{"url_path":"/sec/cdtg/10-k/2026/item-4","section_key":"item-4","section_title":"Item 4 INFORMATION ON THE COMPANY**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1793895/0001731122-26-000740-index.html","accession_number":"0001731122-26-000740","cik":"0001793895","ticker":"CDTG","issuer_name":"CDT Environmental Technology Investment Holdings Ltd","edgar_url":"https://www.sec.gov/Archives/edgar/data/1793895/0001731122-26-000740-index.html","primary_entity_key":"0001793895","primary_entity_name":"CDT Environmental Technology Investment Holdings Ltd"},"word_count":17335,"has_tables":true,"body_markdown":"**ITEM 4. INFORMATION ON THE COMPANY**\n\n \n\n**A. History and Development of the Company**\n\n \n\nCDT Environmental Technology Investment\nHoldings Limited, or CDT Cayman, is a holding company incorporated on November 28, 2016, under the laws of the Cayman Islands. CDT Cayman\nhas no substantive operations other than holding all of the outstanding equity of Chao Qiang Holdings Limited, or CQ BVI, established\nunder the laws of the British Virgin Islands on December 14, 2015, and all of the outstanding equity of CDT Environmental Technology Group\nLimited, or CDT BVI, established under the laws of the British Virgin Islands on June 26, 2015. Our registered office in the Cayman Islands\nis located at the office of Campbells Corporate Services Limited, Floor 4, Willow House, Cricket Square, Grand Cayman KY1-9010, Cayman\nIslands. Our principal executive office is located at C1, 4th Floor, Building 1, Financial Base, No. 8 Kefa Road, Nanshan District, Shenzhen,\ntelephone no. +86-0755-86667996. Our website may be found at http://www.cdthb.cn. The information\non our website is not a part of, and is not incorporated into, this document. The SEC maintains an internet site that contains reports,\nproxy and information statements, and other information regarding issuers that file electronically with the SEC. All of the SEC filings\nmade electronically by CDT Cayman are available to the public on the SEC website at www.sec.gov (commission file number 1-42007).\n\n \n\nCQ BVI is a holding company holding\nall of the outstanding equity of Ultra Leader Investments Limited, or Ultra HK, which was established in Hong Kong on February 27, 2015.\nUltra HK is a holding company holding 15% of the outstanding equity of Shenzhen CDT Environmental Technology Co., Ltd., or Shenzhen CDT,\nwhich was established on August 27, 2012 under the laws of the PRC.\n\n \n\nCDT BVI is a holding company holding\nall of the outstanding equity of CDT Environmental Technology (Hong Kong) Limited, or CDT HK, which was established in Hong Kong on July\n30, 2015. CDT HK is also a holding company holding 85% of the outstanding equity of Shenzhen CDT. We, through Ultra HK and CDT HK, hold\n100% of the outstanding equity of Shenzhen CDT. Shenzhen CDT holds equity interests in the PRC subsidiaries noted in the charts below.\n\n \n\n32\n\n \n\n \n\nWe, through our subsidiaries, including\nShenzhen CDT, engage in developing, producing, selling and installing sewage treatment systems and providing sewage treatment services.\n\n \n\nIn October 2019, our shareholders\nresolved to create an additional 50,000,000 of authorized ordinary shares with a par value of $0.001, or the Increase in Share Capital.\nFollowing the Increase in Share Capital, we issued 23,000,000 ordinary shares with a par value of $0.001, or the USD Shares Issued, to\nour existing shareholders as fully paid shares at par value. Following the USD Shares Issued, we repurchased and cancelled 900,000 of\nthe then outstanding ordinary shares with a par value of HK$0.01 then issued and outstanding from our existing shareholders and cancelled\n38,000,000 of the authorized ordinary shares with a par value of HK$ 0.01.\n\n \n\nWe considered the above transactions\nto be a 25.56-for-1 share split of our ordinary shares and deemed the cancellation of 900,000 original ordinary shares with par value\nof HK$ 0.01 and the new issuance of 23,000,000 ordinary shares with par value of $0.001 to our existing shareholders to be part of our\nrecapitalization prior to completion of our initial public offering. We believe it is appropriate to reflect the above transactions on\na retroactive basis similar to a stock split or dividend pursuant to FASB ASC 260. All share and per share amounts used herein and in\nthe consolidated financial statements included elsewhere herein have been retroactively restated to reflect the share split, unless otherwise\nindicated.\n\n \n\nIn December 2020, our shareholders\nresolved to divide 50,000,000 of our authorized ordinary shares with a par value of $0.001, or the Decrease in Share Capital, into 20,000,000\nof our authorized ordinary shares with a par value of $0.0025. Following the Decrease in Share Capital, our then existing 23,000,000 ordinary\nshares with a par value of $0.001 were divided into a total of 9,200,000 ordinary shares with a par value of $0.0025. We considered the\nabove transactions to be a 1-for-2.5 reverse share split of our ordinary shares. We believe it is appropriate to reflect the above transactions\non a retroactive basis similar to a stock split or dividend pursuant to FASB ASC 260. All share and per share amounts used herein and\nin the consolidated financial statements have been retroactively adjusted to reflect the share split, unless otherwise indicated.\n\n \n\nOn September 23, 2025, our shareholders\nresolved to amend and reclassify our authorized share capital such that the authorized share capital of the Company is US$250,000 divided\ninto (a) 94,000,000 Class A ordinary shares of par value US$0.0025 each and (b) 6,000,000 Class B ordinary shares of par value US$0.0025\neach.\n\n \n\nOn November 26, 2025, our shareholders\nfurther resolved to consolidate our authorized share capital (“Share Consolidation”) that with effect as of the date within\none (1) calendar year after November 26, 2025 to be determined by the Board, every twenty five (25) issued and unissued existing Class\nA ordinary shares of US$0.0025 par value each be consolidated into one (1) Class A ordinary share of US$0.0625 par value each; and every\ntwenty five (25) issued and unissued existing Class B ordinary shares of US$0.0025 par value each be consolidated into one (1) Class B\nordinary share of US$0.0625 par value each, such that the authorized share capital of the Company shall become US$250,000 divided into\n(a) 3,760,000 Class A ordinary shares of par value US$0.0625 each and (b) 240,000 Class B ordinary shares of par value US$ 0.0625 each.\nAs of the date of this annual report, the Board has not determined the effective date of the above Share Consolidation.\n\n \n\nAs a result, as of the date of\nthis annual report, our authorized ordinary share capital is US$250,000 divided into (a) 94,000,000 Class A ordinary shares with a par\nvalue of $0.0025 each of which 13,525,000 are issued and outstanding and (b) 6,000,000 Class B ordinary shares of par value US$0.0025\neach of which none are issued and outstanding.\n\n \n\nThe structure of cash flows within\nour organization, and a summary of the applicable regulations, is as follows:\n\n \n\n1. Our equity structure is a direct\nholding structure. The overseas entity to be listed in the U.S., CDT Environmental Technology Investment Holdings Limited, or CDT Cayman,\nwhich was established in the Cayman Islands, directly controls all of the outstanding share capital of Shenzhen CDT Environmental Technology\nCo., Ltd., or Shenzhen CDT, which was established in the PRC, and other domestic operating subsidiaries in the PRC.\n\n \n\nCDT Cayman holds all of the outstanding\nequity of Chao Qiang Holdings Limited, or CQ BVI, which was established in the British Virgin Islands, and CDT Environmental Technology\nGroup Limited, or CDT BVI, which was established in the British Virgin Islands.\n\n \n\nCQ BVI holds all of the outstanding\nequity of Ultra Leader Investments Limited, or Ultra HK, which was established in Hong Kong. CDT BVI holds all of the outstanding equity\nof CDT Environmental Technology (Hong Kong) Limited, or CDT HK, which was established in Hong Kong.\n\n \n\nUltra HK holds 15% of the outstanding\nequity of Shenzhen CDT. CDT HK holds 85% of the outstanding equity of Shenzhen CDT.\n\n \n\nCDT Cayman, through Ultra HK and\nCDT HK, holds 100% of the outstanding equity of Shenzhen CDT. See “Item 4. Information on the Company-C. Organizational Structure.”\n\n \n\n2. Within our direct holding structure,\nthe cross-border transfer of funds within our corporate group is legal and compliant with the laws and regulations of the PRC. After foreign\ninvestors’ funds enter CDT Cayman from an equity offering, including our initial public offering, the funds can be directly transferred\nto CDT BVI, then transferred to CDT HK, and then to subordinate PRC entities through Shenzhen CDT, subject to applicable PRC regulations,\nas noted below. The net proceeds from our offerings must be remitted to China before we will be able to use the funds to grow our business\nin China.\n\n \n\n33\n\n \n\n \n\nAny funds we transfer to our PRC\nsubsidiaries, including those received from our initial public offering, must be transferred either as a shareholder loan or as an increase\nin registered capital, are subject to approval by or registration with relevant governmental authorities in China, which may take several\nmonths. The net proceeds from our initial public offering must be remitted to China before we will be able to use the funds to grow the\nbusiness in China. The procedure to remit funds has taken several months and may take several more months, and we will be unable to use\nany offering proceeds in China until remittance is completed. An increase in registered capital procedure requires prior approval from\nthe local counterpart of the SAMR, along with reporting of the capital increase and related fund flow information to the respective local\ncounterparts of the MOFCOM and the SAFE. In addition, (a) any foreign loan procured by our PRC subsidiaries is required to be registered\nwith the SAFE or its local branches, and (b) our PRC subsidiaries may not procure loans which exceed the statutory amount as approved\nby the MOFCOM or its local branches. Further, any medium-or long- term loan to be provided by us to our PRC subsidiaries must be approved\nby the NDRC and the SAFE or its local branches.\n\n \n\nFurther, SAFE Circular 37 requires\nPRC residents (including PRC individuals and PRC corporate entities) to register with SAFE or its local branches in connection with their\ndirect or indirect offshore investment activities. When a registered overseas special purpose company changes basic information such as\nits Chinese resident individual shareholders, name or operating terms, or changes important matters such as capital increase, capital\nreduction, equity transfer or replacement, merger or division of Chinese resident individual shareholders, it shall promptly go through\nthe registration formalities for changes in foreign exchange for overseas investment with the SAFE. According to the provisions of SAFE\nCircular 37, except for Yunwu Li, no other relevant personnel of this listing are required to register foreign exchange or foreign exchange\nchanges. As of the date of this annual report, to our knowledge, Yunwu Li, our chief executive officer and chairman of our board of directors\nand chairman of the board of directors and general manager of Shenzhen CDT, had completed the foreign exchange registration, but had not\ncompleted the related change registration and remains in the process of completing such registration. The completion of his change registration\nwill affect the procedure of transferring any dividends he obtains from CDT Cayman to China. Yunwu Li will not be able to process the\nremittance of profits and dividends before completing the registration of foreign exchange changes in overseas investments. However, the\nnet proceeds from our initial public offering which must be remitted to China were not affected since Shenzhen CDT previously completed\nthe foreign direct investment foreign exchange registration in 2016. See “Item 3. Key Information-D. Risk Factors-Risks Related\nto Doing Business in China-PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject\nour PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC\nsubsidiaries, limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise\nadversely affect us.”\n\n \n\nIf we intend to distribute dividends,\nwe will transfer the dividends to CDT HK in accordance with the laws and regulations of the PRC, then CDT HK will transfer the dividends\nto CDT BVI, and then to CDT Cayman, and the dividends will be distributed from CDT Cayman to all shareholders respectively in proportion\nto the shares they hold, regardless of whether the shareholders are U.S. investors or investors in other countries or regions.\n\n \n\n3. As of the date of this annual\nreport, no cash and other asset transfers have occurred among us, CDT Cayman, and our subsidiaries; no dividends or distributions by any\nsubsidiary have been made to date to us, CDT Cayman, or to investors; and no transfers, dividends or distributions have been made by us,\nCDT Cayman, to our subsidiaries or to U.S. investors to date. For the foreseeable future, we intend to retain all available funds and\nany future earnings to fund the development and expansion of our business. As a result, we do not expect to pay any cash dividends. To\ndate, we, CDT Cayman and our subsidiaries, have been funded through our initial public offering and subsequent offerings, shareholder\ncapital contributions, bank loans, third party loans and related party loans. See the consolidated statements of change in shareholders’\nequity on page F-5 and Notes 9 and 10 on pages F-23 through F-26 of the notes to the consolidated financial statements included elsewhere\nin this annual report. As of December 31, 2025, these consisted of shareholder capital contributions of $14.35 million, which are reflected\nas par value and additional paid-in capital in the consolidated financial statements included elsewhere in this annual report (see the\nconsolidated statements of change in shareholders’ equity on page F-5 of the consolidated financial statements included elsewhere\nin this annual report), proceeds from our initial public offering, which was completed on April 22, 2024, of 1,500,000 ordinary shares\nat an initial public offering price of $4.00 per share, resulting in net proceeds to us of approximately $4.3 million after deducting\noffering expenses, proceeds from share subscription agreements of $0.6 million from the issuance of 1,200,000 Class A ordinary shares\nin December 2025, bank loans of $1.5 million (see Note 10 on pages F-24 and F-25 of the notes to the consolidated financial statements\nincluded elsewhere in this annual report), third party loans of $2.06 million (see page F-26 of Note 10 of the notes to the consolidated\nfinancial statements included elsewhere in this annual report) and related party loans of $2.56 million (see page F-23 of Note 9 of the\nnotes to the consolidated financial statements included elsewhere in this annual report). See the consolidated statements of change in\nshareholders’ equity on page F-5 and Notes 9 and 10 on pages F-23 through F-26 of the notes to the consolidated financial statements\nincluded elsewhere in this annual report. As of the date of this annual report, none of CDT Cayman or its subsidiaries has written cash\nmanagement policies or procedures in place that dictate how funds are transferred. Rather, the funds can be transferred in accordance\nwith the applicable PRC laws and regulations.\n\n \n\n34\n\n \n\n \n\n4. Our PRC subsidiaries’\nability to distribute dividends is based upon their distributable earnings. Current PRC regulations permit such PRC subsidiaries to pay\ndividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting\nstandards and regulations. In addition, each of our PRC subsidiaries is required to set aside at least 10% of its after-tax profits each\nyear, if any, to fund a statutory reserve until such reserve reaches 50% of each of their respective registered capital. These reserves\nare not distributable as cash dividends.\n\n \n\nTo address persistent capital outflows\nand the RMB’s depreciation against the U.S. dollar in the fourth quarter of 2016, the People’s Bank of China and SAFE have\nimplemented a series of capital control measures in the subsequent months, including stricter vetting procedures for China-based companies\nto remit foreign currency for overseas acquisitions, dividend payments and shareholder loan repayments. The PRC government may continue\nto strengthen its capital controls and our PRC subsidiaries’ dividends and other distributions may be subject to tightened scrutiny\nin the future. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies\nout of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign\ncurrency for the payment of dividends from the profits of any of our PRC subsidiaries, if any. Furthermore, if any of our subsidiaries\nin the PRC incur debt on their own in the future, the instruments governing the debt may restrict their ability to pay dividends or make\nother payments.\n\n \n\nIn addition, the Enterprise Income\nTax Law and its implementation rules provide that a withholding tax at a rate of 10% would be applicable to dividends paid by mainland\nChina companies to non-PRC-resident enterprises unless reduced under treaties or arrangements between the PRC central government and the\ngovernments of other countries or regions where the non-PRC resident enterprises are tax resident. Pursuant to the tax agreement between\nmainland China and the Hong Kong Special Administrative Region, the withholding tax rate in respect to the payment of dividends by a mainland\nChina enterprise to a Hong Kong enterprise may be reduced to 5% from a standard rate of 10%. However, if the relevant tax authorities\ndetermine that our transactions or arrangements are for the primary purpose of enjoying a favorable tax treatment, the relevant tax authorities\nmay decide that a tax rate that is more than the favorable withholding tax rate of 5% will be applicable to dividends received by our\nHong Kong subsidiary from our mainland China subsidiaries in the future. Accordingly, there is no assurance that the reduced 5% withholding\nrate will apply to dividends received by our Hong Kong subsidiary from our mainland China subsidiaries. A higher withholding tax rate\nwill reduce the amount of dividends we may receive from our mainland China subsidiaries.\n\n \n\n**B. Business Overview**\n\n \n\nWe, through our subsidiaries, are\na waste treatment company that generates revenue through design, development, manufacture, sales, installation, operation and maintenance\nof sewage treatment systems and by providing sewage treatment services. We, through our subsidiaries, primarily engage in two business\nlines: sewage treatment systems and sewage treatment services in both urban and rural areas in the PRC. Sewage treatment systems are sometimes\nalso referred to herein as rural sewage treatment, and sewage treatment services are sometimes also referred to herein as septic tank\ntreatment.\n\n \n\nFor sewage treatment systems, we\nsell complete sewage treatment systems, construct rural sewage treatment plants, install the systems, and provide on-going operation and\nmaintenance services for such systems and plants in China for municipalities and enterprise clients. We provide decentralized rural sewage\ntreatment services with our integrated and proprietary system using our advanced quick separation technology. Our quick separation technology\nuses a biochemical process for economically and sufficiently treating rural sewage. In addition, our integrated equipment generally has\na lifespan of over 10 years without replacement of the core components. Due to our quick separation technology and our technological expertise\nand experience, our integrated rural sewage treatment system produces a high quality of outflowing water, with high degrees of automation,\nefficient construction and start up, and low operational costs. In addition, our equipment is typically able to process abrupt increases\nof sewage inflows and high contamination. Our integrated equipment consists of a compact structure and is buried underground in order\nto minimize changes to the surrounding environment.\n\n \n\nWe believe that we will maintain our position as a leader\nin the rural sewage treatment industry with our proprietary technology and successful track record. We have completed more than 60 rural\nsewage treatment plants in Fujian, Jiangxi, and Liaoning provinces in China, with a total treatment capacity of more than 3,400 tons of\nsewage per day, and have established long-term relationships with our customers through our operation and maintenance services.\n\n \n\n35\n\n \n\n \n\nIn 2025, we formally initiated a strategic transformation\nby entering the green hydrogen sector. Building upon its prior research and development efforts and through a deep technical collaboration\nwith the Guangzhou Institute of Energy Conversion, Chinese Academy of Sciences (“GIEC”), we have developed a high-temperature\ngasification process that converts urban and rural organic solid waste—such as crop straw, livestock manure, and municipal sludge—into\nsyngas (primarily composed of hydrogen and carbon monoxide) under oxygen-deficient conditions at temperatures of 700–900°C.\nThe syngas can be further purified via pressure swing adsorption (“PSA”) to produce green hydrogen that meets industrial or\nfuel cell application standards. Alternatively, the syngas may be directly combusted to provide thermal energy or used in co-generation\nfor electricity, thereby enabling a diversified business model that integrates waste-to-hydrogen, clean energy supply, and environmental\nservices.\n\n \n\nOur legacy septic tank treatment service—historically\na secondary line of business—remains compliant with applicable regulations and supported by existing technical capabilities. However,\nin light of limited market potential and our strategic prioritization of growth opportunities in green hydrogen and rural wastewater treatment,\nthis segment has been placed into active wind-down. It currently contributes a negligible portion of total revenue and is expected to\nbe phased out in due course, subject to operational and market considerations.\n\n \n\nWith respect to manufacturing and quality control, we\ncontinue to outsource the production of core components for its modular rural wastewater treatment systems and mobile treatment units\nto long-standing, qualified suppliers. These suppliers operate under our proprietary designs, technical specifications, and oversight.\nAll core intellectual property, including patented technologies and process know-how, remains exclusively owned and controlled by the\nCompany. A rigorous quality management system is maintained, and suppliers undergo annual performance reviews to ensure consistent adherence\nto standards related to product quality, delivery timelines, and after-sales support.\n\n \n\nOur sales and operational footprint spans multiple provinces\nin China, supported by four wholly owned subsidiaries and one branch office. In the rural wastewater treatment segment, we primarily secure\nprojects through partnerships with provincial and municipal state-owned construction enterprises, which are typically engaged by local\ngovernments to implement rural environmental infrastructure. We then provides integrated solutions, including system supply, installation,\nand long-term operation and maintenance services.\n\n \n\nFor our new organic waste-to-hydrogen business, we are\nactively engaging with local governments, industrial parks, and large-scale agricultural or environmental enterprises to develop regional\nresource recovery and clean energy projects under an “EPC + long-term operation” model.\n\n \n\nIn terms of core competencies and technology portfolio,\nwe continue to strengthen our in-house R&D capabilities. As of December 31, 2025, we held 2 invention patents, 36 utility model patents,\nand 3 trademarks. R&D efforts are now strategically focused on optimizing its proprietary rapid-separation wastewater technology while\nadvancing its high-temperature gasification process for hydrogen production. We aim to establish a dual-engine growth platform centered\non environmental remediation and clean energy.\n\n \n\nNotably, a subsidiary of the Company participated in\nthe development of the technical specification “Technical Requirements for Waste-to-Hydrogen via High-Temperature Pyrolysis Gasification,”\na group standard led by GIEC and officially published by the China Inspection and Testing Society in January 2025. We are currently advancing\nthe evaluation and regulatory filing process for its first pilot demonstration projects.\n\n \n\n**Industry Background**\n\n \n\nAccording to a report published by Qianzhan Industry\nResearch Institute in October 2020, the total revenue of China’s decentralized rural wastewater treatment services and equipment\nmarket was approximately RMB 92.5 billion in 2019. The compound annual growth rate (CAGR) of this segment from 2015 to 2019 was approximately\n40.3%.\n\n \n\n36\n\n \n\n \n\nData from China’s Ministry of Housing and Urban-Rural\nDevelopment indicate that, as of 2016, the treatment rate for rural domestic wastewater in administrative villages nationwide was approximately\n22%. By 2021, this rate had increased to 28%, according to a press briefing held by the Ministry of Ecology and Environment on April 22,\n2022. The relatively modest pace of improvement suggests that rural wastewater treatment infrastructure remains in an early stage of development.\n\n \n\nOn the policy front, in December 2016, the Ministry\nof Housing and Urban-Rural Development and the Ministry of Finance jointly announced a long-term objective to achieve wastewater collection\nand treatment infrastructure coverage in 90% of designated villages nationwide within 30 years, accompanied by the establishment of sustainable\noperation and maintenance mechanisms. In April 2019, the Ministry of Housing and Urban-Rural Development, the Ministry of Ecology and\nEnvironment, and the National Development and Reform Commission jointly issued the Three-Year Action Plan for Improving the Quality and\nEfficiency of Urban Sewage Treatment (2019–2021), which called on local governments to increase fiscal support and mobilize funding\nfrom multiple channels to finance the construction and operation of wastewater treatment facilities.\n\n \n\nIn December 2021, the Ministry of Ecology and Environment\nand four other central government departments jointly released the Action Plan for the Campaign to Control Agricultural and Rural Pollution\n(2021–2025). This plan set specific targets: a national rural domestic wastewater treatment rate of 40% by 2025, with further goals\nof 60% by 2027 and 85% by 2035. The plan calls for annual task allocation and phased implementation. It also emphasizes a shift toward\ndecentralized, resource-recovery-oriented, and intelligent treatment models, and encourages integrated management of rural domestic wastewater\ntogether with effluents from livestock breeding, rural tourism (e.g., homestays and scenic areas), and agricultural product processing.\n\n \n\nAccording to a forecast published by The Economist\nIntelligence Unit (EIU) in January 2018, the size of China’s rural wastewater treatment market is expected to reach approximately\nRMB 200 billion by 2030. It should be noted that this forecast was based on the policy environment and implementation progress as of 2018,\nand actual market size may vary depending on factors such as the level of fiscal investment, selection of technical approaches, and local\ngovernment implementation capacity.\n\n \n\nChina generates over 11 billion metric tons of solid\nwaste annually, according to publicly available government and industry statistics. On December 19, 2025, the State Council’s Executive\nMeeting approved a dedicated initiative on comprehensive solid waste management, designating the “Zero-Waste City” program\nas a key policy instrument to advance waste reduction, resource recovery, and safe disposal across industrial, agricultural, and municipal\nsectors.\n\n \n\nUnder the relevant national planning framework, the\n“Zero-Waste City” initiative aims to cover 60% of prefecture-level and above cities by 2027 and achieve nationwide coverage\nby 2035. During the 15th Five-Year Plan period (2026–2030), approximately 200 additional cities are expected to be included in the\nprogram.\n\n \n\nIn terms of technology pathways, the government encourages\nthe adoption of advanced and applicable technologies to enhance resource recovery from waste. Thermochemical conversion technologies,\nsuch as gasification, have been included in the recommended technology catalogues for solid waste resource utilization in certain regions\nand are considered suitable for specific types of organic solid waste. The Company has accumulated multi-year experience in applying such\ntechnologies, and its gasification-based solutions have been implemented in several projects on a commercial scale.\n\n \n\n**Core Competitive Strengths**\n\n \n\nWe believe the following factors form the foundation\nof our current operations and our ongoing strategic exploration:\n\n \n\n1.       Established\nCapabilities in Rural and Urban Wastewater Treatment Solutions\n\n \n\nThe Company has developed an integrated rural wastewater\ntreatment system that utilizes rapid separation technology, offering a cost-effective and efficient solution for small-scale, decentralized\napplications. It also provides both mobile and fixed on-site septic tank cleaning systems, which effectively control odor and noise during\noperations. Its equipment can be customized to meet specific customer requirements and produces effluent that complies with applicable\nnational discharge standards.\n\n \n\n37\n\n \n\n \n\n2.       Regional\nOperational and Service Network\n\n \n\nThe Company has established a presence in eight provinces\nin China, operating through ten subsidiaries (including several majority-owned joint ventures with local strategic partners) and one branch\noffice. It has completed multiple rural wastewater and septic tank treatment projects in provinces such as Fujian, Jiangxi, Liaoning,\nand Zhejiang. This network enables us to respond efficiently to client needs while reducing logistics and travel costs.\n\n \n\n3.       Management\nand Technical Team with Environmental Engineering Experience\n\n \n\nThe Company is led by Mr. Yunwu Li, whose management\nteam has extensive experience in cost control, market responsiveness, and project execution. All employees undergo professional training\nand possess practical operational capabilities in environmental engineering.\n\n \n\n4.       End-to-End\nService Offering and Established Client Relationships\n\n \n\nWe provide integrated services covering solution design,\nequipment installation, technical consultation, and post-commissioning operations and maintenance. Through long-standing collaborations\nwith local governments, state-owned enterprises, and property management companies, we have built stable client relationships and a recognized\nreputation in its core markets.\n\n \n\n5.       Preliminary\nFoundation for Organic Waste Resource Recovery and Clean Energy Initiatives\n\n \n\nSince 2025, the Company has begun exploring the conversion\nof municipal organic waste—including food waste, agricultural residues, and sewage sludge—into syngas via high-temperature\ngasification technology, with potential downstream applications in heat or hydrogen production. The process is based on oxygen-deficient\npyrolysis at temperatures of 700–900°C. The resulting syngas can be purified through pressure swing adsorption (PSA) to produce\nhigh-purity hydrogen.\n\n \n\nIn October 2024, a wholly owned subsidiary of the Company\nparticipated in the drafting of the technical standard “Technical Requirements for Waste-to-Hydrogen Based on High-Temperature Pyrolysis\nGasification” (T/CCS 001-2025), led by the Guangzhou Institute of Energy Conversion, Chinese Academy of Sciences (“GIEC”).\nThe standard was officially issued and implemented by the China Inspection and Testing Society on January 20, 2025.\n\n \n\nIn May 2025, the Company appointed a Ph.D.-level scientist\nfrom GIEC as Chief Scientist for its new energy initiatives. The collaboration remains in the stage of technical validation and process\noptimization.\n\n \n\n6.       Potential\nSynergies Between Existing and New Business Lines\n\n \n\nSewage sludge generated from our existing wastewater\ntreatment operations could, in principle, serve as a feedstock source for future gasification projects. Additionally, certain existing\nclients—including local governments and industrial parks—may develop future demand for organic waste treatment or clean thermal\nenergy/hydrogen, presenting potential cross-selling opportunities. However, such synergies have not yet been validated in operational\nprojects.\n\n \n\n7.       Initial\nProject Filings and Entity Establishment\n\n \n\nAs of April 30, 2026, we have initiated preliminary\nwork on two clean energy-related projects:\n\n \n\n●We have established a project company in Shaowu City, Nanping, Fujian Province, for a biomass-to-steam project, which is currently\nundergoing filing and regulatory approval processes;\n\n \n\n●We are conducting feasibility studies and preparing regulatory submissions for an integrated organic waste gasification, hydrogen\nproduction, and refueling station project in Jiangyin Town, Fuzhou, Fujian Province.\n\n \n\nNeither project has commenced construction, and the\nCompany has not entered into binding agreements for feedstock supply or offtake of energy products.\n\n \n\n38\n\n \n\n \n\n**Business Strategy**\n\n \n\nSince our inception, we have primarily engaged in integrated\nrural domestic wastewater treatment and urban septic tank cleaning services. In 2025, we began exploring a strategic evolution, aiming\nto maintain its core environmental engineering business while assessing the commercial viability of organic waste resource recovery and\nclean energy solutions.\n\n \n\n1.       Maintain\nand Optimize Core Environmental Engineering Business\n\n \n\nThe Company intends to leverage its existing technology,\nregional network, and client base to reinforce our service capabilities in rural wastewater and septic tank treatment, ensuring the stable\noperation of its current core business.\n\n \n\n2.       Proceed\nCautiously with Clean Energy Business Exploration\n\n \n\nThe Company plans to evaluate the commercial feasibility\nof converting organic solid waste into syngas via high-temperature gasification, with potential applications in heat or hydrogen production.\nThe selection of final technology pathways will depend on feedstock availability, local energy demand, and project economics.\n\n \n\n3.       Enhance\nTechnical Capabilities Through Collaboration\n\n \n\nWe will work with GIEC to advance pilot-scale validation\nand engineering adaptation of key technologies. This collaboration is structured through project-based service contracts and does not\nconstitute an exclusive or long-term binding arrangement.\n\n \n\n4.       Explore\nthe Potential for a Diversified Revenue Model\n\n \n\nIf implemented, the new business would follow an “EPC\n+ long-term operations” model, with potential revenue streams including EPC engineering income, waste processing fees, sales of\nhydrogen/steam/electricity, and possible carbon credit revenues. However, this model has not yet generated any income for us, and its\neconomic sustainability remains subject to significant uncertainties.\n\n \n\n5.       Validate\nthe Business Model Through Demonstration Projects\n\n \n\nThe Company intends to use the\nShaowu and Fuzhou projects to test the alignment of technology, policy support, market demand, and financing conditions. Final project\nimplementation will depend on regulatory approvals, funding availability, feedstock security, and customer commitments, among other factors.\n\n \n\n**Our Services and\nProducts**\n\n \n\nWe currently offer two primary\nlines of business in both urban and rural areas: sewage treatment systems and sewage treatment services. For sewage treatment systems,\nwe sell and install our proprietary rural sewage treatment systems and provide on-going operation and maintenance services to our customers.\nFor sewage treatment services, we provide on-site treatment services with our mobile and fixed septic tank treatment systems. Sewage treatment\nsystems are sometimes also referred to herein as rural sewage treatment, and sewage treatment services are sometimes also referred to\nherein as septic tank treatment.\n\n \n\n**Rural Sewage Treatment**\n\n \n\nOur rural sewage treatment systems\nfeature decentralized treatment with a capacity of treating 5 to 500 tons of sewage per day, which we believe is suitable for villages\nand towns in China. We offer turn-key solutions to our customers, including construction of sewage treatment plants, installation of our\nproprietary equipment, and operation and maintenance of such plants with our technical expertise and proprietary technology. We actively\npursue long-term service contracts for operation and maintenance.\n\n \n\nOur rural sewage treatment systems\nutilize quick separation technology, a newly emerged biochemical process for sewage treatment in the last 5 to 10 years. The primary filtration\nand treatment process occurs inside quick separation balls, which are numerous porous ceramic balls hosting microorganisms collected in\na spherical plastic frame. Quick separation technology requires no additional pressure. As the blowing apparatus forces sewage though\nthe quick separation balls, the flow rate on the surface of the porous ceramic balls is lowered and the suspended solids in the fluid\naccumulate inside the balls. An aerobic process that decomposes organic matter occurs near the surface of ceramic balls and an anaerobic\nprocess that decreases phosphorus and nitrogen occurs near the core. Our quick separation technology innovatively creates a varied, aerobic\nand anaerobic environment in one tank while traditional biochemical methodologies, such as A/O methodology, maintain only one environment\nin one tank.\n\n \n\n39\n\n \n\n \n\n \n\nWe believe our quick separation\ntechnology is effective in treating sewage at small scales. Other methodologies include MBR, A2/O and A/O. MBR is able to convert sewage\ninto high-quality clean water, but typically requires high capital investment and therefore is usually found in large, centralized treatment\nplants. A2/O and A/O are economically feasible for decentralized sewage treatment, but produce unstable treated water which sometimes\nfails to meet the national standards for sewage discharge. Our quick separation technology has the following advantages, which we believe\noutweigh the disadvantages, such as the need to use additional chemicals to reduce sulfur in wastewater and the low level, at times, of\nthe biochemical oxygen demand level in the quick separation tank, which can make it difficult to sustain the microorganisms in the quick\nseparation balls without additional carbon sources:\n\n \n\n \n●\nhigh quality of outflowing water (Grade IA) - combines aerobic and anaerobic process inside quick separation balls and thus is more efficient in decomposition of organic matter and nitrogen;\n\n \n\n \n●\nefficient construction and startup - microorganisms are fixed inside the quick separation balls with no additional time for cultivation and domestication of microorganisms;\n\n \n\n \n●\ncompact structure;\n\n \n\n \n●\nhigh degree of automation;\n\n \n\n \n●\nlow operating cost;\n\n \n\n \n●\nlifespan of more than 10 year without replacement of key components;\n\n \n\n \n●\ncustomized design for each plant\n\n \n\n \n●\nprevent abrupt increase of sewage inflows and contamination;\n\n \n\n \n●\nreduced odor; and\n\n \n\n \n●\nreduced waste by-products.\n\n \n\nThroughout our years of experience\nin rural sewage treatment, we have improved our quick separation technology and processes to have the following unique advantages:\n\n \n\n \n●\nautomated and precise control of the sewage inflow and timing in the quick separation tank with flowmeter and back-flow devices in the regulating tank;\n\n \n\n \n●\nreduced energy consumption;\n\n \n\n \n●\nanti-corrosion coatings;\n\n \n\n \n●\ngrease separation tank inside regulating tank, which we believe increases efficiency of the quick separation process in subsequent stages; and\n\n \n\n \n●\nmodified quick separation balls with proprietary substances that benefit the microorganisms necessary for the aerobic and anaerobic processes.\n\n \n\n40\n\n \n\n \n\nThe process flow of our integrated\nrural sewage treatment system is as follows:\n\n \n\n \n\nWe have completed more than 60\nplants in the Fujian, Jiangxi, and Liaoning provinces in China and have established long-term relationships with our customers through\nour operation and maintenance services.\n\n \n\n**Septic Tank Treatment**\n\n \n\nWe offer septic tank treatment\nservices with two types of septic tank treatment systems, each of which treats septic waste on site: (1) a mobile system for households\nin urban and rural areas, and (2) a fixed system for public toilets in urban areas.\n\n \n\nOur mobile system is composed\nof an integrated waste treatment system assembled on a vehicle to allow for transport to septic tanks in all areas. The system is modular\nin design for flexibility and is composed of a pump, a compactor, a multi-dish screw dehydrator which mechanically dewaters sludge in\nthe system, and a small pipeline dredger. Our mobile system is able to manage septic tank waste treatment through the processes of waste\nextraction, separation of solid waste from liquid sewage, dehydration of solid waste, residue filtration, and bale pressing. This treatment\nprocess reduces the odor and noise of traditional treatments, and reduces spillage during transportation. Our mobile system is highly\nautomated and requires only two or three workers per system during operation. One mobile system is typically able to treat one 400-cubic-meter\nseptic tank per day.\n\n \n\n41\n\n \n\n \n\n \n\nOur fixed system is an integrated\nand stand-alone waste treatment system designed for public toilets in cities. It adopts our quick separation technology and has a compact\nstructure, only requiring twelve square meters for a system capable of treating twenty tons of sewage per day. Due to our advanced quick\nseparation technology, our fixed system is able to decompose solid waste and treat sewage to meet the *Sewage Quality Standards for\nDischarge to Municipal Sewers* (GB/T 31962-2015).\n\n \n\n \n\nWe primarily procure outsourcing\ncontracts from local governments and residential and business property management companies. We have established six subsidiaries in five\nprovinces in China with local partners to expand our geographic market coverage. We have built a stable customer base that typically renews\nour septic tank service contracts annually or biennially.\n\n \n\n**Our Customers**\n\n \n\nOur current customers are primarily\nlocal governments, state-owned companies and residential and business property management companies in China. We determine a particular\ncustomer’s credit limits based on its size, creditworthiness and financial strength to limit the likelihood of nonpayment. Our largest\ncustomer in the year ended December 31, 2025 accounted for 46.6% of our total revenues in such period. Our largest customer in the year\nended December 31, 2024 accounts for 22.1% of our total revenues in such period. Our largest customer in the year ended December 31, 2023\naccounted for 23.4% of our total revenues in such period.\n\n \n\n42\n\n \n\n \n\n**Sales and Marketing**\n\n \n\nWe have established sales and marketing\nnetworks in many cities across eight provinces in China, with ten majority-owned subsidiaries and one branch offices, and we are in the\nprocess of penetrating the market in Fujian and Zhejiang provinces and expanding our sales and marketing efforts in northern China. Our\nsales and marketing operations are currently primarily initiated by, and the responsibility of, our general managers at our headquarters\nand our subsidiaries, together with our business development department, assisted by our engineering department.\n\n \n\nFor rural sewage treatment, our\ncustomers are city or provincial level state-owned construction companies that provide turn-key solutions of rural sewage infrastructure\nconstruction including drainage, pipeline and sewage treatment for local governments. When obtaining a new customer, we first identify\nthe demand of local governments in rural sewage treatment. Then, we approach such state-owned companies that are capable of and experienced\nin undertaking sewage treatment related projects. We assist the state-owned companies in their bidding process with local governments,\nespecially on the technology and process of rural sewage treatment. Lastly, the state-owned companies will use our rural sewage equipment\nand services after winning the bid. We have mutually beneficial partnerships with state-owned companies as we provide the technological\nsupport in rural sewage treatment and the state-owned companies have good relationships with local governments, well-known brands, and\nsufficient working capital. For the projects we assisted with, the state-owned companies have shown a very high success rate in the bidding\nprocess. State-owned companies in China often enter Engineering Procurement Construction, or EPC, contracts with the Chinese government,\nand often also undertake Public-Private-Partnership, or PPP, or Build-Operate-Transfer, or BOT, projects. EPC contracts indicate that\na contractor is responsible for the engineering, procurement and construction of a particular facility or work awarded to it. BOT projects\nare funded solely by the contractor, and the contractor is responsible for construction and operation for a certain period of time. PPP\nprojects are co-funded by the companies and the Chinese government, and the companies share the costs and risks of the project together\nwith the Chinese government. In order to accomplish large EPC, PPP, or BOT projects, state-owned companies will procure rural sewage treatment\nequipment and services from us. We are responsible for building and operating decentralized rural sewage treatment plants. We charge construction\nand service fees for construction or renovation of sewage treatment plants and the provision of rural sewage treatment services.\n\n \n\nFor septic tank treatment systems,\nwe have expanded into various geographic markets through our establishment of subsidiaries with strategic partners who have outstanding\nlocal networks and resources. We have established ten subsidiaries in eight provinces in China. Through those subsidiaries, we procure\nseptic tank treatment contracts from local governments and residential and business property management companies.\n\n \n\nOur sales and marketing efforts\nfocus on active and on-going communication with relevant government agencies, state-owned strategic partners and residential and business\nproperty management companies. We also actively seek partnerships with state-owned companies at the central government level and therefore\nbecome more exposed to a boarder geographic market coverage. We also frequently attend the industry seminars held by the government. We\nintend to increase our sales and marketing efforts via advertisement in magazines in the waste treatment industry and attending relevant\nexhibitions.\n\n \n\n**Manufacturing**\n\n \n\n**Rural Sewage Treatment**\n\n \n\nWe outsource manufacturing of our\nintegrated rural sewage treatment system primarily to four suppliers in the Jiangsu and Fujian provinces. We have established stable and\nlong-term relationships with our suppliers and they generally deliver our orders on a timely basis. The average time required for an integrated\nequipment system, for treating less than 100 tons of sewage per day, from execution of the contract to delivery is typically between 45\nand 60 days. Our suppliers have the ability to manufacture any of our integrated rural sewage treatment systems. All integrated equipment\nmust pass strict quality control procedures at three stages: (1) during our selection of the supplier, (2) during the testing stages before\npurchase and implementation and (3) during an annual supplier appraisal conducted by us. During the selection process of our suppliers,\nwe conduct due diligence to ensure that the suppliers meet our standards, including that they have obtained necessary permits, that they\nmeet national standards of quality control, that they have the necessary equipment and capacity to meet our needs and that they agree\non our criteria for testing. We also typically perform several test runs before we accept products from our suppliers. In addition, we\nappraise our suppliers annually to ensure that they continue to meet our expectations regarding quality, timing of delivery, and post-sale\nservices.\n\n \n\n43\n\n \n\n \n\n**Septic Tank Treatment**\n\n \n\nWe previously assembled the components\nof our mobile septic tank treatment system and installed such equipment on our vehicles at our factory in Nanping, China. We have since\nceased in-house assembly and now outsource component production to third-party suppliers on an as-needed basis, primarily to support the\nmaintenance and servicing of existing equipment. Our subsidiary continues to operate the septic tank treatment business. We maintain our\nproprietary technology and provide design and technological support to our suppliers. To protect our proprietary technology, we contract\nwith different suppliers for separate components.\n\n \n\nWe purchase certain components\nand assemblies from a limited number of suppliers. We believe alternative sources are available, but any prolonged inability to obtain\nthese components could have an adverse effect on our operating results and customer relationships.\n\n \n\n**Research and Development**\n\n \n\nWe are committed to researching\nand developing our sewage treatment technologies and septic tank treatment systems in order to meet the demands of our customers in the\nwaste treatment market. We collect feedback from our completed projects and modify our integrated equipment and technologies based on\nprevious experiences. We believe scientific and technological innovations will aid us to achieve our long-term strategic objective of\nbecoming one of the premier waste treatment solution companies in China. For this reason, we devote significant financial and personnel\nresources to research and development. Our current research and development efforts are primarily focused on improving the efficiency\nof the microorganisms in our rural sewage treatment system and exploring the combination of membrane and quick separation technology to\nmaximize the proficiency of water treatment. Our research and development team is comprised of highly skilled engineers and scientists\nwith extensive experience in sewage and septic technologies, chemistry, and design. To supplement our internal expertise, we have also\ncollaborated with third-party institutions to whom we provided funds for research and development purposes. For the new septic tank treatment\nservices for septic tank sewage collection stations, we continually conduct research to create an efficient and compact system. We are\nalso exploring the combination of different sewage treatment methods to maximize the quality of water outflow.\n\n \n\nOur research and development expense\nwas $47,602 during the year ended December 31, 2025, $61,786 during the year ended December 31, 2024, and $80,948 during the year ended\nDecember 31, 2023. We intend to continue to invest in research and development to support and enhance our existing products and services\nand to develop future product and service offerings to enhance our position in the market.\n\n \n\n**Intellectual Property**\n\n \n\nOur success and future revenue\ngrowth may depend, in part, on our ability to protect our intellectual property as products that are material to our operating results\nincorporate patented technology.\n\n \n\nWe have pursued protections for\nour intellectual property rights since our founding in 2012 and we focus our intellectual property efforts in China. Our patent strategy\nis designed to provide a balance between the need for coverage in our strategic market and the need to maintain reasonable costs.\n\n \n\nWe believe our patents and other\nintellectual property rights serve to distinguish and protect our products from infringement and contribute to our competitive advantages.\nAs of December 31, 2025, we had 2 invention patents, 36 utility model patents and 3 trademarks.\n\n \n\n44\n\n \n\n \n\nWe cannot assure you that any patents\nwill be issued from any of our pending applications. In addition, any rights granted under any of our existing or future patents may not\nprovide meaningful protection or any commercial advantage to us. With respect to our other proprietary rights, it may be possible for\nthird parties to copy or otherwise obtain and use our proprietary technology without authorization or to develop similar technology independently.\nWe may in the future initiate claims or litigation against third parties to determine the validity and scope of proprietary rights of\nothers. In addition, we may in the future initiate litigation to enforce our intellectual property rights or to protect our trade secrets.\nAdditional information about the risks relating to our intellectual property is provided under “Item 3. Key Information-D. Risk\nFactors-Risks Related to Intellectual Property.”\n\n \n\n**Competition**\n\n \n\nWe face competition from several\nregional competitors in the rural sewage treatment industry and the septic tank treatment industry. We may also face competition from\nnew and emerging companies.\n\n \n\nRural sewage treatment and septic\ntank treatment are emerging industries in China. We believe our primary competitors are regional companies that undertake construction\nof rural sewage treatment plants and provide operation and maintenance services, along with regional companies in the septic tank treatment\nindustry. Due to the difficulty of centralized treatment of rural sewage in China, large companies do not typically enter the rural sewage\ntreatment market. The regional companies that we compete with are typically small in scale and rely on their relationships with large\nand state-owned companies which outsource the rural sewage treatment. Such companies typically use A2/O or A/O methodology to treat rural\nsewage which is not as efficient as our quick separation technology.\n\n \n\nWe believe there are barriers to\nentry in our markets that limit the number of qualified competitors. These barriers result from stringent performance standards, product\nqualification protocols and requirements for consistent levels of service and support. We believe that our broad array of products and\nproduct designs coupled with our engineering expertise and experienced service providers enable us to provide customers with differentiated\nproduct performance, value and customer support.\n\n \n\nThe principal competitive factors\nin our markets include:\n\n \n\n \n●\nability to provide projects with advanced technology and equipment;\n\n \n\n \n●\nconstruction quality and standards;\n\n \n\n \n●\nability to find projects;\n\n \n\n \n●\nreputation in the market;\n\n \n\n \n●\nunified management; and\n\n \n\n \n●\nability to address unique client needs.\n\n \n\nWe believe we compete favorably\nwith respect to the factors mentioned above. See “Item 5. Operating and Financial Review and Prospectus –\nOperating results” for a breakdown of the total revenues by category of activities for and geographic markets of the Company.\n\n \n\n45\n\n \n\n \n\n**Seasonality**\n\n \n\nOur business is affected by seasonality.\nConstruction of our treatment systems is typically slow during winter seasons due to inclement weather and around Chinese holidays due\nto government and other and closures.\n\n \n\n**Employees and Human Capital**\n\n \n\nAs of December 31, 2025, we had\n68 employees, of whom 64 were full-time employees, 4 were part-time employees and all were located in China. Our success depends on our\nability to attract, motivate, train and retain qualified personnel. We believe we offer our employees competitive compensation packages\nand an environment that encourages self-development and, as a result, have generally been able to attract and retain qualified personnel\nand maintain a stable core management team. None of our employees are represented by a labor union or covered by a collective bargaining\nagreement. We have never experienced any employment related work stoppages, and we consider our relations with our employees to be good.\n\n \n\n**Legal Proceedings**\n\n \n\nWe are not currently a party\nto any legal proceedings that in the opinion of our management would have a material adverse effect on our business. However, from time\nto time we may be involved in legal proceedings or may be subject to claims arising in the ordinary course of our business. Although the\nresults of litigation and claims cannot be predicted with certainty, we believe that the final outcome of ordinary course matters will\nnot have a material adverse effect on our business, operating results, financial condition or cash flows.\n\n \n\n**Regulations**\n\n \n\nThe following sets forth a summary\nof the most significant rules and regulations that affect our business activities in China.\n\n \n\n**Regulations and National Policies Relating to the Water Treatment Equipment\nManufacturing Industry**\n\n \n\nPursuant to the 13th Five Year\nPlan for National Economic and Social Development of the PRC (2016-2020), or the 13th Five Year Plan, which became effective on March\n16, 2016, Section 4, “Strengthening Environmental Infrastructure Construction”, under Chapter 44, “Strengthening Comprehensive\nEnvironmental Governance”, stipulates that China needs to accelerate the construction and transformation of urban sewage treatment\nfacilities and pipe networks, promote the harmless treatment of sludge and the utilization of resources, and achieve full coverage and\nstable compliance operations of urban sewage and garbage treatment facilities. Further, Section 2, “Speed up the construction of\nbeautiful and livable villages”, under Chapter 36, “Promoting Coordinated Urban-Rural Development”, provides that China\nneeds to comprehensively improve rural production and living conditions and accelerate the transformation of rural environment sanitation\nfacilities.\n\n \n\nPursuant to the 14th Five Year\nPlan for National Economic and Social Development of the PRC (2021-2025), or the 14th Five Year Plan, which became effective on March\n12, 2021, Section 3, “Improving the Living Environment in Rural Areas”, under Chapter 24, “Implementation of Rural Construction\nAction”, which provides that China needs to carry out the improvement of rural living environment, and steadily solve the outstanding\nenvironmental problems, including rural black and smelly water issue, the Chinese government promotes rural toilet revolution in line\nwith local conditions and comprehensive improvement of rural water systems. In addition, Section 2, “Comprehensively Improving the\nLevel of Environmental Infrastructure”, under Chapter 38, “Continuous Improvement of Environmental Quality”, stipulates\nthat China aims to build an environmental infrastructure system integrating sewage, garbage, solid waste, hazardous waste, medical waste\ntreatment and disposal facilities, and monitoring and supervision capabilities, and form an environmental infrastructure network extending\nfrom cities to towns and villages. The Chinese government aims to promote the full coverage of urban sewage pipe network, carry out differential\nand accurate upgrading of sewage treatment, and promote the centralized incineration of sludge for harmless treatment.\n\n \n\n46\n\n \n\n \n\nChina’s five-year plans are\nblueprints containing the country’s social, economic, and political goals. They encompass and intertwine with existing policies,\nregional plans, and strategic initiatives. A five-year plan signals the Chinese government’s vision for future reforms and communicates\nthis to other parts of the bureaucracy, industry players and Chinese citizens.\n\n \n\nPursuant to (a) the Law of China\non the Prevention and Control of Water Pollution, which was adopted in 1984, last amended in 2017 and became effective in 2018, (b) the\nLaw of China on Circular Economy Promotion, which was adopted in 2018, and (c) the Regulation on Urban Drainage and Sewage Treatment which,\nwas adopted in 2013 and became effective in 2014, the Chinese government supports the application of advanced and applicable technology\nto the prevention and control of water pollution, and the research, development and promotion of science and technology. Further, the\nChinese government encourages social funds to invest, construct and operate urban drainage and sewage treatment equipment.\n\n \n\nPursuant to the Water Pollution\nPrevention and Control Action Plan, or the Water Ten Plan, which was issued by the PRC in April 2015, the Chinese government adopted specific\ntargets related to water quality and environmental protection. To achieve these targets, the government will promote research and advanced\ntechnologies on water pollution treatment and recycling.\n\n \n\nIn addition, in the Water Ten Plan,\nthere is an increased emphasis on the importance of cooperating with foreign technological partners in the areas of water treatment process\nequipment. We believe these policies, among others, will cause more industries to utilize new technologies in water treatment.\n\n \n\nThe principal regulation governing\nforeign ownership of water treatment equipment manufacturing businesses in China is the Catalogue of Encouraged Industries for Foreign\nInvestment, which was issued by the MOFCOM and the NDRC on December 15, 2025, and became effective on February 1, 2026. Under the Guidance\nCatalogue, our main business, the water treatment equipment manufacturing business is in an industry that foreign investors are encouraged\nto invest in.\n\n \n\n**Regulations Relating to Environmental Protection**\n\n \n\nThe Environmental Protection Law,\nwhich was adopted in 1989, last amended in 2014 and became effective in 2015, effectively established the legal framework for environment\nprotection in China. The Environmental Protection Law requires the Ministry of Environmental Protection of China, to implement uniform\nsupervision and administration of environmental protection work nationwide and establishes national waste discharge standards. Enterprises\nproducing environmental contamination and other public hazards must incorporate environmental protection work into their planning and\nestablish environmental protection systems. As of the date of this annual report, the business of us and our subsidiaries complied with\nthe relevant provisions of the Environmental Protection Law.\n\n \n\nThrough the adoption of the Environmental\nImpact Assessment Law in 2018 and the Category-based Management Directory on the Environmental Impact Assessment for Construction Projects,\nwhich was recently amended in 2020 and became effective on January 1, 2021, the Chinese government established a system to appraise the\nenvironmental impact of construction projects and classify the appraisal based on the degree of environmental impact caused by such construction\nproject. As of the date of this annual report, we and our subsidiaries have compiled environmental impact assessment documents in accordance\nwith relevant rules and regulations and have been approved by the authorities.\n\n \n\nOn October 16, 2018, the Ministry\nof Industry and Information Technology of China promulgated and implemented the Specification Conditions of Sewage Treatment for Environmental\nProtection Equipment Manufacturing Industry, which stipulates that sewage treatment enterprises include sewage treatment equipment enterprises\nand sewage treatment engineering enterprises. It also stipulates that such enterprises must meet the following conditions: (1) The enterprise\nmust have the qualification of an independent legal person, obtain a business license, and engage in the production of sewage treatment\nequipment or engineering of sewage treatment. (2) The enterprise should have the capabilities of research and development, design, installation\nand debugging, as well as relevant qualifications. Equipment enterprises should have fixed production sites that adapt to the scale of\nproduction. (3) Crafts and equipment used in the production or construction of an enterprise shall comply with the requirements of the\nnational industrial policy, and such enterprise shall not produce products that have been eliminated by the state, nor use equipment,\nmaterials and crafts that have been eliminated by the country. (4) The enterprise shall have a good\n\n \n\n47\n\n \n\nfinancial status, the financial data shall be authentic and credible, and shall be audited by an accounting firm registered in the PRC\nwho can issue third-party financial audit reports for the past three years. (5) The enterprise should have good credit, public image and\nability to perform contracts, pay taxes in accordance with the law, and should have not been subjected to administrative punishment in\nviolation of national laws and regulations in the past three years, and should not have major quality or production safety accidents,\nand other accidents, and should not have malicious low-price bidding behaviors, or unfair competitive behaviors. (6) The average profit\nrate of the enterprise in the past three years should not be less than 6%. (7) The enterprise should have a stable cooperation mechanism\nwith research and development institutions, universities, and research institutes on technological research and development. Within the\nenterprise, there should be scientific and technical personnel with a college degree or above that account for more than 30% of the total\nnumber of employees engaged in the work of sewage treatment, of which scientific and technical personnel engaged in research and development\nin the field of sewage treatment should account for more than 6% of the total number of employees or no less than 100 employees. (8) The\nannual investment of an equipment enterprise in research and development of sewage treatment in the past three years accounts for no less\nthan 3% of the sales of sewage treatment equipment, and the annual investment of the engineering enterprise should not be less than RMB\n20 million (approximately $3.0 million). (9) In the past three years, the enterprise has obtained more than one authorized invention patent\nor more than 10 utility model patents (including software copyrights) in the field of sewage treatment, or has mainly undertaken to complete\nmore than one national scientific and technological project in the field of sewage treatment. At the same time, the regulation requires\nenterprises to voluntarily apply for regulation announcements in accordance with the conditions of this regulation. The Ministry of Industry\nand Information Technology of China is responsible for the dynamic management of the list of announced enterprises. The local competent\nindustry and information technology authorities at various levels are responsible for the supervision of the enterprises in the region\nthat have been announced, and all sectors of the society supervise the enterprises that have been announced. We meet the requirements\nof the Specification Conditions of Sewage Treatment for Environmental Protection Equipment Manufacturing Industry.\n\n \n\n**Legal Regulations on Intellectual Property in the PRC**\n\n \n\n**Copyright**\n\n \n\nPursuant to the Copyright Law of\nthe PRC, which was first promulgated by the Standing Committee of the National People’s Congress on September 7, 1990 and became\neffective from June 1, 1991, and was last amended on November 11, 2020 and became effective on June 1, 2021, copyrights include personal\nrights (such as the right of publication and authorship) and property rights (such as the right of reproduction and that of distribution).\nUnless permitted under the Copyright Law of the PRC, acts such as reproduction, distribution, performance, screening, broadcasting or\ncompiling or disseminating the work to the public through information network without the consent of the copyright holder constitute infringements.\n\n \n\n**Trademark**\n\n \n\nPursuant to the Trademark Law of\nthe PRC, which was first promulgated by the Standing Committee of the National People’s Congress on August 23, 1982 and became effective\nfrom March 1, 1983, and was most recently amended on April 23, 2019 and became effective on November 1, 2019, the exclusive right to use\na registered trademark shall be limited to trademarks which have been approved for registration and to goods for which it is registered.\nThe period of validity of a registered trademark is 10 years, counted from the day the registration is approved. According to this law,\nusing a trademark that is identical to or similar to a registered trademark in connection with the same or similar goods without the authorization\nof the owner of the registered trademark constitutes an infringement of the exclusive right to use a registered trademark.\n\n \n\n**Patent**\n\n \n\nPursuant to the Patent Law of the\nPRC, which was promulgated by the Standing Committee of the National People’s Congress on March 12, 1984 and became effective from\nApril 1, 1985, and was most recently amended on October 17, 2020 and became effective on June 1, 2021, following the grant of the patent\nright for an invention or utility model, unless otherwise stipulated in the Patent Law, no organization or individual shall implement\nthe patent without licensing from the patentee, i.e. shall not manufacture, use, offer to sell, sell or import such patented products\nfor manufacturing and business purposes, or use the patented method and use, offer to sell, sell or import products obtained directly\naccording to the patent method. Following the grant of design patent rights, no organization or individual shall implement the patent\nwithout licensing from the patentee, i.e. shall not manufacture, offer to sell, sell or import the design patented products for manufacturing\nand business purposes.\n\n \n\n48\n\n \n\n \n\n**Domain Name**\n\n \n\nPursuant to the Administrative\nMeasures on Internet Domain Names, which was recently amended by the Ministry of Industry and Information Technology of China on August\n24, 2017 and became effective on November 1, 2017, “domain name” shall refer to the character mark of hierarchical structure,\nwhich identifies and locates a computer on the internet and corresponds to the internet protocol (IP) address of that computer. And the\nprinciple of “first come, first serve” is followed for the domain name registration service. After completing the domain name\nregistration, the applicant becomes the holder of the domain name registered by him/it. Furthermore, the holder shall pay operation fees\nfor registered domain names on schedule. If the domain name holder fails to pay the corresponding fees as required, the original domain\nname registrar shall write it off and notify the holder of the domain name in written form. We have paid the corresponding fees for our\ndomain name as required, and the service period is until April 28, 2026.\n\n \n\n**Legal Regulations on Labor Protection in\nthe PRC**\n\n \n\nAccording to the Labor Law of the\nPRC, or the Labor Law, which was promulgated by the Standing Committee of the National People’s Congress (the “SCNPC”)\non July 5, 1994, came into effect on January 1, 1995, and was most recently amended on December 29, 2018, an employer shall develop and\nimprove its rules and regulations to safeguard the rights of its workers. An employer shall develop and improve its labor safety and health\nsystem, stringently implement national protocols and standards on labor safety and health, conduct labor safety and health education for\nworkers, guard against labor accidents and reduce occupational hazards. Labor safety and health facilities must comply with relevant national\nstandards. An employer must provide workers with the necessary labor protection gear that complies with labor safety and health conditions\nstipulated under national regulations,as well as provide regular health checks for workers that are engaged in operations with occupational\nhazards. Laborers engaged in special operations shall have received specialized training and have obtained the pertinent qualifications.\nAn employer shall develop a vocational training system. Vocational training funds shall be set aside and used in accordance with national\nregulations and vocational training for workers shall be carried out systematically based on the actual conditions of the company.\n\n \n\nThe Labor Contract Law of the PRC,\nwhich was promulgated by the SCNPC on June 29, 2007, came into effect on January 1, 2008, and was amended on December 28, 2012 and became\neffective as of July 1, 2013, and the Implementation Regulations on the Labor Contract Law, which was promulgated and became effective\non September 18, 2008, regulate both parties through a labor contract, namely the employer and the employee, and contain specific provisions\ninvolving the terms of the labor contract. It is stipulated under the Labor Contract Law and the Implementation Regulations on the Labor\nContract Law that a labor contract must be made in writing. An employer and an employee may enter into a fixed-term labor contract, a\nnon-fixed term labor contract, or a labor contract that concludes upon the completion of certain work assignments, after reaching agreement\nupon due negotiations. An employer may legally terminate a labor contract and dismiss its employees after reaching agreement upon due\nnegotiations with the employee or by fulfilling the statutory conditions. Labor contracts concluded prior to the enactment of the Labor\nLaw and subsisting within the validity period thereof shall continue to be honored. With respect to a circumstance where a labor relationship\nhas already been established but no formal written contract has been made, a written labor contract shall be entered into within one month\nfrom the commencement date of the employment.\n\n \n\nAccording to the Provisional Regulations\non the Collection and Payment of Social Insurance Premiums, the Regulations on Work Injury Insurance, the Regulations on Unemployment\nInsurance and the Trial Measures on Employee Maternity Insurance of Enterprises, enterprises in the PRC shall provide benefit plans for\ntheir employees, which include basic pension insurance, unemployment insurance, maternity insurance, work injury insurance and basic medical\ninsurance. An enterprise must provide social insurance by processing social insurance registration with local social insurance agencies,\nand shall pay or withhold relevant social insurance premiums for or on behalf of employees. The Law on Social Insurance of the PRC, which\nwas promulgated by the Standing Committee of the National People’s Congress on October 28, 2010, and became effective on July 1,\n2011, and was most recently updated on December 29, 2018, has consolidated pertinent provisions for basic pension insurance, unemployment\ninsurance, maternity insurance, work injury insurance and basic medical insurance, and has elaborated in detail the legal obligations\nand liabilities of employers who do not comply with relevant laws and regulations on social insurance.\n\n \n\n49\n\n \n\n \n\nAccording to the Interim Measures\nfor Participation in the Social Insurance System by Foreigners Working within the Territory of China, which was promulgated by the Ministry\nof Human Resources and Social Security of China on September 6, 2011, and was amended on December 13, 2024, employers who employ foreigners\nshall participate in the basic pension insurance, unemployment insurance, basic medical insurance, occupational injury insurance, and\nmaternity leave insurance in accordance with the relevant law, with the social insurance premiums to be contributed respectively by the\nemployers and foreigner employees as required. In accordance with such Interim Measures, the social insurance administrative agencies\nshall exercise their right to supervise and examine the legal compliance of foreign employees and employers and the employers who do not\npay social insurance premiums in conformity with the laws shall be subject to the administrative provisions provided in the Social Insurance\nLaw and the relevant regulations and rules mentioned above.\n\n \n\nAccording to the Regulations on\nthe Administration of Housing Provident Fund, which was promulgated by the State Council and became effective on April 3, 1999, and was\namended on March 24, 2002 and was partially revised on March 24, 2019 by Decision of the State Council on Revising Some Administrative\nRegulations (Decree No. 710 of the State Council), housing provident fund contributions by an individual employee and housing provident\nfund contributions by his or her employer shall belong to the individual employee. Registration by PRC companies at the applicable housing\nprovident fund management center is compulsory and a special housing provident fund account for each of the employees shall be opened\nat an entrusted bank.\n\n \n\nThe employer shall timely pay up\nand deposit housing provident fund contributions in full amount and late or insufficient payments shall be prohibited. The employer shall\nprocess housing provident fund payment and deposit registrations with the housing provident fund administration center. With respect to\ncompanies who violate the above regulations and fail to process housing provident fund payment and deposit registrations or open housing\nprovident fund accounts for their employees, such companies shall be ordered by the housing provident fund administration center to complete\nsuch procedures within a designated period. Those who fail to process their registrations within the designated period shall be subject\nto a fine ranging from RMB 10,000 (approximately $1,500) to RMB 50,000 (approximately $7,500). When companies breach these regulations\nand fail to pay up housing provident fund contributions in full amount as due, the housing provident fund administration center shall\norder such companies to pay up within a designated period, and may further apply to the People’s Court for mandatory enforcement\nagainst those who still fail to comply after the expiry of such period.\n\n \n\nAs of December 31, 2025, Shenzhen\nCDT and its subsidiaries failed to pay social insurance premiums in full and on time for 64 employees. According to the Provisional Regulations\non the Collection and Payment of Social Insurance Premiums, because Shenzhen CDT and its subsidiaries did not pay the social insurance\npremiums in full for all employees, premium collection agencies may order them to pay or make up the arrears and may impose an overdue\nfine. If Shenzhen CDT fails to pay such overdue fine, they may be further fined.\n\n \n\nAs of December 31, 2025, Shenzhen\nCDT and its subsidiaries failed to make full or required housing provident fund contributions for 53 employees. According to the Regulations\non the Administration of Housing Provident Fund, due to the failure to pay the housing provident fund for all employees, Shenzhen CDT\nmay be ordered with a deadline for payment from the Housing Provident Fund Management Center. In addition, if Shenzhen CDT does not make\nthe housing accumulation fund deposit registration or does not establish the housing provident fund account for the employees, the housing\nprovident fund management center will order a deadline for payment, and if Shenzhen CDT fails to pay the housing provident fund within\nthe deadline, it will be imposed a fine of not less than RMB 10,000 (approximately $1,500) and not more than RMB 50,000 (approximately\n$7,500). \n\n \n\n50\n\n \n\n \n\n**Legal Regulations\non Tax in the PRC**\n\n \n\n**Income Tax**\n\n \n\nIn January 2008, the PRC Enterprise\nIncome Tax Law took effect, which was last amended by the SCNPC on December 29, 2018. The PRC Enterprise Income Tax Law applies a uniform\n25% enterprise income tax rate to both FIEs and domestic enterprises, except where tax incentives are granted to special industries and\nprojects. The PRC Enterprise Income Tax Law defines “resident enterprise” as an enterprise established outside of the territory\nof China but with its “de facto management body” within China, which will also be subject to the 25% enterprise income tax\nrate. The implementation rules define the term “de facto management body” as the body that exercises full and substantial\ncontrol and overall management over the business, productions, personnel, accounts, and properties of an enterprise. Under the PRC Enterprise\nIncome Tax Law and its implementation regulations, dividends generated from the business of a PRC subsidiary after January 1, 2008, and\npayable to its foreign investor may be subject to a withholding tax rate of 10% if the PRC tax authorities determine that the foreign\ninvestor is a Non-resident Enterprise, unless there is a tax treaty with China that provides for a preferential withholding tax rate.\nDistributions of earnings generated before January 1, 2008, are exempt from PRC withholding tax.\n\n \n\nIn January 2009, the SAT promulgated\nthe Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises, or the Non-resident\nEnterprises Measures, which was repealed by Announcement of the State Administration of Taxation on Issues Relating to Withholding at\nSource of Income Tax of Non-resident Enterprises, or SAT Circular 37, which came into effect on December 1, 2017 and was revised on June\n15, 2018. The SAT Circular 37 further clarifies the practice and procedure of withholding of non-resident enterprise income tax. It shall\napply to the handling of matters relating to withholding at source of income tax of non-resident enterprises pursuant to the provisions\nof Article 37, Article 39 and Article 40 of the Enterprise Income Tax Law. According to Article 37, Article 39 of the Enterprise Income\nTax Law, income tax over non-resident enterprise income pursuant to the provisions of the third paragraph of Article 3 shall be subject\nto withholding at the source, where the payer shall act as the withholding agent. The tax amount for each payment made or due shall be\nwithheld by the withholding agent from the amount paid or payable. Where a withholding agent fails to withhold tax or perform tax withholding\nobligations pursuant to the provisions of Article 37, the taxpayer shall pay tax at the place where the income is derived. Where the taxpayer\nfails to pay tax pursuant to law, the tax authorities may demand payment of the tax amount payable, from a payer of the taxpayer with\npayable tax amounts from other taxable income items in China.\n\n \n\nOn April 30, 2009, the Ministry\nof Finance of the People’s Republic of China (the “MOF”) and the SAT jointly issued the Circular on Issues Concerning\nTreatment of Enterprise Income Tax in Enterprise Restructuring Business, or Circular 59, which became effective retroactively as of January\n1, 2008 and was partially revised on January 1, 2014. By promulgating and implementing this circular, the PRC tax authorities have enhanced\ntheir scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a Non-resident Enterprise.\n\n \n\nOn February 3, 2015, the SAT issued\nthe Announcement of the State Administration of Taxation on Several Issues Relating to Enterprise Income Tax of Transfers of Assets between\nNon-resident Enterprises, or SAT Circular 7, which was partially abolished on December 29, 2017. SAT Circular 7 extends its tax jurisdiction\nto transactions involving transfer of immovable property in China and assets held under the establishment, and placement in China, of\na foreign company through the offshore transfer of a foreign intermediate holding company. SAT Circular 7 also addresses transfer of the\nequity interest in a foreign intermediate holding company broadly. In addition, SAT Circular 7 introduces safe harbor scenarios applicable\nto internal group restructurings. However, it also brings challenges to both the foreign transferor and transferee of the Indirect Transfer\nas they have to assess whether the transaction should be subject to PRC tax and to file or withhold the PRC tax accordingly.\n\n \n\nIf non-resident investors were\ninvolved in our private equity financing, if such transactions were determined by the tax authorities to lack reasonable commercial purpose,\nwe and our non-resident investors may be at risk of being required to file a return and be taxed under SAT Circular 7 and we may be required\nto expend valuable resources to comply with SAT Circular 7 or to establish that we should not be held liable for any obligations under\nSAT Circular 7.\n\n \n\n51\n\n \n\n \n\n**Value-Added Tax**\n\n \n\nAccording to the Value-added Tax\nLaw of the PRC, which was promulgated on December 25, 2025 and became effective on January 1, 2026, all taxpayers selling goods, providing\nprocessing, repair or replacement services or importing goods within the PRC shall pay value-added tax. Unless otherwise stipulated, the\ntax rate for taxpayers selling services or intangible assets is six percent; the applicable rate for the export of goods by taxpayers\nshall be nil. The Notice of the Ministry of Finance and the State Administration of Taxation on the Adjustment to VAT Rates was released\non April 4, 2018 and became effective on May 1, 2018. It declared that the VAT tax rate in regard to the sale of goods, provision of processing,\nrepairs and replacement services and importation of goods into China shall be reduced from the previous 17% to 16% from May 1, 2018.\n\n \n\nFurthermore, according to the Pilot\nScheme on Switching from Business Tax to Value-added Tax, which was promulgated by the MOF and the SAT, China began to launch taxation\nreforms in a gradual manner from January 1, 2012, whereby the collection of value-added tax in lieu of business tax items was implemented\non a trial basis in regions showing significant radiating effects in economic development and providing outstanding reform examples, beginning\nwith production service industries such as transportation and certain modern service industries.\n\n \n\nIn accordance with Notice of the\nMinistry of Finance and the State Administration of Taxation on Full Launch of the Pilot Scheme on Levying Value-added Tax in Place of\nBusiness Tax that took effect on May 1, 2016 and revised thereafter, upon approval of the State Council, the pilot program of the collection\nof value-added tax in lieu of business tax shall be promoted nationwide in a comprehensive manner starting May 1, 2016, and all taxpayers\nof business tax engaged in the building industry, the real estate industry, the financial industry and the life service industry shall\nbe included in the scope of the pilot program with regard to payment of value-added tax instead of business tax. Our main business, the\nwater treatment equipment manufacturing business, is included in the scope of the pilot program with regard to payment of value-added\ntax instead of business tax.\n\n \n\n**Regulations on Foreign\nExchange**\n\n \n\n**Foreign Currency\nExchange**\n\n \n\nPursuant to the Regulations on\nForeign Exchange System of the People’s Republic of China, as amended in 2008, and various regulations issued by SAFE and other\nrelevant PRC government authorities, Renminbi is freely convertible to the extent of current account items, such as trade related receipts\nand payments, interest and dividends. Capital account items, such as direct equity investments, loans and repatriation of investment,\nunless expressly exempted by laws and regulations, still require prior filing with SAFE or its provincial branch for conversion of Renminbi\ninto a foreign currency, such as U.S. dollars, and remittance of the foreign currency outside of the PRC. Payments for transactions that\ntake place within the PRC must be made in Renminbi. Foreign currency revenues received by PRC companies may be repatriated into or retained\noutside of the PRC in accordance with requirements and terms specified by SAFE.\n\n \n\n**Dividend Distributions**\n\n \n\nWholly foreign-owned enterprises\nand Sino-foreign equity joint ventures in the PRC may pay dividends only out of their accumulated profits, if any, as determined in accordance\nwith PRC accounting standards and regulations. Additionally, these FIEs may not pay dividends unless they set aside at least 10% of their\nrespective accumulated profits after tax each year, if any, to fund certain reserve funds, until such time as the accumulated amount of\nsuch fund reaches 50% of the enterprise’s registered capital. In addition, these companies also may allocate a portion of their\nafter-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable\nas cash dividends.\n\n \n\n52\n\n \n\n \n\n**Regulations Relating\nto Foreign Exchange Registration of Overseas Investment by PRC Residents**\n\n \n\nSAFE Circular 37, issued by SAFE\nand effective on July 4, 2014, regulates foreign exchange matters in relation to the use of SPVs by PRC residents or entities to seek\noffshore investment and financing and conduct round trip investment in China. Under Circular 37, a SPV refers to an offshore entity established\nor controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment,\nusing legitimate domestic or offshore assets or interests, while “round trip investment” refers to the direct investment in\nChina by PRC residents or entities through SPVs, namely, establishing FIEs to obtain the ownership, control rights and management rights.\nSAFE Circular 37 requires that, before making contribution into a SPV, PRC residents or entities are required to complete foreign exchange\nregistration with the SAFE or its local branch. SAFE Circular 37 further provides that option or share-based incentive tool holders of\na non-listed SPV can exercise the options or share incentive tools to become a shareholder of such non-listed SPV, subject to registration\nwith SAFE or its local branch.\n\n \n\nPRC residents or entities who have\ncontributed legitimate domestic or offshore interests or assets to SPVs but have yet to obtain SAFE registration before the implementation\nof SAFE Circular 37 shall register their ownership interests or control in such SPVs with SAFE or its local branch. An amendment to the\nregistration is required if there is a material change in the registered SPV, such as any change of basic information (including change\nof such PRC “resident’s name” and operation term), increases or decreases in investment amounts, transfers or exchanges\nof shares, or mergers or divisions. Failure to comply with the registration procedures set forth in SAFE Circular 37, or making misrepresentation\non or failure to disclose controllers of a FIE that is established through round-trip investment, may result in restrictions on the foreign\nexchange activities of the relevant FIEs, including payment of dividends and other distributions, such as proceeds from any reduction\nin capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may\nalso subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations. On February 13, 2015,\nSAFE further promulgated the Circular on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct\nInvestment, or SAFE Circular 13, which took effect on June 1, 2015. This SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC\nresidents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or\ncontrol of an offshore entity established for the purpose of overseas investment or financing. On April 10, 2020, SAFE issued the Notice\nof the SAFE on Optimizing Foreign Exchange Administration to Support the Development of Foreign-related Business, or the SAFE Circular\n8. SAFE Circular 8 provides that under the condition that the use of the funds is genuine and compliant with current administrative provisions\non use of income relating to capital account, enterprises are allowed to use income under capital account such as capital funds, foreign\ndebts and overseas listings for domestic payment, without submission to the bank prior to each transaction of materials evidencing the\nveracity of such payment.\n\n \n\nAs of December 31, 2025, to our\nknowledge, Yunwu Li, our chief executive officer and chairman of our board of directors and chairman of the board of directors and general\nmanager of Shenzhen CDT, had not completed the change registration and was in the process of registration.\n\n \n\nOn March 30, 2015, the SAFE promulgated\nthe Notice of the SAFE on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, or Circular\n19, which came into effect on June 1, 2015 and has been partially repealed. According to Circular 19, the foreign exchange capital of\nFIEs shall be subject to the Discretional Foreign Exchange Settlement. The Discretional Foreign Exchange Settlement refers to the foreign\nexchange capital in the capital account of a FIE for which the rights and interests of monetary contribution has been confirmed by the\nlocal foreign exchange bureau (or the book-entry registration of monetary contribution by the banks) can be settled at the banks based\non the actual operational needs of the FIE. The proportion of Discretional Foreign Exchange Settlement of the foreign exchange capital\nof a FIE is temporarily determined to be 100%. The Renminbi converted from the foreign exchange capital will be kept in a designated account\nand if a FIE needs to make further payment from such account, it still needs to provide supporting documents and go through the review\nprocess with the banks.\n\n \n\nSAFE issued the Circular on Reforming\nand Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16, on June 9, 2016, which became\neffective simultaneously. Pursuant to Circular 16, enterprises registered in the PRC may also convert their foreign debts from foreign\ncurrency to Renminbi on a discretionary basis. The Notice of the State Administration of Foreign Exchange on Further Deepening Reform\nto Promote Cross-border Trade and Investment Facilitation, or the Circular 28, was promulgated and became effective on December 4, 2023.\nThe Circular 16 and the Circular 28 provide an integrated standard for conversion of foreign exchange under capital account items (including\nforeign currency capital and foreign debts) on a discretionary basis which applies to all enterprises registered in the PRC. Circular\n16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly\nused for purposes beyond its business scope or prohibited by PRC laws or regulations, while such converted Renminbi shall not be provided\nas loans to its non-affiliated entities.\n\n \n\n53\n\n \n\n \n\n**Regulations on\nloans to and direct investment in the PRC entities by offshore holding companies**\n\n \n\nAccording to the Provisional Regulations\non the Statistical Monitoring of Foreign Debt (Revised in 2020) promulgated by the State Council on November 29, 2020, which came into\neffect on the same date, and the Interim Provisions on the Management of Foreign Debts promulgated by SAFE, the NDRC and the MOF which\nbecame effective from March 1, 2003, and was amended on July 26, 2022 and took effect on September 1, 2022, loans by foreign companies\nto their subsidiaries in China, which accordingly are FIEs, are considered foreign debt, and such loans must be registered with the local\nbranches of the SAFE. Under the provisions, the total amount of accumulated medium-term and long-term foreign debt and the balance of\nshort-term debt borrowed by a FIE is limited to the difference between the total investment and the registered capital of the foreign-invested\nenterprise.\n\n \n\nOn January 12, 2017, the People’s\nBank of China promulgated the Circular of the People’s Bank of China on Matters relating to the Macro-prudential Management of Comprehensive\nCross-border Financing, or PBOC Circular 9, which took effect on the same date. The PBOC Circular 9 established a capital or net assets-based\nconstraint mechanism for cross-border financing. Under such mechanism, a company may carry out cross-border financing in Renminbi or foreign\ncurrencies at their own discretion. The total cross-border financing of a company shall be calculated using a risk-weighted approach and\nshall not exceed an upper limit. The upper limit is calculated as capital or assets multiplied by a cross-border financing leverage ratio\nand multiplied by a macro-prudential regulation parameter.\n\n \n\nIn addition, according to PBOC\nCircular 9, as of the date of the promulgation of PBOC Circular 9, a transition period of one year is set for foreign-invested enterprises\nand during such transition period, FIEs may apply either the current cross-border financing management mode, or the mode in this PBOC\nCircular 9 at its sole discretion. After the end of the transition period, the cross-border financing management mode for FIEs will be\ndetermined by the People’s Bank of China and SAFE after assessment based on the overall implementation of this PBOC Circular 9.\n\n \n\nAccording to applicable PRC regulations\non FIEs, capital contributions from a foreign holding company to its PRC subsidiaries, which are considered FIEs, may only be made when\napproval by or registration with the MOFCOM or its local counterpart is obtained.\n\n \n\n**Regulations Relating to Foreign Investment**\n\n \n\n**The Guidance Catalogue of Industries for Foreign\nInvestment**\n\n \n\nThe Catalogue of Encouraged Industries\nfor Foreign Investment (2025 Edition), or the ‘Encouraging Catalogue (2025 Edition), was jointly promulgated by the NDRC and the\nMOFCOM on December 15, 2025, which became effective on February 1, 2026. The Special Administrative Measures (Negative List) for the Access\nof Foreign Investment (2024 Edition), or the Negative List (2024 Edition), was jointly promulgated by the NDRC and the MOFCOM on September\n6, 2024, which came into effect on November 1, 2024. The Negative List (2024 Edition) and the Encouraging Catalogue (2025 Edition) contain\nspecific provisions guiding market access of foreign capital, stipulating in detail the rules of entry according to the categories of\nencouraged industries, restricted industries and prohibited industries. Industries not listed in the Negative List (2024 Edition) are\ngenerally open to foreign investment unless specifically prohibited or restricted by other PRC laws and regulations. Foreign investment\nin the encouraged category is entitled to certain preferential treatment and incentives extended by the government, while foreign investment\nin the restricted category is permitted but subject to certain restrictions under the PRC laws. Foreign investment in the prohibited category\nis not allowed. According to the Negative List and the Encouragement Catalogue, we, through our subsidiaries, are a waste treatment company,\nand we are not operating in any restricted industries or prohibited industries. We are operating in an encouraged industry, and the industry\nis open to foreign investment.\n\n \n\n**The Foreign Investment Law**\n\n \n\nOn March 15, 2019, the National\nPeople’s Congress approved the Foreign Investment Law, which took effect on January 1, 2020 and replaced three existing laws on\nforeign investments in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperative Joint Venture Law and the Wholly Foreign-owned\nEnterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law embodies an expected PRC\nregulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative\nefforts to unify the corporate legal requirements for both foreign and domestic invested enterprises in China. The Foreign Investment\nLaw establishes the basic framework for the access to, and the promotion, protection and administration of foreign investments in view\nof investment protection and fair competition.\n\n \n\n54\n\n \n\n \n\nAccording to the Foreign Investment\nLaw, “foreign investment” refers to investment activities directly or indirectly conducted by one or more natural persons,\nbusiness entities, or otherwise organizations of a foreign country (collectively referred to as “foreign investor”) within\nChina, and the investment activities include the following situations: (i) a foreign investor, individually or collectively with other\ninvestors, establishes a foreign-invested enterprise within China; (ii) a foreign investor acquires stock shares, equity shares, shares\nin assets, or other like rights and interests of an enterprise within China; (iii) a foreign investor, individually or collectively with\nother investors, invests in a new project within China; and (iv) investments in other means as provided by laws, administrative regulations,\nor the State Council.\n\n \n\nAccording to the Foreign Investment\nLaw, the State Council will publish or approve to publish the “negative list” for special administrative measures concerning\nforeign investment. The Foreign Investment Law grants national treatment to foreign-invested entities, or FIEs, except for those FIEs\nthat operate in industries deemed to be either “restricted” or “prohibited” in the “negative list”.\nThe Foreign Investment Law provides that FIEs operating in foreign restricted or prohibited industries will require market entry clearance\nand other approvals from relevant PRC governmental authorities. If a foreign investor is found to invest in any prohibited industry in\nthe “negative list”, such foreign investor may be required to, among other aspects, cease its investment activities, dispose\nof its equity interests or assets within a prescribed time limit and have its income confiscated. If the investment activity of a foreign\ninvestor is in breach of any special administrative measure for restrictive access provided for in the “negative list”, the\nrelevant competent department shall order the foreign investor to make corrections and take necessary measures to meet the requirements\nof the special administrative measure for restrictive access.\n\n \n\nBesides, the PRC government established\na foreign investment information reporting system, according to which foreign investors or foreign-invested enterprises shall submit investment\ninformation to the competent department for commerce concerned through the enterprise registration system and the enterprise credit information\npublicity system, and a security review system under which the security review shall be conducted for foreign investment affecting or\nlikely affecting the state security.\n\n \n\nFurthermore, the Foreign Investment\nLaw provides that foreign invested enterprises established according to the existing laws regulating foreign investment may maintain their\nstructure and corporate governance within five years after the implementing of the Foreign Investment Law.\n\n \n\nIn addition, the Foreign Investment\nLaw also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others,\nthat a foreign investor may freely transfer into or out of China, in Renminbi or a foreign currency, its contributions, profits, capital\ngains, income from disposition of assets, royalties of intellectual property rights, indemnity or compensation lawfully acquired, and\nincome from liquidation, among others, within China; local governments shall abide by their commitments to the foreign investors; governments\nat all levels and their departments shall enact local normative documents concerning foreign investment in compliance with laws and regulations\nand shall not impair legitimate rights and interests, impose additional obligations onto FIEs, set market access restrictions and exit\nconditions, or intervene with the normal production and operation activities of FIEs; except for special circumstances, in which case\nstatutory procedures shall be followed and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition\nof the investment of foreign investors is prohibited; and mandatory technology transfer is prohibited.\n\n \n\n**Measures for the Security Review of Foreign Investments**\n\n \n\nThe Measures for the Security Review\nof Foreign Investment was promulgated in accordance with the Foreign Investment Law of the People’s Republic of China, the National\nSecurity Law of the People’s Republic of China and the relevant laws for the purposes of adapting to the needs of forming a new\npattern of all-round opening up, effectively preventing and defusing national security risks while actively promoting foreign investment.\nThe Measures for the Security Review of Foreign Investment, as deliberated and adopted at the 13th executive meeting of the NDRC on November\n27, 2020, with the approval of the State Council, are hereby issued, and entered into force on January 18, 2021.\n\n \n\n55\n\n \n\nSecurity review shall be conducted only for foreign investments that affect or may affect national security. In accordance with Article\n4, foreign investors or the relevant parties in China shall proactively report any foreign investment within the following scope to the\nOffice of the Working Mechanism before making the investment: (1) investment in the arms industry, an ancillary to the arms industry,\nor any other field related to national defense security and investment in an area surrounding a military installation or an arms industry\nfacility; and (2) investment in important agricultural products, important energy and resources, critical equipment manufacturing, important\ninfrastructure, important transportation services, important cultural products and services, important information technology and Internet\nproducts and services, important financial services, key technology, or any other important field related to national security, resulting\nin the foreign investor’s acquisition of actual control of the enterprise invested in. Although we, as a foreign investment enterprise,\nare subject to the Measures for the Security Review of Foreign Investment, the business scope is not within the scopes of review in Article\n4. Therefore, there is no need to proactively report to the Working Mechanism Office.\n\n \n\n**Company Law**\n\n \n\nPursuant to the PRC Company Law,\npromulgated by the Standing Committee of the National People’s Congress on December, 29 1993, effective as of July 1, 1994, and\nas revised on December 25, 1999, August 28, 2004, October 27, 2005, December 28, 2013, October 26, 2018 and December 29, 2023 , the\nestablishment, operation and management of corporate entities in the PRC are governed by the PRC Company Law. The PRC Company Law defines\ntwo types of companies: limited liability companies and limited stock companies.\n\n \n\nOur PRC operating subsidiary is\na limited liability company. Unless otherwise stipulated in the related laws on foreign investment, foreign invested companies are also\nrequired to comply with the provisions of the PRC Company Law.\n\n \n\n**Laws and Regulations on the Protection of Consumer\nRights and Interests**\n\n \n\nBusiness operators in the business\nof supplying and selling manufactured goods or services to consumers, shall comply with the Law of the PRC on the Protection of Consumer\nRights and Interests, or the Consumer Rights Protection Law, promulgated by the SCNPC on October 31, 1993, and effective as of January\n1, 1994, and last amended on October 25, 2013 and took effect on March 15, 2014.\n\n \n\nAccording to the Consumer Rights\nProtection Law, business operators must ensure that the goods or services provided by them meet the requirements for safeguarding personal\nand property safety. For goods and services that may endanger personal and property safety, consumers should be provided with a true description\nand an explicit warning, as well as a description and indication of the proper way to use the goods or accept the services and the methods\nof preventing the occurrence of a hazard. If the goods or services provided by the business operators cause personal injuries to consumers\nor third parties, the business operators shall compensate the injured parties for their losses.\n\n \n\n**PRC Civil Code**\n\n \n\nAll of our contracts are subject\nto the PRC Civil Code which was promulgated on May 28, 2020 and became effective on January 1, 2021. Under PRC Civil Code, a natural person,\nlegal person or other legally established organization shall have full capacity of civil conduct while entering into a contract. Except\nas otherwise stipulated by law or agreed by the parties, the formation, validity, performance, modification, assignment, termination,\nand liability for breach of a contract are stipulated by PRC Civil Code. A contracting party who failed to perform or failed to fulfill\nits contractual obligation shall bear the responsibility of a continued duty to perform or to provide remedies and compensation as provided\nby PRC Civil Code.\n\n \n\n**Product Quality Law**\n\n \n\nPursuant to Product Quality Law\nof the PRC, promulgated on September 1, 1993 and amended in 2000, 2009 and 2018 respectively, producing or selling products that do not\nmeet the standards or requirements for safeguarding human health or that constitute unreasonable threats to the safety of human life or\nproperty is prohibited. Where a defective product causes physical injury to a person or damage to his/her property, the injured party\nmay claim compensation against the manufacturer or the distributor of such product.\n\n \n\n56\n\n \n\n \n\nWhere any person produces or sells\nproducts that do not comply with the relevant national or industrial standards for safeguarding human health or constitute unreasonable\nthreats to the safety of human life or property, the relevant authority will order the specific manufacturer or distributor to suspend\nthe production or sale of defective products, confiscate the products produced or for sale, and impose a fine in an amount of up to three\ntimes the value of the defective products. Where illegal earnings were made or were involved, the relevant earnings will be confiscated\naccordingly. If the breach of regulation is serious, the business license of the relevant manufacturer and distributor may be revoked.\nIf the relevant activities constitute a crime, the offender may be prosecuted.\n\n \n\n**Standardization Law of the People’s Republic\nof China**\n\n \n\nStandardization Law of the People’s\nRepublic of China was passed by the Fifth Session of the Standing Committee of the Seventh National People’s Congress on December\n29, 1988, and revised on November 4, 2017 and took effect on January 1, 2018. This law is formulated for the purposes of developing socialist\ncommodity economy, promoting scientific and technological advancement, improving the quality of products, adapting standardization work\nto the need for socialist modernization and external economic relationship development. This law applies to industrial products.\n\n \n\n**Regulations of the People’s Republic of China\non Certification and Accreditation**\n\n \n\nRegulations of the People’s\nRepublic of China on Certification and Accreditation became effective as of September 3, 2003, and was later revised on February 6, 2016,\nNovember 29, 2020 and July 20, 2023. This regulation is formulated for the purposes of standardizing certification and accreditation,\nimproving the quality of products and services and management standard. This regulation applies to all certification agencies, certification\nservices and accreditation services in the PRC.\n\n \n\n**C. Organizational Structure**\n\n \n\nThe charts below summarize our corporate legal structure\nand identify our subsidiaries as of the date of this annual report:\n\n \n\n \n\n57\n\n \n\n \n\n**Name**\n \n**Background**\n \n**Ownership**\n\nChao Qiang Holdings Limited\n \n\n● A British Virgin Islands company\n\n● Incorporated on December 14,\n2015\n\n● A holding company\n\n \n100% owned by CDT Environmental Technology Investment Holdings Limited\n\nCDT Environmental Technology Group Limited\n \n\n● A British Virgin Islands company\n\n● Incorporated on June 26, 2015\n\n● A holding company\n\n \n100% owned by CDT Environmental Technology Investment Holdings Limited\n\nUltra Leader Investments Limited\n \n\n● A Hong Kong company\n\n● Incorporated on February 27,\n2015\n\n● A holding company\n\n \n100% owned by Chao\n\nQiang Holdings Limited\n\nCDT Environmental Technology (Hong Kong) Limited\n \n\n● A Hong Kong company\n\n● Incorporated on July 30, 2015\n\n● A holding company\n\n \n100% owned by CDT Environmental Technology Group Limited\n\n \n\n58\n\n \n\n \n\nShenzhen CDT Environmental Technology Co., Ltd.\n \n\n● A PRC limited liability company\n\n● Incorporated on August 27, 2012\n\n● Registered capital of RMB 60,000,000\n(approximately $9.0 million)\n\n● Developing, producing, selling and\ninstalling sewage treatment systems and providing sewage treatment services\n\n \n\n100% collectively owned by Ultra Leader Investments Limited (15%) and\n\n \n\nCDT Environmental Technology (Hong Kong) Limited (85%)\n\nBeijing Minyuntong Environmental Technology Co., Ltd. (f/k/a Beijing CDT Environmental Technology Co., Ltd.)\n \n\n● A PRC limited liability company\n\n● Incorporated on April 25, 2016\n\n● Registered capital of RMB 20,000,000\n(approximately $3.0 million)\n\n● Providing sewage treatment services\n\n \n100% owned by Shenzhen CDT Environmental Technology Co., Ltd.\n\nFuzhou LSY Environmental Technology Co., Ltd.\n \n\n● A PRC limited liability company\n\n● Incorporated on March 13, 2015\n\n● Registered capital of RMB 5,000,000\n(approximately $0.8 million )\n\n● Providing sewage treatment services\n\n \n\n51% owned by Shenzhen CDT Environmental Technology Co., Ltd.\n\n \n\n \n\nTianjin CDT Environmental Technology Co., Ltd.\n \n\n● A PRC limited liability company\n\n● Incorporated on October 22,\n2014\n\n● Registered capital of RMB 10,000,000\n(approximately $1.5 million)\n\n● Providing sewage treatment services\n\n \n\n100% owned by Shenzhen CDT Environmental Technology Co., Ltd.\n\n \n\n \n\nChengde CDT Environmental Technology Co., Ltd.\n \n\n● A PRC limited liability company\n\n● Incorporated on March 26, 2015\n\n● Registered capital of RMB 5,000,000\n(approximately $0.8 million)\n\n● Providing sewage treatment services\n\n \n\n51% owned by Shenzhen CDT Environmental Technology Co., Ltd.\n\n \n\n \n\nBeijing Innovation CDT Environmental Technology Co., Ltd.\n \n\n● A PRC limited liability company\n\n● Incorporated on September 7,\n2016\n\n● Registered capital of RMB 5,000,000\n(approximately $0.8 million)\n\n● Providing sewage treatment services\n\n \n\n51% owned by Shenzhen CDT Environmental Technology Co., Ltd.\n\n \n\n \n\n \n\n59\n\n \n\n \n\nHengshui CDT Environmental Technology Co., Ltd.\n \n\n● A PRC limited liability company\n\n● Incorporated on May 18, 2015\n\n● Registered capital of RMB 3,000,000\n(approximately $0.5 million)\n\n● Providing sewage treatment services\n\n \n\n51% owned by Shenzhen CDT Environmental Technology Co., Ltd.\n\n \n\n \n\nHuzhou CDT Environmental Technology Co., Ltd.\n \n\n● A PRC limited liability company\n\n● Incorporated on Feruary 6, 2015\n\n● Registered capital of RMB 5,000,000\n(approximately $0.8 million)\n\n● Providing sewage treatment services\n\n \n\n51% owned by Shenzhen CDT Environmental Technology Co., Ltd.\n\n \n\n \n\nHohhot CDT Environmental Technology Co., Ltd.\n \n\n● A PRC limited liability company\n\n● Incorporated on February 11,\n201\n\n● Registered capital of RMB 5,000,000\n(approximately $0.8 million)\n\n● Providing sewage treatment services\n\n \n\n51% owned by Shenzhen CDT Environmental Technology Co., Ltd.\n\n \n\n \n\nShaowu Fuluoneng Energy Technology Co., Ltd.\n \n\n● A PRC limited liability company\n\n● Incorporated on December 1,\n2025\n\n● Registered capital of RMB 10,000,000\n(approximately $1.4 million)\n\n● Engaged in gasifying organic\nwaste to produce hydrogen-rich syngas and supplying clean steam through combustion\n\n \n\n100% owned by Shenzhen CDT Environmental Technology Co., Ltd.\n\n \n\n \n\n \n\n60\n\n \n\n \n\n**D. Property, Plant and Equipment**\n\n \n\nOur principal executive office\nis located at C1, 4th Floor, Building 1, Financial Base, No. 8 Kefa Road, Nanshan District, Shenzhen, China, 518057, where we lease approximately\n3,440 square feet of office space. We lease this space under a lease that terminates on September 30, 2026.  We previously leased\na facility located at No.2, Shangping Road, Shangchen Industrial Park, Jianyang District, Nanping City, Fujian Province, China, consisting\nof approximately 5,382 square feet of factory space, which has been terminated prior to the original lease expiration date of July 31,\n2024. We also lease other spaces that we do not view to be material to our business.\n\n \n\nWe believe that our facilities\nare adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space will be available on\ncommercially reasonable terms to accommodate any expansion of our operations."}