| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). Principles
of consolidation The consolidated
financial statements include the accounts of the Company and its wholly owned subsidiaries. All transactions and balances among
the Company and its subsidiaries have been eliminated upon consolidation. Use
of estimates In preparing
the consolidated financial statements in conformity with U.S. GAAP, management makes estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of
the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not
limited to, the valuation of cryptocurrencies and other current assets, useful lives of property and equipment, the recoverability
of long-lived assets, provision necessary for contingent liabilities and realization of deferred tax assets. Actual results could
differ from those estimates. Fair
value of financial instruments ASC 825-10
requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to
maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure
fair value are as follows:
● 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, quoted market prices
for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable and inputs
derived from or corroborated by observable market data.
● Level 3 - inputs
to the valuation methodology are unobservable. Fair value
of cryptocurrencies is based on quoted prices in active markets. The fair value of the Company’s other financial instruments
including cash and cash equivalents, restricted cash, deposits, other receivables, accounts payable, due to related parties, accounts
payable and other payables, approximate their fair values because of the short-term nature of these assets and liabilities. Cash
and cash equivalents Cash includes
cash on hand and demand deposits in accounts maintained with commercial banks. The Company considers all highly liquid investment
instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. Cryptocurrencies Cryptocurrencies
(including bitcoin and bitcoin cash) are included in current assets in the accompanying consolidated balance sheets. Cryptocurrencies
purchased are recorded at cost and cryptocurrencies awarded to the Company through its mining activities are accounted for in
connection with the Company’s revenue recognition policy disclosed below. Cryptocurrencies
held are accounted for as intangible assets with indefinite useful lives. An intangible asset with an indefinite useful life is
not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating
that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds
its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In
testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely
than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative
impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test.
To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment
losses is not permitted. Purchases
of cryptocurrencies by the Company are included within investing activities in the accompanying consolidated statements of cash
flows, while cryptocurrencies awarded to the Company through its mining activities are included within operating activities on
the accompanying consolidated statements of cash flows. The sales of cryptocurrencies are included within investing activities
in the accompanying consolidated statements of cash flows and any realized gains or losses from such sales are included in “realized
gain (loss) on exchange of cryptocurrencies” in the consolidated statements of operations and other comprehensive loss.
The Company accounts for its gains or losses in accordance with the first-in first-out method of accounting. Property
and equipment Property
and equipment are stated at cost. The straight-line depreciation method is used to compute depreciation over the estimated useful
lives of the assets, as follows:
Useful
life
Cryptocurrency mining equipment 3
years Expenditures
for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred.
Expenditures for major renewals and betterments which substantially extend the useful life of assets are capitalized. The cost
and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss
is recognized in in “other income (expenses)” in the consolidated statements of operations and other comprehensive
loss. Impairment
of long-lived assets Long-lived
assets, including plant and equipment 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. Revenue
recognition The Company
recognizes revenue in accordance with ASC 606 Revenue from Contracts with Customers (“ASC 606”). To determine
revenue recognition for contracts with customers, the Company performs the following five steps: (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 The Company
recognizes revenue when it transfers its goods and services to customers in an amount that reflects the consideration to which
the Company expects to be entitled in such exchange. Cryptocurrency mining The Company
has entered into digital asset mining pools by executing contracts with the mining pool operators to provide computing power to
the mining pool. The contracts are terminable at any time by either party and the Company’s enforceable right to compensation
only begins when the Company provides computing power to the mining pool operator. In exchange for providing computing power,
the Company is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital
asset transaction fees to the mining pool operator which are recorded as a component of cost of revenues), for successfully adding
a block to the blockchain. The Company’s fractional share is based on the proportion of computing power the Company contributed
to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm. Providing
computing power in digital asset transaction verification services is an output of the Company’s ordinary activities. The
provision of providing such computing power is the only performance obligation in the Company’s contracts with mining pool
operators. The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at
fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company
has earned the award from the pools. The consideration is all variable. Because it is not probable that a significant reversal
of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block
(by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which
time revenue is recognized. There is no significant financing component in these transactions. Fair value
of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency at the time of receipt. There is
currently no specific definitive guidance under GAAP or alternative accounting framework for the accounting for cryptocurrencies
recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment.
In the event authoritative guidance is enacted by the FASB, the Company may be required to change its policies, which could have
an effect on the Company’s consolidated financial position and results from operations. Cost
of revenue The Company’s
cost of revenue consists primarily of direct production costs related to mining operations, including utilities and other service
charges, but excluding depreciation and amortization, which are separately stated in the Company’s consolidated statements
of operations. Income taxes The Company
accounts for income taxes under the asset and liability method, in which deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in operations in the period that includes the enactment date. A valuation allowance is required to the extent any deferred tax
assets may not be realizable. ASC Topic
740, Income Taxes, (“ASC 740”), also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s
financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not
to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest
and penalties, accounting in interim period, disclosure and transition. Based on the Company’s evaluation, it has been concluded
that there are no significant uncertain tax positions requiring recognition in the Company’s consolidated financial statements.
The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments
that would result in material changes to its financial position. Loss
per share The Company
computes loss per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”).
ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net loss
divided by the weighted average common shares outstanding for the period. Diluted presents the dilutive effect on a per share
basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning
of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that
increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. For the years ended December
31, 2020, 2019 and 2018, there were no dilutive shares. Comprehensive
loss Comprehensive
loss consists of two components, net loss and other comprehensive loss. The foreign currency translation gain or loss resulting
from translation of the financial statements expressed in RMB to US$ is reported in other comprehensive loss in the consolidated
statements of operations and other comprehensive loss. Statement
of cash flows In accordance
with ASC 230, “Statement of Cash Flows,” cash flows from the Company’s operations are formulated based upon
the local currencies. As a result, amounts related to assets and liabilities reported on the statements of cash flows will not
necessarily agree with changes in the corresponding balances on the balance sheets. Commitments
and contingencies In the normal
course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business,
which cover a wide range of matters. Liabilities for contingencies are recorded when it is probable that a liability has been
incurred and the amount of the assessment can be reasonably estimated. If the assessment
of a contingency indicates that it is probable that a material loss is incurred and the amount of the liability can be estimated,
then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially
material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature
of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies
considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would
be disclosed. Discontinued
operation In accordance
with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal
of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the
disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results
when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the
criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits
to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be
reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same
time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net
income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45. As of December
31, 2020, the Company’s peer-to-peer lending business and the car rental business in the PRC met all the conditions required
in order to be classified as a discontinued operation (Note 1). Accordingly, the operating results of peer-to-peer lending business
and the car rental business in the PRC are reported as a loss from discontinued operations in the accompanying consolidated financial
statements for all periods presented. In addition, the assets and liabilities related to our peer-to-peer lending business and
the car rental business in the PRC are reported as assets and liabilities of discontinued operations in the accompanying consolidated
balance sheets on December 31, 2019. For additional information, see Note 10, “Disposition of Point Cattle”. Recent
accounting pronouncements In June
2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected
credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable
and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses
on financial assets measured at amortized cost. ASU 2016-13 was subsequently amended by Accounting Standards Update 2018-19, Codification
Improvements to Topic 326, Financial Instruments—Credit Losses, Accounting Standards Update 2019-04 Codification Improvements
to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,
and Accounting Standards Update 2019-05, Targeted Transition Relief. For public entities, ASU 2016-13 and its amendments are effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For all other entities, this
guidance and its amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within
those fiscal years. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2018. As an emerging growth company, the Company plans to adopt this guidance effective August
1, 2023. The Company is currently evaluating the impact of its pending adoption of ASU 2016-13 on its consolidated financial statements. In June 2018,
the FASB issued ASU 2018-07, “Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting,” which expands the scope of ASC 718 to include share-based payment transactions for acquiring
goods and services from non-employees. An entity should apply the requirements of ASC 718 to non-employee awards except for specific
guidance on inputs to an option pricing model and the attribution of cost. The amendments specify that ASC 718 applies to
all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s
own operations by issuing share-based payment awards. The Company adopted the new guidance beginning on October 1, 2019.
The adoption of this guidance did not have a material impact on our financial position, results of operations and cash flows. In August
2018, the FASB Accounting Standards Board issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework
Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 modifies the
disclosure requirements on fair value measurements. ASU 2018-13 is effective for all entities for fiscal years and interim periods
within those fiscal years beginning after December 15, 2019, with early adoption permitted for any removed or modified disclosures.
The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective
basis. The Company does not expect this guidance will have a material impact on its consolidated financial statements. In December
2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. ASU 2019-12
is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and
amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December
15, 2020 and interim periods within those fiscal years, which is 2022 fiscal year for us, with early adoption permitted. The Company
does not expect adoption of the new guidance to have a significant impact on its consolidated financial statements. |
