Lithium & Boron Technology (LBTI) 8-K Shenyang Taiyu Machinery & Electronic Equipment Co., LTD

SmartHeat, Inc.

and

Taiyu Machinery & Electronic Equipment Co., Ltd.

Pro Forma Combined Financial Statements

(unaudited)

Contents

Pro Forma Combined Financial Statements:	Page
Pro Forma Combined Balance Sheet as of December 31, 2007 (unaudited)	F- 2
Pro Forma Combined Statements of Operations for the year ended December 31, 2006 (unaudited)	F- 3
Notes to Pro Forma Combined Financial Statements (unaudited)	F- 4

F-1

SMARTHEAT INC. (FKA: PACIFIC GOLDRIM RESOURCES, INC.)

AND TAIYU MACHINERY & ELECTRONIC EQUIPMENT CO., LTD.

Pro forma Combined Balance Sheet

As of December 31, 2007

(unaudited)

		SmartHeat			Taiyu		Pro forma				Pro forma
			(1)			(2)	Adjustments				Combined
		(historical)			(historical)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents	$	7,632		$	393,147	$	(7,632	)	(b)	$	393,147
	Restricted cash					537,098						537,098
	Accounts receivable, net					4,762,822						4,762,822
	Retentions receivable					191,319						191,319
	Inventory					7,928,408						7,928,408
	Advances to suppliers					158,750						158,750
	Other receivables					766,231						766,231
	Due from related parties					118,560						118,560
TOTAL CURRENT ASSETS			7,632			14,856,335		(7,632	)			14,856,335
PROPERTY AND EQUIPMENT, NET						2,040,809						2,040,809
Accounts receivable, net						949,998						949,998
Retentions receivable						169,309						169,309
Intangible assets, net						534,208						534,208
TOTAL NONCURRENT ASSETS						1,653,515
TOTAL ASSETS		$	7,632		$	18,550,659	$	(7,632	)		$	18,550,659
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Accounts payable	$	272		$	3,128,585	$	(272	)	(b)	$	3,128,585
	Customer deposits					3,125,406						3,125,406
	Other payables					807,700						807,700
	Tax payable					503,010						503,010
	Due to related party					445,990						445,990
	Loan payable					4,619,856						4,619,856
TOTAL CURRENT LIABILITIES			272			12,630,547		(272	)			12,630,547
STOCKHOLDERS' EQUITY
	Common Stock		6,549					16,000		(a)		22,549
	Additional paid in capital		38,426			3,120,632		(60,975	)	(a)		3,098,083
	Statutory reserve		(37,615	)		506,532		37,615				506,532
	Accumulated other comprehensive income					473,859						473,859
	Retained earnings					1,819,089						1,819,089
TOTAL STOCKHOLDERS' EQUITY			7,360			5,920,112		(7,360	)			5,920,112
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	7,632		$	18,550,659	$	(7,632	)		$	18,550,659
(1)	Source: unaudited financial statements of SmartHeat Inc. (FKA: Pacific Goldrim Resources, Inc.) as of January 31, 2008 as filed in Quarterly Report on Form 10QSBfiled with the SEC on March 04, 2008.
(2)	Source: audited financial statements of Taiyu Machinery & Electronic Equipment Co., Ltd. as of December 31, 2007 included in this 8-K.
(a)	After cancellation of 2,500,000 shares by the old shareholders of Smartheat and issuance of 18,500,000 shares to the shareholder of Taiyu, total shares outstanding after the reverse merge is 22,549,900.
(b)	Spin off of Smartheat's assets and liabilities to shareholder as consideration of cancellation of shares.
See accompanying notes to pro forma combined financial statements

F-2

SMARTHEAT INC. (FKA: PACIFIC GOLDRIM RESOURCES, INC.)

AND TAIYU MACHINERY & ELECTRONIC EQUIPMENT CO., LTD.

Pro forma Combined Statement of Operations

As of December 31, 2007

(unaudited)

	SmartHeat			Taiyu			Pro forma		Pro forma
		(1)			(2)		Adjustments		Combined
	(historical)			(historical)
Net Revenue	$	-		$	13,273,151		$	-	$	13,273,151
Cost of Revenue		-			8,667,353					8,667,353
Gross Profit		-			4,605,798			-		4,605,798
Operating expenses:
Selling expenses		-			1,681,624					1,681,624
General and administrative expenses		30,456			687,466					717,922
Total operating expenses		30,456			2,369,090			-		2,399,546
Income (loss) from operations		(30,456	)		2,236,708			-		2,206,252
Non-operating income (expenses):
Interest income					175,084					175,084
Interest expense					(230,905	)				(230,905	)
Other income					45,126					45,126
Other expenses					(16,939	)				(16,939	)
Subsidy income					52,591					52,591
Total non-operating income		-			24,957			-		24,957
Income before income tax		(30,456	)		2,261,665					2,231,209
Income tax expense		-			(175,647	)				(175,647	)
Income after income tax		(30,456	)		2,086,018					2,055,562
Minority interest		-			1,873					1,873
Net income	$	(30,456	)	$	2,087,891		$	-	$	2,057,435
Earnings per share	$	(0.00	)						$	0.09
Weighted average shares outstanding		6,549,900								22,549,900
(1)    Source: audited financial statements of SmartHeat Inc. (FKA: Pacific Goldrim Resources, Inc.) as of October 31, 2007 as filed in annual Report on Form 10KSB filed with the SEC on January 29, 2008.
(2)   Source: audited financial statements of Taiyu Machinery & Electronic Equipment Co., Ltd. as of December 31, 2007 included in this 8-K.
See accompanying notes to pro forma combined financial statements

F-3

SmartHeat, Inc. and

Taiyu Machinery & Electronic Equipment Co., Ltd.

Notes to Pro forma Consolidated Financial Statements

NOTE 1 - BASIS OF PRESENTATION

Pursuant to a share exchange agreement dated April 14, 2008, between SmartHeat Inc. ("SmartHeat"), formerly known as Pacific Goldrim Resources, Inc, and Taiyu Machinery & Electronic Equipment Co., Ltd. ("Taiyu"), SmartHeat issued 18,500,000 shares of its common stock to acquire Taiyu. Concurrent with the share exchange agreement, one of SmartHeat’s shareholder cancelled 2,500,000 shares out of 6,549,900 of total issued and outstanding shares of SmartHeat.

The accompanying pro forma consolidated balance sheet presents the accounts of SmartHeat and Taiyu as if the acquisition of Taiyu by SmartHeat occurred on December 31, 2007.  The accompanying pro forma consolidated statements of operations present the accounts of SmartHeat and Taiyu for the year ended December 31, 2007 as if the acquisition occurred on January 1, 2007 for income statement purpose. For accounting purposes, the transaction is being accounted for as a recapitalization of Taiyu as Taiyu’s shareholders will own the majority of the shares and will exercise significant influence over the operating and financial policies of the consolidated entity.

The following adjustments would be required if the acquisition occurred as indicated above:

a.           Recapitalization of Taiyu to account for issuance

·   of an aggregate of 18,500,000 shares of SmartHeat to the shareholders of Taiyu,

·   the total issued and outstanding shares after the reverse merger were 22,549,900;

b.           Cancellation of 2,500,000 shares of SmartHeat

·   common stock owed by major shareholder, officers of Goldrim and

·   public float as part of the transaction. The assets and liabilities of SmartHeat

·   were spun off to the shareholder as consideration of the cancellation of

·   2,500,000 shares owned by the shareholder.

F-4