NOTE 16 – DiSPOSAL OF SUBSIDIARY

Background

In July 2022, the Company, through its wholly-owned subsidiary Jiangsu Huanya Jieneng New Energy Co., Ltd. (‘JHJ’), acquired a 49% equity interest in Sichuan Hongzuo Shuya Energy Limited (‘Shuya’), an entity engaged in pipeline natural gas and compressed natural gas trading activities in China.

On January 1, 2023, JHJ entered into a Consistent Action Agreement with other shareholders of Shuya, which resulted in the Company obtaining control over Shuya. Accordingly, the Company began consolidating Shuya as a variable interest entity effective January 1, 2023 in accordance with ASC 810.

On January 1, 2024, the Consistent Action Agreement was terminated. As a result, the Company lost control over Shuya and deconsolidated the entity effective January 1, 2024. The Company recognized a loss on deconsolidation of $344,889 during the year ended December 31, 2024 and retained its 49% equity investment in Shuya, which was accounted for under the equity method of accounting pursuant to ASC 323.

Disposal Transaction

On December 12, 2025, the Company completed the disposal of its entire 49% equity interest in Shuya through equity transfer agreements with third parties for total consideration consisting of:

●Cash consideration of approximately $721,929 consisting of which is included in cash flows from investing activities in the accompanying consolidated statement of cash flows.

Gain on Disposal

The Company recognized a gain on disposal of $318,426 during the year ended December 31, 2025, which is presented in ‘Investment from Shuya’ in the accompanying consolidated statement of operations. The loss was calculated as the following table:

SCHEDULE OF FAIR VALUE OF CONSIDERATION RECEIVED

The fair value of consideration received consisted primarily of cash proceeds and was measured based on the contractual cash amounts received at closing. Accordingly, no significant Level 3 valuation inputs were required under ASC 820.

Discontinued Operations Assessment

The Company evaluated whether the disposal of Shuya met the criteria for presentation as a discontinued operation under ASC 205-20 and concluded that it did not represent a strategic shift that has, or will have, a major effect on the Company’s operations or financial results. Although the Company’s China operations generated approximately $1.17 million of revenue during 2025, those operating activities and related revenues were generated by JHJ, which remains part of the Company’s continuing operations. Shuya was not the primary operating entity generating such revenues, and the Company did not receive dividend distributions from Shuya. The disposal did not result in the exit of a major business line, customer base, geographic market, or strategic initiative and did not alter the Company’s core business strategy. Accordingly, management concluded that the disposal of Shuya does not qualify for discontinued operations presentation under ASC 205-20.

Results of Operations

For the period from January 1, 2025 through December 12, 2025, the Company recognized equity in net income of Shuya totaling $67,734, representing its 49% share of Shuya’s net income of approximately $138,232 for the period.

Additionally, the Company received actual payment of $201,410. Under the equity method, since the Company has already recognized its share of Shuya’s earnings, these investment receipts should be treated as a reduction of the carrying amount of the investment in Shuya.

Cash Flow Impact

The disposal resulted in cash proceeds of $721,929, which is included in cash flows from investing activities in the accompanying consolidated statement of cash flows.

Strategic Rationale

The Company disposed of its investment in Shuya as part of a strategic shift to focus on its core clean energy technology and distributed energy project development activities in North America and Europe, and to exit natural gas trading operations in China.