Principles of consolidation

The Company's unaudited condensed consolidated financial statements include the financial statements of its wholly-owned and majority owned subsidiaries, as well as the financial statements of the Huayang Companies, including Dyeing, which conducts the Company's continuing operations, and Heavy Industries, which operated discontinued operations. All significant intercompany accounts and transactions have been eliminated in consolidation.

On December 30, 2016, the Company sold and transferred its 100% interest in Fulland Wind to an unrelated party. Additionally, the Company's management decided to discontinue its petroleum and chemical equipment segment due to significant declines in revenues and the loss of its major customers. As such, petroleum and chemical segment's assets and liabilities have been classified on the consolidated balance sheets as assets and liabilities of discontinued operations as of September 30, 2019 and December 31, 2018. The operating results of the petroleum and chemical segment have been classified as discontinued operations in our consolidated statements of operations for all periods presented. Unless otherwise indicated, all disclosures and amounts in the notes to the consolidated financial statements are related to the Company's continuing operations.

Pursuant to Accounting Standards Codification ("ASC") Topic 810, the Huayang Companies are considered variable interest entities ("VIE"), and the Company is the primary beneficiary. The Company's relationships with the Huayang Companies and their shareholders are governed by a series of contractual arrangements between Green Power, the Company's wholly foreign-owned enterprise in the PRC, and each of the Huayang Companies, which are the operating companies of the Company in the PRC. Under PRC laws, each of Green Power, Dyeing and Heavy Industries is an independent legal entity and none of them is exposed to liabilities incurred by the other parties. The contractual arrangements constitute valid and binding obligations of the parties of such agreements. Each of the contractual arrangements and the rights and obligations of the parties thereto are enforceable and valid in accordance with the laws of the PRC.

Because of the contractual arrangements, the Company has a pecuniary interest in the Huayang Companies that requires the Company to consolidate the Huayang Companies in its financial statements as if they are wholly-owned subsidiaries of the Company.

Cash and cash equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. The Company maintains with various financial institutions mainly in the PRC, Hong Kong and the U.S. As of September 30, 2019 and December 31, 2018, cash balances held in PRC and Hong Kong banks of $92,864 and $774,316, respectively, are uninsured.

Concentrations of credit risk

The Company's operations are carried out in the PRC and Hong Kong. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC and Hong Kong, and by the general state of the economies in the PRC and Hong Kong. The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. Substantially all of the Company's cash is maintained with state-owned banks within the PRC and Hong Kong, and none of these deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts. A significant portion of the Company's sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas; however, concentrations of credit risk with respect to accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.

Inventories

Inventories, consisting of raw materials, work-in-process and finished goods related to the Company's products are stated at the lower of cost or market utilizing the weighted average method. A reserve is established when management determines that certain inventories may not be saleable. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the market value. These reserves are recorded based on estimates. The Company recorded an inventory reserve of $4,643,524 and $1,212,706 as of September 30, 2019 and December 31, 2018, respectively.

Equity method investment

Investments in which the Company has the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in the long-term assets on the consolidated balance sheets. Under this method of accounting, the Company's share of the net earnings or losses of the investee is presented under other income (expense) on the consolidated statements of operations. The Company evaluates its equity method investment whenever events or changes in circumstance indicate that the carrying amounts of such investment may be impaired. A loss would be recorded if a decline in the value of an equity method investment is determined to be other than temporary (see Note 7).

Employee benefits

The Company's operations and employees are all located in the PRC and Hong Kong. The Company makes mandatory contributions to the PRC and Hong Kong governments' health, retirement benefit and unemployment funds in accordance with the relevant Chinese social security laws and law of Mandatory Provident Fund in Hong Kong. The costs of these payments are charged to the same accounts as the related salary costs in the same period as the related salary costs incurred. Employee benefit costs totaled $180,256 and $196,299 for the nine months ended September 30, 2019 and 2018, respectively.

Loss per share of common stock

Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company did not have any common stock equivalents or potentially dilutive common stock outstanding during the three and nine months ended September 30, 2019 and 2018. In a period in which the Company has a net loss, all potentially dilutive securities are excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact.

The following table presents a reconciliation of basic and diluted net loss per share:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss for basic and diluted attributable to common shareholders	$	(1,068,228	)	$	(18,196,461	)	$	(28,102,387	)	$	(28,779,651	)
From continuing operations		(1,068,228	)		(18,196,076	)		(28,102,387	)		(28,796,137	)
From discontinued operations		-			(385	)		-			16,486

Weighted average common stock outstanding – basic and diluted		9,278,106			7,100,416			8,866,755			3,598,265

Net loss per share of common stock
From continuing operations – basic and diluted	$	(0.12	)	$	(2.56	)	$	(3.17	)	$	(8.00	)
From discontinued operations – basic and diluted		-			(0.00	)		-			0.01
Net loss per common share – basic and diluted	$	(0.12	)	$	(2.56	)	$	(3.17	)	$	(7.99	)

Reclassification

Certain reclassifications have been made in prior period's consolidated financial statements to conform to the current year's financial presentation. The reclassifications have no effect on previously reported net loss.