1,585		1,593

ZHEJIANG TIANLAN

Other payables and accrued expenses

13 Other payables and accrued expenses

	December 31,
	2021		2020
	RMB’000		RMB’000
Accrued expenses		8,315		7,629
Output VAT		5,468		6,529
Deposits received and temporary receipts		4,645		3,589
		18,428		17,747

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Other taxes payable

12 Months Ended

Dec. 31, 2020

ZHEJIANG TIANLAN

Other taxes payable

14 Other taxes payable

Other taxes payable mainly comprise Valued-Added Tax (“VAT”). The Group is subject to output VAT levied at the rate of 3% to 13 % (2020: 3% to 13%) of the revenue from sales of equipment.  The input VAT paid on purchases of materials and other direct inputs can be used to offset the output VAT levied on operating revenue to determine the net VAT payable or recoverable.

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Capital reserve

12 Months Ended

Dec. 31, 2021

ZHEJIANG TIANLAN

Capital reserve

15 Capital reserve

Capital reserve represents capital contributions from shareholders in excess of the paid-in capital amount and capitalization of gain on disposal of subsidiaries to the shareholders in previous years.

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Ordinary share

12 Months Ended

Dec. 31, 2021

Ordinary share

Ordinary share

11 Ordinary share

On October 8, 2019, the Company had stock split in the form of bonus shares at the rate of one ordinary share for every two ordinary shares held, creating 1,030,950 new shares of common stock.

During the year ended December 31, 2020, there was no movement with the Company’s issued ordinary shares and outstanding shares.

On March 3, 2021, the Company had stock split in the form of bonus shares at the rate of two ordinary shares for every three ordinary shares held, creating 2,061,900 new shares of common stock.

On January 24, 2022, the Company had stock split in the form of  bonus shares at the rate of one ordinary shares for every two ordinary shares held, creating 2,577,373 new shares of common stock, as described in Note 24 to the consolidated financial statements.

Number of outstanding shares at year end of:

	2021			2020
Shares issued		7,899,832	*		7,899,832	*
Less: shares under treasury stock		(167,700	)		(167,700	)
		7,732,132			7,732,132

* Retroactively restated for effect of the stock splits effected in the form of bonus shares

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Goodwill

12 Months Ended

Dec. 31, 2021

Goodwill

Goodwill

12 Goodwill

Reporting units - The Group’s reporting units consist of its trading and manufacturing and engineering segments. Goodwill is not amortized, but instead is reviewed for impairment at least annually during the fourth quarter of each year at the reporting level, absent any interim indicators of impairment or other factors requiring an assessment.

Annual impairment assessment - For our 2021 and 2020 annual impairment test we performed a qualitative assessment, using information as of December 31, 2021 and 2020, respectively. Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. We determined there were no factors indicating the need to perform a quantitative goodwill impairment test and concluded that it is more likely than not the fair value of our reporting units is greater than their carrying value and thus there was no impairment to goodwill. As of December 31, 2019, the Group completed the annual impairment test by comparing the carrying amount of the net assets, including goodwill, with the fair value of Yixing Pact Environmental Technology Co., Ltd and Pact Asia Pacific Limited as of December 31, 2019

In addition to our annual review, we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value of a reporting unit may be greater than fair value. Factors that could trigger an interim impairment review include, but are not limited to, significant adverse changes in the business climate which may be indicated by a decline in our market capitalization or decline in operating results. No impairments were recorded to our goodwill during the years ended December 31, 2021, 2020 and 2019. No material events or changes occurred between the testing date and year end to trigger a subsequent impairment review.

At December 31, 2021 and 2020, we had goodwill for our engineering segment with a carrying amount of US$1,071,000 and US$1,071,000, respectively.

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PRC statutory reserves

12 Months Ended

Dec. 31, 2021

PRC statutory reserves

PRC statutory reserves

13 PRC statutory reserves

Under the relevant PRC laws and regulations, the PRC subsidiaries are required to appropriate a certain percentage of their respective net income to two statutory funds i.e. the statutory reserve fund and the statutory staff welfare fund. The PRC subsidiaries can also appropriate certain amount of its net income to the enterprise expansion fund.

(i) Statutory reserve fund

Pursuant to applicable PRC laws and regulations, the PRC subsidiaries are required to allocate at least 10% of its net income to the statutory reserve fund until such fund reaches 50% of its registered capital. The statutory reserve fund can be utilised upon the approval by the relevant authorities, to offset accumulated losses or to increase its registered capital, provided that such fund be maintained at a minimum of 25% of its registered capital.

Under the PRC laws and regulations, the PRC subsidiaries are restricted in their ability to transfer certain of its net assets in the form of dividend payments, loans or advances. The amounts restricted include paid-in capital and statutory reserves, as determined pursuant to PRC generally accepted accounting principles, totaling US$2,452,000 as at December 31, 2021 (2020: US$3,174,000 and 2019: US$3,174,000).

(ii) Statutory staff welfare fund

Pursuant to applicable PRC laws and regulations, the PRC subsidiaries are required to allocate a certain amount of its net income to the statutory staff welfare fund determined by it. The statutory staff welfare fund can only be used to provide staff welfare facilities and other collective benefits to its employees. This fund is non-distributable other than upon liquidation of the PRC subsidiaries. The balances as at December 31, 2021 and 2020 include in statutory reserves were US$12,000.

(iii) Enterprise expansion fund

The enterprise expansion fund shall only be used to make up losses, expand the PRC subsidiaries’ production operations, or increase the capital of the subsidiaries. The enterprise expansion fund can be utilised upon approval by relevant authorities, to convert into registered capital and issue bonus capital to existing investors, provided that such fund be maintained at a minimum of 25% of its registered capital. The balances as at December 31, 2021 and 2020 include in statutory reserves were US$408,000.

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Other income, net

12 Months Ended

Dec. 31, 2021

Other income, net

14 Other income, net

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Exchange gain / (loss), Other income, netnet		77		101		(30	)
Rental income		50		59		82
Government subsidies – Employment Support Scheme *		-		147		-
		127		307		52

* The amount represents salaries and wage subsidies granted under Anti-Epidemic Fund by the Government of the Hong Kong Special Administrative Region for the use of paying wages of employees from June to November 2020.

ZHEJIANG TIANLAN

Other income, net

16 Other income and other losses

Other income

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Compensation income		-		22,548		-
Gain on disposal of property, plant and equipment		39		-		39
Investment income		531		266		-
Amounts waived by payees		3,061		4,535		280
Reversal of allowance for doubtful accounts		183		6,463		-
Subsidy income from PRC government		7,780		5,834		5,957
		11,594		39,646		6,276

Other losses

	Year ended  December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Bad debts written off		-		-		5,383
Impairment loss on contract assets		1,238		1,399		-
Impairment loss on long-term investments		-		1,340		-
Impairment loss on property, plant and equipment		-		2,742		-
Investment loss		-		-		241
		1,238		5,481		5,624

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Income taxes

12 Months Ended

Dec. 31, 2021

Income taxes

15 Income taxes

No income tax arose in the United States of America by the Group for the years ended December 31, 2021, 2021 and 2020.

The Company and Pact Asia Pacific Limited are exempt from taxation in the British Virgin Islands (“BVI”).

Far East and Euro Tech (China) Limited provided for Hong Kong profits tax at a rate of 8.25% on assessable profits up to US$256,000; and 16.5% on any part of assessable profits over US$256,000 in year 2021 and 2020 (2019: 16.5%) on the basis of their income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for profits tax purposes.

Euro Tech Trading (Shanghai) Limited (“ETTS”), a subsidiary of Far East, provides for PRC Enterprise Income Tax (“EIT”) at a rate of 25% (2020 and 2019: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2021, ETTS had an assessable loss carried forward of US$18,000 as agreed by the local tax authority to offset its profit for the forth coming years (2020: US$604,778 and 2019: US$518,328). Such loss will expire in 5 years.

Shanghai Euro Tech Limited (“SET”), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2020 and 2019: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2021, SET had an assessable loss carried forward of US$678,000 as agreed by the local tax authority to offset its profit for the forth coming years (2020: US$658,733 and 2019: US$444,192). Such loss will expire in 5 years.

Shanghai Euro Tech Environmental Engineering Company Limited (“SETEE”), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2020 and 2019: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2021, SETEE had an assessable loss carried forward of US$Nil as agreed by the local tax authority to offset its profit for the forth coming years (2019: US$34,032 and 2018: US$380,591).

Yixing Pact Environmental Technology Co. Ltd. (“Yixing”), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2020 and 2019: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2021, Yixing had an assessable loss carried forward of US$1,759,000 as agreed by the local tax authority to offset its profit for the forth coming years (2020: US$2,304,828 and 2019: US$1,664,275). Such loss will expire in 5 years.

Under the New Enterprise Income Tax Law and the implementation rules, profits of the PRC subsidiaries earned on or after January 1, 2008 and distributed by the PRC subsidiaries to foreign holding company are subject to a withholding tax at a rate of 10% unless reduced by tax treaty. Aggregate undistributed earnings of Far East’s subsidiaries located in the PRC that are available for distribution to Far East of approximately US$0.6 million at December 31, 2021 (2020: US$0.6 million and 2019: US$0.6 million) are intended to be reinvested, and accordingly, no deferred taxation has been made for the PRC dividend withholding taxes that would be payable upon the distribution of those amounts to Far East. Distributions made out of pre January 1, 2008 retained earnings will not be subject to the withholding tax.

The Company and its subsidiaries are based in Hong Kong and PRC and file Hong Kong profits tax return and PRC EIT return, respectively. The components of the (provision) / credit for income taxes (expense) / credit were as follows:

	Year ended December 31,
	2021			2020			2019
	US$’000			US$’000			US$’000
Current taxes (expense )
Hong Kong profits tax and the PRC EIT		(57	)		(4	)		-
Income tax expense		(57	)		(4	)		-
Deferred tax credit / (expenses)
Hong Kong and the PRC		147			(92	)		(37	)
Total deferred tax credit / (expenses)		147			(92	)		(37	)
Total credit / (expense)		90			(96	)		(37	)

The items comprising the difference between income taxes computed at the Hong Kong profits tax and PRC EIT statutory tax rates in effect for 2021, 2020 and 2019 and our effective tax rates were as follows:

	Year ended December 31,
	2021			2020			2019
	US$’000			US$’000			US$’000
Income / (loss) before income taxes		1,276			498			(173	)
Computed tax using respective companies’ statutory tax rates		158			133			69
Change in valuation allowances		349			48			30
Under-provision for income taxes in prior years		(12	)		-			(5	)
Non-deductible expenses		(405	)		(277	)		(131	)
Income taxes credit / (expense) at effective tax rate		90			(96	)		(37	)

The components of deferred tax assets / (liabilities) are as follows:

	December 31,
	2021			2020
	US$’000			US$’000
Tax losses		614			901
Temporary differences		(3	)		(5	)
Less: Valuation allowances		(469	)		(901	)
Net deferred tax assets / (liabilities)		142			(5	)

Uncertain tax positions

As a result of the Group’s analysis, management has determined that the Group does not have any material uncertain tax positions.

ZHEJIANG TIANLAN

Income taxes

17 Income tax(credit)/expense

According to relevant PRC tax laws and regulations, entities incorporated in the PRC are subject to Enterprise Income Tax (“EIT”) at a statutory rate of 25% or reduced national EIT rates of 15% for certain High and New Technology Enterprises (“HNTE”) on PRC taxable income. Zhejiang Tianlan Environmental Protection Technology Company Limited and Hangzhou Tianlan Environmental Protection Equipment Company Limited are classified as HNTE which enjoy a preferential tax rate of 15%.

During the years ended December 31, 2021 and 2020, the PRC tax laws and regulations have launched a tax reduction scheme for small enterprises, Hangzhou Tianlan Pure Environmental  Protection Technology Company Limited, Hangzhou Tiancan Environmental Technology Company Limited, Zhejiang Tianlan Environmental Engineering and Design Company Limited and Zhejiang Tianlan Environmental Protection Engineering Company Limited are entitled to enjoy this tax benefit. As such, they are subjects to Enterprise Income Tax rate of 20% only.

The Company and its subsidiaries are based in the PRC and file an EIT return. The components of the provision for income tax expense/(credit) were as follows:

	Year ended  December 31,
	2021			2020		2019
	RMB’000			RMB’000		RMB’000
Current tax (credit)/expense
PRC EIT		(32	)		757		28
Income tax (credit)/expense		(32	)		757		28
Deferred tax (credit)/expense		(666	)		1,101		268
Total deferred tax (credit)/expense		(666	)		1,101		268
Total (credit)/expense		(698	)		1,858		296

The items comprising the difference between income tax computed at the EIT statutory rates in effect for 2021, 2020 and 2019 and our effective tax rates were as follows:

	Year ended  December 31,
	2021			2020			2019
	RMB’000			RMB’000			RMB’000
Income before income tax		12,880			15,358			4,654
Computed tax using respective companies’ statutory tax rates		1,932			2,304			642
(Over)-provision for income tax in prior years		(39	)		(48	)		-
Temporary differences		401			182			202
Tax effect of expenses not deductible for tax purposes		286			2,306			693
Tax effect of special deduction for research and development costs		(3,263	)		(3,001	)		(2,103	)
Others		(15	)		115			862
Income taxes (credit)/expense at effective tax rate		(698	)		1,858			296

The components of deferred tax assets are as follows:

	December 31,
	2021		2020
	RMB’000		RMB’000
Allowance for doubtful accounts		6,188		6,184
Deferred government grant		583		750
Impairment losses on assets		6,940		6,705
Tax losses		594		-
Total deferred tax assets		14,305		13,639

Uncertain tax positions

As a result of the Group’s analysis, management has determined that the Group does not have any material uncertain tax positions.

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Net income per ordinary share

12 Months Ended

Dec. 31, 2021

Net income per ordinary share

Net income per ordinary share

16        Net income per ordinary share

The calculation of the basic and diluted net income per ordinary share is based on the following data:

	December 31,
	2021		2020		2019
	Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted net income per share		7,732,132		7,732,132		7,732,132

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Stock options

12 Months Ended

Dec. 31, 2021

Stock options

Stock options

17 Stock options

2019 Stock Option and Incentive Plan

In April 2019, the Board of Directors approved the adoption of the 2019 Stock Option and Incentive Plan (the “Plan”). The Plan was also subsequently approved under a resolution of the Company's shareholders. The Plan provides for the granting of up to 300,000 (500,000 after bonus shares adjustment) Ordinary Shares (the “Share Limit”), in the form of options to Officers, Directors and Key Employees who perform services which contribute to the successful performance of the Company and its subsidiaries. In addition, the Plan provides that, on the first day of each fiscal year commencing on January 1, 2020, the Share Limit shall automatically be increased by that number of shares equal to 5% of the number of Ordinary Shares outstanding as of such date.

The Board of Directors or a committee (the “Committee”) appointed by the Board of Directors administers the Plan.

Appropriate adjustment in the maximum number of Ordinary Shares issuable pursuant to this Plan, the maximum number of Ordinary Shares with respect to which options may be granted within any 12-month period to any participant during the duration of this Plan, the number of shares subject to options granted under this Plan, and the exercise price with respect to options, shall be made to give effect to any increase or decrease in the number of issued Ordinary Shares resulting from a subdivision or consolidation of shares whether through reorganization, recapitalization, division of shares, reverse share split, spin-off, split-off, spin-out, or other distribution of assets to shareholders, issue of bonus shares or combination of shares, assumption and conversion of outstanding options due to an acquisition by the Company of the shares, stock or assets of any other company or corporation, other increase or decrease in the number of such shares outstanding effected, without receipt of consideration by the Company, or any other occurrence for which the Committee determines an adjustment is appropriate.

The purchase price per share of the Ordinary Shares to be paid upon the exercise of the option must be at least 100% of the fair market value of an Ordinary Shares on the date on which the option was granted. Under the Plan, if the Ordinary Shares are principally traded on a national securities exchange or the Nasdaq Global Market or Capital Market at the time of grant, the Company is required to use, at fair market value, the average of the closing prices of the Ordinary Shares for the ten consecutive trading days immediately before the date of grant. If the Ordinary Shares are traded on a national securities exchange or the Nasdaq Stock Global Market or Capital Market, but no closing prices are reported for such ten-day period, or if the Ordinary Shares are principally traded in the over-the-counter market, the Company is required to use, as fair market value, the average of the mean between the bid and asked prices reported for the Company’s Ordinary Shares at the close of trading during such ten-day period before the date of grant. If the Ordinary Shares are traded neither on a national securities exchange, one of the Nasdaq’s Markets nor in the over-the-counter market or if bid and asked prices are otherwise not available, the fair market value of the Ordinary Shares on the date of grant will be determined in good faith by the Committee or the Board of Directors, as the case may be.

2019 Stock option and incentive plan (Cont’d)

The Board of Directors or the Committee, as the case may be, determines, at the time of grant, when each option granted under the Plan will become exercisable. Notwithstanding the foregoing, all options held by a key employee of the Company or its subsidiaries become immediately exercisable, whether or not exercisable at the time, upon the death or disability, and shall be exercisable within twelve (12) months after the date of death or disability, but in no event later than the expiration date of such Options.

No option is to be exercisable more than ten years from the date the option is granted.

Payment of Exercise Price for Options. Under the Plans, payment for shares purchased upon exercise of an option may be made by any of the following methods, subject to certain requirements: (i) in cash, (ii) in Ordinary Shares which have been held by the participant for not less than six months prior to the exercise of the option, valued at its Fair Market Value (as defined) on the date of exercise, (iii) in cash by a broker-dealer to whom the holder of the option has submitted an exercise notice consisting of a fully endorsed option, or (iv) by such other medium of payment as the Board or the Committee, as applicable, in its sole discretion, shall authorize, or by any combination of (i), (ii), or (iii), at the sole discretion of the Board or the Committee, as applicable, or in any manner provided in the option agreement, except by directing the Company to withhold Ordinary Shares otherwise issuable upon the exercise of the Option in payment of the exercise price.

Transfer of Options. Under the Plans, an option may not be sold, assigned or otherwise transferred except to:

· the spouse or lineal descendant of a plan participant;

· the trustee of a trust for the primary benefit of a plan participant’s spouse or lineal descendant;

· a partnership of which a plan participant and lineal descendants are the only partners; or

· a tax exempt organization.

These assignments are only permitted if the assigning option holder does not receive any compensation in connection with the assignment and the assignment is expressly approved by the Board or Committee, as the case may be.

2019 Stock option and incentive plan (Cont’d)

The Company indemnifies the members of any Committee and its delegates and the Chief Executive Officer against (a) the reasonable expenses (as such expenses are incurred), including attorneys’ fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding (or in connection with any appeal therein), to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any option granted under the Plan; and (b) all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member or delegatee, as applicable, is liable for gross negligence or gross misconduct in the performance of his or her duties; provided that within 60 days after institution of any such action, suit or proceeding a Committee member or delegatee shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same.

The Board may terminate, suspend, or amend the Plan at any time without the authorization of shareholders to the extent allowed by law or the rules of any market on which the Company’s shares are then listed or quoted.

During the year ended December 31, 2019, the Company granted such options to its officers, directors and employees, which allow them to purchase up to 51,000 ordinary shares. The exercise price of all options granted is US$2.60 per share. The stock options granted are exercisable on January 1, 2022 and terminate on April 18, 2029.

The Company estimate the fair value of the options granted under the Binomial pricing model at US$2.324 per share.

Changes in outstanding options under various plans mentioned above were as follows:

	Year ended December 31,
	2021					2020				2019
	Number of options		Weighted average exercise price			Number of options		Weighted average exercise price		Number of options		Weighted average exercise price
			US$					US$				US$
Outstanding, beginning of year		51,000		2.60			51,000		2.60		-		-
Granted		-		-			-		-		51,000		2.60
Bonus shares adjustment		34,000		(1.04	)		-		-		-		-
Outstanding, end of year		85,000		1.56			51,000		2.60		51,000		2.60
Exercisable, end of year		-		-			-		-		-		-

As of December 31, 2021, 2020 and 2019, there was no unrecognized stock-based compensation expense related to unvested stock options. The compensation expense for the year is approximately US$55,000 (2020: US$54,000; 2019: US$10,000).

The Group applies the provisions of ASC No. 718-10, which requires to recognise expense related to the fair value of stock-based compensation awards, including employee stock options.

The Binomial option-pricing model is used to estimate the fair value of the options granted. This requires the input of subjective assumptions, including the expected volatility of stock price, expected option term, expected risk-free rate over the expected option term and expected dividend yield rate over the expected option term. Because changes in subjective input assumptions can materially affect the fair value estimate, in directors’ opinion, the existing model may not necessarily provide a realisable measure of the fair value of the stock options. Expected volatility is based on historical volatility in the 180 days prior to the issue of the options. Expected option term and dividend yield rate are based on historical trends. Expected risk-free rate is based on US Treasury securities with similar maturities as the expected terms of the options at the date of grant.

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Pension plan

12 Months Ended

Dec. 31, 2021

Pension plan

18 Pension plan

Prior to December 1, 2000, Far East had only one defined contribution pension plan for all its Hong Kong employees. Under this plan, all employees were entitled to pension benefits equal to their own contributions plus 50% to 100% of individual fund account balances contributed by Far East, depending on their years of service with Far East. Far East was required to make specific contributions at approximately 10% of the basic salaries of the employees to an independent fund management company.

With the introduction of the Mandatory Provident Fund Scheme (“MPF scheme”), a defined contribution scheme managed by an independent trustee on December 1, 2000, Far East and its employees who joined Far East subsequently make monthly contributions to the scheme at 5% of the employee’s cash income as defined under the Mandatory Provident Fund Schemes Ordinance. Under the MPF scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employees' relevant income, subject to a cap of monthly relevant income of HK$30,000. Contributions to the plan vest immediately.

During the years ended December 31, 2021, 2020 and 2019, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately US$225,000, US$104,000 and US$332,000 respectively.

As stipulated by the rules and regulations in the PRC, the PRC’s subsidiaries contributes to state-sponsored retirement plans for its employees in Mainland China. PRC’s subsidiaries’ contribution approximately 16% of the basic salaries of its employees, and have no further obligations for the actual payment of pension or post-retirement benefits beyond the annual contributions. The state-sponsored retirement plans are responsible for the entire pension obligations payable to retired employees.

ZHEJIANG TIANLAN

Pension plan

18 Pension plan

As stipulated by the rules and regulations in the PRC, the Group contributes to state-sponsored retirement plans for its employees in Mainland China.  The Group contributes approximately 12% to 14% of the basic salaries of its employees, and has no further obligations for the actual payment of pension or post-retirement benefits beyond the annual contributions.  The state-sponsored retirement plans are responsible for the entire pension obligations payable to retired employees.

During the years ended December 31, 2021, 2020 and 2019, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately RMB6,003,000, RMB5,645,000 and RMB5,449,000 respectively.

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Risk factors

12 Months Ended

Dec. 31, 2021

Risk factors

19 Risk factors

Financial risk factors

The Group’s activities expose it to a variety of financial risks: credit risk and foreign exchange rate risk.

(i) Credit risk

The Group has no significant concentration of credit risk, cash in banks in Hong Kong and PRC is insured with limit of approximately US$64,000 and US$72,000, respectively per bank per each depositor. Uninsured cash in banks and restricted cash balances in Hong Kong and PRC are of approximately US$5,327,000 (2020: US$4,594,000). Cash transactions are limited to high credit quality banks.

(ii) Foreign exchange rate risk

The Group operates in Hong Kong, the PRC and trades with both local and overseas customers and suppliers, and is exposed to foreign exchange rate risk arising from various currency exposures, primarily with respect to purchases in Hong Kong dollars, Renminbi and Euros. Foreign exchange risk arises from committed and unmatched future commercial transactions, such as confirmed import purchase orders and sales orders, recognized assets and liabilities, and net investment in the PRC operations.

ZHEJIANG TIANLAN

Risk factors

19 Risk factors

Financial risk factors

The Group’s activities expose it mainly to credit risk. 

Credit risk

The Group has no significant concentration of credit risk, cash in banks in PRC is insured with limit of approximately RMB500,000, per bank per each depositor. Uninsured cash in banks and restricted cash balances in PRC are of approximately RMB48,855,000 (2020: RMB44,494,000). Cash transactions are limited to high credit quality banks.

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Risk and uncertainty

12 Months Ended

Dec. 31, 2021

Risk and uncertainty

Risk and uncertainty

20 Risk and uncertainty

The outbreak of COVID-19 worldwide and the various public health measures put in place in many countries to prevent the spread of COVID-19 have disrupted the overall business of the Group at different levels of time and regions in 2020. After the Chinese new year in February 2020, the Group’s domestic businesses were affected by the lock-down of various cities implemented in PRC, resulting in the forced suspension of some local operations until the gradual resumption of work beginning from late March to early April 2020. Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Group’s consolidated financial position, results of its operations, the specific impact is not readily determinable as of the date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Related party transactions

12 Months Ended

Dec. 31, 2021

Related party transactions

21 Related party transactions

Other than compensation to directors and stock options available to the directors and disposal of long-term investment to associate Blue Sky for a total consideration of approximately US$148,000 with nil gain or loss on disposal during the year ended December 31, 2020, there were no transactions with other related parties in the years 2021, 2020 and 2019.

ZHEJIANG TIANLAN

Related party transactions

20 Related party transaction

There were purchase of a subsidiary from shareholders of the Company with total consideration of approximately RMB Nil (2020: RMB4,590,000), engineering service income from an investment of approximately RMB273,000 (2020: RMB2,518,000) and remuneration to key management personnel of approximately RMB1,209,000 (2020: RMB 1,400,000).

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Commitments and contingencies

12 Months Ended

Dec. 31, 2021

Commitments and contingencies

22 Commitments and contingencies

(i) Banking facilities

As at December 31, 2021 and 2020, the Group had various banking facilities available for overdraft and import and export credits from which the Group can draw up to approximately US$897,000 and US$897,000 respectively, of which approximately US$605,000 and US$596,000 were utilised for issuance of bank guarantees as security for the performance of various contracts with customers and import loans. The various banking facilities are secured by a bank deposit of approximately US$897,000 and various blanket counter indemnities and counter indemnities. The Group undertakes to maintain its tangible net worth not at any time less than approximately US$3,846,000 and was in compliance with the covenant. The weighted average interest rate for import loans as at December 31, 2021 was 5% per annum (December 31, 2020: 4.9% per annum). For the years ended December 31, 2021 and 2020, the average dollar amount of the bank borrowings was approximately US$219,000 and US$457,000 respectively and average interest rates were approximately 5% and 4.9% per annum respectively for the years ended December 31, 2021 and 2020.

(ii) Non-controlling interest put option

The Group granted the non-controlling interest of Yixing Pact Environmental Technology Co., Ltd. and Pact Asia Pacific Limited a put option, which is effective from 2009, requiring the Group to acquire part or all remaining shares of these two companies at a purchase price per share calculated by 5.2 times of their average net income for the three prior fiscal years divided by total number of shares outstanding at the time of exercise of such option. Such put option did not have an expiry date.

(iii) Insurance

The Group carries insurance policies to cover various risks, primarily general liability, automobile liability, workers’ compensation and employee medical expenses under which we are liable to reimburse the insurance company for a portion of each claim paid.

(iv) Purchase commitments

To manage the risk of changes in material prices and subcontracting costs used in tendering bids for engineering contracts, most of the time, the Group obtains firm quotations from suppliers and subcontractors before submitting a bid. These quotations do not include any quantity guarantees. As soon as the Group is advised that its bid is successful, the Group enters into firm contracts with most of its materials suppliers and sub-contractors, thereby mitigating the risk of future price variations affecting the contract costs.

(v) Litigations

The Group is now and may in the future be involved as a party to various legal proceedings that are incidental to the ordinary course of business. Management, after consultation with legal counsel, does not believe that the outcome of these actions will have a material impact on the consolidated financial statements of the Group. There are no significant unresolved legal issues as of December 31, 2021 and 2020.

(vi) Contingencies

The Group accounts for loss contingencies in accordance with ASC Topic 450 and other related guidelines. As of December 31, 2021 and 2020, the Group’s management is of the opinion that there are no commitments and contingencies to account for.

ZHEJIANG TIANLAN

Commitments and contingencies

21 Commitments and contingencies

(i) Insurance

The Group carries insurance policies to cover various risks, primarily general liability, automobile liability, workers’ compensation and employee medical expenses under which we are liable to reimburse the insurance company for a portion of each claim paid.

(ii) Purchase commitments

To manage the risk of changes in material prices and subcontracting costs used in tendering bids for contracts, most of the time, the Group obtains firm quotations from suppliers and subcontractors before submitting a bid. These quotations do not include any quantity guarantees. As soon as the Group is advised that its bid is successful, the Group enters into firm contracts with most of its materials suppliers and sub-contractors, thereby mitigating the risk of future price variations affecting the contract costs.

(iii) Litigation

The Group is now and may in the future be involved as a party to various legal proceedings that are incidental to the ordinary course of business. Management, after consultation with legal counsel, does not believe that the outcome of these actions will have a material impact on the consolidated financial statements of the Group. There are no significant unresolved legal issues as of December 31, 2021 and 2020.

(v) Contingencies

The Group accounts for loss contingencies in accordance with ASC Topic 450 and other related guidelines. As of December 31, 2021 and 2020, the Group’s management is of the opinion that there are no commitments and contingencies to account for.

(vi) Operating leases

The Group has no operating leases expense during the year ended December 31, 2021 (2020 and 2019: RMB Nil). At December 31, 2021, the Group has no future minimum lease payments under non-cancellable operating leases.

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Segment information

12 Months Ended

Dec. 31, 2021

Segment information

Segment information

23 Segment information

(i) The Group reports under two segments: Trading and manufacturing, and Engineering.

Operating income represents total revenues less operating expenses, excluding other expense, interest and income taxes. The identifiable assets by segment are those used in each segment’s operations. Intersegment transactions are not significant and have been eliminated to arrive at consolidated totals.

	Year ended December 31,
	2021			2020			2019
	US$’000			US$’000			US$’000
Revenue
Trading and manufacturing		9,619			9,476			11,877
Engineering		11,769			3,881			5,522
		21,388			13,357			17,399
Operating income / (loss)
Trading and manufacturing		140			(488	)		(102	)
Engineering		846			(1,027	)		(158	)
Unallocated corporate expenses		(205	)		(186	)		(180	)
		781			(1,701	)		(440	)

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Depreciation:
Trading and manufacturing		32		39		54
Engineering		6		10		15
		38		49		69
Capital expenditures, gross
Trading and manufacturing		1		2		17
Engineering		3		9		4
		4		11		21

(i) The Group reports under two segments: Trading and manufacturing, and Engineering. (Cont’d)

	December 31,
	2021		2020
	US$’000		US$’000
Assets
Trading and manufacturing		7,969		7,877
Engineering		13,281		12,218
		21,250		20,095
Liabilities
Trading and manufacturing		3,428		2,645
Engineering		3,021		2,987
		6,449		5,632

(ii) Geographical analysis of revenue by customer location is as follows:

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Revenue -
The PRC		13,217		5,072		6,886
Hong Kong		7,937		8,024		10,169
Others		234		261		344
		21,388		13,357		17,399

(iii) Long-lived assets ⁽¹⁾

Geographical analysis of long-lived assets is as follows:

	December 31,
	2021		2020
	US$’000		US$’000
Hong Kong		25		47
The PRC		190		212
		215		259

⁽¹⁾  Long-lived assets represent property, plant and equipment, net.

(iv) Major suppliers

Details of individual suppliers accounting for more than 5% of the Group’s purchases are as follows:

	Year ended December 31,
	2021			2020			2019
Supplier A		42	%		30	%		53	%
Supplier B		13	%		10	%		7	%
Supplier C		6	%		9	%		6	%
Supplier D		6	%		6	%		6	%
Supplier E		5	%		5	%		-
Supplier F		-			12	%		-

(v) Major customers

Details of individual customers accounting for more than 5% of the Group’s revenue are as follows:

	Year ended December 31,
	2021			2020			2019
Customer A		15	%		9	%		19	%
Customer B		-			8	%		-
Customer C		-			6	%		10	%
Customer D		-			-			5	%

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Subsequent events

12 Months Ended

Dec. 31, 2021

Subsequent events

24 Subsequent event

On December 16, 2021, the Company announced that the Company’s board of directors authorized the issuance of bonus shares (the “Bonus Shares”), which are issuable on January 21, 2022 to shareholders of record as of January 7, 2022 (the “Record Date”). Shareholders of record on the Record Date will receive one (1) ordinary share for every two (2) ordinary shares held. All issuances resulting in a fractional share will be rounded down to the next whole share. The common stock began trading on a split-adjusted basis on January 24, 2022. The effect of the stock split in form of bonus shares has been reflected retroactively in the financial statements and net income per ordinary share computations.

ZHEJIANG TIANLAN

Subsequent events

22 Subsequent event

On April 22, 2022, the director of the Company proposed a cash dividend of an aggregate of approximately RMB9,082,000, which dividend was paid to all holders of record subject to approval in shareholders’ annual general meeting.

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Summary of significant accounting policies (Policies)

12 Months Ended

Dec. 31, 2021

Basis of consolidation

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The accompanying consolidated financial statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated.

Subsidiaries

Subsidiaries are all entities over which the Group has control; has the power to appoint or remove the majority of the members of the board of directors; has the right to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.

Investments in affiliates

We account for our interest in an investment using the equity method of accounting per Accounting Standards Codification (“ASC”) No. 323, “Investments - Equity Method and Joint Ventures” if we are not the primary beneficiary of a VIE or do not have a controlling interest. The investment is recorded at cost and the carrying amount is adjusted periodically to recognize our proportionate share of income or loss, additional contributions made and dividends and capital distributions received. We record the effect of any impairment or other than temporary decrease in the value of the investment.

In the event a partially owned equity affiliate were to incur a loss and our cumulative proportionate share of the loss exceeded the carrying amount of the equity method investment, application of the equity method would be suspended and our proportionate share of further losses would not be recognized unless we committed to provide further financial support to the affiliate. We would resume application of the equity method once the affiliate became profitable and our proportionate share of the affiliate’s earnings equals our cumulative proportionate share of losses that were not recognized during the period the application of the equity method was suspended.

Revenue recognition

Our revenue is derived from long-term contracts for customers in our engineering segment, as well as short-term contracts for customers in our trading and manufacturing segment. Accounting treatment for these contracts in accordance with Accounting Standards Update (“ASU”) 2014-09 (Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customer), is as follows:

Performance obligations satisfied over time (Engineering services)

Recognition of performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Engineering service projects typically span between several days to over 5 years. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. Some contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle (engineering).

Revenues are recognized as our obligations are satisfied over time, by reference to the progress towards complete satisfaction of that performance obligation.

If the Group expects the reference to progress certificates issued by the customers, with additional adjustments where necessary, depicts the Group’s performance in transferring control of goods or services promised to customers for individual projects, the Group satisfies the performance obligation over time and therefore, recognizes revenue over time in accordance with the output method for measuring progress. Under output method, revenue recognition is based on the stage of completion of the contracts, provided that the stage of contract completion and the gross billing value of contracting work can be measured reliably. The stage of completion of a contract is established by reference to the construction works certified by customers.

Remaining performance obligations (“RPOs”)

RPOs represent the amount of revenues we expect to recognize in the future from our contract commitments on projects and are hereafter referred to as “Backlog”. Backlog includes the entire expected revenue values for subsidiary we consolidate. Backlog may not be indicative of future operating results, and projects included in Backlog may be canceled, modified or otherwise altered by customers.

The Group had the following backlog:

	2021		2020
	US$’000		US$’000
Engineering segment		5,400		11,581

Unrecognized contract revenue which is expected to be recognized in next 12 months is approximately US$5,400,000 (2020: US$11,581,000).

Performance obligations satisfied over time (Engineering services) (Cont’d)

Variable consideration

Contract modifications through change orders, claims and incentives are routine in the performance of the Group’s contracts to account for changes in the contract specifications or requirements. In most instances, contract modifications are not distinct from the existing contract due to the significant integration service provided in the contract and are accounted for as a modification of the existing contract and performance obligation. Either the Group or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Change orders that are unapproved as to both price and scope are evaluated as claims. The Group considers claims to be amounts in excess of approved contract prices that the Group seeks to collect from its customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.

The Group estimates variable consideration for a performance obligation at the most likely amount to which the Group expects to be entitled (or the most likely amount the Group expects to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which the Group will be entitled (or will be incurred in the case of liquidated damages). The Group includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Group’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Group.

The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in the Group’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.

Performance obligations satisfied at a point-in-time (Trading and manufacturing)

Revenue for our trading and manufacturing contracts is recognized at a point in time. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been delivered to the point of receipt by customer.

Classification of contract assets and liabilities

For revenue recognized associated with its contracts with customers over time, for which the Group has an enforceable right to receive compensation. Many of our contracts contain specific provisions that determine when the Group can bill for its work performed under these contracts.

Any revenue earned on a contract that has not yet been billed to the customer is recorded as a contract asset on the Group’s consolidated balance sheets.

The Group’s consolidated balance sheets present contract liabilities that contain deferred revenue that represent any costs incurred on contracts in process for which revenue has not yet been recognized.

Rental income

Rental income from operating leases is recognized in consolidated statements of operations and comprehensive income /(loss) on a straight-line basis over the term of the relevant lease.

Research and development costs

Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately US$61,000, US$497,000 and US$35,000 for the years ended December 31, 2021, 2020 and 2019 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss).

Advertising and promotional expenses

Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately US$7,000, US$7,000 and US$13,000 for the years ended December 31, 2021, 2020 and 2019 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss).

Income taxes

The Group follows the liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Group also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized.

The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Group does not believe it has any uncertain tax positions through the periods ended December 31, 2021, 2020 and 2019 respectively which would have a material impact on the Group’s consolidated financial statements.

Interest and penalties related to uncertain income tax positions are included in income tax expense on the Group’s consolidated statements of operations and comprehensive income / (loss). Interest and penalties actually incurred are charged to interest expense and the other income, respectively if applicable.

The Group files tax returns in Hong Kong and the PRC. The tax returns for 2021, 2020 and 2019 are subject to examination by Hong Kong and PRC taxing authorities, commencing with the first year filed.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, and bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal. There were no cash equivalents as of December 31, 2021 and 2020.

Restricted cash

Restricted cash represents cash deposits retained with banks in the PRC for issuance of performance bonds and guarantees to the customers and cash deposited by the Group into separate accounts and designated as collateral for standby letters of credit in the same amount in accordance with contractual agreements.

Accounts receivable and allowance for doubtful accounts

The Group does not charge interest to its customers and carries its customer receivables at their face amounts, less an allowance for doubtful accounts. As is common practice in the industry, the Group classifies all accounts receivable as current assets.

The Group grants trade credit, on a non-collateralized basis, to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Group analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.

Inventories

Inventories are measured using the first-in, first-out method and are stated at the lower of cost or net realizable value. Cost of finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity. Allowance is made for obsolete, slow moving or defective items, where appropriate.

Property, plant and equipment and land use right, net

Property, plant and equipment is carried at cost. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in consolidated income from operations. The cost of maintenance and repairs is charged to expense as incurred. Property, plant and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property, plant and equipment exceeds its fair value, an impairment charge would be recorded in the consolidated statement of operations.

Depreciation of property, plant and equipment are computed using the straight-line method over the assets’ estimated useful lives as follows:

Office premises	47 to 51 years
Leasehold improvements	over terms of the leases or the useful lives whichever is less
Furniture, fixtures and office equipment	3 to 5 years
Motor vehicles	4 years
Testing equipment	3 years

Long-term investment

The Group has elected to apply the measurement alternative to equity securities without readily determinable fair values. As such, the Group’s non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the investee.

Lease arrangements

In the ordinary course of business, the Group enters into a variety of operating lease arrangements.

Operating right-of-use leases are included in operating lease right-of-use assets, current portion of long-term operating lease obligations and long-term operating lease obligations, net of current maturities on the Group’s consolidated balance sheets, as appropriate. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Group’s leases do not provide an implicit rate to calculate present value, the Group determines this rate by estimating the Group’s incremental borrowing rate, utilizing the borrowing rates associated with the Group’s various debt instruments. The operating lease right-of-use asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Goodwill

Goodwill is not amortized. The Group performs either a qualitative or quantitative assessment to review goodwill for impairment on an annual basis. This assessment is performed at the beginning of the fourth quarter, or when circumstances change, such as a significant adverse change in the business climate or the decision to sell a business, both of which would indicate that impairment may have occurred.

A qualitative assessment considers financial, industry, segment and macroeconomic factors, if the qualitative assessment indicates a potential for impairment, a quantitative assessment is performed to determine if impairment exists. The quantitative assessment begins with a comparison of the fair value of the reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss would be recognized in an amount equal to that excess, limited to the total amount of the goodwill allocated to the reporting unit. If the carrying value of goodwill exceeds its implied fair value, an impairment charge would be recorded in the consolidated statements of operations and comprehensive income / (loss).

As a result of the annual qualitative review process in 2021 and 2020, the Group determined it was not necessary to perform a quantitative assessment.

Foreign currency translation

The assets and liabilities of the Group’s subsidiaries denominated in currencies other than U.S. dollars are translated into U.S. dollars using the applicable exchange rates at the consolidated balance sheet date. For consolidated statements of operations and comprehensive income/(loss)’ items, amounts denominated in currencies other than U.S. dollars were translated into U.S. dollars using the average exchange rate during the period. Equity accounts were translated at their historical exchange rates. Net gains and losses resulting from translation of foreign currency on consolidated financial statements are included in the consolidated statements of stockholders’ equity as accumulated other comprehensive income. Foreign currency transaction gains and losses are reflected in the consolidated statements of operations and comprehensive income / (loss).

Comprehensive income / (loss)

We account for comprehensive income in accordance with ASC No. 220, “Comprehensive Income”, which specifies the computation, presentation and disclosure requirements for comprehensive income / (loss). Comprehensive income / (loss) consists of net income / (loss) and foreign currency translation adjustments, primarily from fluctuations in foreign currency exchange rates of our foreign subsidiaries with a functional currency other than the U.S. dollar.

Ordinary share

On November 22, 2011, the Company filed Amended and Restated Memorandum and Articles of Association with the Registry of Corporate Affairs of the BVI Financial Services Commission that on November 29, 2011 became effective as of the filing date to amend the Company’s ordinary shares of US$0.01 par value capital stock to no par value capital stock. Treasury stock is accounted for using the cost method. When treasury stock is reissued, the value is computed and recorded using a weighted-average basis.

On October 8, 2019, the Company had stock split in the form of bonus shares at the rate of one ordinary share for every two ordinary shares held, creating 1,030,950 new shares of common stock.

On March 3, 2021, the Company had stock split in the form of  bonus shares at the rate of two ordinary shares for every three ordinary shares held, creating 2,061,900 new shares of common stock.

The effect of the above stock splits have been reflected retroactively in the financial statements and net income per ordinary share computations.

Net income per ordinary share

The Group computes net income per ordinary share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to Euro Tech Holdings Company Limited are computed by dividing net income attributable to Euro Tech Holdings Company Limited by the weighted average number of ordinary shares outstanding during the period. The Group reports both basic earnings per share, which is based on the weighted average number of ordinary shares outstanding, and diluted earnings per share, which is based on the weighted average number of ordinary shares outstanding and all dilutive potential ordinary shares outstanding.

Outstanding stock options are the only dilutive potential shares of the Company.

Stock-based compensation

The Group determines compensation expense for stock-based awards based on the estimated fair values at the grant date and recognizes the related compensation expense over the vesting period. The Group uses the straight-line amortization method to recognize compensation expense related to stock-based awards that have only service conditions. This method recognizes stock compensation expense on a straight-line basis over the requisite service period for the entire award.

Use of estimates

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Group require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from engineering contracts over time, the valuation of goodwill, and contract assets and contract liabilities. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.

Related parties

Related parties are affiliates of the Group; entities for which investments are accounted for by the equity method by the Group; trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; principal owners of the Group; its management; members of the immediate families of principal owners of the Group and its management; and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Another party also is a related party if it can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

Segment information

The Group reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Group’s reportable segments. The Group categorises its operations into two business segments: Trading and manufacturing, and Engineering.

Concentrations

Financial instruments that potentially subject the Group to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable, net. The Group maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions.

The Group is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Group’s top customers accounting for more than 5% of the Group’s revenue generated approximately 15%, 23%, and 34% of consolidated revenues for the years ended December 31, 2021, 2020 and 2019, respectively.

The Group grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, general contractors, owners and managers of industrial properties and government departments.

Consequently, the Group is subject to potential credit risk related to changes in business and economic factors. At December 31, 2021, three (2020: three) of the Group’s customers individually exceeded 10.0% of accounts receivable, net. The Group believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.

Finance costs

Interest relating to loans repaid is expensed in the period the repayment occurs.

Warranties

The suppliers of the Group offer a standard one-year warranty to end customers of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis.

Shipping and handling costs

Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues.

Statutory reserves

The Group is required to make appropriation to reserve funds, comprising the statutory reserve fund and statutory staff welfare fund, based on after-tax net income determined with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations to the statutory reserve fund is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve fund is equal to 50% of the entities’ registered capital.

Fair value measurements

The Group uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of December 31, 2021 and 2020, the Group determined that the carrying values of cash and cash equivalents, restricted cash, accounts receivable, net, prepayments and other current assets, contract assets, bank borrowings, accounts payable, contract liabilities, other payables and accrued expenses approximate their fair values because of the short-term nature of these instruments.

Recent accounting pronouncements

Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Group considers the applicability and impact of all ASUs. The Group, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Group or may have minimal impact on its consolidated financial statements.

Recently adopted accounting pronouncements

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 ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The Group adopted this ASU in January 2021 and there was no effect on the consolidated financial statements or disclosures.

In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),” an amendment clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivative instruments. The Group adopted this guidance in January 2021 and there was no effect on the consolidated financial statements or disclosures.

Recently issued accounting pronouncements not yet adopted

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” this ASU affects a wide variety of Topics in the Codification. They apply to all reporting entities within the scope of the affected accounting guidance. More specifically, this ASU, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose because the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure Section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). Those amendments are not expected to change current practice. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early application of the amendments is permitted for and varies based on the entity. The amendments should be applied retrospectively and at the beginning of the period that includes the adoption date. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.

Reclassification

Certain reclassifications have been made to prior year amounts to conform with the current year presentation.

Non-controlling interests

For entities that are consolidated, but not 100% owned, a portion of the income or loss and equity is allocated to owners other than the Group. The aggregate of the income or loss and corresponding equity that is not owned by the Group is included within non-controlling interests in the consolidated financial statements.

Non-controlling interests is presented as a separate component of equity in the consolidated balance sheets. Net income includes the net income attributable to the holders of non-controlling interests in the consolidated statements of operations and comprehensive income / (loss). Profits and losses are allocated to non-controlling interests in proportion to their relative ownership interests regardless of their basis.

Impairment of long lived assets

Long-lived assets such as property, plant and equipment with finite lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment for the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Group recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. There was no impairment of long lived assets during 2021, 2020 and 2019, respectively.

Effect of the Restatement on the Consolidated Financial Statements

Subsequent to the issuance of the Company’s consolidated financial statements for the year ended December 31, 2021 on May 13, 2022, certain errors were identified,

(i)	(loss) / gain on disposal of property, plant and equipment not included in operating income / (loss)
(ii)	bonus share issuances were not accounted for and disclosed as stock splits in the consolidated statements of shareholders' equity, earnings per share computations for all periods presented

The impact of the restatement on the December 31, 2021 financial statements is reflected in the following tables:

CONSOLIDATED BALANCE SHEETS

	December 31, 2021
	As Previously Reported	As Restated
	US$’000	US$’000
Ordinary share	5,322,459 no par value shares issued as of December 31, 2021 (2020: 3,260,559)	7,899,832 no par value shares issued as of December 31, 2021 and 2020

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME / (LOSS)

	December 31
	As Previously Reported			As Restated
	US$’000			US$’000
Operating income / (loss)
2021		781			771
2020		(1,701	)		(272	)
2019		(440	)		(445	)
Net income / (loss) per ordinary share attributable to Euro Tech Holdings Company Limited’s shareholders
- Basic
2021	$	US0.19		$	US0.13
2020	$	US0.25		$	US0.10
2019	$	US(0.06	)	$	US(0.02	)
- Diluted
2021	$	US0.19		$	US0.13
2020	$	US0.25		$	US0.10
2019	$	US(0.06)		$	US(0.02	)
Weighted average number of ordinary shares outstanding
- Basic
2021		5,154,759			7,732,132
2020		3,092,859			7,732,132
2019		2,301,993			7,732,132
- Diluted
2021		5,154,759			7,732,132
2020		3,092,859			7,732,132
2019		2,301,993			7,732,132

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	December 31
	As Previously Reported		As Restated
	US$’000		US$’000
Number of ordinary share
Balance at December 31, 2018		2,229,609		7,899,832
Balance at December 31, 2019		3,260,559		7,899,832
Balance at December 31, 2020		3,260,559		7,899,832
Balance at December 31, 2021		5,322,459		7,899,832

Commensurate adjustments have been made to Notes 2 (s), 11, 16 and 24 to the consolidated financial statements.  

ZHEJIANG TIANLAN

Basis of consolidation

The accompanying consolidated financial statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated.

Subsidiaries

Subsidiaries are all entities over which the Group has control; has the power to appoint or remove the majority of the members of the board of directors; has the right to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.

Revenue recognition

Our revenue is derived from long-term contracts for customers, as well as short-term contracts for customers. Accounting treatment for these contracts in accordance with Accounting Standards Update (“ASU”) 2014-09 (Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers), is as follows:

Performance obligations satisfied over time (Design, installation and operation management services)

Recognition of performance obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Engineering projects typically span between 12 to 36 months. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Some contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle (design, installation and operation management services).

Revenues are recognized as our obligations are satisfied over time, using the ratio of project costs incurred to estimated total costs for each contract because of the continuous transfer of control to the customer as all of the work is performed at the customer’s site and, therefore, the customer controls the asset as it is being installed. This continuous transfer of control to the customer is further supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay the Group for costs incurred plus a reasonable profit and take control of any work in process. This cost-to-cost measure is used because management considers it to be the best available measure of progress on these contracts. Contract costs include all direct material, labor, subcontract and other costs.

Items excluded from cost-to-cost

Pre-contract costs are generally not material and are charged to expense as incurred, but in certain cases pre-contract recognition may be deferred if specific probability criteria are met.

Variable consideration

Contract modifications through change orders, claims and incentives are routine in the performance of the Group’s contracts to account for changes in the contract specifications or requirements. In most instances, contract modifications are not distinct from the existing contract due to the significant integration of services provided in the contract and are accounted for as a modification of the existing contract and performance obligation. Either the Group or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Change orders that are unapproved as to both price and scope are evaluated as claims. The Group considers claims to be amounts in excess of approved contract prices that the Group seeks to collect from its customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.

The Group estimates variable consideration for a performance obligation at the most likely amount to which the Group expects to be entitled (or the most likely amount the Group expects to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which the Group will be entitled (or will incur in the case of liquidated damages). The Group includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Group’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Group.

The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in the Group’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.

Performance obligations satisfied at a point-in-time (Sales of equipment)

Revenue for our sales contracts is recognized at a point in time. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been delivered to the point of receipt by customer.

Research and development costs

Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately 23,419,000, RMB28,589,000 and RMB19,018,000 for the years ended December 31, 2021, 2020 and 2019 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations.

Income taxes

The Group follows the liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Group also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized.

The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Group does not believe it has any uncertain tax positions through the periods ended December 31, 2021, 2020 and 2019 respectively which would have a material impact on the Group’s consolidated financial statements.

The Group files tax returns in the PRC. The tax returns for 2021, 2020 and 2019 are subject to examination by the PRC taxing authorities, commencing with the first year filed.

Cash and cash equivalents

Cash and cash equivalents consist of bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal and uninsured. There were no cash equivalents as of December 31, 2021 and 2020.

Accounts receivable and allowance for doubtful accounts

The Group does not charge interest to its customers and carries its customer receivables at their face amounts, less an allowance for doubtful accounts. As is common practice in the industry, the Group classifies all accounts receivable as current assets.

The Group grants trade credit, on a non-collateralized basis, to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Group analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.

Inventories

Inventories are measured using the weighted average method and are stated at the lower of cost or net realizable value. Cost of finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity.

Property, plant and equipment and land use right, net

Property, plant and equipment is carried at cost. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in consolidated income from operations. The cost of maintenance and repairs is charged to expense as incurred. Property, plant and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property, plant and equipment exceeds its fair value, an impairment charge would be recorded in the consolidated statement of operations.

Land in the PRC is owned by the PRC government. The government in the PRC, according to PRC Law, may sell the right to use the land for a specific period of time. Thus, all of the Group’s land purchases in the PRC are considered to be leasehold land and are classified as land use right.

Depreciation of property, plant and equipment and amortization of land use right are computed using the straight-line method over the assets’ estimated useful lives as follows:

Land use right	Over terms of the leases
Buildings and leasehold improvements	11 to 50 years, with 5% residual value
Furniture, fixtures and office equipment	5 years, with 5% residual value
Motor vehicles	5 years, with 5% residual value
Plant and machineries	5 to 10 years, with 5% residual value

Lease arrangements

The Group adopted ASU No. 2016-02, Leases (Topic 842). The Group leases certain equipment under finance leases. The economic substance of the leases is a financing transaction for acquisition of the equipment. Accordingly, the right-of-use assets for these leases are included on the Group’s consolidated balance sheets in property, plant and equipment, net of accumulated depreciation, amortization and impairment losses, with a corresponding amount recorded in current portion of long-term finance lease obligations. The finance lease assets are amortized over the life of the lease or, if shorter, the life of the leased asset, on a straight-line basis and included in depreciation expense. The financing component associated with finance lease obligations is included in interest expense. Generally, for the Group’s finance leases an implicit rate to calculate present value is provided in the lease agreement, however if a rate in not provided the Group determines this rate by estimating the Group’s incremental borrowing rate, utilizing the borrowing rates associated with the Group’s various debt instruments.

The Group determines if an arrangement is a lease at inception. Lease liabilities are the Group’s obligation to make lease payments arising from a lease and are measured on a discounted basis.

Net income per ordinary share

The Group computes net income per ordinary share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited are computed by dividing net income attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited by the weighted average number of ordinary shares outstanding during the period.

Use of estimates

The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Group require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from contracts over time, contract assets, net and contract liabilities. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.

Related parties

Entities are considered to be related to the Group if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Group. Related parties also include principal owners of the Group, its management, members of the immediate families of principal owners of the Group and its management and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Concentrations

Financial instruments that potentially subject the Group to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable, net. The Group maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions.

The Group is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Group’s top five customers accounted for approximately 35%, 39%, and 40% of consolidated revenues for the years ended December 31, 2021, 2020 and 2019, respectively. For the years ended December 31, 2021, 2020 and 2019, one customer accounted for 16%, 16% and 17% of annual revenues, respectively.

The Group grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, general contractors, owners and managers of industrial properties.

Consequently, the Group is subject to potential credit risk related to changes in business and economic factors. At December 31, 2021 and 2020, none of the Group’s customers individually exceeded 10.0% of accounts receivable. The Group believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.

Finance costs

Interest relating to loans repaid is expensed in the period the repayment occurs.

Warranties

The suppliers of the Group offer a standard one-year warranty to end customer of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis.

Shipping and handling costs

Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues.

Statutory reserves

The Group is required to make appropriation to reserve, comprising the PRC statutory reserve, based on after-tax net income determined with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations to the PRC statutory reserve are required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital.

Fair value measurements

The Group uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of December 31, 2021 and 2020, the Group determined that the carrying values of cash, and cash equivalents, accounts receivable, net, prepayments and other current assets, contract assets, bank borrowings, accounts payable, other payables and accrued expenses and contract liabilities approximate their fair values because of the short-term nature of these instruments.

Recent accounting pronouncements

Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Group considers the applicability and impact of all ASUs. The Group, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Group or may have minimal impact on its consolidated financial statements.

Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial instruments, including trade receivables and off-balance sheet credit exposures. Under this guidance, an entity is required to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. This ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The Group adopted this ASU in January 2020 and there was no effect on the consolidated financial statements or disclosures.

Recently issued accounting pronouncements not yet adopted

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 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 Group 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 adoption of this standard is not expected to have a material impact on the Group’s consolidated financial statements or disclosures.

In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),” an amendment clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivative instruments. The guidance is effective for fiscal years beginning after December 15, 2020. ASU 2020-01 will become effective for the Group in fiscal 2022. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” this ASU affects a wide variety of Topics in the Codification. They apply to all reporting entities within the scope of the affected accounting guidance. More specifically, this ASU, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose because the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure Section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). Those amendments are not expected to change current practice. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early application of the amendments is permitted for and varies based on the entity. The amendments should be applied retrospectively and at the beginning of the period that includes the adoption date. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.

Non-controlling interests

For entities that are consolidated, but not 100% owned, a portion of the income or loss and equity is allocated to owners other than the Group. The aggregate of the income or loss and corresponding equity that is not owned by the Group is included within non-controlling interests in the consolidated financial statements.

Non-controlling interests is presented as a separate component of equity in the consolidated balance sheets. Net income includes the net income attributable to the holders of non-controlling interests in the consolidated statements of operations and comprehensive income / (loss). Profits and losses are allocated to non-controlling interests in proportion to their relative ownership interests regardless of their basis.

Basis of presentation

The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Classification of contract assets and liabilities

For revenue recognized associated with its contracts with customers over time, for which the Group has an enforceable right to receive compensation. Many of our contracts contain specific provisions that determine when the Group can bill for its work performed under these contracts.

Any revenue earned on a contract that has not yet been billed to the customer is recorded as a contract asset on the Group’s consolidated balance sheets.

The Group’s consolidated balance sheets present contract liabilities that contain deferred revenue that represent any costs incurred on contracts in process for which revenue has not yet been recognized.

Intangible assets, net

The Group is currently amortizing its acquired intangible assets, consisted of patents and others, with finite-lived over periods generally ranging between three to twenty years.

Government grant income

Government grant income consists of receipt of funds to subsidize the investment cost of technical development in China. No present or future obligation arises from the receipt of such amount.

Government grants are recognized in the consolidated balance sheet initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognized as income in the consolidated statement of operations on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognized in the consolidated statements of operations over the useful life of the asset by way of reduced depreciation expenses.

Share capital

Paid in capital refers to the registered capital paid up by the shareholders of the Company.

At December 31, 2021, there were 82,572,000 shares (2020: 82,572,000 shares) issued.

Short-term and long-term investments

The Group has elected to apply the measurement alternative to equity securities without readily determinable fair values. As such, the Group’s non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the investee.

Impairment of long lived assets

Long-lived assets such as property, plant and equipment and intangible assets with finite lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment for the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Group recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets. The impairment of long-lived assets amounted to approximately RMB Nil, RMB2,742,000 and RMB Nil for the years ended December 31, 2021, 2020 and 2019 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations.

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Organization and business (Tables)

12 Months Ended

Dec. 31, 2021

Schedule of significant subsidiaries

Name of entity	Ownership interest held by the Group						Place of incorporation and principal place of operation	Principal activities
	2021			2020
Euro Tech (Far East) Limited		100	%		100	%	Hong Kong	Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems
Euro Tech Trading (Shanghai) Limited		100	%		100	%	The PRC	Inactive
Shanghai Euro Tech Limited		100	%		100	%	The PRC	Manufacturing of analytical and testing equipment
Shanghai Euro Tech Environmental Engineering Company Limited		-			100	%	The PRC	Inactive
Euro Tech (China) Limited		-			-		Hong Kong	Inactive

Name of entity	Ownership interest held by the Group						Place of incorporation and principal place of operation	Principal activities
	2021			2020
Yixing Pact Environmental Technology Co., Ltd.		58	%		58	%	The PRC	Design, manufacturing and operation of water and waste water treatment machinery and equipment
Pact Asia Pacific Limited		58	%		58	%	The British Virgin Islands	Selling of environmental protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services
Affiliate:
Zhejiang Tianlan Environmental Protection Technology Co. Ltd. (“Blue Sky”)		19.4	%*		19.4	%*	The PRC	Design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted

ZHEJIANG TIANLAN

Schedule of significant subsidiaries

Name of entity	Ownership interest held by the Group						Place of incorporation and principal place of operation	Principal activities
	2021			2020
Zhejiang Tianlan Environmental Protection Engineering Company Limited		100	%*		100	%*	PRC	Design, general contract, installation and operating management of environmental protection projects
Hangzhou Tianlan Environmental Protection Equipment Company Limited		51	%		51	%	PRC	Manufacturing and installation services of environmental protection equipment
Hangzhou Tianlan Pure Environmental Protection Technology Company Limited		38.25	%		38.25	%	PRC	Manufacturing of environmental protection equipment
Hangzhou Tiancan Environmental Technology Company Limited		80	%		80	%	PRC	Manufacturing of environmental protection equipment

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Summary of significant accounting policies (Tables)

12 Months Ended

Dec. 31, 2021

Summary of significant accounting policies

Property, plant and equipment

Office premises	47 to 51 years
Leasehold improvements	over terms of the leases or the useful lives whichever is less
Furniture, fixtures and office equipment	3 to 5 years
Motor vehicles	4 years
Testing equipment	3 years

Engineering segment backlog

	2021		2020
	US$’000		US$’000
Engineering segment		5,400		11,581

Impact of the restatement equity

	December 31, 2021
	As Previously Reported	As Restated
	US$’000	US$’000
Ordinary share	5,322,459 no par value shares issued as of December 31, 2021 (2020: 3,260,559)	7,899,832 no par value shares issued as of December 31, 2021 and 2020

Impact of the restatement income loss of opration

	December 31
	As Previously Reported			As Restated
	US$’000			US$’000
Operating income / (loss)
2021		781			771
2020		(1,701	)		(272	)
2019		(440	)		(445	)
Net income / (loss) per ordinary share attributable to Euro Tech Holdings Company Limited’s shareholders
- Basic
2021	$	US0.19		$	US0.13
2020	$	US0.25		$	US0.10
2019	$	US(0.06	)	$	US(0.02	)
- Diluted
2021	$	US0.19		$	US0.13
2020	$	US0.25		$	US0.10
2019	$	US(0.06)		$	US(0.02	)
Weighted average number of ordinary shares outstanding
- Basic
2021		5,154,759			7,732,132
2020		3,092,859			7,732,132
2019		2,301,993			7,732,132
- Diluted
2021		5,154,759			7,732,132
2020		3,092,859			7,732,132
2019		2,301,993			7,732,132

Impact of the restatement shareholders equity

	December 31
	As Previously Reported		As Restated
	US$’000		US$’000
Number of ordinary share
Balance at December 31, 2018		2,229,609		7,899,832
Balance at December 31, 2019		3,260,559		7,899,832
Balance at December 31, 2020		3,260,559		7,899,832
Balance at December 31, 2021		5,322,459		7,899,832

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Lease obligations (Tables)

12 Months Ended

Dec. 31, 2021

Lease expense

	Years ended December 31,
	2021		2020
	US$’000		US$’000
Operating lease cost		243		257
Short-term lease cost		62		64
Total lease cost		305		321

Supplemental information related to operating leases

	Years ended December 31,
	2021		2020
	US$’000		US$’000
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		196		195
Right-of-use assets obtained in exchange for lease obligations (noncash):
Operating leases		-		-

	December 31,
	2021			2020
	US$’000			US$’000
Operating leases
Operating lease right-of-use assets		238			233
Current portion of long-term operating lease obligations		175			118
Long-term operating lease obligations, net of current maturities		41			94
		216			212
Total operating lease liabilities
Weighted average remaining lease term
Operating leases		23 months			16 months
Weighted average discount rate
Operating leases		5	%		5	%

Future minimum lease payments required under operating leases

	Operating leases
	US$’000
Year ending December 31,
2022		181
2023		42
Total lease payments		223
Less: imputed interest		(7	)
Total		216

ZHEJIANG TIANLAN

Lease expense

	Years ended December 31,
	2021		2020
	RMB’000		RMB’000
Finance lease cost:
Amortization of right-of-use assets		-		5,837
Interest on lease liabilities included under cost of revenue and selling and administrative expenses		-		1,244
Total finance lease cost		-		7,081

Supplemental information related to finance leases

	Years ended December 31,
	2021		2020
	RMB’000		RMB’000
Cash paid for amounts included in the measurement of lease liabilities:
Finance cash flows from finance leases		-		11,263
Right-of-use assets obtained in exchange for lease obligations (noncash):
Finance leases		-		-

	December 31,
	2021			2020
	RMB’000			RMB’000
Finance leases
Property, plant and equipment, at cost		-			-
Accumulated depreciation and impairment losses		-			-
Property, plant and equipment, net		-			-
Current maturities of long-term debt		-			-
Total finance lease liabilities		-			-
Weighted average remaining lease term
Finance leases		-			-
Weighted average discount rate
Finance leases		5.9	%		5.9	%

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Accounts receivable, net (Tables)

12 Months Ended

Dec. 31, 2021

Accounts receivable, net

	2021			2020
	US$’000			US$’000
Contract receivables		3,661			3,229
Less: allowance for doubtful accounts		(30	)		(30	)
		3,631			3,199

Allowance for doubtful accounts activity

	2021		2020
	US$’000		US$’000
Balance at beginning of period		30		36
Less : reversal in allowances		-		(6	)
Balance at end of period		30		30

Age analysis of past due account receivables

	2021		2020
	US$’000		US$’000
Current		1,441		2,014
Past due
1-30 days		1,570		85
31-60 days		495		202
61-90 days		108		41
Greater than or equal to 91 days		17		857
		2,190		1,185
		3,631		3,199

ZHEJIANG TIANLAN

Accounts receivable, net

	2021			2020
	RMB’000			RMB’000
Contract receivables		148,889			160,803
Less: allowance for doubtful accounts		(42,867	)		(42,182	)
		106,022			118,621

Allowance for doubtful accounts activity

	2021			2020
	RMB’000			RMB’000
Balance at beginning of period		42,182			26,484
Add: provision for allowances		868			22,161
Less: Reversal of provision for doubtful accounts		(183	)		(6,463	)
Balance at end of period		42,867			42,182

Age analysis of past due account receivables

	2021		2020
	RMB’000		RMB’000
Within 1 year		82,534		76,590
1 year -  2 years		12,144		31,389
2 years - 3 years		5,111		6,128
3 years - 4 years		5,141		3,678
4 years - 5 years		1,092		836
		106,022		118,621

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Prepayments and other current assets (Tables)

12 Months Ended

Dec. 31, 2021

Prepayment and other current assets

	December 31,
	2021		2020
	US$’000		US$’000
Deposits paid		243		838
Prepayments		104		168
Other receivables		222		250
Other tax recoverable		3		258
		572		1,514

ZHEJIANG TIANLAN

Prepayment and other current assets

	December 31,
	2021		2020
	RMB’000		RMB’000
Prepayments		22,717		16,632
Deposits paid for bidding projects and temporary payments		7,030		10,448
Other current assets		3,751		1,307
		33,498		28,387

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Contract assets and liabilities (Tables)

12 Months Ended

Dec. 31, 2021

Contract assets and liabilities

	2021		2020
	US$’000		US$’000
Unbilled revenue		74		202

	2021		2020
	US$’000		US$’000
Deferred revenue		1,076		1,063

	December 31,
	2021			2020
	US$’000			US$’000
Contract assets		74			202
Contract liabilities		(1,076	)		(1,063	)
Net contract liabilities		(1,002	)		(861	)

Net (liability) / asset position for contracts in process

	2021			2020
	US$’000			US$’000
Costs incurred in contracts in process		169			1,904
Estimated earnings		59			-
Cost and estimated earnings on uncompleted contracts		228			1,904
Less: billings to date		(1,230	)		(2,765	)
		(1,002	)		(861	)

	2021			2020
	US$’000			US$’000
Unbilled revenue		74			202
Deferred revenue		(1,076	)		(1,063	)
		(1,002	)		(861	)

Disaggregated revenue from contracts

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Revenue
Trading and manufacturing (revenue recognized at point in time)		9,619		9,476		11,877
Engineering (revenue recognized over time)		11,769		3,881		5,522
		21,388		13,357		17,399

ZHEJIANG TIANLAN

Contract assets and liabilities

	2021		2020
	RMB’000		RMB’000
Unbilled revenue		72,310		94,494

	2021		2020
	RMB’000		RMB’000
Deferred revenue		37,481		47,135

	2021			2020
	RMB’000			RMB’000
Contract assets		72,310			94,494
Contract liabilities		(37,481	)		(47,135	)
Net contract assets		34,829			47,359

	2021			2020
	RMB’000			RMB’000
Gross contract assets		81,198			102,144
Less: allowance for doubtful accounts		(8,888	)		(7,650	)
		72,310			94,494

Net (liability) / asset position for contracts in process

	2021			2020
	RMB’000			RMB’000
Estimated earnings on uncompleted contracts		503,434			406,064
Less: billings to date		(468,605	)		(358,705	)
		34,829			47,359

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Inventories (Tables)

12 Months Ended

Dec. 31, 2021

Inventories

	December 31,
	2021		2020
	US$’000		US$’000
Raw materials		89		63
Work in progress		20		20
Finished goods		438		259
		547		342

ZHEJIANG TIANLAN

Inventories

	December 31,
	2021		2020
	RMB’000		RMB’000
Raw materials		2,381		341
Finished goods		1,005		2,048
		3,386		2,389

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Investments in affiliates (Tables)

12 Months Ended

Dec. 31, 2021

Investments in affiliates

Investments in affiliates

	December 31,
	2021			2020
Zhejiang Tianlan Environmental Protection Technology Co. Ltd.
Interest held		19.4	%		19.4	%
	US$’000			US$’000
Long-term investment, at cost, less impairment		5,540			5,540
Share of undistributed profits		2,537			2,544
		8,077			8,084

Summary of the financial information of the affiliates

	December 31,
	2021			2020
Balance Sheet:	US$’000			US$’000
Current assets		42,510			44,918
Non-current assets		15,172			15,258
Total assets		57,682			60,176
Total liabilities		(27,376	)		(30,889	)
Total shareholders’ equity		30,306			29,287

	Year ended December 31,
	2021		2020
Operating results:	US$’000		US$’000
Net sales		51,280		43,933
Operating income		1,997		2,214
Net income		2,105		1,946

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Property, plant and equipment, net (Tables)

12 Months Ended

Dec. 31, 2021

Property, plant and equipment

	December 31,
	2021			2020
	US$’000			US$’000
Office premises*		673			673
Leasehold improvements		125			157
Furniture, fixtures and office equipment		439			557
Motor vehicles		175			175
Testing equipment		37			37
		1,449			1,599
Less: Accumulated depreciation		(1,234	)		(1,340	)
		215			259

Depreciation charge

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Depreciation charge		38		49		69

ZHEJIANG TIANLAN

Property, plant and equipment

	December 31,
	2021			2020
	RMB’000			RMB’000
Building and leasehold improvements		167,874			167,874
Furniture, fixtures and office equipment		3,694			3,658
Motor vehicles		4,647			4,808
Plant and machineries		10,097			9,399
Total		186,312			185,739
Less: Accumulated depreciation and amortization		(76,008	)		(70,241	)
Accumulated impairment losses		(36,241	)		(36,241	)
Total		(112,249	)		(106,482	)
Net		74,063			79,257

Depreciation charge

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Depreciation charge		6,466		6,359		6,556

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Other payables and accrued expenses (Tables)

12 Months Ended

Dec. 31, 2021

Other payables and accrued expenses

	December 31,
	2021		2020
	US$’000		US$’000
Dividend payables		86		84
Deposits received from customers		6		-
Rental deposit received		3		4
Accruals for operating expenses		1,360		1,500
Other tax payables		130		5
		1,585		1,593

ZHEJIANG TIANLAN

Other payables and accrued expenses

	December 31,
	2021		2020
	RMB’000		RMB’000
Accrued expenses		8,315		7,629
Output VAT		5,468		6,529
Deposits received and temporary receipts		4,645		3,589
		18,428		17,747

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Ordinary share (Tables)

12 Months Ended

Dec. 31, 2021

Ordinary share

Shares outstanding

	2021			2020
Shares issued		7,899,832	*		7,899,832	*
Less: shares under treasury stock		(167,700	)		(167,700	)
		7,732,132			7,732,132

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Other income (losses) net (Tables)

12 Months Ended

Dec. 31, 2021

Other income / (losses), net

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Exchange gain / (loss), Other income, netnet		77		101		(30	)
Rental income		50		59		82
Government subsidies – Employment Support Scheme *		-		147		-
		127		307		52

ZHEJIANG TIANLAN

Other income / (losses), net

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Compensation income		-		22,548		-
Gain on disposal of property, plant and equipment		39		-		39
Investment income		531		266		-
Amounts waived by payees		3,061		4,535		280
Reversal of allowance for doubtful accounts		183		6,463		-
Subsidy income from PRC government		7,780		5,834		5,957
		11,594		39,646		6,276

	Year ended  December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Bad debts written off		-		-		5,383
Impairment loss on contract assets		1,238		1,399		-
Impairment loss on long-term investments		-		1,340		-
Impairment loss on property, plant and equipment		-		2,742		-
Investment loss		-		-		241
		1,238		5,481		5,624

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Income taxes (Tables)

12 Months Ended

Dec. 31, 2021

Components of income tax (expense) / credit

	Year ended December 31,
	2021			2020			2019
	US$’000			US$’000			US$’000
Current taxes (expense )
Hong Kong profits tax and the PRC EIT		(57	)		(4	)		-
Income tax expense		(57	)		(4	)		-
Deferred tax credit / (expenses)
Hong Kong and the PRC		147			(92	)		(37	)
Total deferred tax credit / (expenses)		147			(92	)		(37	)
Total credit / (expense)		90			(96	)		(37	)

Reconciling items from income tax

	Year ended December 31,
	2021			2020			2019
	US$’000			US$’000			US$’000
Income / (loss) before income taxes		1,276			498			(173	)
Computed tax using respective companies’ statutory tax rates		158			133			69
Change in valuation allowances		349			48			30
Under-provision for income taxes in prior years		(12	)		-			(5	)
Non-deductible expenses		(405	)		(277	)		(131	)
Income taxes credit / (expense) at effective tax rate		90			(96	)		(37	)

Components of deferred tax assets

	December 31,
	2021			2020
	US$’000			US$’000
Tax losses		614			901
Temporary differences		(3	)		(5	)
Less: Valuation allowances		(469	)		(901	)
Net deferred tax assets / (liabilities)		142			(5	)

ZHEJIANG TIANLAN

Components of income tax (expense) / credit

	Year ended  December 31,
	2021			2020		2019
	RMB’000			RMB’000		RMB’000
Current tax (credit)/expense
PRC EIT		(32	)		757		28
Income tax (credit)/expense		(32	)		757		28
Deferred tax (credit)/expense		(666	)		1,101		268
Total deferred tax (credit)/expense		(666	)		1,101		268
Total (credit)/expense		(698	)		1,858		296

Reconciling items from income tax

	Year ended  December 31,
	2021			2020			2019
	RMB’000			RMB’000			RMB’000
Income before income tax		12,880			15,358			4,654
Computed tax using respective companies’ statutory tax rates		1,932			2,304			642
(Over)-provision for income tax in prior years		(39	)		(48	)		-
Temporary differences		401			182			202
Tax effect of expenses not deductible for tax purposes		286			2,306			693
Tax effect of special deduction for research and development costs		(3,263	)		(3,001	)		(2,103	)
Others		(15	)		115			862
Income taxes (credit)/expense at effective tax rate		(698	)		1,858			296

Components of deferred tax assets

	December 31,
	2021		2020
	RMB’000		RMB’000
Allowance for doubtful accounts		6,188		6,184
Deferred government grant		583		750
Impairment losses on assets		6,940		6,705
Tax losses		594		-
Total deferred tax assets		14,305		13,639

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Net income per ordinary share (Tables)

12 Months Ended

Dec. 31, 2021

Net income per ordinary share

Basic and diluted number of shares

	December 31,
	2021		2020		2019
	Number of shares
Weighted average number of ordinary shares for the purposes of basic and diluted net income per share		7,732,132		7,732,132		7,732,132

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Stock options (Tables)

12 Months Ended

Dec. 31, 2021

Stock options

Stock option activity

	Year ended December 31,
	2021					2020				2019
	Number of options		Weighted average exercise price			Number of options		Weighted average exercise price		Number of options		Weighted average exercise price
			US$					US$				US$
Outstanding, beginning of year		51,000		2.60			51,000		2.60		-		-
Granted		-		-			-		-		51,000		2.60
Bonus shares adjustment		34,000		(1.04	)		-		-		-		-
Outstanding, end of year		85,000		1.56			51,000		2.60		51,000		2.60
Exercisable, end of year		-		-			-		-		-		-

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Segment information (Tables)

12 Months Ended

Dec. 31, 2021

Segment information

Segment information

	Year ended December 31,
	2021			2020			2019
	US$’000			US$’000			US$’000
Revenue
Trading and manufacturing		9,619			9,476			11,877
Engineering		11,769			3,881			5,522
		21,388			13,357			17,399
Operating income / (loss)
Trading and manufacturing		140			(488	)		(102	)
Engineering		846			(1,027	)		(158	)
Unallocated corporate expenses		(205	)		(186	)		(180	)
		781			(1,701	)		(440	)

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Depreciation:
Trading and manufacturing		32		39		54
Engineering		6		10		15
		38		49		69
Capital expenditures, gross
Trading and manufacturing		1		2		17
Engineering		3		9		4
		4		11		21

	December 31,
	2021		2020
	US$’000		US$’000
Assets
Trading and manufacturing		7,969		7,877
Engineering		13,281		12,218
		21,250		20,095
Liabilities
Trading and manufacturing		3,428		2,645
Engineering		3,021		2,987
		6,449		5,632

Geographical analysis of revenue and assets

	Year ended December 31,
	2021		2020		2019
	US$’000		US$’000		US$’000
Revenue -
The PRC		13,217		5,072		6,886
Hong Kong		7,937		8,024		10,169
Others		234		261		344
		21,388		13,357		17,399

	December 31,
	2021		2020
	US$’000		US$’000
Hong Kong		25		47
The PRC		190		212
		215		259

Major suppliers and customers

	Year ended December 31,
	2021			2020			2019
Supplier A		42	%		30	%		53	%
Supplier B		13	%		10	%		7	%
Supplier C		6	%		9	%		6	%
Supplier D		6	%		6	%		6	%
Supplier E		5	%		5	%		-
Supplier F		-			12	%		-

	Year ended December 31,
	2021			2020			2019
Customer A		15	%		9	%		19	%
Customer B		-			8	%		-
Customer C		-			6	%		10	%
Customer D		-			-			5	%

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Intangible assets, net (Tables) - ZHEJIANG TIANLAN

12 Months Ended

Dec. 31, 2021

Intangible assets, net

	December 31,
	2021			2020
	RMB’000			RMB’000
Amortizable intangible assets
Gross carrying amount
Patents		3,750			3,750
Others		165			165
		3,915			3,915
Less: Accumulated amortization		(2,050	)		(1,795	)
Net carrying amount		1,865			2,120

Amortization expense

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Amortization expense		255		142		152

	Future amortization expense
	RMB’000
2022		255
2023		255
2024		255
2025		255
2026		255
Thereafter		590
Total		1,865

	Future amortization expense
	RMB’000
2021		142
2022		142
2023		142
2024		142
2025		142
Thereafter		1,410
Total		2,120

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Bank borrowings (Tables)

12 Months Ended

Dec. 31, 2021

ZHEJIANG TIANLAN

Bank borrowings

	December 31,
	2021		2020
	RMB’000		RMB’000
Bank loans borrowed by the Company (note i)		8,511		10,014
Bank loans borrowed by subsidiaries of the Company (note ii)		5,007		10,015
		13,518		20,029

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Land use right, net (Tables) - ZHEJIANG TIANLAN

12 Months Ended

Dec. 31, 2021

Schedule of land use right

	December 31,
	2021			2020
	RMB’000			RMB’000
Gross carrying amount
Land use right		7,361			7,361
Less: Accumulated amortization		(2,364	)		(2,214	)
Net carrying amount		4,997			5,147

Amortization expense

	Year ended December 31,
	2021		2020		2019
	RMB’000		RMB’000		RMB’000
Amortization expense		150		159		149

	Future amortization expense
	RMB’000
2022		150
2023		150
2024		150
2025		150
2026		150
Thereafter		4,247
Total		4,997

	Future amortization expense
	RMB’000
2021		159
2022		159
2023		159
2024		159
2025		159
Thereafter		4,352
Total		5,147

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Organization and business (Details)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Shanghai Euro Tech Environmental Engineering Company Limited
Percentage of equity ownership	0.00%	100.00%
Place of incorporation	The PRC	The PRC
Principal activities	Inactive	Inactive
Shanghai Euro Tech Limited
Percentage of equity ownership	100.00%	100.00%
Place of incorporation	The PRC	The PRC
Principal activities	Manufacturing of analytical and testing equipment	Manufacturing of analytical and testing equipment
Euro Tech Trading (Shanghai) Limited
Percentage of equity ownership	100.00%	100.00%
Place of incorporation	The PRC	The PRC
Principal activities	Inactive	Inactive
Euro Tech (China) Limited
Percentage of equity ownership	0.00%	0.00%
Place of incorporation	Hong Kong	Hong Kong
Principal activities	Inactive	Inactive
Euro Tech (Far East) Limited
Percentage of equity ownership	100.00%	100.00%
Place of incorporation	Hong Kong	Hong Kong
Principal activities	Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems	Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems
Zhejiang Tianlan Environmental Protection Technology Co. Ltd.
Percentage of equity ownership	19.40%	19.40%
Place of incorporation	The PRC	The PRC
Principal activities	Design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted	Design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted
Pact Asia Pacific Limited
Percentage of equity ownership	58.00%	58.00%
Place of incorporation	The British Virgin Islands	The British Virgin Islands
Principal activities	Selling of environmental protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services	Selling of environmental protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services
Yixing Pact Environmental Technology Co., Ltd
Percentage of equity ownership	58.00%	58.00%
Place of incorporation	The PRC	The PRC
Principal activities	Design, manufacturing and operation of water and waste water treatment machinery and equipment	Design, manufacturing and operation of water and waste water treatment machinery and equipment
ZHEJIANG TIANLAN | Hangzhou Tiancan Environmental Technology Company Limited
Percentage of equity ownership	80.00%	80.00%
Place of incorporation	PRC	PRC
Principal activities	Manufacturing of environmental protection equipment	Manufacturing of environmental protection equipment
ZHEJIANG TIANLAN | Hangzhou Tianlan Pure Environmental Protection Technology Company Limited
Percentage of equity ownership	38.25%	38.25%
Place of incorporation	PRC	PRC
Principal activities	Manufacturing of environmental protection equipment	Manufacturing of environmental protection equipment
ZHEJIANG TIANLAN | Zhejiang Tianlan Environmental Protection Engineering Company Limited
Percentage of equity ownership	100.00%	100.00%
Place of incorporation	PRC	PRC
Principal activities	Design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted	Design, general contract, installation and operating management of environmental protection projects
ZHEJIANG TIANLAN | Hangzhou Tianlan Environmental Protection Equipment Company Limited
Percentage of equity ownership	51.00%	51.00%
Place of incorporation	PRC	PRC
Principal activities	Manufacturing and installation services of environmental protection equipment	Manufacturing and installation services of environmental protection equipment

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Summary of significant accounting policies (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Summary of significant accounting policies
Engineering segment backlog	$ 5,400	$ 11,581

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Summary of significant accounting policies (Details 1)	12 Months Ended
	Dec. 31, 2021
Furniture, Fixtures and Office Equipment
Useful lives	3 to 5 years
Furniture, Fixtures and Office Equipment | ZHEJIANG TIANLAN
Useful lives	5 years, with 5% residual value
Motor Vehicles
Useful lives	4 years
Motor Vehicles | ZHEJIANG TIANLAN
Useful lives	5 years, with 5% residual value
Testing Equipment
Useful lives	3 years
Office Premises
Useful lives	47 to 51 years
Land Use Right | ZHEJIANG TIANLAN
Useful lives	Over terms of the leases
Plant and Machineries | ZHEJIANG TIANLAN
Useful lives	5 to 10 years, with 5% residual value
Buildings and Leasehold Improvements | ZHEJIANG TIANLAN
Useful lives	11 to 50 years, with 5% residual value

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Summary of significant accounting policies (Details 2) - shares	Dec. 31, 2021	Mar. 03, 2021	Dec. 31, 2020	Oct. 08, 2019
Shares issued	7,899,832	2,061,900	7,899,832	1,030,950
Previously reported
Shares issued	5,322,459		3,260,559
Restatement
Shares issued	7,899,832		7,899,832

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Summary of significant accounting policies (Details 3) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Operating income (loss)	$ 771	$ (272)	$ (445)
Previously reported
Operating income (loss)	$ 781	$ (1,701)	$ (440)
Net income (loss) per ordinary share	$ 0.19	$ 0.25	$ (0.06)
Weighted average number of ordinary shares outstanding	5,154,759	3,092,859	2,301,993
Weighted average number of ordinary shares outstanding diluted	5,154,759	3,092,859	2,301,993
Net income (loss) per ordinary share diluted	$ 0.19	$ 0.25	$ (0.06)
Restatement
Operating income (loss)	$ 771	$ (272)	$ (445)
Net income (loss) per ordinary share	$ 0.13	$ 0.10	$ (0.02)
Weighted average number of ordinary shares outstanding	7,732,132	7,732,132	7,732,132
Weighted average number of ordinary shares outstanding diluted	7,732,132	7,732,132	7,732,132
Net income (loss) per ordinary share diluted	$ 0.13	$ 0.10	$ (0.02)

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Summary of significant accounting policies (Details 4) - shares	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Previously reported
Shares issued	5,322,459	3,260,559	3,260,559	2,229,609
Restatement
Shares issued	7,899,832	7,899,832	7,899,832	7,899,832

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Summary of significant accounting policies (Details Narrative)	12 Months Ended
	Dec. 31, 2021 USD ($) shares	Dec. 31, 2021 CNY (¥) shares	Dec. 31, 2020 USD ($) shares	Dec. 31, 2020 CNY (¥) shares	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)	Mar. 03, 2021 shares	Oct. 08, 2019 shares
Research and development costs	$ 61,000		$ 497,000		$ 35,000
Advertising and promotional expenses	7,000		7,000		$ 13,000
Unrecognized contract revenue	$ 5,400,000		$ 11,581,000
Shares issued | shares	7,899,832	7,899,832	7,899,832	7,899,832			2,061,900	1,030,950
Revenue
Concentration percentage	15.00%	15.00%	23.00%	23.00%	34.00%	34.00%
Accounts Receivable
Concentration percentage	10.00%	10.00%
ZHEJIANG TIANLAN
Research and development costs | ¥		¥ 23,419,000		¥ 28,589,000		¥ 19,018,000
Shares issued | shares	82,572,000	82,572,000	82,572,000	82,572,000
Impairment of long-lived assets | ¥		¥ 0		¥ 2,742,000		¥ 0
ZHEJIANG TIANLAN | Revenue
Concentration percentage	35.00%	35.00%	39.00%	39.00%	40.00%	40.00%
ZHEJIANG TIANLAN | Revenue | Customer One
Concentration percentage	16.00%	16.00%	16.00%	16.00%	17.00%	17.00%
ZHEJIANG TIANLAN | Accounts Receivable
Concentration percentage	10.00%	10.00%

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Lease obligations (Details) ¥ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Operating lease cost | $	$ 243	$ 257
Short-term lease cost | $	62	64
Total lease cost | $	$ 305	$ 321
ZHEJIANG TIANLAN
Total lease cost | ¥			¥ 7,081
Amortization of right-of-use assets | ¥			5,837
Interest on lease liabilities included under cost of revenue and selling and administrative expenses | ¥			¥ 1,244

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Lease obligations (Details 1) ¥ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 USD ($)
Operating cash flows from operating leases | $	$ 196,000		$ 195,000
Right-of-use asset obtained in exchange for new operating lease obligations | $	$ 0		$ 0		$ 460,000
ZHEJIANG TIANLAN
Finance cash flows from finance leases | ¥		¥ 0		¥ 11,263
Right-of-use assets obtained in exchange for lease obligations (noncash): Finance leases | ¥		¥ 0		¥ 0

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Lease obligations (Details 2) ¥ in Thousands, $ in Thousands	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Operating lease right-of-use assets | $	$ 238		$ 233
Current portion of long-term operating lease obligations | $	175		118
Long-term operating lease obligations, net of current maturities | $	41		94
Total operating lease liabilities | $	$ 216		$ 212
ZHEJIANG TIANLAN
Property, plant and equipment, at cost		¥ 0		¥ 0
Accumulated depreciation and impairment losses		0		0
Property, plant and equipment, net		0		0
Current maturities of long-term debt		0		0
Total finance lease liabilities		¥ 0		¥ 0

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Lease obligations (Details 3)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Weighted-average remaining lease term - operating leases	23 months	16 months
Weighted-average discount rate - operating leases	5.00%	5.00%
ZHEJIANG TIANLAN
Weighted-average remaining lease term - finance leases	0 months	0 months
Weighted-average discount rate - finance leases	5.90%	5.90%

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Lease obligations (Details 4) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Lease obligations
Year ending December 31, 2022	$ 181
2023	42
Total lease payments	223
Less: imputed interest	(7)
Total	$ 216	$ 212

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Accounts receivable net (Details) ¥ in Thousands, $ in Thousands	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 CNY (¥)	Dec. 31, 2019 USD ($)
Contract receivables | $		$ 3,661		$ 3,229
Less: allowance for doubtful accounts | $		(30)		(30)		$ (36)
Accounts receivable, net | $		$ 3,631		$ 3,199
ZHEJIANG TIANLAN
Contract receivables | ¥	¥ 148,889		¥ 160,803
Less: allowance for doubtful accounts | ¥	(42,867)		(42,182)		¥ (26,484)
Accounts receivable, net | ¥	¥ 106,022		¥ 118,621

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Accounts receivable net (Details 1) ¥ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Balance at beginning of period | $	$ 30,000		$ 36,000
Less: reversal of provision for doubtful accounts | $	0		(6,000)
Balance at end of period | $	$ 30,000		$ 30,000
ZHEJIANG TIANLAN
Balance at beginning of period		¥ 42,182		¥ 26,484
Less: reversal of provision for doubtful accounts		(183)		(6,463)
Balance at end of period		42,867		42,182
Add: provision for allowances		¥ 868		¥ 22,161

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Accounts receivable net (Details 2) $ in Thousands	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2020 USD ($)
Accounts receivable, net		$ 3,631		$ 3,199
Current
Accounts receivable, net		1,441		2,014
1 - 30 Days Past Due
Accounts receivable, net		1,570		85
31 - 60 Days Past Due
Accounts receivable, net		495		202
61 - 90 Days Past Due
Accounts receivable, net		108		41
Greater Than or Equal to 91 Days
Accounts receivable, net		17		857
Past Due
Accounts receivable, net		$ 2,190		$ 1,185
ZHEJIANG TIANLAN
Accounts receivable, net | ¥	¥ 106,022,000		¥ 118,621,000
ZHEJIANG TIANLAN | Within 1 Year
Accounts receivable, net | ¥	85,534,000		76,590,000
ZHEJIANG TIANLAN | 1 year - 2 Years
Accounts receivable, net | ¥	12,144,000		31,389,000
ZHEJIANG TIANLAN | 2 Years - 3 Years
Accounts receivable, net | ¥	5,111,000		6,128,000
ZHEJIANG TIANLAN | 3 Years - 4 Years
Accounts receivable, net | ¥	5,141,000		3,678,000
ZHEJIANG TIANLAN | 4 Years - 5 Years
Accounts receivable, net | ¥	¥ 1,092,000		¥ 836,000

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Accounts receivable net (Details Narrative)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2020 USD ($)
Bank loans | $		$ 88,000		$ 92,000
ZHEJIANG TIANLAN
Bank loans	¥ 13,518,000		¥ 20,029,000
ZHEJIANG TIANLAN | Accounts Receivable
Bank loans	¥ 0		¥ 0

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Prepayments and other current assets (Details) ¥ in Thousands	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Deposits paid	$ 243,000		$ 838,000
Prepayments	104,000		168,000
Other receivables	222,000		250,000
Other tax recoverable	3,000		258,000
Prepayments and other current assets	572,000		1,514,000
ZHEJIANG TIANLAN
Prepayments | ¥		¥ 22,717		¥ 16,632
Prepayments and other current assets | ¥		33,498		28,387
Deposits paid for bidding projects and temporary payments | ¥		7,030		10,448
Other current assets | ¥		¥ 3,751		¥ 1,307
ZHEJIANG TIANLAN
Other receivables	$ 13,988,000		$ 10,448,000

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Contract assets and liabilities (Details) ¥ in Thousands, $ in Thousands	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Unbilled revenue | $	$ 74		$ 202
ZHEJIANG TIANLAN
Unbilled revenue | ¥		¥ 72,310		¥ 94,494

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Contract assets and liabilities (Details 1) ¥ in Thousands, $ in Thousands	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)
Deferred revenue | $	$ 1,076		$ 1,063
ZHEJIANG TIANLAN
Deferred revenue | ¥		¥ 37,481		¥ 47,135

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Contract assets and liabilities (Details 2) ¥ in Thousands	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Contract assets: unbilled revenue	$ 74,000		$ 202,000
Contract liabilities: deferred revenue	(1,076,000)		(1,063,000)
Net contract (liabilities) / assets	(1,002,000)		(861,000)
ZHEJIANG TIANLAN
Contract assets: unbilled revenue | ¥		¥ 72,310		¥ 94,494
Contract liabilities: deferred revenue | ¥		(37,481)		(47,135)
Net contract (liabilities) / assets | ¥		¥ 34,829		¥ 47,359
ZHEJIANG TIANLAN
Contract liabilities: deferred revenue	$ (55,898,000)		$ (47,135,000)

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Contract assets and liabilities (Details 3)	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Costs and estimated earnings on uncompleted contracts	$ 228,000		$ 1,904,000
Less: billings to date	(1,230,000)		(2,765,000)
Costs incurred in contracts in process	169,000		1,904,000
Costs and estimated earnings on uncompleted contracts in excess of billings	(1,002,000)		(861,000)
Estimated earnings	(1,002,000)		(861,000)
Unbilled revenue	74,000		202,000
Deferred revenue	(1,076,000)		(1,063,000)
ZHEJIANG TIANLAN
Costs and estimated earnings on uncompleted contracts | ¥		¥ 503,434,000		¥ 406,064,000
Less: billings to date | ¥		(468,605,000)		(358,705,000)
Costs and estimated earnings on uncompleted contracts in excess of billings | ¥		34,829,000		47,359,000
Unbilled revenue | ¥		¥ 72,310,000		¥ 94,494,000
ZHEJIANG TIANLAN
Costs and estimated earnings on uncompleted contracts	433,195,000		406,064,000
Costs and estimated earnings on uncompleted contracts in excess of billings	$ 25,063,000		$ 47,359,000

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Contract assets and liabilities (Details 4) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Contract assets and liabilities
Trading and manufacturing	$ 9,619	$ 9,476	$ 11,877
Engineering	11,769	3,881	5,522
Total revenues	$ 21,388	$ 13,357	$ 17,399

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Contract assets and liabilities (Details 5) ¥ in Thousands, $ in Thousands	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Contract assets, net | $	$ 74		$ 202
ZHEJIANG TIANLAN
Gross contract assets		¥ 81,198		¥ 102,144
Less: allowance for doubtful accounts		(8,888)		(7,650)
Contract assets, net		¥ 72,310		¥ 94,494

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Inventories (Details) ¥ in Thousands, $ in Thousands	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Raw materials	$ 89		$ 63
Work in progress	20		20
Finished goods	438		259
Inventory, net	$ 547		$ 342
ZHEJIANG TIANLAN
Raw materials | ¥		¥ 2,381		¥ 341
Finished goods | ¥		1,005		2,048
Inventory, net | ¥		¥ 3,386		¥ 2,389

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Inventories (Details Narrative) - USD ($) $ in Thousands	12 Months Ended	24 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Inventories
Write-down of inventories	$ 55,000	$ 13,000

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Property plant and equipment net (Details)	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Office premises	$ 673,000		$ 673,000
Leasehold improvements	125,000		157,000
Furniture, fixtures and office equipment	439,000		557,000
Motor vehicles	175,000		175,000
Testing equipment	37,000		37,000
Property, plant and equipment, gross	1,449,000		1,599,000
Less: accumulated depreciation and amortization	(1,234,000)		(1,340,000)
Net	215,000		259,000
ZHEJIANG TIANLAN
Furniture, fixtures and office equipment | ¥		¥ 3,694,000		¥ 3,658,000
Motor vehicles | ¥		4,647,000		4,808,000
Property, plant and equipment, gross | ¥		186,312,000		185,739,000
Less: accumulated depreciation and amortization | ¥		(76,008,000)		(70,241,000)
Net | ¥		74,063,000		79,257,000
Building and leasehold improvements | ¥		167,874,000		167,874,000
Plant and machineries | ¥		10,097,000		9,399,000
Accumulated impairment losses | ¥		(36,241,000)		(36,241,000)
Accumulated, Total | ¥		¥ (112,249,000)		¥ (106,482,000)
ZHEJIANG TIANLAN
Furniture, fixtures and office equipment	3,543,000		3,658,000
Motor vehicles	4,808,000		4,808,000
Property, plant and equipment, gross	185,162,000		185,739,000
Net	87,781,000		79,257,000
Building and leasehold improvements			167,874,000
Plant and machineries	$ 8,937,000		$ 9,399,000

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Property plant and equipment net (Details 1) ¥ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)
Depreciation charge | $	$ 38		$ 49		$ 69
ZHEJIANG TIANLAN
Depreciation charge | ¥		¥ 6,466		¥ 6,359		¥ 6,556

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Property plant and equipment net (Details Narrative) ¥ in Thousands	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2020 USD ($)
Bank loans		$ 88,000		$ 92,000
ZHEJIANG TIANLAN
Bank loans | ¥	¥ 13,518		¥ 20,029
ZHEJIANG TIANLAN | Property, Plant and Equipment [Member]
Bank loans		$ 1,524,000		$ 34,403,000

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Investments in affiliates (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Investments in affiliates
Interest held	19.40%	19.40%
Long-term investment, at cost, less impairment	$ 5,540	$ 5,540
Share of undistributed profits	2,537	2,544
Investment in affiliates	$ 8,077	$ 8,084

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Investments in affiliates (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Interest held	19.40%	19.40%
Long-term investment, at cost, less impairment	$ 5,540,000	$ 5,540,000
Blue Sky
Interest held	19.40%	19.40%
Long-term investment, at cost, less impairment	$ 5,540,000

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Investments in affiliates (Details 1) ¥ in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)
Balance Sheet:
Current assets	$ 11,504	$ 10,448
Non-current assets	9,746	9,647
Total assets	21,250	20,095
Total liabilities	(6,449)	(5,632)
Total shareholders' equity	13,884	13,935		¥ 182,869
Operating results:
Operating income	771	(272)	$ (445)
Net income	989	769	$ (146)
Blue Sky
Balance Sheet:
Current assets	42,510	44,918
Non-current assets	15,172	15,258
Total assets	57,682	60,176
Total liabilities	(27,376)	(30,889)
Total shareholders' equity	30,306	29,287
Operating results:
Net sales	51,280	43,933
Operating income	1,997	2,214
Net income	$ 2,105	$ 1,946

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Other payables and accrued expenses (Details)	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)
Dividend payables	$ 86,000		$ 84,000
Deposit received from customers	6,000		0
Rental deposit received	3,000		4,000
Accruals for operating expenses	1,360,000		1,500,000
Other tax payables	130,000		5,000
Other payables and accrued expenses	$ 1,585,000		$ 1,593,000
ZHEJIANG TIANLAN
Other payables and accrued expenses | ¥		¥ 18,428,000		¥ 17,747,000
Accrued expenses | ¥		8,315		7,629
Output VAT | ¥		5,468		6,529
Deposits received and temporary receipts | ¥		¥ 4,645		¥ 3,589

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Ordinary share (Details) - shares	Dec. 31, 2021	Mar. 03, 2021	Dec. 31, 2020	Oct. 08, 2019
Ordinary share
Shares issued	7,899,832	2,061,900	7,899,832	1,030,950
Less: shares under treasury stock	(167,700)		(167,700)
Total	7,732,132		7,732,132

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Ordinary share (Details Narrative) - shares			1 Months Ended
	Mar. 03, 2021	Oct. 08, 2019	Jan. 24, 2022
Ordinary share
New shares of common stock	2,061,900	1,030,950	2,577,373

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Goodwill (Details Narrative) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Goodwill
Goodwill	$ 1,071,000	$ 1,071,000

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PRC statutory reserves (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Statutory Reserve Fund
Statutory reserve	$ 2,452,000	$ 3,174,000	$ 3,174,000
Minimum Registered capital percentage	25.00%
Registered capital percentage	50.00%
Net income statutory reserve fund	10.00%
Statutory Staff Welfare Fund
Statutory reserve	$ 12,000	12,000
Enterprise Expansion Fund
Statutory reserve	$ 408,000	$ 408,000
Minimum Registered capital percentage	25.00%

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Net income per ordinary share (Details) - shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Net income per ordinary share
Weighted average number of ordinary shares for the purposes of basic and diluted net income per share	7,732,132	7,732,132	7,732,132

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Stock options (Details) - Stock Options - $ / shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2019
Number of options
Outstanding, beginning of year	51,000
Granted		51,000
Bonus shares adjustment	34,000
Outstanding, end of year	85,000	51,000
Weighted average exercise price
Outstanding, beginning of years	$ 2.60
Granteds		$ 2.60
Bonus shares adjustments	(1.04)
Outstanding, end of years	$ 1.56	$ 2.60

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Stock options (Details Narrative) - USD ($)	1 Months Ended	12 Months Ended
	Apr. 30, 2019	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Compensation expense		$ 55,000	$ 54,000	$ 10,000
2019 Stock Option and Incentive Plan
Fair market value ordinary shares percentage	100.00%
Bonus shares adjustment	500,000
Granted	300,000
Percentage of number of ordinary shares outstanding	5.00%
Purchase ordinary shares				51,000
Fair value options granted				$ 2.324
Compensation expense		$ 55,000	$ 54,000	$ 10,000
Exercise price options granted				$ 2.60

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Segment information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Revenue	$ 21,388,000	$ 13,357,000	$ 17,399,000
Operating loss	781,000	(1,701,000)	(440,000)
Depreciation	38,000	49,000	69,000
Capital expenditures, gross	4,000	11,000	21,000
Assets	21,250,000	20,095,000
Liabilities	6,449,000	5,632,000
Trading and Manufacturing
Revenue	9,619,000	9,476,000	11,877,000
Operating loss	140,000	(488,000)	(102,000)
Depreciation	32,000	39,000	54,000
Capital expenditures, gross	1,000	2,000	17,000
Assets	7,969,000	7,877,000
Liabilities	3,428,000	2,645,000
Engineering
Revenue	11,769,000	3,881,000	5,522,000
Operating loss	846,000	(1,027,000)	(158,000)
Depreciation	6,000	10,000	15,000
Capital expenditures, gross	3,000	9,000	4,000
Assets	13,281,000	12,218,000
Liabilities	3,021,000	2,987,000
Unallocated Corporate Expenses
Revenue		0
Operating loss	$ (205,000)	$ (186,000)	$ (180,000)

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Segment information (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Revenue	$ 21,388	$ 13,357	$ 17,399
Geographical analysis of long-lived assets	215	259
The PRC
Revenue	13,217	5,072	6,886
Geographical analysis of long-lived assets	190	212
Hong Kong
Revenue	7,937	8,024	10,169
Geographical analysis of long-lived assets	25	47
Others
Revenue	$ 234	$ 261	$ 344

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Segment information (Details 2)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Supplier A
Supplier accounting for more than 5% of Group's purchases	42	30	53
Supplier B
Supplier accounting for more than 5% of Group's purchases	13	10	7
Supplier C
Supplier accounting for more than 5% of Group's purchases	6	9	6
Supplier D
Supplier accounting for more than 5% of Group's purchases	6	6	6
Supplier E
Supplier accounting for more than 5% of Group's purchases	5	5	0
Supplier F
Supplier accounting for more than 5% of Group's purchases	0	12	0

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Segment information (Details 3)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Customer D
Customers accounting for more than 5% of the Group's revenue	0	0	5
Customer C
Customers accounting for more than 5% of the Group's revenue	0	6	10
Customer B
Customers accounting for more than 5% of the Group's revenue	0	8	0
Customer A
Customers accounting for more than 5% of the Group's revenue	15	9	19

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Intangible assets net (Details) - ZHEJIANG TIANLAN - CNY (¥) ¥ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Patents	¥ 3,750	¥ 3,750
Others	165	165
Intangible assets, gross	3,915	3,915
Less: accumulated amortization	(2,050)	(1,795)
Intangible assets, net	¥ 1,865	¥ 2,120

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Intangible assets net (Details 1) - CNY (¥)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
ZHEJIANG TIANLAN
Amortization expense	¥ 255	¥ 142	¥ 152

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Intangible assets net (Details 2) - ZHEJIANG TIANLAN - CNY (¥)	Dec. 31, 2021	Dec. 31, 2020
2021		¥ 142,000
2022	¥ 255,000	142,000
2023	255,000	142,000
2024	255,000	142,000
2025	255,000	142,000
2026	255
Thereafter	590,000	1,410,000
Intangible assets, net	¥ 1,865,000	¥ 2,120,000

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Land use right net (Details) - ZHEJIANG TIANLAN - CNY (¥) ¥ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Land use right, gross	¥ 7,361	¥ 7,361
Less: accumulated amortization	(2,364)	(2,214)
Land use right, net	¥ 4,997	¥ 5,147

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Land use right net (Details 1) - CNY (¥)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
ZHEJIANG TIANLAN
Amortization expense	¥ 150	¥ 159	¥ 149

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Land use right net (Details 2) - ZHEJIANG TIANLAN - CNY (¥)	Dec. 31, 2021	Dec. 31, 2020
2021		¥ 159,000
2022	¥ 150,000	159,000
2023	150,000	159,000
2024	150,000	159,000
2025	150,000	159,000
2026	150
Thereafter	4,247,000	4,352,000
Total	¥ 4,997,000	¥ 5,147,000

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Land use right net (Details Narrative) - CNY (¥)	Dec. 31, 2021	Dec. 31, 2020
ZHEJIANG TIANLAN
Land use right pledged bank loan	¥ 1,463,000	¥ 4,463,000

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Bank borrowings (Details) ¥ in Thousands	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2020 USD ($)
Bank loan | $		$ 88,000		$ 92,000
ZHEJIANG TIANLAN
Bank loan	¥ 13,518		¥ 20,029
ZHEJIANG TIANLAN | Bank Loan Borrowed by the Company
Bank loan	8,511		10,014
ZHEJIANG TIANLAN | Bank Loan Borrowed by Subsidiaries of the Company
Bank loan	¥ 5,007		¥ 10,015

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Bank borrowings (Details Narrative) - ZHEJIANG TIANLAN - CNY (¥)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Interest fixed rates minimum	4.35%
Interest paid	¥ 253,000	¥ 1,377,000	¥ 1,991,000
Interest fixed rates	5.00%	4.79%

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Other taxes payable (Details Narrative) - ZHEJIANG TIANLAN	Dec. 31, 2021	Dec. 31, 2020
Minimum [Member]
Valued-Added Tax rate	3.00%	3.00%
Maximum [Member]
Valued-Added Tax rate	13.00%	13.00%

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Other income net (Details)	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)
Exchange gain / (loss), net | $	$ 77,000		$ 101,000		$ (30,000)
Rental income | $	50,000		59,000		82,000
Government subsidies - Employment Support Scheme | $	0		147,000		0
Other income, net | $	127,000		307,000		52,000
Other income | $	$ 127,000		$ 307,000		$ 52,000
ZHEJIANG TIANLAN
Compensation income		¥ 0		¥ 22,548,000		¥ 0
Gain on disposal of property, plant and equipment		39,000		0		39,000
Investment income		531,000		266,000		0
Amounts waived by payees		3,061,000		4,535,000		280,000
Reversal of allowance for doubtful accounts		183,000		6,463,000		0
Subsidy income from PRC government		7,780,000		5,834,000		5,957,000
Other income		11,594,000		39,646,000		6,276,000
Bad debts written off		0		0		5,383,000
Impairment loss on contract assets		1,238,000		1,399,000		0
Impairment loss on long-term investments		0		1,340,000		0
Impairment loss on property, plant and equipment		0		2,742,000		0
Investment loss		0		0		241,000
Other losses		¥ 1,238,000		¥ 5,481,000		¥ 5,624,000

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Income taxes (Details) ¥ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)
Current taxes (expense )
Current taxes (expense): Hong Kong profits tax and the PRC EIT | $	$ (57,000)		$ (4,000)		$ 0
Income tax expense | $	(57,000)		(4,000)		0
Deferred tax credit / (expenses): Hong Kong and the PRC | $	147,000		(92,000)		(37,000)
Total deferred tax credit / (expense) | $	147,000		(92,000)		(37,000)
Total credit / (expense) | $	$ (90,000)		$ 96,000		$ 37,000
ZHEJIANG TIANLAN
Current taxes (expense )
Income tax expense | ¥		¥ (32)		¥ 757		¥ 28
Total deferred tax credit / (expense) | ¥		(666)		1,101		268
Total credit / (expense) | ¥		(698)		1,858		296
Current PRC EIT | ¥		(32)		757		28
Deferred tax (credit)/expense | ¥		¥ (666)		¥ 1,101		¥ 268

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Income taxes (Details 1)	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)
Income / (loss) before income taxes | $	$ 1,276,000		$ 498,000		$ (173,000)
Computed tax using respective companies' statutory tax rates | $	158,000		133,000		69,000
Change in valuation allowances | $	349,000		48,000		30,000
Under-provision for income taxes in prior years | $	(12,000)		0		(5,000)
Non-deductible expenses | $	(405,000)		(277,000)		(131,000)
Income taxes credit / (expense) at effective tax rate | $	$ (90,000)		$ 96,000		$ 37,000
ZHEJIANG TIANLAN
Income / (loss) before income taxes		¥ 12,880,000		¥ 15,358,000		¥ 4,654,000
Computed tax using respective companies' statutory tax rates		1,932,000		2,304,000		642,000
Under-provision for income taxes in prior years		(39,000)		(48,000)		0
Non-deductible expenses		286,000		2,306,000		693,000
Income taxes credit / (expense) at effective tax rate		(698,000)		1,858,000		296,000
Temporary differences		401,000		182,000		202,000
Tax effect of special deduction for research and development costs		3,263,000		3,001,000		2,103,000
Others		¥ (15,000)		¥ 115,000		¥ 862,000

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Income taxes (Details 2) $ in Thousands	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2020 USD ($)
Tax losses | $		$ 614		$ 901
Temporary differences | $		(3)		(5)
Less: valuation allowances | $		(469)		(901)
Net deferred tax assets / (liabilities) | $		$ 142		$ (5)
ZHEJIANG TIANLAN
Tax losses	¥ 594,000		¥ 0
Allowance for doubtful debts	6,188,000		6,184,000
Deferred government grant	583,000		750,000
Impairment losses on assets	6,940,000		6,705,000
Net deferred tax assets	¥ 14,305,000		¥ 13,639,000

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Income taxes (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Aggregate undistributed earnings	$ 600,000	$ 600,000	$ 600,000
Income tax rate	10.00%
Assessable profits/loss	$ 1,366,000	$ 402,000	$ (210,000)
Hong Kong
Income tax rate	8.25%	16.50%	16.50%
Assessable profits/loss	$ 256,000	$ 256,000
Shanghai Euro Tech Limited
Income tax rate		25.00%	25.00%
Assessable profits/loss	(678,000)	$ (658,733)	$ (444,192)
Shanghai Euro Tech Environmental Engineering Company Limited
Income tax rate		25.00%	25.00%
Assessable profits/loss	0		$ (34,032)	$ (380,591)
Yixing Pact Environmental Technology Co. Ltd.
Income tax rate		25.00%	25.00%
Assessable profits/loss	1,759,000	$ 2,304,828	$ 1,664,275
Euro Tech Trading (Shanghai) Limited
Income tax rate		25.00%	25.00%
Assessable profits/loss	$ (18,000)	$ (604,778)	$ (518,328)

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Pension plan (Details Narrative)	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)
Aggregate contributions to pension plans and retirement benefit schemes | $	$ 225,000		$ 104,000		$ 332,000
ZHEJIANG TIANLAN
Aggregate contributions to pension plans and retirement benefit schemes | ¥		¥ 6,003,000		¥ 5,645,000		¥ 5,449,000

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Risk factors (Details Narrative)	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Restricted cash | $	$ 1,411,000			$ 1,672,000	$ 729,000
Hong Kong
Concentration of credit risk | $	64,000
Restricted cash | $	$ 5,327,000
PRC
Concentration of credit risk		¥ 72,000
Restricted cash			¥ 4,594,000
PRC | ZHEJIANG TIANLAN
Concentration of credit risk		¥ 44,494,000
Restricted cash			¥ 48,855,000

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Related party transactions (Details Narrative)	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 USD ($)
Proceeds from sale of long-term investment | $	$ 0		$ 148,000		$ 0
ZHEJIANG TIANLAN | Engineering Service
Investment		¥ 273,000		¥ 2,518,000
Remuneration		1,209,000		1,400,000
Total consideration		¥ 0		¥ 4,590,000
Blue Sky
Proceeds from sale of long-term investment | $			$ 148,000

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Commitments and contingencies (Details Narrative)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 CNY (¥)
Banking facilities available for overdraft and import and export credits		$ 897,000		$ 897,000
Utilised for issuance of bank guarantees		605,000		$ 596,000
Secured by bank deposit		$ 897,000
Weighted average interest rate		5.00%		4.90%
Bank borrowings		$ 219,000		$ 457,000
Average interest rates	5.00%	5.00%	4.90%	4.90%
ZHEJIANG TIANLAN
Operating leases expense | ¥	¥ 0		¥ 0		¥ 0

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Subsequent event (Details Narrative)	Apr. 22, 2022 CNY (¥)
ZHEJIANG TIANLAN | Subsequent Event [Member]
Proposed dividend	¥ 9,082,000