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Industrial Technical Holdings Corp – IPO: ‘F-1/A’ on 3/30/20

On:  Monday, 3/30/20, at 4:58pm ET   ·   Delayed-Release:  Document/Exhibit ¶  –  Release Delayed   ·   Accession #:  1477932-20-1683   ·   File #:  333-233613

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 3/30/20  Industrial Technical Holdin… Corp F-1/A¶                11:14M                                    Discount Edgar/FA

Document/Exhibit                   Description                      Pages   Size 

 1: F-1/A       Pre-Effective Amendment to Registration Statement   HTML   1.10M 
                by a Foreign Issuer                                              
11: CORRESP   ¶ Comment-Response or Other Letter to the SEC         HTML      5K 
 2: EX-5.1      Legal Opinion                                       HTML     10K 
 3: EX-5.2      Form of Opinion                                     HTML      5K 
 4: EX-5.3      Form of Opinion                                     HTML      5K 
 5: EX-5.4      Form of Opinion                                     HTML      5K 
 6: EX-10.2     Lease Agreement                                     HTML     19K 
 7: EX-10.3     Lease Agreement                                     HTML     19K 
 8: EX-10.4     Lease Agreement                                     HTML     19K 
 9: EX-10.5     Lease Agreement                                     HTML     19K 
10: EX-23.1     Consent Letter                                      HTML      7K 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549 

FORM F-1

(Amendment No. 6)

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Huanxiu Street Office

Shuanglong Industrial Park,

266201 Jimo, Qingdao

China

Telephone: +86(0)532-89657397-0

(Address of principal executive offices, including zip code, and telephone number, including area code)

Belmont Trust Limited

P.O. Box 3443

Road Town

Tortola, VG1110

British Virgin Islands

Telephone: (284) 494-5800

(Name, address, including zip code, and telephone number, including area code, of agent of service)

COPY TO:

Andrew J. Befumo, Esq.

andrew@befumolaw.com

Befumo & Schaeffer, PLLC

1629 K St., NW Suite 300

Washington, DC 20006

Telephone: (202) 669-0619

Approximate date of commencement of the proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

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

If an emerging growth company that prepared its consolidated financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE

* This Offering pertains to the resale of shares by selling securityholders only. The Registrant will receive no proceeds from this offering.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PROSPECTUS (SUBJECT TO COMPLETION) Dated ____, 2020

INDUSTRIAL TECHNICAL HOLDINGS CORPORATION

1,075,160 ORDINARY SHARES

This prospectus relates to the resale of up to 1,075,160 ordinary shares of our stock, from time to time, by the selling securityholders identified in this prospectus. The selling security holders will offer and sell the ordinary shares of outstanding stock at an initial price of $5.00 per share until our ordinary shares are quoted on a national securities exchange, and thereafter at prevailing market prices, at varying prices determined at the time of sale, or at negotiated prices. No cash will be received by us from the sale of ordinary shares of stock by the selling securityholders. We will incur all costs associated with this prospectus.

We have no class of securities registered under the Securities Exchange Act of 1934, as amended, and none of our securities are traded on any stock exchange or stock quotation system in the United States. While we intend to seek a market maker to file an application with the Financial Industry Regulatory Authority to receive a stock symbol in order for such market maker to post a bid and ask on a national securities exchange, we do not currently have a market maker willing to post quotations for our ordinary shares, and there can be no assurance that an active trading market for our shares will develop, or if developed, that it will be sustained; therefore listing approval in major stock exchange is remote.

We are an “emerging growth company” as defined in section 3(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are therefore eligible for certain exemptions from various reporting requirements applicable to reporting companies under the Exchange Act. (See “Exemptions Under the Jumpstart Our Business Startups Act” on page 29.)

In reviewing this prospectus, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 8.

This investment involves a high degree of risk. You should purchase shares only if you can afford a complete loss.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This prospectus shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall the selling security holders sell any of these securities in any state where such an offer to sell or solicitation would be unlawful before registration or qualification under such state’s securities laws.

Until ______, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

TABLE OF CONTENTS

PROSPECTUS SUMMARY

The following summary highlights, and should be read in conjunction with, the more detailed information contained elsewhere in this prospectus. You should read carefully the entire document, including our combined consolidated financial statements and related notes, to understand our business, our ordinary shares and the other considerations that are important to your decision to invest in our ordinary shares. You should pay special attention to the “Risk Factors” section beginning on page 74.

INDUSTRIAL TECHNICAL HOLDINGS CORPORATION (“ITHC” also the “Registrant” the “Company” “us” “we” and “our”) was incorporated on February 22, 2018, under the laws of the British Virgin Islands. ITHC owns 100% of Industrial Technical Corporation Hong Kong Limited (“ITC-HK”). ITC-HK is a holding company based in Hong Kong which conducts operations through subsidiaries as follows:

(i) ITC-HK owns 100% of Qingdao CSSC Technical Products Ltd. (“CSSC”); a manufacturer of machinery components based in mainland China. CSSC specializes in the design and engineering of the precision parts of agricultural equipment and machinery; and

(ii) ITC-HK owns 100% of Fortschritt China Agritech Limited (“Fortschritt HK”); a holding company based in Hong Kong; and

(iii) Fortschritt HK owns 100% of Fortschritt Qingdao Agritech Ltd. (“Fortschritt” also “Fortschritt China”); a manufacturer of modern agricultural machinery. Forschritt currently produces two models of high-density baler machines, with approximately two hundred units in various stages of assembly, and 4 completed units having been sold by CSSC in January 2020. The company also has completed prototypes for several other agricultural machines; and

(iv) CSSC owns 50% of PlanET Biogas China Ltd. (“PlanET” also “PlanET China”); a joint venture with a leading German company in the area of engineering and building green energy biogas plants. PlanET has no sales to date.

The Company’s corporate structure is shown in the below diagram:

Our operations began in 2004 with the founding of CSSC. CSSC produces agricultural machinery parts for the German market as well as for Fortschritt and PlanET. To date we have not sold any products through our Fortschritt or PlanET subsidiaries.

Due to China’s largely unmechanized agricultural industry, agricultural waste products (primarily straw) have typically been burned rather than baled for other uses. In 2015, as pollution levels from burning post-agricultural straw peaked in China, CSSC developed a potential solution to significantly reduce burning straw and instead convert the straw into green energy.

CSSC’s proposed solution to the pollution problem resulted in the Company’s expansion into the Fortschritt brand, to produce highly efficient state-of-the-art machinery for the mechanization of Chinese agriculture, and PlanET to process agricultural waste products into usable energy products.

The Company’s plan, as discussed in greater detail in this prospectus under the heading Our Company

Our principal executive offices are located at Huanxiu Street Office, Shuanglong Industrial Park, 266201 Jimo, Qingdao, China. Our telephone number is +86(0)532-89657397-0. Our website address is http://www.itc-group.biz. Information on our subsidiaries you can find here:

We are not a reporting issuer under any securities legislation and our securities are not listed or posted for trading on any securities exchange or stock quotation system.

OFFERING SUMMARY

SUMMARY FINANCIAL DATA

The summary financial information set forth below has been derived from the consolidated financial statements of Industrial Technical Holdings Corporation for the period from January 1, 2017, to December 31, 2018, and for the six-month period ended June 30, 2019. You should read the following summary financial data together with our audited consolidated financial statements and the notes thereto included elsewhere in this prospectus.

RISK FACTORS

An investment in our shares of common stock carries a significant degree of risk. You should carefully consider the following risks, as well as the other information contained in this prospectus, including our consolidated financial statements and related notes, included elsewhere in this prospectus before you decide to purchase our shares. Any one of these risks and uncertainties has the potential to cause material adverse effects on our business, prospects, financial condition and operating results which could cause actual results to differ materially from any forward-looking statements expressed by us and a significant decrease in the value of our common stock. Refer to “Forward-Looking Statements”.

There is no assurance that we will be successful in preventing the material adverse effects that any of the following risks and uncertainties may cause, or that these potential risks and uncertainties are a complete list of the risks and uncertainties facing us. Furthermore, there may be additional risks and uncertainties that we are presently unaware of, or presently consider immaterial, that may become material in the future and have a material adverse effect on us. You could lose all or a significant portion of your investment due to any of these risks and uncertainties.

RISKS RELATING TO OUR BUSINESS

We will need a significant amount of capital to carry out our proposed business plan, and a failure to raise sufficient funds will have a material adverse effect on our operations.

In order to carry out our proposed business plan, we will require a significant amount of capital. We estimate that we will need approximately $10 million to finance our planned operations for the next 12 months.

We intend to raise our cash requirements for the next 12 months through the sale of our equity securities in private placements, through shareholder loans or possibly through a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money through such capital-raising efforts, we may review other financing possibilities such as bank loans. At this time we do not commit any broker-dealer to provide us with financing. There is no assurance that any financing will be available to us or if available, on terms that will be acceptable to us. We also may negotiate with our management and consultants to pay parts of their salaries and fees with stock and stock options instead of cash.

Our ability to obtain the necessary financing to carry out our business plan is subject to several factors, including general market conditions and investor acceptance of our business plan. These factors may make the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities or substantially change our current corporate structure. There is no guarantee that we will be able to obtain any funding or that we will have sufficient resources to conduct our business as projected, any of which may have an adverse material effect on our operations.

Our revenue and net income may be materially and adversely affected by any economic slowdown in China. The PRC government has in recent years implemented several measures to control the rate of economic growth, including by raising interest rates and adjusting deposit reserve ratios for commercial banks as well as by implementing other measures designed to tighten credit and liquidity. These measures have contributed to a slowdown of the PRC economy. According to the National Bureau of Statistics of China, China’s GDP growth rate was 6.7% in 2016. Any continuing or worsening slowdown could significantly reduce domestic commerce in China, including through the Internet generally and within our ecosystem. An economic downturn, whether actual or perceived, a further decrease in economic growth rates or an otherwise uncertain economic outlook in China or any other market in which we may operate could have a material adverse effect on our business, financial condition and results of operations.

Damage claims against our products could reduce our sales and revenues. If any of our products are found to cause injury or damage, the Company could suffer financial damages. We have not had significant claims for damages or losses from our products to date. The Company does not carry product liability insurance. Any claims for damages related to the products we sell could damage our reputation and reduce our revenues.

Disruption to our supply chain of parts needed for constructing our products could negatively affect our sales. The Company has not yet experienced significant problems in obtaining parts from suppliers required for constructing its products. However, there is no guarantee that some of the current suppliers may not be able to continue to provide parts needed for constructing our products from our current suppliers. We have no written agreements with any of our suppliers and order these parts from different manufacturers on a purchase order basis. If the manufactured parts do not meet the quality standard, the parts are not accepted by us. This could cause a shortage of those parts in inventory resulting in backorders and even cancellations of orders. Sales of existing products in inventory may not be sufficient to use all stock on hand before we can obtain replacement parts from other suppliers. This could reduce or eliminate our revenues.

Growth of our business will partially depend on the recognition of our Fortschritt brand, and any failure to maintain, protect and enhance our brand would limit our ability to expand or retain our customer base, which would materially and adversely affect our business, financial condition and results of operations. We believe that the recognition of our brand among customers has helped us manage our customer acquisition costs and contributed to the growth and success of our business. Accordingly, maintaining, protecting and enhancing the recognition of our brand is critical to our business and market position. Many factors, some of which are beyond our control, are important to maintaining, protecting and enhancing our brand. These factors include but not limited to our ability to:

A public perception that we do not provide satisfactory products or services to customers, even if factually incorrect or based on isolated incidents, could damage our reputation, diminish the value of our brand, undermine the trust and credibility we have established and had a negative impact on our ability to attract and retain customers, and our business, financial condition and results of operations may be materially and adversely affected.

Our success is dependent on continuation of our Brand Licensing and Technology Transfer Agreement with MAFA. Our future success and revenue growth are significantly dependent upon the continued use of, and production of equipment under the brand name “Fortschritt.” The Brand Licensing and Technology Transfer Agreement with MAFA (the “Licensing Agreement”) under which the Registrant acquired the rights to the Fortschritt brand is cancellable until December 31, 2021, by either party without cause, provided such cancellation is announced by June 30, 2021. The Registrant’s continued use of the Fortschritt brand name and production of Fortschritt products is therefore outside the Registrant’s control. In the event the Licensing Agreement is cancelled, the Registrant will be entitled to sell any remaining inventory under the brand name Fortschritt, and the Registrant would thereafter have no interest in the Fortschritt brand including but not limited to its products and intellectual property. Furthermore, while the Licensing Agreement grants a 10% equity interest in the Registrant to MAFA, the agreement is silent as to the disposition of MAFA’s granted equity interest in the event the Licensing Agreement is cancelled. Cancellation of the Licensing Agreement would remove a major component of the Registrant’s business plan, which would negatively affect our business, results of operations and financial condition.

Overall tightening of the labor market, increases in labor costs or any possible labor unrest may adversely affect our business and results of operations. Our business requires a substantial number of workers, and any failure to retain stable and dedicated labor by us may lead to disruption to our business operations. Although we have not experienced any labor shortage to date, we have observed an overall tightening and increasingly competitive labor market. We have experienced, and expect to continue to experience, increases in labor costs due to increases in salary, social benefits, and employee headcount. We compete with other companies in our industry and other labor-intensive industries for labor, and we may not be able to offer competitive remuneration and benefits compared to them. If we are unable to manage and control our labor costs, our business, financial condition and results of operations may be materially and adversely affected.

If we fail to adopt new technologies to evolving customer needs or emerging industry standards, our business may be materially and adversely affected. To remain competitive, we must continue to stay abreast of the constantly evolving industry trends and to enhance and improve our technology accordingly. Our success will depend, in part, on our ability to identify, develop, acquire or license leading technologies useful in our business. There can be no assurance that we will be able to use new technologies effectively or adapt to meet customer requirements. If we are unable to adapt in a cost-effective and timely manner in response to changing market conditions or customer preferences, whether for technical, legal, financial or other reasons, our business may be materially and adversely affected.

We, our directors, management and employees may be subject to litigation and regulatory investigations and proceedings, such as claims relating to product safety, commercial, labor, employment, antitrust or securities matters, and may not always be successful in defending ourselves against such claims or proceedings.

While we strive to maximize quality control, the selling of defective products may expose us to liabilities associated with customer protection laws. A manufacturer may be responsible for compensation on customer’s injury or loss even if such loss is not caused by the manufacturer. Thus, we may also be held liable if our suppliers, dealers or other business partners fail to comply with applicable rules and regulations. Though we can ask the responsible parties for indemnity, our reputation could still be adversely affected. In addition, our directors, management and employees may from time to time be subject to litigation and regulatory investigations and proceedings or otherwise face potential liability and expense in relation to commercial, labor, employment, antitrust, securities or other matters, which could adversely affect our reputation and results of operations.

After we become a publicly listed company, we may face additional exposure to claims and lawsuits. These claims could divert management time and attention away from our business and result in significant costs to investigate and defend, regardless of the merits of the claims. In some instances, we may elect or be forced to pay substantial damages if we are unsuccessful in our efforts to defend against these claims, which could harm our business, financial condition and results of operations.

We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business. We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate intellectual property rights held by third parties. We have not, but may in the future become, subject to legal proceedings and claims relating to the intellectual property rights of others. There could also be existing intellectual property of which we are not aware that our products may inadvertently infringe. We cannot assure you that holders of intellectual property purportedly relating to some aspect of our technology, products or business, if any such holders exist, would not seek to enforce such intellectual property against us in China, Europe, the United States or any other jurisdictions. If we are found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. In addition, we may incur significant expenses, and may be forced to divert management’s time and other resources from our business and operations to defend against any such infringement claims, regardless of their merits. Successful infringement or licensing claims made against us may result in significant monetary liabilities and may materially disrupt our business and operations by restricting or prohibiting our use of the intellectual property in question, and our business, financial position and results of operations could be materially and adversely affected.

RISKS RELATING TO DOING BUSINESS IN CHINA

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations. 

Substantially all of our assets and operations are located in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our business and operating results, lead to a reduction in demand for our products and adversely affect our competitive position. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. While some of these measures may benefit the overall Chinese economy, they may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. In addition, in the past the Chinese government has implemented certain measures, including interest rate adjustment, to control the pace of economic growth. These measures may cause decreased economic activity in China, which may adversely affect our business and operating results.

Uncertainties with respect to the PRC legal system could adversely affect us. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value.

In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation since then has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, the interpretation and enforcement of these laws and regulations involve uncertainties. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our contractual rights or tort claims. In addition, the regulatory uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us.

Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.

You may experience difficulties in effecting service of the legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the prospectus based on foreign laws. We are a company incorporated under the laws of the British Virgin Islands, we conduct substantially all of our operations in China, and substantially all of our assets are located in China. As a result, it may be difficult for our shareholders to effect service of process upon us or those persons inside China. In addition, China does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the British Virgin Islands and many other countries and regions. Therefore, recognition and enforcement in China of judgments of a court in any of these non-PRC jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.

Our employment practices may be adversely impacted by the labor contract law of the PRC. The PRC National People’s Congress promulgated the Labor Contract Law which became effective on January 1, 2008, and was amended on December 28, 2012, and the State Council promulgated implementing rules for the labor contract law on September 18, 2008. The labor contract law and the implementing rules impose requirements concerning, among others, the execution of written contracts between employers and employees, the time limits for probationary periods, and the length of employment contracts. The interpretation and implementation of these regulations are still evolving, our employment practices may violate the labor contract law and related regulations and we could be subject to penalties, fines or legal fees as a result. If we are subject to severe penalties or incur significant legal fees in connection with labor law disputes or investigations, our business, financial condition and results of operations may be adversely affected.

Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your investment. The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. It is difficult to predict how long such depreciation of RMB against the U.S. dollar may last and when and how the relationship between the RMB and the U.S. dollar may change again. Much of our revenues and costs are denominated in Renminbi. a significant revaluation of Renminbi may materially and adversely affect our results of operations and financial position reported in Renminbi when translated into U.S. dollars, and the value of and any dividends payable on our Shares in U.S. dollars. To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive. Conversely, if we decide to convert our Renminbi into U.S. dollars to make payments for dividends on our Shares or other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount.

Regulation and censorship of information disseminated over the internet in China may adversely affect our business and reputation and subject us to liability for information displayed on our website. The PRC government has adopted regulations governing internet access and the distribution of news and other information over the internet. Under these regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet content that, among other things, violates PRC laws and regulations, impairs the national dignity of China, or is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide internet content and other licenses, and the closure of the concerned websites. The website operator may also be held liable for such censored information displayed on or linked to the websites. If our website is found to be in violation of any such requirements, we may be penalized by relevant authorities, and our operations or reputation could be adversely affected.

The audit report included in this prospectus is prepared by an auditor who is not inspected by the Public Company Accounting Oversight Board and, as such, our investors are deprived of the benefits of such inspection.  Our independent registered public accounting firm that issues the audit report included in our prospectus filed with the SEC, as auditors of companies that are traded publicly in the U.S. and a firm registered with the U.S. Public Company Accounting Oversight Board, or the PCAOB, is required by the laws of the U.S. to undergo regular inspections by the PCAOB to assess its compliance with the laws of the U.S. and professional standards. Because our auditors are located in the People’s Republic of China, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, our auditors, as well as all other firms located in the PRC, are not currently inspected by the PCAOB. 

Inspections of other firms that the PCAOB has conducted outside China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditor’s audits and its quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections. 

The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our consolidated financial statements.

We may be classified as a “resident enterprise” for PRC enterprise income tax purposes, which could result in unfavorable tax consequences to us and our non-PRC shareholders.  The EIT Law provides that enterprises established outside of the PRC whose “de facto management bodies” are located in the PRC are considered “resident enterprises” and are generally subject to the uniform 25% enterprise income tax rate on their worldwide income. In addition, a circular issued by the State Administration of Taxation on April 22, 2009 regarding the standards used to classify certain Chinese-invested enterprises controlled by Chinese enterprises or Chinese group enterprises and established outside of the PRC as “resident enterprises” clarified that dividends and other income paid by such “resident enterprises” will be considered to be PRC source income, subject to PRC withholding tax, currently at a rate of 10%, when recognized by non-PRC enterprise shareholders. This circular also subjects such “resident enterprises” to various reporting requirements with the PRC tax authorities. Under the implementation regulations to the enterprise income tax, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, the circular mentioned above sets out criteria for determining whether “de facto management bodies” are located in the PRC for overseas incorporated, domestically controlled enterprises. However, as this circular only applies to enterprises established outside of the PRC that are controlled by PRC enterprises or groups of PRC enterprises, it remains unclear how the tax authorities will determine the location of “de facto management bodies” for overseas incorporated enterprises that are controlled by individual PRC residents like us and some of our subsidiaries. Therefore, although substantially all of our management is currently located in the PRC, it remains unclear whether the PRC tax authorities would require or permit our overseas registered entities to be treated as PRC resident enterprises. We do not currently consider our company to be a PRC resident enterprise. However, if the PRC tax authorities disagree with our assessment and determine that we are a “resident enterprise” we may be subject to enterprise income tax at a rate of 25% on our worldwide income and dividends paid by us to our non-PRC shareholders as well as capital gains recognized by them with respect to the sale of the ADSs may be subject to a PRC withholding tax. 

This will have an impact on our effective tax rate, a material adverse effect on our net income and results of operations, and may require us to withhold tax on our non-PRC shareholders.

We are subject to PRC laws governing the industry in which we operate. If we are found to have failed to comply with applicable laws, we may incur additional expenditures or be subject to significant fines and penalties, which would have a material adverse effect on our business and operations. Our operations are subject to PRC laws and regulations applicable to us. However, the scope of many PRC laws and regulations are uncertain, and their implementation could differ significantly in different localities. In certain instances, local rules and their implementation are not necessarily consistent with the regulations at the higher or national level. Although we strive to comply with all applicable PRC laws and regulations, the relevant PRC government authorities may decide that we have not been in compliance with certain laws or regulations.

If the Chinese government determines that the corporate structure through which we control our PRC subsidiaries does not comply with applicable regulations, our business would be adversely affected.

There are uncertainties regarding the interpretation and application of PRC laws, rules and regulations, including but not limited to the laws, rules and regulations governing the validity of our corporate structure and control of our operating PRC subsidiaries.

There are uncertainties regarding the interpretation and application of PRC laws, rules and regulations, including but not limited to the laws, rules and regulations governing the validity and enforcement of the contractual arrangements between the Registrant and its Chinese operating subsidiaries. We cannot assure you that the PRC regulatory authorities will not determine that our corporate structure or operations violate PRC laws, rules or regulations. The Chinese government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant governmental bodies may be revoked at a later time by higher regulatory bodies.

In addition, new PRC laws, rules and regulations may be introduced from time to time to impose additional requirements that may be applicable to us, our business and operations.

We cannot predict the effect of the interpretation of existing or new Chinese laws or regulations on our businesses. We cannot assure you that our current ownership and operating structure would not be found in violation of any current or future Chinese laws or regulations. As a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease certain of our operations. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations.

If we are determined to be in violation of any existing or future PRC laws, rules or regulations or fail to obtain or maintain any of the required governmental permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including:

The imposition of any of these penalties would have a material adverse effect on our financial condition, results of operations and prospects.

RISKS RELATING TO OUR ORDINARY SHARES OF STOCK

There is no public market for our ordinary shares and you may not be able to resell our ordinary shares at or above the price you paid, or at all. There is currently no public market for our ordinary shares. We cannot assure you that our ordinary shares will ever be qualified for public resale, or if qualified, that an active public market for our ordinary shares will develop. If there is no public market for our ordinary shares, you may lose some or all of your investment.

The continued sale of our equity securities will dilute the ownership percentage of our existing stockholders. The Board of Directors has the authority to issue additional shares of our capital stock to provide additional financing in the future and the issuance of any such shares may result in a reduction of the book value or market price, if one exists at the time, of the outstanding ordinary shares. If we do issue any such additional ordinary shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders. As a result of such dilution, if you acquire ordinary shares, your proportionate ownership interest and voting power could be decreased.

FINRA sales practice requirements may limit your ability to buy and sell our ordinary shares, which could depress the price of our shares. FINRA rules require broker-dealers to have reasonable grounds for believing that an investment is suitable for a customer before recommending that investment to the customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, and investment objectives, among other things. Under interpretations of these rules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers. Thus, FINRA requirements may make it more difficult for broker-dealers to recommend that their customers buy our ordinary shares, which may limit your ability to buy and sell our shares, have an adverse effect on the market for our shares and, thereby, depress our share price.

We are a “foreign private issuer,” and our disclosure obligations differ from those of U.S. domestic reporting companies. As a result, we may not provide you the same information as U.S. domestic reporting companies or we may provide information at different times, which may make it more difficult for you to evaluate our performance and prospects. We are a foreign private issuer and, as a result, we are not subject to the same requirements as U.S. domestic issuers. Under the Exchange Act, we will be subject to reporting obligations that, to some extent, are more lenient and less frequent than those of U.S. domestic reporting companies. For example, we will not be required to issue quarterly reports or proxy statements. We will not be required to disclose detailed individual executive compensation information. Furthermore, our directors and executive officers will not be required to report equity holdings under Section 16 of the Exchange Act and will not be subject to the insider short-swing profit disclosure and recovery regime. As a foreign private issuer, we will also be exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. However, we will still be subject to the anti-fraud and anti-manipulation rules of the SEC, such as Rule 10b-5 under the Exchange Act. Since many of the disclosure obligations imposed on us as a foreign private issuer differs from those imposed on U.S. domestic reporting companies, you should not expect to receive the same information about us and at the same time as the information provided by U.S. domestic reporting companies.

We will incur increased costs and become subject to additional regulations and requirements as a result of becoming a newly public company, and our management will be required to devote substantial time to new compliance matters, which could lower our profits or make it more difficult to run our business. If we become a public company as planned, we will incur significant legal, accounting and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements and costs of recruiting and retaining non-executive directors. We also have incurred and will incur costs associated with rules implemented by the Securities and Exchange Commission, or the SEC, as well as any exchange or listing platform in which our securities may be quoted. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. Our management will need to devote a substantial amount of time to ensure that we comply with all of these requirements. These laws and regulations also could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our Board of Directors, our board committees or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our ordinary shares, fines, sanctions, and other regulatory action and potentially civil litigation.

Indemnification of Directors and Executive Officers and Limitation of Liability. BVI law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the BVI High Court to be contrary to public policy (e.g. for purporting to provide indemnification against the consequences of committing a crime). An indemnity will be void and of no effect and will not apply to a person unless the person acted honestly and in good faith and in what he believed to be in the best interests of the company and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful. Our memorandum and articles of association provide indemnification for our officers and directors against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings, provided such persons acted honestly and in good faith.

Our Articles of Association additionally provide that any Shareholder receiving a certificate shall indemnify and hold the Company and its directors and officers harmless from any loss or liability which it or they may incur by reason of any wrongful or fraudulent use or representation made by any person by virtue of the possession thereof. In the event a shareholder’s certificate is lost, stolen, or is the subject of a fraudulent use or representation or transaction, the shareholder may be required by the Company to provide an affidavit of the facts surrounding the loss, theft or fraudulent activity before the Company issues a replacement certificate or certificates. When authorizing such issuance of a replacement certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to give the Company a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

The indemnification provided to the company, its officers and directors is not intended to, and shall not protect or indemnify for liabilities arising under the Security Act of 1933; and such provisions are not intended to, and shall not nullify any shareholder claims, and/or act as a waiver of the ability of shareholders to bring any claims against the Company and its directors and officers. In the event that a claim for indemnification is asserted by any director, officer or controlling person, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

The market price of common shares may be volatile, which could cause the value of your investment to decline. Even if a trading market develops, the market price of our ordinary shares may be highly volatile and could be subject to wide fluctuations. Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could reduce the market price of our ordinary shares in spite of our operating performance. In addition, our results of operations could be below the expectations of public market analysts and investors due to a number of potential factors, including variations in our quarterly results of operations, additions or departures of key management personnel, failure to meet analysts’ earnings estimates, publication of research reports about our industry, litigation and government investigations, changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business, adverse market reaction to any indebtedness we may incur or securities we may issue in the future, changes in market valuations of similar companies or speculation in the press or investment community, announcements by our competitors of significant contracts, acquisitions, dispositions, strategic partnerships, joint ventures or capital commitments, adverse publicity about our industry in or individual scandals, and in response the market price of our ordinary shares could decrease significantly. You may be unable to resell your ordinary shares of at or above the initial public offering price. In the past few years, stock markets have experienced extreme price and volume fluctuations. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources, or at all.

RISKS RELATING TO TAXATION

There are significant uncertainties under the PRC Enterprise Income Tax Law relating to the withholding tax liabilities of our PRC subsidiaries, and dividends payable by our PRC subsidiaries to our offshore subsidiaries may not qualified to enjoy certain treaty benefits. Under the PRC Enterprise Income Tax Law and its implementation rules, the profits of a foreign-invested enterprise generated through operations, which are distributed to its immediate holding company outside China, will be subject to a withholding tax rate of 10%. Pursuant to a special arrangement between Hong Kong and China, such rate may be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity interest in the PRC company. Our current PRC subsidiaries are wholly owned by our Hong Kong subsidiary. Accordingly, Industrial Technical Corporation Hong Kong Limited may qualify for a 5% tax rate in respect of distributions from our PRC subsidiaries. Under the Notice of the State Administration of Taxation (“SAT”) on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated in 2009, the taxpayer needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These conditions include: (i) the taxpayer must be the beneficial owner of the relevant dividends, and (ii) the corporate shareholder to receive dividends from the PRC subsidiaries must have met the direct ownership thresholds during the 12 consecutive months preceding the receipt of the dividends. Further, the SAT promulgated the Notice on How to Understand and Recognize the “Beneficial Owner” in Tax Treaties in 2009, which limits the “beneficial owner” to individuals, enterprises or other organizations normally engaged in substantive operations, and sets forth certain detailed factors in determining “beneficial owner” status.

Entitlement to a lower tax rate on dividends according to tax treaties or arrangements between the PRC central government and governments of other countries or regions is subject to the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, which provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. As a result, we cannot assure you that we will be entitled to any preferential withholding tax rate under treaties for dividends received from our PRC subsidiaries.

If we are classified as a PRC resident enterprise for PRC enterprise income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders. Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with its “de facto management body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the SAT issued a circular, known as SAT Circular 82, partially abolished on December 29, 2017, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular applies only to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China, and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. 

We believe that, as a BVI company, our company is not a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that our company is a PRC resident enterprise for enterprise income tax purposes, we would be subject to PRC enterprise income on our worldwide income at the rate of 25%. Furthermore, we would be required to withhold a 10% tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of our ordinary shares. In addition, non-resident enterprise shareholders may be subject to PRC tax on gains realized on the sale or other disposition of the ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends paid to our non-PRC individual shareholders and any gain realized on the transfer of the ordinary shares by such shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld at source by us). These rates may be reduced by an applicable tax treaty, but it is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in our ordinary shares.

We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

On February 3, 2015, the SAT issued the Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Bulletin 7. SAT Bulletin 7 extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Bulletin 7 has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Bulletin 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets, as such persons need to determine whether their transactions are subject to these rules and whether any withholding obligation applies.

On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax.

Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other person who pays for the transfer is obligated to withhold the applicable taxes currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.

We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, or a sale of shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or may be taxed if our company is transferor in such transactions and may be subject to withholding obligations if our company is transferee in such transactions, under SAT Bulletin 7 and/or SAT Bulletin 37. For transfers of shares of our company by investors who are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under SAT Bulletin 7 and/or SAT Bulletin 37. As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 and/or SAT Bulletin 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements made under “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this prospectus constitute forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “beliefs,” “estimates,” “predicts,” “potential,” “intends,” or “continue,” or the negative of these terms or other comparable terminology.

These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.

Forward-looking statements are no guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate.

Important factors that could cause actual results, developments and business decision to differ materially from those anticipated in these forward-looking statements include, among other things:

These statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, level of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in this prospectus in greater detail under the heading “Risk Factors.” You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity performance, or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this prospectus.

Information on the Company 

History and Development

The Company comprises Fortschritt, CSSC and PlanET, all three of which are operated through the Company’s Chinese subsidiaries.

In 2004, CSSC was founded in Qingdao. The aim was to create a low-cost production platform supplier for German industry and to produce finished products for the Chinese market. Since its inception, CSSC’s Chinese workers have been trained to produce components acceptable to its primarily German clientele (over 90% of CSSC’s production is exported to Germany). The company’s workers receive intensive in-house training and instruction, and receive international licensing as needed through the German technical association (TÜV).

In 2015, pollution levels peaked in China. A major cause was attributed to the burning of straw after harvesting directly on the fields as agriculture was largely unmechanized at this time. In discussions with local government representatives, potential solutions were discussed to significantly reduce emissions.

The degree of pollution caused by the burning of the straw, which was carried out on a large scale in China, “was visible in the atmosphere”:

At that time, CSSC suggested a potential solution to the local government to significantly reduce or eliminate the burning of straw and begin collecting it by hay pressing (baler machines) and then ferment it in biogas plants to extract green energy.

For this reason, we founded two additional companies:

1. Fortschritt China Agritech Limited, produces modern agriculture machinery including high pressure baler machines, transport units and harvesting machines, from parts manufactured by CSSC, building upon the well-known German brand, Fortschritt; and

2. PlanET, a joint venture with a leading German company in Biogas Plants engineering and building.

As a Chinese producer of high-quality precision machine parts and technical components, CSSC currently produces parts and components for Fortschritt and plans to produce parts and components for PlanET when such parts and components are required.

In 2016, prior to manufacturing parts for Fortschritt, CSSC imported 6 K868 machines from Maschinenfabrik Stolpen Gmbh (“MAFA”) and subsequently sold the 6 machines to a wholesaler domiciled in the inner Mongolia region of China in order to test the market.

On May 9, 2016, ITC-HK entered into a Brand Licensing and Technology Transfer Agreement (the “Licensing Agreement”) with MAFA for the exclusive use, manufacturing, and sales and marketing rights of German designed agricultural machines in China and other Greater Asian markets under the Fortschritt brand name. The Licensing Agreement may be cancelled until December 31, 2021, provided such cancellation is announced by June 30, 2021. A copy of the Licensing Agreement is included in this registration statement as Exhibit 10.1.

CSSC currently manufactures parts for Fortschritt branded machines assembled and sold by third parties; and CSSC also currently manufactures parts for Fortschritt branded machines assembled by Fortschritt China for sale into the Chinese market. During 2017 – 2018 CSSC manufactured and sold the parts for 30 Fortschritt K838 machines to MAFA, and MAFA subsequently assembled the parts and sold the 30 machines into the German market.

While Fortschritt China has not commenced full production of K838 and K868 machines at their facilities, the company has assembled two K838 machines and two K868 machines using parts produced by CSSC, and in January 2020 the two K838 machines and two K868 machines were sold. A total of approximately 100 K838 and 100 K868 machines using CSSC sourced parts are currently in various stages of assembly by Fortcchritt China.

The Company plans to use the synergies between its three brands to become a leader in green agriculture, both within China and worldwide, by providing machinery through Fortschritt and CSSC (i) for the mechanization of Chinese agriculture, (ii) for agricultural operations worldwide, and (iii) as part of a green agricultural system whereby organic agricultural waste products are converted into usable energy.

In order to carry out this plan, we estimate that we will need approximately $10 million for the next 12 months, as follows: approximately $4 million for purchasing raw material, employee wages and operating expenses until the company has sufficient income from sales to fund its operations; approximately $3.5 million for equipment, coating line and machinery; and approximately $2.5 million for research and development, including re-engineering of older model Fortschritt machines and development of new machines.

Fortschritt was incorporated in December 2016 in Hong Kong and China to manufacture Fortschritt branded agricultural machinery in China from parts sourced from CSSC.

BRAND HISTORY

MILESTONES FROM 1854 TILL NOW:

KOMBINAT FORTSCHRITT PRODUCTS 1990

(year of German Reunification, privatization and break-up of “Kombinat Fortschritt” begins)

EXAMPLES OF THE RANGE OF KOMBINAT FORTSCHRITT’S AGRICULTURAL MACHINERY:

RAKE, BALER, AND FORAGE HARVESTER

SPECIAL MACHINE SPRAYER, APPLE HARVESTER 

POTATO HARVESTER, FULLY AUTOMATIC

All machines are state-of-the-art and demonstrably superior to existing Chinese equipment and harvesting techniques due to manufacturing efficiency, overall quality, and long useful life requiring minimal maintenance.

Since the 1970s almost all agricultural machines have seen only minor alteration of engineering and design features; this continues to be true for virtually all machinery manufactured and distributed today.

Kombinat Fortschritt, unlike most of its western counterparts, was organized as a fully integrated business. All engineering developments were completed by own internal design teams and all parts, to the last screw were manufactured in-house. This resulted in “Fortschritt” designs and engineering know-how being documented in detailed production drawings to the smallest part of a complex machine.

The Kombinat’s engineers had to fulfill the requirements of the socialist countries’ markets, demanding easy to maintain, durable machinery.

From the 1970s the Kombinat’s machines was also required to be suitable for export to western customers, in order to serve as hard currency spinner for the East Germany state.

At its height Kombinat Fortschritt employed more than 60,000 people in multiple locations throughout East Germany, being one of the nation’s biggest and internationally most successful enterprises.

With the end of East Germany, and the break-up of the Kombinat, the history of “Fortschritt” seemed to have come to an end, as western competitors picked up production sites and individual part producing outfits. Western competitors used their own designs and brands, and the knowledge and engineering designs of Fortschritt where ignored as they were deemed eastern, and thus unfashionable. Nevertheless, the brand continued to live on in many socialist countries, among them China, conserved through some of the original East German machines that can still be found operating in these countries.

MAFA, has since updated some of the designs acquired from Kombinat Fortschritt and used them for OEM products for companies such as Case, Fendt, Kvernerland and Kuhn.

BRAND STRENGTH AND PUBLIC AUDIENCE RECEPTION

Despite the fact that Kombinat

Other models by Fortschritt on the official stamps of the former GDR (East Germany): Tractor ZT 303, Beets-Toboggan-Core KS-6, Precision-Forage-Harvester E 280, Chopper-Harvester E 065

BANKNOTE: In the 70s and 80s, several “combine-harvesters” such as the Fortschritt E512

were shown on the reverse side of GDR (East Germany) banknote

WORLDWIDE HARVESTER AND TRACTOR (ONE TYPE) EXPORT FIGURES:

EXPORT FIGURES FOR THE K434 BALER MACHINES TO UKRAINE, RUSSIA, CUBA AND CHINA:

The Company builds on strong Fortschritt brand recognition in China stemming from the brand’s export history of over one hundred years. The Company designs and produces reliable, durable, and high-performing agricultural equipment and machinery. Fortschritt has 12 employees, including research & development and technology design teams based in China and overseen by leading experts from Germany. The Company operates a state-of-the-art 2,500 square meter assembly line, as well as offices and warehouses in its leased premises located in Qingdao, China.

Pictures of the modern production line equivalent to European standards:

Modern research & development department and ready-made products:

Semi-finished parts in the warehouse:

FORTSCHRITT CHINA AGRITECH LIMITED commenced with production of the following machines:

Status of the production of the above machines:

A total of approximately 100 K868 machines are in various stages of assembly.

K838 has begun production in 2019 and two prototypes were sent to business partner for on-field testing in May 2019. Sales of K838 have begun in January 2020 with the sale of two K838 machines.

A total of approximately 100 K838 machines are in various stages of assembly.

E 36 Prototype has been completed;

E 251 Prototype has been completed;

ME01 Prototype has been completed.

Serial production of a high-density baler machine (K888) and a potato harvester are planned for in 2021. In addition, a multi-function small tractor and crasher are slated for 2022. Plans to initiate a research & development team for these products and a specialized robotics team with a focus on the agricultural sector have also been developed.

HIGH DENSITY BALER MACHINE K838 AND K868

The Company currently markets two high-density baler machines, the K838, and the K868. The smaller model, the FORTSCHRITT K838, is a robust, maneuverable and powerful baler that has been on the market since 2016. The K838 is optimized for use on smaller and angled surfaces and is compatible with various bale-collecting machines.

FORTSCHRITT K838: SMALL HIGH-DENSITY BALER IN USE

The FORTSCHRITT K868 high-density baler machine can be used with tractors equipped with 70-110 horsepower engines. The baler can pick up straw, herbs and green grass for husbandry feedstock. Field testing showed that the K868 is also able to process rice straw. With its unique automatic loading system, A K868 can clean 1 hectare (10,000 sqm) in approximately 30 minutes.

The advantage of both machines is Fortschritt’s automatic-loading system, which is the subject of Chinese patent No. ZL 2016 2 1144174.6, which is valid through 21 October 2026. English translation of this patent is filed as Exhibit 10.13 to this Registration Statement on Form F-1.

Scope of the Chinese Patent. The utility model name is: An automatic loading device with rotating parallel guide for picking up and binding square balers. The utility model relates to a rotary parallel rail type automatic loading device for picking up and tying machine, which is a special matching device which is installed behind the picking and tying machine and is convenient for automatic loading of the compressed side bundle along the rotating guide rail. The utility model comprises a rotary conveying end assembly, a near horizontal conveying end assembly, a folding automatic tripping mechanism, an automatic return spring, a tripping pull wire and a tilting pull rod. The device is matched with the picking and tying machine, and has a simple structure, a clever design and a quick design. Efficient, the square baler of the front baler can be directly transported to the synchronous transporter, which effectively solves the problem that the knotted bundle is scattered to the ground, and the difficulty of picking up later and the large amount of labor is used, which greatly saves labor and compresses. The square bale combined with the harvesting process saves time and effort and fills the gap in China’s picking up and baling joint harvesting equipment.

While the Company does not currently receive any subsidies, and there is no guaranty that the Company will receive any future subsidies, the “Agricultural Audit Master Station” (part of the “Ministry of Agricultural & Rural Affairs”) officially certified our Fortschritt baler machines. This is a state registration, which makes future state subsidies possible.

Fortschritt passed the required tests to obtain state subsidies and market agricultural machines in China.

Going forward, automatization in the agricultural sector is key for China given the steady decrease in the percentage of the population working in agriculture (83% in 1969 versus 18% today) while salaries have increased (yearly ca. 10%).

See below:

(Labor market and salary report 2015/2016 German chamber of commerce)

Today, only 50% is mechanized and workers primarily use small hand-held operated machines:

LOADING WAGON E36

Fortschritt machines require no manual handling. The Fortschritt E36 loading wagon fulfills the purpose of loading, pick-up, and reloading greens and droughts. A powerful PICK-UP with five rows of prongs, a working width of 1.85m, hydraulic lifting, air-dyed feeler wheels, adjustable bearing pressure, and further adjustment possibilities ensures the best calculation quality and high-recording performance. The PICK-UP switches off automatically during lifting. The universal dowel allows an optional lower or upper attachment.

FORTSCHRITT E36 LOADING-WAGON

This wagon is a market innovation with its automatic loading system and capability to cut straw and grass while transporting it in a pick-up.

The 4-raking unit is the heart of the trailer. The steering lever control has a much better wear behavior compared to curve tracks, so there is no interruption of the work, no knife breakage, and an independent knife restoration. The bottom can be hydraulically lowered by the tractor. Depending on the crop, the installation of knives can be optionally made, from “without a knife” to “33 knives”. All knives can be swiveled in and out.

We will also produce a trailer for tractors for transport purposes. This is an emerging field in China as historically, China did not produce enough tractors to meet demand and transport is typically handled with heavy trucks. We believe this adoption of tractor trailers will meaningfully reduce harvesting costs as agricultural workers will use their own tractors for transport versus hiring a truck operator.

E251 SINGLE ROTOR RAKES

The Single Rotor Rakes operates in tandem with the baler machine. It is used to turn the hay and straw to enhance the drying process from sunlight. We plan to introduce this model to the Chinese market.

ME 01 MULTICAR ELECTROMOBILE

This small truck is a multi-function electromobile with hybrid drive. It can be used for agricultural and communal purposes.

The front and back can be assembled with a variety of attachment tools.

We developed a working protype to conduct a range of battery system tests to fine-tune performance and evaluate various component pieces and attachments.

There is no multi-function electromobile with hybrid drive vehicle in China according to our research. The truck can be produced for the Chinese market and for export.

MILESTONES

	2016	• Six K868 machines are purchased from MAFA and sold into the Chinese market by CSSC.
	12-2016	· Company founding
	2017	· Construction of two new factories and office space for Fortschritt, in the company’s leased premises in Qingdao, China
		· Investment in machines and equipment (e.g. lasers) for production of precision parts and components
	12-2017	· Procurement of IT equipment, quality control software, robotics, and tooling equipment for production of the baler machines
	2018	· Initiated a dedicated sales and marketing campaign, exhibition attendance and displays   · Conducted successful tests in the Chinese market   · 30 sets of K868 parts were produced for the German market and exported · Two baler machine production line is ready   · K868 machines on backorder. Strong demand with production backlog growing.

NOTE: A main sales involves mandated SUBSTITUTION by the GOVERNMENT.
	03-2019	· Produced four K838 and four K868 machines and conducted field tests with oversight and inspection of the Chinese government
	06-2019	· Material for approximately 100 small and 80 medium to large baler machines have begun production
	07-2019	· Field tests a resounding success and the Chinese government commits to providing on-going support and targeted product substitution of nearly 30%
	NOTE: Imported agricultural machines require payment of import taxes, transport costs and VAT.

	12-2019	· Conclude development of the multi-function electromobile hybrid drive carrier and compact transporter for the Chinese agricultural and rural areas
	2020	· Officially enter the Chinese market with two baler models and one trailer for serial production
	2021	· Commence production of a harvester machine

LOCATION OF ITC IN CHINA

Qingdao - Population and Infrastructure

Qingdao has an international airport, highways to Shanghai (600km) and Beijing (550 km), an international deep seaport, which is the third biggest in China and the eight biggest in the world. With the international port, Qingdao supplies more than 450 ports around the globe with 97 shipping routes. In 2018, the high-speed train connection to Beijing and Shanghai was completed.

In 2007, Qingdao was named as one of China’s top ten cities by the Chinese Cities Brand Value Report, which was released at the 2007 Beijing Summit of China Cities Forum (“The Global Financial Centres Index 24, Sept. 2018”. In 2009, Qingdao was named China’s most livable city by the Chinese Institute of City Competitiveness (“China’s Top 10 Liveables Cities in China Issued, 0. July 2009”).

As of 2014, Qingdao has a population of nine million people, with six universities, among them the Qingdao Technical College and the Qingdao Agriculture University with 1,500 academic staffs.

This provides a fertile environment to attract junior level engineers.

Qingdao. Located in the Shandong province is one of the major areas for wheat production (wheat is the main ingredient for all products):

MARKET - COUNTRYSIDE

China’s agricultural sector is the biggest in the world. The country is the number one producer in terms of output for many crops and fruits. Compared to other industrialized countries, China still employs a comparatively high percentage of its total labor force in the agricultural sector.

Major changes in wheat production 2017/18 was (in Mio t)

Source: USDA, Foreign Agricultural Service, Production, Supply, and Distribution database.

Major projected wheat output changes for 2017/18 (in Mio t)

Source: USDA, Foreign Agricultural Service, Production, Supply, and Distribution database.

CHINA WORLD MARKET SHARE AGRICULTURAL (PRODUCTION)

This high ratio of labor force allocated to agriculture is not reflected in the overall contribution of the sector to the total GDP of the country. This fact indicates that the mechanization and industrialization of China’s farm sector are comparatively low. The National Bureau of Statistics displays a 55% mechanization rate for the agricultural sector, but within reason, it can be assumed that this figure includes outdated and inefficient machines and equipment, that may not even be in use any longer.

China is in the midst of a historic shift from traditional, labor-intensive agricultural practices to mechanized, high-tech agriculture. The agricultural sector is owned by the Chinese government, which has made the mechanization of agriculture and the shifting of the rural population to urban areas a top political goal. Changing population structure, limited agricultural land and water resources, the increasingly different eating habits of the Chinese population make this issue the highest priority of the government. Food security is central to China’s strategic alignment and to all countries of the world.

Although China’s agricultural machinery industry is facing many challenges, the industry is still promising in the long run. The state has introduced the Thirteenth Five-Year Plan for National Agricultural Mechanization Development, an Action Program for Agricultural Machinery and Equipment Development (2016-2025) and other policies to promote the full agricultural mechanization. Data shows that China’s comprehensive agricultural mechanization level hits more than 65% in 2016, away from the goal of 70% in 2020.

On February 4, 2018, the Central Committee of the Communist Party of China (CCCPC) and the State Council unveiled its first policy document for 2018. This document, referred to as the No. 1 Document, traditionally focuses on agricultural and rural issues and is considered to be a significant policy document that outlines goals for the upcoming year. The overall message of the 2018 No. 1 Document is focused on developing intensive, domestic agriculture to further China’s strategic interests under the theme of Rural Revitalization.

China aims to complete agricultural and rural modernization by 2035 and develop a strong agricultural sector while raising farm incomes to “moderately prosperous levels” by 2050. (See GAIN report CH18007)

Despite this huge amount of people still living on and engaged in farming, China is facing the challenge to modernize and industrialize the countryside further.

This issue is driven by three key factors:

DEMOGRAPHICS

The trend for moving from countryside to the cities is worldwide and has many reasons. One reason is, that the living conditions in cities are mostly better than countryside, education of the younger generation is better also.

In 1991 almost 44% of the world population was working as a farmer, till 2019 this number is reducing to 28% .

Employment in agriculture (% of total employment) (modeled ILO estimate)

Source: International Labor Organization, ILOSTAT database (April 2019)

Since 2006 China’s rural areas have lost more than 115 million inhabitants (averagely 15 million p.a.), predominantly younger people in search of a better life moving to the cities with its factories and offices. Left behind is a rural society, feeling the impact of China’s rapidly shifting demographics towards an aging population even more than the cities. By 2020, nearly 20% of China’s total population will be 60 years and older (Source: United Nations/ National Bureau of Statistics).

Source: World Bank Source: U.S. Census Bureau, International Data Base

With less labor available, farmers face increased pressure from wage inflation and labor shortages, while at the same time opportunities for farmers to plant bigger fields develop. The ones who left the countryside or have become too old to work the fields themselves, lease their plots to an emerging class of agro-industrialists and agro-entrepreneurs.

FOOD INFLATION

China’s population spends over 1/3 (CPI basket contribution ratio 31.8% in 2016; Source: National Bureau of Statistics) of their disposable income on foodstuff, resulting in the stability of food prices being a pivotal issue for social stability. This could be observed during the years 2008-2011, when food prices spurred by multiple factors, were key drivers of inflation in China. Only a modernized, efficient producing agricultural sector will be able to fulfill the central government’s ambitious target of supplying 99% of the countries food consumption domestically at stable prices. In parallel, the growing demand for meat from China’s urbanized consumer class, lead to further increases in grain prices. The food price hikes recently experienced in China can only be countered sustainably, by increasing efficiency and output, while at the same time reducing the exposure to labor shortages and wage inflation risks.

ENVIRONMENTAL ISSUES

The farming sector is a major contributor to air and water pollution in China. Especially in the northern provinces of Henan, Hebei, and Shandong, the burning of straw on the fields had a major negative impact on air quality, especially during the period from August to late November. Beijing Meteorological Observatory believes, getting straw burning in the provinces surrounding the capital under control will significantly reduce air pollution in the capital. Furthermore, the overuse of fertilizer and inadequate application of pesticides are causing problems for water and soil. According to China’s Ministry of Environmental Protection, nearly 20% of the nation’s arable land is seriously polluted. With agriculture also being a major contributor to water pollution, the Chinese Ministry of Agriculture indicated, that millions of hectares of farmland near rivers may have to be taken out of production to ensure drinking water supply safety. Such a step certainly would jeopardize the government’s aims concerning food supply safety and price stability, thus making further steps towards the efficiency improvement of the agricultural sector inevitable.

ARABLE LAND PER PERSON (HECTARES)

(Source: Food and Agriculture Organization of the United Nations (FAO), 2015)

COMPARED TO OTHER COUNTRIES, CHINA STILL HAS A HUGE POTENTIAL FOR GROWING, WHILE THE MECHANIZATION IS LOW.

Agricultural land area (sq. km)

NUMBER OF AGRICULTURAL TRACTORS PER PER 100 SQ. KM OF ARABLE LAND

(UNITS PER 100 SQ. KM)

84 China (units per 100 sq. km) in 2000

China`s number of tractors was at level 84 units per 100 sq. km in 2000, up from 67 units per 100 sq. km previous year. This is a change of 25.06 %.

Agricultural machinery refers to the number of wheel and crawler tractors (excluding garden tractors) in use in agriculture at the end of the calendar year specified or during the first quarter of the following year. Arable land includes land defined by the FAO as land under temporary crops (double-cropped areas are counted once), temporary meadows for mowing or for pasture, land under market or kitchen gardens, and land temporarily fallow. Land abandoned as a result of shifting cultivation is excluded.

Compared to other Asian countries, China has an enormous potential for growth:

Source: Biennial Conference of the Australian Society for Engineering in Agriculture (SEAg), published by SEAg, Editors: T.M. Banhazi and C. Saunders - 13-16 of September 2009, Brisbane, QLD

Compared to the United States, China’s agriculture market has a significant growth potential:

Source: Biennial Conference of the Australian Society for Engineering in Agriculture (SEAg), published by SEAg, Editors: T.M. Banhazi and C. Saunders - 13-16 of September 2009, Brisbane, QLD

Source: ERS compilation of data from China National Development and Reform Commission and USDA National Agricultural Statistics Service.

China’s agriculture equipment market is valued at around US$28 Billion in 2018 and is expected to reach nearly US$50 Billion by 2025. China has always attached great importance to agriculture, rural areas, and farmers, as agriculture is the primary industry of the national economy.

In 2004, China entered a new era in its approach to agricultural policy, as it began to subsidize rather than tax agriculture. As a result, since 2004, China’s agricultural market has maintained its growth momentum both for production and sale volume. The government has reiterated its commitment to support agriculture and increase the allocation of funds for the development of the rural economy. This has led to a continuous rise in the income level of farmers, increasing their ability to buy agriculture equipment.

China’s agricultural equipment industry is characterized by a large number of mostly unspecialized manufacturers producing low technology machinery. The country has over 2,500 agricultural equipment manufacturers, mainly concentrated in Shandong, Henan, Jiangsu, Liaoning, and Zhejiang provinces, but due to the lack of resources like human capital, funding and the infrastructure necessary to develop sophisticated farming machines, China still relies heavily on foreign imports for high-tech farming machinery. According to the China Agricultural Machinery Distribution Association (CAMDA), the top five domestic manufacturers accounted for less than 25 percent of the market.

GOVERNMENT POLICIES

In the last decade, the Chinese government has raised awareness of the challenges the countryside is facing. This awareness is reflected by numerous supporting policies such as land reforms, increased credit availability in rural areas, the abolishing of VAT for farmers and agricultural goods, and last but not least, a heavy increase of direct government subsidies for the agricultural sector. The government policies aim at several key points to spur the development & modernization of the countryside:

(See: The Law of Agricultural Mechanization Promotion of the PRC)

SEASONALITY

CSSC’s slowest months are February through May. CSSC will use its slow months for the main production of parts for the Company’s Fortschritt brand machines. Because the Chinese agricultural industry spans multiple climatic zones, and the Company plans to market products to other countries in varying climatic zones, we do not anticipate seasonality to have an impact on our business.

We do not anticipate seasonality to have an impact on our business at Fortschritt. We will begin production of our E-Mobile at Fortschritt for the Chinese market. This is a multifunctional machine, usable for summer (cutting grass, transport, cleaning) as well as for winter (snow slide, transport, cleaning, wintergrit).

AGRICULTURAL SUBSIDIES DEVELOPMENT 2005-2014

(Source: Ministry of Agriculture/ National Bureau of Statistics)

MARKET - CHINA AGRICULTURAL MACHINERY

MARKET OVERVIEW

Until recently, the Chinese market for agricultural machinery was dominated by two types of enterprise:

Traditionally, China’s farming sector consisted of small farms relying almost exclusively on manual labor. Since about 2004 China’s rapid change of its economic model from stone-age communism towards a market-driven economy, has started to take effect on rural live and work. Although still at a low level, mechanization has started and the availability and use of fertilizers as well as pesticides saw production levels soaring.

Nowadays the mechanization ratio has reached 55%, a still a very low level compared to western industrialized societies, and there is the reason to believe that this figure still includes a good number of very old, low-performance equipment.

The demographic developments, and the drag of the cities have left a countryside behind that is suffering from labor shortages and excessive aging. This demographic situation alone, favors the agricultural machinery sectors for many reasons:

LAND LEASE- people who started working in the factories are nowadays renting out there fields to other farmers, thus the average plot size is getting bigger. While bigger plots can be farmed more economically, the shrinking labor pool and aging rural society forces the farmers to increase the mechanization. This trend is supported by the government, first of all making it possible to lease farmland from third parties, secondly by putting in place special lending- and agriculture-related subsidy programs, encouraging bigger farm sizes.

MECHANIZED SERVICE COOPERATIVES- bigger fields and shrinking labor pool have seen the rise of a new class of agro-entrepreneurship in China, the so-called Mechanized Service Cooperatives (‘MSC’). These cooperatives often consist of groups of farmers pooling their resources to purchase high-performance equipment. After working their own fields, they rent out the machinery to other small farmers who cannot afford advanced equipment by themselves. These MSC’s have become so successful, that China Mobile, the leading countryside cellular network operator, even launched a platform for the MSC’s to manage their business more efficiently.

SURGING FARMERS INCOME- during the last decade, spurred by rising food prices, increased farm sizes and government supportive actions, rural incomes have improved significantly. Although the picture is incomplete due to a lack of data, increased production output, food prices and mechanization levels, imply that farming in China is moving towards becoming a real industry, that will ultimately create its very own industrialists.

GOVERNMENT POLICIES AND AIMS

An important indicator for the development of the countryside is the target set by the government to produce 85% of the agricultural output with only 7% of the labor force by 2030, bringing China in line with the modern industrial nations (Source: Ministry of Agriculture). This target corresponds to urbanization and demographic trends.

This aim seems more realistic than the goal laid down in a previous five-year plan, to source 99% of China’s food consumption domestically.

These developments have not gone unnoticed outside China and western companies began to widen their presence and activities in China in the last 4 years, either by developing sales & distribution networks for import machinery or setting up production bases in China.

Several market reports and industry experts estimate that the market for agricultural machinery is growing by over 10% p.a. This estimation is confirmed by figures published by western companies supplying and/ or producing agricultural equipment in China (Source: John Deere/ Claas/ Agco).

In 2015 more than 50% of the German agricultural machinery companies active in China, judged the business climate for agricultural machinery in the PRC as very good or good, with more than 80% judging the business climate in this sector as at least satisfactory (Source: Agrievolution/ VDMA). This makes China the market with the strongest outlook in this survey by far.

Nowadays 15% of the global output of agricultural machinery is manufactured in China already.

(Source: VDMA)

COMPETITION ANALYSIS & PEER ACTIVITY

MAIN COMPETITORS

The following key international and Chinese players have developed manufacturing bases for agricultural machinery in China.

JOHN DEERE, USA

The biggest agricultural machinery producer in the world has currently set up four plants in China in Ningbo, Harbin, Tianjin, and Jiamusi. John Deere also established a joint venture with Tianjin Tractor Manufacturing Co. Limited.

CNH (CASE NEW HOLLAND), ITALY

CNH operates four manufacturing sites in Harbin, Shanghai, Foshan, and Urumqi. The company´s largest manufacturing base In Harbin was commissioned in July 2014. New Holland produces a wide range of agricultural machinery ranging from tractors to add-on applications.

CLAAS, GERMANY

German-based company has grown through acquisitions aggressively in the past decade and propelled itself into the top tier of agricultural machinery manufacturers. The company reports an 11,3% growth in Asian sales in 2015. CLAAS raised 300 million USD in the US in 2012 issuing debt certificates to finance its further growth. In 2013 the company acquired an 85% stake in Shandong based Jinyee Machinery Manufacturing Co. Ltd, a state-owned enterprise.

AGCO, USA

The US Group has commissioned a major manufacturing facility in Changzhou in 2014, focusing on Tractors.

YTO GROUP, CHINA

The company´s tractor business is mainly conducted through its publicly listed subsidiary First Tractor Company Limited. The company´s business had been heavily affected by foreign competition, with its tractor sales declining by 22% in 2014 and its agricultural machinery sales dropping 18% in the same year.

FOTON LOVOL, CHINA

Since 2015 the company aggressively develops its agricultural machinery segment. In January of the same year, the company acquired Mater Macc, an Italian agricultural machinery enterprise. In March 2015 Phase I of its CNY 2 billion investment, a high-end agricultural machinery production base was commissioned focusing on balers and grain dryers.

ZOOMLION HEAVY MACHINERY, CHINA

Formerly known as Chery Heavy Industry Limited, spun off the mother company in 2014. Zoomlion Group is still the biggest shareholder, holding over 60% of the stock. In December 2014 the company commissioned a new production base with a planned capacity of 18,000 units of large-scale equipment, predominantly harvesters.

Besides these key players, a large number of small domestic enterprises is active in the market, which is still highly fragmented. These companies often produce very cheap, very low-quality products and suffer from a lack of engineering capabilities and technological know-how.

Apart from the equipment as mentioned before providers and other Chinese enterprises have started to discover the countryside. Shandong based white good giant Haier entered the arena, through its subsidiary Haier Finance, providing lease financing for agricultural machinery with two offices located in Beijing and Shanghai.

Haier Finance Advertisement for Agricultural Machinery Leasing, 2016

Suning, the Chinese electronics and home appliances retailing giant will invest CNY 5 billion in the Chinese rural market in 2016 to open 1,500 additional self-owned stores and develop 10,000 agent points and authorized service sites. The company’s chairman Zhang Jindong announced that by building channels like self-owned stores and Chinese local-featured halls, Suning aims to promote the industrialization of agriculture in China.

(Source: Chinatechnewswire)

STRATEGIC APPROACH AND KEY MARKETS (PROVINCES)

The company will initially launch the K868 baler machine in China’s ten biggest agricultural provinces. These 10 selected Provinces account for significant amounts of agricultural products.

Table: Agricultural output FCA’s target Provinces compared with total US production

The company will develop its own sales, distribution and service network in the 5 northeastern provinces surrounding its production base in Shandong. These five provinces include some of the most productive in agriculture. The company will appoint provincial representatives and agents and work with local banks and nationwide operating providers of leasing finance. The company received an inquiry from a leading Shandong paper producer for 300 baler machines in July 2016.

Table: Provinces selected for FCA’s own distribution & service network

In six more Provinces the company has already identified suitable distribution partners for its products and signed LOI’s with several local distribution companies. These provinces are also among China’s most productive farming areas.

Table: Provinces with Distribution Partners

SALES & DISTRIBUTION

The existing dealerships and dealer networks in China for agricultural machinery is highly fragmented. The company seeks to develop relationships with leading sales organizations in key regions as well as develop its own sales network in the strongest farming areas, co-operating with bigger local farms and MSC’s.

The company is in active talks with First Mongolian Machinery Co. Limited in Baotou, a subsidiary of Norinco (www.norincogroup.com.cn), concerning the access to their nationwide sales network.

The company will also approach leading machinery leasing and financing institutions such as Haier Finance and Agricultural Bank of China.

The company will attend important trade fairs throughout China such as the CIAME (China International Agricultural Machinery Fair) regularly.

SERVICE NETWORK

The company will train service technicians. They will independently operate in their provinces and order spare parts from the company or the local distributor. Our clear, structured design with no electronics involved in key operating parts, allow any car mechanic or locksmith to be trained to maintain and to repair the machines.

The company will set up a service network of 3-5 mobile mechanics per province. These mechanics will rotate inside the provinces and return every four weeks to the Qingdao headquarter for further training. The service mechanics will be Qingdao based employees, this way it can be prevented that they leave the company or start developing their local operations after obtaining the necessary know-how.

The company will establish a WeChat based repair request platform and is considering further methods such as GPS trackers on the machines to obtain data concerning machinery use as well as market information.

The Directors that the additional turnover generated from spare part sales and servicing will amount to 4%-8% of the machinery sales volume per annum. Currently, it is considered to install GPS trackers on every machine sold, in order to establish a database that will enable the company to identify machinery use times and locations, in order to increase maintenance efficiency. The company is exploring opportunities for spare part shipping also through China Post’s agricultural product service and online order platforms.

CSSC COMPANY PROFILE

CSSC is the production base for Fortschritt and PlanET. The main object of the enterprise is the production of agricultural machinery parts for the German market Fortschritt and PlanET.

CSSC was established in Qingdao, China in 2004. QCSSC provides CAD design, prototype development, production and assembly of metal products to such customers as HYDAC, HAKO, KÄRCHER, KRONE, and MINUTEMAN. The Company is staffed by 120 professionals including German management and a skilled team of European and Chinese specialists and 40 Trainees. The location is approximately 400m from the company “Fortschritt China”. The whole area is about 10.000 sqm, 6.000 sqm production facility, storage and office building.

CSSC`s metal-processing-spectrum includes full-automated laser-cutting, the use of combine- technology to stamping, folding, welding, finishing and assembly. In addition, we provide all the finishes including powder coating. CSSC`s machine-park with a modern and innovative production is absolutely high-quality and ensures our customers at all times to provide consistent and high-grade-products. The high-tech manufacturing equipment, ERP-process-control and the expertise of our highly-qualified-staff build a more solid foundation for quality, reliability of delivery times and competitive prices. CSSC manufacture all common materials such as normal and stainless steels, aluminum and other nonferrous metals.

Typical Industrial work with Robotics nowadays, and part of CSSC beside its machine-park:

FACE RECOGNITION, LASER EQUIPMENT, ROBOT-WELDING

CSSC works with its customers to provide fully comprehensive product design, development, prototyping, manufacture, and assembly of final products. Customers entrust the Company with development tasks in such fields as vehicle technology (agricultural machinery, trailers, spare parts, etc.), traffic engineering (railway transport, spatial planning, alignment, planning, etc.), engineering (process engineering, power engineering, supply engineering, production engineering), material handling (platform trucks, cranes, etc.) and furniture design (product design, materials science, lighting design) as well as transport logistics.

// SERVICE MANAGEMENT. The Company creates long-term sustainable and fruitful business relationships by creating trust through transparency. The Company strives to keep its customers fully informed throughout the project lifecycle. From the idea and sketch to the complex system-solution, creation and design-development is part of this concept. They assist and advise on cost-optimization through intelligent planning and functional analysis.

For example, the selection of a suitable material plays just as an important role as the forming-process, the design or the laser-compatible design-optimization. Their seamless combination of design and manufacture is effective and practicable. The implementation of customer ideas is made by the most modern design and construction software.

// SERVICE. The CSSC metal-processing-spectrum includes fully automated laser-cutting, the use of combine- technology to stamping, folding, welding, finishing, and assembly. In addition, CSSC provides all the finishes including powder coating. The machine-park with the highest quality, modern and innovative production provides their customers with consistent and high-grade-products. The high-tech manufacturing equipment, ERP-process-control and the expertise of highly-qualified-staff provide a solid foundation for manufacturing quality, reliability of delivery times and competitive prices. CSSC manufactures all common materials such as normal and stainless steels, aluminum and other nonferrous metals.

// COMPETITORS. What distinguishes CSSC and makes it special compared to its competitors is its versatility. While other companies specialize in a particular activity, CSSC is broadly diversified and offers a variety of uses. The CSSC offers e.g. not just welding in their portfolio. You already have to distinguish between the manual welding MAG and TIG, and then there is still the welding by robots. Not only in China, but also technology leading countries such as Germany, companies specialize in an activity to have a competitive advantage.

However, this advantage consists only in the subjective perception of each customer, because specialization suggests especially much experience and quality. CSSC has a unique selling proposition as a German-led company in China, which has been successful over 15 years as a supplier worldwide without ever having money borrowed.

// COMPETITIVE SITUATION. Customers include market leaders such as KÄRCHER, KRONE, AEROSPACE or HAKO. And these customers not only order individual single parts but entire assemblies. This implies a wide range of finishing possibilities, from CNC laser cutting to wire erosion to sandblast. The CSSC produces everything in its own enterprise. And for sure the CSSC is also training. Constantly grow the own claim to quality, whether process assurance like automation (Industry 4.0), leadership and training of employees, or in the development of certifications.

Certifications for an industrial manufacturing company require high investment costs.

For every license of the assembly or welding of products for HIGH-SPEED TRAINS, FILTER-PLANTS or WIND-GENERATORS, a company needs special certificates.

CSSC has more than 50 welders with international high-level welding certificate for railway or pressure-vessels, supplied over 800 clients worldwide & produced over 30.000 assembly units (each unit consists of 2-150 single parts).

CSSC started supplying global players like KRONE, that focused on Agriculture Machinery. The subsidiary of ITC collected experiences over one and half decade and is ready to supply the ITC-owned-brand-Fortschritt to produce own machines of the Agriculture Machinery. That`s what makes the competitive position of this subsidiary more than strong and defines specialization in a new way. CSSC builds the basic; Starting with the acquisition, to accounting and customer care up, to the packing and the dispatch of the parts on container ships or in airplanes.

PlanET COMPANY PROFILE

PlanET China; supplier for GREEN ENERGY

PlanET stands for “Planning and Application of Energy Technology”. PlanET China specializes in the design, construction, and service of advanced biogas plants. PlanET China is an affiliate of PlanET Biogas Group GmbH (“PlanET Germany”) which is based in Vreden, Germany. The PlanET Biogas Group is one of the leading providers for the planning, construction, service, and repowering of AD plants. We offer technical solutions for the use of 100 percent manure or slurry and challenging substrates such as grass or straw.

Mr. Andreas Spiegler is CEO of PlanET China, and as of June 2019 PlanET China had no employees. PlanET China plans to acquire prefabricated biogas equipment sourced from PlanET Germany, and use local Chinese workers to install and service the biogas equipment in China. Plan ET Germany will be responsible for design and engineering of the Biogas plants.

PlanET Biogas China ltd. is an affiliate of PlanET Biogas Group GmbH, which is based in Vreden, Germany. PlanET Biogas Group GmbH ranks among the leading biogas plant builders in Germany and Europe and has designed, constructed and services over 400 anaerobic digestion systems worldwide. PlanET China is located inside of the office building of CSSC.

The name PlanET stands for “Planning and Application of Energy Technology”. PlanET specializes in the design, construction, and service of advanced biogas plants. PlanET Germany started in 1998, and now has over 250 employees, and 400 operating biogas plants. The expected turnover of PlanET group will reach 160 Mio Euro in 2019.

BIOGAS

Biogas is a mixture of gases, predominantly carbon dioxide (CO2) and methane. Methane is the enriching component, which is used for energetic benefits. Sludge, bio-waste and leftovers, farm residues such as dung and slurry and selective energy crops like corn are ideally suited as input. Biogas develops through microbial degradation of organic substances without oxygen. The biogas can be transferred to a Combined Heat and Power Unit (CHP). The electricity and heat produced in this way can be used off-site or fed into the public grid.

BENEFITS OF BIOGAS

Biogas can be converted into electricity and heat or it can be used as fuel. It may be used as an equivalent to natural gas.

In addition to the economy of turning bio-waste streams into usable energy, biogas has enormous ecological advantages: Substituting fossil fuels with biogas reduces carbon dioxide (CO2) emissions, a recognized contributor to global warming. Digestion products can furthermore replace industrial mineral fertilizer because the mineral nutrients are not degraded and can be returned on the fields as a valuable fertilizer.

While countries like Germany reduced its emission of CO₂ to -24,1%, Chinas emission grew up to +306,6% in 2017. (Source: Statista) The biggest emission of CO₂ in the world gets out from China.

WHY IS BIOGAS NEUTRAL TO THE CLIMATE BALANCE?

Because of the biogas only CO₂ which was created by the organic plants is used. But the fossil fuels come additional to our atmosphere and change the balance. For this reason, we have the climate change, one of the most dangerous processes in the human future.

On-Farm Solution. Recycling slurry and manure through an AD plant provides a sustainable system for adding value to farm waste and boosting farm income. The PlanET on-farm solutions are tailor-made and meet the needs of agricultural farms in order to successfully integrate a plant in an already existing business. It is possible to simply utilize the existing farm waste stream to generate power and provide fertilizer. Most project calculations show customer return on investment capital (ROIC) of more than 10% once investment, fixed and variable costs and electricity generation revenues have been considered. Furthermore, on-farm AD plants generally benefit from high levels of public acceptance and do not normally require additional space.

Heat Use. Biogas offers a number of outstanding interactions especially with regard to the methods of livestock farming. Pig and poultry farmers, in particular, need considerable amounts of heat. Most of the CHP’s thermal energy can be used for local heat concepts to replace costly fossil fuels or granting the operator additional income by selling it to e.g. public buildings like hospitals, swimming pools or retirement houses. Another way is the addition of a dryer to the biogas plant set up. There are several containerized PlanET plug-and-play solutions for easy integration into existing or newly designed concepts.

Operating a biogas plant is a chance to reduce energy costs with the production of electricity and heat. When heat is needed for the production process, the integration of an AD plant into existing production structures could realize enormous benefits. You could achieve perfect synergies by feeding the biogas plant with left-overs from the production process and simultaneously using the biogas heat from the CHP unit.

Circular Waste Management. The digestion of waste could complete a cycle of raw materials based on food production or food waste management. Waste disposals are used for the production of biogas and the biogas can substitute fossil fuels for the generation of electricity and heat - such a biogas concept provides a double benefit for its plant owner! The PlanET portfolio also covers the construction and the service of waste to energy plants. Our biogas plants can process almost all organic waste materials from the food industry as well as agricultural residues or fats and oils. Especially in the food industry business sector, anaerobic digestion offers significant cost advantages over traditional disposal methods - both to waste management companies and producers alike.

// COMPETITIVE SITUATION

In China are only two competitors who are able to produce plants which are working:

- A German - Chinese JV between Krieger & Fischer and Hangzhou Energy

- EnviTec Germany

MARKET CHANCES IN CHINA

The Chinese government aims to cover 15 percent of its primary energy demand by renewable energy sources by 2020. Here, bioenergy can contribute to the diversification of the renewable energy mix and support a stable baseload power. It not only contributes to rural development and decreases local environmental pollution as well as the greenhouse gas emissions but also supports overall development towards a sustainable low-carbon circular economy.

The government states that by the end of 2010, about 45,259 small-scale and 27,436 middle and large-scale biogas plants (digester >50 m3) existed with a digester capacity of 8.57 million m3 and an annual biogas output of 1.05 billion nm3 throughout the Chinese biogas sector. This includes 4,641 biogas plants with digesters of more than 300 m3. However, middle and large-scale biogas plants, which are explicitly developed for energy use, and not solely for anaerobic treatment of wastewater, have only emerged in recent years. To utilize the various positives effects and application potentials of bioenergy, the Chinese government has set ambitious goals for its biogas sector. As part of its medium and long-term development plan for renewable energy from 2006 to 2020, the National Development and Reform Commission (NDRC) aims to create 10,000 middle and large-scale biogas plants in the livestock industry and 6,000 industrial wastewater treatment plants with an overall biogas yield of 14 billion nm3 biogas, realize an installed electric capacity of three gigawatts.

During the last ten years, climate change mitigation emerged as an additional development driver of China’s biogas sector. As part of its greenhouse gas emission reduction policies, China signed the Kyoto Protocol in 2002. During the 11th Five-Year Plan, the Chinese government achieved a 20 percent reduction of CO2 emission per unit of Gross Domestic Product (GDP). A total of about two trillion Chinese Yuan (CNY) - 240 billion euros - was invested to achieve this goal. In the course of the Copenhagen UN Climate Change Conference 2009, China then announced its 2020 voluntary targets of reducing the intensity of CO2 emissions per GDP by 40 to 45 percent compared to 2005 and increasing the share of non-fossil fuels in primary energy consumption to around 15 percent by 2020.

MAKING USE OF A HUGE POTENTIAL

Current estimates indicate that use biomass resources in China alone have the energetic potential to cover about five percent of China’s primary energy. The combined energetic potential of crop residues, energy crops, animal manure, urban household waste, and wastewater sludge will lead to a future biogas potential of about 440 billion nm3 in 2030 or installed capacity of about 71 GW. According to current estimates of the total yearly biomass energy potential in 2030, crop residues, including by-products, will represent the largest share at 50 percent of the total biogas potential. Cultivated energy crops on marginal land are estimated to reach 40 percent of the total biomass energy potential by 2030. Animal manure could contribute 9 percent of the future biogas energy, while simultaneously reducing environmental pollution in rural areas. Biodegradable and municipal sewage waste could add another seven and 3 percent respectively.

Regarding the Chinese greenhouse gas (GHG) emission reduction goals, the utilization of the described biomass resources as a substitute for fossil fuels as well as through replacing chemical fertilizer through biogas plant effluent as organic fertilizer is estimated to lead to a yearly emission reduction potential of CO2 equivalents of 4.75 billion tons by 2020 and seven billion tons by 2030.

USE OF PROCEEDS

We will not receive any proceeds from the sale of the ordinary shares by the selling shareholders. All net proceeds from the sale of the ordinary shares will go to the selling shareholders.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our Ordinary Shares and do not anticipate paying any cash dividends in the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects, and other factors our board of directors may deem relevant.

Under British Virgin Islands law, we may only pay dividends from surplus (the excess, if any, at the time of the determination of the total assets of our company over the sum of our liabilities, as shown in our books of account, plus our capital), and we must be solvent before and after the dividend payment in the sense that we will be able to satisfy our liabilities as they become due in the ordinary course of business; and the realizable value of assets of our company will not be less than the sum of our total liabilities, other than deferred taxes as shown on our books of account, and our capital.

If we determine to pay dividends on any of our Ordinary Shares in the future, as a holding company, we will be dependent on receipt of funds from our Hong Kong subsidiary, ITC-HK. Current PRC regulations permit the PRC Subsidiaries to pay dividends to ITC-HK. Under British Virgin Islands law, we may only pay dividends from surplus (the excess, if any, at the time of the determination of the total assets of our company over the sum of our liabilities, as shown in our books of account, plus our capital), and we must be solvent before and after the dividend payment in the sense that we will be able to satisfy our liabilities as they become due in the ordinary course of business; and the realizable value of assets of our company will not be less than the sum of our total liabilities, other than deferred taxes as shown on our books of account, and our capital; only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entity in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings of the respective companies, the reserve funds are not distributable as cash dividends except in the event of a liquidation.

In addition, pursuant to the EIT Law and its implementation rules, dividends generated after January 1, 2008 and distributed to us by our PRC subsidiaries are subject to withholding tax at a rate of 10% unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade, and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from operations in China may be used to pay dividends to our company. The PRC Subsidiaries may go to a licensed bank to remit their after-tax profits out of China. Nevertheless, the bank will require the PRC Subsidiaries to produce the following documents for verification before they may transfer the dividends to an overseas bank account of their parent company, Industrial Technical Holdings Corporation , or indirect parent, ITC-HK: (1) tax payment statement and tax return; (2) auditor’s report issued by a Chinese certified public accounting firm confirming the availability of profits and dividends for distribution in the current year; (3) the Board minutes authorizing the distribution of dividends to its shareholders; (4) the foreign exchange registration certificate issued by SAFE; (5) the capital verification report issued by a Chinese certified public accounting firm; (6) if the declared dividends will be distributed out of accumulated profits earned in prior years, the PRC Subsidiaries must appoint a Chinese certified public accounting firm to issue an auditors’ report to the bank to certify the PRC Subsidiaries’ financial position during the years from which the profits arose; and (7) other information as required by SAFE.

CAPITALIZATION

The following table sets forth our unaudited capitalization at December 31, 2018 and as adjusted to give effect to the public listing.

____________

DILUTION

The Shares to be sold by the selling security holders are Ordinary Shares that are currently issued and outstanding. Accordingly, there will not be any dilution to our existing shareholders or new investors from the sale of the Shares.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS OF INDUSTRIAL TECHNICAL HOLDINGS CORPORATION AND SUBSIDIARIES

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that are based on our management’s current expectations, estimates and projections for our business, which are subject to a number of risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Forward-Looking Statements” and “Risk Factors”.

Overview

The Registrant was formed under the laws of the British Virgin Islands on the 22nd day of February 2018 to act as a holding company for Industrial Technical Corporation Hong Kong Limited (“ITC-HK”) a company formed under the laws of Hong Kong. ITC-HK is a holding company which conducts operations through subsidiaries as follows:

(i) ITC-HK owns 100% of Qingdao CSSC Technical Products Ltd. (“CSSC”); a manufacturer of machinery components based in mainland China. CSSC specializes in the design and engineering of the precision parts of agricultural equipment and machinery; and

(ii) ITC-HK owns 100% of Fortschritt China Agritech Limited (“Fortschritt HK”); a holding company based in Hong Kong; and

(iii) Fortschritt HK owns 100% of Fortschritt Qingdao Agritech Ltd. (“Fortschritt” also “Fortschritt China”); a manufacturer of modern agricultural machinery; and

(iv) CSSC owns 50% of PlanET Biogas China Ltd. (“PlanET”); a joint venture with a leading German company (PlanET Biogas Global GmbH) in the area of engineering and building green energy biogas plants. PlanET has no sales to date.

In accordance with Accounting Standards Codification (“ASC”) 805-50-25, this Reorganization has been accounted for as a recapitalization among entities under common control. The “combination” of the Company and its subsidiaries has been accounted for at historical cost and prepared on the basis as if the aforementioned transactions had become effective as of the beginning of the first period presented in the accompanying consolidated financial statements. Results of operations for the period presented comprise those of the previously separate entities combined from the beginning of the period to the end of the period. By eliminating the effects of intra-entity transactions in determining the results of operations for the period before the Reorganization, those results will be on substantially the same basis as the results of operations for the period after the date of combination. The effects of intra-entity transactions on current assets, current liabilities, revenue, and cost of sales for periods presented and on retained earnings (accumulated deficit) at the beginning of the periods presented are eliminated to the extent possible. Furthermore, ASC 805-50-45 5 indicates that the consolidated financial statements and financial information presented for prior years also shall be retrospectively adjusted to furnish comparative information.

Unless otherwise indicated, references to the “Company”, “us”, “we” or “ITHC” refer to Industrial Technical Holdings Corporation and its consolidated subsidiaries.

The Company’s aim is to create an integrated industrial complex, serving global markets with German precision-engineered parts, products, and services made in China. The principal production base is located in Qingdao, Shandong Province, PR China.

ITHC holds interests in machining parts manufacturing, special machinery assembly as well as agricultural and environmental technologies, and have three operating subsidiaries.

Company ownership structure below:

Results of Operations

The following tables set forth a summary of ITHC’s consolidated results of operations for the periods presented. This information should be read together with ITHC’s consolidated financial statements and related notes included elsewhere in this proxy statement. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

The following tables set forth a breakdown of ITHC’s subsidiaries results of operations

During the period presented above, Fortschritt and PlanET’s revenue and cost of revenue were $nil and $nil respectively.

Year Ended December 31, 2018 Compared to Year Ended December 31, 2017

Revenues:

The following tables present the average selling prices, quantities sold for our products and new product implementation for the periods indicated:

Net revenues increased from $5,851,546 during the year ended December 31, 2017 to $6,182,801 during the year ended December 31, 2018 due to the continued growth in our export sales business. For the period presented, the Company did not have change in price or new products implementation; therefore, increase in revenue is mainly driven by increase in quantities sold from 1,145,004 during the year ended December 31,2017 to 1,316,520 during the year ended December 31,2018. Although the Company did not have price change in products, average price was reduced by 8% to $ 4.70 per unit as compared to last year as less high unit price products were sold for the year ended December 31,2018.

Cost of Sales:

Cost of sales increased from $4,434,480 during the year ended December 31, 2017 to $4,743,454 during the year ended December 31, 2018, which is in line with our sales which was primarily driven by the continued growth in our export sales business primarily driven by continued diversification into oversea market.

Gross Profit:

Gross profit slightly increased from $1,417,066 during the year ended December 31, 2017 to $1,439,347 during the year ended December 31, 2018.

Selling, General and Administrative Expenses:

Total selling, general and administrative expenses increased from $1,989,052 during the year ended December 31, 2017 to $2,290,306 during the year ended December 31, 2018.

Selling and marketing expense. Selling and marketing expense slightly decreased from $503,907 during the year ended December 31, 2017 to $343,719 during the year ended December 31, 2018, primarily due to a decrease in transportation cost.

General and administrative expenses. General and administrative expenses increased from $1,485,145 during the year ended December 31, 2017 to $1,819,087 during the year ended December 31, 2018, primarily due to increased allowance of account receivables in 2018.

Stock base compensation. Stock base compensation increased from nil during the year ended December 31, 2017 to $127,500 during the year ended December 31, 2018, primarily due to stock base compensation of ITHC (BVI) incurred in 2018.

Other Income/(expenses):

Total other income/(expenses) increased from $(7,643) during the year ended December 31, 2017 to $215,684 during the year ended December 31, 2018.

Other Income. Other income increased from $95,310 during the year ended December 31, 2017 to $ 264,463 during the year ended December 31, 2018. This primarily reflects 2018 foreign exchange positive impact and subsidies amount change.

Other Expense. Other expense decreased from $101,444 during the year ended December 31, 2017 to $37,580 during the year ended December 31, 2018. This primarily due to the write-off of uncollectable receivables in 2017.

Income Tax Expense:

Provision for income tax were nil during the year ended December 31, 2017 and 2018.

Net Loss:

As a result of the foregoing, net loss remained stable at $579,629 during the year ended December 31, 2017 and $635,275 during the year ended December 31, 2018.

Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018

Revenue:

The following tables present the average selling prices, quantities sold for our products and new product implementation for the periods indicated:

Net revenue decreased from $2,757,474 during the six months ended June 30, 2018 to $2,280,798 in the same period of 2019. The decrease was primarily due to slowed down in the demand from customer orders. For the period presented, the Company did not have change in price or new products implementation; therefore, decrease in revenue is mainly driven by decrease in quantities sold from 701,731 during the six months ended June 30, 2018 to 400,396 during the six months ended June 30, 2019. Although the Company did not have price change in products, average price has increased by 45% to $5.70 per unit as compared to last year as more high unit price products were sold for the six months ended June 30, 2019.

Cost of Sales:

Cost of sales decreased from $2,026,221 during the six months ended June 30, 2018 to $1,802,454 in the same period of 2019 because of the decrease in quantities produced during the six months ended June 30, 2019.

Gross Profit:

Gross profit decreased from $731,253 during the six months ended June 30, 2018 to $478,344 during the six months ended June 30, 2019. The decrease was primarily due to decline in sales.

Selling, General and Administrative Expenses:

Total selling, general and administrative expenses decreased slightly from $997,178 during the six months ended June 30, 2018 to $840,316 during the six months ended June 30, 2019.

Selling and marketing expense. Selling and marketing expenses decreased from $159,558 during the six months ended June 30, 2018 to $54,941 during the six months ended June 30, 2019. The decrease was primarily due to the decrease in net revenue in 2019 as compared to the 2018 period, which resulted in decreased freight expenses.

General and administrative expenses. General and administrative expenses decreased slightly from $837,620 during the six months ended June 30, 2018 to $765,375 during the same period in 2019. The decrease was primarily due to the decreased employees from 131 to 111 which resulted in lower payroll during the six months ended June 30, 2019 as compared to the same period in 2018.

Stock based compensation. Stock based compensation increased from nil during the six months ended June 30, 2018 to $20,000 during the six months ended June 30, 2019, primarily due to stock base compensation to directors of ITHC (BVI) incurred in 2019.

Other Income/(Expenses):

Total other income/(expenses) decreased from $48,597 income during the six months ended June 30, 2018 to an expense of $16,014 expenses during the six months ended June 30, 2019.

Other Income. Other income decreased from $66,572 during the six months ended June 30, 2018 to $6,366 during the six months ended June 30, 2019. This primarily reflects loss on foreign currency transactions during the six months ended June 30, 2019.

Other Expense. Other expense increased slightly from $17,971 expenses during the six months ended June 30, 2018 to $18,164 expenses during the six months ended June 30, 2019. This increase was primarily due to the increase of bank transfer fees.

Income Tax Expense:

Provision for income tax were nil during the six months ended June 30, 2018 and 2019.

Net Loss:

As a result of the foregoing, net loss increased from $217,328 during the six months ended June 30, 2018 to $377,986 during the six months ended June 30, 2019.

Liquidity and Capital Resources

Going Concern Consideration

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which contemplate continuation of the Company as a going concern basis. The going-concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed on the consolidated financial statements. The Group’s ability to continue as a going concern depends on the liquidation of its current assets and business developments. As of June 30, 2019, the Company incurred positive working capital, $277,002, a comprehensive loss of $2,111,833 and incurred a negative operating cash flow of $493,106. As of December 31, 2018, the Company incurred positive working capital, $404,154, a comprehensive loss of $1,670,752 and incurred a negative operating cash flow of $871,232. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.

Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our stockholders. Our sources of capital in the past have included borrowings from our stockholders and related parties. While we believe that our existing shareholders and related parties will continue to provide the additional cash to meet our obligations as they become due, there can be no assurance that we will be able to raise such additional capital resources on satisfactory terms.

In order to carry out our proposed business plan, we will require a significant amount of capital. We estimate that we will need approximately $10 million to finance our planned operations for the next 12 months.

We estimate that we will need approximately $10 million to finance our planned operations for the next 12 months. The Company may, to raise our cash requirements for the next 12 months through the sale of our equity securities in private placements, through shareholder loans or possibly through a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money through such capital-raising efforts, we may review other financing possibilities such as bank loans or loan from related parties. At this time, we do not commit any broker-dealer to provide us with financing. There is no assurance that any financing will be available to us or if available, on terms that will be acceptable to us. We also may negotiate with our management and consultants to pay parts of their salaries and fees with stock and stock options instead of cash.

Cash Flows and Working Capital

ITHC’s primary sources of liquidity have been funding from issuance of common shares for cash, which have historically been sufficient to meet ITHC’s working capital and substantially all of its capital expenditure requirements.

 In order to carry out our proposed business plan, we will require a significant amount of capital. We estimate that we will need approximately $10 million to finance our planned operations for the next 12 months.

We intend to raise our cash requirements for the next 12 months through the sale of our equity securities in private placements, through shareholder loans or possibly through a registered public offering (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising enough money through such capital-raising efforts, we may review other financing possibilities such as bank loans. At this time we do not commit any broker-dealer to provide us with financing. There is no assurance that any financing will be available to us or if available, on terms that will be acceptable to us. We also may negotiate with our management and consultants to pay parts of their salaries and fees with stock and stock options instead of cash.

Net cash used in operating activities of $692,377 in 2017, compared to net cash used in operating activities of $871,233 in 2018. Net cash used in operating activities was $493,106 in the six months ended June 30, 2019, compared with net cash used in operating activities of $859,652 in the same period of 2018.

As of December 31, 2018, ITHC had cash and cash equivalents of approximately $608,001, compared to cash and cash equivalents of approximately $124,152 as of December 31, 2017 and cash and cash equivalents of approximately $261,285 as of June 30, 2019.

The following table sets forth a summary of ITHC’s cash flows for the periods presented: