UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2020

 

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File Number: 001-37513

 

CODE CHAIN NEW CONTINENT LIMITED

(Exact name of registrant as specified in its charter)

 

Nevada   47-3709051
(State or other jurisdiction of
incorporation or organization)
 

(I.R.S. Employer

Identification Number)

  

180 Qingnian West Road,

Hongqiao Building West, 4th Floor

Nantong, Jiangsu, China

  226001
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: +86 0513-8912-3630

 

Not applicable

(Former name or former address, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, 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 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of August 12, 2020, there were 30,188,958 shares of the Company’s common stock issued and outstanding.

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.0001   CCNC   Nasdaq Capital Market

 

 

 

 

  

TABLE OF CONTENTS

 

    Page
PART I. FINANCIAL INFORMATION 1
     
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) 1
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 33
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 44
     
ITEM 4. CONTROLS AND PROCEDURES 44
     
PART II. OTHER INFORMATION 45
     
ITEM 1. LEGAL PROCEEDINGS 45
     
ITEM 1A. RISK FACTORS 45
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 45
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 45
     
ITEM 4. MINE SAFETY DISCLOSURES 45
     
ITEM 5. OTHER INFORMATION 45
     
ITEM 6. EXHIBITS 45

 

i

 

  

PART I — FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

CODE CHAIN NEW CONTINENT LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

   June 30,   December 31, 
   2020   2019 
   (Unaudited)     
ASSETS        
CURRENT ASSETS        
Cash and cash equivalents  $1,939,520   $2,483,567 
Short Term Investment   3,036,938    - 
Notes receivable        43,003 
Accounts receivable, net   

1,039,772

    2,197,264 
Other receivables, net   

1,820,365

    52,616 
Inventories   1,248,906    1,197,065 
Prepayments   4,144,414    4,069,214 
Discontinued operations - current assets   -    1,544,177 
Total current assets   13,229,915    11,586,906 
           
PLANT AND EQUIPMENT, NET   79,688    19,057 
           
RIGHT-OF-USE ASSETS   85,605    90,250 
           
OTHER ASSETS          
Goodwill   14,329,042    7,289,454 
Intangible assets, net   1,130,528    - 
Deferred tax assets   3,531    37,532 
Discontinued operations – non-current assets   -    3,424,390 
Total other assets   15,463,101    10,751,376 
           
Total assets  $28,858,309   $22,447,589 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
           
CURRENT LIABILITIES          
Short term loans - bank  $437,884   $- 
Accounts payable   920,480    344,108 
Other payables and accrued liabilities   2,585,341    4,121,862 
Other payables - related parties   641,570    1,336,902 
Customer deposits   1,040,124    146,771 
Lease liabilities - current   62,093    61,009 
Taxes payable   3,555    202 
Discontinued operations - current liabilities        10,174,066 
Total current liabilities   5,691,047    16,184,920 
           
OTHER LIABILITIES          
Lease liabilities - noncurrent   60,681    61,580 
Discontinued operations – non-current liabilities   -    239,097 
Total other liabilities   60,681    300,677 
           
Total liabilities   5,751,728    16,485,597 
           
COMMITMENTS AND CONTINGENCIES          
           
SHAREHOLDERS’ EQUITY          
Preferred stock, $0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively   -    - 
Common stock, $0.0001 par value, 200,000,000 shares authorized, 28,514,520 and 20,821,661 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively*   2,851    2,082 
Additional paid-in capital   19,242,951    8,350,861 
Retained earnings   5,400,286    (1,558,683)
Accumulated other comprehensive loss   (1,539,507)   (832,268)
Total shareholders’ equity   23,106,581    5,961,992 
           
Total liabilities and shareholders’ equity  $28,858,309   $22,447,589 

 

1

 

  

CODE CHAIN NEW CONTINENT LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

  

   For the
Three Months Ended
June 30,
   For the
Six Months Ended
June 30,
 
   2020   2019   2020   2019 
REVENUES                
Equipment and systems  $-   $-   $-   $- 
Fuel materials   1,279,781    7,418,297    6,445,181    12,285,253 
Trading and others   46,482    473,468    46,482    639,297 
TOTAL REVENUES   1,326,263    7,891,765    6,491,663    12,924,550 
                     
COST OF REVENUES                    
Equipment and systems   -    -    -    - 
Fuel materials   1,189,205    7,423,011    6,172,177    12,312,714 
Trading and others   -    256,787    -    316,063 
TOTAL COST OF REVENUES   1,189,205    7,679,798    6,172,177    12,628,777 
                     
GROSS PROFIT   137,058    211,967    319,486    295,773 
                     
OPERATING EXPENSES (INCOME)                    
Selling, general and administrative   311,685    (19,305)   904,055    567,804 
Provision for (recovery of) doubtful accounts   969    405,022    (134,769)   289,873 
TOTAL OPERATING EXPENSES (INCOME)   312,654    385,717    769,286    857,677 
                     
INCOME FROM OPERATIONS   (175,596)   (173,750)   (449,800)   (561,904)
                     
OTHER INCOME (EXPENSE)                    
Interest income   8,423    (2)   10,063    - 
Interest expense   (9,462)   (9,764)   (11,482)   (17,606)
Investment income   3,600    -    12,950    - 
Other income (expense), net   (1)   946    (1)   - 
Total other income (expense), net   2,560    (8,820)   11,530    (17,606
                     
INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS   (173,036)   (182,570)   (438,270)   (579,510)
                     
PROVISION FOR INCOME TAXES   1,567    (5,279)   50,111    42,239 
                     
INCOME FROM CONTINUING OPERATIONS   (174,603)   (177,291)   (488,381)   (621,749)
                     
Discontinued operations:                    
Income (loss) from discontinued operations, net of taxes   (4,446)   1,537,297    495,733    1,250,309 
Gain on disposal, net of taxes   6,951,617    -    6,951,617    - 
    6,947,171    1,537,297    7,447,350    1,250,309 
                     
Net income   6,772,568    1,360,006    6,958,969    628,560 
                     
OTHER COMPREHENSIVE INCOME                    
Foreign currency translation adjustment   (382,301)   (558,490)   (707,240)   (47,405)
                     
COMPREHENSIVE INCOME (LOSS)  $6,390,267   $801,516   $6,251,729   $581,155 
                     
WEIGHTED AVERAGE NUMBER OF COMMON SHARES                    
Basic and diluted*   27,640,684    21,735,542    27,640,684    20,867,311 
                     
Earnings per share from continuing operations                    
Basic and diluted   (0.01)   (0.01)   (0.02)   (0.03)
                     
Earnings per share from discontinued operations                    
Basic and diluted   0.25    0.07    0.27    0.06 
                     
Earnings per share available to common shareholders                    
Basic and diluted*  $0.25   $0.06   $0.25   $0.03 

 

2

 

  

CODE CHAIN NEW CONTINENT LIMITED AND SUBSIDIARIES

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

 

   For the Six Months Ended June 30, 2019 
   Preferred Stock   Common Stock   Additional   Retained Earnings   Accumulated
Other
     
   Shares   Amount   Shares   Amount   Paid-in Capital   Statutory
Reserves
   Unrestricted   Comprehensive
Income (Loss)
   Total 
BALANCE, January 1, 2019        -   $    -    19,895,935   $1,990   $4,814,846         -   $15,267,660   $(720,693)  $19,363,803 
Net income   -              -    -    -    628,560    -    628,560 
Conversion of warrants into common stock        -    106,903    11    (11)   -    -    -    - 
Issuance of common stock for debt settlement   -    -    131,330    13    261,334    -    -    -    261,347 
Issuance of common stock for debt settlement   -    -    142,530    14    290,747    -    -    -    290,761 
Issuance of common stock for cash             1,492,000    149    2,983,850    -    -         2,983,999 
Foreign currency translation   -    -    -    -    -    -    -    (47,405)   (47,405)
BALANCE, June 30, 2019 (Unaudited)   -   $-    21,768,698   $2,177    8,350,766   $-   $15,896,220   $(768,098)  $23,481,065 

 

   For the Six Months Ended June 30, 2020 
   Preferred Stock   Common Stock   Additional   Retained Earnings   Accumulated
Other
     
                   Paid-in   Statutory       Comprehensive     
   Shares   Amount   Shares   Amount   Capital   Reserves   Unrestricted   Income (Loss)   Total 
BALANCE, January 1, 2020      -        -    20,821,661    2,082    8,350,861         -    (1,558,683)   (832,267)   5,961,993 
Net income   -    -    -    -    -    -    6,958,969    -    6,958,969 
Issuance of shares for acquisition   -    -    4,000,000    400    7,199,600    -    -    -    7,200,000 
Issuance of common stock for cash   -    -    3,692,859    369    3,692,490    -    -    -    3,692,859 
Foreign currency translation   -    -    -    -    -    -    -    (707,240)   (707,240)
BALANCE, June 30, 2020 (Unaudited)   -   $-    28,514,520   $2,851   $19,242,951   $-   $5,400,286   $(1,539,507)  $23,106,581 

 

3

 

  

CODE CHAIN NEW CONTINENT LIMITED AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   For the
Six Months Ended
June 30,
 
   2020   2019 
         
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income  $6,958,969   $628,560 
Adjustments to reconcile net income to net cash used in operating activities:          
Depreciation of plant and equipment   8,448    198,570 
Amortization of intangible assets   46    108,082 
Gain on disposal of discontinued operations   (6,951,617)     
Deferred tax provision   33,692    (8,229)
Change in operating assets and liabilities          
Notes receivable   42,679    (640,167)
Accounts receivables   1,133,484    (2,627,521)
Other receivables   (32,423)   (202,197)
Other receivable - related party   13,260    41,297 
Inventories   (69,803)   638,092 
Prepayments   (131,316)   (346,858)
Accounts payable   545,282    648,537 
Other payables and accrued liabilities   (1,161,359)   (1,764,652)
Customer deposits   599,565    506,600 
Lease liabilities   13,377    51,948 
Taxes payable   3,380    475,649 
Net cash used in operating activities   1,005,664    (2,292,289)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Net increase in cash from acquisition of Wuge   228,788    - 
Net decrease in cash from disposal of discontinued operations   (470,576)   - 
Purchase of intangible assets   (1,138,664)   - 
Purchase of financial products   (3,058,670)   - 
Purchase of equipment   (63,814)   (16,796)
Net cash (used in) provided by investing activities   (4,502,936)   (16,796)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from issuance of common stock   2,572,697    2,984,000 
Proceeds from short-term loans - bank   441,017    - 
Net cash provided by financing activities   3,013,714    2,984,000 
           
EFFECT OF EXCHANGE RATE ON CASH   (60,489)   (65,187)
           
INCREASE IN CASH   (544,047)   609,728 
           
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   2,483,567    726,737 
           
CASH AND CASH EQUIVALENTS, END OF PERIOD  $1,939,520   $1,336,465 
           
SUPPLEMENTAL CASH FLOW INFORMATION:          
Cash paid for income tax  $16,419   $- 
Cash paid for interest  $11,482   $17,606 
           
NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES          
Issuance of common stock for warrants conversion  $-   $11 
Issuance of common stock for debts settlement  $-   $552,108 
Initial recognition of right-of-use assets and lease liabilities  $122,774   $317,349 

  

4

 

  

CODE CHAIN NEW CONTINENT LIMITED AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1 – Nature of business and organization

 

Code Chain New Continent Limited (the “Company” or “CCNC”), formerly known as TMSR Holding Company Limited and JM Global Holding Company, was a blank check company incorporated in Delaware on April 10, 2015. The Company was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, exchangeable share transaction or other similar business transaction, one or more operating businesses or assets. On June 20, 2018, CCNC completed a reincorporation and as a result, the Company changed its state of incorporation from Delaware to Nevada (the “Reincorporation”). The Articles of Incorporation and Bylaws of CCNC Nevada became the governing instruments of the Company, resulting in a 2-for-1 forward stock split of the Company’s common stock (the “Forward Split). The Reincorporation and Forward Split were approved by shareholders holding the majority of the outstanding shares of common stock of CCNC Delaware on June 1, 2018 at the Annual Meeting of Shareholders.

 

On February 6, 2018, China Sunlong Environmental Technology Inc. (“China Sunlong”) consummated the business combination with the Company pursuant to a Share Exchange Agreement (the “Share Exchange Agreement”) dated as of August 28, 2017 by and among (i) the Company; (ii) Zhong Hui Holding Limited; (iii) China Sunlong; (iv) each of the shareholders of China Sunlong named on Annex I of the Share Exchange Agreement (the “Sellers”); and (v) Chuanliu Ni, a Chinese citizen who is the Chief Executive Officer and director of China Sunlong, in the capacity as the representative for the Sellers. Pursuant to the Share Exchange Agreement, the Company acquired from the Sellers all of the issued and outstanding equity interests of China Sunlong in exchange for 17,990,856 newly-issued shares of common stock of the Company to the Sellers. 1,799,088 of these newly-issued shares are held in escrow for 18 months from the closing date of the Business Combination as a security for China Sunlong and the Sellers’ indemnification obligations under the Share Exchange Agreement. This transaction is accounted for as a “reverse merger” and recapitalization at the date of the consummation of the transaction since the shareholders of China Sunlong owns the majority of the outstanding shares of the Company immediately following the completion of the transaction and the Company’s operations was the operations of China Sunlong following the transaction. Accordingly, China Sunlong was deemed to be the accounting acquirer in the transaction and the transaction was treated as a recapitalization of China Sunlong. The financial statements of China Sunlong prior to February 6, 2018 are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of the Company.

 

China Sunlong is a holding company incorporated on August 31, 2015, under the laws of the Cayman Islands. China Sunlong has no substantive operations other than holding all of the outstanding share capital of Shengrong Environmental Protection Holding Company Limited (“Shengrong BVI”). Shengrong BVI is a holding company incorporated on June 30, 2015, under the laws of the British Virgin Islands. Shengrong BVI has no substantive operations other than holding all of the outstanding share capital of Hong Kong Shengrong Environmental Technology Limited (“Shengrong HK”). Shengrong HK is also a holding company holding all of the outstanding equity of Shengrong Environmental Protection Technology (Wuhan) Co., Ltd. (“Shengrong WFOE”).

 

The Company focuses on the industrial solid waste recycling and comprehensive utilization. The Company’s main products are high efficiency permanent magnetic separators and comprehensive utilization systems for industrial solid wastes. The Company’s headquarter is located in Hubei Province, in the People’s Republic of China (the “PRC” or “China”). All of the Company’s business activities are carried out by the wholly owned operating Chinese company, Hubei Shengrong Environmental Protection Energy-Saving Science and Technology Ltd. (“Hubei Shengrong”) prior to May 1, 2018.

 

On April 11, 2018, the Company, Shengrong WFOE and Hubei Shengrong, both of which are the Company’s indirectly owned subsidiaries (collectively “Purchasers”), entered into a Share Purchase Agreement with Long Liao, Chunyong Zheng, Wuhan Modern Industrial Technology Research Institute, and Hubei Zhonggong Materials Group Co., Ltd. (collectively “Sellers” ) and Wuhan HOST Coating Materials Co., Ltd. (“Wuhan HOST”), a company incorporated in China engaging in the research, development, production and sale of coating materials. Pursuant to the Share Purchase Agreement, as supplemented on August 16, 2018, the Purchasers acquired all of the outstanding equity interests of Wuhan Host. In exchange for the transfer of 100% equity interest of Wuhan Host, Purchasers shall pay a total consideration of $11.2 million, of which $4.7 million or RMB equivalent shall be paid in cash and $6.0 million shall be paid in shares of common stock, of CCNC (“Share Consideration”). The Parties agree the Share Consideration shall be an aggregate of 1,012,932 shares of common stock of which is based on the closing price of US$4.64 on March 27, 2018.

 

5

 

 

 

On March 31, 2017, China Sunlong completed its acquisition of 100% of the equity in TJComex International Group Corporation (“TJComex BVI”). At the closing of such acquisition, the selling shareholders of TJComex BVI received 5,935 shares of China Sunlong Common Stock valued at $926.71 per share for 100% of their equity in TJComex BVI. TJComex BVI owns 100% of the issued and outstanding capital stock of TJComex Hong Kong Company Limited (“TJComex HK”), a Hong Kong limited liability company, which owns 100% equity interest of Tianjin Corro Technological Consulting Co., Ltd. (“TJComex WFOE”), a wholly foreign owned enterprise incorporated under the laws of the PRC. Pursuant to certain contractual arrangements, TJComex WFOE controls Tianjin Commodity Exchange Co., Ltd. (“TJComex Tianjin”), a limited liability company incorporated under the law of the PRC. TJComex Tianjin is engaged in general merchandise trading business and related consulting services, and its headquarter is located in the city of Tianjin, PRC.

 

On April 2, 2018, the Company disposed of its subsidiary, TJComex BVI in consideration of (i) its minimum contribution to the Company’s results of operation and (ii) the unsatisfactory synergy between the TJComex BVI business and the rest of the Company’s business. The Company’s decision to dispose of TJComex BVI is to (i) improve the Company’s overall financial condition and results of operations, (ii) reduce the complexity of the Company’s business, (iii) focus the Company’s resources on the solid waste recycling business as well as developing environmental control business opportunities; and (iv) make it possible for the Company to pursue acquisition opportunities for more compatible businesses. TJComex BVI was disposed to Chuanliu Ni, a Chinese citizen who is the director of China Sunlong.

 

As of April 2, 2018, the net assets of TJComex BVI were $16,598 and is being recorded as a loss from disposal of subsidiary in the consolidated financial statements for the period ending December 31, 2018. As TJComex BVI operating revenue was less than 1% of the Company’s revenue and the disposal did not constitute a strategic shift that will have a major effect on the Company’s operations and financial results, the results of operations for TJComex BVI were not reported as discontinued operations under the guidance of Accounting Standards Codification 205.

 

On October 10, 2017, Hubei Shengrong established a wholly owned subsidiary, Fujian Shengrong Environmental Protection Energy-Saving Science and Technology Ltd. (“Fujian Shengrong”), with registered capital of RMB 10,000,000 (approximately USD 1,518,120). Fujian Shengrong has no operations prior to May 30, 2018. On May 30, 2018, Hubei Shengrong and two unrelated entities entered into certain Capital Transfer and Contribution Agreement pursuant to which these two entities shall contribute cash of approximately USD 5.0 million (RMB 32.0 million) into Fujian Shengrong and Hubei Shengrong shall contribute approximately USD 1.3 million (RMB 8.0 million) which is the consideration for certain technology consulting services to be provided by Hubei Shengrong to the two entities. Upon completion of the contribution, the total registered capital of Fujian Shengrong increased to RMB 40.0 million (approximately USD 6.3 million) and Hubai Shengrong owns 20% and the two entities collectively own 80% of the equity interest of Fujian Shengrong. In August 2018, Hubei Shengrong transferred 20% equity interest of Fujian Shengrong to Shengrong WFOE. The Company will account for the investment in Fujian Shengrong using the cost method. Since Shengrong WFOE did not provide any cash contribution to Fujian Shengrong or technology services, the investment balance under the cost method investment on June 30, 2020 is $0.

 

6

 

  

 

On November 30, 2018, the Company entered into a Share Purchase Agreement with Jirong Huang and Qihuang Wang (collectively “Sellers”) and Jiangsu Rong Hai Electric Power Fuel Co., Ltd. (“Rong Hai”), a company incorporated in China engaging in the sale of fuel materials and harbor cargo handling services. Pursuant to the Share Purchase Agreement, CCNC shall issue an aggregate of 4,630,000 shares of CCNC’s common stock to the Rong Hai Shareholders, in exchange for Rong Hai Shareholders’ agreement to enter into, and their agreement to cause Rong Hai to enter into, certain VIE Agreements (the “Rong Hai VIE Agreements”) with Shengrong WFOE, through which Shengrong WFOE shall have the right to control, manage and operate Rong Hai in return for a service fee approximately equal to 100% of Rong Hai’s net income (“Acquisition”). On November 30, 2018, Shengrong WFOE, the Company’s indirectly owned subsidiary, entered into a series of VIE Agreements with Rong Hai and the Rong Hai Shareholders. The VIE Agreements are designed to provide Shengrong WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Rong Hai, including absolute rights to control the management, operations, assets, property and revenue of Rong Hai. Rong Hai has the necessary license to carry out coal trading business in China. The Acquisition closed on November 30, 2018. Starting on November 30, 2018, the Company’s business activities added coal wholesales and sales of coke, steels, construction materials, mechanical equipment and steel scrap, of which business activities are carried out in Nantong, Jiang Su Province, PRC.

 

On December 27, 2018, the Company, entered into an Equity Purchase Agreement with Hopeway International Enterprises Limited., a private limited company duly organized under the laws of British Virgin Islands (the “Hopeway”). Pursuant to the Equity Purchase Agreement, Shengrong WOFE shall sell 100% equity interests in Hubei Shengrong to Hopeway in exchange for Hopeway’s agreement to irrevocably forfeit and cancel 8,523,320 shares of common stock of the Company, constituting all the shares owned by Hopeway. The transaction contemplated by the Equity Purchase Agreement is hereby referred as Disposition. The Company’s decision to dispose of Hubei Shengrong is due to the planning mandates of Wuhan Municipal Government 2018 which manufactures should move away from city’s downtown area. Therefore, due to the policy change, Hubei Shengrong is forced to close the existing facility, relocate and build a new facility, which is expected to take approximately 7-8 years. As a result, Hubei Shengrong will not be able to keep the production running and will generate no income in the foreseeable future. Management believed it is very difficult, if possible at all, to continue manufacturing of solid waste recycling systems. As such, the Company has been actively seeking to dispose Hubei Shengrong while retaining the research and development and sale of solid waste recycling systems business. Upon closing of the Disposition, Hopeway will become the sole shareholder of Hubei Shengrong and as a result, assume all assets and obligations of Hubei Shengrong except the research and development team and intellectual property rights in connection with the solid waste recycling systems business shall be assigned to Shengrong WFOE as part of the Disposition. As Shengrong WFOE has significant continuing involvement in the sale of solid waste recycling systems business and the processed industrial waste materials trading business, this restructuring did not constitute a strategic shift that will have a major effect on the Company’s operations and financial results. Therefore, the results of operations for Hubei Shengrong were not reported as discontinued operations under the guidance of Accounting Standards Codification 205.

 

In April 2019, TMSR Holdings Limited (“TMSR HK”), our indirect wholly owned subsidiary, was incorporated under the laws of Hong Kong.

 

In August 2019, Tongrong Technology (Jiangsu) Co., Ltd. (“Tongrong WFOE”), our indirect wholly owned subsidiary, was incorporated under the laws of PRC.

 

In August 2019, Citi Profit Investment Holding Limited (“Citi Profit”), an exempted company formed under the laws of the British Virgin Islands, became our wholly owned subsidiary.

 

TMSR HK, Tongrong WFOE and Citi Profit are all holding companies that do not have any substantive business operations.

 

On January 3, 2020, the Company entered into a share purchase agreement with Sichuan Wuge Network Games Co., Ltd. (“Wuge”) and all the shareholders of Wuge, including Wei Xu, Bibo Lin, Jiangsu Lingkong Network Joint Stock Co., Ltd., which is controlled by Wei Xu, and Anhui Shuziren Network Technology Co., Ltd., which is also controlled by Wei Xu. Pursuant to the share purchase agreement, on January 24, 2020, the Company issued an aggregate of 4,000,000 shares of TMSR’s common stock to the shareholders of Wuge, in exchange for Wuge’s shareholders’ agreement to enter into, and their agreement to cause Wuge to enter into, certain VIE agreements (the “Wuge VIE Agreements”) with Tongrong WFOE, through which Tongrong WFOE has the right to control, manage and operate Wuge in return for a service fee equal to 100% of Wuge’s net income.

 

On April 30, 2020, Tongrong WFOE entered into a series of assignment agreements with Shengrong WFOE, Rong Hai and shareholders of Rong Hai, pursuant to which Shengrong WFOE assign all its rights and obligations under the Rong Hai VIE Agreements to Tongrong WFOE. The Rong Hai VIE Agreements and the Assignment Agreements grant Tongrong WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Rong Hai, including absolute rights to control the management, operations, assets, property and revenue of Rong Hai. The assignment does not have any impact on Company’s consolidated financial statements.

 

Effective May 18, 2020, the Company changed its corporate name from “TMSR Holding Company Limited” to “Code Chain New Continent Limited” pursuant to a Certificate of Amendment to the Company’s Articles of Incorporation filed with the Secretary of State of the State of Nevada. In connection with the name change, effective May 18, 2020, the ticker symbol of the Company’s common stock and warrants changed from “TMSR” and “TMSRW” to “CCNC” and “CCNCW”, respectively.

 

On June 30, 2020, the Company entered into a share purchase agreement with Jiazhen Li, former CEO of the Company (the “Buyer”), Long Liao and Chunyong Zheng, who are former shareholders of Wuhan HOST Coating Materials Co., Ltd., an indirect subsidiary of the Company, (collectively the “Payees”). Pursuant to the Agreement, the Company agreed to sell, and the Buyer agreed to purchase all the issued and outstanding ordinary shares of China Sunlong (the “Sunlong Shares”). The Payees have a prior relationship with the Buyer and have agreed to be responsible for the payment of the purchase price on behalf of Buyer. The purchase price for the Sunlong Shares shall be $1,732,114, payable in consideration of cancellation of 1,012,932 shares of the Company owned by the Payees (the “CCNC Shares”). The CCNC Shares are valued at $1.71 per share, based on the closing price of the Company’s common stock on June 30, 2020.

 

7

 

  

The accompanying consolidated financial statements reflect the activities of CCNC and each of the following entities:

 

Name   Background   Ownership
China Sunlong3   A Cayman Islands company   100% owned by the Company
Shengrong BVI3  

A British Virgin Island company

Incorporated on June 30, 2015

  100% owned by China Sunlong
Citi Profit BVI    

A British Virgin Island company

Incorporated on April 2019 

  100% owned by the Company
Shengrong HK3  

A Hong Kong company

Incorporated on September 25, 2015 

  100% owned by Shengrong BVI
TMSR HK  

A Hong Kong company

Incorporated on April 2019 

  100% owned by Citi Profit BVI
Shengrong WFOE3   A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”)   100% owned by Shengrong HK
   

● 

 

Incorporated on March 1, 2016

Registered capital of USD 12,946 (HKD100,000), fully funded

Purchase and sales of high efficiency permanent magnetic separator and comprehensive utilization system

Trading of processed industrial waste materials

   
Tongrong WFOE  

 

A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”)

Incorporated on August 2019

  100% owned by TMSR HK
Hubei Shengrong2  

A PRC limited liability company

Incorporated on January 14, 2009

  100% owned by Shengrong WFOE
    Registered capital of USD 4,417,800 (RMB 30,000,000), fully funded    
   

 

Production and sales of high efficiency permanent magnetic separator and comprehensive utilization system.

Trading of processed industrial waste materials

   
Wuhan HOST3  

A PRC limited liability company

Incorporated on October 27, 2010

Registered capital of USD 750,075 (RMB 5,000,000), fully funded

  100% owned by Shengrong WFOE
    Research, development, production and sale of coating materials.    
Shanghai Host Coating Materials Co., Ltd. (“Shanghai HOST”)3  

A PRC limited liability company

Incorporated on December 11, 2014

Registered capital of USD 3,184,371 (RMB 20,000,000), to be fully funded by November 2024

   
    No operations and no capital contribution has been made as of December 31, 2018   80% owned by Wuhan HOST
Wuhan HOST Coating Materials Xiaogan Co., Ltd. (“Xiaogan HOST”)3  

 

A PRC limited liability company

Incorporated on December 25, 2018

Registered capital of USD 11,595,379 (RMB 80,000,000), to be fully funded by December 2028

No operations and no capital contribution has been made as of December 31, 2018

  90% owned by Wuhan HOST
Jiangsu Rong Hai Electric Power Fuel Co., Ltd. (“Rong Hai”)  

● 

A PRC limited liability company

Incorporated on May 20, 2009

Registered capital of USD 3,171,655 (RMB 20,180,000), fully funded

Coal wholesales and sales of coke, steels, construction materials, mechanical equipment and steel scrap

  VIE of Tongrong WFOE
Wuge  

A PRC limited liability company

Incorporated on July 4, 2019

  VIE of Tongrong WFOE
TJComex BVI1  

A British Virgin Island company

Incorporated on March 8, 2016 

  100% owned by China Sunlong
TJComex HK1  

A Hong Kong company

Incorporated on March 19, 2014 

  100% owned by TJComex BVI
TJComex WFOE1   A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”)   100% owned by TJComex HK
    Incorporated on March 10, 2004    
    Registered capital of USD 200,000    
TJComex Tianjin1  

A PRC limited liability company

Incorporated on November 19, 2007

  100% owned by TJComex WFOE
    Registered capital of USD 7,809,165 (RMB 55,000,000)    
    General merchandise trading business and related consulting services    

 

1 Disposed on April 2, 2018
2 Disposed on December 27, 2018
3Disposed on June 30, 2020

 

8

 

 

Contractual Arrangements

 

Rong Hai and Wuge are controlled through contractual agreements in lieu of direct equity ownership by the Company or any of its subsidiaries. Such contractual arrangements consist of a series of five agreements, consulting services agreement, equity pledge agreement, call option agreement, voting rights proxy agreement, and operating agreement (collectively the “Contractual Arrangements”).

 

Material terms of each of the Rong Hai VIE Agreements are described below:

 

Consulting Services Agreement  

 

Pursuant to the consulting services agreement between Rong Hai and Shengrong WFOE dated November 30, 2018, Shengrong WFOE has the exclusive right to provide consulting services to Rong Hai relating to Rong Hai’s business, including but not limited to business consulting services, human resources development, and business development. Shengrong WFOE exclusively owns any intellectual property rights arising from the performance of this agreement. Shengrong WFOE has the right to determine the service fees based on Rong Hai’s actual operation on a quarterly basis.

 

This consulting services agreement took effect upon execution and shall remain in full force and effective until Rong Hai’s valid operation term expires. Shengrong WFOE may, at its discretion, decide to renew or terminate this consulting services agreement. 

 

Equity Pledge Agreement.    

 

Under the equity pledge agreement among Shengrong WFOE, Rong Hai and the shareholders of Rong Hai dated November 30, 2018, the shareholders pledged all of their equity interests in Rong Hai to Shengrong WFOE to guarantee Rong Hai’s performance of relevant obligations and indebtedness under the consulting services agreement. In addition, the shareholders of Rong Hai have completed the registration of the equity pledge under the agreement with the competent local authority. If Rong Hai breaches its obligation under the consulting services agreement, Shengrong WFOE, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests.

 

This equity pledge agreement took effect upon execution and shall remain in full force and effective until Rong Hai and Shengrong WFOE’s satisfaction of all contractual obligations and settlement of all secured indebtedness. Upon Shengrong WFOE’s request, Rong Hai shall extend its operation period to sustain the effectiveness of this equity pledge agreement.

 

Call Option Agreement    

 

Under the call option agreement among Shengrong WFOE, Rong Hai and the shareholders of Rong Hai dated November 30, 2018, each of the shareholders of Rong Hai irrevocably granted to WFOE or its designee an option to purchase at any time, to the extent permitted under PRC law, all or a portion of his equity interests in Rong Hai. Also, Shengrong WFOE or its designee has the right to acquire any and all of its assets of Rong Hai. Without Shengrong WFOE’s prior written consent, Rong Hai’s shareholders cannot transfer their equity interests in Rong Hai, and Rong Hai cannot transfer its assets. The acquisition price for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time of the exercise of the option.

 

This call option agreement shall took effect upon execution. Rong Hai and Shengrong WFOE shall not terminate this call option agreement under any circumstances for any reason unless it is early terminated by Shengrong WFOE or by the requirements under the applicable laws. This call option agreement shall be terminated provided that all equity interest or assets under this option is transferred to Shengrong WFOE or its designee.

 

Voting Rights Proxy Agreement    

 

Under the voting rights proxy agreement among Shengrong WFOE and the shareholders of Rong Hai dated November 30, 2018, each shareholder of Rong Hai irrevocably appointed Shengrong WFOE as its attorney-in-fact to exercise on such shareholder’s behalf any and all rights that such shareholder has in respect of his equity interests in Rong Hai, including but limited to the power to vote on its behalf on all matters of Rong Hai requiring shareholder approval in accordance with the articles of association of Rong Hai.

 

9

 

  

The voting rights proxy agreement took effect upon execution of and shall remain in effect indefinitely for the maximum period of time permitted by law in consideration of Shengrong WFOE.

 

Operating Agreement    

 

Pursuant to the operating agreement among Shengrong WFOE, Rong Hai and the shareholders of Rong Hai dated November 30, 2018, Rong Hai and the shareholders of Rong Hai agreed not to enter into any transaction that could materially affect Rong Hai’s assets, obligations, rights or operations without prior written consent from Shengrong WFOE, including but not limited to the amendment of the articles of association of Rong Hai. Rong Hai and its shareholders agree to accept and follow our corporate policies provided by Shengrong WFOE in connection with Rong Hai’s daily operations, financial management and the employment and dismissal of Rong Hai’s employees. Rong Hai agreed that it should seek guarantee from Shengrong WFOE first if any guarantee is needed for Rong Hai’s performance of any contract or loan in the course of its business operation.

 

This operating agreement took effect upon execution and shall remain in full force and effective until Rong Hai’s valid operation term expires. Either party of Shengrong WFOE and Rong Hai shall complete approval or registration procedures for the extension of its business term three months prior to the expiration of its business term, for the purpose of the maintenance of the effectiveness of this operating agreement. 

 

 

 

Material terms of each of the Wuge VIE Agreements are described below:

 

Technical Consultation and Services Agreement.

 

Pursuant to the technical consultation and services agreement between Wuge and Tongrong WFOE dated January 3, 2020, Tongrong WFOE has the exclusive right to provide consultation services to Wuge relating to Wuge’s business, including but not limited to business consultation services, human resources development, and business development. Tongrong WFOE exclusively owns any intellectual property rights arising from the performance of this agreement. Tongrong WFOE has the right to determine the service fees based on Wuge’s actual operation on a quarterly basis. This agreement will be effective as long as Wuge exists. Tongrong WFOE may terminate this agreement at any time by giving a 30 days’ prior written notice to Wuge.

 

Equity Pledge Agreement.

 

Under the equity pledge agreement among Tongrong WFOE, Wuge and Wuge Shareholders dated January 3, 2020, Wuge Shareholders pledged all of their equity interests in Wuge to Tongrong WFOE to guarantee Wuge’s performance of relevant obligations and indebtedness under the technical consultation and services agreement. In addition, Wuge Shareholders will complete the registration of the equity pledge under the agreement with the competent local authority. If Wuge breaches its obligation under the technical consultation and services agreement, Tongrong WFOE, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. This pledge will remain effective until all the guaranteed obligations are performed or the Wuge Shareholders cease to be shareholders of Wuge.

 

Equity Option Agreement.

 

Under the equity option agreement among Tongrong WFOE, Wuge and Wuge Shareholders dated January 3, 2020, each of Wuge Shareholders irrevocably granted to Tongrong WFOE or its designee an option to purchase at any time, to the extent permitted under PRC law, all or a portion of his equity interests in Wuge. Also, Tongrong WFOE or its designee has the right to acquire any and all of its assets of Wuge. Without Tongrong WFOE’s prior written consent, Wuge’s shareholders cannot transfer their equity interests in Wuge and Wuge cannot transfer its assets. The acquisition price for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time of the exercise of the option. This pledge will remain effective until all options have been exercised.

 

Voting Rights Proxy and Financial Support Agreement.

 

Under the voting rights proxy and financial support agreement among Tongrong WFOE, Wuge and Wuge Shareholders dated January 3, 2020, each Wuge Shareholder irrevocably appointed Tongrong WFOE as its attorney-in-fact to exercise on such shareholder’s behalf any and all rights that such shareholder has in respect of his equity interests in Wuge, including but not limited to the power to vote on its behalf on all matters of Wuge requiring shareholder approval in accordance with the articles of association of Wuge. The proxy agreement is for a term of 20 years and can be extended by Tongrong WFOE unilaterally by prior written notice to the other parties.

 

10

 

 

 

The Company’s Board of Directors determined that the certain operating subsidiaries, namely, Wuhan Host, and Shengrong WFOE have been designated as discontinued operations. The Company’s board intends to sell these businesses based on their values as continuing going concerns. The Company’s assets and liabilities on its consolidated balance sheets at June 30, 2020 and December 31, 2019 and its statements of operations for the six months ended June 30, 2020 and 2019 have been grouped and re-grouped based on this designation.

 

Note 2 – Summary of significant accounting policies

 

Basis of presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for information pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). Interim results are not necessarily indicative of results to be expected for the full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on April 17, 2020.

 

Principles of consolidation

 

The unaudited condensed financial statements of the Company include the accounts of CCNC and its wholly owned subsidiaries and VIE. All intercompany transactions and balances are eliminated upon consolidation.

 

Use of estimates and assumptions

 

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include the useful lives of intangible assets, deferred revenues and plant and equipment, impairment of long-lived assets, collectability of receivables, inventory valuation allowance, present value of lease liabilities and realization of deferred tax assets. Actual results could differ from these estimates.

 

Foreign currency translation and transaction

 

The reporting currency of the Company is the U.S. dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. The statement of income accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

 

11

 

  

Translation adjustments included in accumulated other comprehensive loss amounted to $(1,540,111) and $(832,267) as of June 30, 2020 and December 31, 2019, respectively. The balance sheet amounts, with the exception of shareholders’ equity at June 30, 2020 and December 31, 2019 were translated at 7.08 RMB and 7.14 RMB to $1.00, respectively. The shareholders’ equity accounts were stated at their historical rate. The average translation rates applied to statement of income accounts for the six months ended June 30, 2020 and 2019 were 7.03 RMB and 6.78 RMB, respectively. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

 

The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Company because it has not engaged in any significant transactions that are subject to the restrictions.

 

Accounts receivable, net

 

Accounts receivable include trade accounts due from customers. An allowance for doubtful accounts may be established and recorded based on management’s assessment of potential losses based on the credit history and relationships with the customers. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

 

Inventories

 

Inventories are comprised of raw materials and work in progress and are stated at the lower of cost or net realizable value using the first-in-first-out method in Shengrong WFOE and weighted average method in Wuhan HOST and Rong Hai. Management reviews inventories for obsolescence and cost in excess of net realizable value at least annually and recognize an impairment charge against the inventory when the carrying value exceeds net realizable value. As of June 30, 2020 and December 31, 2019, no obsolescence and cost in excess of net realizable value were recognized.

 

Prepayments

 

Prepayments are funds deposited or advanced to outside vendors for future inventory or services purchases. As a standard practice in China, many of the Company’s vendors require a certain amount to be deposited with them as a guarantee that the Company will complete its purchases on a timely basis. This amount is refundable and bears no interest. The Company has legally binding contracts with its vendors, which require any outstanding prepayments to be returned to the Company when the contract ends.

  

Plant and equipment

 

Plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method after consideration of the estimated useful lives of the assets and estimated residual value. The estimated useful lives and residual value are as follows:

 

   Useful Life  Estimated
Residual
Value
 
Building  5 – 20 years   5%
Office equipment and furnishing  5 years   5%
Production equipment  3-10 years   5%
Automobile  5 years   5%
Leasehold improvements  Shorter of the remaining lease terms or estimated useful lives   0%

 

12

 

 

The cost and related accumulated depreciation and amortization of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation and amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

  

Intangible assets

 

Intangible assets represent land use rights and patents, and they are stated at cost, less accumulated amortization. Research and development costs associated with internally developed patents are expensed when incurred. Amortization expense is recognized on the straight-line basis over the estimated useful lives of the assets. All land in the PRC is owned by the government; however, the government grants “land use rights.” The Company has obtained the rights to use various parcels of land. The patents have finite useful lives and are amortized using a straight-line method that reflects the estimated pattern in which the economic benefits of the intangible asset are to be consumed. The Company amortizes the cost of the land use rights and patents, over their useful life using the straight-line method. The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.  The estimated useful lives are as follows:

 

    Useful Life
Land use rights   50 years
     
Patents   10 - 20 years
     
Software   5 years

 

Goodwill

 

Goodwill represents the excess of the consideration paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred. Goodwill is carried at cost less accumulated impairment losses. If impairment exists, goodwill is immediately written off to its fair value and the loss is recognized in the consolidated statements of income. Impairment losses on goodwill are not reversed. In 2019, the Company recorded approximately $3.42 million in impairment to its Wuhan Host and Shengrong WFOE operating units. The entities were located at the epicenter of the COVID 19 virus. Accordingly, those entities were materially adversely impacted.

 

Impairment for long-lived assets

 

Long-lived assets, including plant, equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. In 2019, the Company recognized approximately $4.89 million in impairment to long lived assets related to Wuhan Host and Shengrong WFOE. 

 

13

 

  

Fair value measurement

 

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash, notes receivable, accounts receivable, other receivables, prepayments, accounts payable, other payables and accrued liabilities, customer deposits, short term loans and taxes payable to approximate their fair values because of their short term nature.

 

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

 

  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 assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. 
     
  Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

 

Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.

 

Customer deposits 

 

In Shengrong WFOE, customer deposits represent amounts advanced by customers on product orders. Generally, the Company requires 3% to 10% advanced deposits from the customers upon the signing of the sales contracts. At various stages of the sales contract execution, the Company generally collects certain amounts of advanced deposits from the customers based on the approximate amount of cash flows needed at each stage. Customer deposits are reduced when the related sale is recognized in accordance with the Company’s revenue recognition policy.

 

In Wuhan HOST, customer deposits represent amounts advanced by customers on product orders. Generally, the Company requires 95% to 100% advanced deposits from the customers upon signing of the sales contracts. A few customers with good credit history are not required to make any deposit. Customer deposits are reduced when the related sale is recognized in accordance with the Company’s revenue recognition policy.

 

Revenue recognition

 

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of January 1, 2018.  This did not result in an adjustment to retained earnings upon adoption of this new guidance as the Company’s revenue, other than retainage revenues, was recognized based on the amount of consideration we expect to receive in exchange for satisfying the performance obligations. However, the impact of the Company’s retainage revenue was not material as of the date of adoption, and as a result, did not result in an adjustment.

 

The core principle underlying the revenue recognition ASU is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.  The Company’s revenue streams are primarily recognized at a point in time except for the retainage revenues where the retainage periods are recognized over the retainage period, usually is a period of twelve months.

 

14

 

  

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition except its retainage revenues.

 

An entity will also be required to determine if it controls the goods or services prior to the transfer to the customer in order to determine if it should account for the arrangement as a principal or agent. Principal arrangements, where the entity controls the goods or services provided, will result in the recognition of the gross amount of consideration expected in the exchange. Agent arrangements, where the entity simply arranges but does not control the goods or services being transferred to the customer, will result in the recognition of the net amount the entity is entitled to retain in the exchange.

 

Revenue from equipment and systems, revenue from coating and fuel materials, and revenue from trading and others are recognized at the date of goods delivered and title passed to customers, when a formal arrangement exists, the price is fixed or determinable, the Company has no other significant obligations and collectability is reasonably assured. Such revenues are recognized at a point in time after all performance obligations are satisfied under the new five-step model. In addition, training service revenues are recognized when the services are rendered and the Company has no other obligations, and collectability is reasonably assured. These revenues are recognized at a point in time.

 

Prior to January 1, 2018, the Company allowed its customers to retain 5% to 10% of the contract price as warranty retainage during the retainage period of 12 months to guarantee product quality. Retainage is considered as a payment term included as a part of the contract price, and was recognized as revenue upon the shipment of products. Due to nature of the retainage, the Company’s policy is to record revenue the full value of the contract without VAT, including any retainage, since the Company has experienced insignificant warranty retainage claims historically. Due to the infrequent and insignificant amount of warranty retainage claims, the ability to collect retainage was reasonably assured and was recognized at the time of shipment. On January 1, 2018, upon the adoption of ASU 2014-09 (ASC 606), revenues from product warranty retainage are recognized over the retainage period over 12 months. For the six months ended June 30, 2020, less than 5% of our retainage revenues were recognized in our consolidated revenues and included in the Company’s equipment and systems revenues in the accompanying statements of income and comprehensive income.

 

Payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits.

 

The Company’s disaggregate revenue streams are summarized as follows:

 

   For the Three Months Ended
June 30,
   For the Six Months Ended
June 30,
 
   2020   2019   2020   2019 
Revenues – Equipment and systems  $       -   $      -   $       -   $     - 
Revenues –fuel materials   1,279,781    7,418,297    6,445,181    12,285,253 
Revenues – Trading and others   46,482    473,468    46,482    639,297 
Total revenues  $1,326,263   $7,891,765   $6,491,663   $12,924,550 

 

15

 

 

Gross versus Net Revenue Reporting

 

Starting from July 2016, in the normal course of the Company’s trading of industrial waste materials business, the Company directly purchases the processed industrial waste materials from the Company’s suppliers under the Company’s specifications and drop ships the materials directly to the Company’s customers. The Company would inspect the materials at its customers’ site, during which inspection it temporarily assumes legal title to the materials, and after which inspection legal title is transferred to its customers. In these situations, the Company generally collects the sales proceed directly from the Company’s customers and pay for the inventory purchases to the Company’s suppliers separately. The determination of whether revenues should be reported on a gross or net basis is based on the Company’s assessment of whether it is the principal or an agent in the transaction. In determining whether the Company is the principal or an agent, the Company follows the new accounting guidance for principal-agent considerations. Since the Company is the primary obligor and is responsible for (i) fulfilling the processed industrial waste materials delivery, (ii) controlling the inventory by temporarily assume legal title to the materials after inspecting the products from our vendors before passing the materials to our customers, and (iii) bearing the back-end risk of inventory loss with respect to any product return from the Company’s customers, the Company has concluded that it is the principal in these arrangements, and therefore report revenues and cost of revenues on a gross basis.

 

Research and Development (“R&D”) Expenses

 

Research and development expenses include salaries and other compensation-related expenses paid to the Company’s research and product development personnel while they are working on R&D projects, as well as raw materials used for the R&D projects. R&D expenses incurred by the Company are included in the selling, general and administrative expenses and totaled $0 and $219,675 for the six months ended June 30, 2020 and 2019, respectively.

 

Income taxes

 

The Company accounts for income taxes in accordance with U.S. GAAP for income taxes. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred taxes is accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

 

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company incurred no such penalties and interest for the six months ended June 30, 2020 and 2019. As of June 30, 2020, the Company’s PRC tax returns filed for 2017, 2018 and 2019 remain subject to examination by any applicable tax authorities.

 

Earnings per share

 

Basic earnings per share are computed by dividing income available to common shareholders of the Company by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares. 9,079,348 and 10,500,000 of outstanding warrants which is equivalent to convertible of 4,539,674 and 5,250,000 common shares were excluded from the diluted earnings per share calculation due to its antidilutive effect for the six months ended June 30, 2020 and 2019, respectively. 824,000 of outstanding options were excluded from the diluted earnings per share calculation due to its antidilutive effect for the six months ended June 30, 2020 and 2019.

  

16

 

  

Recently issued accounting pronouncements

 

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not believe the adoption of this ASU would have a material effect on the Company’s unaudited condensed consolidated financial statements.

 

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

 

Note 3 – Business combination and restructuring

 

TJ Comex BVI

 

On April 2, 2018, the Company disposed of its subsidiary, TJComex BVI, in consideration of (i) its minimum contribution to the Company’s results of operation and (ii) the unsatisfactory synergy between the TJComex BVI business and the rest of the Company’s business. The Company’s decision to dispose TJComex BVI is to (i) improve the Company’s overall financial condition and results of operations, (ii) reduce the complexity of the Company’s business, (iii) focus the Company’s resources on the solid waste recycling business as well as developing environmental control business opportunities; and (iv) make it possible for the Company to pursue acquisition opportunities for more compatible business. TJComex BVI was disposed to Chuanliu Ni, a Chinese citizen who is the Chief Executive Officer and director of China Sunlong, for no consideration.

 

As of April 2, 2018, the net assets of TJComex BVI were $16,598 and will be recorded as a loss from disposal of subsidiary in the consolidated financial statements for the year ended December 31, 2018. As TJComex BVI operating revenue was less than 1% of the Company’s revenue and the disposal did not constitute a strategic shift that will have a major effect on the Company’s operations and financial results, the results of operations for TJComex BVI were not reported as discontinued operations under the guidance of Accounting Standards Codification 205.

 

Wuhan HOST

 

On April 11, 2018, the Company, Shengrong WFOE and Hubei Shengrong, both of which are the Company’s indirectly owned subsidiaries (collectively “Purchasers”), entered into a Share Purchase Agreement (the “Purchase Agreement”) with Long Liao, Chunyong Zheng, Wuhan Modern Industrial Technology Research Institute, and Hubei Zhonggong Materials Group Co., Ltd. (collectively “Sellers” ) and Wuhan HOST Coating Materials Co., Ltd. (“Wuhan HOST”), a company incorporated in China engaging in the research, development, production and sale of coating materials. Pursuant to the Purchase Agreement, the Purchasers acquired all of the outstanding equity interests of Wuhan Host (the “Acquisition”). In exchange for the transfer of 100% equity interest of Wuhan Host, Purchasers shall pay a total consideration of $11.2 million (“Total Consideration”), of which $ 5.2 million or RMB equivalent shall be paid in cash (“Cash Consideration”) and $6.0 million shall be paid in shares of common stock (“Common Stock”), par value $0.0001, of CCNC (“Share Consideration”). The Parties agree the Share Consideration shall be an aggregate of 1,293,104 shares of common stock of which is based on the closing price of US$4.64 on March 27, 2018. The Share Consideration shall be issued in three equal installments, which shall be subject to lock-up of 12, 24 and 36 months, respectively. The Purchase Agreement contains representations, warranties and covenants customary for acquisitions of this type. The Acquisition closed on May 1, 2018.

 

17

 

 

On August 16, 2018, The Purchasers and the Sellers entered into a supplement agreement (“Supplement Agreement”), which modified the terms of consideration set forth in the Purchase Agreement entered between Purchasers and Sellers on April 11, 2018. Pursuant to the Supplement Agreement, in exchange for the transfer of 100% equity interest of Wuhan Host, Purchasers shall pay a total consideration of $11.2 million (“Total Consideration”), of which $6.5 million or RMB equivalent shall be paid in cash (“Cash Consideration”) and $4.7 million shall be paid in shares of common stock (“Common Stock”), par value $0.0001, of CCNC (“Share Consideration”). In the Supplement Agreement, both Purchasers and Sellers also agreed to delete the section 3.3 of the Share Purchase Agreement, a section that stipulates the Share Consideration shall be issued in three equal installments.

 

The Company’s acquisition of Wuhan HOST was accounted for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of Wuhan HOST based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, plant and equipment, and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

 

The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Wuhan HOST based on a valuation performed by an independent valuation firm engaged by the Company:

 

Total consideration at fair value   $ 11,200,000  

 

   Fair Value 
Cash  $276,626 
Other current assets   6,763,767 
Plant and equipment   6,499,268 
Other noncurrent assets   2,139,987 
Goodwill   7,544,008 
Total asset   23,223,656 
Total liabilities   (12,023,656)
Net asset acquired  $11,200,000 

 

Approximately $7.5 million of goodwill arising from the acquisition consists largely of synergies expected from combining the operations of the Company and Wuhan HOST. None of the goodwill is expected to be deductible for income tax purposes.

 

The Company’s Board of Directors has determined that it will discontinue Wuhan Host, and identify a buyer for the Wuhan Host in 2020. The Company recognized an impairment charge of approximately $3.42 million.

 

Rong Hai

 

On November 30, 2018, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with Jirong Huang and Qihuang Wang (collectively “Sellers”) and Jiangsu Rong Hai Electric Power Fuel Co., Ltd. (“Rong Hai”), a company incorporated in China engaging in the sale of fuel materials and harbor cargo handling services. Pursuant to the SPA, CCNC shall issue an aggregate of 4,630,000 shares of CCNC’s common stock to the Rong Hai Shareholders, in exchange for Rong Hai Shareholders’ agreement to enter into, and their agreement to cause Rong Hai to enter into, certain VIE Agreements (the “Rong Hai VIE Agreements”) with Shengrong WFOE, through which Shengrong WFOE shall have the right to control, manage and operate Rong Hai in return for a service fee approximately equal to 100% of Rong Hai’s net income (“Acquisition”). On November 30, 2018, Shengrong WFOE, the Company’s indirectly owned subsidiary, entered into a series of VIE Agreements with Rong Hai and the Rong Hai Shareholders. The VIE Agreements are designed to provide WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Rong Hai, including absolute rights to control the management, operations, assets, property and revenue of Rong Hai. Rong Hai has the necessary license to carry out coal trading business in China. The Acquisition closed on November 30, 2018.

 

18

 

 

The Company’s acquisition of Rong Hai was accounted for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of Rong Hai based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, plant and equipment, and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

 

 The Company’s acquisition of Rong Hai was accounted for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of Rong Hai based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, plant and equipment, and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

 

The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Rong Hai based on a valuation performed by an independent valuation firm engaged by the Company:

 

Total consideration at fair value  $9,260,000 

 

   Fair Value 
Cash  $717,056 
Other current assets   5,980,230 
Plant and equipment   28,875 
Other noncurrent assets   116,655 
Goodwill   7,307,470 
Total asset   14,150,286 
Total liabilities   (4,890,286)
Net asset acquired  $9,260,000 

 

Approximately $7.3 million of goodwill arising from the acquisition consists largely of synergies expected from combining the operations of the Company and Rong Hai. None of the goodwill is expected to be deductible for income tax purposes.

 

Hubei Shengrong

 

On December 27, 2018, the Company, entered into an Equity Purchase Agreement (the “EPA”) with Hopeway International Enterprises Limited., a private limited company duly organized under the laws of British Virgin Islands (the “Hopeway” or “Purchaser”). Pursuant to the EPA, Shengrong WOFE shall sell 100% equity interests in Hubei Shengrong to the Purchaser in exchange for the Purchaser’s agreement (“Consideration”) to irrevocably forfeit and cancel 8,523,320 shares of common stock of the Company (the “Shares”), constituting all the shares owned by the Purchaser. The transaction contemplated by the EPA is hereby referred as Disposition. The Company’s decision to dispose of Hubei Shengrong is due to the planning mandates of Wuhan Municipal Government 2018 which manufactures should move away from city’s downtown area. Therefore, due to the policy change, Hubei Shengrong is forced to close the existing facility, relocate and build a new facility, which is expected to take approximately 7-8 years. As a result, Hubei Shengrong will not be able to keep the production running and will generate no income in the foreseeable future. Management believed it is very difficult, if possible at all, to continue manufacturing of solid waste recycling systems. As such, the Company has been actively seeking to dispose Hubei Shengrong while retaining the research and development and sale of solid waste recycling systems business. Upon closing of the Disposition, the Purchaser will become the sole shareholder of Hubei Shengrong and as a result, assume all assets and obligations of Hubei Shengrong except the research and development team and intellectual property rights in connection with the solid waste recycling systems business shall be assigned to Shengrong WFOE as part of the Disposition. As Shengrong WFOE has significant continuing involvement in the sale of solid waste recycling systems business and the processed industrial waste materials trading business, the results of operations for Hubei Shengrong were not reported as discontinued operations under the guidance of Accounting Standards Codification 205.

 

19

 

 

Hopeway is jointly owned by Ms. Jiazhen Li, the Company’s chief executive officer, and Mr. Xiaonian Zhang, the Company’s president and director. As Hopeway is a related party under common control with the Company under Ms. Li and Mr. Zhang, no gain or loss are recognized in this disposition and the net consideration of the transaction are recognized as addition to capital as opposed to a gain. Total fair value of the consideration of the cancelled 8,523,320 shares of common stock was determined by using the average closing stock price of the Company held by Hopeway during the period from February 6, 2018 to December 27, 2018 at $3.56 per share.

 

As of December 27, 2018, the net assets of Hubei Shengrong and reconciliation of reduction of capital are as follows:

 

   December 27,
2018
 
CURRENT ASSETS    
Cash and cash equivalents  $47,994 
Accounts receivable, net   9,410,436 
Accounts receivable - related party, net   761,794 
Other receivables   48,718 
Other receivable - related party   2,158 
Inventories   5,332,990 
Prepayments   31,793,810 
Total current assets   47,397,900 
      
PLANT AND EQUIPMENT, NET   203,992 
      
OTHER ASSETS     
Other assets   7,269 
Deferred tax assets   780,550 
Total other assets   787,819 
      
Total assets  $48,389,711 
      
CURRENT LIABILITIES     
Short term loans - bank  $2,180,708 
Accounts payable   95,854 
Other payables and accrued liabilities   156,498 
Other payables - related parties   507,183 
Customer deposits   347,853 
Taxes payable   16,602,841 
Total current liabilities   19,890,937 
      
OTHER LIABILITIES     
Deferred rent liabilities   30,763 
Total other liabilities   30,763 
      
Total liabilities  $19,921,700 
      
Total net assets  $28,468,011 
Total consideration   (30,362,135)
Currency translation adjustment   900,281 
Total addition to paid-in-capital  $993,843 

 

20

 

 

Wuge  

 

On January 3, 2020, the Company entered into a share purchase agreement with Sichuan Wuge Network Games Co., Ltd. (“Wuge”) and all the shareholders of Wuge (“Wuge Shareholders”). Pursuant to the share purchase agreement, the Company agreed to issue an aggregate of 4,000,000 shares of CCNC’s common stock to the Wuge Shareholders, in exchange for Wuge Shareholders’ agreement to enter into, and their agreement to cause Wuge to enter into, certain VIE agreements (“VIE Agreements”) with Tongrong WFOE the Company’s indirectly owned subsidiary, through which Tongrong WFOE shall have the right to control, manage and operate Wuge in return for a service fee equal to 100% of Wuge’s net income (the “Acquisition”). On January 3, 2020, Tongrong WFOE entered into a series of VIE Agreements with Wuge and the Wuge Shareholders. The VIE Agreements are designed to provide Tongrong WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Wuge, including absolute rights to control the management, operations, assets, property and revenue of Wuge. Wuge has all necessary license to carry out its business in China.Wuge is a technology company in development stage. It was incorporated in China in July 2019. Wuge Manor, the game Wuge is developing, is the world’s first game that combines Internet of Things (IoT) and e-commerce that is based on Code Chain platform. Through the game, players will be able to have access to hundreds of vendors and business owners in over 100 cities in China, participate in activities those businesses set up and collect points, which can be redeemed as equipment in the game or coupons usable when making purchase at that business. In addition, Wuge produced electronic tokens that can be stored in the Code Chain system to purchase virtual property based on real estate. The Acquisition closed on January 24, 2020.

 

The Company’s acquisition of Wuge was accounted for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of Wuge based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, plant and equipment, and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

 

The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Wuge based on a valuation performed by an independent valuation firm engaged by the Company:

 

Total consideration at fair value  $7,200,000 

 

   Fair Value 
Cash  $228,788 
Other current assets   20,834 
Plant and equipment   6,024 
Other noncurrent assets   8,097 
Goodwill   7,343,209 
Total asset   7,606,952 
Total liabilities   (406,952)
Net asset acquired  $7,200,000 

 

Approximately $7.3 millions of goodwill arising from the acquisition consists largely of synergies expected from combining the operations of the Company and Wuge. None of the goodwill is expected to be deductible for income tax purposes.

 

21

 

  

Note 4 – Variable interest entity

 

On November 30, 2018, Tongrong WFOE entered into Contractual Arrangements with Rong Hai and its shareholders upon executing of the “Purchase Agreement”. The significant terms of these Contractual Arrangements are summarized in “Note 1 - Nature of business and organization” above. As a result, the Company classifies Rong Hai as VIE.

 

On January 3, 2020, Tongrong WFOE entered into Contractual Arrangements with Wuge and its shareholders upon executing of the “Purchase Agreement”. The significant terms of these Contractual Arrangements are summarized in “Note 1 - Nature of business and organization” above. As a result, the Company classifies Wuge as VIE.

 

A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Tongrong WFOE is deemed to have a controlling financial interest and be the primary beneficiary of Rong Hai and Wuge because it has both of the following characteristics:

 

(1) The power to direct activities at Rong Hai and Wuge that most significantly impact such entity’s economic performance, and

 

(2) The obligation to absorb losses of, and the right to receive benefits from Rong Hai and Wuge that could potentially be significant to such entity.

 

Accordingly, the accounts of Rong Hai and Wuge are consolidated in the accompanying financial statements pursuant to ASC 810-10, Consolidation. In addition, their financial positions and results of operations are included in the Company’s consolidated financial statements beginning on November 30, 2018.

 

The carrying amount of the VIE’s assets and liabilities are as follows: 

 

   June 30,   December 31, 
   2020   2019 
         
Current assets  $9,201,684   $8,687,451 
Property, plants and equipment, Intangible Assets   1,165,027    19,057 
Other noncurrent assets   89,136    127,782 
Goodwill   14,329,042    7,289,454 
Total assets   24,786,889    16,123,744 
           
Current liabilities   8,264,556    6,067,264 
Non-current liabilities   60,681    61,580 
Total liabilities   8,325,237    6,128,844 
Net assets  $16,459,652   $9,994,900 

 

   June 30,   December 31, 
   2020   2019 
         
Short-term loan  $437,884   $- 
Accounts payable   880,713    619,329 
Other payables and accrued liabilities   74,154    301,230 
Other payables – related party   5,766,063    5,082,068 
Tax payables   3,525    202 
Customer Advances   1,040,124    3,426 
Lease liabilities   62,093    61,009 
Total current liabilities   8,264,556    6,067,264 
Lease liabilities - noncurrent   60,681    61,580 
Total liabilities  $8,325,237   $6,128,844 

 

22

 

  

The summarized operating results of the VIE’s are as follows:

 

    For the
six months ended
June 30,
 
    2020  
       
Operating revenues   $ 6,491,663  
Gross profit     326,254  
Income from operations     (337,537)  
Net income   $ (387,648)  

 

Note 5 – Accounts receivable, net

 

Accounts receivable consist of the following:

 

    June 30,
2020
    December 31,
2019
 
             
Accounts receivable   $ 1,153,142     $ 2,221,319  
Less: Allowance for doubtful accounts     (113,370)       (24,055 )
Total accounts receivable, net   $ 1,039,772     $ 2,197,264  

 

Movement of allowance for doubtful accounts is as follows:

 

   June 30,
2020
   December 31,
2019
 
         
Beginning balance  $24,055   $732,846 
Beginning balance from Wuhan HOST   -    260,764 
Beginning balance from Rong Hai   24,055    472,082 
Addition   90,308    - 
Recovery   -    (708,791)
Exchange rate effect   (993)   - 
Ending balance  $113,370   $24,055 

 

Note 6 – Inventories

 

Inventories consist of the following:

 

   June 30,
2020
   December 31,
2019
 
         
Raw materials  $-   $- 
Work in progress   -    - 
Finished Goods   1,248,906    1,197,065 
Total inventories  $1,248,906   $1,197,065 

 

23

 

 

Note 7 – Plant and equipment, net

 

Plant and equipment consist of the following:

 

   June 30,
2020
   December 31,
2019
 
         
Office equipment and furniture  $62,972   $39,688 
Automobile   251,523    209,057 
Subtotal   314,495    248,745 
Less: accumulated depreciation   (234,807)   (229,688)
Total  $79,688   $19,057 

 

Depreciation expense for the six months ended June 30, 2020 and 2019 amounted to $8,403 and $198,570, respectively.

 

Note 8 – Intangible assets, net

 

Intangible assets consist of the following:

 

   June 30,
2020
   December 31,
2019
 
         
Development of technology  $1,130,023   $        - 
Software   551    - 
Less: accumulated amortization   (46)   - 
Net intangible assets  $1,130,528   $- 

 

Amortization expense for the six months ended June 30, 2020 and 2019 amounted to $46 and $0, respectively.

 

Note 9 – Goodwill

 

The changes in the carrying amount of goodwill by business units are as follows

 

   Wuhan HOST   Rong Hai   Wuge   Total 
Balance as of December 31, 2019  $3,424,390   $7,289,454   $        -   $10,713,844 
Goodwill acquired through acquisition   -    -    7,140,304    7,140,304 
Disposal of the company   (3,424,390)   -    -    (3,424,390)
Foreign currency translation adjustment   -    (106,364)   5,648    (100,716)
Balance as of  June 30, 2020  $-   $7,183,090   $7,145,952   $14,329,042 

 

Note 10 – Related party balances and transactions

 

Related party balances

 

Other payables – related parties:

 

Name of related party   Relationship   June 30,
2020
    December 31,
2019
 
                 
Chuanliu Ni   Chief Executive Officer and director of a former subsidiary   $ 325,907     $ 325,907  
Zhong Hui Holding Limited   Shareholder of the Company     140,500       140,500  
Chengdu Yuan Code Chain Technology Co. Ltd   A company controlled by former shareholder of the Company     103,719       -  
Qihai Wang   Shareholder of the Company     71,444       166,673  
Jiangsu Longying Education Technology Co. Ltd   A company in which shareholder hold shares     -       422,868  
Jiangsu Longhai Film Culture Media Co. Ltd   Under common control of shareholder of the Company     -       280,954  
Total       $ 641,570     $ 1,336,902  

 

The above payables represent interest free loans and advances. These loans and advances are unsecured and due on demand.

 

24

 

 

Note 11 – Debt

 

Short term loan

 

Short term loan due to bank is as follows:

 

Short term loans   Maturities     Weighted average interest rate     Collateral/Guarantee   June 30,
2020
    December 31,
2019
 
Loan from Bank of Jiangsu     March 25, 2021       4.5 %   Guaranteed by Qihai Wang’s personal property   $ 247,193               -  
Loan from Bank of Jiangsu     January 12, 2021        5.22 %   Guaranteed by Qihai Wang’s personal property   $ 190,691       -  

 

Interest expense for the three months ended June 30, 2020 and 2019 amounted to $9,473 and $9,764, respectively, and for the six months ended June 30, 2020 and 2019 amounted to $11,482 and $17,606, respectively.

 

Note 12 – Taxes

 

Income tax

 

United States

 

CCNC was organized in the state of Delaware in April 2015 and re-incorporated in the state of Nevada in June 2018. CCNC’s U.S. net operating loss for the six months ended June 30, 2020 amounted to approximately $90,000. As of June 30, 2020, CCNC’s net operating loss carry forward for United States income taxes was approximately $19,000. The net operating loss carry forwards are available to reduce future years’ taxable income through year 2038. Management believes that the realization of the benefits from these losses appears uncertain due to the Company’s operating history and continued losses in the United States. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. Management reviews this valuation allowance periodically and makes changes accordingly.

 

On December 22, 2017, the “Tax Cuts and Jobs Act” (“The 2017 Tax Act”) was enacted in the United States. Under the provisions of the Act, the U.S. corporate tax rate decreased from 34% to 21%. The 2017 Tax Act imposed a global intangible low-taxed income tax (“GILTI”), which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits. The Company determined that there are no impact of GILTI for the six months ended June 30, 2020 and 2019, which the Company believes that it will be imposed a minimum tax rate of 10.5% and to the extent foreign tax credits are available to reduce its US corporate tax, which may result in no additional US federal income tax being due.

 

Cayman Islands

 

China Sunlong is incorporated in the Cayman Islands and are not subject to tax on income or capital gains under current Cayman Islands law. In addition, upon payments of dividends by China Sunlong to its shareholders, no Cayman Islands withholding tax will be imposed.

 

British Virgin Islands

 

Shengrong BVI is incorporated in the British Virgin Islands and are not subject to tax on income or capital gains under current British Virgin Islands law. In addition, upon payments of dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed.

 

Hong Kong

 

Shengrong HK is incorporated in Hong Kong and are subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax law, Shengrong HK is exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.

 

25

 

 

PRC

 

Shengrong WFOE, Tongrong WFOE, Wuhan HOST,Wuge and Rong Hai are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the “EIT Laws”), Chinese enterprises are subject to income tax at a rate of 25% after appropriate tax adjustments.

 

Significant components of the provision for income taxes are as follows: 

  

   For the
three months ended
June 30,
2020
   For the
three months ended
June 30,
2019
 
         
Current  $1,810   $234,473 
Deferred   (243)   (38,229)
Total provision for income taxes  $1,567   $196,244 

  

   For the
six months ended
June 30,
2020
   For the
six months ended
June 30,
2019
 
         
Current  $16,419   $255,301 
Deferred   33,692    (8,229)
Total provision for income taxes  $50,111   $247,072 

 

Deferred tax assets

 

Bad debt allowances must be approved by the Chinese tax authority prior to being deducted as an expense item on the tax return.

 

Significant components of deferred tax assets were as follows:

 

   June 30,
2020
   December 31,
2019
 
         
Net operating losses carried forward – U.S.  $19,106   $17,309 
Net operating losses carried forward – PRC   -    - 
Bad debt allowance   3,531    37,532 
Valuation allowance   (19,106)   (17,309)
Deferred tax assets, net  $3,531   $37,532 

 

Value added tax

 

Enterprises or individuals who sell commodities, engage in repair and maintenance or import and export goods in the PRC are subject to a value added tax in accordance with PRC laws. The value added tax (“VAT”) standard rates are 6% to 17% of the gross sales price and changed to 6% to 16% of gross sales starting in May 2018. The VAT standard rates changed to 6% to 13% of the gross sales prices starting in April 2019. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on sales of the finished products and services.

 

26

 

 

Taxes payable consisted of the following:

 

   June 30,
2020
   December 31,
2019
 
         
VAT taxes payable  $1,550   $          - 
Income taxes payable   1,900    - 
Other taxes payable   105    202 
Total  $3,555   $202 

 

Note 13 – Leases

 

Effective January 1, 2019, the Company adopted ASU 2016-02, “Leases” (Topic 842), and elected the package of practical expedients that does not require us to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. The Company adopted the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. The impact of the adoption on January 1, 2019 increased the right-of-uses and lease liabilities by approximately $298,000.

 

The Company had an office lease agreement with a 5-year lease term starting in December 2016 until December 2021 and another office lease agreement with a 5-year lease term starting in January 2018 until January 2023. Upon adoption of ASU 2016-02, the Company recognized lease labilities of approximately $298,000, with corresponding Right-of-use (“ROU”) assets of the same amount based on the present value of the future minimum rental payments of the new lease, using an effective interest rate of 4.75%, which is determined using an incremental borrowing rate.

 

The weighted average remaining lease term of its existing leases is 3.22 years.

 

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 

For the three months ended June 30, 2020 and 2019, rent expenses amounted to $7,966 and $24,941, respectively.

 

For the six months ended June 30, 2020 and 2019, rent expenses amounted to $16,047 and $51,948, respectively.

 

The five-year maturity of the Company’s lease obligations is presented below:

 

Twelve months ended June 30,  Operating
lease
amount
 
2020  $124,377 
2021   99,501 
2022   76,957 
2023   23,900 
Total lease payments   324,735 
Less: interest   (201,961)
Present value of lease liabilities  $122,774 

 

Note 14 – Concentration of risk

 

Credit risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. As of June 30, 2020 and December 31, 2019, no cash were deposited with various financial institutions located in the U.S. As of June 30, 2020 and December 31, 2019, $1,939,520 and $4,003,554 and were deposited with various financial institutions located in the PRC, respectively. As of June 30, 2020 and December 31, 2019, $0 and $354 were deposited with one financial institution located in Hong Kong, respectively. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.

 

Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.

 

27

 

 

Customer and vendor concentration risk

        

For the three months ended June 30, 2020, one customers accounted for 98.3% of the Company’s revenues. For the three months ended June 30, 2019, three customers accounted for 22.2%, 21.8% and 20.0% of the Company’s revenues.

 

For the six months ended June 30, 2020, one customers accounted for 99.3% of the Company’s revenues. For the six months ended June 30, 2019, four customers accounted for 15.0%, 14.3%,14.1% and 12.9% of the Company’s revenues.

 

 As of June 30, 2020, two customer accounted for 50.7% and 45.4% of the Company’s accounts receivable; and one customer accounted for 100% of the Company’s Customer Advances. As of June 30, 2019, two customer accounted for 42.1% and 15.7% of the Company’s accounts receivable; and four customer accounted for 20.7%,17.7%,17.1% and 15.5% of the Company’s Customer Advances.

 

For the three months ended June 30, 2020, one suppliers accounted for 87.1% of the Company’s total purchases. For the three months ended June 30, 2019, two suppliers accounted for 26.7% and 13.2% of the Company’s total purchases.

  

For the six months ended June 30, 2020, four suppliers accounted for 30.1%, 28.7%, 18.2% and 12.7% of the Company’s total purchases. For the six months ended June 30, 2019, three suppliers accounted for 32.5%, 11.9% and 11.1% of the Company’s total purchases.

 

As of June 30, 2020, three suppliers accounted for 58.9%, 19.04% and 10.6% of the Company’s prepayments; and four suppliers accounted for 33.4%, 30.9%, 17.5% and 15.2% of the Company’s total accounts payable. As of June 30, 2019, three suppliers accounted for 39.6%, 18.7% and 12.4% of the Company’s prepayments; and three suppliers accounted for 28.1%, 21.5% and 16.7% of the Company’s total accounts payable.

 

Note 15 – Equity

 

Restricted net assets

 

The Company’s ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by Shengrong WFOE only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the accompanying unaudited condensed consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of Shengrong WFOE.

 

Shengrong WFOE, Wuhan HOST, Rong Hai are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, Shengrong WFOE may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion. Wuhan HOST and Rong Hai may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by State Administration of Foreign Exchange.

 

As of June 30, 2020 and December 31, 2019, Shengrong WFOE, Wuhan HOST, and Rong Hai, collectively attributed $0 of retained earnings for their statutory reserves as they have accumulated losses.

 

As a result of the foregoing restrictions, Shengrong WFOE, Tongrong WFOE, Wuge, Wuhan Host and Rong Hai are restricted in their ability to transfer their net assets to the Company. Foreign exchange and other regulation in the PRC may further restrict Shengrong WFOE, Tongrong WFOE, Wuge, Wuhan Host and Rong Hai from transferring funds to China Sunlong in the form of dividends, loans and advances. As of June 30, 2020 and December 31, 2019, amounts restricted are the net assets of Shengrong WFOE, Tongrong WFOE, Wuge, Wuhan Host and Rong Hai which amounted to $2,123,588 and $(7,263,520), respectively.

 

Stock split

 

On June 1, 2018, the Company’s shareholder approved a 2 for 1 stock split of the Company’s common stock at the Annual Meeting of Shareholders. The stock split was effected on June 20, 2018, pursuant to the completion of the reincorporation from Delaware to Nevada. All shares and per share amounts used herein and in the accompanying consolidated financial statements have been retroactively restated to reflect the stock split.

 

28

 

 

Common stock

 

On June 23, 2018, the Company issued an aggregate of 26,693 shares of the Company’s common stock, par value $0.0001 per share, to certain non-U.S. purchasers at a purchase price of $5.00 per share for an aggregate offering price of $133,335 pursuant to certain securities purchase agreement dated April 20, 2018 and June 22, 2018.  The issuances were pursuant to the exemption from registration under Regulation S promulgated under the Securities Act of 1933, as amended.

 

On February 12, 2019, the Company’s warrant holders converted 294,971 of the Company’s warrants into 52,077 shares of the Company’s common stock using cashless exercises method.

 

On February 20, 2019, the Company’s warrant holders converted 415,355 of the Company’s warrants into 54,826 shares of the Company’s common stock using cashless exercises method.

 

On March 11, 2019, the Board granted an aggregate of 131,330 shares of restricted common stock, with a fair value of $261,347, determined using the closing price of $1.99 on March 11, 2019, to repay the debt the Company owed to two unrelated third parties. As the carrying value of the debt equaled to the fair value of the 131,330 common shares at $1.99 per share, no gain or loss were recognized upon this debt settlement.

 

On March 15, 2019, the Board granted an aggregate of 142,530 shares of restricted common stock, with a fair value of $290,761, determined using the closing price of $2.04 on March 15, 2019, to repay the debt the Company owed to one unrelated third party. As the carrying value of the debt equaled to the fair value of the 142,530 common shares at $2.04 per share, no gain or loss were recognized upon this debt settlement.

 

On April 4, 2019, the Company entered into certain securities purchase agreement with certain “non-U.S. Persons” as defined in Regulation S of the Securities Act of 1933, as amended pursuant to which the Company agreed to sell 1,492,000 shares of its common stock, par value $0.0001 per share, at a per share purchase price of $2.00. The net proceeds to the Company from this offering were approximately $2.9 million. 

 

On November 20, 2019, the company wrote off 947,037 common shares.

 

On December 23, 2019, TMSR Holding Company Limited (the “Company”) entered into certain securities purchase agreement (the “SPA”) with certain “non-U.S. Persons” (the “Purchasers”) as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to which the Company agreed to sell 3,692,859 shares of its common stock (“Common Stock”), par value $0.0001 per share, at a per share purchase price of $1.00. The net proceeds to the Company from this offering will be approximately $3.66 million.

 

On January 3, 2020, the Company entered into a Share Purchase Agreement with Wuge and all the shareholders of Wuge (“Wuge Shareholders”). Wuge Shareholders are Wei Xu, Bibo Lin, Jiangsu Lingkong Network Joint Stock Co., Ltd., which is controlled by Wei Xu, and Anhui Shuziren Network Technology Co., Ltd., which is controlled by Wei Xu. Pursuant to the SPA, TMSR shall issue an aggregate of 4,000,000 shares of TMSR’s common stock to the Wuge Shareholders, in exchange for Wuge Shareholders’ agreement to enter into, and their agreement to cause Wuge to enter into, certain VIE agreements (“VIE Agreements”) with Tongrong Technology (Jiangsu) Co., Ltd. (“WFOE”), the Company’s indirectly owned subsidiary, through which WFOE shall have the right to control, manage and operate Wuge in return for a service fee equal to 100% of Wuge’s net income (“Acquisition”). On January 24, 2020, the Company completed the Acquisition and issued the Shares to the Wuge Shareholders.

 

Warrants and options

 

On July 29, 2015, the Company sold 10,000,000 units at a purchase price of $5.00 per unit (“Public Units”) in its initial public offering. Each Public Unit consists of one share of the Company’s common stock, $0.0001 par value, and one warrant. Each warrant will entitle the holder to purchase one-half of one share of common stock at an exercise price of $2.88 per half share ($5.75 per whole share). Warrants may be exercised only for a whole number of shares of common stock. No fractional shares will be issued upon exercise of the warrants. The warrants will become exercisable on 30 days after the consummation of its initial Business Combination with China Sunlong on February 6, 2018. The warrants will expire February 5, 2023. The warrants will be redeemable by the Company at a price of $0.01 per warrant upon 30 days prior written notice after the warrants become exercisable, only in the event that the last sale price of the common stock equals or exceeds $12.00 per share for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which notice of redemption is given.

 

The sponsor of the Company purchased, simultaneously with the closing of the Public Offering on July 29, 2015, 500,000 units at $5.00 per unit in a private placement for an aggregate price of $2,500,000. Each unit purchased is substantially identical to the units sold in the Public Offering.

 

The Company sold to the underwriter (and/or its designees), for $100, as additional compensation, an option to purchase up to a total of 800,000 units exercisable at $5.00 per unit (or an aggregate exercise price of $4,000,000) upon the closing of the Public Offering. Since the option is not exercisable until the earliest on the closing the initial Business Combination, the option will effectively represent the right to purchase up to 800,000 shares of common stock and 800,000 warrants to purchase 400,000 shares at $5.75 per full share for an aggregate maximum amount of $6,300,000. The units issuable upon exercise of this option are identical to those issued in the Public Offering.

 

In July 2016, the board of directors of the Company appointed two new directors. In August 2016, the sponsor of the Company granted an option to each of the two new directors to acquire 12,000 shares of common stock at a price of $4.90 per share vested immediately and exercisable commencing six months after closing of the initial Business Combination and expiring five years from the closing of the initial Business Combination.

 

29

 

 

The aforementioned warrants and options are deemed to be effective on February 6, 2018, the date of the consummation of its initial business combination with China Sunlong, as the Company was deemed to be the accounting acquiree in the transaction and the transaction was treated as a recapitalization of China Sunlong.

 

The summary of warrant activity is as follows:

 

       Exercisable
Into
   Weighted
Average
   Average
Remaining
 
   Warrants   Number of   Exercise    Contractual 
   Outstanding   Shares   Price   Life 
December 31, 2019   9,079,348    4,539,674   $5.75    3.14 
Granted/Acquired   -    -   $-    - 
Forfeited   -    -   $-    - 
Exercised   -    -    -    - 
June 30, 2020   9,079,348    4,539,674   $5.75    2.64 

 

The summary of option activity is as follows:

 

       Weighted   Average 
       Average   Remaining 
   Options   Exercise    Contractual 
   Outstanding   Price   Life 
December 31, 2019   824,000   $5.00    4.16 
Granted/Acquired   -   $-    - 
Forfeited   -   $-    - 
Exercised   -   $-    - 
June 30, 2020   824,000   $5.00    2.64 

 

Note 16 – Contingencies

  

The Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity.

 

On February 27, 2013, Wuhan HOST entered into a contract to purchase land use rights for a parcel of land in E Zhou City, Hubei, China, for $1,212,478.  The Company has paid to the local government $781,349, a balance of $431,129 has not been paid; however, the government has already issued to the Company all the necessary certificates transferring title of the land use rights for the parcel of land to the Company, and has not taken action to collect any remaining unpaid balance.  If the government determines that it wishes to collect an unpaid balance, the total cost to the Company would be $431,129.

 

Note 17 – Segment reporting

 

The Company follows ASC 280, Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance. The Company’s chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measure being income from operations.

 

The Company’s has discontinued Wuhan Host and Shengrong WFOE. The Company’s remain business segment and operations is Rong Hai. The Company’s consolidated results of operations and consolidated financial position from continuing operations are almost all attributable to Rong Hai; accordingly, management believes that the consolidated balance sheets and statement of operations provide the relevant information to assess Rong Hai’s performance.

 

The following represents assets by division as of:

 

Total assets as of  June 30,
2020
   December 31,
2019
 
Hubei Shengrong and Shengrong WFOE  $-   $- 
Wuhan HOST   -    - 
Rong Hai and Tongrong WFOE   17,710,457    17,407,872 
Wuge   2,198,636    - 
CCNC, China Sunlong, Shengrong BVI and Shengrong HK   8,949,216    71,521 
Total Assets  $28,858,309   $17,479,393 

 

30

 

 

Note 18 – Discontinued Operations

 

The following depicts the financial position for the discounted operations of Wuhan Host, Shengrong WOFE, Shengrong HK and China Sunlong as of June 30, 2020 and December 31, 2019, and the result of operations for the discounted operations of Wuhan Host, Shengrong WOFE, Shengrong HK and China Sunlong for the six months ended June 30, 2020 and 2019.

 

   June 30,   December 31, 
Financial Position  2020   2019 
CURRENT ASSETS        
Cash and cash equivalents         -    1,544,177 
Total current assets   -    1,544,177 
           
PLANT AND EQUIPMENT, NET   -    - 
           
OTHER ASSETS          
Goodwill   -    3,424,390 
Intangible assets, net   -    - 
Deferred tax assets   -    - 
Total other assets   -    3,424,390 
Total assets   -    4,968,567 
           
CURRENT LIABILITIES          
Accounts payable   -    2,288,195 
Other payables and accrued liabilities   -    1,332,430 
Other payables - related parties   -    3,108,908 
Customer deposits   -    3,019,264 
Lease liabilities - current   -    98,582 
Taxes payable   -    326,687 
Total current liabilities   -    10,174,066 
           
OTHER LIABILITIES          
Third party loan - noncurrent   -    143,345 
Lease liabilities - noncurrent   -    95,752 
Total other liabilities   -    239,097 
           
Total liabilities   -    10,413,163 
           
Net Assets   -    (5,444,596)

 

31

 

 

Results of Operations  For the six months
ended
June 30,
2020
   For the
six months
ended
June 30,
2019
 
REVENUES        
Equipment and systems  $          -   $2,971,542 
Coating and fuel materials   -    4,163,919 
Trading and others   -    - 
TOTAL REVENUES   -    7,135,461 
           
COST OF REVENUES          
Equipment and systems   -    1,208,838 
Coating and fuel materials   -    3,665,496 
Trading and others   -    - 
TOTAL COST OF REVENUES   -    4,874,334 
           
GROSS PROFIT   -    2,261,127 
           
OPERATING EXPENSES (INCOME)          
Selling, general and administrative   (495,733)   843,129 
Provision for (recovery of) doubtful accounts   -    - 
TOTAL OPERATING EXPENSES   (495,733)   843,129 
           
INCOME FROM OPERATIONS   495,733    1,417,998
           
OTHER INCOME (EXPENSE)          
Interest income   -    869 
Other income (expense), net   -    36,275 
Total other income (expense), net   -    37,144 
           
INCOME (LOSS) BEFORE INCOME TAXES   495,733   1,455,142
           
PROVISION FOR INCOME TAXES   -    204,833 
           
NET (LOSS) INCOME  $495,733  $1,250,309

 

Note 19 – Subsequent events

 

On August 11, 2020, pursuant to certain securities purchase agreements dated May 1, 2020, the Company issued 1,674,428 shares of its common, at a per share purchase price of $1.50, to the eleven investors. The gross proceeds to the Company from this private placement were approximately $2.51 million.

 

32

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of the results of our operations and financial condition should be read in conjunction with our unaudited condensed financial statements, and the notes to those unaudited condensed financial statements that are included elsewhere in this Report. All monetary figures are presented in U.S. dollars, unless otherwise indicated.

 

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange rate; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

 

Although the forward-looking statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

 

Overview

 

Code Chain New Continent Limited (formerly known as TMSR Holding Company Limited and JM Global Holding Company, the “Company” or “CCNC”), through its subsidiaries and controlled entities, focuses its business into three segments: (1) research, development and sale of an array of solid waste recycling systems for the mining and industrial sectors (the “solid waste recycling systems business”); (2) coal wholesales and sales of coke, steels, construction materials, mechanical equipment and steel scrap (the “coal and coke wholesale business”); and (3) the research and development, production and sale of Zinc-rich coating materials (the “coating materials business”). The solid waste recycling systems business was carried out by Shengrong Environmental Protection Technology (Wuhan) Co. Ltd. (“Shengrong WFOE”), the Company’s indirect subsidiary. The coating materials business was carried out by Wuhan HOST Coating Materials Co., Ltd. (“Wuhan HOST”), the Company’s indirect subsidiary. The Company’s coal and coke wholesale business is carried out by Jiangsu Rong Hai Electric Power Fuel Co., Ltd. (“Rong Hai”), an entity contractually controlled by the Company. The Company has also engaged in mobile game development, Internet of Things (IoT), and electronic tokens through Wuge Network Games Co., Ltd. (“Wuge”), an entity contractually controlled by the Company.

 

On June 30, 2020, the Company entered into a share purchase agreement with Jiazhen Li, former CEO of the Company (the “Buyer”), Long Liao and Chunyong Zheng, who are former shareholders of Wuhan HOST, to sell all the equity interest the Company held in China Sunlong. Shengrong WFOE and Wuhan HOST are indirect subsidiaries of China Sunlong. As a result, as of June 30, 2020, operations of Shengrong WFOE and Wuhan HOST have been designated as discontinued operations.

 

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Key Factors that Affect Operating Results

 

Management has observed the trends and uncertainties of government efforts to control the industrial solid wastes discharge, which we believe may have a direct impact on our operations in the near future.

 

Although the PRC economy has grown in recent years, the pace of growth has slowed, and even that rate of growth may not continue. According to the National Bureau of Statistics in China (“NBS”), the annual rate of growth in the PRC declined from 7.7% in 2013 to 7.4% in 2014, 6.9% in 2015, 6.7% in 2016, and 6.9% in 2017 and dropped to 6.6% in 2018. A further slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in the PRC may materially reduce the demand for the combined company’s selling of coating and fuel materials and may have a materially adverse effect on its business.

  

Our operating subsidiaries are incorporated, and our operations and assets are primarily located, in China. Accordingly, our results of operations, financial condition and prospects are affected by China’s economic and regulation conditions in the following factors: (a) an economic downturn in China or any regional market in China; (b) economic policies and initiatives undertaken by the Chinese government; (c) changes in the Chinese or regional business or regulatory environment affecting our customers; and (e) Changes in the Chinese government policy on industrial solid waste. Unfavorable changes could affect demand for services that we provide and could materially and adversely affect the results of operations. Although the Company has generally benefited from China’s economic growth and the policies to encourage the improvement of reducing of solid waste discharge, the Company is also affected by the complexity, uncertainties and changes in the Chinese economic conditions and regulations governing the mining industry.

 

Our recycling systems and equipment operations are largely affected by the testing result of installed solid waste recycling systems and equipment. If an installed solid waste recycling system or equipment cannot meet the acceptance standards stated on the sales contract, which usually include the outlook of the systems and equipment, the recycled rate of low magnetic catalysts and the physical and chemical index of low magnetic catalysts, then we need to adjust the systems and equipment until their performance meets the acceptance standards. Only after the testing results meet the standards, the products can be considered delivered and title passed to customers, and we can recognize sales.

 

Our fuel materials, mainly coal, operations are largely affected by the following aspects. First, the PRC’s macroeconomic growth is not as fast as expected; the slowdown of economic growth will affect the demand of the market, and the reduction of coal consumption by enterprises will affect the sales of coal and directly affect our earnings. Second, the coal market price fluctuation will also affect our sales revenue; because Jiangsu Rong Hai has long-term and stable customers, the price fluctuations will affect the cost of purchasing coal and thus affect our revenue. Third, the risk of price fluctuation in the shipping industry. The fluctuation of shipping price will also directly affect the fluctuation of coal market price, thus affecting our income. Fourth, we have long-term and stable customers and continues to rely on a small number of customers from 2009 to 2019. Losing our major customers will have a significant impact on our results of operations. In addition, the payment situation of these customers will be affected by abnormal market changes, which will have a negative impact on our business recovery accounts and cash flow.

 

As a result of the novel coronavirus (COVID-19) outbreak, we have seen a slowdown in revenue growth in first quarter 2020 as our businesses have been negatively impacted by the COVID-19. These impacts of COVID-19 on our business, financial condition, and results of operations include, but are not limited to, the following:

 

  We temporally closed our offices and production facilities to adhere to the policy beginning in February 2020, as required by relevant PRC regulatory authorities. Our offices are slowly reopening pursuant to local guidelines.

 

  Our customers could potentially be negatively impacted by the outbreak, which may reduce the demand of our products. As a result, our revenue and income may be negatively impacted in 2020.

 

  The situation may worsen if the COVID-19 outbreak continues. We will continue to closely monitor our collections throughout 2020.

 

Because of the significant uncertainties surrounding the COVID-19 outbreak, the extent of the continued business disruption and the related financial impact cannot be reasonably estimated at this time.

 

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Results of Operations

 

Three Months Ended June 30, 2020 vs. June 30, 2019

 

               Percentage 
   2020   2019   Change   Change 
Revenues – Fuel materials  $1,279,781   $7,418,297   $(6,138,516)   (82.7)%
Revenues –others   46,482    473,468    (426,986)   (90.2)%
Total revenues   1,326,263    7,891,765    (6,565,502)   (83.2)%
Cost of Revenues – Fuel materials   1,189,205    7,423,011    (6,233,806)   (84.0)%
Cost of Revenues – others   -    256,787    (256,787)   (100.0)%
Total cost of revenues   1,189,205    7,679,798    (6,490,593)   (84.5)%
Gross profit   137,058    211,967    (74,909)   (35.3)%
Operating expenses   312,654    385,717    (73,063)   (18.9)%
Loss from operations   (175,596)   (173,750)   (1,846)   1.1%
Other income, net   2,560    (8,820)   11,380    (129.0)%
Loss from continuing operations   (174,603)   (177,291)   2,688    (1.5)%
Discontinued operations:                    
Loss(income) from discontinued operations   (4,446)   1,537,297    (1,541,743)   (100.3)%
Gain on disposal, net of taxes   6,951,617    -    6,951,617    N/A 
Net income   6,772,568    1,360,006    5,412,562    398.0%

 

Revenues

 

The Company’s revenue consists of fuel materials revenue and others revenue. Total revenues decreased by approximately $6.1 million, or approximately 82.7%, to approximately $1.3 million for the three months ended June 30, 2020, compared to approximately $7.4 million for the three months ended June 30, 2019.

 

Fuel Revenue

 

During the three months ended June 30, 2020, we sold 18,364 tons of coal after Rong Hai being acquired with an average selling price of approximately $69.69 per ton.

 

Others Revenue

 

Our other revenues decreased by approximately $0.4 million, or 90.2%, to approximately $46,000 for the three months ended June 30, 2020 as compared to approximately $0.5 million for the three months ended June 30, 2019. The decrease was mainly due to decreased harbor cargo handling revenue of Rong Hai.

 

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Cost of Revenues

 

The Company’s cost of revenues consists of cost of fuel materials, and cost of others. Total cost of revenues decreased by approximately $6.5 million, or approximately 84.5% to approximately $1.2 million for the three months ended June 30, 2020, compared to approximately $7.7 million for the same period in 2019. Our total cost of revenues decrease was attributable to the Company’s general decrease in revenue for fuel materials.

 

Cost of Fuel Materials Revenue

 

During the three months ended June 30, 2020, we sold18,364 tons of coal after Rong Hai being acquired with an average unit cost of approximately $64.76.

 

Cost of Others Revenue

 

Cost of others revenue decreased by approximately $0.3 million or 100%, to approximately $0 for the three months ended June 30, 2020, compared to $0.3 million for the same period in 2019. The decrease was mainly due to increased harbor cargo handling revenue of Rong Hai.  

 

Gross Profit

 

The Company’s gross profit decreased by approximately $0.1 million, or 35.3%, to approximately $0.1 million during the three months ended June 30, 2020, from approximately $0.2 million for the three months ended June 30, 2019. The decrease was due to the decline in coal sales.

 

Operating Expenses

 

The Company’s operating expenses include selling, general and administrative (“SG&A”) expenses, and recovery of doubtful accounts.

 

SG & A expenses increased by approximately $330,990, by approximately 1714.53%, from approximately ($0.02) million for the three months ended June 30, 2019 to approximately $0.3 million for the three months ended June 30, 2020. The significant increase was due to certain SG & A expenses from prior periods reclassified to conform to the current period presentation.

 

Loss from Operations

 

As a result of the foregoing, loss from operations for the three months ended June 30, 2020 was approximately $0.2 million, a increase of approximately $2,688, or approximately 1.5%, from approximately $0.2 million for the three months ended June 30, 2019. The increase of loss was a result of improved gross profit and recovery of doubtful accounts.

  

Net Income

 

The Company’s net income increased by approximately $5.4 million, or 398.0%, to approximately $6.8 million net income for the three months ended June 30, 2020, from approximately $1.4 million net income for the same period in 2019. The increase was mainly due to the disposal of some subsidiaries

 

 

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Six Months Ended June 30, 2020 vs. June 30, 2019

 

               Percentage 
   2020   2019   Change   Change 
Revenues – Fuel materials  $6,445,181   $12,285,253   $(5,840,072)   (47.5)%
Revenues –others   46,482    639,297    (592,815)   (92.7)%
Total revenues   6,491,663    12,924,550    (6,432,887)   (49.8)%
Cost of Revenues – Fuel materials   6,172,177    12,312,714    (6,140,537)   (49.9)%
Cost of Revenues – others   -    316,063    (316,063)   (100.0)%
Total cost of revenues   6,172,177    12,628,777    (6,456,600)   (51.1)%
Gross profit   319,486    295,773    23,713    8.0%
Operating expenses   769,286    857,677    (88,549)   (10.3)%
Loss from operations   (449,800)   (561,904)   112,104    (20.0)%
Other income, net   11,530    (17,606)   29,136    (165.5)%
Loss from continuing operations   (488,381)   (621,749)   133,368    (21.5)%
Discontinued operations:                    
Income (loss) from discontinued operations   495,733    1,250,309    (754,576)   (60.4)%
Gain (loss) on disposal, net of taxes   6,951,617    -    6,951,617    N/A 
Net income (loss)   6,958,969    628,560    6,330,409    1,007.1%

 

Revenues

 

The Company’s revenue consists of fuel materials revenue and others revenue. Total revenues decreased by approximately $5.8 million, or approximately 47.5%, to approximately $6.4 million for the six months ended June 30, 2020, compared to approximately $12.3 million for the six months ended June 30, 2019.

 

Fuel Revenue

 

During the six months ended June 30, 2020, we sold 109,503 tons of coal after Rong Hai being acquired with an average selling price of approximately $58.86 per ton.

 

Others Revenue

 

Our other revenues decreased by approximately $0.6 million, or 92.7%, to approximately $46,482 for the six months ended June 30, 2020 as compared to approximately $0.6 million for the six months ended June 30, 2019. The decrease was mainly due to decreased harbor cargo handling revenue of Rong Hai.

 

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Cost of Revenues

 

The Company’s cost of revenues consists of cost of fuel materials, and cost of others. Total cost of revenues decreased by approximately $6.5 million, or approximately 51.1% to approximately $6.2 million for the six months ended June 30, 2020, compared to approximately $12.6 million for the same period in 2019. Our total cost of revenues increase was attributable to the Company’s general decrease in revenue for fuel materials.

 

Cost of Fuel Materials Revenue

 

During the six months ended June 30, 2020, we sold 109,503 tons of coal after Rong Hai being acquired with an average unit cost of approximately $56.37.

 

Cost of Others Revenue

 

Cost of others revenue decreased by approximately $0.3 million or 100%, to approximately $0 for the six months ended June 30, 2020, compared to $0.3 million for the same period in 2019. The decrease was mainly due to increased harbor cargo handling revenue of Rong Hai.

 

Gross Profit

 

The Company’s gross profit decreased by approximately $23,713, or 8.0%, to approximately $0.32 million during the six months ended June 30, 2020, from approximately $0.29 million for the six months ended June 30, 2019. This increase was mainly due to the increase in Wuge’s income.

 

Operating Expenses

 

The Company’s operating expenses include selling, general and administrative (“SG&A”) expenses, and recovery of doubtful accounts.

 

SG & A expenses increased by approximately $0.3 million, by approximately 59.2%, from approximately $0.6 million for the six months ended June 30, 2019 to approximately $0.9 million for the six months ended June 30, 2020. The increase was mainly due to certain SG & A expenses from prior periods reclassified to conform to the current period presentation.

 

Loss from Operations

 

As a result of the foregoing, loss from operations for the six months ended June 30, 2020 was approximately $0.4 million, a increase of approximately $0.1 million, or approximately 20.0%, from approximately $0.6 million for the six months ended June 30, 2019. The increase of loss was a result of improved gross profit and recovery of doubtful accounts.

  

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Net Income

 

The Company’s net income increased by approximately $6.3 million, or 1,007.1%, to approximately $7.0 million net income for the six months ended June 30, 2020, from approximately $0.6 million net income for the same period in 2019. The increase was mainly due to the disposal of some subsidiaries

 

Critical Accounting Policies and Estimates

 

The preparation of the unaudited condensed financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our unaudited condensed consolidated financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our unaudited condensed consolidated financial statements.

 

Cash and cash equivalents

 

The Company considers certain short-term, highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. Cash and cash equivalents primarily represent bank deposits and fixed deposits with maturities of less than three months.

 

Investments

 

The Company purchases certain liquid short term investments such as money market funds and or other short term debt securities marketed by large financial institutions. These investments are not insured against loss of principal. These investments are accounted for as financial instruments that are marked to fair market value at the end of each reporting period. As result of their short maturities, and limited risk profile, at times, their amortized carrying cost may be the best approximation their fair value.

 

Accounts receivable, net

 

Accounts receivable include trade accounts due from customers. An allowance for doubtful accounts may be established and recorded based on management’s assessment of potential losses based on the credit history and relationships with the customers. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

  

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Inventories

 

Inventories are comprised of raw materials, work in progress and finished goods and are stated at the lower of cost or net realizable value using the first-in-first-out method in Shengrong WFOE and weighted average method in Wuhan HOST and Rong Hai. Management reviews inventories for obsolescence and cost in excess of net realizable value at least annually and records a reserve against the inventory when the carrying value exceeds net realizable value.

 

Prepayments

 

Prepayments are funds deposited or advanced to outside vendors for future inventory purchases. As a standard practice in China, many of the Company’s vendors require a certain amount to be deposited with them as a guarantee that the Company will complete its purchases on a timely basis. This amount is refundable and bears no interest. The Company has legally binding contracts with its vendors, which require any outstanding prepayments to be returned to the Company when the contract ends.

 

Fair value measurement

 

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by us. The Company considers the carrying amount of cash, notes receivable, accounts receivable, other receivables, prepayments, accounts payable, other payables and accrued liabilities, customer deposits, short term loans and taxes payable to approximate their fair values because of their short term nature.

 

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

 

  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 assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

 

  Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

 

Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.

 

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Revenue recognition

 

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of January 1, 2018.  This did not result in an adjustment to retained earnings upon adoption of this new guidance as the Company’s revenue, other than warranty revenues, was recognized based on the amount of consideration we expect to receive in exchange for satisfying the performance obligations. However, the impact of the Company’s warranty revenue was not material as of the date of adoption, and as a result, did not result in an adjustment.

 

The core principle underlying the revenue recognition ASU is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.  The Company’s revenue streams are primarily recognized at a point in time except for the warranty revenues where the warranty periods are recognized over the warranty period, usually is a period of twelve months.

  

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition except its warranty revenues.

 

An entity will also be required to determine if it controls the goods or services prior to the transfer to the customer in order to determine if it should account for the arrangement as a principal or agent. Principal arrangements, where the entity controls the goods or services provided, will result in the recognition of the gross amount of consideration expected in the exchange. Agent arrangements, where the entity simply arranges but does not control the goods or services being transferred to the customer, will result in the recognition of the net amount the entity is entitled to retain in the exchange.

 

Revenue from equipment and systems, revenue from coating and fuel materials, and revenue from trading and others are recognized at the date of goods delivered and title passed to customers, when a formal arrangement exists, the price is fixed or determinable, the Company has no other significant obligations and collectability is reasonably assured. Such revenues are recognized at a point in time after all performance obligations are satisfied under the new five-step model. In addition, training service revenues are recognized when the services are rendered and the Company has no other obligations, and collectability is reasonably assured. These revenues are recognized at a point in time. 

 

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Prior to January 1, 2018, the Company allowed its customers to retain 5% to 10% of the contract price as retainage during the warranty period of 12 months to guarantee product quality. Retainage is considered as a payment term included as a part of the contract price, and was recognized as revenue upon the shipment of products. Due to nature of the retainage, the Company’s policy is to record revenue the full value of the contract without VAT, including any retainage, since the Company has experienced insignificant warranty claims historically. Due to the infrequent and insignificant amount of warranty claims, the ability to collect retainage was reasonably assured and was recognized at the time of shipment. On January 1, 2018, upon the adoption of ASU 2014-09 (ASC 606), revenues from product warranty are recognized over the warranty period over 12 months.

 

Payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits.

 

Gross versus Net Revenue Reporting

 

Starting from July 2016, in the normal course of the Company’s trading of industrial waste materials business, the Company directly purchases the processed industrial waste materials from the Company’s suppliers under the Company’s specifications and drop ships the materials directly to the Company’s customers. The Company would inspect the materials at its customers’ site, during which inspection it temporarily assumes legal title to the materials, and after which inspection legal title is transferred to its customers. In these situations, the Company generally collects the sales proceed directly from the Company’s customers and pay for the inventory purchases to the Company’s suppliers separately. The determination of whether revenues should be reported on a gross or net basis is based on the Company’s assessment of whether it is the principal or an agent in the transaction. In determining whether the Company is the principal or an agent, the Company follows the new accounting guidance for principal-agent considerations. Since the Company is the primary obligor and is responsible for (i) fulfilling the processed industrial waste materials delivery, (ii) controlling the inventory by temporarily assume legal title to the materials after inspecting the products from our vendors before passing the materials to our customers, and (iii) bearing the back-end risk of inventory loss with respect to any product return from the Company’s customers, the Company has concluded that it is the principal in these arrangements, and therefore report revenues and cost of revenues on a gross basis.

  

Recently Issue Accounting Pronouncements

  

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We do not believe the adoption of this ASU would have a material effect on our consolidated financial statements.

 

We do not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on our consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

 

Liquidity and Capital Resources

 

The Company has funded working capital and other capital requirements primarily by equity contributions, loans from shareholders, cash flow from operations, short term bank loans, loans from third parties and cash received from JM Global Holding Company through the reverse capitalization. Cash is required to repay debts and pay salaries, office expenses, income taxes and other operating expenses. As of June 30, 2020, our net working capital was approximately $7.5 million, over 11% of the Company’s current liabilities was from other payables – related parties due to major shareholders. Removing these liabilities, the Company had net working capital of $8.2 million and is expected to continuing generate cash flow from operations in the twelve months period.

 

We believe that current levels of cash and cash flows from operations will be sufficient to meet its anticipated cash needs for at least the next twelve months from the date the consolidated financial statements to be issued. However, it may need additional cash resources in the future if it experiences changed business conditions or other developments, and may also need additional cash resources in the future if it wishes to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If it is determined that the cash requirements exceed the Company’s amounts of cash and cash equivalents on hand, the Company may seek to issue debt or equity securities or obtain additional credit facility. 

 

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The following summarizes the key components of the Company’s cash flows for the six months ended June 30, 2020 and 2019.

 

   For the
Six Months
ended
June 30,
 
   2020   2019 
         
Net cash provided by operating activities  $1,005,663   $(2,292,289)
Net cash used in investing activities   (4,261,148)   (16,796)
Net cash provided by financing activities   3,013,714    2,984,000 
Effect of exchange rate change on cash   (60,488)   (65,187)
Net change in cash  $(302,259)  $609,728 

 

As of June 30, 2020 and December 31, 2019, the Company had cash in the amount of $1,939,520 and $4,027,744, respectively. As of June 30, 2020 and December 31, 2019, $1,939,520 and $4,027,390 and were deposited with various financial institutions located in the PRC, respectively. As of June 30, 2020 and December 31, 2019, $0 and $354 were deposited with one financial institution located in Hong Kong, respectively.

 

Operating activities

 

Net cash provided by operating activities was approximately $1.0 million for the six months ended June 30, 2020, as compared to approximately $2.3 million net cash used in operating activities for the six months ended June 30, 2019.  Net cash provided by operating activities was mainly due to the increase of approximately $0.5 million accounts payable, the decrease of approximately $1.2 million other payables and accrued liabilities, and the increase of approximately $0.6 million of customer deposits, and the decrease of approximately $1.0 million of accounts receivables.

 

Investing activities

 

Net cash used in investing activities was approximately $4.3 million for the six months ended June 30, 2020, as compared to approximately $17,000 net cash used in investing activities for the six months ended June 30, 2019. Net cash used in investing activities for the six months ended June 30, 2020 was due to approximately $1.1 million spending on purchase of intangible assets and 3.1 million buy financial products.

 

Financing activities

 

Net cash provided by financing activities was approximately $3.0 million for the six months ended June 30, 2020, as compared to approximately $3.0 million net cash used in financing activities for the six months ended June 30, 2019. Net cash provided by financing activities for the six months ended June 30, 2020 was due to approximately $0.4 million proceeds from short-term loans – bank and $2.6 million proceeds from issuance of common stock.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Credit Risk

 

Credit risk is one of the most significant risks for the Company’s business.

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. Cash held at major financial institutions located in the PRC are not insured by the government. While we believe that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.

 

Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. Credit risk is controlled by the application of credit approvals, limits and monitoring procedures. The Company manages credit risk through in-house research and analysis of the Chinese economy and the underlying obligors and transaction structures. To minimize credit risk, the Company normally require prepayment from the customers prior to begin production or delivery products. The Company identifies credit risk collectively based on industry, geography and customer type. This information is monitored regularly by management.

 

In measuring the credit risk of our sales to our customers, the Company mainly reflects the “probability of default” by the customer on its contractual obligations and considers the current financial position of the customer and the exposures to the customer and its likely future development.

 

Liquidity Risk

 

The Company is also exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, the Company will turn to other financial institutions and the owners to obtain short-term funding to meet the liquidity shortage.

 

Inflation Risk

 

The Company is also exposed to inflation risk. Inflationary factors, such as increases in raw material and overhead costs, could impair our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses as a percentage of sales revenue if the selling prices of our products do not increase with such increased costs.

 

Foreign Currency Risk

 

A majority of the Company’s operating activities and a significant portion of the Company’s assets and liabilities are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the Peoples’ Bank of China (“PBOC”) or other authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts. The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. 

  

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2020. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective. 

 

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

 

44

 

 

PART II — OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

None. 

 

ITEM 1A. RISK FACTORS

 

Not applicable for smaller reporting companies.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On May 1, 2020, the Company entered into securities purchase agreement with eleven “non-U.S. Persons” as defined in Regulation S of the Securities Act of 1933, as amended (the “Securities Act”). On August 11, 2020, pursuant to the securities purchase agreement, the Company issued 1,674,428 shares of its common, at a per share purchase price of $1.50, to the eleven investors. The gross proceeds to the Company from this private placement were approximately $2.51 million. The shares issued in the private placement are exempt from the registration requirements of the Securities Act, pursuant to Regulation S promulgated thereunder.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

  

ITEM 6. EXHIBITS

 

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

Exhibit
Number
  Description
     
31.1   Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2   Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1   Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
32.2   Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350.
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema
101.CAL   XBRL Taxonomy Extension Calculation Linkbase
101.DEF   XBRL Taxonomy Extension Definition Linkbase
101.LAB   XBRL Taxonomy Extension Label Linkbase
101.PRE   XBRL Taxonomy Extension Presentation Linkbase

 

45

 

 

SIGNATURES

 

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  CODE CHAIN NEW CONTINENT LIMITED
     
Date: August 13, 2020  By: /s/ Yimin Jin
  Name:   Yimin Jin
  Title: Chief Executive Officer and
Co-Chairman of the Board
    (Principal Executive Officer)

 

 

46

 

 

EXHIBIT 31.1

 

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Yimin Jin, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 of Code Chain New Continent Limited.;

 

2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

 

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 13, 2020 By: /s/ Yimin Jin
   

Yimin Jin

Co-Chairman of the Board

(Principal Executive Officer)

 

EXHIBIT 31.2

 

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Yi Li, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 of Code Chain New Continent Limited.;

 

2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

 

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 13, 2020 By: /s/ Yi Li
   

Yi Li

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

SECTION 906 OF SARBANES-OXLEY ACT OF 2002

 

I, Yimin Jin, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

1.The Quarterly Report on Form 10-Q of Code Chain New Continent Limited. (the “Company”) for the quarterly period ended June 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

 

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 13, 2020 By: /s/ Yimin Jin
    Yimin Jin
   

Co-Chairman of the Board

(Principal Executive Officer)

 

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

EXHIBIT 32.2

 

Certification Pursuant To

Section 906 of Sarbanes-Oxley Act of 2002

 

I, Yi Li, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

1.The Quarterly Report on Form 10-Q of Code Chain New Continent Limited (the “Company”) for the quarterly period ended June 30, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

 

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 13, 2020 By: /s/ Yi Li
    Yi Li
   

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

  

 

 

v3.20.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2020
Aug. 12, 2020
Document and Entity Information [Abstract]    
Entity Registrant Name Code Chain New Continent Ltd  
Entity Central Index Key 0001641398  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Type 10-Q  
Document Period End Date Jun. 30, 2020  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2020  
Entity Current Reporting Status Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   30,188,958
Entity Interactive Data Current Yes  
Entity Incorporation State Country Code NV  
Entity File Number 001-37513  
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2020
Dec. 31, 2019
CURRENT ASSETS    
Cash and cash equivalents $ 1,939,520 $ 2,483,567
Short Term Investment 3,036,938
Notes receivable   43,003
Accounts receivable, net 1,039,772 2,197,264
Other receivables, net 1,820,365 52,616
Inventories 1,248,906 1,197,065
Prepayments 4,144,414 4,069,214
Discontinued operations - current assets 1,544,177
Total current assets 13,229,915 11,586,906
PLANT AND EQUIPMENT, NET 79,688 19,057
RIGHT-OF-USE ASSETS 85,605 90,250
OTHER ASSETS    
Goodwill 14,329,042 7,289,454
Intangible assets, net 1,130,528
Deferred tax assets 3,531 37,532
Discontinued operations - non-current assets 3,424,390
Total other assets 15,463,101 10,751,376
Total assets 28,858,309 22,447,589
CURRENT LIABILITIES    
Short term loans - bank 437,884
Accounts payable 920,480 344,108
Other payables and accrued liabilities 2,585,341 4,121,862
Other payables - related parties 641,570 1,336,902
Customer deposits 1,040,124 146,771
Lease liabilities - current 62,093 61,009
Taxes payable 3,555 202
Discontinued operations - current liabilities   10,174,066
Total current liabilities 5,691,047 16,184,920
OTHER LIABILITIES    
Lease liabilities - noncurrent 60,681 61,580
Discontinued operations - non-current liabilities 239,097
Total other liabilities 60,681 300,677
Total liabilities 5,751,728 16,485,597
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY    
Preferred stock, $0.0001 par value, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
Common stock, $0.0001 par value, 200,000,000 shares authorized, 28,514,520 and 20,821,661 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively* 2,851 2,082
Additional paid-in capital 19,242,951 8,350,861
Retained earnings 5,400,286 (1,558,683)
Accumulated other comprehensive loss (1,539,507) (832,268)
Total shareholders' equity 23,106,581 5,961,992
Total liabilities and shareholders' equity $ 28,858,309 $ 22,447,589
v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 28,514,520 28,514,520
Common stock, shares outstanding 20,821,661 20,821,661
v3.20.2
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
REVENUES        
Equipment and systems
Fuel materials 1,279,781 7,418,297 6,445,181 12,285,253
Trading and others 46,482 473,468 46,482 639,297
TOTAL REVENUES 1,326,263 7,891,765 6,491,663 12,924,550
COST OF REVENUES        
Equipment and systems
Fuel materials 1,189,205 7,423,011 6,172,177 12,312,714
Trading and others 256,787 316,063
TOTAL COST OF REVENUES 1,189,205 7,679,798 6,172,177 12,628,777
GROSS PROFIT 137,058 211,967 319,486 295,773
OPERATING EXPENSES (INCOME)        
Selling, general and administrative 311,685 (19,305) 904,055 567,804
Provision for (recovery of) doubtful accounts 969 405,022 (134,769) 289,873
TOTAL OPERATING EXPENSES (INCOME) 312,654 385,717 769,286 857,677
INCOME FROM OPERATIONS (175,596) (173,750) (449,800) (561,904)
OTHER INCOME (EXPENSE)        
Interest income 8,423 (2) 10,063
Interest expense (9,462) (9,764) (11,482) (17,606)
Investment income 3,600 12,950
Other income (expense), net (1) 946 (1)
Total other income (expense), net 2,560 (8,820) 11,530 (17,606)
INCOME BEFORE INCOME TAXES FROM CONTINUING OPERATIONS (173,036) (182,570) (438,270) (579,510)
PROVISION FOR INCOME TAXES 1,567 (5,279) 50,111 42,239
INCOME FROM CONTINUING OPERATIONS (174,603) (177,291) (488,381) (621,749)
Discontinued operations:        
Income (loss) from discontinued operations, net of taxes (4,446) 1,537,297 495,733 1,250,309
Gain on disposal, net of taxes 6,951,617 6,951,617
Income (loss) from discontinued operations, total 6,947,171 1,537,297 7,447,350 1,250,309
Net income 6,772,568 1,360,006 6,958,969 628,560
OTHER COMPREHENSIVE INCOME        
Foreign currency translation adjustment (382,301) (558,490) (707,240) (47,405)
COMPREHENSIVE INCOME (LOSS) $ 6,390,267 $ 801,516 $ 6,251,729 $ 581,155
WEIGHTED AVERAGE NUMBER OF COMMON SHARES        
Basic and diluted 27,640,684 21,735,542 27,640,684 20,867,311
Earnings per share from continuing operations        
Basic and diluted $ (0.01) $ (0.01) $ (0.02) $ (0.03)
Earnings per share from discontinued operations        
Basic and diluted 0.25 0.07 0.27 0.06
Earnings per share available to common shareholders        
Basic and diluted $ 0.25 $ 0.06 $ 0.25 $ 0.03
v3.20.2
Condensed Statements of Changes in Shareholders' Equity - USD ($)
Preferred Stock
Common Stock
Additional Paid-in Capital
Retained Earnings Statutory Reserves
Retained Earnings Unrestricted
Accumulated Other Comprehensive Income (Loss)
Total
Balance at Dec. 31, 2018 $ 1,990 $ 4,814,846 $ 15,267,660 $ (720,693) $ 19,363,803
Balance, Shares at Dec. 31, 2018 19,895,935          
Net income         628,560 628,560
Issuance of common stock for cash   $ 149 2,983,850       2,983,999
Issuance of common stock for cash, Shares   1,492,000          
Conversion of warrants into common stock   $ 11 (11)        
Conversion of warrants into common stock, Shares   106,903          
Issuance of common stock for debt settlement   $ 13 261,334       261,347
Issuance of common stock for debt settlement, Shares   131,330          
Issuance of common stock for debt settlement   $ 14 290,747       290,761
Issuance of common stock for debt settlement, shares   142,530          
Foreign currency translation           (47,405) (47,405)
Balance at Jun. 30, 2019 $ 2,177 8,350,766   15,896,220 (768,098) 23,481,065
Balance, Shares at Jun. 30, 2019 21,768,698          
Balance at Dec. 31, 2019 $ 2,082 8,350,861   (1,558,683) (832,267) 5,961,992
Balance, Shares at Dec. 31, 2019 20,821,661          
Net income 6,958,969 6,958,969
Issuance of shares for acquisition   $ 400 7,199,600       7,200,000
Issuance of shares for acquisition, shares   4,000,000          
Issuance of common stock for cash $ 369 3,692,490 3,692,859
Issuance of common stock for cash, Shares 3,692,859          
Foreign currency translation (707,240) (707,240)
Balance at Jun. 30, 2020 $ 2,851 $ 19,242,951 $ 5,400,286 $ (1,539,507) $ 23,106,581
Balance, Shares at Jun. 30, 2020 28,514,520          
v3.20.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income $ 6,958,969 $ 628,560
Adjustments to reconcile net income to net cash used in operating activities:    
Depreciation of plant and equipment 8,448 198,570
Amortization of intangible assets 46 108,082
Gain on disposal of discontinued operations (6,951,617)
Deferred tax provision 33,692 (8,229)
Change in operating assets and liabilities    
Notes receivable 42,679 (640,167)
Accounts receivables 1,133,484 (2,627,521)
Other receivables (32,423) (202,197)
Other receivable - related party 13,260 41,297
Inventories (69,803) 638,092
Prepayments (131,316) (346,858)
Accounts payable 545,282 648,537
Other payables and accrued liabilities (1,161,359) (1,764,652)
Customer deposits 599,565 506,600
Lease liabilities 13,377 51,948
Taxes payable 3,380 475,649
Net cash used in operating activities 1,005,664 (2,292,289)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Net increase in cash from acquisition of Wuge 228,788
Net decrease in cash from disposal of discontinued operations (470,576)
Purchase of intangible assets (1,138,664)
Purchase of financial products (3,058,670)
Purchase of equipment (63,814) (16,796)
Net cash (used in) provided by investing activities (4,502,936) (16,796)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from issuance of common stock 2,572,697 2,984,000
Proceeds from short-term loans - bank 441,017
Net cash provided by financing activities 3,013,714 2,984,000
EFFECT OF EXCHANGE RATE ON CASH (60,489) (65,187)
INCREASE IN CASH (544,047) 609,728
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,483,567 726,737
CASH AND CASH EQUIVALENTS, END OF PERIOD 1,939,520 1,336,465
SUPPLEMENTAL CASH FLOW INFORMATION:    
Cash paid for income tax 16,419
Cash paid for interest 11,482 17,606
NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES    
Issuance of common stock for warrants conversion 11
Issuance of common stock for debts settlement 552,108
Initial recognition of right-of-use assets and lease liabilities $ 122,774 $ 317,349
v3.20.2
Nature of Business and Organization
6 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of business and organization

Note 1 – Nature of business and organization

 

Code Chain New Continent Limited (the "Company" or "CCNC"), formerly known as TMSR Holding Company Limited and JM Global Holding Company, was a blank check company incorporated in Delaware on April 10, 2015. The Company was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, exchangeable share transaction or other similar business transaction, one or more operating businesses or assets. On June 20, 2018, CCNC completed a reincorporation and as a result, the Company changed its state of incorporation from Delaware to Nevada (the "Reincorporation"). The Articles of Incorporation and Bylaws of CCNC Nevada became the governing instruments of the Company, resulting in a 2-for-1 forward stock split of the Company's common stock (the "Forward Split). The Reincorporation and Forward Split were approved by shareholders holding the majority of the outstanding shares of common stock of CCNC Delaware on June 1, 2018 at the Annual Meeting of Shareholders.

 

On February 6, 2018, China Sunlong Environmental Technology Inc. ("China Sunlong") consummated the business combination with the Company pursuant to a Share Exchange Agreement (the "Share Exchange Agreement") dated as of August 28, 2017 by and among (i) the Company; (ii) Zhong Hui Holding Limited; (iii) China Sunlong; (iv) each of the shareholders of China Sunlong named on Annex I of the Share Exchange Agreement (the "Sellers"); and (v) Chuanliu Ni, a Chinese citizen who is the Chief Executive Officer and director of China Sunlong, in the capacity as the representative for the Sellers. Pursuant to the Share Exchange Agreement, the Company acquired from the Sellers all of the issued and outstanding equity interests of China Sunlong in exchange for 17,990,856 newly-issued shares of common stock of the Company to the Sellers. 1,799,088 of these newly-issued shares are held in escrow for 18 months from the closing date of the Business Combination as a security for China Sunlong and the Sellers' indemnification obligations under the Share Exchange Agreement. This transaction is accounted for as a "reverse merger" and recapitalization at the date of the consummation of the transaction since the shareholders of China Sunlong owns the majority of the outstanding shares of the Company immediately following the completion of the transaction and the Company's operations was the operations of China Sunlong following the transaction. Accordingly, China Sunlong was deemed to be the accounting acquirer in the transaction and the transaction was treated as a recapitalization of China Sunlong. The financial statements of China Sunlong prior to February 6, 2018 are prepared on the basis as if the reorganization became effective as of the beginning of the first period presented in the accompanying consolidated financial statements of the Company.

 

China Sunlong is a holding company incorporated on August 31, 2015, under the laws of the Cayman Islands. China Sunlong has no substantive operations other than holding all of the outstanding share capital of Shengrong Environmental Protection Holding Company Limited ("Shengrong BVI"). Shengrong BVI is a holding company incorporated on June 30, 2015, under the laws of the British Virgin Islands. Shengrong BVI has no substantive operations other than holding all of the outstanding share capital of Hong Kong Shengrong Environmental Technology Limited ("Shengrong HK"). Shengrong HK is also a holding company holding all of the outstanding equity of Shengrong Environmental Protection Technology (Wuhan) Co., Ltd. ("Shengrong WFOE").

 

The Company focuses on the industrial solid waste recycling and comprehensive utilization. The Company's main products are high efficiency permanent magnetic separators and comprehensive utilization systems for industrial solid wastes. The Company's headquarter is located in Hubei Province, in the People's Republic of China (the "PRC" or "China"). All of the Company's business activities are carried out by the wholly owned operating Chinese company, Hubei Shengrong Environmental Protection Energy-Saving Science and Technology Ltd. ("Hubei Shengrong") prior to May 1, 2018.

 

On April 11, 2018, the Company, Shengrong WFOE and Hubei Shengrong, both of which are the Company's indirectly owned subsidiaries (collectively "Purchasers"), entered into a Share Purchase Agreement with Long Liao, Chunyong Zheng, Wuhan Modern Industrial Technology Research Institute, and Hubei Zhonggong Materials Group Co., Ltd. (collectively "Sellers" ) and Wuhan HOST Coating Materials Co., Ltd. ("Wuhan HOST"), a company incorporated in China engaging in the research, development, production and sale of coating materials. Pursuant to the Share Purchase Agreement, as supplemented on August 16, 2018, the Purchasers acquired all of the outstanding equity interests of Wuhan Host. In exchange for the transfer of 100% equity interest of Wuhan Host, Purchasers shall pay a total consideration of $11.2 million, of which $4.7 million or RMB equivalent shall be paid in cash and $6.0 million shall be paid in shares of common stock, of CCNC ("Share Consideration"). The Parties agree the Share Consideration shall be an aggregate of 1,012,932 shares of common stock of which is based on the closing price of US$4.64 on March 27, 2018.

  

On March 31, 2017, China Sunlong completed its acquisition of 100% of the equity in TJComex International Group Corporation ("TJComex BVI"). At the closing of such acquisition, the selling shareholders of TJComex BVI received 5,935 shares of China Sunlong Common Stock valued at $926.71 per share for 100% of their equity in TJComex BVI. TJComex BVI owns 100% of the issued and outstanding capital stock of TJComex Hong Kong Company Limited ("TJComex HK"), a Hong Kong limited liability company, which owns 100% equity interest of Tianjin Corro Technological Consulting Co., Ltd. ("TJComex WFOE"), a wholly foreign owned enterprise incorporated under the laws of the PRC. Pursuant to certain contractual arrangements, TJComex WFOE controls Tianjin Commodity Exchange Co., Ltd. ("TJComex Tianjin"), a limited liability company incorporated under the law of the PRC. TJComex Tianjin is engaged in general merchandise trading business and related consulting services, and its headquarter is located in the city of Tianjin, PRC.

 

On April 2, 2018, the Company disposed of its subsidiary, TJComex BVI in consideration of (i) its minimum contribution to the Company's results of operation and (ii) the unsatisfactory synergy between the TJComex BVI business and the rest of the Company's business. The Company's decision to dispose of TJComex BVI is to (i) improve the Company's overall financial condition and results of operations, (ii) reduce the complexity of the Company's business, (iii) focus the Company's resources on the solid waste recycling business as well as developing environmental control business opportunities; and (iv) make it possible for the Company to pursue acquisition opportunities for more compatible businesses. TJComex BVI was disposed to Chuanliu Ni, a Chinese citizen who is the director of China Sunlong.

 

As of April 2, 2018, the net assets of TJComex BVI were $16,598 and is being recorded as a loss from disposal of subsidiary in the consolidated financial statements for the period ending December 31, 2018. As TJComex BVI operating revenue was less than 1% of the Company's revenue and the disposal did not constitute a strategic shift that will have a major effect on the Company's operations and financial results, the results of operations for TJComex BVI were not reported as discontinued operations under the guidance of Accounting Standards Codification 205.

 

On October 10, 2017, Hubei Shengrong established a wholly owned subsidiary, Fujian Shengrong Environmental Protection Energy-Saving Science and Technology Ltd. ("Fujian Shengrong"), with registered capital of RMB 10,000,000 (approximately USD 1,518,120). Fujian Shengrong has no operations prior to May 30, 2018. On May 30, 2018, Hubei Shengrong and two unrelated entities entered into certain Capital Transfer and Contribution Agreement pursuant to which these two entities shall contribute cash of approximately USD 5.0 million (RMB 32.0 million) into Fujian Shengrong and Hubei Shengrong shall contribute approximately USD 1.3 million (RMB 8.0 million) which is the consideration for certain technology consulting services to be provided by Hubei Shengrong to the two entities. Upon completion of the contribution, the total registered capital of Fujian Shengrong increased to RMB 40.0 million (approximately USD 6.3 million) and Hubai Shengrong owns 20% and the two entities collectively own 80% of the equity interest of Fujian Shengrong. In August 2018, Hubei Shengrong transferred 20% equity interest of Fujian Shengrong to Shengrong WFOE. The Company will account for the investment in Fujian Shengrong using the cost method. Since Shengrong WFOE did not provide any cash contribution to Fujian Shengrong or technology services, the investment balance under the cost method investment on June 30, 2020 is $0.

 

On November 30, 2018, the Company entered into a Share Purchase Agreement with Jirong Huang and Qihuang Wang (collectively "Sellers") and Jiangsu Rong Hai Electric Power Fuel Co., Ltd. ("Rong Hai"), a company incorporated in China engaging in the sale of fuel materials and harbor cargo handling services. Pursuant to the Share Purchase Agreement, CCNC shall issue an aggregate of 4,630,000 shares of CCNC's common stock to the Rong Hai Shareholders, in exchange for Rong Hai Shareholders' agreement to enter into, and their agreement to cause Rong Hai to enter into, certain VIE Agreements (the "Rong Hai VIE Agreements") with Shengrong WFOE, through which Shengrong WFOE shall have the right to control, manage and operate Rong Hai in return for a service fee approximately equal to 100% of Rong Hai's net income ("Acquisition"). On November 30, 2018, Shengrong WFOE, the Company's indirectly owned subsidiary, entered into a series of VIE Agreements with Rong Hai and the Rong Hai Shareholders. The VIE Agreements are designed to provide Shengrong WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Rong Hai, including absolute rights to control the management, operations, assets, property and revenue of Rong Hai. Rong Hai has the necessary license to carry out coal trading business in China. The Acquisition closed on November 30, 2018. Starting on November 30, 2018, the Company's business activities added coal wholesales and sales of coke, steels, construction materials, mechanical equipment and steel scrap, of which business activities are carried out in Nantong, Jiang Su Province, PRC.

 

On December 27, 2018, the Company, entered into an Equity Purchase Agreement with Hopeway International Enterprises Limited., a private limited company duly organized under the laws of British Virgin Islands (the "Hopeway"). Pursuant to the Equity Purchase Agreement, Shengrong WOFE shall sell 100% equity interests in Hubei Shengrong to Hopeway in exchange for Hopeway's agreement to irrevocably forfeit and cancel 8,523,320 shares of common stock of the Company, constituting all the shares owned by Hopeway. The transaction contemplated by the Equity Purchase Agreement is hereby referred as Disposition. The Company's decision to dispose of Hubei Shengrong is due to the planning mandates of Wuhan Municipal Government 2018 which manufactures should move away from city's downtown area. Therefore, due to the policy change, Hubei Shengrong is forced to close the existing facility, relocate and build a new facility, which is expected to take approximately 7-8 years. As a result, Hubei Shengrong will not be able to keep the production running and will generate no income in the foreseeable future. Management believed it is very difficult, if possible at all, to continue manufacturing of solid waste recycling systems. As such, the Company has been actively seeking to dispose Hubei Shengrong while retaining the research and development and sale of solid waste recycling systems business. Upon closing of the Disposition, Hopeway will become the sole shareholder of Hubei Shengrong and as a result, assume all assets and obligations of Hubei Shengrong except the research and development team and intellectual property rights in connection with the solid waste recycling systems business shall be assigned to Shengrong WFOE as part of the Disposition. As Shengrong WFOE has significant continuing involvement in the sale of solid waste recycling systems business and the processed industrial waste materials trading business, this restructuring did not constitute a strategic shift that will have a major effect on the Company's operations and financial results. Therefore, the results of operations for Hubei Shengrong were not reported as discontinued operations under the guidance of Accounting Standards Codification 205.

 

In April 2019, TMSR Holdings Limited ("TMSR HK"), our indirect wholly owned subsidiary, was incorporated under the laws of Hong Kong.

 

In August 2019, Tongrong Technology (Jiangsu) Co., Ltd. ("Tongrong WFOE"), our indirect wholly owned subsidiary, was incorporated under the laws of PRC.

 

In August 2019, Citi Profit Investment Holding Limited ("Citi Profit"), an exempted company formed under the laws of the British Virgin Islands, became our wholly owned subsidiary.

 

TMSR HK, Tongrong WFOE and Citi Profit are all holding companies that do not have any substantive business operations.

 

On January 3, 2020, the Company entered into a share purchase agreement with Sichuan Wuge Network Games Co., Ltd. ("Wuge") and all the shareholders of Wuge, including Wei Xu, Bibo Lin, Jiangsu Lingkong Network Joint Stock Co., Ltd., which is controlled by Wei Xu, and Anhui Shuziren Network Technology Co., Ltd., which is also controlled by Wei Xu. Pursuant to the share purchase agreement, on January 24, 2020, the Company issued an aggregate of 4,000,000 shares of TMSR's common stock to the shareholders of Wuge, in exchange for Wuge's shareholders' agreement to enter into, and their agreement to cause Wuge to enter into, certain VIE agreements (the "Wuge VIE Agreements") with Tongrong WFOE, through which Tongrong WFOE has the right to control, manage and operate Wuge in return for a service fee equal to 100% of Wuge's net income.

 

On April 30, 2020, Tongrong WFOE entered into a series of assignment agreements with Shengrong WFOE, Rong Hai and shareholders of Rong Hai, pursuant to which Shengrong WFOE assign all its rights and obligations under the Rong Hai VIE Agreements to Tongrong WFOE. The Rong Hai VIE Agreements and the Assignment Agreements grant Tongrong WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Rong Hai, including absolute rights to control the management, operations, assets, property and revenue of Rong Hai. The assignment does not have any impact on Company's consolidated financial statements.

 

Effective May 18, 2020, the Company changed its corporate name from "TMSR Holding Company Limited" to "Code Chain New Continent Limited" pursuant to a Certificate of Amendment to the Company's Articles of Incorporation filed with the Secretary of State of the State of Nevada. In connection with the name change, effective May 18, 2020, the ticker symbol of the Company's common stock and warrants changed from "TMSR" and "TMSRW" to "CCNC" and "CCNCW", respectively.

 

On June 30, 2020, the Company entered into a share purchase agreement with Jiazhen Li, former CEO of the Company (the "Buyer"), Long Liao and Chunyong Zheng, who are former shareholders of Wuhan HOST Coating Materials Co., Ltd., an indirect subsidiary of the Company, (collectively the "Payees"). Pursuant to the Agreement, the Company agreed to sell, and the Buyer agreed to purchase all the issued and outstanding ordinary shares of China Sunlong (the "Sunlong Shares"). The Payees have a prior relationship with the Buyer and have agreed to be responsible for the payment of the purchase price on behalf of Buyer. The purchase price for the Sunlong Shares shall be $1,732,114, payable in consideration of cancellation of 1,012,932 shares of the Company owned by the Payees (the "CCNC Shares"). The CCNC Shares are valued at $1.71 per share, based on the closing price of the Company's common stock on June 30, 2020.

 

The accompanying consolidated financial statements reflect the activities of CCNC and each of the following entities:

 

Name   Background   Ownership
China Sunlong3   A Cayman Islands company   100% owned by the Company
Shengrong BVI3  

A British Virgin Island company

Incorporated on June 30, 2015

  100% owned by China Sunlong
Citi Profit BVI    

A British Virgin Island company

Incorporated on April 2019 

  100% owned by the Company
Shengrong HK3  

A Hong Kong company

Incorporated on September 25, 2015 

  100% owned by Shengrong BVI
TMSR HK  

A Hong Kong company

Incorporated on April 2019 

  100% owned by Citi Profit BVI
Shengrong WFOE3   A PRC limited liability company and deemed a wholly foreign owned enterprise ("WFOE")   100% owned by Shengrong HK
   

● 

 

Incorporated on March 1, 2016

Registered capital of USD 12,946 (HKD100,000), fully funded

Purchase and sales of high efficiency permanent magnetic separator and comprehensive utilization system

Trading of processed industrial waste materials

   
Tongrong WFOE  

 

A PRC limited liability company and deemed a wholly foreign owned enterprise ("WFOE")

Incorporated on August 2019

  100% owned by TMSR HK
Hubei Shengrong2  

A PRC limited liability company

Incorporated on January 14, 2009

  100% owned by Shengrong WFOE
    Registered capital of USD 4,417,800 (RMB 30,000,000), fully funded    
   

 

Production and sales of high efficiency permanent magnetic separator and comprehensive utilization system.

Trading of processed industrial waste materials

   
Wuhan HOST3  

A PRC limited liability company

Incorporated on October 27, 2010

Registered capital of USD 750,075 (RMB 5,000,000), fully funded

  100% owned by Shengrong WFOE
    Research, development, production and sale of coating materials.    
Shanghai Host Coating Materials Co., Ltd. ("Shanghai HOST")3  

A PRC limited liability company

Incorporated on December 11, 2014

Registered capital of USD 3,184,371 (RMB 20,000,000), to be fully funded by November 2024

   
    No operations and no capital contribution has been made as of December 31, 2018   80% owned by Wuhan HOST
Wuhan HOST Coating Materials Xiaogan Co., Ltd. ("Xiaogan HOST")3  

 

A PRC limited liability company

Incorporated on December 25, 2018

Registered capital of USD 11,595,379 (RMB 80,000,000), to be fully funded by December 2028

No operations and no capital contribution has been made as of December 31, 2018

  90% owned by Wuhan HOST
Jiangsu Rong Hai Electric Power Fuel Co., Ltd. ("Rong Hai")  

● 

A PRC limited liability company

Incorporated on May 20, 2009

Registered capital of USD 3,171,655 (RMB 20,180,000), fully funded

Coal wholesales and sales of coke, steels, construction materials, mechanical equipment and steel scrap

  VIE of Tongrong WFOE
Wuge  

A PRC limited liability company

Incorporated on July 4, 2019

  VIE of Tongrong WFOE
TJComex BVI1  

A British Virgin Island company

Incorporated on March 8, 2016 

  100% owned by China Sunlong
TJComex HK1  

A Hong Kong company

Incorporated on March 19, 2014 

  100% owned by TJComex BVI
TJComex WFOE1   A PRC limited liability company and deemed a wholly foreign owned enterprise ("WFOE")   100% owned by TJComex HK
    Incorporated on March 10, 2004    
    Registered capital of USD 200,000    
TJComex Tianjin1  

A PRC limited liability company

Incorporated on November 19, 2007

  100% owned by TJComex WFOE
    Registered capital of USD 7,809,165 (RMB 55,000,000)    
    General merchandise trading business and related consulting services    

 

1 Disposed on April 2, 2018
2 Disposed on December 27, 2018
3Disposed on June 30, 2020

 

Contractual Arrangements

 

Rong Hai and Wuge are controlled through contractual agreements in lieu of direct equity ownership by the Company or any of its subsidiaries. Such contractual arrangements consist of a series of five agreements, consulting services agreement, equity pledge agreement, call option agreement, voting rights proxy agreement, and operating agreement (collectively the "Contractual Arrangements").

 

Material terms of each of the Rong Hai VIE Agreements are described below:

 

Consulting Services Agreement  

 

Pursuant to the consulting services agreement between Rong Hai and Shengrong WFOE dated November 30, 2018, Shengrong WFOE has the exclusive right to provide consulting services to Rong Hai relating to Rong Hai's business, including but not limited to business consulting services, human resources development, and business development. Shengrong WFOE exclusively owns any intellectual property rights arising from the performance of this agreement. Shengrong WFOE has the right to determine the service fees based on Rong Hai's actual operation on a quarterly basis.

 

This consulting services agreement took effect upon execution and shall remain in full force and effective until Rong Hai's valid operation term expires. Shengrong WFOE may, at its discretion, decide to renew or terminate this consulting services agreement. 

 

Equity Pledge Agreement.    

 

Under the equity pledge agreement among Shengrong WFOE, Rong Hai and the shareholders of Rong Hai dated November 30, 2018, the shareholders pledged all of their equity interests in Rong Hai to Shengrong WFOE to guarantee Rong Hai's performance of relevant obligations and indebtedness under the consulting services agreement. In addition, the shareholders of Rong Hai have completed the registration of the equity pledge under the agreement with the competent local authority. If Rong Hai breaches its obligation under the consulting services agreement, Shengrong WFOE, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests.

 

This equity pledge agreement took effect upon execution and shall remain in full force and effective until Rong Hai and Shengrong WFOE's satisfaction of all contractual obligations and settlement of all secured indebtedness. Upon Shengrong WFOE's request, Rong Hai shall extend its operation period to sustain the effectiveness of this equity pledge agreement.

 

Call Option Agreement    

 

Under the call option agreement among Shengrong WFOE, Rong Hai and the shareholders of Rong Hai dated November 30, 2018, each of the shareholders of Rong Hai irrevocably granted to WFOE or its designee an option to purchase at any time, to the extent permitted under PRC law, all or a portion of his equity interests in Rong Hai. Also, Shengrong WFOE or its designee has the right to acquire any and all of its assets of Rong Hai. Without Shengrong WFOE's prior written consent, Rong Hai's shareholders cannot transfer their equity interests in Rong Hai, and Rong Hai cannot transfer its assets. The acquisition price for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time of the exercise of the option.

 

This call option agreement shall took effect upon execution. Rong Hai and Shengrong WFOE shall not terminate this call option agreement under any circumstances for any reason unless it is early terminated by Shengrong WFOE or by the requirements under the applicable laws. This call option agreement shall be terminated provided that all equity interest or assets under this option is transferred to Shengrong WFOE or its designee.

 

Voting Rights Proxy Agreement    

 

Under the voting rights proxy agreement among Shengrong WFOE and the shareholders of Rong Hai dated November 30, 2018, each shareholder of Rong Hai irrevocably appointed Shengrong WFOE as its attorney-in-fact to exercise on such shareholder's behalf any and all rights that such shareholder has in respect of his equity interests in Rong Hai, including but limited to the power to vote on its behalf on all matters of Rong Hai requiring shareholder approval in accordance with the articles of association of Rong Hai.

 

The voting rights proxy agreement took effect upon execution of and shall remain in effect indefinitely for the maximum period of time permitted by law in consideration of Shengrong WFOE.

 

Operating Agreement    

 

Pursuant to the operating agreement among Shengrong WFOE, Rong Hai and the shareholders of Rong Hai dated November 30, 2018, Rong Hai and the shareholders of Rong Hai agreed not to enter into any transaction that could materially affect Rong Hai's assets, obligations, rights or operations without prior written consent from Shengrong WFOE, including but not limited to the amendment of the articles of association of Rong Hai. Rong Hai and its shareholders agree to accept and follow our corporate policies provided by Shengrong WFOE in connection with Rong Hai's daily operations, financial management and the employment and dismissal of Rong Hai's employees. Rong Hai agreed that it should seek guarantee from Shengrong WFOE first if any guarantee is needed for Rong Hai's performance of any contract or loan in the course of its business operation.

 

This operating agreement took effect upon execution and shall remain in full force and effective until Rong Hai's valid operation term expires. Either party of Shengrong WFOE and Rong Hai shall complete approval or registration procedures for the extension of its business term three months prior to the expiration of its business term, for the purpose of the maintenance of the effectiveness of this operating agreement. 

  

Material terms of each of the Wuge VIE Agreements are described below:

 

Technical Consultation and Services Agreement.

 

Pursuant to the technical consultation and services agreement between Wuge and Tongrong WFOE dated January 3, 2020, Tongrong WFOE has the exclusive right to provide consultation services to Wuge relating to Wuge's business, including but not limited to business consultation services, human resources development, and business development. Tongrong WFOE exclusively owns any intellectual property rights arising from the performance of this agreement. Tongrong WFOE has the right to determine the service fees based on Wuge's actual operation on a quarterly basis. This agreement will be effective as long as Wuge exists. Tongrong WFOE may terminate this agreement at any time by giving a 30 days' prior written notice to Wuge.

 

Equity Pledge Agreement.

 

Under the equity pledge agreement among Tongrong WFOE, Wuge and Wuge Shareholders dated January 3, 2020, Wuge Shareholders pledged all of their equity interests in Wuge to Tongrong WFOE to guarantee Wuge's performance of relevant obligations and indebtedness under the technical consultation and services agreement. In addition, Wuge Shareholders will complete the registration of the equity pledge under the agreement with the competent local authority. If Wuge breaches its obligation under the technical consultation and services agreement, Tongrong WFOE, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. This pledge will remain effective until all the guaranteed obligations are performed or the Wuge Shareholders cease to be shareholders of Wuge.

 

Equity Option Agreement.

 

Under the equity option agreement among Tongrong WFOE, Wuge and Wuge Shareholders dated January 3, 2020, each of Wuge Shareholders irrevocably granted to Tongrong WFOE or its designee an option to purchase at any time, to the extent permitted under PRC law, all or a portion of his equity interests in Wuge. Also, Tongrong WFOE or its designee has the right to acquire any and all of its assets of Wuge. Without Tongrong WFOE's prior written consent, Wuge's shareholders cannot transfer their equity interests in Wuge and Wuge cannot transfer its assets. The acquisition price for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time of the exercise of the option. This pledge will remain effective until all options have been exercised.

 

Voting Rights Proxy and Financial Support Agreement.

 

Under the voting rights proxy and financial support agreement among Tongrong WFOE, Wuge and Wuge Shareholders dated January 3, 2020, each Wuge Shareholder irrevocably appointed Tongrong WFOE as its attorney-in-fact to exercise on such shareholder's behalf any and all rights that such shareholder has in respect of his equity interests in Wuge, including but not limited to the power to vote on its behalf on all matters of Wuge requiring shareholder approval in accordance with the articles of association of Wuge. The proxy agreement is for a term of 20 years and can be extended by Tongrong WFOE unilaterally by prior written notice to the other parties.

 

The Company's Board of Directors determined that the certain operating subsidiaries, namely, Wuhan Host, and Shengrong WFOE have been designated as discontinued operations. The Company's board intends to sell these businesses based on their values as continuing going concerns. The Company's assets and liabilities on its consolidated balance sheets at June 30, 2020 and December 31, 2019 and its statements of operations for the six months ended June 30, 2020 and 2019 have been grouped and re-grouped based on this designation.

v3.20.2
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Summary of significant accounting policies

Note 2 – Summary of significant accounting policies

 

Basis of presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for information pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). Interim results are not necessarily indicative of results to be expected for the full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on April 17, 2020.

 

Principles of consolidation

 

The unaudited condensed financial statements of the Company include the accounts of CCNC and its wholly owned subsidiaries and VIE. All intercompany transactions and balances are eliminated upon consolidation.

 

Use of estimates and assumptions

 

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include the useful lives of intangible assets, deferred revenues and plant and equipment, impairment of long-lived assets, collectability of receivables, inventory valuation allowance, present value of lease liabilities and realization of deferred tax assets. Actual results could differ from these estimates.

 

Foreign currency translation and transaction

 

The reporting currency of the Company is the U.S. dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. The statement of income accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

 

Translation adjustments included in accumulated other comprehensive loss amounted to $(1,540,111) and $(832,267) as of June 30, 2020 and December 31, 2019, respectively. The balance sheet amounts, with the exception of shareholders’ equity at June 30, 2020 and December 31, 2019 were translated at 7.08 RMB and 7.14 RMB to $1.00, respectively. The shareholders’ equity accounts were stated at their historical rate. The average translation rates applied to statement of income accounts for the six months ended June 30, 2020 and 2019 were 7.03 RMB and 6.78 RMB, respectively. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

 

The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Company because it has not engaged in any significant transactions that are subject to the restrictions.

 

Accounts receivable, net

 

Accounts receivable include trade accounts due from customers. An allowance for doubtful accounts may be established and recorded based on management’s assessment of potential losses based on the credit history and relationships with the customers. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

 

Inventories

 

Inventories are comprised of raw materials and work in progress and are stated at the lower of cost or net realizable value using the first-in-first-out method in Shengrong WFOE and weighted average method in Wuhan HOST and Rong Hai. Management reviews inventories for obsolescence and cost in excess of net realizable value at least annually and recognize an impairment charge against the inventory when the carrying value exceeds net realizable value. As of June 30, 2020 and December 31, 2019, no obsolescence and cost in excess of net realizable value were recognized.

 

Prepayments

 

Prepayments are funds deposited or advanced to outside vendors for future inventory or services purchases. As a standard practice in China, many of the Company’s vendors require a certain amount to be deposited with them as a guarantee that the Company will complete its purchases on a timely basis. This amount is refundable and bears no interest. The Company has legally binding contracts with its vendors, which require any outstanding prepayments to be returned to the Company when the contract ends.

  

Plant and equipment

 

Plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method after consideration of the estimated useful lives of the assets and estimated residual value. The estimated useful lives and residual value are as follows:

 

   Useful Life  Estimated
Residual
Value
 
Building  5 – 20 years   5%
Office equipment and furnishing  5 years   5%
Production equipment  3-10 years   5%
Automobile  5 years   5%
Leasehold improvements  Shorter of the remaining lease terms or estimated useful lives   0%

 

The cost and related accumulated depreciation and amortization of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation and amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

  

Intangible assets

 

Intangible assets represent land use rights and patents, and they are stated at cost, less accumulated amortization. Research and development costs associated with internally developed patents are expensed when incurred. Amortization expense is recognized on the straight-line basis over the estimated useful lives of the assets. All land in the PRC is owned by the government; however, the government grants “land use rights.” The Company has obtained the rights to use various parcels of land. The patents have finite useful lives and are amortized using a straight-line method that reflects the estimated pattern in which the economic benefits of the intangible asset are to be consumed. The Company amortizes the cost of the land use rights and patents, over their useful life using the straight-line method. The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.  The estimated useful lives are as follows:

 

    Useful Life
Land use rights   50 years
     
Patents   10 - 20 years
     
Software   5 years

 

Goodwill

 

Goodwill represents the excess of the consideration paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred. Goodwill is carried at cost less accumulated impairment losses. If impairment exists, goodwill is immediately written off to its fair value and the loss is recognized in the consolidated statements of income. Impairment losses on goodwill are not reversed. In 2019, the Company recorded approximately $3.42 million in impairment to its Wuhan Host and Shengrong WFOE operating units. The entities were located at the epicenter of the COVID 19 virus. Accordingly, those entities were materially adversely impacted.

 

Impairment for long-lived assets

 

Long-lived assets, including plant, equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. In 2019, the Company recognized approximately $4.89 million in impairment to long lived assets related to Wuhan Host and Shengrong WFOE. 

 

Fair value measurement

 

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash, notes receivable, accounts receivable, other receivables, prepayments, accounts payable, other payables and accrued liabilities, customer deposits, short term loans and taxes payable to approximate their fair values because of their short term nature.

 

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

 

  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 assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. 
     
  Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

 

Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.

 

Customer deposits 

 

In Shengrong WFOE, customer deposits represent amounts advanced by customers on product orders. Generally, the Company requires 3% to 10% advanced deposits from the customers upon the signing of the sales contracts. At various stages of the sales contract execution, the Company generally collects certain amounts of advanced deposits from the customers based on the approximate amount of cash flows needed at each stage. Customer deposits are reduced when the related sale is recognized in accordance with the Company’s revenue recognition policy.

 

In Wuhan HOST, customer deposits represent amounts advanced by customers on product orders. Generally, the Company requires 95% to 100% advanced deposits from the customers upon signing of the sales contracts. A few customers with good credit history are not required to make any deposit. Customer deposits are reduced when the related sale is recognized in accordance with the Company’s revenue recognition policy.

 

Revenue recognition

 

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of January 1, 2018.  This did not result in an adjustment to retained earnings upon adoption of this new guidance as the Company’s revenue, other than retainage revenues, was recognized based on the amount of consideration we expect to receive in exchange for satisfying the performance obligations. However, the impact of the Company’s retainage revenue was not material as of the date of adoption, and as a result, did not result in an adjustment.

 

The core principle underlying the revenue recognition ASU is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.  The Company’s revenue streams are primarily recognized at a point in time except for the retainage revenues where the retainage periods are recognized over the retainage period, usually is a period of twelve months.

 

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition except its retainage revenues.

 

An entity will also be required to determine if it controls the goods or services prior to the transfer to the customer in order to determine if it should account for the arrangement as a principal or agent. Principal arrangements, where the entity controls the goods or services provided, will result in the recognition of the gross amount of consideration expected in the exchange. Agent arrangements, where the entity simply arranges but does not control the goods or services being transferred to the customer, will result in the recognition of the net amount the entity is entitled to retain in the exchange.

 

Revenue from equipment and systems, revenue from coating and fuel materials, and revenue from trading and others are recognized at the date of goods delivered and title passed to customers, when a formal arrangement exists, the price is fixed or determinable, the Company has no other significant obligations and collectability is reasonably assured. Such revenues are recognized at a point in time after all performance obligations are satisfied under the new five-step model. In addition, training service revenues are recognized when the services are rendered and the Company has no other obligations, and collectability is reasonably assured. These revenues are recognized at a point in time.

 

Prior to January 1, 2018, the Company allowed its customers to retain 5% to 10% of the contract price as warranty retainage during the retainage period of 12 months to guarantee product quality. Retainage is considered as a payment term included as a part of the contract price, and was recognized as revenue upon the shipment of products. Due to nature of the retainage, the Company’s policy is to record revenue the full value of the contract without VAT, including any retainage, since the Company has experienced insignificant warranty retainage claims historically. Due to the infrequent and insignificant amount of warranty retainage claims, the ability to collect retainage was reasonably assured and was recognized at the time of shipment. On January 1, 2018, upon the adoption of ASU 2014-09 (ASC 606), revenues from product warranty retainage are recognized over the retainage period over 12 months. For the six months ended June 30, 2020, less than 5% of our retainage revenues were recognized in our consolidated revenues and included in the Company’s equipment and systems revenues in the accompanying statements of income and comprehensive income.

 

Payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits.

 

The Company’s disaggregate revenue streams are summarized as follows:

 

   For the Three Months Ended
June 30,
   For the Six Months Ended
June 30,
 
   2020   2019   2020   2019 
Revenues – Equipment and systems  $       -   $      -   $       -   $     - 
Revenues –fuel materials   1,279,781    7,418,297    6,445,181    12,285,253 
Revenues – Trading and others   46,482    473,468    46,482    639,297 
Total revenues  $1,326,263   $7,891,765   $6,491,663   $12,924,550 

 

Gross versus Net Revenue Reporting

 

Starting from July 2016, in the normal course of the Company’s trading of industrial waste materials business, the Company directly purchases the processed industrial waste materials from the Company’s suppliers under the Company’s specifications and drop ships the materials directly to the Company’s customers. The Company would inspect the materials at its customers’ site, during which inspection it temporarily assumes legal title to the materials, and after which inspection legal title is transferred to its customers. In these situations, the Company generally collects the sales proceed directly from the Company’s customers and pay for the inventory purchases to the Company’s suppliers separately. The determination of whether revenues should be reported on a gross or net basis is based on the Company’s assessment of whether it is the principal or an agent in the transaction. In determining whether the Company is the principal or an agent, the Company follows the new accounting guidance for principal-agent considerations. Since the Company is the primary obligor and is responsible for (i) fulfilling the processed industrial waste materials delivery, (ii) controlling the inventory by temporarily assume legal title to the materials after inspecting the products from our vendors before passing the materials to our customers, and (iii) bearing the back-end risk of inventory loss with respect to any product return from the Company’s customers, the Company has concluded that it is the principal in these arrangements, and therefore report revenues and cost of revenues on a gross basis.

 

Research and Development (“R&D”) Expenses

 

Research and development expenses include salaries and other compensation-related expenses paid to the Company’s research and product development personnel while they are working on R&D projects, as well as raw materials used for the R&D projects. R&D expenses incurred by the Company are included in the selling, general and administrative expenses and totaled $0 and $219,675 for the six months ended June 30, 2020 and 2019, respectively.

 

Income taxes

 

The Company accounts for income taxes in accordance with U.S. GAAP for income taxes. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred taxes is accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

 

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company incurred no such penalties and interest for the six months ended June 30, 2020 and 2019. As of June 30, 2020, the Company’s PRC tax returns filed for 2017, 2018 and 2019 remain subject to examination by any applicable tax authorities.

 

Earnings per share

 

Basic earnings per share are computed by dividing income available to common shareholders of the Company by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares. 9,079,348 and 10,500,000 of outstanding warrants which is equivalent to convertible of 4,539,674 and 5,250,000 common shares were excluded from the diluted earnings per share calculation due to its antidilutive effect for the six months ended June 30, 2020 and 2019, respectively. 824,000 of outstanding options were excluded from the diluted earnings per share calculation due to its antidilutive effect for the six months ended June 30, 2020 and 2019.

    

Recently issued accounting pronouncements

 

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not believe the adoption of this ASU would have a material effect on the Company’s unaudited condensed consolidated financial statements.

 

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

v3.20.2
Business Combination and Restructuring
6 Months Ended
Jun. 30, 2020
Business Combinations [Abstract]  
Business combination and restructuring

Note 3 – Business combination and restructuring

 

TJ Comex BVI

 

On April 2, 2018, the Company disposed of its subsidiary, TJComex BVI, in consideration of (i) its minimum contribution to the Company's results of operation and (ii) the unsatisfactory synergy between the TJComex BVI business and the rest of the Company's business. The Company's decision to dispose TJComex BVI is to (i) improve the Company's overall financial condition and results of operations, (ii) reduce the complexity of the Company's business, (iii) focus the Company's resources on the solid waste recycling business as well as developing environmental control business opportunities; and (iv) make it possible for the Company to pursue acquisition opportunities for more compatible business. TJComex BVI was disposed to Chuanliu Ni, a Chinese citizen who is the Chief Executive Officer and director of China Sunlong, for no consideration.

 

As of April 2, 2018, the net assets of TJComex BVI were $16,598 and will be recorded as a loss from disposal of subsidiary in the consolidated financial statements for the year ended December 31, 2018. As TJComex BVI operating revenue was less than 1% of the Company's revenue and the disposal did not constitute a strategic shift that will have a major effect on the Company's operations and financial results, the results of operations for TJComex BVI were not reported as discontinued operations under the guidance of Accounting Standards Codification 205.

 

Wuhan HOST

 

On April 11, 2018, the Company, Shengrong WFOE and Hubei Shengrong, both of which are the Company's indirectly owned subsidiaries (collectively "Purchasers"), entered into a Share Purchase Agreement (the "Purchase Agreement") with Long Liao, Chunyong Zheng, Wuhan Modern Industrial Technology Research Institute, and Hubei Zhonggong Materials Group Co., Ltd. (collectively "Sellers" ) and Wuhan HOST Coating Materials Co., Ltd. ("Wuhan HOST"), a company incorporated in China engaging in the research, development, production and sale of coating materials. Pursuant to the Purchase Agreement, the Purchasers acquired all of the outstanding equity interests of Wuhan Host (the "Acquisition"). In exchange for the transfer of 100% equity interest of Wuhan Host, Purchasers shall pay a total consideration of $11.2 million ("Total Consideration"), of which $ 5.2 million or RMB equivalent shall be paid in cash ("Cash Consideration") and $6.0 million shall be paid in shares of common stock ("Common Stock"), par value $0.0001, of CCNC ("Share Consideration"). The Parties agree the Share Consideration shall be an aggregate of 1,293,104 shares of common stock of which is based on the closing price of US$4.64 on March 27, 2018. The Share Consideration shall be issued in three equal installments, which shall be subject to lock-up of 12, 24 and 36 months, respectively. The Purchase Agreement contains representations, warranties and covenants customary for acquisitions of this type. The Acquisition closed on May 1, 2018.

 

On August 16, 2018, The Purchasers and the Sellers entered into a supplement agreement ("Supplement Agreement"), which modified the terms of consideration set forth in the Purchase Agreement entered between Purchasers and Sellers on April 11, 2018. Pursuant to the Supplement Agreement, in exchange for the transfer of 100% equity interest of Wuhan Host, Purchasers shall pay a total consideration of $11.2 million ("Total Consideration"), of which $6.5 million or RMB equivalent shall be paid in cash ("Cash Consideration") and $4.7 million shall be paid in shares of common stock ("Common Stock"), par value $0.0001, of CCNC ("Share Consideration"). In the Supplement Agreement, both Purchasers and Sellers also agreed to delete the section 3.3 of the Share Purchase Agreement, a section that stipulates the Share Consideration shall be issued in three equal installments.

 

The Company's acquisition of Wuhan HOST was accounted for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of Wuhan HOST based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, plant and equipment, and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

 

The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Wuhan HOST based on a valuation performed by an independent valuation firm engaged by the Company:

 

Total consideration at fair value   $ 11,200,000  

 

   Fair Value 
Cash  $276,626 
Other current assets   6,763,767 
Plant and equipment   6,499,268 
Other noncurrent assets   2,139,987 
Goodwill   7,544,008 
Total asset   23,223,656 
Total liabilities   (12,023,656)
Net asset acquired  $11,200,000 

 

Approximately $7.5 million of goodwill arising from the acquisition consists largely of synergies expected from combining the operations of the Company and Wuhan HOST. None of the goodwill is expected to be deductible for income tax purposes.

 

The Company's Board of Directors has determined that it will discontinue Wuhan Host, and identify a buyer for the Wuhan Host in 2020. The Company recognized an impairment charge of approximately $3.42 million.

 

Rong Hai

 

On November 30, 2018, the Company entered into a Share Purchase Agreement (the "Purchase Agreement") with Jirong Huang and Qihuang Wang (collectively "Sellers") and Jiangsu Rong Hai Electric Power Fuel Co., Ltd. ("Rong Hai"), a company incorporated in China engaging in the sale of fuel materials and harbor cargo handling services. Pursuant to the SPA, CCNC shall issue an aggregate of 4,630,000 shares of CCNC's common stock to the Rong Hai Shareholders, in exchange for Rong Hai Shareholders' agreement to enter into, and their agreement to cause Rong Hai to enter into, certain VIE Agreements (the "Rong Hai VIE Agreements") with Shengrong WFOE, through which Shengrong WFOE shall have the right to control, manage and operate Rong Hai in return for a service fee approximately equal to 100% of Rong Hai's net income ("Acquisition"). On November 30, 2018, Shengrong WFOE, the Company's indirectly owned subsidiary, entered into a series of VIE Agreements with Rong Hai and the Rong Hai Shareholders. The VIE Agreements are designed to provide WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Rong Hai, including absolute rights to control the management, operations, assets, property and revenue of Rong Hai. Rong Hai has the necessary license to carry out coal trading business in China. The Acquisition closed on November 30, 2018.

 

The Company's acquisition of Rong Hai was accounted for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of Rong Hai based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, plant and equipment, and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

 

 The Company's acquisition of Rong Hai was accounted for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of Rong Hai based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, plant and equipment, and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

 

The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Rong Hai based on a valuation performed by an independent valuation firm engaged by the Company:

 

Total consideration at fair value  $9,260,000 

 

   Fair Value 
Cash  $717,056 
Other current assets   5,980,230 
Plant and equipment   28,875 
Other noncurrent assets   116,655 
Goodwill   7,307,470 
Total asset   14,150,286 
Total liabilities   (4,890,286)
Net asset acquired  $9,260,000 

 

Approximately $7.3 million of goodwill arising from the acquisition consists largely of synergies expected from combining the operations of the Company and Rong Hai. None of the goodwill is expected to be deductible for income tax purposes.

 

Hubei Shengrong

 

On December 27, 2018, the Company, entered into an Equity Purchase Agreement (the "EPA") with Hopeway International Enterprises Limited., a private limited company duly organized under the laws of British Virgin Islands (the "Hopeway" or "Purchaser"). Pursuant to the EPA, Shengrong WOFE shall sell 100% equity interests in Hubei Shengrong to the Purchaser in exchange for the Purchaser's agreement ("Consideration") to irrevocably forfeit and cancel 8,523,320 shares of common stock of the Company (the "Shares"), constituting all the shares owned by the Purchaser. The transaction contemplated by the EPA is hereby referred as Disposition. The Company's decision to dispose of Hubei Shengrong is due to the planning mandates of Wuhan Municipal Government 2018 which manufactures should move away from city's downtown area. Therefore, due to the policy change, Hubei Shengrong is forced to close the existing facility, relocate and build a new facility, which is expected to take approximately 7-8 years. As a result, Hubei Shengrong will not be able to keep the production running and will generate no income in the foreseeable future. Management believed it is very difficult, if possible at all, to continue manufacturing of solid waste recycling systems. As such, the Company has been actively seeking to dispose Hubei Shengrong while retaining the research and development and sale of solid waste recycling systems business. Upon closing of the Disposition, the Purchaser will become the sole shareholder of Hubei Shengrong and as a result, assume all assets and obligations of Hubei Shengrong except the research and development team and intellectual property rights in connection with the solid waste recycling systems business shall be assigned to Shengrong WFOE as part of the Disposition. As Shengrong WFOE has significant continuing involvement in the sale of solid waste recycling systems business and the processed industrial waste materials trading business, the results of operations for Hubei Shengrong were not reported as discontinued operations under the guidance of Accounting Standards Codification 205.

 

Hopeway is jointly owned by Ms. Jiazhen Li, the Company's chief executive officer, and Mr. Xiaonian Zhang, the Company's president and director. As Hopeway is a related party under common control with the Company under Ms. Li and Mr. Zhang, no gain or loss are recognized in this disposition and the net consideration of the transaction are recognized as addition to capital as opposed to a gain. Total fair value of the consideration of the cancelled 8,523,320 shares of common stock was determined by using the average closing stock price of the Company held by Hopeway during the period from February 6, 2018 to December 27, 2018 at $3.56 per share.

 

As of December 27, 2018, the net assets of Hubei Shengrong and reconciliation of reduction of capital are as follows:

 

   December 27,
2018
 
CURRENT ASSETS    
Cash and cash equivalents  $47,994 
Accounts receivable, net   9,410,436 
Accounts receivable - related party, net   761,794 
Other receivables   48,718 
Other receivable - related party   2,158 
Inventories   5,332,990 
Prepayments   31,793,810 
Total current assets   47,397,900 
      
PLANT AND EQUIPMENT, NET   203,992 
      
OTHER ASSETS     
Other assets   7,269 
Deferred tax assets   780,550 
Total other assets   787,819 
      
Total assets  $48,389,711 
      
CURRENT LIABILITIES     
Short term loans - bank  $2,180,708 
Accounts payable   95,854 
Other payables and accrued liabilities   156,498 
Other payables - related parties   507,183 
Customer deposits   347,853 
Taxes payable   16,602,841 
Total current liabilities   19,890,937 
      
OTHER LIABILITIES     
Deferred rent liabilities   30,763 
Total other liabilities   30,763 
      
Total liabilities  $19,921,700 
      
Total net assets  $28,468,011 
Total consideration   (30,362,135)
Currency translation adjustment   900,281 
Total addition to paid-in-capital  $993,843 

 

Wuge  

 

On January 3, 2020, the Company entered into a share purchase agreement with Sichuan Wuge Network Games Co., Ltd. ("Wuge") and all the shareholders of Wuge ("Wuge Shareholders"). Pursuant to the share purchase agreement, the Company agreed to issue an aggregate of 4,000,000 shares of CCNC's common stock to the Wuge Shareholders, in exchange for Wuge Shareholders' agreement to enter into, and their agreement to cause Wuge to enter into, certain VIE agreements ("VIE Agreements") with Tongrong WFOE the Company's indirectly owned subsidiary, through which Tongrong WFOE shall have the right to control, manage and operate Wuge in return for a service fee equal to 100% of Wuge's net income (the "Acquisition"). On January 3, 2020, Tongrong WFOE entered into a series of VIE Agreements with Wuge and the Wuge Shareholders. The VIE Agreements are designed to provide Tongrong WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Wuge, including absolute rights to control the management, operations, assets, property and revenue of Wuge. Wuge has all necessary license to carry out its business in China.Wuge is a technology company in development stage. It was incorporated in China in July 2019. Wuge Manor, the game Wuge is developing, is the world's first game that combines Internet of Things (IoT) and e-commerce that is based on Code Chain platform. Through the game, players will be able to have access to hundreds of vendors and business owners in over 100 cities in China, participate in activities those businesses set up and collect points, which can be redeemed as equipment in the game or coupons usable when making purchase at that business. In addition, Wuge produced electronic tokens that can be stored in the Code Chain system to purchase virtual property based on real estate. The Acquisition closed on January 24, 2020.

 

The Company's acquisition of Wuge was accounted for as a business combination in accordance with ASC 805. The Company has allocated the purchase price of Wuge based upon the fair value of the identifiable assets acquired and liabilities assumed on the acquisition date. Other current assets and current liabilities were valued using the cost approach. Management of the Company is responsible for determining the fair value of assets acquired, liabilities assumed, plant and equipment, and intangible assets identified as of the acquisition date and considered a number of factors including valuations from independent appraisers. Acquisition-related costs incurred for the acquisitions are not material and have been expensed as incurred in general and administrative expense.

 

The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date, which represents the net purchase price allocation at the date of the acquisition of Wuge based on a valuation performed by an independent valuation firm engaged by the Company:

 

Total consideration at fair value  $7,200,000 

 

   Fair Value 
Cash  $228,788 
Other current assets   20,834 
Plant and equipment   6,024 
Other noncurrent assets   8,097 
Goodwill   7,343,209 
Total asset   7,606,952 
Total liabilities   (406,952)
Net asset acquired  $7,200,000 

 

Approximately $7.3 millions of goodwill arising from the acquisition consists largely of synergies expected from combining the operations of the Company and Wuge. None of the goodwill is expected to be deductible for income tax purposes.

v3.20.2
Variable Interest Entity
6 Months Ended
Jun. 30, 2020
Variable Interest Entity [Abstract]  
Variable interest entity

Note 4 – Variable interest entity

 

On November 30, 2018, Tongrong WFOE entered into Contractual Arrangements with Rong Hai and its shareholders upon executing of the "Purchase Agreement". The significant terms of these Contractual Arrangements are summarized in "Note 1 - Nature of business and organization" above. As a result, the Company classifies Rong Hai as VIE.

 

On January 3, 2020, Tongrong WFOE entered into Contractual Arrangements with Wuge and its shareholders upon executing of the "Purchase Agreement". The significant terms of these Contractual Arrangements are summarized in "Note 1 - Nature of business and organization" above. As a result, the Company classifies Wuge as VIE.

 

A VIE is an entity that has either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Tongrong WFOE is deemed to have a controlling financial interest and be the primary beneficiary of Rong Hai and Wuge because it has both of the following characteristics:

 

(1) The power to direct activities at Rong Hai and Wuge that most significantly impact such entity's economic performance, and

 

(2) The obligation to absorb losses of, and the right to receive benefits from Rong Hai and Wuge that could potentially be significant to such entity.

 

Accordingly, the accounts of Rong Hai and Wuge are consolidated in the accompanying financial statements pursuant to ASC 810-10, Consolidation. In addition, their financial positions and results of operations are included in the Company's consolidated financial statements beginning on November 30, 2018.

 

The carrying amount of the VIE's assets and liabilities are as follows: 

 

   June 30,   December 31, 
   2020   2019 
         
Current assets  $9,201,684   $8,687,451 
Property, plants and equipment, Intangible Assets   1,165,027    19,057 
Other noncurrent assets   89,136    127,782 
Goodwill   14,329,042    7,289,454 
Total assets   24,786,889    16,123,744 
           
Current liabilities   8,264,556    6,067,264 
Non-current liabilities   60,681    61,580 
Total liabilities   8,325,237    6,128,844 
Net assets  $16,459,652   $9,994,900 

 

   June 30,   December 31, 
   2020   2019 
         
Short-term loan  $437,884   $- 
Accounts payable   880,713    619,329 
Other payables and accrued liabilities   74,154    301,230 
Other payables – related party   5,766,063    5,082,068 
Tax payables   3,525    202 
Customer Advances   1,040,124    3,426 
Lease liabilities   62,093    61,009 
Total current liabilities   8,264,556    6,067,264 
Lease liabilities - noncurrent   60,681    61,580 
Total liabilities  $8,325,237   $6,128,844 

 

The summarized operating results of the VIE's are as follows:

 

    For the
six months ended
June 30,
 
    2020  
       
Operating revenues   $ 6,491,663  
Gross profit     326,254  
Income from operations     (337,537)  
Net income   $ (387,648)  
v3.20.2
Accounts Receivable, Net
6 Months Ended
Jun. 30, 2020
Receivables [Abstract]  
Accounts receivable, net

Note 5 – Accounts receivable, net

 

Accounts receivable consist of the following:

 

    June 30,
2020
    December 31,
2019
 
             
Accounts receivable   $ 1,153,142     $ 2,221,319  
Less: Allowance for doubtful accounts     (113,370)       (24,055 )
Total accounts receivable, net   $ 1,039,772     $ 2,197,264  

 

Movement of allowance for doubtful accounts is as follows:

 

   June 30,
2020
   December 31,
2019
 
         
Beginning balance  $24,055   $732,846 
Beginning balance from Wuhan HOST   -    260,764 
Beginning balance from Rong Hai   24,055    472,082 
Addition   90,308    - 
Recovery   -    (708,791)
Exchange rate effect   (993)   - 
Ending balance  $113,370   $24,055 
v3.20.2
Inventories
6 Months Ended
Jun. 30, 2020
Inventory Disclosure [Abstract]  
Inventories

Note 6 – Inventories

 

Inventories consist of the following:

 

   June 30,
2020
   December 31,
2019
 
         
Raw materials  $-   $- 
Work in progress   -    - 
Finished Goods   1,248,906    1,197,065 
Total inventories  $1,248,906   $1,197,065 
v3.20.2
Plant and Equipment, Net
6 Months Ended
Jun. 30, 2020
Property, Plant and Equipment [Abstract]  
Plant and equipment, net

Note 7 – Plant and equipment, net

 

Plant and equipment consist of the following:

 

   June 30,
2020
   December 31,
2019
 
         
Office equipment and furniture  $62,972   $39,688 
Automobile   251,523    209,057 
Subtotal   314,495    248,745 
Less: accumulated depreciation   (234,807)   (229,688)
Total  $79,688   $19,057 

 

Depreciation expense for the six months ended June 30, 2020 and 2019 amounted to $8,403 and $198,570, respectively.

v3.20.2
Intangible Assets, Net
6 Months Ended
Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible assets, net

Note 8 – Intangible assets, net

 

Intangible assets consist of the following:

 

   March 31,
2020
   December 31,
2019
 
         
Development of technology  $1,129,681   $        - 
Less: accumulated amortization   -    - 
Net intangible assets  $1,129,681   $- 

 

Amortization expense for the three months ended March 31, 2020 and 2019 amounted to $0 and $0, respectively.

v3.20.2
Goodwill
6 Months Ended
Jun. 30, 2020
Share Based Compensation Arrangement By Share Based Payment Award Warrant Forfeitures In Period  
Goodwill

Note 9 – Goodwill

 

The changes in the carrying amount of goodwill by business units are as follows

 

   Wuhan HOST   Rong Hai   Wuge   Total 
Balance as of December 31, 2019  $3,424,390   $7,289,454   $        -   $10,713,844 
Goodwill acquired through acquisition   -    -    7,140,304    7,140,304 
Disposal of the company   (3,424,390)   -    -    (3,424,390)
Foreign currency translation adjustment   -    (106,364)   5,648    (100,716)
Balance as of  June 30, 2020  $-   $7,183,090   $7,145,952   $14,329,042 
v3.20.2
Related Party Balances and Transactions
6 Months Ended
Jun. 30, 2020
Related Party Transactions [Abstract]  
Related party balances and transactions

Note 10 – Related party balances and transactions

 

Related party balances

 

Other payables – related parties:

 

Name of related party   Relationship   June 30,
2020
    December 31,
2019
 
                 
Chuanliu Ni   Chief Executive Officer and director of a former subsidiary   $ 325,907     $ 325,907  
Zhong Hui Holding Limited   Shareholder of the Company     140,500       140,500  
Chengdu Yuan Code Chain Technology Co. Ltd   A company controlled by former shareholder of the Company     103,719       -  
Qihai Wang   Shareholder of the Company     71,444       166,673  
Jiangsu Longying Education Technology Co. Ltd   A company in which shareholder hold shares     -       422,868  
Jiangsu Longhai Film Culture Media Co. Ltd   Under common control of shareholder of the Company     -       280,954  
Total       $ 641,570     $ 1,336,902  

 

The above payables represent interest free loans and advances. These loans and advances are unsecured and due on demand.

v3.20.2
Debt
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Debt

Note 11 – Debt

 

Short term loan

 

Short term loan due to bank is as follows:

 

Short term loans   Maturities     Weighted average interest rate     Collateral/Guarantee   June 30,
2020
    December 31,
2019
 
Loan from Bank of Jiangsu     March 25, 2021       4.5 %   Guaranteed by Qihai Wang's personal property   $ 247,193               -  
Loan from Bank of Jiangsu     January 12, 2021        5.22 %   Guaranteed by Qihai Wang's personal property   $ 190,691       -  

 

Interest expense for the three months ended June 30, 2020 and 2019 amounted to $9,473 and $9,764, respectively, and for the six months ended June 30, 2020 and 2019 amounted to $11,482 and $17,606, respectively.

v3.20.2
Taxes
6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Taxes

Note 12 – Taxes

 

Income tax

 

United States

 

CCNC was organized in the state of Delaware in April 2015 and re-incorporated in the state of Nevada in June 2018. CCNC's U.S. net operating loss for the six months ended June 30, 2020 amounted to approximately $90,000. As of June 30, 2020, CCNC's net operating loss carry forward for United States income taxes was approximately $19,000. The net operating loss carry forwards are available to reduce future years' taxable income through year 2038. Management believes that the realization of the benefits from these losses appears uncertain due to the Company's operating history and continued losses in the United States. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero. Management reviews this valuation allowance periodically and makes changes accordingly.

 

On December 22, 2017, the "Tax Cuts and Jobs Act" ("The 2017 Tax Act") was enacted in the United States. Under the provisions of the Act, the U.S. corporate tax rate decreased from 34% to 21%. The 2017 Tax Act imposed a global intangible low-taxed income tax ("GILTI"), which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits. The Company determined that there are no impact of GILTI for the six months ended June 30, 2020 and 2019, which the Company believes that it will be imposed a minimum tax rate of 10.5% and to the extent foreign tax credits are available to reduce its US corporate tax, which may result in no additional US federal income tax being due.

 

Cayman Islands

 

China Sunlong is incorporated in the Cayman Islands and are not subject to tax on income or capital gains under current Cayman Islands law. In addition, upon payments of dividends by China Sunlong to its shareholders, no Cayman Islands withholding tax will be imposed.

 

British Virgin Islands

 

Shengrong BVI is incorporated in the British Virgin Islands and are not subject to tax on income or capital gains under current British Virgin Islands law. In addition, upon payments of dividends by these entities to their shareholders, no British Virgin Islands withholding tax will be imposed.

 

Hong Kong

 

Shengrong HK is incorporated in Hong Kong and are subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 16.5% in Hong Kong. The Company did not make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earned in Hong Kong since inception. Under Hong Kong tax law, Shengrong HK is exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.

 

PRC

 

Shengrong WFOE, Tongrong WFOE, Wuhan HOST,Wuge and Rong Hai are governed by the income tax laws of the PRC and the income tax provision in respect to operations in the PRC is calculated at the applicable tax rates on the taxable income for the periods based on existing legislation, interpretations and practices in respect thereof. Under the Enterprise Income Tax Laws of the PRC (the "EIT Laws"), Chinese enterprises are subject to income tax at a rate of 25% after appropriate tax adjustments.

 

Significant components of the provision for income taxes are as follows: 

  

   For the
three months ended
June 30,
2020
   For the
three months ended
June 30,
2019
 
         
Current  $1,810   $234,473 
Deferred   (243)   (38,229)
Total provision for income taxes  $1,567   $196,244 

  

   For the
six months ended
June 30,
2020
   For the
six months ended
June 30,
2019
 
         
Current  $16,419   $255,301 
Deferred   33,692    (8,229)
Total provision for income taxes  $50,111   $247,072 

 

Deferred tax assets

 

Bad debt allowances must be approved by the Chinese tax authority prior to being deducted as an expense item on the tax return.

 

Significant components of deferred tax assets were as follows:

 

   June 30,
2020
   December 31,
2019
 
         
Net operating losses carried forward – U.S.  $19,106   $17,309 
Net operating losses carried forward – PRC   -    - 
Bad debt allowance   3,531    37,532 
Valuation allowance   (19,106)   (17,309)
Deferred tax assets, net  $3,531   $37,532 

 

Value added tax

 

Enterprises or individuals who sell commodities, engage in repair and maintenance or import and export goods in the PRC are subject to a value added tax in accordance with PRC laws. The value added tax ("VAT") standard rates are 6% to 17% of the gross sales price and changed to 6% to 16% of gross sales starting in May 2018. The VAT standard rates changed to 6% to 13% of the gross sales prices starting in April 2019. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company's finished products can be used to offset the VAT due on sales of the finished products and services.

 

Taxes payable consisted of the following:

 

   June 30,
2020
   December 31,
2019
 
         
VAT taxes payable  $1,550   $          - 
Income taxes payable   1,900    - 
Other taxes payable   105    202 
Total  $3,555   $202 
v3.20.2
Leases
6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Leases

Note 13 – Leases

 

Effective January 1, 2019, the Company adopted ASU 2016-02, "Leases" (Topic 842), and elected the package of practical expedients that does not require us to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. The Company adopted the practical expedient that allows lessees to treat the lease and non-lease components of a lease as a single lease component. The impact of the adoption on January 1, 2019 increased the right-of-uses and lease liabilities by approximately $298,000.

 

The Company had an office lease agreement with a 5-year lease term starting in December 2016 until December 2021 and another office lease agreement with a 5-year lease term starting in January 2018 until January 2023. Upon adoption of ASU 2016-02, the Company recognized lease labilities of approximately $298,000, with corresponding Right-of-use ("ROU") assets of the same amount based on the present value of the future minimum rental payments of the new lease, using an effective interest rate of 4.75%, which is determined using an incremental borrowing rate.

 

The weighted average remaining lease term of its existing leases is 3.22 years.

 

The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 

For the three months ended June 30, 2020 and 2019, rent expenses amounted to $7,966 and $24,941, respectively.

 

For the six months ended June 30, 2020 and 2019, rent expenses amounted to $16,047 and $51,948, respectively.

 

The five-year maturity of the Company's lease obligations is presented below:

 

Twelve months ended June 30,  Operating
lease
amount
 
2020  $124,377 
2021   99,501 
2022   76,957 
2023   23,900 
Total lease payments   324,735 
Less: interest   (201,961)
Present value of lease liabilities  $122,774 
v3.20.2
Concentration of Risk
6 Months Ended
Jun. 30, 2020
Risks and Uncertainties [Abstract]  
Concentration of risk

Note 14 – Concentration of risk

 

Credit risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and accounts receivable. As of June 30, 2020 and December 31, 2019, no cash were deposited with various financial institutions located in the U.S. As of June 30, 2020 and December 31, 2019, $1,939,520 and $4,003,554 and were deposited with various financial institutions located in the PRC, respectively. As of June 30, 2020 and December 31, 2019, $0 and $354 were deposited with one financial institution located in Hong Kong, respectively. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.

 

Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company's assessment of its customers' creditworthiness and its ongoing monitoring of outstanding balances.

 

Customer and vendor concentration risk

        

For the three months ended June 30, 2020, one customers accounted for 98.3% of the Company's revenues. For the three months ended June 30, 2019, three customers accounted for 22.2%, 21.8% and 20.0% of the Company's revenues.

 

For the six months ended June 30, 2020, one customers accounted for 99.3% of the Company's revenues. For the six months ended June 30, 2019, four customers accounted for 15.0%, 14.3%,14.1% and 12.9% of the Company's revenues.

 

 As of June 30, 2020, two customer accounted for 50.7% and 45.4% of the Company's accounts receivable; and one customer accounted for 100% of the Company's Customer Advances. As of June 30, 2019, two customer accounted for 42.1% and 15.7% of the Company's accounts receivable; and four customer accounted for 20.7%,17.7%,17.1% and 15.5% of the Company's Customer Advances.

 

For the three months ended June 30, 2020, one suppliers accounted for 87.1% of the Company's total purchases. For the three months ended June 30, 2019, two suppliers accounted for 26.7% and 13.2% of the Company's total purchases.

  

For the six months ended June 30, 2020, four suppliers accounted for 30.1%, 28.7%, 18.2% and 12.7% of the Company's total purchases. For the six months ended June 30, 2019, three suppliers accounted for 32.5%, 11.9% and 11.1% of the Company's total purchases.

 

As of June 30, 2020, three suppliers accounted for 58.9%, 19.04% and 10.6% of the Company's prepayments; and four suppliers accounted for 33.4%, 30.9%, 17.5% and 15.2% of the Company's total accounts payable. As of June 30, 2019, three suppliers accounted for 39.6%, 18.7% and 12.4% of the Company's prepayments; and three suppliers accounted for 28.1%, 21.5% and 16.7% of the Company's total accounts payable.

v3.20.2
Equity
6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Equity

Note 15 – Equity

 

Restricted net assets

 

The Company's ability to pay dividends is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by Shengrong WFOE only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the accompanying unaudited condensed consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of Shengrong WFOE.

 

Shengrong WFOE, Wuhan HOST, Rong Hai are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, Shengrong WFOE may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion fund and staff bonus and welfare fund at its discretion. Wuhan HOST and Rong Hai may allocate a portion of its after-tax profits based on PRC accounting standards to a discretionary surplus fund at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by State Administration of Foreign Exchange.

 

As of June 30, 2020 and December 31, 2019, Shengrong WFOE, Wuhan HOST, and Rong Hai, collectively attributed $0 of retained earnings for their statutory reserves as they have accumulated losses.

 

As a result of the foregoing restrictions, Shengrong WFOE, Tongrong WFOE, Wuge, Wuhan Host and Rong Hai are restricted in their ability to transfer their net assets to the Company. Foreign exchange and other regulation in the PRC may further restrict Shengrong WFOE, Tongrong WFOE, Wuge, Wuhan Host and Rong Hai from transferring funds to China Sunlong in the form of dividends, loans and advances. As of June 30, 2020 and December 31, 2019, amounts restricted are the net assets of Shengrong WFOE, Tongrong WFOE, Wuge, Wuhan Host and Rong Hai which amounted to $2,123,588 and $(7,263,520), respectively.

 

Stock split

 

On June 1, 2018, the Company's shareholder approved a 2 for 1 stock split of the Company's common stock at the Annual Meeting of Shareholders. The stock split was effected on June 20, 2018, pursuant to the completion of the reincorporation from Delaware to Nevada. All shares and per share amounts used herein and in the accompanying consolidated financial statements have been retroactively restated to reflect the stock split.

 

Common stock

 

On June 23, 2018, the Company issued an aggregate of 26,693 shares of the Company's common stock, par value $0.0001 per share, to certain non-U.S. purchasers at a purchase price of $5.00 per share for an aggregate offering price of $133,335 pursuant to certain securities purchase agreement dated April 20, 2018 and June 22, 2018.  The issuances were pursuant to the exemption from registration under Regulation S promulgated under the Securities Act of 1933, as amended.

 

On February 12, 2019, the Company's warrant holders converted 294,971 of the Company's warrants into 52,077 shares of the Company's common stock using cashless exercises method.

 

On February 20, 2019, the Company's warrant holders converted 415,355 of the Company's warrants into 54,826 shares of the Company's common stock using cashless exercises method.

 

On March 11, 2019, the Board granted an aggregate of 131,330 shares of restricted common stock, with a fair value of $261,347, determined using the closing price of $1.99 on March 11, 2019, to repay the debt the Company owed to two unrelated third parties. As the carrying value of the debt equaled to the fair value of the 131,330 common shares at $1.99 per share, no gain or loss were recognized upon this debt settlement.

 

On March 15, 2019, the Board granted an aggregate of 142,530 shares of restricted common stock, with a fair value of $290,761, determined using the closing price of $2.04 on March 15, 2019, to repay the debt the Company owed to one unrelated third party. As the carrying value of the debt equaled to the fair value of the 142,530 common shares at $2.04 per share, no gain or loss were recognized upon this debt settlement.

 

On April 4, 2019, the Company entered into certain securities purchase agreement with certain "non-U.S. Persons" as defined in Regulation S of the Securities Act of 1933, as amended pursuant to which the Company agreed to sell 1,492,000 shares of its common stock, par value $0.0001 per share, at a per share purchase price of $2.00. The net proceeds to the Company from this offering were approximately $2.9 million. 

 

On November 20, 2019, the company wrote off 947,037 common shares.

 

On December 23, 2019, TMSR Holding Company Limited (the "Company") entered into certain securities purchase agreement (the "SPA") with certain "non-U.S. Persons" (the "Purchasers") as defined in Regulation S of the Securities Act of 1933, as amended (the "Securities Act") pursuant to which the Company agreed to sell 3,692,859 shares of its common stock ("Common Stock"), par value $0.0001 per share, at a per share purchase price of $1.00. The net proceeds to the Company from this offering will be approximately $3.66 million.

 

On January 3, 2020, the Company entered into a Share Purchase Agreement with Wuge and all the shareholders of Wuge ("Wuge Shareholders"). Wuge Shareholders are Wei Xu, Bibo Lin, Jiangsu Lingkong Network Joint Stock Co., Ltd., which is controlled by Wei Xu, and Anhui Shuziren Network Technology Co., Ltd., which is controlled by Wei Xu. Pursuant to the SPA, TMSR shall issue an aggregate of 4,000,000 shares of TMSR's common stock to the Wuge Shareholders, in exchange for Wuge Shareholders' agreement to enter into, and their agreement to cause Wuge to enter into, certain VIE agreements ("VIE Agreements") with Tongrong Technology (Jiangsu) Co., Ltd. ("WFOE"), the Company's indirectly owned subsidiary, through which WFOE shall have the right to control, manage and operate Wuge in return for a service fee equal to 100% of Wuge's net income ("Acquisition"). On January 24, 2020, the Company completed the Acquisition and issued the Shares to the Wuge Shareholders.

 

Warrants and options

 

On July 29, 2015, the Company sold 10,000,000 units at a purchase price of $5.00 per unit ("Public Units") in its initial public offering. Each Public Unit consists of one share of the Company's common stock, $0.0001 par value, and one warrant. Each warrant will entitle the holder to purchase one-half of one share of common stock at an exercise price of $2.88 per half share ($5.75 per whole share). Warrants may be exercised only for a whole number of shares of common stock. No fractional shares will be issued upon exercise of the warrants. The warrants will become exercisable on 30 days after the consummation of its initial Business Combination with China Sunlong on February 6, 2018. The warrants will expire February 5, 2023. The warrants will be redeemable by the Company at a price of $0.01 per warrant upon 30 days prior written notice after the warrants become exercisable, only in the event that the last sale price of the common stock equals or exceeds $12.00 per share for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which notice of redemption is given.

 

The sponsor of the Company purchased, simultaneously with the closing of the Public Offering on July 29, 2015, 500,000 units at $5.00 per unit in a private placement for an aggregate price of $2,500,000. Each unit purchased is substantially identical to the units sold in the Public Offering.

 

The Company sold to the underwriter (and/or its designees), for $100, as additional compensation, an option to purchase up to a total of 800,000 units exercisable at $5.00 per unit (or an aggregate exercise price of $4,000,000) upon the closing of the Public Offering. Since the option is not exercisable until the earliest on the closing the initial Business Combination, the option will effectively represent the right to purchase up to 800,000 shares of common stock and 800,000 warrants to purchase 400,000 shares at $5.75 per full share for an aggregate maximum amount of $6,300,000. The units issuable upon exercise of this option are identical to those issued in the Public Offering.

 

In July 2016, the board of directors of the Company appointed two new directors. In August 2016, the sponsor of the Company granted an option to each of the two new directors to acquire 12,000 shares of common stock at a price of $4.90 per share vested immediately and exercisable commencing six months after closing of the initial Business Combination and expiring five years from the closing of the initial Business Combination.

 

The aforementioned warrants and options are deemed to be effective on February 6, 2018, the date of the consummation of its initial business combination with China Sunlong, as the Company was deemed to be the accounting acquiree in the transaction and the transaction was treated as a recapitalization of China Sunlong.

 

The summary of warrant activity is as follows:

 

       Exercisable
Into
   Weighted
Average
   Average
Remaining
 
   Warrants   Number of   Exercise    Contractual 
   Outstanding   Shares   Price   Life 
December 31, 2019   9,079,348    4,539,674   $5.75    3.14 
Granted/Acquired   -    -   $-    - 
Forfeited   -    -   $-    - 
Exercised   -    -    -    - 
June 30, 2020   9,079,348    4,539,674   $5.75    2.64 

 

The summary of option activity is as follows:

 

       Weighted   Average 
       Average   Remaining 
   Options   Exercise    Contractual 
   Outstanding   Price   Life 
December 31, 2019   824,000   $5.00    4.16 
Granted/Acquired   -   $-    - 
Forfeited   -   $-    - 
Exercised   -   $-    - 
June 30, 2020   824,000   $5.00    2.64 
v3.20.2
Contingencies
6 Months Ended
Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Contingencies

Note 16 – Contingencies

  

The Company may be subject to certain legal proceedings, claims and disputes that arise in the ordinary course of business. Although the outcomes of these legal proceedings cannot be predicted, the Company does not believe these actions, in the aggregate, will have a material adverse impact on its financial position, results of operations or liquidity.

 

On February 27, 2013, Wuhan HOST entered into a contract to purchase land use rights for a parcel of land in E Zhou City, Hubei, China, for $1,212,478.  The Company has paid to the local government $781,349, a balance of $431,129 has not been paid; however, the government has already issued to the Company all the necessary certificates transferring title of the land use rights for the parcel of land to the Company, and has not taken action to collect any remaining unpaid balance.  If the government determines that it wishes to collect an unpaid balance, the total cost to the Company would be $431,129.

v3.20.2
Segment Reporting
6 Months Ended
Jun. 30, 2020
Segment Reporting [Abstract]  
Segment reporting

Note 17 – Segment reporting

 

The Company follows ASC 280, Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance. The Company's chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measure being income from operations.

 

The Company's has discontinued Wuhan Host and Shengrong WFOE. The Company's remain business segment and operations is Rong Hai. The Company's consolidated results of operations and consolidated financial position from continuing operations are almost all attributable to Rong Hai; accordingly, management believes that the consolidated balance sheets and statement of operations provide the relevant information to assess Rong Hai's performance.

 

The following represents assets by division as of:

 

Total assets as of  June 30,
2020
   December 31,
2019
 
Hubei Shengrong and Shengrong WFOE  $-   $- 
Wuhan HOST   -    - 
Rong Hai and Tongrong WFOE   17,710,457    17,407,872 
Wuge   2,198,636    - 
CCNC, China Sunlong, Shengrong BVI and Shengrong HK   8,949,216    71,521 
Total Assets  $28,858,309   $17,479,393 
v3.20.2
Discontinued Operations
6 Months Ended
Jun. 30, 2020
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

Note 18 – Discontinued Operations

 

The following depicts the financial position for the discounted operations of Wuhan Host, Shengrong WOFE, Shengrong HK and China Sunlong as of June 30, 2020 and December 31, 2019, and the result of operations for the discounted operations of Wuhan Host, Shengrong WOFE, Shengrong HK and China Sunlong for the six months ended June 30, 2020 and 2019.

 

   June 30,   December 31, 
Financial Position  2020   2019 
CURRENT ASSETS        
Cash and cash equivalents         -    1,544,177 
Total current assets   -    1,544,177 
           
PLANT AND EQUIPMENT, NET   -    - 
           
OTHER ASSETS          
Goodwill   -    3,424,390 
Intangible assets, net   -    - 
Deferred tax assets   -    - 
Total other assets   -    3,424,390 
Total assets   -    4,968,567 
           
CURRENT LIABILITIES          
Accounts payable   -    2,288,195 
Other payables and accrued liabilities   -    1,332,430 
Other payables - related parties   -    3,108,908 
Customer deposits   -    3,019,264 
Lease liabilities - current   -    98,582 
Taxes payable   -    326,687 
Total current liabilities   -    10,174,066 
           
OTHER LIABILITIES          
Third party loan - noncurrent   -    143,345 
Lease liabilities - noncurrent   -    95,752 
Total other liabilities   -    239,097 
           
Total liabilities   -    10,413,163 
           
Net Assets   -    (5,444,596)

  

Results of Operations  For the six months
ended
June 30,
2020
   For the
six months
ended
June 30,
2019
 
REVENUES        
Equipment and systems  $          -   $2,971,542 
Coating and fuel materials   -    4,163,919 
Trading and others   -    - 
TOTAL REVENUES   -    7,135,461 
           
COST OF REVENUES          
Equipment and systems   -    1,208,838 
Coating and fuel materials   -    3,665,496 
Trading and others   -    - 
TOTAL COST OF REVENUES   -    4,874,334 
           
GROSS PROFIT   -    2,261,127 
           
OPERATING EXPENSES (INCOME)          
Selling, general and administrative   (495,733)   843,129 
Provision for (recovery of) doubtful accounts   -    - 
TOTAL OPERATING EXPENSES   (495,733)   843,129 
           
INCOME FROM OPERATIONS   495,733    1,417,998
           
OTHER INCOME (EXPENSE)          
Interest income   -    869 
Other income (expense), net   -    36,275 
Total other income (expense), net   -    37,144 
           
INCOME (LOSS) BEFORE INCOME TAXES   495,733   1,455,142
           
PROVISION FOR INCOME TAXES   -    204,833 
           
NET (LOSS) INCOME  $495,733  $1,250,309
v3.20.2
Subsequent Events
6 Months Ended
Jun. 30, 2020
Subsequent Events [Abstract]  
Subsequent events

Note 19 – Subsequent events

 

On August 11, 2020, pursuant to certain securities purchase agreements dated May 1, 2020, the Company issued 1,674,428 shares of its common, at a per share purchase price of $1.50, to the eleven investors. The gross proceeds to the Company from this private placement were approximately $2.51 million.

v3.20.2
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Basis of presentation

Basis of presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for information pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). Interim results are not necessarily indicative of results to be expected for the full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the year ended December 31, 2019, filed with the Securities and Exchange Commission on April 17, 2020.

Principles of consolidation

Principles of consolidation

 

The unaudited condensed financial statements of the Company include the accounts of CCNC and its wholly owned subsidiaries and VIE. All intercompany transactions and balances are eliminated upon consolidation.

 

Use of estimates and assumptions

Use of estimates and assumptions

 

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the periods presented. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include the useful lives of intangible assets, deferred revenues and plant and equipment, impairment of long-lived assets, collectability of receivables, inventory valuation allowance, present value of lease liabilities and realization of deferred tax assets. Actual results could differ from these estimates.

Foreign currency translation and transaction

Foreign currency translation and transaction

 

The reporting currency of the Company is the U.S. dollar. The Company in China conducts its businesses in the local currency, Renminbi (RMB), as its functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. The statement of income accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

 

Translation adjustments included in accumulated other comprehensive loss amounted to $(1,540,111) and $(832,267) as of June 30, 2020 and December 31, 2019, respectively. The balance sheet amounts, with the exception of shareholders’ equity at June 30, 2020 and December 31, 2019 were translated at 7.08 RMB and 7.14 RMB to $1.00, respectively. The shareholders’ equity accounts were stated at their historical rate. The average translation rates applied to statement of income accounts for the six months ended June 30, 2020 and 2019 were 7.03 RMB and 6.78 RMB, respectively. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.

 

The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Company because it has not engaged in any significant transactions that are subject to the restrictions.

 

Accounts receivable, net

Accounts receivable, net

 

Accounts receivable include trade accounts due from customers. An allowance for doubtful accounts may be established and recorded based on management’s assessment of potential losses based on the credit history and relationships with the customers. Management reviews its receivables on a regular basis to determine if the bad debt allowance is adequate, and adjusts the allowance when necessary. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable.

Inventories

Inventories

 

Inventories are comprised of raw materials and work in progress and are stated at the lower of cost or net realizable value using the first-in-first-out method in Shengrong WFOE and weighted average method in Wuhan HOST and Rong Hai. Management reviews inventories for obsolescence and cost in excess of net realizable value at least annually and recognize an impairment charge against the inventory when the carrying value exceeds net realizable value. As of June 30, 2020 and December 31, 2019, no obsolescence and cost in excess of net realizable value were recognized.

Prepayments

Prepayments

 

Prepayments are funds deposited or advanced to outside vendors for future inventory or services purchases. As a standard practice in China, many of the Company’s vendors require a certain amount to be deposited with them as a guarantee that the Company will complete its purchases on a timely basis. This amount is refundable and bears no interest. The Company has legally binding contracts with its vendors, which require any outstanding prepayments to be returned to the Company when the contract ends.

Plant and equipment

Plant and equipment

 

Plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method after consideration of the estimated useful lives of the assets and estimated residual value. The estimated useful lives and residual value are as follows:

 

   Useful Life  Estimated
Residual
Value
 
Building  5 – 20 years   5%
Office equipment and furnishing  5 years   5%
Production equipment  3-10 years   5%
Automobile  5 years   5%
Leasehold improvements  Shorter of the remaining lease terms or estimated useful lives   0%

 

The cost and related accumulated depreciation and amortization of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the consolidated statements of income and comprehensive income. Expenditures for maintenance and repairs are charged to earnings as incurred, while additions, renewals and betterments, which are expected to extend the useful life of assets, are capitalized. The Company also re-evaluates the periods of depreciation and amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

Intangible assets

Intangible assets

 

Intangible assets represent land use rights and patents, and they are stated at cost, less accumulated amortization. Research and development costs associated with internally developed patents are expensed when incurred. Amortization expense is recognized on the straight-line basis over the estimated useful lives of the assets. All land in the PRC is owned by the government; however, the government grants "land use rights." The Company has obtained the rights to use various parcels of land. The patents have finite useful lives and are amortized using a straight-line method that reflects the estimated pattern in which the economic benefits of the intangible asset are to be consumed. The Company amortizes the cost of the land use rights and patents, over their useful life using the straight-line method. The Company also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives.  The estimated useful lives are as follows:

 

    Useful Life
Land use rights   50 years
     
Patents   10 - 20 years
     
Software   5 years
Goodwill

Goodwill

 

Goodwill represents the excess of the consideration paid of an acquisition over the fair value of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is not amortized and is tested for impairment at least annually, more often when circumstances indicate impairment may have occurred. Goodwill is carried at cost less accumulated impairment losses. If impairment exists, goodwill is immediately written off to its fair value and the loss is recognized in the consolidated statements of income. Impairment losses on goodwill are not reversed. In 2019, the Company recorded approximately $3.42 million in impairment to its Wuhan Host and Shengrong WFOE operating units. The entities were located at the epicenter of the COVID 19 virus. Accordingly, those entities were materially adversely impacted.

Impairment for long-lived assets

Impairment for long-lived assets

 

Long-lived assets, including plant, equipment and intangible assets with finite lives are reviewed for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flows the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flows expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. If an impairment is identified, the Company would reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flows approach or, when available and appropriate, to comparable market values. In 2019, the Company recognized approximately $4.89 million in impairment to long lived assets related to Wuhan Host and Shengrong WFOE. 

Fair value measurement

Fair value measurement

 

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash, notes receivable, accounts receivable, other receivables, prepayments, accounts payable, other payables and accrued liabilities, customer deposits, short term loans and taxes payable to approximate their fair values because of their short term nature.

 

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

 

  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 assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. 
     
  Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

 

Financial instruments included in current assets and current liabilities are reported in the consolidated balance sheets at face value or cost, which approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest.

Customer deposits

Customer deposits 

 

In Shengrong WFOE, customer deposits represent amounts advanced by customers on product orders. Generally, the Company requires 3% to 10% advanced deposits from the customers upon the signing of the sales contracts. At various stages of the sales contract execution, the Company generally collects certain amounts of advanced deposits from the customers based on the approximate amount of cash flows needed at each stage. Customer deposits are reduced when the related sale is recognized in accordance with the Company’s revenue recognition policy.

 

In Wuhan HOST, customer deposits represent amounts advanced by customers on product orders. Generally, the Company requires 95% to 100% advanced deposits from the customers upon signing of the sales contracts. A few customers with good credit history are not required to make any deposit. Customer deposits are reduced when the related sale is recognized in accordance with the Company’s revenue recognition policy.

Revenue recognition

Revenue recognition

 

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of January 1, 2018.  This did not result in an adjustment to retained earnings upon adoption of this new guidance as the Company’s revenue, other than retainage revenues, was recognized based on the amount of consideration we expect to receive in exchange for satisfying the performance obligations. However, the impact of the Company’s retainage revenue was not material as of the date of adoption, and as a result, did not result in an adjustment.

 

The core principle underlying the revenue recognition ASU is that the Company will recognize revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This will require the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer.  The Company’s revenue streams are primarily recognized at a point in time except for the retainage revenues where the retainage periods are recognized over the retainage period, usually is a period of twelve months.

 

The ASU requires the use of a new five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation. The application of the five-step model to the revenue streams compared to the prior guidance did not result in significant changes in the way the Company records its revenue. Upon adoption, the Company evaluated its revenue recognition policy for all revenue streams within the scope of the ASU under previous standards and using the five-step model under the new guidance and confirmed that there were no differences in the pattern of revenue recognition except its retainage revenues.

 

An entity will also be required to determine if it controls the goods or services prior to the transfer to the customer in order to determine if it should account for the arrangement as a principal or agent. Principal arrangements, where the entity controls the goods or services provided, will result in the recognition of the gross amount of consideration expected in the exchange. Agent arrangements, where the entity simply arranges but does not control the goods or services being transferred to the customer, will result in the recognition of the net amount the entity is entitled to retain in the exchange.

 

Revenue from equipment and systems, revenue from coating and fuel materials, and revenue from trading and others are recognized at the date of goods delivered and title passed to customers, when a formal arrangement exists, the price is fixed or determinable, the Company has no other significant obligations and collectability is reasonably assured. Such revenues are recognized at a point in time after all performance obligations are satisfied under the new five-step model. In addition, training service revenues are recognized when the services are rendered and the Company has no other obligations, and collectability is reasonably assured. These revenues are recognized at a point in time.

 

Prior to January 1, 2018, the Company allowed its customers to retain 5% to 10% of the contract price as warranty retainage during the retainage period of 12 months to guarantee product quality. Retainage is considered as a payment term included as a part of the contract price, and was recognized as revenue upon the shipment of products. Due to nature of the retainage, the Company’s policy is to record revenue the full value of the contract without VAT, including any retainage, since the Company has experienced insignificant warranty retainage claims historically. Due to the infrequent and insignificant amount of warranty retainage claims, the ability to collect retainage was reasonably assured and was recognized at the time of shipment. On January 1, 2018, upon the adoption of ASU 2014-09 (ASC 606), revenues from product warranty retainage are recognized over the retainage period over 12 months. For the six months ended June 30, 2020, less than 5% of our retainage revenues were recognized in our consolidated revenues and included in the Company’s equipment and systems revenues in the accompanying statements of income and comprehensive income.

 

Payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits.

 

The Company’s disaggregate revenue streams are summarized as follows:

 

   For the Three Months Ended
June 30,
   For the Six Months Ended
June 30,
 
   2020   2019   2020   2019 
Revenues – Equipment and systems  $       -   $      -   $       -   $     - 
Revenues –fuel materials   1,279,781    7,418,297    6,445,181    12,285,253 
Revenues – Trading and others   46,482    473,468    46,482    639,297 
Total revenues  $1,326,263   $7,891,765   $6,491,663   $12,924,550 

 

Gross versus Net Revenue Reporting

 

Starting from July 2016, in the normal course of the Company’s trading of industrial waste materials business, the Company directly purchases the processed industrial waste materials from the Company’s suppliers under the Company’s specifications and drop ships the materials directly to the Company’s customers. The Company would inspect the materials at its customers’ site, during which inspection it temporarily assumes legal title to the materials, and after which inspection legal title is transferred to its customers. In these situations, the Company generally collects the sales proceed directly from the Company’s customers and pay for the inventory purchases to the Company’s suppliers separately. The determination of whether revenues should be reported on a gross or net basis is based on the Company’s assessment of whether it is the principal or an agent in the transaction. In determining whether the Company is the principal or an agent, the Company follows the new accounting guidance for principal-agent considerations. Since the Company is the primary obligor and is responsible for (i) fulfilling the processed industrial waste materials delivery, (ii) controlling the inventory by temporarily assume legal title to the materials after inspecting the products from our vendors before passing the materials to our customers, and (iii) bearing the back-end risk of inventory loss with respect to any product return from the Company’s customers, the Company has concluded that it is the principal in these arrangements, and therefore report revenues and cost of revenues on a gross basis.

Research and Development ("R&D") Expenses

Research and Development (“R&D”) Expenses

 

Research and development expenses include salaries and other compensation-related expenses paid to the Company’s research and product development personnel while they are working on R&D projects, as well as raw materials used for the R&D projects. R&D expenses incurred by the Company are included in the selling, general and administrative expenses and totaled $0 and $219,675 for the six months ended June 30, 2020 and 2019, respectively.

Income taxes

Income taxes

 

The Company accounts for income taxes in accordance with U.S. GAAP for income taxes. The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred taxes is accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

 

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. The Company incurred no such penalties and interest for the six months ended June 30, 2020 and 2019. As of June 30, 2020, the Company’s PRC tax returns filed for 2017, 2018 and 2019 remain subject to examination by any applicable tax authorities.

Earnings per share

Earnings per share

 

Basic earnings per share are computed by dividing income available to common shareholders of the Company by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common shares were exercised and converted into common shares. 9,079,348 and 10,500,000 of outstanding warrants which is equivalent to convertible of 4,539,674 and 5,250,000 common shares were excluded from the diluted earnings per share calculation due to its antidilutive effect for the six months ended June 30, 2020 and 2019, respectively. 824,000 of outstanding options were excluded from the diluted earnings per share calculation due to its antidilutive effect for the six months ended June 30, 2020 and 2019.

Recently issued accounting pronouncements

Recently issued accounting pronouncements

 

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, (1) for public business entities for reporting periods for which financial statements have not yet been issued and (2) for all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not believe the adoption of this ASU would have a material effect on the Company’s unaudited condensed consolidated financial statements.

 

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

v3.20.2
Nature of Business and Organization (Tables)
6 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of activities of TMSR and related entities

Name   Background   Ownership
China Sunlong3   A Cayman Islands company   100% owned by the Company
Shengrong BVI3  

A British Virgin Island company

Incorporated on June 30, 2015

  100% owned by China Sunlong
Citi Profit BVI    

A British Virgin Island company

Incorporated on April 2019 

  100% owned by the Company
Shengrong HK3  

A Hong Kong company

Incorporated on September 25, 2015 

  100% owned by Shengrong BVI
TMSR HK  

A Hong Kong company

Incorporated on April 2019 

  100% owned by Citi Profit BVI
Shengrong WFOE3   A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”)   100% owned by Shengrong HK
   

● 

 

Incorporated on March 1, 2016

Registered capital of USD 12,946 (HKD100,000), fully funded

Purchase and sales of high efficiency permanent magnetic separator and comprehensive utilization system

Trading of processed industrial waste materials

   
Tongrong WFOE  

 

A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”)

Incorporated on August 2019

  100% owned by TMSR HK
Hubei Shengrong2  

A PRC limited liability company

Incorporated on January 14, 2009

  100% owned by Shengrong WFOE
    Registered capital of USD 4,417,800 (RMB 30,000,000), fully funded    
   

 

Production and sales of high efficiency permanent magnetic separator and comprehensive utilization system.

Trading of processed industrial waste materials

   
Wuhan HOST3  

A PRC limited liability company

Incorporated on October 27, 2010

Registered capital of USD 750,075 (RMB 5,000,000), fully funded

  100% owned by Shengrong WFOE
    Research, development, production and sale of coating materials.    
Shanghai Host Coating Materials Co., Ltd. (“Shanghai HOST”)3  

A PRC limited liability company

Incorporated on December 11, 2014

Registered capital of USD 3,184,371 (RMB 20,000,000), to be fully funded by November 2024

   
    No operations and no capital contribution has been made as of December 31, 2018   80% owned by Wuhan HOST
Wuhan HOST Coating Materials Xiaogan Co., Ltd. (“Xiaogan HOST”)3  

 

A PRC limited liability company

Incorporated on December 25, 2018

Registered capital of USD 11,595,379 (RMB 80,000,000), to be fully funded by December 2028

No operations and no capital contribution has been made as of December 31, 2018

  90% owned by Wuhan HOST
Jiangsu Rong Hai Electric Power Fuel Co., Ltd. (“Rong Hai”)  

● 

A PRC limited liability company

Incorporated on May 20, 2009

Registered capital of USD 3,171,655 (RMB 20,180,000), fully funded

Coal wholesales and sales of coke, steels, construction materials, mechanical equipment and steel scrap

  VIE of Tongrong WFOE
Wuge  

A PRC limited liability company

Incorporated on January 3, 2020

  VIE of Tongrong WFOE
TJComex BVI1  

A British Virgin Island company

Incorporated on March 8, 2016 

  100% owned by China Sunlong
TJComex HK1  

A Hong Kong company

Incorporated on March 19, 2014 

  100% owned by TJComex BVI
TJComex WFOE1   A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”)   100% owned by TJComex HK
    Incorporated on March 10, 2004    
    Registered capital of USD 200,000    
TJComex Tianjin1  

A PRC limited liability company

Incorporated on November 19, 2007

  100% owned by TJComex WFOE
    Registered capital of USD 7,809,165 (RMB 55,000,000)    
    General merchandise trading business and related consulting services    

 

1 Disposed on April 2, 2018
2 Disposed on December 27, 2018
3Disposed on June 30, 2020
v3.20.2
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Schedule of estimated useful lives of plant and equipment
   Useful Life  Estimated
Residual
Value
 
Building  5 – 20 years   5%
Office equipment and furnishing  5 years   5%
Production equipment  3-10 years   5%
Automobile  5 years   5%
Leasehold improvements  Shorter of the remaining lease terms or estimated useful lives   0%
Schedule of estimated useful lives of intangible assets
  Useful Life
Land use rights   50 years
     
Patents   10 - 20 years
     
Software   5 years
Schedule of disaggregate revenue
  For the Three Months Ended
June 30,
   For the Six Months Ended
June 30,
 
   2020   2019   2020   2019 
Revenues – Equipment and systems  $       -   $      -   $       -   $     - 
Revenues –fuel materials   1,279,781    7,418,297    6,445,181    12,285,253 
Revenues – Trading and others   46,482    473,468    46,482    639,297 
Total revenues  $1,326,263   $7,891,765   $6,491,663   $12,924,550 
v3.20.2
Business Combination and Restructuring (Tables)
6 Months Ended
Jun. 30, 2020
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Schedule of reconciliation of reduction of capital
   December 27,
2018
 
CURRENT ASSETS    
Cash and cash equivalents  $47,994 
Accounts receivable, net   9,410,436 
Accounts receivable - related party, net   761,794 
Other receivables   48,718 
Other receivable - related party   2,158 
Inventories   5,332,990 
Prepayments   31,793,810 
Total current assets   47,397,900 
      
PLANT AND EQUIPMENT, NET   203,992 
      
OTHER ASSETS     
Other assets   7,269 
Deferred tax assets   780,550 
Total other assets   787,819 
      
Total assets  $48,389,711 
      
CURRENT LIABILITIES     
Short term loans - bank  $2,180,708 
Accounts payable   95,854 
Other payables and accrued liabilities   156,498 
Other payables - related parties   507,183 
Customer deposits   347,853 
Taxes payable   16,602,841 
Total current liabilities   19,890,937 
      
OTHER LIABILITIES     
Deferred rent liabilities   30,763 
Total other liabilities   30,763 
      
Total liabilities  $19,921,700 
      
Total net assets  $28,468,011 
Total consideration   (30,362,135)
Currency translation adjustment   900,281 
Total addition to paid-in-capital  $993,843 
Wuhan HOST [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Schedule of the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date

Total consideration at fair value   $ 11,200,000  

 

   Fair Value 
Cash  $276,626 
Other current assets   6,763,767 
Plant and equipment   6,499,268 
Other noncurrent assets   2,139,987 
Goodwill   7,544,008 
Total asset   23,223,656 
Total liabilities   (12,023,656)
Net asset acquired  $11,200,000 

 

Rong Hai [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Schedule of the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date

Total consideration at fair value  $9,260,000 

 

   Fair Value 
Cash  $717,056 
Other current assets   5,980,230 
Plant and equipment   28,875 
Other noncurrent assets   116,655 
Goodwill   7,307,470 
Total asset   14,150,286 
Total liabilities   (4,890,286)
Net asset acquired  $9,260,000 
Wuge [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Schedule of the fair value of the identifiable assets acquired and liabilities assumed at the acquisition date

Total consideration at fair value  $7,200,000 

 

   Fair Value 
Cash  $228,788 
Other current assets   20,834 
Plant and equipment   6,024 
Other noncurrent assets   8,097 
Goodwill   7,343,209 
Total asset   7,606,952 
Total liabilities   (406,952)
Net asset acquired  $7,200,000 

 

v3.20.2
Variable Interest Entity (Tables)
6 Months Ended
Jun. 30, 2020
Variable Interest Entity [Abstract]  
Schedule of carrying amount of the VIE's assets and liabilities

   June 30,   December 31, 
   2020   2019 
         
Current assets  $9,201,684   $8,687,451 
Property, plants and equipment, Intangible Assets   1,165,027    19,057 
Other noncurrent assets   89,136    127,782 
Goodwill   14,329,042    7,289,454 
Total assets   24,786,889    16,123,744 
           
Current liabilities   8,264,556    6,067,264 
Non-current liabilities   60,681    61,580 
Total liabilities   8,325,237    6,128,844 
Net assets  $16,459,652   $9,994,900 

 

   June 30,   December 31, 
   2020   2019 
         
Short-term loan  $437,884   $- 
Accounts payable   880,713    619,329 
Other payables and accrued liabilities   74,154    301,230 
Other payables – related party   5,766,063    5,082,068 
Tax payables   3,525    202 
Customer Advances   1,040,124    3,426 
Lease liabilities   62,093    61,009 
Total current liabilities   8,264,556    6,067,264 
Lease liabilities - noncurrent   60,681    61,580 
Total liabilities  $8,325,237   $6,128,844 

Schedule of operating results of VIE's

 

    For the
six months ended
June 30,
 
    2020  
       
Operating revenues   $ 6,491,663  
Gross profit     326,254  
Income from operations     (337,537)  
Net income   $ (387,648)  
v3.20.2
Accounts Receivable, Net (Tables)
6 Months Ended
Jun. 30, 2020
Receivables [Abstract]  
Schedule of accounts receivable

    June 30,
2020
    December 31,
2019
 
             
Accounts receivable   $ 1,153,142     $ 2,221,319  
Less: Allowance for doubtful accounts     (113,370)       (24,055 )
Total accounts receivable, net   $ 1,039,772     $ 2,197,264  
Schedule of movement of allowance for doubtful accounts

   June 30,
2020
   December 31,
2019
 
         
Beginning balance  $24,055   $732,846 
Beginning balance from Wuhan HOST   -    260,764 
Beginning balance from Rong Hai   24,055    472,082 
Addition   90,308    - 
Recovery   -    (708,791)
Exchange rate effect   (993)   - 
Ending balance  $113,370   $24,055 
v3.20.2
Inventories (Tables)
6 Months Ended
Jun. 30, 2020
Inventory Disclosure [Abstract]  
Schedule of inventories

   June 30,
2020
   December 31,
2019
 
         
Raw materials  $-   $- 
Work in progress   -    - 
Finished Goods   1,248,906    1,197,065 
Total inventories  $1,248,906   $1,197,065 
v3.20.2
Plant and Equipment, Net (Tables)
6 Months Ended
Jun. 30, 2020
Property, Plant and Equipment [Abstract]  
Schedule of plant and equipment

   June 30,
2020
   December 31,
2019
 
         
Office equipment and furniture  $62,972   $39,688 
Automobile   251,523    209,057 
Subtotal   314,495    248,745 
Less: accumulated depreciation   (234,807)   (229,688)
Total  $79,688   $19,057 
v3.20.2
Intangible Assets, Net (Tables)
6 Months Ended
Jun. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of intangible assets
   March 31,
2020
   December 31,
2019
 
         
Development of technology  $1,129,681   $        - 
Less: accumulated amortization   -    - 
Net intangible assets  $1,129,681   $- 
v3.20.2
Goodwill (Tables)
6 Months Ended
Jun. 30, 2020
Share Based Compensation Arrangement By Share Based Payment Award Warrant Forfeitures In Period  
Schedule of goodwill by business units
  Wuhan HOST   Rong Hai   Wuge   Total 
Balance as of December 31, 2019  $3,424,390   $7,289,454   $        -   $10,713,844 
Goodwill acquired through acquisition   -    -    7,140,304    7,140,304 
Disposal of the company   (3,424,390)   -    -    (3,424,390)
Foreign currency translation adjustment   -    (106,364)   5,648    (100,716)
Balance as of  June 30, 2020  $-   $7,183,090   $7,145,952   $14,329,042 
v3.20.2
Related Party Balances and Transactions (Tables)
6 Months Ended
Jun. 30, 2020
Related Party Transactions [Abstract]  
Schedule of other payables - related parties
Name of related party   Relationship   June 30,
2020
    December 31,
2019
 
                 
Chuanliu Ni   Chief Executive Officer and director of a former subsidiary   $ 325,907     $ 325,907  
Zhong Hui Holding Limited   Shareholder of the Company     140,500       140,500  
Chengdu Yuan Code Chain Technology Co. Ltd   A company controlled by former shareholder of the Company     103,719       -  
Qihai Wang   Shareholder of the Company     71,444       166,673  
Jiangsu Longying Education Technology Co. Ltd   A company in which shareholder hold shares     -       422,868  
Jiangsu Longhai Film Culture Media Co. Ltd   Under common control of shareholder of the Company     -       280,954  
Total       $ 641,570     $ 1,336,902  
v3.20.2
Debt (Tables)
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Schedule of short term loan due to bank
Short term loans   Maturities     Weighted average interest rate     Collateral/Guarantee   June 30,
2020
    December 31,
2019
 
Loan from Bank of Jiangsu     March 25, 2021       4.5 %   Guaranteed by Qihai Wang's personal property   $ 247,193               -  
Loan from Bank of Jiangsu     January 12, 2021        5.22 %   Guaranteed by Qihai Wang's personal property   $ 190,691       -  
v3.20.2
Taxes (Tables)
6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Schedule of components of the provision for income taxes
   For the
three months ended
June 30,
2020
   For the
three months ended
June 30,
2019
 
         
Current  $1,810   $234,473 
Deferred   (243)   (38,229)
Total provision for income taxes  $1,567   $196,244 

  

   For the
six months ended
June 30,
2020
   For the
six months ended
June 30,
2019
 
         
Current  $16,419   $255,301 
Deferred   33,692    (8,229)
Total provision for income taxes  $50,111   $247,072 
Schedule of components of deferred tax assets
   June 30,
2020
   December 31,
2019
 
         
Net operating losses carried forward – U.S.  $19,106   $17,309 
Net operating losses carried forward – PRC   -    - 
Bad debt allowance   3,531    37,532 
Valuation allowance   (19,106)   (17,309)
Deferred tax assets, net  $3,531   $37,532 

Schedule of taxes payable
   June 30,
2020
   December 31,
2019
 
         
VAT taxes payable  $1,550   $          - 
Income taxes payable   1,900    - 
Other taxes payable   105    202 
Total  $3,555   $202 
v3.20.2
Leases (Tables)
6 Months Ended
Jun. 30, 2020
Leases [Abstract]  
Schedule of operating lease
Twelve months ended June 30,  Operating
lease
amount
 
2020  $124,377 
2021   99,501 
2022   76,957 
2023   23,900 
Total lease payments   324,735 
Less: interest   (201,961)
Present value of lease liabilities  $122,774 
v3.20.2
Equity (Tables)
6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Schedule of warrant activity
      Exercisable
Into
   Weighted
Average
   Average
Remaining
 
   Warrants   Number of   Exercise    Contractual 
   Outstanding   Shares   Price   Life 
December 31, 2019   9,079,348    4,539,674   $5.75    3.14 
Granted/Acquired   -    -   $-    - 
Forfeited   -    -   $-    - 
Exercised   -    -    -    - 
June 30, 2020   9,079,348    4,539,674   $5.75    2.64 
Schedule of option activity
      Weighted   Average 
       Average   Remaining 
   Options   Exercise    Contractual 
   Outstanding   Price   Life 
December 31, 2019   824,000   $5.00    4.16 
Granted/Acquired   -   $-    - 
Forfeited   -   $-    - 
Exercised   -   $-    - 
June 30, 2020   824,000   $5.00    2.64 

 

v3.20.2
Segment Reporting (Tables)
6 Months Ended
Jun. 30, 2020
Segment Reporting Tables Abstract  
Schedule of assets by division

Total assets as of  June 30,
2020
   December 31,
2019
 
Hubei Shengrong and Shengrong WFOE  $-   $- 
Wuhan HOST   -    - 
Rong Hai and Tongrong WFOE   17,710,457    17,407,872 
Wuge   2,198,636    - 
CCNC, China Sunlong, Shengrong BVI and Shengrong HK   8,949,216    71,521 
Total Assets  $28,858,309   $17,479,393 
v3.20.2
Discontinued Operations (Tables)
6 Months Ended
Jun. 30, 2020
Discontinued Operations and Disposal Groups [Abstract]  
Schedule of financial position and result of operations for the discounted operations

   June 30,   December 31, 
Financial Position  2020   2019 
CURRENT ASSETS        
Cash and cash equivalents         -    1,544,177 
Total current assets   -    1,544,177 
           
PLANT AND EQUIPMENT, NET   -    - 
           
OTHER ASSETS          
Goodwill   -    3,424,390 
Intangible assets, net   -    - 
Deferred tax assets   -    - 
Total other assets   -    3,424,390 
Total assets   -    4,968,567 
           
CURRENT LIABILITIES          
Accounts payable   -    2,288,195 
Other payables and accrued liabilities   -    1,332,430 
Other payables - related parties   -    3,108,908 
Customer deposits   -    3,019,264 
Lease liabilities - current   -    98,582 
Taxes payable   -    326,687 
Total current liabilities   -    10,174,066 
           
OTHER LIABILITIES          
Third party loan - noncurrent   -    143,345 
Lease liabilities - noncurrent   -    95,752 
Total other liabilities   -    239,097 
           
Total liabilities   -    10,413,163 
           
Net Assets   -    (5,444,596)

  

Results of Operations  For the six months
ended
June 30,
2020
   For the
six months
ended
June 30,
2019
 
REVENUES        
Equipment and systems  $          -   $2,971,542 
Coating and fuel materials   -    4,163,919 
Trading and others   -    - 
TOTAL REVENUES   -    7,135,461 
           
COST OF REVENUES          
Equipment and systems   -    1,208,838 
Coating and fuel materials   -    3,665,496 
Trading and others   -    - 
TOTAL COST OF REVENUES   -    4,874,334 
           
GROSS PROFIT   -    2,261,127 
           
OPERATING EXPENSES (INCOME)          
Selling, general and administrative   (495,733)   843,129 
Provision for (recovery of) doubtful accounts   -    - 
TOTAL OPERATING EXPENSES   (495,733)   843,129 
           
INCOME FROM OPERATIONS   495,733    1,417,998
           
OTHER INCOME (EXPENSE)          
Interest income   -    869 
Other income (expense), net   -    36,275 
Total other income (expense), net   -    37,144 
           
INCOME (LOSS) BEFORE INCOME TAXES   495,733   1,455,142
           
PROVISION FOR INCOME TAXES   -    204,833 
           
NET (LOSS) INCOME  $495,733  $1,250,309
v3.20.2
Nature of Business and Organization (Details)
6 Months Ended
Jun. 30, 2020
China Sunlong [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A Cayman Islands company
Ownership 100% owned by the Company [1]
Shengrong BVI [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A British Virgin Island company Incorporated on June 30, 2015
Ownership 100% owned by China Sunlong [1]
Shengrong HK [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A Hong Kong company Incorporated on September 25, 2015
Ownership 100% owned by Shengrong BVI [1]
Shengrong WFOE [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A PRC limited liability company and deemed a wholly foreign owned enterprise ("WFOE") Incorporated on March 1, 2016 Registered capital of USD 12,946 (HKD100,000), fully funded Purchase and sales of high efficiency permanent magnetic separator and comprehensive utilization system Trading of processed industrial waste materials
Ownership 100% owned by Shengrong HK [1]
Hubei Shengrong [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A PRC limited liability company Incorporated on January 14, 2009 Registered capital of USD 4,417,800 (RMB 30,000,000), fully funded Production and sales of high efficiency permanent magnetic separator and comprehensive utilization system. Trading of processed industrial waste materials
Ownership 100% owned by Shengrong WFOE [2]
Wuhan HOST [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A PRC limited liability company Incorporated on October 27, 2010 Registered capital of USD 750,075 (RMB 5,000,000), fully funded Research, development, production and sale of coating materials.
Ownership 100% owned by Shengrong WFOE [1]
Shanghai Host Coating Materials Co., Ltd. ("Shanghai HOST") [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A PRC limited liability company Incorporated on December 11, 2014 Registered capital of USD 3,184,371 (RMB 20,000,000), to be fully funded by November 2024 No operations and no capital contribution has been made as of December 31, 2018
Ownership 80% owned by Wuhan HOST [1]
Wuhan HOST Coating Materials Xiaogan Co., Ltd. (“Xiaogan HOST”) [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A PRC limited liability company Incorporated on December 25, 2018 Registered capital of USD 11,595,379 (RMB 80,000,000), to be fully funded by December 2028 No operations and no capital contribution has been made as of December 31, 2018
Ownership 90% owned by Wuhan HOST [1]
Jiangsu Rong Hai Electric Power Fuel Co., Ltd. (“Rong Hai”) [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A PRC limited liability company Incorporated on May 20, 2009 Registered capital of USD 3,171,655 (RMB 20,180,000), fully funded Coal wholesales and sales of coke, steels, construction materials, mechanical equipment and steel scrap
Ownership VIE of Tongrong WFOE
TJComex BVI [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A British Virgin Island company Incorporated on March 8, 2016
Ownership 100% owned by China Sunlong [3]
TJComex HK [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A Hong Kong company Incorporated on March 19, 2014
Ownership 100% owned by TJComex BVI [3]
TJComex WFOE [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A PRC limited liability company and deemed a wholly foreign owned enterprise ("WFOE") Incorporated on March 10, 2004 Registered capital of USD 200,000
Ownership 100% owned by TJComex HK [3]
TJComex Tianjin [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A PRC limited liability company Incorporated on November 19, 2007 Registered capital of USD 7,809,165 (RMB 55,000,000) General merchandise trading business and related consulting services
Ownership 100% owned by TJComex WFOE [3]
Citi Profit BVI [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A British Virgin Island company Incorporated on April 2019
Ownership 100% owned by the Company
TMSR HK [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A Hong Kong company Incorporated on April 2019
Ownership 100% owned by Citi Profit BVI
Tongrong WFOE [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A PRC limited liability company and deemed a wholly foreign owned enterprise (“WFOE”) Incorporated on August 2019
Ownership 100% owned by TMSR HK
Wuge [Member]  
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]  
Background A PRC limited liability company Incorporated on July 4, 2019
Ownership VIE of Tongrong WFOE
[1] Disposed on June 30, 2020
[2] Disposed on December 27, 2018
[3] Disposed on April 2, 2018
v3.20.2
Nature of Business and Organization (Details Textual)
1 Months Ended 6 Months Ended
Jan. 24, 2020
Jan. 03, 2020
Apr. 11, 2018
Feb. 06, 2018
shares
Mar. 31, 2017
Nov. 30, 2018
shares
May 30, 2018
Jun. 30, 2020
Dec. 27, 2018
shares
Apr. 02, 2018
USD ($)
Oct. 10, 2017
USD ($)
Oct. 10, 2017
CNY (¥)
Nature of Business and Organization (Textual)                        
Exchange for newly-issued shares of common stock       17,990,856                
Business acquisition, description of equity interest acquired       (v) Chuanliu Ni, a Chinese citizen who is the Chief Executive Officer and director of China Sunlong, in the capacity as the representative for the Sellers. Pursuant to the Share Exchange Agreement, the Companyacquired from the Sellers all of the issued and outstanding equity interests of China Sunlong in exchange for 17,990,856 newly-issued shares of common stock of the Companyto the Sellers. 1,799,088 of these newly-issued shares are held in escrow for 18 months from the closing date of the Business Combination.                
RMB [Member]                        
Nature of Business and Organization (Textual)                        
Registered capital | ¥                       ¥ 10,000,000
TjCome BVI [Member]                        
Nature of Business and Organization (Textual)                        
Business acquisition, description of equity interest acquired         China Sunlong completed its acquisition of 100% of the equity in TJComex International Group Corporation ("TJComex BVI"). At the closing of such acquisition, the selling shareholders of TJComex BVI received 5,935 shares of China Sunlong Common Stock valued at $926.71 per share for 100% of their equity in TJComex BVI. TJComex BVI owns 100% of the issued and outstanding capital stock of TJComex Hong Kong Company Limited ("TJComex HK"), a Hong Kong limited liability company, which owns 100% equity interest of Tianjin Corro Technological Consulting Co., Ltd. ("TJComex WFOE"), a wholly foreign owned enterprise incorporated under the laws of the PRC. Pursuant to certain contractual arrangements, TJComex WFOE controls Tianjin Commodity Exchange Co., Ltd. ("TJComex Tianjin"), a limited liability company incorporated under the law of the PRC. TJComex Tianjin is engaged in general merchandise trading business and related consulting services, and its headquarter is located in the city of Tianjin, PRC.              
Net assets | $                   $ 16,598    
Hubei Shengrong [Member]                        
Nature of Business and Organization (Textual)                        
Registered capital | $                     $ 1,518,120  
Business combination, description             Hubei Shengrong and two unrelated entities entered into certain Capital Transfer and Contribution Agreement pursuant to which these two entities shall contribute cash of approximately USD 5.0 million (RMB 32.0 million) into Fujian Shengrong and Hubei Shengrong shall contribute approximately USD 1.3 million (RMB 8.0 million) which is the consideration for certain technology consulting services to be provided by Hubei Shengrong to the two entities. Upon completion of the contribution, the total registered capital of Fujian Shengrong increased to RMB 40.0 million (approximately USD 6.3 million) and Hubai Shengrong owns 20% and the two entities collectively own 80% of the equity interest of Fujian Shengrong. In August, 2018, Hubei Shengrong transferred 20% equity interest of Fujian Shengrong to Shengrong WFOE. The Company will account for the investment in Fujian Shengrong using the cost method. Since Shengrong WFOE did not provide any cash contribution to Fujian Shengrong or technology services, the investment balance under the cost method investment on June 30, 2020 is $0.          
Wuhan HOST Coating Materials Co., Ltd. [Member]                        
Nature of Business and Organization (Textual)                        
Business combination, description     In exchange for the transfer of 100% equity interest of Wuhan Host, Purchasers shall pay a total consideration of $11.2 million, of which $4.7 million or RMB equivalent shall be paid in cash and $6.0 million shall be paid in shares of common stock, of CCNC ("Share Consideration"). The Parties agree the Share Consideration shall be an aggregate of 1,012,932 shares of common stock of which is based on the closing price of US$4.64 on March 27, 2018.                  
Equity Purchase Agreement [Member]                        
Nature of Business and Organization (Textual)                        
Forfeit and cancellation of shares                 8,523,320      
Purchase Agreement [Member]                        
Nature of Business and Organization (Textual)                        
Exchange for newly-issued shares of common stock           4,630,000            
Business combination, description The Company issued an aggregate of 4,000,000 shares of TMSR's common stock ("TMSR Shares") to the shareholders of Wuge, in exchange for Wuge's shareholders' agreement to enter into, and their agreement to cause Wuge to enter into, certain VIE agreements (the "Wuge VIE Agreements") with Tongrong WFOE, through which Tongrong WFOE has the right to control, manage and operate Wuge in return for a service fee equal to 100% of Wuge's net income.             The purchase price for the Sunlong Shares shall be $1,732,114, payable in consideration of cancellation of 1,012,932 shares of the Company owned by the Payees (the “CCNC Shares”). The CCNC Shares are valued at $1.71 per share, based on the closing price of the Company’s common stock on June 30, 2020.        
Operating Agreement [Member]                        
Nature of Business and Organization (Textual)                        
Agreement term   20 years                    
v3.20.2
Summary of Significant Accounting Policies (Details)
6 Months Ended
Jun. 30, 2020
Building [Member]  
Property, Plant and Equipment [Line Items]  
Plant and equipment, Estimated Residual Value 5.00%
Building [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Plant and equipment, Useful Life 5 years
Building [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Plant and equipment, Useful Life 20 years
Office equipment and furnishing [Member]  
Property, Plant and Equipment [Line Items]  
Plant and equipment, Useful Life 5 years
Plant and equipment, Estimated Residual Value 5.00%
Production equipment [Member]  
Property, Plant and Equipment [Line Items]  
Plant and equipment, Estimated Residual Value 5.00%
Production equipment [Member] | Minimum [Member]  
Property, Plant and Equipment [Line Items]  
Plant and equipment, Useful Life 3 years
Production equipment [Member] | Maximum [Member]  
Property, Plant and Equipment [Line Items]  
Plant and equipment, Useful Life 10 years
Automobile [Member]  
Property, Plant and Equipment [Line Items]  
Plant and equipment, Useful Life 5 years
Plant and equipment, Estimated Residual Value 5.00%
Leasehold Improvements [Member]  
Property, Plant and Equipment [Line Items]  
Plant and equipment, Estimated Residual Value 0.00%
Property and equipment, Useful Life, description Shorter of the remaining lease terms or estimated useful lives
v3.20.2
Summary of Significant Accounting Policies (Details 1)
6 Months Ended
Jun. 30, 2020
Software [Member]  
Finite-Lived Intangible Assets [Line Items]  
Estimated useful lives for intangible assets 5 years
Patents [Member] | Minimum [Member]  
Finite-Lived Intangible Assets [Line Items]  
Estimated useful lives for intangible assets 10 years
Patents [Member] | Maximum [Member]  
Finite-Lived Intangible Assets [Line Items]  
Estimated useful lives for intangible assets 20 years
Land use rights [Member]  
Finite-Lived Intangible Assets [Line Items]  
Estimated useful lives for intangible assets 50 years
v3.20.2
Summary of Significant Accounting Policies (Details 2) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Accounting Policies [Abstract]        
Revenues - Equipment and systems
Revenues - fuel materials 1,279,781 7,418,297 6,445,181 12,285,253
Revenues - Trading and others 46,482 473,468 46,482 639,297
Total revenues $ 1,326,263 $ 7,891,765 $ 6,491,663 $ 12,924,550
v3.20.2
Summary of Significant Accounting Policies (Details Textual) - USD ($)
6 Months Ended 12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Summary of Significant Accounting Policies (Textual)      
Accumulated other comprehensive income (loss) $ (1,539,507)   $ (832,268)
Foreign currency translation, description The balance sheet amounts, with the exception of shareholders’ equity at June 30, 2020 and December 31, 2019 were translated at 7.08 RMB and 7.14 RMB to $1.00, respectively. The shareholders’ equity accounts were stated at their historical rate. The average translation rates applied to statement of income accounts for the six months ended June 30, 2020 and 2019 were 7.03 RMB and 6.78 RMB, respectively. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheet.    
Description of warranty revenue The Company allowed its customers to retain 5% to 10% of the contract price as warranty retainage during the retainage period of 12 months to guarantee product quality. Retainage is considered as a payment term included as a part of the contract price, and was recognized as revenue upon the shipment of products. Due to nature of the retainage, the Company’s policy is to record revenue the full value of the contract without VAT, including any retainage, since the Company has experienced insignificant warranty retainage claims historically. Due to the infrequent and insignificant amount of warranty retainage claims, the ability to collect retainage was reasonably assured and was recognized at the time of shipment. On January 1, 2018, upon the adoption of ASU 2014-09 (ASC 606), revenues from product warranty retainage are recognized over the retainage period over 12 months. For the six months ended June 30, 2020, less than 5% of our retainage revenues were recognized in our consolidated revenues and included in the Company’s equipment and systems revenues in the accompanying statements of income and comprehensive income.    
Research and development expense $ 0 $ 219,675  
Outstanding warrants 9,079,348 10,500,000  
Outstanding options   824,000  
Common shares excluded from diluted earnings per share 4,539,674 5,250,000  
Income tax benefit, percentage 50.00%    
Hubei Shengrong [Member]      
Summary of Significant Accounting Policies (Textual)      
Customer deposits, description The Company requires 3% to 10% advanced deposits from the customers upon the signing of the sales contracts.    
Wuhan Host [Member]      
Summary of Significant Accounting Policies (Textual)      
Customer deposits, description The Company requires 95% to 100% advanced deposits from the customers upon signing of the sales contracts.    
Impairment Units     3,420,000
Impairment of long lived assets     4,890,000
Shengrong WFOE [Member]      
Summary of Significant Accounting Policies (Textual)      
Impairment Units     3,420,000
Impairment of long lived assets     $ 4,890,000
v3.20.2
Business Combination and Restructuring (Details) - USD ($)
6 Months Ended
Jun. 30, 2020
Dec. 27, 2018
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]    
Cash   $ 47,994
Other current assets   31,793,810
Plant and equipment   203,992
Total asset   48,389,711
Total liabilities   (19,921,700)
Net asset acquired   $ 28,468,011
Wuhan HOST [Member]    
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]    
Total consideration at fair value $ 11,200,000  
Cash 276,626  
Other current assets 6,763,767  
Plant and equipment 6,499,268  
Other noncurrent assets 2,139,987  
Goodwill 7,544,008  
Total asset 23,223,656  
Total liabilities (12,023,656)  
Net asset acquired 11,200,000  
Rong Hai [Member]    
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]    
Total consideration at fair value 9,260,000  
Cash 717,056  
Other current assets 5,980,230  
Plant and equipment 28,875  
Other noncurrent assets 116,655  
Goodwill 7,307,470  
Total asset 14,150,286  
Total liabilities (4,890,286)  
Net asset acquired 9,260,000  
Wuge [Member]    
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]    
Total consideration at fair value 7,300,000  
Cash 228,788  
Other current assets 20,834  
Plant and equipment 6,024  
Other noncurrent assets 8,097  
Goodwill 7,343,209  
Total asset 7,606,952  
Total liabilities (406,952)  
Net asset acquired $ 7,200,000  
v3.20.2
Business Combination and Restructuring (Details 1)
Dec. 27, 2018
USD ($)
CURRENT ASSETS  
Cash and cash equivalents $ 47,994
Accounts receivable, net 9,410,436
Accounts receivable - related party, net 761,794
Other receivables 48,718
Other receivable - related party 2,158
Inventories 5,332,990
Prepayments 31,793,810
Total current assets 47,397,900
PLANT AND EQUIPMENT, NET 203,992
OTHER ASSETS  
Other assets 7,269
Deferred tax assets 780,550
Total other assets 787,819
Total assets 48,389,711
CURRENT LIABILITIES  
Short term loans - bank 2,180,708
Accounts payable 95,854
Other payables and accrued liabilities 156,498
Other payables - related parties 507,183
Customer deposits 347,853
Taxes payable 16,602,841
Total current liabilities 19,890,937
OTHER LIABILITIES  
Deferred rent liabilities 30,763
Total other liabilities 30,763
Total liabilities 19,921,700
Total net assets 28,468,011
Total consideration (30,362,135)
Currency translation adjustment 900,281
Total addition to paid-in-capital $ 993,843
v3.20.2
Business Combination and Restructuring (Details Textual) - USD ($)
1 Months Ended 6 Months Ended
Apr. 16, 2018
Apr. 11, 2018
Nov. 30, 2018
Jun. 30, 2020
Jun. 30, 2019
Jan. 03, 2020
Dec. 31, 2019
Dec. 27, 2018
Aug. 16, 2018
Apr. 02, 2018
Business Combination and Restructuring (Textual)                    
Common stock par value       $ 0.0001     $ 0.0001      
Goodwill acquisition       $ 7,140,304            
Payments of cash consideration       470,576          
Rong Hai [Member]                    
Business Combination and Restructuring (Textual)                    
Total Consideration       9,260,000            
Goodwill acquisition       $ 7,300,000            
Wuhan HOST [Member]                    
Business Combination and Restructuring (Textual)                    
Business combination, description The Purchasers and the Sellers entered into a supplement agreement ("Supplement Agreement"), which modified the terms of consideration set forth in the Purchase Agreement entered between Purchasers and Sellers on April 11, 2018. Pursuant to the Supplement Agreement, in exchange for the transfer of 100% equity interest of Wuhan Host, Purchasers shall pay a total consideration of $11.2 million ("Total Consideration"), of which $6.5 million or RMB equivalent shall be paid in cash ("Cash Consideration") and $4.7 million shall be paid in shares of common stock ("Common Stock"), par value $0.0001, of CCNC ("Share Consideration"). In exchange for the transfer of 100% equity interest of Wuhan Host, Purchasers shall pay a total consideration of $11.2 million ("Total Consideration"), of which $ 5.2 million or RMB equivalent shall be paid in cash ("Cash Consideration") and $6.0 million shall be paid in shares of common stock ("Common Stock"), par value $0.0001, of CCNC ("Share Consideration"). The Parties agree the Share Consideration shall be an aggregate of 1,293,104 shares of common stock of which is based on the closing price of US$4.64 on March 27, 2018. The Share Consideration shall be issued in three equal installments, which shall be subject to lock-up of 12, 24 and 36 months, respectively. The Purchase Agreement contains representations, warranties and covenants customary for acquisitions of this type. The Acquisition closed on May 1, 2018.   The Company, Shengrong WFOE and Hubei Shengrong, both of which are the Company's indirectly owned subsidiaries (collectively "Purchasers"), entered into a Share Purchase Agreement (the "Purchase Agreement") with Long Liao, Chunyong Zheng, Wuhan Modern Industrial Technology Research Institute, and Hubei Zhonggong Materials Group Co., Ltd. (collectively "Sellers" ) and Wuhan HOST Coating Materials Co., Ltd. ("Wuhan HOST"), a company incorporated in China engaging in the research, development, production and sale of coating materials. Pursuant to the Purchase Agreement, the Purchasers acquired all of the outstanding equity interests of Wuhan Host (the "Acquisition"). In exchange for the transfer of 100% equity interest of Wuhan Host, Purchasers shall pay a total consideration of $11.2 million ("Total Consideration"), of which $ 5.2 million or RMB equivalent shall be paid in cash ("Cash Consideration") and $6.0 million shall be paid in shares of common stock ("Common Stock"), par value $0.0001, of CCNC ("Share Consideration"). The Parties agree the Share Consideration shall be an aggregate of 1,293,104 shares of common stock of which is based on the closing price of US$4.64 on March 27, 2018. The Share Consideration shall be issued in three equal installments, which shall be subject to lock-up of 12, 24 and 36 months, respectively. The Purchase Agreement contains representations, warranties and covenants customary for acquisitions of this type. The Acquisition closed on May 1, 2018.            
Total Consideration       $ 11,200,000            
Goodwill acquisition       7,500,000            
Payments of cash consideration       6,500,000            
Wuhan HOST [Member] | Board of Directors [Member]                    
Business Combination and Restructuring (Textual)                    
Goodwill impairment loss       3,420,000            
Tjcomex Bvi [Member]                    
Business Combination and Restructuring (Textual)                    
Net assets                   $ 16,598
Wuge [Member]                    
Business Combination and Restructuring (Textual)                    
Goodwill impairment loss       7,500,000            
Total Consideration       $ 7,300,000            
Purchase Agreement [Member]                    
Business Combination and Restructuring (Textual)                    
Aggregate shares issued     4,630,000     4,000,000        
Goodwill acquisition     $ 7,300,000              
Percentage of service fee           100.00%        
Equity Agreement [Member]                    
Business Combination and Restructuring (Textual)                    
Forfeit and cancellation of shares               8,523,320    
Stock price per share               $ 3.56    
Percentage of equity interest               100.00%    
Supplement Agreement [Member]                    
Business Combination and Restructuring (Textual)                    
Cash consideration                 $ 4,700,000  
Common stock par value                 $ 0.0001  
v3.20.2
Variable Interest Entity (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2020
Dec. 31, 2019
Short-term loan $ 437,884   $ 437,884    
Accounts payable 920,480   920,480     344,108
Other payables and accrued liabilities 2,585,341   2,585,341     4,121,862
Other payables - related party 641,570   641,570   $ 641,570 1,336,902
Tax payables 3,555   3,555     202
Total current liabilities 5,691,047   5,691,047     16,184,920
Total liabilities 5,751,728   5,751,728     16,485,597
Operating revenues 1,189,205 $ 7,679,798 6,172,177 $ 12,628,777    
Gross profit 137,058 211,967 319,486 295,773    
Income from operations (175,596) $ (173,750) (449,800) $ (561,904)    
Variable Interest Entities [Member]            
Current assets 9,201,684   9,201,684     8,687,451
Property, plants and equipment, Intangible Assets 1,165,027   1,165,027     19,057
Other noncurrent assets 89,136   89,136     127,782
Goodwill 14,329,042   14,329,042     7,289,454
Total assets 24,786,889   24,786,889     16,123,744
Current liabilities 8,264,556   8,264,556     6,067,264
Non-current liabilities 60,681   60,681     61,580
Total liabilities 8,325,237   8,325,237     6,128,844
Net assets 16,459,652   16,459,652     9,994,900
Short-term loan 437,884   437,884      
Accounts payable 880,713   880,713     619,329
Other payables and accrued liabilities 74,154   74,154     301,230
Other payables - related party 5,766,063   5,766,063     5,082,068
Tax payables 3,525   3,525     202
Customer Advances 1,040,124   1,040,124     3,426
Lease liabilities 62,093   62,093     61,009
Total current liabilities 8,264,556   8,264,556     6,067,264
Lease liabilities - noncurrent 60,681   60,681     61,580
Total liabilities $ 8,325,237   8,325,237     $ 6,128,844
Operating revenues     6,491,663      
Gross profit     326,254      
Income from operations     (337,537)      
Net income     $ (387,648)      
v3.20.2
Accounts Receivable, Net (Details) - USD ($)
Jun. 30, 2020
Dec. 31, 2019
Receivables [Abstract]    
Accounts receivable $ 1,153,142 $ 2,221,319
Less: Allowance for doubtful accounts (113,370) (24,055)
Total accounts receivable, net $ 1,039,772 $ 2,197,264
v3.20.2
Accounts Receivable, Net (Details 1) - USD ($)
6 Months Ended 12 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Receivables [Abstract]    
Beginning balance $ 24,055 $ 732,846
Beginning balance from Wuhan HOST 260,764
Beginning balance from Rong Hai 24,055 472,082
Addition 90,308
Recovery (708,791)
Exchange rate effect (993)
Ending balance $ 113,370 $ 24,055
v3.20.2
Inventories (Details) - USD ($)
Jun. 30, 2020
Dec. 31, 2019
Inventory Disclosure [Abstract]    
Raw materials
Work in progress
Finished Goods 1,248,906 1,248,906
Total inventories $ 1,248,906 $ 1,197,065
v3.20.2
Plant and Equipment, Net (Details) - USD ($)
Jun. 30, 2020
Dec. 31, 2019
Property, Plant and Equipment [Line Items]    
Subtotal $ 314,495 $ 248,745
Less: accumulated depreciation (234,807) (229,688)
Total 79,688 19,057
Office equipment and furniture [Member]    
Property, Plant and Equipment [Line Items]    
Subtotal 62,972 39,688
Automobile [Member]    
Property, Plant and Equipment [Line Items]    
Subtotal $ 251,523 $ 209,057
v3.20.2
Plant and Equipment, Net (Details Textual) - USD ($)
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Plant and Equipment, Net (Textual)    
Depreciation and amortization expense $ 8,403 $ 198,570
v3.20.2
Intangible Assets, Net (Details) - USD ($)
Jun. 30, 2020
Dec. 31, 2019
Less: accumulated amortization $ (46)
Net intangible assets 1,130,528
Development of technology [Member]    
Intangible assets, gross 1,130,023
Software [Member]    
Intangible assets, gross $ 551
v3.20.2
Intangible Assets, Net (Details Textual) - USD ($)
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Intangible assets, net (Textual)    
Amortization expense $ 46 $ 108,082
v3.20.2
Goodwill (Details)
6 Months Ended
Jun. 30, 2020
USD ($)
Beginning Balance $ 7,289,454
Goodwill impairments 7,140,304
Disposal of the company (3,424,390)
Foreign currency translation adjustment (100,716)
Ending Balance 14,329,042
Wuhan HOST [Member]  
Beginning Balance 3,424,390
Disposal of the company (3,424,390)
Foreign currency translation adjustment
Ending Balance
Rong Hai [Member]  
Beginning Balance 7,289,454
Foreign currency translation adjustment (106,364)
Ending Balance 7,183,090
Wuge [Member]  
Beginning Balance
Goodwill impairments 7,140,304
Foreign currency translation adjustment 5,648
Ending Balance $ 7,145,952
v3.20.2
Related Party Balances and Transactions (Details) - USD ($)
6 Months Ended
Jun. 30, 2020
Dec. 31, 2020
Dec. 31, 2019
Related Party Transaction [Line Items]      
Other payables - related parties $ 641,570 $ 641,570 $ 1,336,902
Chuanliu Ni [Member]      
Related Party Transaction [Line Items]      
Name of related party Chuanliu Ni    
Relationship Chief Executive Officer and director of a former subsidiary    
Other payables - related parties $ 325,907   325,907
Zhong Hui Holding Limited [Member]      
Related Party Transaction [Line Items]      
Name of related party Zhong Hui Holding Limited    
Relationship Shareholder of the Company    
Other payables - related parties $ 140,500   140,500
Chengdu Yuan Code Chain Technology Co. LTD [Member]      
Related Party Transaction [Line Items]      
Name of related party Chengdu Yuan Code Chain Technology Co. Ltd    
Relationship A company controlled by former shareholder of the Company    
Other payables - related parties $ 103,719  
Qihai Wang [Member]      
Related Party Transaction [Line Items]      
Name of related party Qihai Wang    
Relationship Shareholder of the Company    
Other payables - related parties $ 71,444   166,673
Jiangsu Longying Education Technology Co. LTD [Member]      
Related Party Transaction [Line Items]      
Name of related party Jiangsu Longying Education Technology Co. Ltd    
Relationship A company in which shareholder hold shares    
Other payables - related parties   422,868
Jiangsu Longhai Film Culture Media Co. Ltd [Member]      
Related Party Transaction [Line Items]      
Name of related party Jiangsu Longhai Film Culture Media Co. Ltd    
Relationship Under common control of shareholder of the Company    
Other payables - related parties   $ 280,954
v3.20.2
Debt (Details) - USD ($)
6 Months Ended 12 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Bank of Jiangsu [Member]    
Short-term Debt [Line Items]    
Short term loans Loan from Bank of Jiangsu Loan from Bank of Jiangsu
Maturities March 25, 2021 March 25, 2021
Weighted average interest rate 4.50% 4.50%
Collateral/Guarantee Guaranteed by Qihai Wang’s personal property Guaranteed by Qihai Wang’s personal property
Short term loan due to bank $ 247,193
Bank of Jiangsu One [Member]    
Short-term Debt [Line Items]    
Short term loans Loan from Bank of Jiangsu Loan from Bank of Jiangsu
Maturities January 12, 2021 January 12, 2021
Weighted average interest rate 5.22% 5.22%
Collateral/Guarantee Guaranteed by Qihai Wang’s personal property Guaranteed by Qihai Wang’s personal property
Short term loan due to bank $ 190,691
v3.20.2
Debt (Details Textual) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Debt (Textual)        
Interest expense $ 9,473 $ 9,764 $ 11,482 $ 17,606
v3.20.2
Taxes (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Income Tax Disclosure [Abstract]        
Current $ 1,810 $ 234,473 $ 16,419 $ 255,301
Deferred (243) (38,229) 33,692 (8,229)
Total provision for income taxes $ 1,567 $ (5,279) $ 50,111 $ 42,239
v3.20.2
Taxes (Details 1) - USD ($)
Jun. 30, 2020
Dec. 31, 2019
Income Tax Disclosure [Abstract]    
Net operating losses carried forward - U.S. $ 19,106 $ 17,309
Net operating losses carried forward - PRC
Bad debt allowance 3,531 37,532
Valuation allowance (19,106) (17,309)
Deferred tax assets, net $ 3,531 $ 37,532
v3.20.2
Taxes (Details 2) - USD ($)
Jun. 30, 2020
Dec. 31, 2019
Income Tax Disclosure [Abstract]    
VAT taxes payable $ 1,550
Income taxes payable 1,900
Other taxes payable 105 202
Total $ 3,555 $ 202
v3.20.2
Taxes (Details Textual) - USD ($)
1 Months Ended 6 Months Ended
Apr. 30, 2019
May 30, 2018
Dec. 22, 2017
Jun. 30, 2020
Maximum [Member]        
Taxes (Textual)        
Value added tax 13.00% 16.00%   17.00%
Minimum [Member]        
Taxes (Textual)        
Value added tax 6.00% 6.00%   6.00%
UNITED STATES        
Taxes (Textual)        
Net operating loss       $ 90,000
Net operating loss carry forward       $ 19,000
Deferred tax asset valuation allowance, description       The Company has provided a 100% valuation allowance on the deferred tax asset to reduce the asset to zero.
Corporate tax rate, description     The "Tax Cuts and Jobs Act" ("The 2017 Tax Act") was enacted in the United States. Under the provisions of the Act, the U.S. corporate tax rate decreased from 34% to 21%. The 2017 Tax Act imposed a global intangible low-taxed income tax ("GILTI"), which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits. The Company determined that there are no impact of GILTI for the six months ended June 30, 2020 and 2019, which the Company believes that it will be imposed a minimum tax rate of 10.5% and to the extent foreign tax credits are available to reduce its US corporate tax, which may result in no additional US federal income tax being due.  
Hong Kong [Member]        
Taxes (Textual)        
Foreign tax rate, percentage       16.50%
China [Member]        
Taxes (Textual)        
Foreign tax rate, percentage       25.00%
v3.20.2
Leases (Details)
Jun. 30, 2020
USD ($)
Twelve months ended June 30,  
2020 $ 124,377
2021 99,501
2022 76,957
2023 23,900
Total lease payments 324,735
Less: interest (201,961)
Present value of lease liabilities $ 122,774
v3.20.2
Leases (Details Textual) - USD ($)
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Leases (Textual)          
Lease liabilities         $ 298,000
Description office lease agreement         The Company had an office lease agreement with a 5-year lease term starting in December 2016 until December 2021 and another office lease agreement with a 5-year lease term starting in January 2018 until January 2023.
Effective interest rate         4.75%
Weighted average remaining lease term         3 years 2 months 19 days
Rent expenses $ 7,966 $ 24,941 $ 16,047 $ 51,948  
Lease liabilities with right-of-use assets         $ 298,000
v3.20.2
Concentration of Risk (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Hong Kong [Member]          
Concentration Risk [Line Items]          
Deposit for concentration risk $ 0   $ 0   $ 354
PRC [Member]          
Concentration Risk [Line Items]          
Deposit for concentration risk $ 1,939,520   $ 1,939,520   $ 4,003,554
Revenues [Member] | Customer One [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk 98.30% 22.00% 99.30% 15.00%  
Revenues [Member] | Customer Two [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk   21.80%   14.30%  
Revenues [Member] | Customer Three [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk   20.00%   14.10%  
Revenues [Member] | Customer Four [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk       12.90%  
Customer Advances [Member] | Customer One [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     100.00% 20.70%  
Customer Advances [Member] | Customer Two [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk       17.70%  
Customer Advances [Member] | Customer Three [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk       17.10%  
Customer Advances [Member] | Customer Four [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk       15.50%  
Accounts Receivable [Member] | Customer One [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     50.70% 42.10%  
Accounts Receivable [Member] | Customer Two [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     45.40% 15.70%  
Prepayments [Member] | Suppliers One [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     58.90% 39.60%  
Prepayments [Member] | Suppliers Two [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     19.04% 18.70%  
Prepayments [Member] | Suppliers Three [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     10.60% 12.40%  
Accounts Payable [Member] | Suppliers One [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     33.40% 28.10%  
Accounts Payable [Member] | Suppliers Two [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     30.90% 21.50%  
Accounts Payable [Member] | Suppliers Three [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     17.50% 16.70%  
Accounts Payable [Member] | Suppliers Four [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     15.20%    
Total Purchases [Member] | Suppliers One [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk 87.10% 26.70% 30.10% 32.50%  
Total Purchases [Member] | Suppliers Two [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk   13.20% 28.70% 11.90%  
Total Purchases [Member] | Suppliers Three [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     18.20% 11.10%  
Total Purchases [Member] | Suppliers Four [Member]          
Concentration Risk [Line Items]          
Percentage of concentration risk     12.70%    
v3.20.2
Equity (Details) - Warrant [Member]
6 Months Ended
Jun. 30, 2020
$ / shares
shares
Warrants Outstanding  
Warrants Outstanding, December 31, 2019 9,079,348
Granted/Acquired
Forfeited
Exercised
Warrants Outstanding, March 31, 2020 9,079,348
Exercisable Into Number of Shares  
Exercisable Into Number of Shares, December 31, 2019 4,539,674
Granted/Acquired
Forfeited
Exercised
Exercisable Into Number of Shares, March 31, 2020 4,539,674
Weighted Average Exercise Price  
Weighted Average Exercise Price, December 31, 2019 | $ / shares $ 5.75
Granted/Acquired | $ / shares
Forfeited | $ / shares
Exercised | $ / shares
Weighted Average Exercise Price, March 31, 2020 | $ / shares $ 5.75
Average Remaining Contractual Life  
Average Remaining Contractual Life, December 31, 2019 3 years 1 month 20 days
Average Remaining Contractual Life, March 31, 2020 2 years 7 months 21 days
v3.20.2
Equity (Details 1) - Employee Stock Option [Member]
6 Months Ended
Jun. 30, 2020
$ / shares
shares
Options Outstanding  
Options Outstanding, December 31, 2019 | shares 824,000
Granted/Acquired | shares
Forfeited | shares
Exercised | shares
Options Outstanding, March 31, 2020 | shares 824,000
Weighted Average Exercise Price  
Weighted Average Exercise Price, December 31, 2019 | $ / shares $ 5.00
Granted/Acquired | $ / shares
Forfeited | $ / shares
Exercised | $ / shares
Weighted Average Exercise Price, March 31, 2020 | $ / shares $ 5.00
Average Remaining Contractual Life  
Average Remaining Contractual Life, December 31, 2019 4 years 1 month 27 days
Average Remaining Contractual Life, March 31, 2020 2 years 7 months 21 days
v3.20.2
Equity (Details Textual) - USD ($)
1 Months Ended 6 Months Ended
Apr. 04, 2019
Mar. 15, 2019
Mar. 11, 2019
Feb. 20, 2019
Feb. 12, 2019
Jan. 03, 2020
Dec. 23, 2019
Nov. 20, 2019
Jun. 23, 2018
Aug. 31, 2016
Jul. 29, 2015
Jun. 30, 2020
Dec. 31, 2019
Jun. 30, 2019
Equity (Textual)                            
Common stock, par value                       $ 0.0001 $ 0.0001  
Right to purchase shares of common stock                       9,079,348   10,500,000
Shareholder stock split, description                       On June 1, 2018, the Company's shareholder approved a 2 for 1 stock split of the Company's common stock at the Annual Meeting of Shareholders.    
Share Purchase Agreement [Member]                            
Equity (Textual)                            
Aggregate exercise price of stock option           $ 4,000,000                
Share purchase agreement, description           The Company entered into a Share Purchase Agreement with Wuge and all the shareholders of Wuge ("Wuge Shareholders"). Wuge Shareholders are Wei Xu, Bibo Lin, Jiangsu Lingkong Network Joint Stock Co., Ltd., which is controlled by Wei Xu, and Anhui Shuziren Network Technology Co., Ltd., which is controlled by Wei Xu. Pursuant to the SPA, TMSR shall issue an aggregate of 4,000,000 shares of TMSR's common stock ("TMSR Shares") to the Wuge Shareholders, in exchange for Wuge Shareholders' agreement to enter into, and their agreement to cause Wuge to enter into, certain VIE agreements ("VIE Agreements") with Tongrong Technology (Jiangsu) Co., Ltd. ("WFOE"), the Company's indirectly owned subsidiary, through which WFOE shall have the right to control, manage and operate Wuge in return for a service fee equal to 100% of Wuge's net income ("Acquisition"). On January 24, 2020, the Company completed the Acquisition and issued the Shares to the Wuge Shareholders.                
Restricted Stock [Member]                            
Equity (Textual)                            
Description of granted board of restricted common stock   the Board granted an aggregate of 142,530 shares of restricted common stock, with a fair value of $290,761, determined using the closing price of $2.04 on March 15, 2019, to repay the debt the Company owed to one unrelated third party. As the carrying value of the debt equaled to the fair value of the 142,530 common shares at $2.04 per share, no gain or loss were recognized upon this debt settlement. The Board granted an aggregate of 131,330 shares of restricted common stock, with a fair value of $261,347, determined using the closing price of $1.99 on March 11, 2019, to repay the debt the Company owed to two unrelated third parties. As the carrying value of the debt equaled to the fair value of the 131,330 common shares at $1.99 per share, no gain or loss were recognized upon this debt settlement.                      
Shengrong WFOE, Tongrong WFOE, Wuge, Wuhan Host and Rong Hai [Member]                            
Equity (Textual)                            
Retained earnings for statutory reserves                       $ 0 $ 0  
Restricted net assets                       $ 2,123,588 $ (7,263,520)  
Common Stock [Member]                            
Equity (Textual)                            
Common stock, par value $ 0.0001           $ 0.0001   $ 0.0001          
Share price $ 2.00           $ 1.00              
Common stock aggregate to issued                 26,693          
Common stock purchase price                 $ 5.00          
Aggregate offering price                 $ 133,335          
Common stock shares, issued 1,492,000           3,692,859              
Net proceeds from offering costs $ 2,900,000           $ 3,660,000              
Company wrote off common shares               947,037            
Warrants And Options [Member]                            
Equity (Textual)                            
Common stock sold                     10,000,000      
Common stock sale price                     $ 5.00      
Common stock, par value                     $ 0.0001      
Common stock rights, description                     Each warrant will entitle the holder to purchase one-half of one share of common stock at an exercise price of $2.88 per half share ($5.75 per whole share).      
Warrant redemption, description                     The warrants will be redeemable by the Company at a price of $0.01 per warrant upon 30 days prior written notice after the warrants become exercisable, only in the event that the last sale price of the common stock equals or exceeds $12.00 per share for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which notice of redemption is given.      
Private placement for an aggregate price                     $ 2,500,000      
Purchase of private placement for an aggregate price offering                     500,000      
Share price                     $ 5.00      
Additional compensation                     $ 100      
Stock option exercisable, shares                     800,000      
Aggregate exercise price of stock option                     $ 800,000      
Right to purchase shares of common stock                     800,000      
Warrants to purchase per share                     $ 5.75      
Aggregate maximum amount of warrants                     400,000      
Aggregate maximum amount                     $ 6,300,000      
Warrant [Member]                            
Equity (Textual)                            
Stock option exercisable, shares                       4,539,674 4,539,674  
Converted warrants shares       415,355 294,971                  
Common stock using cashless exercises       54,826 52,077                  
Director [Member]                            
Equity (Textual)                            
Share price                   $ 4.90        
Shares acquired by two new directors                   12,000        
v3.20.2
Contingencies (Details)
1 Months Ended
Feb. 27, 2013
Commitments and Contingencies (Textual)  
Land purchase contract, description Wuhan HOST entered into a contract to purchase land use rights for a parcel of land in E Zhou City, Hubei, China, for $1,212,478.  The Company has paid to the local government $781,349, a balance of $431,129 has not been paid; however, the government has already issued to the Company all the necessary certificates transferring title of the land use rights for the parcel of land to the Company, and has not taken action to collect any remaining unpaid balance.  If the government determines that it wishes to collect an unpaid balance, the total cost to the Company would be $431,129.
v3.20.2
Segment Reporting (Details) - USD ($)
Jun. 30, 2020
Dec. 31, 2019
Total Assets $ 28,858,309 $ 22,447,589
Hubei Shengrong and Shengrong WFOE [Member]    
Total Assets
Wuhan Host [Member]    
Total Assets
Rong Hai and Tongrong WFOE [Member]    
Total Assets 17,710,457 17,407,872
Wuge [Member]    
Total Assets 2,198,636
CCNC, China Sunlong, Shengrong BVI And Shengrong HK [Member]    
Total Assets $ 8,949,216 $ 71,521
v3.20.2
Discontinued Operations (Details) - USD ($)
Jun. 30, 2020
Dec. 31, 2019
CURRENT ASSETS    
Cash and cash equivalents $ 1,544,177
Total current assets 1,544,177
PLANT AND EQUIPMENT, NET
OTHER ASSETS    
Goodwill 3,424,390
Intangible assets, net
Deferred tax assets
Total other assets 3,424,390
Total assets 4,968,567
CURRENT LIABILITIES    
Accounts payable 2,288,195
Other payables and accrued liabilities 1,332,430
Other payables - related parties 3,108,908
Customer deposits 3,019,264
Lease liabilities - current 98,582
Taxes payable 326,687
Total current liabilities 10,174,066
OTHER LIABILITIES    
Third party loan - noncurrent 143,345
Lease liabilities - noncurrent 95,752
Total other liabilities 239,097
Total liabilities 10,413,163
Net Assets $ (5,444,596)
v3.20.2
Discontinued Operations (Details 1) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
REVENUES        
Equipment and systems     $ 2,971,542
Coating and fuel materials     4,163,919
Trading and others    
TOTAL REVENUES     7,135,461
COST OF REVENUES        
Equipment and systems     1,208,838
Coating and fuel materials     3,665,496
Trading and others    
TOTAL COST OF REVENUES     4,874,334
GROSS PROFIT     2,261,127
OPERATING EXPENSES (INCOME)        
Selling, general and administrative     (495,733) 843,129
Provision for (recovery of) doubtful accounts    
TOTAL OPERATING EXPENSES     (495,733) 843,129
INCOME FROM OPERATIONS     495,733 1,417,998
OTHER INCOME (EXPENSE)        
Interest income     869
Other income (expense), net     36,275
Total other income (expense), net     37,144
INCOME (LOSS) BEFORE INCOME TAXES     495,733 1,455,142
PROVISION FOR INCOME TAXES     204,833
NET (LOSS) INCOME $ (4,446) $ 1,537,297 $ 495,733 $ 1,250,309
v3.20.2
Subsequent Events (Details) - Subsequent Event [Member]
Aug. 11, 2020
USD ($)
$ / shares
shares
Subsequent events (Textual)  
Common shares issued | shares 1,674,428
Purchase price per share | $ / shares $ 1.50
Gross proceeds | $ $ 2,510,000