| 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 September
30, 2024. However, there was no revenue for the Company for the nine and three months ended September 30, 2024 or 2023. All significant
inter-company accounts and transactions were eliminated in consolidation. A
subsidiary is an entity in which (i) the Company directly or indirectly controls more than 50% of the voting power; or (ii) the
Company has the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the
meetings of the board of directors or to govern the financial and operating policies of the investee pursuant to a statute or under an
agreement among the shareholders or equity holders. Uses
and Sources of Liquidity For
the nine months ended September 30, 2024 and 2023, the Company had a net loss of $952,285 and $518,069, respectively. For the three
months ended September 30, 2024 and 2023, the Company had a net loss of $262,731 and $180,723, respectively. The Company had an
accumulated deficit of $61.45 million as of September 30, 2024. 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 nine and three months ended
September 30, 2024 and 2023, 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, 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 September 30, 2024 and December 31, 2023. 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. Credit
losses On
January 1, 2023, the Company adopted Accounting Standards Update 2016-13 “Financial Instruments — Credit
Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with
an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The adoption of
the credit loss accounting standard has no material impact on the Company’s consolidated financial statements as of January 1,
2023. The
Company’s other receivables in the balance sheet are within the scope of ASC Topic 326. As the Company has limited customers
and debtors, the Company uses the loss-rate method to evaluates the expected credit losses on an individual basis. When establishing
the loss rate, the Company makes the assessment on various factors, including historical experience, credit-worthiness of customers
and debtors, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that
may affect its ability to collect from the customers and debtors. The Company also provides specific provisions for allowance when facts
and circumstances indicate that the receivable is unlikely to be collected. Expected
credit losses are recorded as allowance for credit losses on the consolidated statements of operations. After all attempts to collect
a receivable have failed, the receivable is written off against the allowance. In the event the Company recovers amount that is previously
reserved for, the Company will reduce the specific allowance for credit losses. 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 September 30, 2024 and December 31, 2023,
the Company had no accounts receivable. Value
added tax (“VAT”) The
Company is subject to VAT and related surcharges on revenue generated from sales and services. The Company records revenue net of VAT.
This VAT may be offset by qualified input VAT paid by the Company to suppliers. Net VAT balance between input VAT and output VAT is recorded
in the line item of VAT receivable on the unaudited consolidated balance sheets. The
VAT rate is 13% for taxpayers selling consumer products and 6% for providing technology services. Entities that are VAT general
taxpayers are allowed to offset qualified input VAT, paid to suppliers against their output VAT liabilities. As of September 30, 2024
and December 31, 2023, the Company had $172,528 and $170,694 VAT receivable, respectively. 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
September 30, 2024, the Company did not have any outstanding short term loan receivables; at December 31, 2023, the Company had $68.77 million
short term loan receivables and 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. Plant
and Equipment Plant
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 plant 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 plant 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, “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
September 30, 2024 and December 31, 2023, 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 September 30, 2024 and December 31, 2023, 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 nine and three months ended September 30, 2024 and 2023, the basic and diluted income (loss) per share were the same due to the anti-dilutive
features of the warrants and options. For the nine and three months ended September 30, 2024 and 2023, 17,015 shares and 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
November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU
2023-07”). The amendments in ASU 2023-07 improve reportable segment disclosure requirements through enhanced disclosures about
significant segment expenses that are regularly provided to the chief operating decision maker (CODM). In addition, the amendments enhance
interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide
new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. ASU 2023-07
will be effective for annual reporting periods beginning after December 15, 2023, and interim periods within annual reporting periods
beginning after December 15, 2024. Early adoption is permitted. The adoption of ASU 2023-01 did not have a material impact on the Company’s
consolidated financial statement presentation or disclosures. In
December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”),
which requires disclosures of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes
paid, among other disclosure requirements. This ASU will be effective for annual reporting periods beginning after December 15, 2024.
Early adoption is permitted. ASU 2023-09 will be applied on a prospective basis with the option to apply the standard retrospectively.
The Company’s management does not believe that the adoption of ASU 2023-09 will have a material impact on the Company’s consolidated
financial statement presentation or disclosures. The
Company’s management does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently
adopted, will have a material impact on the Company’s financial statement presentation or disclosures. |
