Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as "believe," "expect," "anticipate," "project," "target," "plan," "optimistic," "intend," "aim," "will" or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2011, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

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

Use of Terms

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

º "THT," "Company," "we," "us," or "our" are to the combined business of THT Heat Transfer Technology, Inc., a Nevada corporation, and its consolidated subsidiaries: Megaway, Star Wealth, Siping Juyuan and Beijing Juyuan;

º "Megaway" are to Megaway International Holdings Limited, a BVI company;

º "Star Wealth" are to Star Wealth International Holdings Limited, a Hong Kong company;

º "Siping Juyuan" are to Siping City Juyuan Hanyang Plate Heat Exchanger Co. Ltd., a PRC company;

º "Beijing Juyuan" are to Beijing Juyuan Hanyang Heat Exchange Equipment Co., Ltd., a PRC company;

º "BVI" are to the British Virgin Islands;

º "Hong Kong" are to the Hong Kong Special Administrative Region of the People's Republic of China;

º "PRC" and "China" are to the People's Republic of China;

º "SEC" are to the Securities and Exchange Commission;

º "Exchange Act" are to the Securities Exchange Act of 1934, as amended;

º "Securities Act" are to the Securities Act of 1933, as amended;

º "Renminbi" and "RMB" are to the legal currency of China; and

º "U.S. dollars," "dollars" and "$" are to the legal currency of the United States.

Overview of our Business

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

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

Second Quarter Financial Performance Highlights

The following summarizes certain key financial information for the second quarter of 2012:

º Sales revenue: Sales revenue decreased by $2.98 million, or 21.05%, to $11.20 million for the three months ended June 30, 2012, from $14.18 million for the same period in 2011.

º Gross profit: Gross profit decreased by $1.26 million, or 20.77%, to $4.82 million for the three months ended June 30, 2012, from $6.08 million for the same period in 2011. As a percentage of sales revenue, gross profit increased by 0.15% to 43.01% for the three months ended June 30, 2012, from 42.86% for the same period in 2011.

º Net income attributable to stockholders: Net income attributable to our stockholders decreased by $1.87 million, or 56.55%, to $1.44 million for the three months ended June 30, 2012, from $3.31 million for the same period in 2011.

º Fully diluted net income per share: Fully diluted net income per share was $0.07 for the three months ended June 30, 2012, as compared to $0.16 for the same period in 2011.

Results of Operations

Comparison of Three Months Ended June 30, 2012 and 2011

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

                                                              Three Months Ended
                                                                   June 30,                        $           %
                                                                 2012            2011          Change     Change
Sales revenue                                           $  11,195,347   $  14,179,746   $  (2,984,399 )   (21.05 )
Cost of sales                                              (6,380,265 )    (8,102,332 )    (1,722,067 )   (21.25 )
Gross profit                                                4,815,082       6,077,414      (1,262,332 )   (20.77 )
Operating expenses:
       Administrative expenses                                787,362       1,027,211        (239,849 )   (23.35 )
       Research and development expenses                      245,297         437,173        (191,876 )   (43.89 )
       Selling expenses                                     1,953,179       1,524,185         428,994      28.15
Total operating expenses                                    2,985,838       2,988,569          (2,730 )    (0.09 )
Income from operations                                      1,829,244       3,088,845      (1,259,601 )   (40.78 )
Interest income                                                 4,463          10,030          (5,567 )   (55.50 )
Other income                                                  137,735         847,930        (710,195 )   (83.76 )
Finance costs                                                (501,762 )      (209,389 )      (292,373 )   139.63
Income before income taxes and noncontrolling interests     1,469,680       3,737,416      (2,267,736 )   (60.68 )
Income taxes                                                  (34,934 )      (493,072 )       458,138     (92.92 )
Net income before noncontrolling interests                  1,434,746       3,244,344      (1,809,598 )   (55.78 )
Net loss attributable to noncontrolling interests               4,964          69,061         (64,097 )   (92.81 )
Net income attributable to THT common stockholders      $  1,439,710    $   3,313,405   $  (1,873,695 )   (56.55 )

Sales revenue. Our sales revenue is generated from sales of heat exchange products. Sales revenue decreased by $2.98 million, or 21.05%, to $11.20 million for the three months ended June 30, 2012, from $14.18 million for the same period in 2011. Our sales volume in the three months ended June 30, 2012 amounted to 483 units, a decrease of 509 units, from 992 units for the same period in 2011. Such decrease was mainly due to the decreased sales revenue from plate heat exchangers and air coolers in the 2012 period as compared with the 2011 period. Sales revenue from plate heat exchangers decreased by $5.88 million, or 60.08%, to $3.90 million for the three months ended June 30, 2012, from $9.78 million for the same period in 2011. Sales from air coolers decreased $0.65 million, or 56.16%, to $0.51 million for the three months ended June 30, 2012, from $1.16 million for the same period in 2011. The decrease was caused by decreased demand of our products as a result of an overall slowdown in China's economy. Although sales revenue from heat exchange units, shell-and-tube heat exchangers and other products increased, the increase was not enough to offset the decreased sales revenue from plate heat exchangers and air coolers.

                                          Three Months Ended June 30,
                                        2012                      2011
                                     $            %            $            %
Plate heat exchanger          $   3,904,772     34.88   $   9,780,986     68.98
Heat exchange unit                3,645,234     32.56       2,211,923     15.60
Air-cooled heat exchanger           507,782      4.54       1,158,247      8.17
Shell-and-tube heat exchanger     1,259,196     11.25         492,401      3.47
Others                            1,878,363     16.77         536,189      3.78
TOTAL                         $  11,195,347      100%   $  14,179,746      100%

Cost of sales. Our cost of sales is primarily comprised of the costs of our raw materials, labor and factory overhead. Our cost of sales decreased by $1.72 million, or 21.25%, to $6.38 million for the three months ended June 30, 2012, from $8.10 million for the three months ended June 30, 2011. The decrease in the cost of sales was generally in line with the decrease in our sales revenue. Cost of sales as a percentage of sales revenue were 56.99% and 57.14% for the three months ended June 30, 2012 and 2011, respectively, a decrease of 0.15 percentage points. The decrease was mainly attributable to the decrease in the labor costs and raw material costs.

Gross profit. Our gross profit is equal to the difference between our sales revenue and our cost of sales. Our gross profit decreased by $1.26 million, or 20.77%, to $4.82 million for the three months ended June 30, 2012, from $6.08 million for the same period in 2011. The decrease in our gross profit was mainly attributable to decreased sales revenue from plate heat exchangers and air coolers. Although the average unit selling price of our products increased 35.00% in the three months ended June 30, 2012 in comparison with the same period in 2011, gross profit margin for the three months ended June 30, 2012 increased to 43.01% from 42.86% for the same period in 2011. The increase in our gross profit margin was mainly attributable to the decrease in labor costs and raw material costs as noted above.

Administrative expenses. Our administrative expenses consist of the costs associated with staff and support personnel who manage our business activities. Our administrative expenses decreased by $0.24 million, or 23.35%, to $0.79 million for the three months ended June 30, 2012, from $1.03 million for the same period in 2011. As a percentage of sales revenue, administrative expenses decreased to 7.03% for the three months ended June 30, 2012, as compared to 7.24% for the same period in 2011. The decrease in administrative expenses was primarily due to a decrease in labor insurance costs. The labor insurance decreased by $0.195 million, or 97.50%, to $5,000 for the three months ended June 30, 2012, from $0.20 million for the same period in 2011. The decrease in labor insurance was mainly due to the slowdown in China's economic growth which led to job cuts.

Research and development expenses. Our research and development expenses consist of the costs associated with research and development personnel and expense in research and development projects. Our research and development expenses decreased by $0.19 million, or 43.89%, to $0.25 million for the three months ended June 30, 2012, from $0.44 million for the same period in 2011. The decrease in research and development expenses was mainly attributable to the decrease in the costs of raw materials used in R&D and the seasonality investment.

Selling expenses. Our selling expenses include sales commissions, the cost of advertising and promotional materials, salaries and fringe benefits of sales personnel, after-sale support services and other sales-related costs. Our selling expenses increased by $0.43 million, or 28.15%, to $1.95 million for the three months ended June 30, 2012, from $1.52 million for the same period in 2011. As a percentage of sales revenue, selling expenses increased to 17.45% for the three months ended June 30, 2012, as compared to 10.75% for the same period in 2011. The increase was mainly attributable to the increased travelling expenses of our sales personnel. Traveling expense increased by $0.22 million, or 34.48%, to $0.86 million for the six months ended June 30, 2012, from $0.64 million for the same period in 2011. The increase in travelling expenses was mainly due to our efforts to expand our market share.

Income before income taxes and noncontrolling interests. Income before income taxes and noncontrolling interests decreased by $2.27 million, or 60.68%, to $1.47 million for the three months ended June 30, 2012, from $3.74 million for the same period in 2011. Such decrease was mainly attributable to the decrease in our gross profit.

Net income attributable to common stockholders. As a result of the cumulative effect of the foregoing factors, our net income attributable to common stockholders decreased by $1.87 million, or 56.55%, to $1.44 million for the three months ended June 30, 2012, from $3.31 million for the same period in 2011. As a percentage of sales revenue, our net income attributable to common stockholders was 12.86% and 23.37% for the three months ended June 30, 2012 and 2011, respectively.

Comparison of Six Months Ended June 30, 2012 and June 30, 2011

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

                                                           Six Months Ended June 30,           $              %
                                                              2012            2011           Change        Change
Sales revenue                                           $   22,644,772   $  28,232,666   $  (5,587,894 )    (19.79 )
Cost of sales                                              (13,223,900 )   (16,112,561 )    (2,888,661 )    (17.93 )
Gross profit                                                 9,420,872      12,120,105      (2,699,233 )    (22.27 )
Operating expenses:
       Administrative expenses                               2,040,191       1,740,142         300,049       17.24
       Research and development expenses                       499,280         784,662        (285,382 )    (36.37 )
       Selling expenses                                      4,207,776       3,224,048         983,728       30.51
Total operating expenses                                     6,747,247       5,748,852         998,395       17.37
Income from operations                                       2,673,625       6,371,253      (3,697,628 )    (58.04 )
Interest income                                                 12,741          23,916         (11,175 )    (46.73 )
Other income                                                   367,196         852,687        (485,491 )    (56.94 )
Finance costs                                                 (903,212 )      (401,986 )      (501,226 )    124.69
Income before income taxes and noncontrolling interests      2,150,350       6,845,870      (4,695,520 )    (68.59 )
Income taxes                                                  (110,898 )      (917,538 )       806,640      (87.91 )
Net income before noncontrolling interests                   2,039,452       5,928,332      (3,888,880 )    (65.60 )
Net loss attributable to noncontrolling interests              (42,563 )        41,650         (84,213 )   (202.19 )
Net income attributable to THT common stockholders      $    1,996,889   $   5,969,982   $  (3,973,093 )    (66.55 )

Sales revenue. Our sales revenue decreased by $5.59 million, or 19.79%, to $22.64 million for the six months ended June 30, 2012, from $28.23 million for the same period in 2011. Our sales volume in the six months ended June 30, 2012 amounted to 1,093 units, a decrease of 827 units, from 1,920 units for the same period in 2011. Such decrease was mainly due to the decreased sales revenue from plate heat exchangers, shell-and-tube heat exchangers and air coolers in the 2012 period as compared with the 2011 period. Sales revenue from plate heat exchangers decreased by $6.38 million, or 41.43%, to $9.02 million for the six months ended June 30, 2012 from $15.40 million for the same period in 2011. Sales revenue from air coolers decreased $6.00 million, or 37.58%, to $0.99 million for the six months ended June 30, 2012 from $1.59 million for the same period in 2011. Sales revenue from shell-and-tube heat exchangers decreased by $1.26 million, or 37.54%, to $2.10 million for the six months ended June 30, 2012, from $3.36 million for the same period in 2011. The decrease was caused by decreased demand for our products as a result of fewer projects around the Chinese spring festival and overall slowdown of China's economy. Although sales revenue from heat exchange units and other products increased, the increase was not enough to offset the decreased sales revenue from plate heat exchangers, shell-and-tube heat exchangers and air coolers.

The following table shows our sales revenue by product for the six months ended June 30, 2012 and 2011:

                                           Six Months Ended June 30,
                                        2012                      2011
                                     $            %            $            %
Plate heat exchanger          $   9,019,461     39.83   $  15,399,087     54.54
Heat exchange unit                7,316,155     32.31       6,464,889     22.90
Air-cooled heat exchanger           990,022      4.37       1,586,064      5.62
Shell-and-tube heat exchanger     2,096,900      9.26       3,357,126     11.89
Others                            3,222,234     14.23       1,425,500      5.05
TOTAL                         $  22,644,772      100%   $  28,232,666      100%

Cost of sales. Our cost of sales decreased by $2.89 million, or 17.93%, to $13.22 million for the six months ended June 30, 2012, from $16.11 million for the six months ended June 30, 2011. The decrease in the cost of sales was generally in line with the decrease in our sales revenue. Cost of sales as a percentage of sales revenue were 58.40% and 57.07% for the six months ended June 30, 2012 and 2011, respectively, an increase of 1.33 percentage points. The increase was mainly attributable to the increased total labor costs and raw material costs in the first half of 2012.

Gross profit. Our gross profit decreased by $2.70 million, or 22.27%, to $9.42 million for the six months ended June 30, 2012, from $12.12 million for the same period in 2011. The decrease in our gross profit was mainly attributable to decreased sales revenue from plate heat exchangers, shell-and-tube heat exchangers and air coolers. Although the average unit selling price of our products increased 24.29% in the six months ended June 30, 2012 in comparison with the same period in 2011, gross profit margin for the six months ended June 30, 2012 dropped to 41.60% from 42.93% for the same period in 2011. The decrease in our gross profit margin was mainly attributable to the increase in labor costs and raw material costs as noted above.

Administrative expenses. Our administrative expenses increased by $0.30 million, or 17.24%, to $2.04 million for the six months ended June 30, 2012, from $1.74 million for the same period in 2011. As a percentage of sales revenue, administrative expenses increased to 9.01% for the six months ended June 30, 2012, as compared to 6.16% for the same period in 2011. The increase in administrative expenses was primarily due to an increase of allowance for doubtful accounts. Allowance for doubtful accounts increased by $0.65 million to $0.36 million in the six months ended June 30, 2012 compared with a reversal of allowance for doubtful accounts of $0.29 million for the same period in 2011. The increase in the allowance for doubtful accounts was mainly due to our policies for bad debt reserves. We record an allowance for doubtful accounts at a rate of 25% for receivables aged between 1 to 2 years, 50% for receivables aged between 2 to 3 years and 100% for receivables aged over 3 years.

Research and development expenses. Our research and development expenses decreased by $0.29 million, or 36.37%, to $0.50 million for the six months ended June 30, 2012, from $0.78 million for the same period in 2011. The decrease in research and development expenses was mainly attributable to the decrease in the costs of raw materials used in R&D and the seasonality investment.

Selling expenses. Our selling expenses increased by $0.98 million, or 30.51%, to $4.21 million for the six months ended June 30, 2012, from $3.22 million for the same period in 2011. As a percentage of sales revenue, selling expenses increased to 18.58% for the six months ended June 30, 2012, as compared to 11.42% for the same period in 2011. The increase was mainly attributable to the increased travelling expenses of our sales personnel. Traveling expense increased by $0.57 million, or 31.67%, to $2.37 million for the six months ended June 30, 2012, from $1.80 million for the same period in 2011. The increase in travelling expenses was mainly due to our efforts to expand our market share.

Income before income taxes and noncontrolling interests. Income before income taxes and noncontrolling interests decreased by $4.70 million, or 68.59%, to $2.15 million for the six months ended June 30, 2012, from $6.85 million for the same period in 2011. Such decrease was mainly attributable to decreased gross profit and increased total expenses.

Income taxes. Our income taxes decreased to $0.11 million for the six months ended June 30, 2012, from $0.92 million for the same period in 2011, as a result of decreased taxable income.

Net income attributable to common stockholders. As a result of the cumulative effect of the foregoing factors, our net income attributable to common stockholders decreased by $3.97 million, or 66.55%, to $2.00 million for the six months ended June 30, 2012, from $5.97 million for the same period in 2011. As a percentage of sales revenue, our net income attributable to common stockholders was 8.82% and 21.15% for the six months ended June 30, 2012 and 2011, respectively.

Liquidity and Capital Resources

As of June 30, 2012, we had cash and cash equivalents of $4.78 million, primarily consisting of cash on hand and demand deposits. We can use our land as collateral to borrow approximately $7.91 million. In addition, we have an approximately $3.16 million credit line from Bank of Communications. We anticipate that cash on hand and borrowing capacity under our bank loans will be sufficient to satisfy our ongoing obligations.

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

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

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

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