Edgar Filing: EURO TECH HOLDINGS CO LTD

clwt_20fa.htm

FORM 20-F/A

(Amendment No. 1)

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

For the fiscal year ended December 31, 2014

Commission file number 000-22113

EURO TECH HOLDINGS COMPANY LIMITED

(Exact name of Registrant as specified in its charter)

EURO TECH HOLDINGS COMPANY LIMITED

(Translation of Registrant’s name into English)

British Virgin Islands

(Jurisdiction of incorporation or organization)

18/F Gee Chang Hong Centre, 65 Wong Chuk Hong Road, Hong Kong

(Address of principal executive offices)

T.C. Leung

FAX: 852-28734887

18/F Gee Change Hong Centre

65 Wong Chuk Hong 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.

Name of each exchange on which registered: NASDAQ

Ordinary Shares, no par value

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

Not Applicable

(Title of Class)

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

Not Applicable

(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 2,069,223 Ordinary Shares

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

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer þ

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

U.S. GAAP þ

International Financial Reporting Standards as issued by the International Accounting Standards Board o

Other o

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. o Item 17 o 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). o Yes þ No

EXPLANATORY NOTES

The purpose of this Amendment No. 1 (“Amendment No. 1”) to the Annual Report on Form 20-F of Euro Tech Holdings Company Limited (the “Company”) for the fiscal year ended December 31, 2014, originally filed with the Securities and Exchange Commission on April 29, 2015 (the “Form 20-F”), is solely to (i) include restated financial statements of the Zhejiang Tianlan Environmental Protection Technology Company Limited (“Blue Sky”), an entity which the Company indirectly owns 20% of equity interest, and the restated financial statements of the Company after consolidation of the restated financial statements of Blue Sky: and (ii) include amended Item 3A, Item 4A, Item 5A and Item 5B of Part I due to the restatement. During the audit of the Company’s consolidated financial statements for the year ended December 31, 2015, and the related audit of Blue Sky’s financial statements for the year ended December 31, 2015, certain errors in the Company’s and Blue Sky’s previously issued financial statements were identified, which errors stemmed from errors in the financial statements of Blue Sky. Specifically, it was determined that (i) Blue Sky had incorrectly accounted for the recognition of construction in progress (or CIP) at the year ended December 31, 2014; (ii) Blue Sky had overstated account and other receivables, other tax payable and income tax payable as of December 31, 2014. Such errors stemmed from the accounting treatment of one of Blue Sky’s construction projects. Blue Sky determined the income recognized for the project at issue should be reversed and all the cost related to this project should be recognized as CIP for the year ended December 31, 2014. As a result of the foregoing, it was also determined that the Company had incorrectly accounted for the interest in Blue Sky and therefore incorrectly accounted for its net profit for the fiscal year ended December 31, 2014. The effects of the restatements are discussed in Note 24 to the Company’s financial statements for year ended December 31, 2014 and Note 22 to Blue Sky’s financial statements for year ended December 31, 2014.

On April 26, 2016 the Audit Committee of the Board of Directors of the Company concurred with and approved management’s recommendation, that the Company’s financial statements for the fiscal year ended December 31, 2014 and Blue Sky’s financial statements for year ended December 31, 2014 should no longer be relied upon due to the errors discussed above and should be restated. The Company’s management and the Audit Committee discussed the matters related to the restatements with Dominic K. F. Chan & Co. the Company’s independent registered public accounting firm.

Unless otherwise stated, all information contained in Amendment No. 1 is as of April 29, 2015, the filing date of the original Form 20-F. Except as stated herein, this Amendment No. 1 does not reflect events or transactions occurring after such filing date or modify or update those disclosures in the Form 20-F that may have been affected by events or transactions occurring subsequent to such filing date. No information in the Form 20-F other than as set forth above is amended hereby. Currently-dated certifications from our Chief Executive Officer and our Chief Financial Officer have been included as exhibits to this amendment.

TABLE OF CONTENTS

PART I

ITEM 3. KEY INFORMATION		4

	Item 3A. Selected Financial Data	4

ITEM 4. INFORMATION ON THE COMPANY		7

	Item 4A. History and Development of the Company	7

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS		8

	Item 5A. Operating Results	8

	Item 5B. Liquidity and Capital Resources	10

PART III

ITEM 18. FINANCIAL STATEMENTS		12

ITEM 19. EXHIBITS		13

PART I

ITEM 3A.

SELECTED FINANCIAL DATA

SELECTED FINANCIAL INFORMATION

(Amounts expressed in thousands, except share and per share data and unless otherwise stated)

The selected consolidated statement of operations and comprehensive income/(loss) data for years ended December 31, 2014, 2013 and 2012 and the selected consolidated balance sheet data as of December 31, 2014 and 2013 set forth below are derived from audited consolidated financial statements of the Company included herein and should be read in conjunction with, and are qualified in their entirety by reference to such financial statements, including the notes thereto and “Item 5. Operating and Financial Review and Prospects.” The selected consolidated statement of operations and comprehensive income/(loss) data for the years ended December 31, 2011 and 2010 and the selected consolidated balance sheet data as of December 31, 2012, 2011 and 2010 set forth below are derived from audited consolidated financial statements of the Company which are not included herein.

	2014		2013		2012		2011		2010
	US$		US$		US$		US$		US$
Balance Sheet Data:
Cash and cash equivalents		4,857		5,406		7,468		5,339		6,130
Working capital(1)		5,267		5,830		5,706		5,730		6,444
Total assets		23,399		23,878		24,947		23,864		25,213
Short-term debt(2)		0		0		0		0		0
Net assets		17,530		17,877		17,756		17,909		18,101
Capital Stock		123		123		123		123		123

______________________

(1) Current assets minus current liabilities.

(2) Short-term debt includes short-term borrowings and current portion of long-term bank loans.

	2014			2013			2012			2011			2010
	US$			US$			US$			US$			US$
Statement of Operations and Comprehensive Income/(loss) Data:
Revenue		18,822			18,602			21,645			20,213			22,305
Cost of revenue		(13,991	)		(13,138	)		(15,480	)		(15,322	)		(16,564	)
Gross profit		4,831			5,464			6,165			4,891			5,741
Selling and Administrative Expenses		(5,802	)		(5,719	)		(6,224	)		(6,565	)		(7,119	)
Operating loss		(971	)		(255	)		(59	)		(1,674	)		(1,378	)
Interest Income		27			45			46			60			42
Other income, net		65			54			48			82			9
(Loss)/gain on disposal of fixed assets		-			(1	)		(22	)		328			1
(Loss)/income before taxes		(879	)		(157	)		13			(1,204	)		(1,326	)

Income (taxes)/benefit		(18	)		(73	)		(142	)		63			(154	)

Equity in income of affiliates		605			325			9			1,131			723
Net (Loss)/Income		(292	)		95			(120	)		(10	)		(757	)

Less: net loss/(income) attributable to non-controlling interest		169			(113	)		(309	)		531			(330	)
Net (loss)/income attributable to the Company		(123	)		(18	)		(429	)		521			(1,087	)

Other comprehensive (loss)/income
Net (loss)/income		(292	)		95			(120	)		(10	)		(757	)
Foreign exchange translation adjustments		(15	)		181			-			215			177
Release of translation reserves upon disposal of a subsidiary		-			(74	)		-			-			-

Comprehensive (loss)/income		(307	)		202			(120	)		205			(580	)
Less: Comprehensive loss/(income) attributable to non-controlling interest		176			(167	)		(309	)		442			(397	)

Comprehensive (loss)/income attributable to the Company		(131	)		35			(429	)		647			(977	)

Net (loss)/income per Ordinary Share-Basic		(0.06	)		(0.01	)		(0.21	)		0.25			(0.52	)
-Diluted		(0.06	)		(0.01	)		(0.21	)		0.25			(0.51	)

Weighted Average Number of Ordinary Shares Outstanding
Basic		2,069,223			2,069,223			2,070,685			2,087,922			2,099,894
Diluted		2,069,223			2,069,223			2,076,315			2,102,199			2,143,375

The Company maintains its books and records in United States dollars (“US$” or “U.S. Dollars”). Its subsidiaries, retail shops and affiliates maintain their books and records either in US$, Hong Kong dollars (“HK$” or “Hong Kong Dollars”) or in Chinese Renminbi (“RMB” or “Renminbi”).

The Hong Kong dollar is freely convertible into other currencies (including the US dollar). Since 1983, the Hong Kong dollar has effectively been officially linked to the US dollar at the rate of approximately HK$ 7.80 = US$ 1.00. However, the market exchange rate of the Hong Kong dollar against the US dollar continues to be influenced by the forces of supply and demand in the foreign exchange market. Exchange rates between the Hong Kong dollar and other currencies are influenced by the rate between the US dollar and the Hong Kong dollar.

Since 1994, the conversion of Renminbi into foreign currencies, including U.S. dollars, has been based on rates set by the People’s Bank of China, which are set daily based on the previous day’s interbank foreign exchange market rates. From 1994 through 2004, the official exchange rate for the conversion of Renminbi to U.S. dollars was generally stable and maintained at the rate of approximately RMB 8.30 = US$ 1.00. However, from 2010 through 2014, the Renminbi has fluctuated and at the end of 2014, 2013, 2012, 2011 and 2010, the exchange rates were approximately RMB 6.1460 = US$ 1.00, RMB 6.1122 = US$ 1.00, RMB 6.3086 = US$ 1.00, RMB 6.3585 = US$ 1.00, RMB 6.6018 = US$1.00, respectively. The value of the Renminbi fluctuates and is subject to changes in PRC political and economic conditions.

The high, low and average exchange rates are set forth below:

	Rate at Period End		Low		High		Average
US$ to RMB


Fiscal 2010		6.6018		6.6018		6.8344		6.7696
Fiscal 2011		6.3585		6.3318		6.6357		6.4640
Fiscal 2012		6.3086		6.2289		6.3862		6.3116
Fiscal 2013		6.1122		6.1084		6.3090		6.1943
Fiscal 2014		6.1460		6.0881		6.2080		6.1457

US$ to HK$


Fiscal 2010		7.7827		7.7507		7.8046		7.7689
Fiscal 2011		7.7690		7.7640		7.8090		7.7845
Fiscal 2012		7.7514		7.7501		7.7688		7.7571
Fiscal 2013		7.7546		7.7508		7.7651		7.7567
Fiscal 2014		7.7577		7.7500		7.7672		7.7547

The Following Months	Low		High		Average
US$ to RMB

July 2014		6.1527		6.2080		6.1687
August 2014		6.1434		6.1716		6.1591
September 2014		6.1377		6.1649		6.1517
October 2014		6.1235		6.1543		6.1403
November 2014		6.1319		6.1467		6.1412
December 2014		6.1217		6.1464		6.1353

US$ to HK$

July 2014		7.7500		7.7516		7.7504
August 2014		7.7500		7.7516		7.7505
September 2014		7.7502		7.7635		7.7519
October 2014		7.7548		7.7653		7.7582
November 2014		7.7521		7.7584		7.7546
December 2014		7.7511		7.7620		7.7547

ITEM 4.

INFORMATION ON THE COMPANY

ITEM 4A.

HISTORY AND DEVELOPMENT OF THE COMPANY

The Company was organized under the laws of the BVI on September 30, 1996 for the purposes of raising capital and for acquiring all the outstanding capital stock of Euro Tech (Far East) Limited, a Hong Kong corporation involved in the distribution of advanced water treatment equipment (“Far East”). In March 1997, the Company acquired all the issued and outstanding capital stock of Far East and it became a wholly-owned subsidiary and was the primary operational entity of the Company.

Yixing Pact Environmental Technology Company Limited (“Yixing”) and Pact Asia Pacific Limited (“Pact”, collectively with “Yixing”, the “Pact-Yixing”), companies engaged in water and waste-water treatment solution business, became our majority-owned subsidiaries in 2005 and 2010, and we acquired additional two percent (2%) and five percent equity interests in Pact-Yixing, respectively.

Pact-Yixing, situated in Shanghai, specialize in the design, manufacture and operation of water and waste-water treatment plants in several industries situated in China. Pact-Yixing, through agents and business alliances, also conduct similar operations in the Middle East.

We established Shanghai Euro Tech Environmental Engineering Company Ltd. (“Shanghai — Environmental”) as a wholly-owned subsidiary under the laws of the PRC, to carry on our environmental engineering department with that line of business and its personnel transferred from our subsidiary, Euro Tech (Far East) Ltd. Shanghai — Environmental is focusing on our water and waste-water treatment engineering business. We are scaling down this company as we have a 58% equity interest in Pact-Yixing that operates similar business activities to avoid duplication of costs and efforts. Shanghai — Environmental is just completing its outstanding projects and had made operating loss of approximately US$238,000 in Fiscal 2014 and we plan to wind down it upon completion of the outstanding projects.

China’s rapid economic growth had led it to become one of the world’s largest emitters of sulfur dioxide. The damage due to acid rain caused by sulfur dioxide is vast, and is also affecting the neighboring countries as air currents transport sulfur dioxide. To tackle these environmental and geo-political issues, China has established targets to reduce key pollutants, namely, sulfur dioxide, nitrogen oxides and suspended particulates. Heavy polluters are being warned to reduce their emissions or face penalties. We believe that as a result, the demand of desulphurization and dust removal equipment will increase accordingly.

In Far East owns a 20% equity interest in Zhejiang Tianlan Environmental Protection Technology Company Limited (“Blue Sky”), founded in 2000. Blue Sky provides design and general contracting services, equipment manufacturing, installation, testing and operation management for the purification treatment of industrial waste gases (specifically as desulphurization, flue gas de-nitration, dust removal) emitted from various boilers and industrial furnaces of power plants, steelworks and chemical plants. By securing an equity stake in Blue Sky’s business, we have a strategic partner to work within China’s environmental protection business. With Blue Sky’s technology and technical support, we believe we are able to provide services and environmental solutions not only for water and waste-water treatment but also for air pollution control for industrial clients in China. Blue Sky's revenue and net income have steadily increased during Fiscal 2010 and Fiscal 2011. During Fiscal 2012, Blue Sky’s sales orders increased by 27%. However, the delay in implementation of some major projects resulted in revenue and net income decreases. Blue Sky's revenue and net income have steadily increased during Fiscal 2013 and Fiscal 2014.

We have a 20% equity interest in Zhejiang Jia Huan Electronic Co. Ltd., (“Jia Huan”). Jia Huan has been in the environmental protection business since 1969. Approximately 95% of Jia Huan’s business is related to air pollution control and less than 5% is related to water and wastewater treatment. Jia Huan designs and manufactures automatic control systems and electric voltage control equipment for electrostatic precipitators which are used as air purification equipment for power plants, cement plants and incinerators to remove and collect dust and pollutants from exhaust stacks.

In Fiscal 2014, Blue Sky and Jia Huan made income contribution of approximately US$453,000 and US$152,000, respectively, to the Company. According to publicly available news reports, the PRC’s Premier opened that country’s 2013 annual Parliament meeting and declared war on pollution and the PRC’s National Development and Reform Commission (“NDRC”), the PRC’s economic planner reported that new guidelines would be issued on relocating key industries away from urban centers to help tackle smog. The NDRC said it would seek to ensure that polluters pay by establishing a new mechanism to compensate victims of environmental damage and hold local officials accountable. We hope that the foregoing will benefit these two affiliates.

ITEM 5A.

OPERATING RESULTS

Background - Political and Economic Conditions in Hong Kong and the PRC

The Company’s operations are located almost entirely within, and revenues are almost entirely generated from Hong Kong and the PRC. Set forth below are the approximate percentage of the Company’s sales made to customers in the PRC and Hong Kong for the fiscal years indicated:

Fiscal Year	PRC			Hong Kong


2012		73	%		25	%
2013		66	%		32	%
2014		58	%		33	%

Sales to customers situated in Macau and elsewhere through Fiscal 2014 were nominal. This makes the Company particularly susceptible to changes in the political and economic climate of either Hong Kong or the PRC.

Hong Kong. Hong Kong has been one of the prime centers for commercial activity and economic development recently in Southeast Asia. On July 1, 1997, sovereignty over Hong Kong was transferred from the United Kingdom to the PRC. As provided in the Sino-British Joint Declaration and the Basic Law, the Hong Kong SAR is provided a high degree of autonomy except in foreign and defense affairs. The Basic Law provides that the Hong Kong SAR is to have its own legislature, legal and judicial system and full economic autonomy for 50 years after the transfer of sovereignty. Based on the current political conditions and the Company’s understanding of the Basic Law, the Company does not believe that the transfer of sovereignty over Hong Kong has had or will have an adverse impact on its financial and operating environment. Although the Chinese government has pledged to maintain the economic and political autonomy of Hong Kong over its internal affairs, there is no assurance that such pledge will continue to be honored if there are changes in the Chinese political or economic climate. Sales in Hong Kong, expressed as a percentage of our revenue increased by 7% in Fiscal 2013 as compared with Fiscal 2012. Sales in Hong Kong, expressed as a percentage of our revenue increased by 1% in Fiscal 2014 as compared with Fiscal 2013. See – Item 3D. “Key Information — Risk Factors.”

PRC. The PRC has been a socialist state since 1949. For more than half a century, the PRC’s economy has been, and presently continues to be, a socialist economy operating under government controls promulgated under various State Plans adopted by central Chinese government authorities and implemented, to a large extent, by provincial and local authorities which may set production and development targets. However, since approximately the early 1980s, the PRC’s national government has undertaken certain reforms to permit greater provincial and local economic autonomy and private economic activities. Any change in political or economic conditions may substantially adversely affect these reform initiatives and, in turn, the Company. Sales in the PRC, expressed as a percentage of total revenue decreased by 7% in Fiscal 2013 as compared with Fiscal 2012. The decrease was primarily due to a decrease in engineering revenues from the PRC as a result of competition from companies offering similar services, that we believe to be of lower quality than our services, at lower prices . Sales in the PRC, expressed as a percentage of total revenue decreased by 8% in Fiscal 2014 as compared with Fiscal 2013. The decrease was primarily due to a decrease in engineering revenues from the PRC as a result of competition from companies offering similar services, that we believe to be of lower quality than our services, at lower prices. See –Item 3D. “Key Information — Risk Factors.”

Results from Operations

The following operating and financial review should be read in conjunction with the Consolidated Financial Statements and notes thereto appearing elsewhere in this Annual Report. All financial data referred to in the following discussion has been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”).

The following table presents selected statement of operations data expressed in thousands of US$ and as a percentage of revenue for the Company’s fiscal years indicated below:

	2014					2013					2012					2011					2010
Revenue		18,822		100	%		18,602		100	%		21,645		100	%		20,213		100	%		22,305		100	%
Cost of revenue		13,991		74.3	%		13,138		70.6	%		15,480		71.5	%		15,322		75.8	%		16,564		74.3	%
Gross Profit		4,831		25.7	%		5,464		29.4	%		6,165		28.5	%		4,891		24.2	%		5,741		25.7	%
Selling and administrative Expenses		5,802		30.8	%		5,719		30.7	%		6,224		28.8	%		6,565		32.5	%		7,119		31.9	%
(Loss)/income before income Taxes		(879	)	-4.7	%		(157	)	-0.8	%		13		0.1	%		(1,204	)	-6.0	%		(1,326	)	-5.9	%
Income taxes/(benefit)		18		0.1	%		73		0.4	%		142		0.7	%		(63	)	-0.3	%		154		0.7	%
Equity in income of Affiliates		605		3.2	%		325		1.7	%		9		0.1	%		1,131		5.6	%		723		3.2	%
Net (loss)/income		(292	)	-1.6	%		95		0.5	%		(120	)	-0.6	%		(10	)	-0.1	%		(757	)	-3.4	%
Net loss/(income) attributable to Non-controlling interest		169		0.9	%		(113	)	-0.6	%		(309	)	-1.4	%		531		2.6	%		(330	)	-1.5	%
Net (loss)/income attributable to the Company		(123	)	-0.7	%		(18	)	-0.1	%		(429	)	-2.0	%		521		2.6	%		(1,087	)	-4.9	%

Fiscal Year Ended December 31, 2014 Compared to Fiscal Year Ended December 31, 2013

Revenue; Gross Profit and Cost of Revenue. Revenue increased by approximately US$ 220,000 or 1.2% to approximately US$ 18,822,000 in Fiscal 2014 from approximately US$ 18,602,000 in Fiscal 2013. Revenue from trading and manufacturing activities increased by approximately US$661,000, while revenue from engineering activities decreased by approximately US$ 441,000. The decrease in revenues from engineering activities was principally due to a decrease of approximately US$ 342,000 for Shanghai — Environmental. Pact-Yixing’s revenues of approximately US$ 7,060,000 and US$ 7,159,000 were included in our revenues in Fiscal 2014 and Fiscal 2013, respectively.

Gross profits decreased by approximately US$ 633,000 or 11.6% to approximately US$ 4,831,000 for Fiscal 2014 as compared to approximately US$ 5,464,000 for Fiscal 2013. During Fiscal 2014, the Company’s cost of revenue was approximately US$ 13,991,000, or 74.3% of revenues, in comparison to approximately US$13,138,000, or 70.6% for Fiscal 2013. Cost of revenue expressed as a percentage of revenue increased by 3.7% in Fiscal 2014 as compared with Fiscal 2013. The gross profit margin percentage decrease was due principally to decrease in gross margin of engineering revenues. Pact-Yixing contributed approximately US$ 2,264,000 to our gross profit in Fiscal 2014, a decrease of approximately US$ 618,000 from Fiscal 2013.

Selling and Administrative Expenses. Selling and administrative expenses were approximately US$ 5,802,000 in Fiscal 2014, a slight increase of approximately US $83,000 or 1.5% from approximately US$ 5,719,000 in Fiscal 2013. The major increase was research and development expenses incurred for the BWTS, increased from approximately US$425,000 in Fiscal 2013 to approximately US$631,000 in Fiscal 2014. Such increase was offset by the reduction of selling and administrative expenses other than research and development expenses.

Equity in Income of Affiliates. Equity in income of affiliates was approximately US$605,000 in Fiscal 2014, an increase of approximately US$280,000 from approximately US$ 325,000 in Fiscal 2013.

Interest Income. Interest income in Fiscal 2014 was approximately US$27,000 as compared to approximately US$45,000 in Fiscal 2013.

Other Income. Other income increased by approximately US$ 11,000 or 20.4% to approximately US$ 65,000 in Fiscal 2014 from approximately US$ 54,000 in Fiscal 2013. The increase in other income was principally due to increase in rental income of approximately US$ 5,000 and decrease in currency exchange loss of approximately US$6,000.

Loss/Gain on Disposal of Fixed Assets. There was no loss on disposal of fixed assets in Fiscal 2014 as compared to approximately US$ 1,000 in Fiscal 2013.

Income Taxes. Taxes decreased by US$ 55,000 to approximately US$ 18,000 in Fiscal 2014 from approximately US$73,000 in Fiscal 2013. This decrease was primarily the result of decrease in net taxable income for Fiscal 2014.

Net Loss/Income. The loss increased by approximately US$ 105,000 to approximately US$ 123,000 in Fiscal 2014 from approximately US$18,000 in Fiscal 2013. This was primarily due to the decrease in revenues and gross profit.

Fiscal Year Ended December 31, 2013 Compared to Fiscal Year Ended December 31, 2012

Revenue; Gross Profit and Cost of Revenue. Revenue decreased by approximately US$ 3,043,000 or 14.1% to approximately US$ 18,602,000 in Fiscal 2013 from approximately US$ 21,645,000 in Fiscal 2012. The decrease was principally due to a decrease in revenues from engineering activities of approximately US$3,163,000 consisted of a decrease of approximately US$ 887,000 for Shanghai — Environmental and a decrease of approximately US$ 2,276,000 for Pact-Yixing. The drop in sales revenue from engineering activities in the PRC was the result of competition from companies offering similar services, that we believe to be of lower quality than our services, at lower prices. Pact-Yixing’s revenues of approximately US$ 7,159,000 and US$ 9,435,000 were included in our revenues in Fiscal 2013 and Fiscal 2012, respectively.

Gross profits decreased by approximately US$ 701,000 or 11.4% to approximately US$ 5,464,000 for Fiscal 2013 as compared to approximately US$ 6,165,000 for Fiscal 2012. During Fiscal 2013, the Company’s cost of revenue was approximately US$ 13,138,000, or 70.6% of revenues, in comparison to approximately US$15,480,000, or 71.5% for Fiscal 2012. Cost of revenue expressed as a percentage of revenue decreased by 0.9% in Fiscal 2013 as compared with Fiscal 2012. The gross profit margin percentage increase was due principally to improvement in gross margin of engineering revenues. Pact-Yixing contributed approximately US$ 2,882,000 to our gross profit in Fiscal 2013, a decrease of approximately US$ 709,000 from Fiscal 2012.

Selling and Administrative Expenses. Selling and administrative expenses were approximately US$ 5,719,000 in Fiscal 2013, a decrease of approximately US$ 505,000 or 8.1% from approximately US$ 6,224,000 in Fiscal 2012. The decrease was principally due to the reduction of expenses for trading and manufacturing activities as the Company continued to consolidate its trading business. Pact-Yixing’s selling and administrative expenses also decreased by approximately US$244,000 in Fiscal 2013 as compared to Fiscal 2012 principally as a result of a decrease in research and development expenses incurred for the BWTS.

Equity in Income of Affiliates. Equity in income of affiliates was approximately US$325,000 in Fiscal 2013, an increase of approximately US$316,000 from approximately US$ 9,000 in Fiscal 2012. The increase was primarily due to the increase in contribution from Blue Sky as a result of completion of some major contracts.

Interest Income. Interest income in Fiscal 2013 was approximately US$45,000 as compared to approximately US$46,000 in Fiscal 2012.

Other Income. Other income increased by approximately US$ 6,000 or 12.5% to approximately US$ 54,000 in Fiscal 2013 from approximately US$ 48,000 in Fiscal 2012. The increase in other income was principally due to increase in rental income of approximately US$ 7,000.

Loss/Gain on Disposal of Fixed Assets. Loss on disposal of fixed assets was approximately US$1,000 in Fiscal 2013 as compared to approximately US$ 22,000 in Fiscal 2012.

Income Taxes. Taxes decreased by US$ 69,000 to approximately US$ 73,000 in Fiscal 2013 from approximately US$142,000 in Fiscal 2012. This decrease was primarily the result of decrease in net taxable income for Fiscal 2013.

Net Income. Income from continuing operations improved by approximately US$ 411,000 to a net loss of approximately US$ 18,000 in Fiscal 2013 from a net loss of approximately US$429,000 in Fiscal 2012. The improvement was primarily due to the profit contribution from Blue Sky and our reduction in selling and administrative expenses.

ITEM 5B.

LIQUIDITY AND CAPITAL RESOURCES

The Company has primarily used its own funds to finance accounts receivable, inventories, and capital expenditures including purchases of property, office furniture and equipment, computers and calibration equipment. The Company has historically met its cash requirements from cash flows from operations, short-term borrowings, bank lines of credit, and long-term mortgage bank loans. The Company expects, but can make no assurances that its present cash reserves, cash from operations and existing available bank credit facilities exercises would be sufficient to fund its future capital expenditure requirements. Working capital at the end of Fiscal 2014 and Fiscal 2013 were approximately US$ 5,267,000 and US$5,830,000, respectively.

During Fiscal 2014, the Company used net cash of approximately US$470,000 in its operating activities principally as a result of net loss of US$123,000, increase in accounts receivables of approximately US$186,000 and inventory of approximately US$49,000, and decrease in other payables of approximately US$ 585,000 which was partially covered by decrease in prepayments and other current assets of approximately US$695,000 and increase in accounts payable of approximately US$446,000.

During Fiscal 2014 and Fiscal 2013, the Company used approximately US$ 64,000 and generated approximately US$ 336,000 in investing activities, respectively. The Company used approximately US$10,000 and US$51,000 to purchase facilities and equipment in Fiscal 2014 and Fiscal 2013, respectively. During Fiscal 2013, the Company received proceeds of approximately US$1,000 on disposal of plant and equipment. During Fiscal 2014 and Fiscal 2013, the Company used approximately US$314,000 and reduced approximately US$274,000, respectively, as restricted cash to issue performance guarantees to its customers through its banks in projects requiring performance guarantees and During Fiscal 2014 and Fiscal 2013, the Company received dividends of approximately US$302,000, and US$246,000 respectively, from the affiliates and paid dividends of approximately US$42,000, and US$134,000 respectively, to non-controlling interest. During Fiscal 2014 and Fiscal 2013, the Company received dividends of approximately US$302,000, and US$246,000 respectively, from the affiliates. During Fiscal 2014 and Fiscal 2013, the Company paid dividends of approximately US$42,000, and US$134,000 respectively, to non-controlling interest.

The Company had various banking facilities available for overdraft, import and export credits and foreign exchange contracts from which the Company could have accessed up to approximately US$1,666,000 at December 31, 2014. The aforementioned available credit facilities were obtained on the conditions that, among other things, the Company not create a charge or lien on its other assets in favor of third parties without such bank’s consent, and the Company maintaining a certain level of net worth. These credit facilities were obtained on the conditions that, among other things, the Company pledge rented out property of approximately 1,200 square feet in Hong Kong as security, not create a charge or lien on its other assets in favor of third parties without such bank’s consent, and the Company maintaining a certain level of net worth.

Cash decreased from approximately US$5,406,000 at the end of Fiscal 2013 to US$4,857,000 at the end of Fiscal 2014. The principal reason for the decrease in cash was the net cash outflow from operating activities.

The Company’s net accounts receivable increased from approximately US$4,082,000 at the end of Fiscal 2013 to US$4,268,000 at the end of Fiscal 2014. The amount of receivables subject to collection is expected to be received under normal commercial trading terms.

The Company’s inventory increased from approximately US$494,000 at the end of Fiscal 2013 to US$543,000 at the end of Fiscal 2014.

The Company’s capital expenditures were approximately US$10,000 and US$51,000 in Fiscal 2014 and Fiscal 2013, respectively. Capital expenditures during Fiscal 2014 and Fiscal 2013 were incurred primarily in connection with the purchase of office equipment, furniture and fixtures. The Company continues to develop new products, for example, non-chemical ballast water treatment system. If such products developments are indeed made, the Company may expect to incur significantly larger capital expenditures, for which the Company presently intends, but as to which no assurance can be made, to use existing cash reserves, cash from operations and available bank credit facilities.

Goodwill

Goodwill related to the engineering segment which is profitable. As of December 31, 2014, we completed the annual impairment test. Based on the result of the first step of the test, the Company determined that there was no impairment of goodwill.

Anticipated Future Resources and Uses of Cash

The Company has historically funded its working capital, capital expenditure, investing and expansions needs from operations, available bank credit facilities and proceeds from the issuances of our ordinary shares and expects to continue funding these requirements from operations and available bank credit facilities. The Company may use its funds to form strategic alliances with third parties, invest in product research and development, or expand its sales offices or, with third parties, seek to acquire new products or businesses or form strategic alliances. The Company expects, but can make no assurances that its present cash reserves, cash from operations and existing available bank credit facilities would be sufficient to fund its future cash requirements.

Inflation

The Company believes generally that past declining rates of inflation in the PRC have had a positive effect on its results from operations. As a result of the recent rise in the rate of inflation in the PRC, we anticipate increases in the overhead costs of our PRC affiliates and offices. The Company believes, although no assurance can be given, that as credit restrictions are gradually lifted, it will be able to increase prices in the market for its products and thus realize increased profit margins.

Critical Accounting Policies

In April 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-08 “Presentation of Financial Statements and Property, Plant and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” changing the presentation of discontinued operations on the statements of income and other requirements for reporting discontinued operations. Under the new standard, a disposal of a component or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the component meets the criteria to be classified as held-for-sale or is disposed. The amendments in this update also require additional disclosures about discontinued operations and disposal of an individually significant component of an entity that does not qualify for discontinued operations. The new accounting guidance is effective for interim and annual periods beginning after December 15, 2014. Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 – Revenue from Contracts with Customers, that will supersede virtually all of the existing revenue recognition guidance in US GAAP and is effective for annual periods beginning on or after December 15, 2016. Early adoption is not permitted. The standard establishes a five-step model that will apply to revenue earned from a contract with a customer. The standard’s requirements will also apply to the sale of some non-financial assets that are not part of the entity’s ordinary activities. Extensive disclosures will be required, including disaggregation of total revenue; information about performance obligations; changes in contract asset and liability account balances between periods and key judgments and estimates. Management is in the process of assessing the impact of the new standard on Company’s financial position.

In August 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-15 – Presentation of Financial Statements—Going Concern. ASU 2014-15 provides guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 requires an entity’s management to evaluate at each reporting period based on the relevant conditions and events that are known at the date of financial statements are issued, whether there are conditions or events, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and to disclose the necessary information. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

In January 2015, the FASB issued ASU No. 2015-01 “Income Statement—Extraordinary and Unusual Items: Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items”. The concept of extraordinary items is removed and instead items that are both unusual in nature and infrequently occurring should be presented within income from continuing operations or disclosed in notes to financial statements because those items satisfy the conditions for an item that is unusual in nature or infrequently occurring. The new accounting guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. Companies have the option to apply the amendments of ASU No. 2015-01 either prospectively or retrospectively.

PART III

ITEM 18.

FINANCIAL STATEMENTS

The following financial statements are filed as part of this annual report on Form 20-F/A.

Euro Tech Holdings Company Limited		F-1

Report of Independent Registered Public Accounting Firm		F-2

Consolidated balance sheets		F-3

Consolidated statements of income		F-4

Consolidated statements of cash flows and changes in shareholders’ equity		F-6

Zhejiang Tianlan Environmental Protection Technology Company Limited		F-35

Report of Independent Registered Public Accounting Firm		F-36

Consolidated Balance Sheet		F-37

Consolidated Statements of Income		F-38

Cash flows and changes in Shareholders’ equity		F-40

Zhejiang Jia Huan Electronic Co., Ltd.		F-56

Report of Independent Registered Public Accounting Firm		F-57

Consolidated balance sheets		F-58

Consolidated statements of income		F-59

Consolidated statements of cash flows and changes in shareholders’ equity		F-60

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)

8.1		List of Subsidiaries (4)

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		X BRL Taxonomy Extension Presentation Linkbase Document*

*	Filed with this Annual Report on Form 20-F/A.

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 20-F filed on April 29, 2015.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F/A and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.

	EURO TECH HOLDINGS COMPANY LIMITED
		(REGISTRANT)

April 28, 2016		/s/ T.C. Leung
		T.C. Leung
		Chief Executive Officer and Chairman of the Board of Directors

EURO TECH HOLDINGS COMPANY LIMITED

AUDITED CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2014 AND 2013 AND

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS),

CONSOLIDATED STATEMENTS OF CASH FLOWS AND CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012

TOGETHER WITH REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

F-1

Report of Independent Registered Public Accounting Firm

To the Directors and Stockholders of

Euro Tech Holdings Company Limited

We have audited the accompanying consolidated balance sheet of Euro Tech Holdings Company Limited (the “Company”) and its subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive income/(loss), changes in shareholders’ equity and cash flows for the years ended December 31, 2014, 2013 and 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated balance sheets of the Company and its subsidiaries as of December 31, 2014 and 2013 and the consolidated results of their operations and their cash flows for the years ended December 31, 2014, 2013 and 2012, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 24 to the accompanying financial statements, the financial statements of the Company for the year ended December 31, 2014 have been restated to correct certain misstatements.

Dominic. K.F. Chan & Co.,

Certified Public Accountants

Hong Kong, China

April 29, 2015

Except for Note 24 dated April 28, 2016

F-2

EURO TECH HOLDINGS COMPANY LIMITED

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2014 AND 2013

	Note			2014			2013
				US$’000			US$’000
Assets

Current assets:
Cash and cash equivalents					4,857			5,406
Restricted cash					879			565
Accounts receivable, net		6			4,268			4,082
Prepayments and other current assets		7			589			1,284
Inventories		8			543			494
Total current assets					11,136			11,831

Property, plant and equipment, net	9 & 22(iii		)		811			889

Interests in affiliates		10			10,154			9,851

Goodwill		13			1,071			1,071

Deferred tax assets		4			227			236

Total assets					23,399			23,878

Liabilities and shareholders’ equity

Current liabilities:
Accounts payable					3,561			3,115
Other payables and accrued expenses		11			2,101			2,686
Taxes payable					207			200
Total current liabilities					5,869			6,001

Commitments and contingencies		20			-			-
Shareholders’ equity:
Ordinary share, 20,000,000 (2013: 20,000,000) shares authorised; 2,229,609 (2013: 2,229,609) shares issued		12			123			123
Additional paid-in capital					9,535			9,533
Treasury stock, 160,386 (2013: 160,386) shares at cost		14			(766	)		(766	)
PRC statutory reserves		15			315			315
Accumulated other comprehensive income					776			784
Retained earnings					5,760			5,883
Equity attributable to shareholders of Euro Tech					15,743			15,872
Non-controlling interest					1,787			2,005
Total shareholders’ equity					17,530			17,877

Total liabilities and shareholders’ equity					23,399			23,878

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

F-3

EURO TECH HOLDINGS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)

FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012

	Note		2014			2013			2012
			US$’000			US$’000			US$’000
Revenues
Trading and manufacturing				11,647			10,986			10,866
Engineering				7,175			7,616			10,779
Total revenues	22(i) & (ii)			18,822			18,602			21,645

Cost of revenues
Trading and manufacturing				(9,060	)		(8,422	)		(8,230	)
Engineering				(4,931	)		(4,716	)		(7,250	)
Total cost of revenues				(13,991	)		(13,138	)		(15,480	)
Gross profit				4,831			5,464			6,165

Selling and administrative expenses				(5,802	)		(5,719	)		(6,224	)
Operating loss				(971	)		(255	)		(59	)
Interest income				27			45			46
Other income, net		3		65			54			48
(Loss) on disposal of fixed assets				-			(1	)		(22	)
(Loss)/profit before income taxes, equity in income of affiliates and non-controlling interests				(879	)		(157	)		13

Income taxes		4		(18	)		(73	)		(142	)

Equity in income of affiliates				605			325			9
Net (loss)/profit for the year				(292	)		95			(120	)
Less: net loss/(income) attributable to non-controlling interest				169			(113	)		(309	)
Net loss attributable to the Company				(123	)		(18	)		(429	)
Other comprehensive (loss) / income
Net (loss)/profit				(292	)		95			(120	)
Foreign exchange translation adjustments				(15	)		181			-
Release of translation reserves upon disposal of a subsidiary				-			(74	)		-
Comprehensive (loss) / income				(307	)		202			(120	)
Less: Comprehensive loss/(income) attributable to non-controlling interest				176			(167	)		(309	)
Comprehensive (loss) / income attributable to the Company				(131	)		35			(429	)

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

F-4

EURO TECH HOLDINGS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS) (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012

	Note	2014			2013			2012
		US$’000			US$’000			US$’000
Net loss per ordinary share
- Basic		$	(US0.06	)	$	(US 0.01	)	$	(US 0.21	)
- Diluted		$	(US0.06	)	$	(US 0.01	)	$	(US 0.21	)
Weighted average number of ordinary shares outstanding
- Basic	5		2,069,223			2,069,223			2,070,685
- Diluted	5		2,069,223			2,069,223			2,076,315

*In connection with a 2 for 11 subsequent reverse stock split on January 13, 2012, the common stock and the computation of Basic and Diluted EPS are adjusted retroactively to reflect the recapitalization change.

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

F-5

EURO TECH HOLDINGS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012

	2014			2013			2012
	US$’000			US$’000			US$’000
Cash flows from operating activities:
Net loss		(123	)		(18	)		(429	)
(Used in)/ adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment		88			108			130
Gain on disposal of property, plant and equipment		-			1			22
Stock-based compensation expenses		2			-			-
Non-controlling interest in (loss)/profits of subsidiaries		(169	)		113			309
Equity in profit of affiliates		(605	)		(325	)		(9	)
Deferred tax assets		9			26			25
Decrease/(increase) in current assets:
Accounts receivable, net		(186	)		(993	)		655
Prepayments and other current assets		695			(436	)		925
Inventories		(49	)		159			(70	)
Increase/(decrease) in current liabilities:
Accounts payable		446			(598	)		838
Other payables and accrued expenses		(585	)		(299	)		327
Taxation payable		7			(293	)		71
Net cash (used in)/provided by operating activities		(470	)		(2,555	)		2,794
Cash flows from investing activities:
Purchase of property, plant and equipment		(10	)		(51	)		(41	)
Proceeds on disposal of property, plant and equipment		-			1			2

Dividend received from affiliates		302			246			-
Restricted cash for issuance of bank guarantees		(314	)		274			(593	)
Dividend paid to non-controlling interest		(42	)		(134	)		-
Net cash (used in)/provided by investing activities		(64	)		336			(632	)
Cash flows from financing activities:
Purchase of treasury stock		-			-			(33	)
Net cash used in financing activities		-			-			(33	)
Effect of exchange rate changes on cash and cash equivalents		(15	)		157			-

Net (decrease)/increase in cash and cash equivalents		(549	)		(2,062	)		2,129
Cash and cash equivalents, beginning of year		5,406			7,468			5,339
Cash and cash equivalents, end of year		4,857			5,406			7,468

	US$’000		US$’000		US$’000
Supplementary information
Interest received		27		45		46
Income taxes paid		3		340		8

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

F-6

EURO TECH HOLDINGS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012

	Number of ordinary share			Ordinary share		Additional paid-in capital		Treasury stock			Accumulated other comprehensive income			PRC statutory reserves		Retained earnings			Non-controlling interest			Total
				US$’000		US$’000		US$’000			US$’000			US$’000		US$’000			US$’000			US$’000

Balance as of January 1, 2012		2,229,628			123		9,533		(733	)		731			274		6,371			1, 610			17,909
Net loss		-			-		-		-			-			-		(429	)		309			(120	)
Purchase of treasury stock		-			-		-		(33	)		-			-		-			-			(33	)
Appropriation of reserves		-			-		-		-			-			37		(37	)		-			-
Cancellation of fractional shares		(19	)		-		-		-			-			-		-			-			-
Balance as of December 31, 2012		2,229,609			123		9,533		(766	)		731			311		5,905			1,919			17,756
Net loss		-			-		-		-			-			-		(18	)		113			95
Other comprehensive income: Foreign exchange translation adjustment		-			-		-		-			127			-		-			54			181
Appropriation of reserves		-			-		-		-			-			4		(4	)		-			-
Dividend paid/payable to non-controlling interest		-			-		-		-			-			-		-			(134	)		(134	)
Disposal of a subsidiary		-			-		-		-			-			-		-			53			53
Release of translation reserves upon disposal of a subsidiary		-			-		-		-			(74	)		-		-			-			(74	)
Balance as of December 31, 2013		2,229,609			123		9,533		(766	)		784			315		5,883			2,005			17,877
Net loss		-			-		-		-			-			-		(123	)		(169	)		(292	)
Other comprehensive income: Foreign exchange translation adjustment		-			-		-		-			(8	)		-		-			(7	)		(15	)
Dividend paid/payable to non-controlling interest		-			-		-		-			-			-		-			(42	)		(42	)
Stock-based compensation expense		-			-		2		-			-			-		-			-			2
Balance as of December 31, 2014		2,229,609			123		9,535		(766	)		776			315		5,760			1,787			17,530

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

F-7

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 Organisation and principal activities

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”).

Details of the Company’s significant subsidiaries and affiliates are summarised as follows:

Name	Percentage of equity ownership	Place of incorporation	Principal activities

Subsidiaries:

Euro Tech (Far East) Limited	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 (China) Limited	100%	Hong Kong	Inactive

ChinaH2O.com Limited***	100%	Hong Kong	Internet content provider and provision of marketing services for environmental industry to the Company and its subsidiaries

Euro Tech Trading (Shanghai) Limited	100%	The PRC	Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems

Shanghai Euro Tech Limited	100%	The PRC	Manufacturing of analytical and testing equipment

Shanghai Euro Tech Environmental Engineering Company Limited	100%	The PRC	Undertaking water and waste-water treatment engineering projects

Chongqing Euro Tech Rizhi Technology Co., Ltd	100%	The PRC	Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems

F-8

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 Organisation and principal activities (Continued)

Name	Percentage of equity ownership	Place of incorporation	Principal activities

Rizhi Euro Tech Instrument (Shaanxi) Co., Ltd	100%	The PRC	Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems

Guangzhou Euro Tech Environmental Equipment Co., Ltd	100%	The PRC	Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems

Yixing Pact Environmental Technology Co., Ltd	58%*	The PRC	Design, manufacture and operation of water and waste water treatment machinery and equipment

Pact Asia Pacific Limited **	58%*	The British Virgin Islands	Producing and selling of environment protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services

Affiliates:

Zhejiang Tianlan Environmental Protection Technology Co. Ltd. (Formerly known as Zhejiang Tianlan Desulfurization and Dust–Removal Co. Ltd.)	20%	The PRC	Design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted

Zhejiang Jia Huan Electronic Co. Ltd.	20%	The PRC	Design and manufacturing automatic control systems and electric voltage control equipment for electrostatic precipitators (air purification equipment)

*In the year 2011, the Company additionally acquired 5% equity interest of these two companies.

** The subsidiary of Pact Asia Pacific Limited, Pact Environmental Equipment Co., Ltd was deregistered on January 11, 2013.

*** The subsidiary was deregistered on February 17, 2012.

F-9

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 Summary of significant accounting policies

(a) Basis of Consolidation

The consolidated financial statements include the accounts of Euro Tech Holdings Company Limited and its subsidiaries (the “Group”). The financial statements of variable interest entities (“VIEs”), as defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 810-10, Consolidation, are included in the consolidated financial statements, if applicable. All material intercompany balances and transactions have been eliminated on consolidation.

The Group identified that certain retail shops established in the PRC qualified as variable interest entities as defined in ASC 810-10. The retail shops are principally engaged in the retailing business of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems. The Company is the primary beneficiary of these retail shops and, accordingly, consolidated their financial statements. The Company has a controlling financial interest in these retail shops and is subject to a majority of the risk of loss from the retailing activities, and is entitled to receive a majority of the retail shops’ residual returns. Total assets and liabilities of these consolidated VIEs total US$12,968 and US$1,388, as of December 31, 2014 and US$5,182 and US$4,744, as of December 31, 2013, respectively. The cumulative losses on consolidating these VIEs in the Group’s consolidated statement of income in 2014 were US$330,299 (2013: losses of US$302,893 and 2012: losses of US$275,232), including taxes of US$1,046 (2013: US$1,018 and 2012: US$1,262). The assets of the entities consist mainly of cash and bank balances, trade and other receivables, inventories and property, plant and equipment. The creditors of these VIEs do not have a recourse to the general credit of the Group. The Group will provide for all necessary financing for the VIEs.

(b) Subsidiaries and affiliates

A subsidiary is a company in which the Company, directly or indirectly, controls more than one half of the voting power; has the power to appoint or remove the majority of the members of the board of directors; 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 business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies (generally 20-50 percent ownership), are accounted for using the equity method of accounting.

The Group’s main source of revenue is the sale of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems. The Company recognises revenue when the product is delivered and the title is transferred. For certain products where installation is necessary, revenue is recognised upon completion of installation. Revenue earned from customer support services, which represents a minor percentage of total revenues, is recognised when such services are provided.

F-10

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

Revenues and profits in long term fixed price contracts or engineering income are recognised using the percentage of completion method in accordance with FASB ASC Subtopic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts. This approach primarily based on contract costs incurred to date compared with total estimated contract costs. Changes to total estimated contract costs or losses, if any, are recognised in the period they are determined. Revenues recognised in excess of amounts billed are classified as costs and estimated earnings in excess of billings on uncompleted contracts. Essentially all of such amounts are expected to be billed and collected within one year and are classified as current assets. Billings in excess of costs and estimated earnings on uncompleted contracts are classified as current liabilities. When reasonably dependable estimates cannot be made, construction contract revenues are recognised using the completed contract method.

(d) Research and Development Costs

Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately US$631,000, US$427,000 and US$930,000 for the years ended December 31, 2014, 2013 and 2012 respectively and were included in “Selling and Administrative” expenses in the Group’s consolidated statements of income.

(e) Advertising and promotional expenses

Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately US$44,000, US$12,000 and US$21,000 for the years December 31, 2014, 2013 and 2012 respectively and were included in “Selling and Administrative” expenses in the Group’s consolidated statements of income.

(f) Taxation

The Group accounts for income and deferred tax under the provision of FASB ASC Subtopic 740-10, Income Taxes, under which deferred taxes are recognised for all temporary differences between the applicable tax balance sheets and the consolidated balance sheet. Deferred tax assets and liabilities are recognised for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. ASC 740-10 also requires the recognition of the future tax benefits of net operating loss carry forwards. A valuation allowance is established when the deferred tax assets are not expected to be realised within a reasonable period of time.

In accordance with ASC 740-10, the Company recognises tax benefits that satisfy a greater than 50% probability threshold and provides for the estimated impact of interest and penalties for such tax benefits. The Company did not have such uncertain tax positions in 2014, 2013 and 2012.

Deferred tax assets and liabilities are measured using the enacted tax rates expected to be applicable for taxable income in the years in which temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in income for the period that includes the enactment date.

F-11

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

(g) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and demand deposits with banks.

(h) Restricted Cash

Restricted cash represents cash deposits retained with banks in the PRC for issuance of performance guarantees to the customers. The amount is expected to be released within one year after the balance sheet date.

(i) Receivables and Other Assets

Receivables and other assets are recorded at their nominal values. Doubtful debt allowances are provided for identified individual risks for these line items. If the loss of a certain part of the receivables is probable, doubtful debt allowances are provided to cover the expected loss. Receivables are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

(j) Inventories

Inventories are stated at the lower of cost, on the first-in, first-out method, or market value. Costs include purchase and related costs incurred in bringing each product to its present location and condition. Market value is calculated based on the estimated normal selling price, less further costs expected to be incurred for disposal. Allowance is made for obsolete, slow moving or defective items, where appropriate.

(k) Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Gains or losses on disposal are reflected in current operations. Major expenditures for betterments and renewals are capitalised. All ordinary repair and maintenance costs are expensed as incurred. Depreciation of property, plant and equipment is 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

F-12

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2	Summary of significant accounting policies (Continued)

(l) Impairment

The Group has adopted FASB ASC Subtopic 360-10, Property, Plant, and Equipment, which requires impairment losses to be recorded for property, plant and equipment to be held and used in operations when indicators of impairment are present. Reviews are regularly performed to determine whether the carrying value of assets is impaired. The Group determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the carrying amount of the assets. An impairment loss, if one exists, is then measured as the amount by which the carrying amount of the asset exceeds the discounted estimated future cash flows. Assets to be disposed of are reported at the lower of the carrying amount or fair value of such assets less costs to sell. Asset impairment charges are recorded to reduce the carrying amount of the long-lived asset that will be sold or disposed of to their estimated fair values. Charges for the asset impairment reduce the carrying amount of the long-lived assets to their estimated salvage value in connection with the decision to dispose of such assets. There were no impairment losses recorded during each of the three years ended December 31, 2014.

(m) Operating Leases

Leases where substantially all the risks and rewards of ownership of the leased assets remain with the lessors are accounted for as operating leases. Rental payments under operating leases are charged to expense on the straight-line basis over the period of the relevant leases.

(n) Goodwill

Goodwill represents the excess of the purchase price in a business combination over the fair value of the net tangible and intangible assets acquired. Under ASC 350, goodwill is not amortized, but rather is subject to an annual impairment test. Goodwill is tested for impairment at the reporting unit level by comparing the fair value of the reporting unit with its carrying value. The Company performs its annual impairment analysis of goodwill in the fourth quarter of the year, or more often if there are indicators of impairment present.

The provisions of ASC 350 require that a two-step impairment test be performed on goodwill at the level of the reporting units. In the first step, or Step 1, the Company compares the fair value of each reporting unit to its carrying value. If the fair value exceeds the carrying value of the net assets, goodwill is considered not impaired, and the Company is not required to perform further testing. If the carrying value of the net assets exceeds the fair value, then the Company must perform the second step, or Step 2, of the impairment test in order to determine the implied fair value of goodwill. To determine the fair value used in Step 1, the Company uses discounted cash flows. If and when the Company is required to perform a Step 2 analysis, determining the fair value of its net assets and its off-balance sheet intangibles would require it to make judgments that involve the use of significant estimates and assumptions.

F-13

EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2	Summary of significant accounting policies (Continued)

(o) Foreign Currency Translation

The Company maintains its books and records in United States dollars. Its subsidiaries and affiliates maintain their books and records either in Hong Kong dollars or Chinese Renminbi (“functional currencies”). Foreign currency transactions during the year are translated into the respective functional currencies at the applicable rates of exchange at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the respective functional currencies using the exchange rates prevailing at the balance sheet dates. Gains or losses from foreign currency transactions are recognised in the consolidated statements of income during the year in which they occur. Translation adjustments on subsidiaries’ equity are included as accumulated comprehensive income or loss.

(p) Derivative Instruments and Hedging Activities

ASC 815, "Derivatives and Hedging" ("ASC 815"), as amended, requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income (loss). If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is immediately recognized in earnings. The Company uses derivatives to hedge certain cash flow foreign currency exposures in order to further reduce the Company's exposure to foreign currency risks.

The Company measured the fair value of the contracts in accordance with ASC No. 820, "Fair Value Measurement and Disclosure" ("ASC 820") at Level 2. Level 2- includes other inputs that are directly or indirectly observable in the marketplace. As of December 31, 2014 the Group does not have any open contracts.

(q) Comprehensive Income

The Group has adopted FASB ASC Subtopic 220-10, Comprehensive Income, which requires the Group to report all changes in equity during a period, except for those resulting from investment by owners and distribution to owners, in the financial statements for the period in which they are recognised. The Group has presented comprehensive income, which encompasses net income and foreign currency translation adjustments, in the consolidated statement of changes in shareholders’ equity.

(r) 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.

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EURO TECH HOLDINGS COMPANY LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2	Summary of significant accounting policies (Continued)

(s) Net income per Ordinary Share

Net income per ordinary share is computed in accordance with FASB ASC Subtopic 260-10, Earnings Per Share, by dividing the net income by the weighted average number of shares of ordinary share outstanding during the period. The Company 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.

(t) Stock-based Compensation

The Group accounts for stock-based compensation in accordance with ASC 718, "Compensation-Stock Compensation" ("ASC 718"). ASC 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statement of operations.

The Group recognizes compensation expenses for the value of its awards, based on the straight line method over the requisite service period of each of the awards, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

(u) Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) req