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Financing with Sale-Leaseback

9 Months Ended

Sep. 30, 2020

Financing with Sale-Leaseback [Abstract]

Financing with Sale-Leaseback

(7) Financing with Sale-Leaseback

The Company entered into a sale-leaseback arrangement (the “Lease Financing Agreement”) with TAC Leasing Co., Ltd.(“TLCL”) on August 6, 2020, for a total financing proceedsin the amount of RMB 16 million (approximately US$2.3 million). Under the sale-leaseback arrangement, Hebei Tengsheng sold the Leased Equipment toTLCL for 16 million (approximately US$2.3 million). Concurrent with the sale of equipment, Hebei Tengsheng leases back the equipment soldto TLCL for a lease term of three years. At the end of the lease term, Hebei Tengsheng may pay a nominal purchase price of RMB 100 (approximately$15) to TLCL and buy back the Leased Equipment. The Leased Equipment in amount of $2,349,452 wasrecorded as right-of-use assets and the net present value of the minimum lease paymentswasrecorded as lease liability andcalculated with TLCL’s implicit interest rate of 15.6% per annum and stated at $567,099 at the inception of the lease on August 17, 2020.

Hebei Tengsheng made two payments due according to the schedule. As of September 30, 2020, the balance ofLeased Equipment net of amortization was $2,336,399. The lease liabilitywere $385,650 and its current portionin the amount of $168,546 as of September 30, 2020.

Amortization of the Leased Equipment was $12,718 for the three and nine months ended September 30, 2020. Total interest expenses for the sale-leaseback arrangement was $7,172 for the three and nine months ended September 30, 2020.

As a result of the sale and leaseback, a deferred gain in the amount of $430,695 was recorded.The deferred gain isamortized over the lease term and as an offset to amortization of the Leased Equipment.

The future minimum lease payments of the capital lease as of September 30, 2020 were as follows:

September 30,		Amount
2021			243,168
2022			243,168
2023			202,640
Less: unearned discount			(134,781	)
			554,196
Less: Current portion of lease liability			(168,546	)
		$	385,650