| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated
financial statements (“CFS”) are prepared in conformity with U.S. Generally Accepted Accounting Principles (“US GAAP”).
The functional currency of the Company’s operating entities is Chinese Renminbi (“RMB”). The accompanying consolidated
financial statements are translated from RMB and presented in U.S. dollars (“USD”). Principle of Consolidation The CFS
include the accounts of SPC and its subsidiaries, Shanghai Yinghua Financial Leasing Co., Ltd. (“Yinghua”) and Sifang
Holdings; Sifang Holdings’ wholly owned subsidiaries, Huahong New Energy Technology Co., Ltd. (“Huahong”) and Shanghai
TCH Energy Tech Co., Ltd. (“Shanghai TCH”); Shanghai TCH’s wholly-owned subsidiary, Xi’an TCH Energy Tech Co.,
Ltd. (“Xi’an TCH”); and Xi’an TCH’s subsidiaries, 1) Erdos TCH Energy Saving Development Co., Ltd (“Erdos
TCH”), 100% owned by Xi’an TCH, 2) Zhonghong, 90% owned by Xi’an TCH and 10% owned by Shanghai TCH, and 3) Zhongxun,
100% owned by Xi’an TCH. Substantially all the Company’s revenues are derived from the operations of Shanghai TCH and its
subsidiaries, which represent substantially all the Company’s consolidated assets and liabilities as of December 31, 2023. However,
there was no revenue for the Company for the years ended December 31, 2023 or 2022. All significant inter-company accounts and transactions
were eliminated in consolidation. Uses and Sources of Liquidity For the years ended December
31, 2023 and 2022, the Company had a net loss of $746,786 and $4,457,327, respectively. The Company had an accumulated deficit of
$60.50 million as of December 31, 2023. The Company disposed all of its systems and currently holds five power generating systems
through Erdos TCH, the five power generating systems are currently not producing any electricity. The Company is in the process of transforming
and expanding into an energy storage integrated solution provider business. The Company plans to pursue disciplined and targeted expansion
strategies for market areas the Company currently does not serve. The Company actively seeks and explores opportunities to apply energy
storage technologies to new industries or segments with high growth potential, including industrial and commercial complexes, large scale
photovoltaic (PV) and wind power stations, remote islands without electricity, and smart energy cities with multi-energy supplies.
The Company’s cash flow forecast indicates it will have sufficient cash to fund its operations for the next 12 months from the date
of issuance of these CFS. Use of Estimates In preparing these CFS in accordance
with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets
as well as revenues and expenses during the period reported. Actual results may differ from these estimates. On an on-going basis,
management evaluates its estimates, including those allowances for bad debt, impairment loss on fixed assets and construction in progress,
income taxes, and contingencies and litigation. Management bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other resources. Revenue Recognition A) Sales-type
Leasing and Related Revenue Recognition The Company follows Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 842. The Company’s sales
type lease contracts for revenue recognition fall under ASC 842. During the years ended December 31, 2023 and 2022, the Company did not
sell any new power generating projects. The Company constructs and leases
waste energy recycling power generating projects to its customers. The Company typically transfers legal ownership of the waste energy
recycling power generating projects to its customers at the end of the lease. The Company finances construction
of waste energy recycling power generating projects. The sales and cost of sales are recognized at the inception of the lease, which is
when control is transferred to the lessee. The Company accounts for the transfer of control as a sales type lease in accordance with ASC
842-10-25-2. The underlying asset is derecognized, and revenue is recorded when collection of payments is probable. This is in accordance
with the revenue recognition principle in ASC 606 - Revenue from contracts with customers. The investment in sales-type leases consists
of the sum of the minimum lease payments receivable less unearned interest income and estimated executory cost. Minimum lease payments
are part of the lease agreement between the Company (as the lessor) and the customer (as the lessee). The discount rate implicit in the
lease is used to calculate the present value of minimum lease payments. The minimum lease payments consist of the gross lease payments
net of executory costs and contingent rentals, if any. Unearned interest is amortized to income over the lease term to produce a constant
periodic rate of return on net investment in the lease. While revenue is recognized at the inception of the lease, the cash flow from
the sales-type lease occurs over the course of the lease, which results in interest income and reduction of receivables. Revenue is recognized
net of value-added tax. B) Contingent
Rental Income The Company records income from
actual electricity generated of each project in the period the income is earned, which is when the electricity is generated. Contingent
rent is not part of minimum lease payments. Operating Leases The Company determines if an
arrangement is a lease or contains a lease at inception. Operating lease liabilities are recognized based on the present value of the
remaining lease payments, discounted using the discount rate for the lease at the commencement date. As the rate implicit in the lease
is not readily determinable for an operating lease, the Company generally uses an incremental borrowing rate based on information available
at the commencement date to determine the present value of future lease payments. Operating lease right-of-use (“ROU assets”)
assets represent the Company’s right to control the use of an identified asset for the lease term and lease liabilities represent
the Company’s obligation to make lease payments arising from the lease. ROU assets are generally recognized based on the amount
of the initial measurement of the lease liability. Lease expense is recognized on a straight-line basis over the lease term. ROU assets are reviewed for impairment
when indicators of impairment are present. ROU assets from operating and finance leases are subject to the impairment guidance in ASC
360, Property, Plant, and Equipment, as ROU assets are long-lived nonfinancial assets. ROU assets are tested for impairment
individually or as part of an asset group if the cash flows related to the ROU asset are not independent from the cash flows of other
assets and liabilities. An asset group is the unit of accounting for long-lived assets to be held and used, which represents the lowest
level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. The Company
recognized no impairment of ROU assets as of December 31, 2023 and 2022. Operating leases are included
in operating lease ROU and operating lease liabilities (current and non-current), on the consolidated balance sheets. Cash Cash includes cash on hand, demand
deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months
or less as of the purchase date. Accounts Receivable The Company’s policy is
to maintain an allowance for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable
and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer
payment patterns to evaluate the adequacy of these reserves. As of December 31, 2023 and 2022, the Company had no accounts receivable. Advance to suppliers Advance to suppliers consist
of balances paid to suppliers for materials that have not been received. The Company reviews its advances to suppliers on a periodic basis
and makes general and specific allowances when there is doubt as to the ability of a supplier to provide supplies to the Company or refund
an advance. Short term loan receivables The Company provided loans to
certain third parties for the purpose of making use of its cash. The Company monitors all loans
receivable for delinquency and provides for estimated losses for specific receivables that are not likely to be collected. Management
periodically assesses the collectability of these loans receivable. Delinquent account balances are written-off against the allowance
for doubtful accounts after management has determined that the likelihood of collection is not probable. As of December 31, 2023 and 2022,
the Company did not accrue allowance against short term loan receivables. Concentration of Credit Risk Cash includes cash on hand and
demand deposits in accounts maintained within China. Balances at financial institutions and state-owned banks within the PRC
are covered by insurance up to RMB 500,000 ($71,792) per bank. Any balance over RMB 500,000 ($71,792) per bank in
PRC is not covered. The Company has not experienced any losses in such accounts. Certain other financial instruments,
which subject the Company to concentration of credit risk, consist of accounts and other receivables. The Company does not require collateral
or other security to support these receivables. The Company conducts periodic reviews of its customers’ financial condition and
customer payment practices to minimize collection risk on accounts receivable. The operations of the Company
are in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political,
economic and legal environments in the PRC. Property and Equipment Property and equipment are stated
at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are expensed as incurred; additions, renewals and betterments
are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed
from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided
using the straight-line method over the estimated lives as follows:
Vehicles 2 – 5 years
Office and Other Equipment 2 – 5 years Impairment
of Long-lived Assets In accordance with FASB ASC Topic
360, “Property, Plant, and Equipment Accounts and other payables Accounts and other payables represent
liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. They are classified
as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). Otherwise,
they are presented as non-current liabilities. Accounts and other payables are
initially recognized as fair value, and subsequently carried at amortized cost using the effective interest method. Borrowings Borrowings are presented as current
liabilities unless the Company has an unconditional right to defer settlement for at least 12 months after the financial year end date,
in which case they are presented as non-current liabilities. Borrowings are initially recognized
at fair value (net of transaction costs) and subsequently carried at amortized cost. Any difference between the proceeds (net of transaction
costs) and the redemption value is recognized in profit or loss over the period of the borrowings using an effective interest method. Borrowing costs are recognized
in profit or loss using the effective interest method. Cost of Sales Cost of sales consists primarily
of the direct material of the power generating system and expenses incurred directly for project construction for sales-type leasing and
sales tax and additions for contingent rental income. Income Taxes Income taxes are accounted for
using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences in future years
of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted
tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company follows FASB ASC
Topic 740, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken
or expected to be taken in a tax return. ASC Topic 740 also provides guidance on recognition of income tax assets and liabilities, classification
of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting
for income taxes in interim periods, and income tax disclosures. Under FASB ASC Topic 740, when
tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others
are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The
benefit of a tax position is recognized in the CFS in the period during which, based on all available evidence, management believes it
is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes,
if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition
threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the
applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described
above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest
and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is
classified as interest expense and penalties are classified in selling, general and administrative expenses in the statement of income. At
December 31, 2023 and 2022, the Company did not take any uncertain positions that would necessitate recording a tax related liability. Statement of Cash Flows In accordance with FASB ASC Topic
230, “Statement of Cash Flows,” Fair Value of Financial Instruments For certain of the Company’s
financial instruments, including cash and equivalents, restricted cash, accounts receivable, other receivables, accounts payable, accrued
liabilities and short-term debts, the carrying amounts approximate their FVs due to their short maturities. Receivables on sales-type
leases are based on interest rates implicit in the lease. FASB ASC Topic 820, “Fair
Value Measurements and Disclosures,” “Financial Instruments,”
● Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
● Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are
observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
● Level
3 inputs to the valuation methodology are unobservable and significant to FV measurement. The
Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC 480, “Distinguishing
Liabilities from Equity,” “Derivatives and Hedging.” As of December 31, 2023 and 2022,
the Company did not have any long-term debt; and the Company did not identify any assets or liabilities that are required to be presented
on the balance sheet at FV. Stock-Based Compensation The Company accounts for share-based
compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires
that share-based payment transactions with employees be measured based on the grant-date FV of the equity instrument issued and recognized
as compensation expense over the requisite service period. The Company accounts for share-based
compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based Payments
to Non-employees”. Share-based compensation associated with the issuance of equity instruments to non-employees is measured at the
FV of the equity instrument issued or committed to be issued, as this is more reliable than the FV of the services received. The FV is
measured at the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance
is complete. The Company follows ASU 2018-07,
“Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands
the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. An entity should
apply the requirements of ASC 718 to non-employee awards except for specific guidance on inputs to an option pricing model and the attribution
of cost. ASC 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed
in a grantor’s own operations by issuing share-based payment awards. Basic and Diluted Earnings
per Share The Company presents net income
(loss) per share (“EPS”) in accordance with FASB ASC Topic 260, “Earning Per Share.” For the years ended December
31, 2023 and 2022, the basic and diluted income (loss) per share were the same due to the anti-dilutive features of the warrants and options.
For the years ended December 31, 2023 and 2022, 30,911 shares purchasable under warrants and options were excluded from the
EPS calculation as these were not dilutive due to the exercise price was more than the stock market price. Foreign Currency Translation
and Comprehensive Income (Loss) The Company’s functional
currency is the Renminbi (“RMB”). For financial reporting purposes, RMB were translated into U.S. Dollars (“USD”
or “$”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet
date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments
arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated
other comprehensive income.” Gains and losses resulting from foreign currency transactions are included in income. The Company follows FASB ASC
Topic 220, “Comprehensive Income.” Segment Reporting FASB ASC Topic 280, “Segment
Reporting,” New Accounting Pronouncements In December
2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure
of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure
requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company’s
management does not believe the adoption of ASU 2023-09 will have a material impact on its financial statements and disclosures. Other recent accounting pronouncements
issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did
not or are not believed by management to have a material impact on the Company’s present or future CFS. |
