Selected Balance Sheet Information:

Selected Consolidated Balance Sheets Information:

Exchange Rate Information

Our business is primarily conducted in China and all of our revenues are received, and substantially all of our expenses are paid, and denominated in RMB. Capital accounts of our condensed financial statements are translated into U.S. dollars from RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the period. RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rates used in translation.

The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated.

B.Capitalization and Indebtedness

Not applicable.

C.Reasons for the Offer and Use of Proceeds

Not applicable.

D.Risk Factors

Risks Relating to our Business and Industry

Our limited operating history makes evaluating our business difficult.

InceptedWe were formed in in 2012 weand started generating revenue in the year ended December 31, 2015. Thus, our limited operating history may not provide a meaningful basis for you to evaluate our business, financial performance, and prospects. We are, and expect for the foreseeable future to be, subject to all the risks and uncertainties, inherent in a new business. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies with a limited operating history. In particular, you should consider that there is a significant risk that we may not be able to:

If we are unsuccessful in addressing any of these risks, our business may be materially and adversely affected.

We may continue to incur losses, negative cash flows from operating activities, and net current liabilitiesor negative working capital in the future. If we are not able to return to profitabilitystay profitable or raise sufficient capital to cover our capital needs, we may not continue as a going concern.

We incurredFor the years ended December 31, 2017 and 2018, we recorded a net loss of $745,660 and $61,924, forrespectively. For the year ended December 31, 2018 as compared to2019, we recorded a net lossincome of $745,660 for the year ended December 31, 2017,$946,535 because of the increase in our revenue and gross profit. In 2015, we recorded a net loss of $12,993, as we began our operations in 2015. In 2016, we recorded a net gain of $749,561. Our ability to achieve profitability depends on the competitiveness of our products and services as well as our ability to control costs and to provide new products and services to meet the market demands and attract new customers. Due to a history of operating loss in 2017 and 2018, the numerous risks and uncertainties associated with our business, we may not be able to achieve profitabilitystay profitable in the short-term or long-term.long-term after 2019.

In addition, our net cash provided by operations for the year ended December 31, 2019 was $827,020, net cash used in operations for the year ended December 31, 2018 was $2,217,943, and net$2,217,943. Net cash used in operations for the year ended December 31, 2017 was $875,222. The net cash used inprovided by operating activities for the year ended December 31, 2018 included $322,626 for professional fee related to listing of the Company and $355,369 for selling expenses, while2019 was mainly derived from the net cash used in operating activities forincome of $946,535, and the year ended December 31, 2017 included $380,233 IPO related expenses and $104,743 for selling expenses.increase of accounts payable of $4,198,587, notes payable of $1,833,744, offsetting by the increase of accounts receivable of $6,132,590. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations.” WeAlthough we have improved the liquidity position and adopted related cost reduction measures, we cannot assure you that our liquidity positionwe will improve in the future.continue to achieve such efficiency or sustain such cost reductions. If we are unsuccessful at generatingunable to generate revenues through more sales ofthat significantly exceed our blending coking coal products,costs and expenses, we maywill continue to incur losses negative cash flows from operating activities and net current liabilities, which may materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.in the future.

If we are unable to achieve profitabilitystay profitable or raise sufficient capital to cover our capital needs, we may not continue as a going concern. There can be no assurance that we can obtain additional financing. Our ability to obtain additional financing is subject to a number of factors, which may be beyond our control. See “—We may not be able to obtain additional financing to support our business and operations, and our equity or debt financings may have an adverse effect on our business operations and share price.”

Our consolidated financial statements for each of the three years ended December 31, 2019, 2018 2017 and 20162017 included in this annual report beginning on page F-1 have been prepared based on the assumption that we will continue on a going concern basis. Our consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might result from the outcome of this uncertainty.

We are primarily a holding company and depend on distributions from our subsidiaries to meet our financial obligations.

Our company has an offshore holding structure commonly used by corporations seeking public offering in a foreign jurisdiction with operations in China. We own Shanxi Jinxuan, whose former name is Liulin Junhao, directly through Jinxuan BVI. Our operations are conducted exclusively through Liulin Junhao,Shanxi Jinxuan, in which we own 100% of the equity interest at the date of this annual report. The operations of Liulin JunhaoShanxi Jinxuan are our sole source of revenues. We have no operations independent of those of Liulin Junhao.Shanxi Jinxuan. As a result, we are dependent upon the performance of Liulin JunhaoShanxi Jinxuan and will be subject to the financial, business, and other factors affecting such subsidiary as well as general economic and financial conditions. As substantially all of our operations are conducted through our subsidiary, we are dependent on the cash flow of our subsidiary to meet our obligations.

Because virtually all of our assets are held by Liulin Junhao,Shanxi Jinxuan, the claims of our shareholders will be structurally subordinate to all existing and future liabilities and obligations, and trade payables of such subsidiary. In the event of a bankruptcy, liquidation or reorganization of the Company, our assets and those of our subsidiaries’ will be available to satisfy the claims of our shareholders only after all of Liulin Junhao’sShanxi Jinxuan’s liabilities and obligations have been paid in full.

Our future operating results have been and may continue to be affected by fluctuations in raw material prices.the prices of or blended coking coal. We may not be able to pass on cost increases to customers.

We are subject to short-term volatility in the prices of blended coking coal price volatility and have purchased and may continue to have to purchase raw coking coal at higher prices.coal. Our operating profits may be negatively affected by fluctuations in the price of rawblended coking coal. In the past, we have been able to pass the cost increase of raw coking coal on to customers butWe may not be able to do sopass the increased cost of blended coking coal in the future. This may adversely affect our gross margins and profitability. Our sales agreements with customers generally contain provisions that permit the parties to adjust the contract price of the blended coking coal upward or downward at specified times or if market spot price of coking coal fluctuates significantly. However, in the event that raw materialsblended coking coal we sourced for specific customers increased to such extent and we fail to agree on a price with our customer under these provisions or otherwise pass on cost increases to the customers, many agreements permit customers to terminate the contract or refuse to buy all of the quantities contracted for. Market prices for rawblended coking coal fluctuate in most regions in China. Additionally, high-quality raw coking coal is critical to our maintaining operating efficiencies and delivering blended coking coal to our customers that meets their specifications. Since high-quality raw coking coal is more limited in supply, its price tends to be more volatile. A general rise in coking coal prices also may adversely affect the price of, and demand for, coke and products made with coke such as iron, steel and concrete. This may in turn lead to a fall in demand for our products.

If we are unable to successfully operate and manage our production operations, we may experience a decrease in revenues.

As we ramp up our production operations to accommodate our planned growth, we may encounter difficulties associated with increasing production scale, including shortages of qualified personnel to operate our equipment or manage manufacturing operations, as well as shortages of key raw materials for our products. In addition, we may also experience difficulties in producing sufficient quantities of products or in achieving desired product quality. If we are unable to successfully operate and manage our production operations to meet our needs, we may not be able to provide our customers with the quantity or quality of products they require in a timely manner. This could cause us to lose customers and result in reduced revenues.

Our future capital needs are uncertain and we may need to raise additional funds in the future.

We may require additional cash resources in the future due to changed business conditions or other future developments. We cannot assure you that our revenues will be sufficient to meet our operational needs and capital requirements in the future. In the past, we have not encountered difficulties in obtaining financing. However, we cannot assure you that financing will be available in amounts or on terms acceptable to us. Our future capital needs and other business reasons could require us to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations or our ability to pay dividends to our shareholders.

Our success depends substantially on the continued retention of certain key personnel and our ability to hire and retain qualified personnel in the future to support our growth and execute our business strategy.

If one or more of our senior executives or other key personnel are unable or unwilling to continue in their present positions, our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. While we depend on the abilities and participation of our current management team generally, we rely particularly upon Xiangyang Guo, our CEO, and Liqin Yang,Yajun Shi, our CFO, who are responsible for the development and implementation of our business plan. The loss of the services of Xiangyang Guo, our CEO, and Liqin Yang,Yajun Shi, our CFO, for any reason could significantly adversely impact our business and results of operations. Competition for senior management and in the coal industry in the PRC is intense and the pool of qualified candidates is limited. We cannot assure you that the services of our senior executives and other key personnel will continue to be available to us, or that we will be able to find a suitable replacement for them if they were to leave.

If the legality or validity of the lease of the collective-owned land use rights is challenged, there may be disruption to our operation and such disruption could have a material adverse effect on our results of operations.

Our operation is based in a location leased from a related party, Liulin Hongxing Coking Coal Trade Co., Ltd. (“Hongxing”), who has the collective-owned land use rights of a parcel of land (about 62,826 square meters) in Bandi Village from September 2003 to September 2023. According to the PRC Laws on Land Administration, the collective-owned land use right shall not be leased, conveyed, or rented for non-agricultural construction, except in the case of legal transfer of the land that conforms to the comprehensive land use plan and is carried out legally by enterprises as a result of bankruptcy or acquisition.

Under current PRC Laws on Land Administration the collective-owned land use rights and our lease may be subject to disputes or challenges by the relevant governmental departments and could be deemed unenforceable.

If the legality or validity of our leases become subject to disputes or challenges, we may need to suspend at least part of our operation on the respective land areas. We may incur costs and losses if we are required to remove our operations and the requisite machinery. We could also lose our rights to use the land and our business, financial condition, and results of operations could be materially and adversely affected.See “Item 4. Information on the Company—B. Business Overview—Properties and Facilities” for more information.

A significant portion of our revenue is concentrated on a few large customers, and we do not have long-term customer supply agreements with our key customers and rely upon our longstanding relationship with them.If we lose one or more of our customers, our results of operations may be adversely and materially impacted.

For the year ended December 31, 2019, we served 2 customers,Shanxi Meijin Jiaohua Co., Ltd. (“Meijin”)and Shanxi Meijin Jiaohua Yangqu Co., Ltd (“Meijin Jiaohua”), consisting of 99% and 1% of our sales revenue, respectively. For the year ended December 31, 2018, four customers, Meijing,Shanxi Meijin Wuzi Supply Co., Ltd.(“Meijin Wuzi”), Shanxi Hongyao LichuangKesheng Trading Co., Ltd. (“Hongyao”), Shanxi Chuangli Trading Co., Ltd (“Chuangli”) and Meijingjiaohua, consistingMeijin Jiaohua, consisted of 33%, 17%, 14% and 11% of our sales revenue, respectively. For the year ended December 31, 2017, we served two customers, Shanxi Jinquan Energy Co. Ltd and Liulin County Xin’an Yuanda Coking Coal Co. Ltd, consisting of 46%54% and 54%46% of our sales revenue, respectively. As a consequence, we may have large amounts of collectibles from these large customers. Additionally, all of our customers send us supply orders specifying the characteristics of blended coking coals that they require, and we supply them on an order-to-order basis without long-term supply agreements. If we lose one or more large customers like these, our sales revenue will decrease and our financial condition and results of operations may be materially adversely impacted.

We had sourced ourblended coking coal raw materials primarily from a limited number of suppliers.supplier. If we lose one or more of the suppliers,supplier, our operation may be disrupted, and our results of operations may be adversely and materially impactedimpacted.

For the year ended December 31, 2019, we sourced all of our coking coal from one supplier, Liulin Xin’an Yuanda Coal Co., Ltd (“Xin’an Yuanda” or “Partner Manufacturer”). For the year ended December 31, 2018, we sourced 24%60% of our coking coal raw materials from one supplier, 46%16% of our coking coal raw materials from a second supplier, and the rest from several other suppliers. For the year ended December 31, 2017, we did not source raw coking coal from our suppliers and relied upon our raw coking coal reserves. In 2016, we sourced 28% of our raw materials from one supplier, and 72% from a second supplier. In 2015, we sourced 100% of our raw materials from one supplier. If we lose one or more suppliers and are unable to swiftly engage new suppliers, our production operation may continue to be disrupted and/or suspended, and we may not be able to deliver finished products to our customers on time. We may also have to pay a higher price to source from a different supplier on short notice. While we are actively searching for and negotiating with new suppliers and we are actively identifying and discussing with supplier targets to merge and/or acquire, there is no guarantee that we will be able to locate appropriate new suppliers and/or supplier merger targets in our desired timeline. As such, our results of operations may be adversely and materially impacted.

We have one steady supplier, but in the event that we lose the supplier, or that the supplier is no longer able to source us the blended coking coal we need,our results of operations may be adversely and materially impacted.

For the year ended December 31, 2019, we found a reliable supplier that provided all of the blended coking coal we sourced. Because we are a comparatively smaller customer, the supplier we source from may choose to prioritize supply for other larger customers. While our supplier is able to prioritize our orders, we cannot guarantee we will not encounter this in the near future, in which case, our operations will be disrupted and our revenues significantly and adversely impacted.

Increases in transportation costs could make our operations less competitive and result in the loss of customers.

Coal producers and processorsdistributors depend upon rail, barge, trucking, overland conveyor, and other systems to deliver coal to markets. We typically transport blended coking coal raw materials from our suppliers, and as such, increases in transportation costs will lead to less competitive pricing for our blended coking coal products. Additionally, since we arrange to transport our blended coking coal to our customers from our supplier’s facilities to the point of use, any disruption of these transportation services because of weather-related problems, strikes, lock-outs, or other events could temporarily impair our ability to supply coal to customers and thus could adversely affect our results of operations. For example, the high volume of raw coal shipped from all Shanxi Province mines could create temporary congestion on the rail systems servicing that region. If transportation for our blended coking coal becomes unavailable or uneconomic for our customers, our ability to sell blended coking coal could suffer. Transportation costs can represent a significant portion of the total cost of blended coal. Since our customers typically pay that cost, it is a critical factor in a distant customer’s purchasing decision. If transportation costs from our facilities to the customer’s facilities are not competitive, the customer may elect to purchase from another company.

We may not be able to meet quality specifications required by our customers and as a result could incur economic penalties or cancelled agreements which would reduce our sales and profitability.

Most of our blended coking coal sales agreements contain provisions requiring us to deliver coking coal meeting quality thresholds for certain characteristics such as Btus, sulfur content, ash content, volatility and ash fusion temperature. If we are not able to deliver products that meet these specifications, because, for example, we are not ablea supplier fails to sourceproduce blended coking coal of the proper quality, we may incur economic penalties, including price adjustments, the rejection of deliveries or termination of the contracts.

We do not have any registered patents or other intellectual property and we may not be able to maintain the confidentiality of our blending processes.

We have no patents covering our blending processes and we rely on the confidentiality of our blending processes in producing a competitive product. The confidentiality of our know-how may not be maintained and we may lose any meaningful competitive advantage which might arise through our proprietary processes.

Our insurance coverage may not be adequate. Any material loss to our properties or assets may have a material adverse effect on our financial condition and operations.

We and our subsidiaries and operating company are insured in amounts that may not adequately cover the risks of our business operations. As a result, any material loss or damage to our properties or other assets, or personal injuries arising from our business operations in excess of our insurance coverage may have a material adverse effect on our financial condition and operations.

Import of blended coking coal from other countries may continue to increase and may result in our obtaining lower prices for our products and/or reduced quantities in demand for our products.

Imported coking coal consisted of 11%24%, 8%15%, and 15%8% of total coking coal consumption in the PRC in 2016,2019, 2018, and 2017 and 2018,, respectively, and imported coking coal is increasingly used to bridge the supply and demand gap in the PRC market. Other than regulatory factors, the main obstacle to the slow growth of imported coking coal in the PRC is that the majority of coke making furnaces are configured to receive only coking coal with characteristics specific to the coking coal produced in the PRC, and re-configuration cost of the furnaces for them to receive imported coking coal is currently high. If more furnaces undergo re-configuration and new furnaces are put in use, imported coking coal may increasingly make up the coking coal consumption in the PRC. More inflow of imported coking coal may result in lower prices for our products and/or reduced quantities in demand for our products.

Because we are a Cayman Islands corporation and all of our business is conducted in the PRC, you may be unable to bring an action against us or our officers and directors or to enforce any judgment you may obtain.

We are incorporated in the Cayman Islands and conduct our operations primarily in China. Substantially all of our assets are located outside of the United States. In addition, all of our directors and officers reside outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the Cayman Islands or in China in the event that you believe we have violated your rights, either under United States federal or state securities laws or otherwise, or if you have a claim against us. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of China may not permit you to enforce a judgment against our assets or the assets of our directors and officers.

Recently introduced economic substance legislation of the Cayman Islands may adversely impact us or our operations.

The Cayman Islands, together with several other non-European Union jurisdictions, have recently introduced legislation aimed at addressing concerns raised by the Council of the European Union as to offshore structures engaged in certain activities which attract profits without real economic activity. With effect from January 1, 2019, the International Tax Co-operation (Economic Substance) Law, 2018 (the “Substance Law”) came into force in the Cayman Islands introducing certain economic substance requirements for in-scope Cayman Islands entities which are engaged in certain “relevant activities,” which in the case of exempted companies incorporated before January 1, 2019, will apply in respect of financial years commencing July 1, 2019, onwards. However, it is anticipated that the Company itself may remain out of scope of the legislation or else be subject to more limited substance requirements. Although it is presently anticipated that the Substance Law will have little material impact on the Company or its operations, as the legislation is new and remains subject to further clarification and interpretation it is not currently possible to ascertain the precise impact of these legislative changes on the Company.

Our lack of effective internal controls over financial reporting may affect our ability to accurately report our financial results or prevent fraud which may affect the market for and price of our Ordinary Share.

To implement Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting. Prior to filing of our registration statement and prospectus, in connection with our initial public filing, we were not subject to these rules. As a result, we do not have in place effective disclosure controls and procedures or internal controls over financial reporting.See “Item 15. Controls and Procedures—Internal Control over Financial Reporting.” We are subject to the requirement that we maintain internal controls and that management perform periodic evaluation of the effectiveness of the internal controls. Effective internal control over financial reporting is important to prevent fraud. As a result, our business, financial condition, results of operations and prospects, as well as the market for and trading price of our Ordinary Shares, may be materially and adversely affected if we do not have effective internal controls. We do not presently have the financial resources or personnel to develop or implement systems that would provide us with the necessary information on a timely basis so as to be able to implement financial controls. As a result, we may not discover any problems in a timely manner and current and potential shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our Ordinary Shares. The absence of internal controls over financial reporting may inhibit investors from purchasing our shares and may make it more difficult for us to raise funds in a debt or equity financing.

Because we are an “emerging growth company,” we may not be subject to requirements that other public companies are subject to, which could affect investor confidence in us and our Ordinary Shares.

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from disclosure and other requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important. See “Item 4. Information on the Company—A. History and Development of the Company— Emerging Growth Company Status.”

Substantial declines in coking coal prices may reduce our revenues, and sustained prices at those levels or lower levels may further reduce our revenues and adversely affect our operating results, cash flows, financial condition, and stock price.

Our results of operations are substantially dependent upon the prices we receive for our coking coal. The price for coking coal in the PRC market fluctuates significantly, ranging from RMB510 (approximately $75.22) to RMB1,177 (approximately $173.61) per ton in the years of 2015 and 2016. The price for coking coal in the PRC market ranged from RMB928 (approximately $137.39)($137.39) to RMB1,528 (approximately $226.21)($226.21) per ton in the year of 2017. The price for coking coal in the PRC market ranged from RMB1,091 (approximately $165)($165) to RMB1,464 (approximately $221)($221) per ton in the year of 2018. The price for coking coal in the PRC market ranged from RMB1,138 ($165) to RMB1,438 ($208)  per ton in the year of 2019. Those prices depend upon factors beyond our control (some of which are described in more detail in other risk factors below), including:

Fluctuating coking coal prices in the PRC may impose significant challenges for us to adjust our operation and production to meet the demands of our customers and ensure our access to raw materials,blended coking coal, and may materially adversely affect our operating results and cash flows.

Lower demand for coking coal by PRC steel producers would reduce our revenues and could further reduce the price of our coking coal.

We producedistribute coking coal that is used by PRC coke manufacturers to supply to the PRC steel industries. Any deterioration in conditions in the PRC steel industry, including the demand for steel and the continued financial viability of the industry, would reduce the demand for our coking coal. In addition, foreign steel industry increasingly relies on processes to make steel that do not use coke, such as electric arc furnaces or pulverized coal processes. If this trend becomes more popular in the PRC, the amount of coking coal that we sell and the prices that we receive for it may decrease, thereby reducing our revenues and adversely impacting our earnings.

Competition within the coal industry may adversely affect our ability to sell coking coal, and excess production capacity in the industry could put downward pressure on coal prices.

We compete with numerous other coking coal producers in various regions of the PRC and to a lesser extent, coking coal producers from other countries. See “Item 4. Information on the Company—B. Business Overview—Competition” for more information relating to the competitive landscape of the industry in which we compete. This competition affects the prices we are able to sell our products, and our ability to retain or attract customers. In addition, if the currencies of our foreign competitors decline against the RMB, those competitors may be able to offer lower prices to our customers than we can.

In the past, high demand for coal and attractive pricing brought new investors to the coal industry, leading to the development of new mines and added production capacity. Subsequent overcapacity in the industry has contributed, and may continue to contribute, to lower coal prices. In addition, lower coal prices set by our competitors may also put downward pressure on coal prices.

Our ability to collect payments from our customers could be impaired if their creditworthiness and financial health deteriorates.

Our ability to receive payment for coking coal sold and delivered depends on the continued creditworthiness and financial health of our customers. Competition with other coal suppliers could force us to extend credit to customers and on terms that could increase the risk we bear on payment default.

Our industry is heavily regulated and we may not be able to remain in compliance with all such regulations and we may be required to incur substantial costs in complying with such regulation.

We are subject to extensive regulation by China’s national, provincial, county, and local authorities in jurisdictions in which our products are manufactured or sold, regarding the manufacturing, storage and distribution of our product, such as the environment protection laws, the tax laws, and the labor contract laws.See “Item 4. Information on the Company – B. Business Overview-Regulations.Overview—Regulations.”

We may not be able to comply with current laws and regulations, or any future laws and regulations. To the extent that new regulations are adopted, we will be required to adjust our activities in order to comply with such regulations. We may be required to incur substantial costs in order to comply. Our failure to comply with applicable laws and regulations could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material and adverse effect on our business, operations, and finances. Changes in applicable laws and regulations may also have a negative impact on our sales.

New legislation or administrative regulations (or judicial interpretations of existing laws and regulations), including proposals related to the protection of the environment that would further regulate and tax the coal industry, may also require us and our customers to change operations significantly or incur increased costs.

Our business operation may be materially and negatively affected by economic policy involving the coal industry promulgated by the Shanxi provincial government.

Due to various circumstances in the coal industry, such as over-extraction, inappropriate extraction, and persistent safety issues experienced by smaller mining operations in Shanxi Province, the Shanxi provincial government has vowed to recoup and is in the process of recouping the Shanxi coal industry with prerogatives of restricting coal output and closing down smaller mining operations in mass. Shanximass.Shanxi provincial authorities have promulgated various guidance and policies that limit the total quantity of coal mined by coal mining companies in Shanxi, and output requirement for mining companies in Shanxi which have resulted in industry consolidation and closing of smaller mines, and in turn a lower total quantity of coal output. While there are uncertainties as to the specific effect of such policies, restricting coal output may limit our access to raw materials needed in our production process, and we may not be able to deliver the amount of coking coal under existing sales orders or at a price acceptable to the customers. If the remaining larger coal mines who survive the industry consolidation in Shanxi decide to use its bargaining power, this may increase the prices we are able to negotiate for such raw materials, this may negatively impact our access to raw materials, and in turn our results of operations.

Terrorist attacks or military conflict could result in disruption of our business.

Terrorist attacks and threats, escalation of military activity in response to such attacks or acts of war may negatively affect our business, financial condition and results of operations. Our business is affected by general economic conditions, fluctuations in consumer confidence and spending, and market liquidity, which can decline as a result of numerous factors outside of our control, such as terrorist attacks and acts of war. Future terrorist attacks, rumors or threats of war, actual conflicts involving China or its allies, or military or trade disruptions affecting our customers may materially adversely affect our operations. As a result, there could be delays or losses in transportation and deliveries of our products to our customers, decreased sales of coal and extensions of time for payment of accounts receivable from customers. Strategic targets such as energy-related assets may be at greater risk of terrorist attacks than other targets. In addition, disruption or significant increases in energy prices could result in government-imposed price controls. Any, or a combination, of these occurrences could have a material adverse effect on Liulin Junhao’sShanxi Jinxuan’s business, financial condition and results of operations.

We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.

Our business could be materially and adversely affected by natural disasters, health epidemics or other public safety concerns affecting the PRC. Natural disasters may give rise to server interruptions to construction business as well as adversely affect our ability to operate our production facility. In recent years, there have been outbreaks of epidemics in China and globally, such as the coronavirus at the end of 2019, H1N1 flu, avian flu or another epidemic. Our business operations could be disrupted by any of these epidemics. In addition, our results of operations could be adversely affected to the extent that any health epidemic harms the Chinese economy in general. A prolonged outbreak of any of these illnesses or other adverse public health developments in China or elsewhere in the world could have a material adverse effect on our business operations.  Such outbreaks could significantly impact the construction and transportation industries, which could severely disrupt our operations and adversely affect our business, financial condition and results of operations. Our headquarter is located in Taiyuan city, where our management and employees currently reside and our facilities locate. Consequently, if any natural disasters, health epidemics or other public safety concerns were to affect Taiyuan or cause travel restriction in or out of Taiyuan city or its surrounding areas, our operation may experience material disruptions, which may materially and adversely affect our business, financial condition and results of operations.

Subsequent to December 31, 2019, COVID-19 has spread rapidly to the other parts of China and around the world. The governments of many countries around the globe have adopted measures to control the spread of the COVID019, including quarantines, travel restrictions, and temporary closure of stores.

All of our revenue and workforce are concentrated in China. Consequently, the COVID-19 outbreak may have material negative impact on our total revenues, collectability of receivables, and other financial position or results of operations. Our business has been impacted by the COVID-19 in a few ways, including but not limited to, temporary closure of business, limited business hours, and restrictions on our employees’ ability to travel and/or visit clients and partners for a prolonged period of time. We have been closely monitoring the impact of COVID-19 on macro economy and coking coal industry in general, as well as the extent to which COVID-19 impacts our business, results of operations and financial condition. However, the extent of impact of COVID-19 on our business for the fiscal year ended December 31, 2020 cannot be estimated with confidence at this time.

Risks Relating to Doing Business in the PRC

Changes in the policies of the PRC government could have a significant impact upon our ability to operate profitably in the PRC.

We conduct all of our operations and all of our revenue is generated in the PRC. Accordingly, economic, political, and legal developments in the PRC will significantly affect our business, financial condition, results of operations, and prospects. Policies of the PRC government can have significant effects on economic conditions in the PRC and the ability of businesses to operate profitably. Our ability to operate profitably in the PRC may be adversely affected by changes in policies by the PRC government, including changes in laws, regulations, or their interpretation.

Because our business is dependent upon government policies that encourage a market-based economy, changes in the political or economic climate in the PRC may impair our ability to operate profitably, if at all.

Although the PRC government has been pursuing a number of economic reform policies for more than two decades, the PRC government continues to exercise significant control over economic growth in the PRC. Because of the nature of our business, we are dependent upon the PRC government pursuing policies that encourage private ownership of businesses. We cannot assure you that the PRC government will pursue policies favoring a market orientedmarket-oriented economy or that existing policies will not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting political, economic and social life in the PRC.

We may not be able to distribute our assets upon liquidation and dividend payment will be subject to restrictions under Chinese foreign exchange rule.

Our assets are located inside China. Under the laws governing foreign investment enterprises in China, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to both the relevant government agency’s approval and supervision as well as the foreign exchange control. This may generate additional risk for our investors in case of liquidation.

Governmental control of currency conversion may limit our ability to utilize our net revenues effectively.

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our net revenues in RMB. As we are an offshore holding company of our PRC subsidiary, the majority of our net revenues are received in RMB. Similarly, as our operation is primarily based in the PRC and our suppliers are primarily based in Shanxi Province presently, most of our future payments are also likely to continue to be in the form of RMB.RMB  . As such, we believe restrictions on the transfer of cash into and out of China, as well as on the exchange of currency will not materially impede our ability to use cash in our operations. Under our current corporate structure, our company in the Cayman Islands relies on dividend payments from our PRC subsidiary to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange of the PRC (“SAFE”) by complying with certain procedural requirements. Therefore, our PRC subsidiary is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the repayment of loans denominated in foreign currencies. But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the overseas investment registrations by the beneficial owners of our company who are PRC residents.

In light of the flood of capital outflows of China in recent years due to the weakening RMB, the PRC government has imposed more restrictive foreign exchange policies and stepped up scrutiny of major outbound capital movement. More restrictions and substantial vetting process are put in place by SAFE to regulate cross-border transactions falling under the capital account. The PRC government may at its discretion further restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our Ordinary Shares.

Regulations relating to offshore investment activities by PRC residents may limit our ability to acquire PRC companies and could adversely affect our business.

In July 2014, SAFE promulgated the Circular on Issues Concerning Foreign Exchange Administration over the Overseas Investment and Financing and Roundtrip Investment by Domestic Residents via Special Purpose Vehicles, or “Circular 37,” which replaced Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Corporate Financing and Roundtrip Investment through Offshore Special Purpose Vehicles, or “Circular 75.” According to Circular 37, prior registration with the local SAFE branch is required for Chinese residents to contribute domestic assets or interests to offshore companies, known as “SPV”s. Moreover, Circular 37 applies retroactively. As a result, Chinese residents who have contributed domestic assets or interests to a SPV, but failed to complete foreign exchange registration of overseas investments as required before July 4, 2014, shall send a letter to SAFE and its branches for explanation. SAFE and its branches shall, under the principle of legality and legitimacy, conduct supplementary registration, and impose administrative punishment on those in violation of the administrative provisions on the foreign exchange pursuant to the law. Circular 37 further requires amendment to a PRC resident’s registration in the event of any significant changes with respect to the SPV, such as an increase or decrease in the capital contributed by PRC individuals, share transfer or exchange, merger, division, or other material event. Under these regulations, PRC residents’ failure to comply with specified registration procedures may result in restrictions being imposed on the foreign exchange activities of the relevant PRC entity, including the payment of dividends and other distributions to its offshore parent, as well as restrictions on capital inflows from the offshore entity to the PRC entity, including restrictions on its ability to contribute additional capital to its PRC subsidiaries. Further, failure to comply with the SAFE registration requirements could result in penalties under PRC law for evasion of foreign exchange regulations.

Bingshan Guo, Xiangyang Guo, Yonghong Che, Haigang Yan, and Ji Li, who are our beneficial owners and are PRC residents, have initiated the application for the initial foreign exchange registrations.

We have urged our current shareholders who are PRC residents to make the necessary applications, filings, and amendments as required under Circular 37 and other related rules. We attempt to comply, and attempt to ensure that our shareholders who are subject to these rules comply with the relevant requirements. We cannot, however, provide any assurances that all of our shareholders who are PRC residents will comply with our request to make or obtain any applicable registration or comply with other requirements of Circular 37 or other related rules. Further, we cannot assure you that our future ultimate shareholders who are PRC residents will provide sufficient supporting documents required by the SAFE or complete the required registration with the SAFE in a timely manner, or at all. Any failure by any of our shareholders who is a PRC resident, or is controlled by a PRC resident, to comply with relevant requirements under these regulations could subject us to fines or sanctions imposed by the PRC government, including restrictions on Liulin Junhao’sShanxi Jinxuan’s ability to pay dividends or make distributions to us and on our ability to increase our investment in the Liulin Junhao.Shanxi Jinxuan.

Because our business is conducted in RMB and the price of our Ordinary Shares is quoted in U.S. dollars, changes in currency conversion rates may affect the value of investments.

Our business is conducted in the PRC, our books and records are maintained in RMB, which is the currency of the PRC, and the financial statements that we file with the SEC and provide to our shareholders are presented in U.S. dollars. Changes in the exchange rate between the RMB and dollar affect the value of our assets and the results of our operations in U.S. dollars. The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions and perceived changes in the economy of the PRC and the United States. Any significant revaluation of the RMB may materially and adversely affect our cash flows, revenue and financial condition.

Regulatory bodies of the United States may be limited in their ability to conduct investigations or inspections of our operations in China.

From time to time, we may receive requests from certain U.S. agencies to investigate or inspect our operations, or to otherwise provide information. While we will be compliant with these requests from these regulators, there is no guarantee that such requests will be honored by those entities who provide services to us or with whom we associate, especially as those entities are located in China. Furthermore, under current PRC laws, an on-site inspection of our facilities by any of these regulators may be limited or disallowed, and therefore be difficult to facilitate.

Under the PRC Enterprise Income Tax Law, or the “EIT Law,” we may be classified as a “resident enterprise” of China, which could result in unfavorable tax consequences to us and our non-PRC shareholders.

The EIT Law and its implementing rules provide that enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” under PRC tax laws. The implementing rules promulgated under the EIT Law define the term “de facto management bodies” as a management body which substantially manages, or has control over the business, personnel, finance and assets of an enterprise. In April 2009, the State Administration of Taxation, or “SAT,” issued a circular, known as “Circular 82,” which provides certain specific criteria for determining whether the “de facto management bodies” of a PRC-controlled enterprise that is incorporated offshore is located in China. However, there are no further detailed rules or precedents governing the procedures and specific criteria for determining “de facto management body.” Although our board of directors and management are located in the PRC, it is unclear if the PRC tax authorities would determine that we should be classified as a PRC “resident enterprise.”

If we are deemed as a PRC “resident enterprise,” we will be subject to PRC enterprise income tax on our worldwide income at a uniform tax rate of 25%, although dividends distributed to us from our existing PRC subsidiary and any other PRC subsidiaries which we may establish from time to time could be exempt from the PRC dividend withholding tax due to our PRC “resident recipient” status. This could have a material and adverse effect on our overall effective tax rate, our income tax expenses and our net income. Furthermore, dividends, if any, paid to our shareholders may be decreased as a result of the decrease in distributable profits. In addition, if we were considered a PRC “resident enterprise”, any dividends we pay to our non-PRC investors, and the gains realized from the transfer of our Ordinary Shares may be considered income derived from sources within the PRC and be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty). It is unclear whether holders of our Ordinary Shares would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. This could have a material and adverse effect on our business operations.

If we become directly subject to the scrutiny, criticism, and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation.

U.S. public companies that have substantially all of their operations in China have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered on financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits and SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on us, our business and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from developing our growth. If such allegations are not proven to be groundless, we and our business operations will be severely affected.

The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.

We are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act. Our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review by China Securities Regulatory Commission, a PRC regulator that is responsible for oversight of the capital markets in China. Accordingly, you should review our SEC reports, filings and our other public pronouncements with the understanding that no local regulator has done any review of us, our SEC reports, other filings or any of our other public pronouncements.

The ownership of our Ordinary Shares is concentrated among a small number of shareholders, and if our principal shareholders, director, and officers choose to act together, they may be able to significantly influence management and operations, which may prevent us from taking actions that may be favorable to you.

Our ownership is concentrated among a small number of shareholders, including our founder, director, officers, and entities related to these persons. Accordingly, these shareholders, acting together, will have the ability to exert substantial influence over all matters requiring approval by our shareholders, including the election and removal of directors and any proposed merger, consolidation or sale of all or substantially all of our assets. This concentration of ownership could have the effect of delaying, deferring or preventing a change in control of the Company or impeding a merger or consolidation, takeover or other business combination that could be favorable to you.

The requirements of being a public company may strain our resources and divert management’s attention.

Compliance with the Exchange Act and the Sarbanes-Oxley Act and other applicable securities rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results. In addition, complying with public company disclosure rules makes our business more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating results.

We have incurred increased costs as a result of being a public company, which we expect will further increase after we cease to qualify as an “emerging growth company.”

We are a public company and incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC, impose various requirements on the corporate governance practices of public companies. As an “emerging growth company” pursuant to the JOBS Act, we may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company,” we expect to incur significant additional expenses and devote substantial management effort toward ensuring compliance increased disclosure requirements.

Our Ordinary Shares are considered a “penny stock” which is subject to restrictions on marketability, so you may not be able to sell your shares.

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our Ordinary Shares is currently less than $5.00 per share and therefore is designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose some information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell the Ordinary Shares and may affect the ability of investors to sell their shares. These regulations may likely have the effect of limiting the trading activity of the Company’s Ordinary Shares and reducing the liquidity of an investment in its Ordinary Shares. In addition, investors may find it difficult to obtain accurate quotations of the Ordinary Shares and may experience a lack of buyers to purchase our Company’s stock or a lack of market makers to support the stock price.

If our Ordinary Shares becomebecomes tradable in the secondary market, we will be subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our Ordinary Shares, which in all likelihood would make it difficult for our shareholders to sell their shares.

Substantial future sales of our Ordinary Shares or the anticipation of future sales of our Ordinary Shares in the public market could cause the price of our Ordinary Shares to decline.

Sales of substantial amounts of our Ordinary Shares in the public market after the consummation of our initial public offering, or the perception that these sales could occur, could cause the market price of our Ordinary Shares to decline. As of December 31, 20182019 and as of the date of this annual report, we have 14,333,334 Ordinary Shares outstanding that are available for sale following our initial public offering and subject to certain restrictions.restrictions  . Sales of these shares into the market could cause the market price of our Ordinary Shares to decline.

Our shareholders may face significant restrictions on the resale of our securities due to state “Blue Sky” laws.

Each state has its own securities laws, often called “blue sky” laws, which (i) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration, and (ii) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or the transaction must be exempt from registration. The applicable broker must be registered in that state.

We do not know whether our securities will be registered or exempt from registration under the laws of any state. A determination regarding registration will be made by those broker-dealers, if any, who agree to serve as the market-makers for our Ordinary Shares. There may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our securities. You should therefore consider the resale market for our Ordinary Shares to be limited, as you may be unable to resell your shares without the significant expense of state registration or qualification.

Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our shareholders have limited protections against interested director transactions, conflicts of interest and similar matters.

The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York and NYSE AMEX Equities exchanges and the Nasdaq Stock Market, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges or the Nasdaq Stock Market. Because we are not presently required to comply with many of the corporate governance provisions, we have not yet adopted these measures.

We do not currently have independent audit or compensation committees.committees  . As a result, the board of directors has the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our shareholders without protections against interested director transactions, conflicts of interest and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.

If the price of our Ordinary Shares is volatile once our Ordinary Shares commence trading on the OTC market, purchasers of Ordinary Shares could incur substantial losses.

The price of our Ordinary Shares is likely to be volatile, once our Ordinary Shares commence trading on the OTC market. As a result of this volatility, investors may not be able to sell their shares of Ordinary Shares at or above the initial public offering price. The price for our Ordinary Shares may be influenced by many factors, including general economic, industry and market conditions.

A decline in the market price of our Ordinary Shares could cause investors to lose some or all of their investment and may adversely impact our ability to attract and retain employees and raise additional capital. In addition, shareholders may initiate securities class action lawsuits if the market price of our shares drops significantly, which may cause us to incur substantial costs and could divert the time and attention of our management.

Moreover, we cannot assure you that any securities analysts will initiate or maintain research coverage of our company and of Ordinary Shares. We do not control analysts or the content and opinions included in their reports. The price of our Ordinary Shares could decline if one or more equity research analysts downgrade our Ordinary Shares or if analysts issue other unfavorable commentary or cease publishing reports about us or our business.

We do not intend to pay cash dividends on our Ordinary Shares in the foreseeable future.

We do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain our future earnings, if any, to fund the development and growth of our business. In addition, the right of holders of our Ordinary Shares to receive dividends declared by our board of directors may be restricted to the extent we issue preferred shares with dividend rights superior to those of our Ordinary Shares.

Shares of the Company’sOur Ordinary Shares represent equity interests and are subordinate to existing and future indebtedness.

Our Ordinary Shares represent equity interests in our Company and, as such, rank junior to any indebtedness of our Company now existing or created in the future, as well as to the rights of any preferred shares that may be issued in the future. In the future, we may incur substantial amounts of debt and other obligations that will rank senior to our Ordinary Shares or to which our Ordinary Shares will be structurally subordinated.

If we cease to qualify as a foreign private issuer, we would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers, and we would incur significant additional legal, accounting and other expenses that we would not incur as a foreign private issuer.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors, and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States domestic issuers, and we are not be required to disclose in our periodic reports all of the information that United States domestic issuers are required to disclose. While we are currently qualified as a foreign private issuer, we may cease to qualify as a foreign private issuer in the future.

Anti-takeover provisions in our amended and restated memorandum of association and articles of association may discourage, delay, or prevent a change in control.

Some provisions of our amended and restated memorandum and articles of association, may discourage, delay, or prevent a change in control of our company or management that shareholders may consider favorable, including, among other things, the following:

Our board of directors may decline to register transfers of Ordinary Shares in certain circumstances.

Our board of directors may, in its sole discretion, decline to register any transfer of any Ordinary Share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any Ordinary Shares unless (i) the instrument of transfer is lodged with us, accompanied by the certificate for the shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is properly stamped, if required; (iv) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed four; (v) the shares conceded are free of any lien in favor of us; or (vi) a fee of such sum as our board of directors may from time to time require, is paid to us in respect thereof.

If our directors refuse to register a transfer they shall, within one month after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year.

The laws of the Cayman Islands may not provide our shareholders with benefits comparable to those provided to shareholders of corporations incorporated in the United States.

Our corporate affairs are governed by our amended and restated memorandum and articles of association, by the Companies Law (Revised) of the Cayman Islands and by the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law in the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands and from English common law. Decisions of the Privy Council (which is the final Court of Appeal for British overseas territories such as the Cayman Islands) are binding on a court in the Cayman Islands. Decisions of the English courts, and particularly the Supreme Court and the Court of Appeal are generally of persuasive authority but are not binding in the courts of the Cayman Islands. Decisions of courts in other Commonwealth jurisdictions are similarly of persuasive but not binding authority. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands has a less developed body of securities laws relative to the United States. Therefore, our public shareholders may have more difficulty protecting their interests in the face of actions by our management, directors or controlling shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

You may be unable to present proposals before annual general meetings or extraordinary general meetings not called by shareholders.

Cayman Islands law provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our amended and restated articles of association allow our shareholders holding shares representing in aggregate not less than 10% of our voting share capital in issue, to requisition a general meeting of our shareholders, in which case our directors are obliged to call such meeting. Advance notice of at least 21 clear days is required for the convening of our annual general shareholders’ meeting and at least 14 clear days’ notice any other general meeting of our shareholders. A quorum required for a meeting of shareholders consists of at least one shareholder present or by proxy, representing not less than one-third in nominal value of the total issued voting shares in our company.

If we are classified as a passive foreign investment company, United States taxpayers who own our Ordinary Shares may have adverse United States federal income tax consequences.

A non-U.S. corporation such as ourselves will be classified as a passive foreign investment company, which is known as a “PFIC,” for any taxable year if, for such year, either

Passive income generally includes dividends, interest, rents and royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our Ordinary Shares, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.

Item 4. INFORMATION ON THE COMPANY

A.History and Development of the Company

We were incorporated in the Cayman Islands on February 24, 2017. Our PRC operating company, Liulin Junhao Coal Trade Co. Ltd.Shanxi Jinxuan, was incorporated as a PRC entity pursuant to PRC law on October 16, 2012. On April 25, 2019, the shareholders of Liulin Junhao Coal Trade Co. Ltd. consented to changing the company’s name to Shanxi Jinxuan Investment Co. Ltd., effective immediately. Pursuant to PRC laws, each entity formed under PRC law shall have a certain business scope approved by the Administration of Industry and Commerce or its local counterpart. As such, Liulin Junhao’sShanxi Jinxuan’s business scope is to engage in the tradingdistributing and reselling of coking coal, its main operation, as well as the investment in coking coal.operation.

We were incorporated by our controlling shareholder Mr. Xiangyang Guo. We directly hold 100% of the equity interests of Jinxuan JH Limited,BVI, a limited company formed in the British Virgin Islands.Islands in 2017. Jinxuan JH LimitedBVI holds 100% of the equity interests of each of Jacqueline G.D International Limited (“Jacqueline HK”)HK, a limited liability company established in Hong Kong in 2017, and Junhao Coking Coal International Holding Limited (“Junhao International”).HK, a limited liability company established in Hong Kong in 2017. Jacqueline HK holds a 25% equity interest in Liulin Junhao,Shanxi Jinxuan, and Junhao InternationalHK holds a 75% equity interest in Liulin Junhao.Shanxi Jinxuan. Neither Jacqueline HK nor Junhao InternationalHK has any business operation other than being a pass-through entity and holding the 25% and 75% equity interests in Liulin Junhao,Shanxi Jinxuan, respectively.

On December 31, 2016, Mr. Xiangyang Guo acquired 72% of the equity interestinterests in Liulin JunhaoShanxi Jinxuan and became its controlling shareholder. Between June 19, 2017 and August 5, 2017, we acquired 100% of the equity interests of Liulin Junhao,Shanxi Jinxuan, through a series of transactions with the then shareholders of Liulin Junhao,Shanxi Jinxuan, including Mr. Xiangyang Guo. More specifically, on June 19, 2017, Junhao InternationalHK acquired the 75% equity interest of Liulin Junhao,Shanxi Jinxuan, and Merit Sky Holding Limited, a Hong Kong limited company then controlled by Mr. Bingshan Guo, acquired the 25% equity interest of Liulin JunhaoShanxi Jinxuan (which was subsequently transferred to Jacqueline HK on July 16, 2017).

As such, our controlling shareholder Mr. Xiangyang Guo has had a controlling ownership interest in Liulin JunhaoShanxi Jinxuan since January 1, 2017. In order to help our investors understand our de facto historical financial conditions and business operations, the financial statements of Liulin Junhao, our operating entity, for the fiscal years ended December 31, 2016 and 2017, are included in this annual report.

Our principal executive offices are located at T4-1802-1812, Huarun building, No.1 Changxin road, Wanbailin District  , Taiyuan, Shanxi, PRC, and our phone number is + 86–351–7020402. We maintain a corporate website at http://www.bestjxjm.com. The information contained in, or accessible from, our website or any other website does not constitute a part of this annual report.

For information regarding our principal capital expenditures,, see “Item 5. Operating and Financial Review and Prospects—Prospects — B. Liquidity and Capital Resources—Resources — Capital Expenditures.”

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting and financial disclosure requirements that are applicable to other public companies, that are not emerging growth companies, including, but not limited to, (1) presenting only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations in this annual report, (2) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (3) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (4) exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We intend to take advantage of these exemptions.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. As a result, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We could remain an emerging growth company for up to five years, or until the earliest of (1) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (2) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Ordinary Shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months, or (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.

Foreign Private Issuer Status

We are a foreign private issuer within the meaning of the rules under the Exchange. As such, we are exempt from certain provisions applicable to United States domestic public companies. For example:

B.Business Overview

Through Liulin Junhao,Shanxi Jinxuan, our operating company, we are a Shanxi Province-based manufacturerdistributor and supplierseller of blended coking coal, also known as metallurgical coke, whichthat is primarily used to produce coke. Coke produced by coking facilities is used mainly in the steel-making process by steel mills. Liulin Junhao is notWe provide two types of services, namely blended coking coal distribution services and agent services to our customers. Prior to the fiscal year ended December 31, 2019, we were a coal mining operationmanufacturer and it does not own any coal mines.supplier of blended coking coal. We started generating revenue in the year ended December 31, 2015, when we generated revenue of $20,270 acting as an agent for coking coal trade for a related third party, Shanxi Yidayang Coal Transportation Co. Ltd. Our coking coal production operation started generating revenue in the year ended December 31, 2016, with $19,589,747 and 100% of our revenue derived from blended coking coal.2015. For the year ended December 31, 2017, revenue from blended coking coal was $79,946 and 44% of our revenue, and revenue from agent fee from third parties was $99,811 and 56% of our revenue. For the year ended December 31, 2018, revenue from blended coking coal was $6,684,112 and 99% of our revenue, and revenue from agent fee from third parties was $37,616 and 1% of our revenue. DuringFor the fiscal year ended December 31, 2018, the majority2019, revenue from blended coking coal was $5,219,06and 82% of our revenue, generatedand revenue from blended coking coal. With respect to our agent fee from third parties we acted as an agent for coking coal trade for third parties in the year ended December 31, 2017, but as we strive to secure raw coking coal supplies, we expect our operation to generate a majoritywas $1,166,929 and 18% of our revenue through manufacturing and sales ofrevenue.

For our blended coking coal distribution services, we distribute blended coking manufactured by Liulin Xin’an Yuanda Coal Co., Ltd. ("Xin'an Yuanda" or "Partner Manufacturer") to customers. In September 2019, we entered into a cooperation agreement (the “Cooperation Agreement”) with Xin’an Yuanda through our subsidiary Shanxi Jinxuan, pursuant to which Xin’an Yuanda shall produce blended coking coal according to our instructions and under our supervision. Our technical personnel directs the mixing ratio of the products on site and supervises the entire blending process. Pursuant to the Cooperation Agreement, Xin’an Yuanda purchases raw coal according to our specifications, provides coal washing and blending plants, provides manufacturing facilities, and operates such facilities. We obtain ownership of the blended coking coal after the blending process completes. Therefore, we act as the principal and recognize revenue in the amount of total consideration charged to customers, upon the completion of our performance obligation. The Cooperation Agreement is a framework agreement which remains effective for one year ended December 31, 2018.since September 26, 2019.

Our primary raw materials are various grades of coking coal whichThe products we typically source from our suppliers, usually coal washing or cleaning plants. Our facility is located in Liulin County, Shanxi Province, an area known as China’s “King of Coal,” known for its high-quality raw coking coal. Currently, suppliers that we have working relationship with are primarily based in Shanxi Province, China, at close proximity to our facility.

Our productsdistribute are batches of blended coking coal of a uniform mix that conform to our customers’ specifications. This is achieved by ourthe proprietary electric coking coal blender that blendsour Partner Manufacturer uses in blending and manufacturesmanufacturing coking coal raw materials of various grades and characteristics into the specified uniform mix.

For our agent services, we accept orders from our customers, purchase blended coking coal that meets the specific requirements of the customers, and hire third-party carriers to deliver blended coking coal products to the premises of our customers. We sign contracts with customers, suppliers and carriers separately. Unlike with respect to our Partner Manufacturer, we do not provide instructions to or supervise the manufacturing process of the suppliers we cooperate with for our agent services.

Our current customers are primarily coke makingproducing companies and coking coal resellers. Our customers are all based in the PRC and currently mainly in Shanxi Province.

Our revenue is primarily generated through sales of our blended coking coal based upon customer specifications. For the fiscal yearsyear ended December 31, 2019, 2018, 2017, and 2016,2017, we generated revenue of $6,385,992, $6,721,728, $179,757, and $19,589,747$179,757 in the aggregate, respectively, with $1,166,929, $37,616, $99,811, and $nil$99,811 generated from agent fee from third parties, Shanxi Jinquan Energy Co. Ltd.parties. For the year ended December 31, 2019, 2018, 2017, and 2016,2017, we produced and sold a total of 36,845, 85,587, 806.35, and 221,303.47806, tons of coking coal, respectively. Our net income for the year ended December 31, 2019, was $946,535, net loss for the year ended December 31, 2018 was $61,924, and net loss for the year ended December 31, 2017 was $745,660, and net gain for$745,660. We incurred profit from our operations of $1,251,634 in the year ended December 31, 2016, was $749,561, respectively. We incurred2019, income from our operations of $33,985 in the year ended December 31, 2018, and losses from our operations of $746,538 in the year ended December 31, 2017, and income from our operations2017. All of $1,006,632 inthe blended coking coal we sourced for the year ended December 31, 2016. In the years ended December 31, 2018, 2017,2019 and 2016, 100%all of our raw materials, various grades of coking coal, for the years ended December 31, 2018 and 2017 were from suppliers based in Shanxi Province, the PRC. For the year ended December 31, 2018,2019, our revenue from product salesagent fees from third parties was $6,684,112 and 99%$1,166,929, or 18%. For the year ended December 31, 2018, our revenue from agent fees from third parties was $37,616, or 1%. For the year ended December 31, 2017, our revenue from agent fees from third parties was $99,811, andor 56% of our revenue, resulted from a significant decline in our sales of blended coking coal reflecting the wider coking coal supply and demand disequilibrium.revenue. See more detailed information in “Item 5. Operating and Financial Review and Prospects – D. Trend Information” in this annual report.

Our revenue in the year ended December 31, 2017 experienced decline mainly due to the coking coal production restrictions imposed at both the PRC national level and the Shanxi provincial level, which reduced the supply of coking coal raw materials in the PRC market by 4% in the first five months of 2017¹. As such, while our facility was able to operate at its full capacity, we had challenges securing the quantity of coking coke raw materials needed to fulfill our customer orders, and have primarily relied upon our coking coal reserve for the production in the year ended December 31, 2017. In response to the new challenge in the supply of coking coal, we have carried out our new strategy of establishing relationship with new suppliers, and identifying supplier targets to merge with and/or acquire. As we strive to secure raw coking coal supplies, we expect our operation to generate a majority of our revenue through manufacturing and sales of blended coking coal in the year ended December 31, 2018.

Marketing, Sales, and Customer Contracts

We maintain

As of December 31, 2019, we maintained our marketing and sales forces in-house in our corporate office with 10 employees, we also maintain trading, transportation and distribution, quality control and contract administration personnel as well as revenue management.two employees. We focus on meeting the needs and specifications of our customers rather than just focusing on generating more revenue. As such, our marketing efforts are centered on customer needs and requirements. By offering coking coal in grades of specific qualities of heat content, sulfur and ash, and other characteristics relevant to our customers, we are able to serve a diverse customer base.

We serve a limited number of customers and our top customers are a few coking coal resale companies and coke producing companies, including Shanxi Coking Coal Trade Co., Ltd., Hongxing, and Shanxi Tianli Zhicheng Trading Co., Ltd., consisting of 48%, 15%, 13% of our sales revenue in 2016, respectively.companies. For the year ended December 31, 2017, we served two customers, Shanxi Jinquan Energy Co. Ltd and Liulin County Xin’an Yuanda, Coking Coal Co. Ltd, consisting of 56%54% and 44%46% of our sales revenue, respectively. For the year ended December 31, 2018, we served four customers, Meijing,Meijin Wuzi, Hongyao, LichuangChuangli, and Meijingjiaohua,Meijin Jiaohua, consisting of 33%, 17%, 14% and 11% of our sales revenue, respectively. For the year ended December 31, 2019, we served two customers, Meijin and Meijin Yangqu, consisting of 99% and 1% of our sales revenue, respectively. We usually supply our customers a certain quantity of blended coking coal, during a three-monthone-month term, for a fixed price, pursuant to a form of sales order entered into in the ordinary course of business. When market volatility is significant, we will supply our blended coking coal on an adjusted price agreed by our customers. In the event we cannot agree on an adjusted price with our customer, the spot price of coking coal ofon the Dalian Futures Exchange will be used. Customer orders also typically contain provisions requiring us to deliver blended coking coal that meets quality thresholds for certain characteristics such as Btus, sulfur content, ash content, volatility and ash fusion temperature. We believe we are not dependent upon these customers and will be able to find new customers swiftly on commercially reasonable terms due to the following. First,because, with Shanxi Province being the largest coke producing province in the PRC market, our location’s proximity to other coking coal resellers and coke producing companies enable us to better access the market, build customer relationships, and swiftly transport and supply the blended coking coal needed by our customers. Second, our raw materials can easily be used to meet the specifications of new customers by utilizing our proprietary blending technology.

Competition

Virtually all of our blended coking coal sales are in the PRC market. Our major competitors are PRC-based companies that sell or provide blended coking coal to coke manufacturing facilities. We primarily compete with Shanxi Coking Coal Group Co., Ltd. and Shanxi Lasen Energy Co., Ltd., both of which are located in Shanxi Province. Some of our competitors are coke manufacturing companies with coking coal blending operations, such as Shanxi Coking Coal Group, who are much larger than us in operation and sales revenue, have greater financial capabilities and longer operating history. The principal factors on which we compete are coal prices, coal quality and characteristics, transportation costs, customer relationships and the reliability of supply. The demand for our coking coal is significantly dependent on the general economy in the PRC and the PRC domestic demand for steel.

¹ http://www.meitanjianghu.com/Newsc/newsDetailView?userId=&newsId=5fdaf83f-0b46-4f11-adfb-e08220e3d007&isShare=1

Suppliers

The primary supply used inFor the year ended December 31, 2019, we relied on one supplier, our business is raw coking coal.Partner Manufacturer, for blended coke coal needed for us to fill the orders of our customers. For the year ended December 31, 2018, we relied on four suppliers and our raw coking coal reserves to provide us with the raw coking coal needed for us to fill the orders of our customers, Xiaoyi Xindafu Trading Co., Ltd. which provided 24%60% of our raw materials, Shanxi Yidayang Coal Transportation Co. Ltd which provided 46%16% of our raw materials, and the remaining 30%24% provided by two other coking coal suppliers. We did not rely on our reserve for coking coal raw materials in the fiscal year ended December 31, 2018. For the year ended December 31, 2017, we did not source raw coking coal from our suppliers and relied upon our raw coking coal reserves. In 2015 and 2016, we have relied on two primary raw material suppliers, Xinfei, and Hongxing to provide raw materials that meet our specific specifications in grades such as water, ash, sulfur, volatility, and others. Hongxing was a related party of Liulin Junhao from March 1, 2015 to December 21, 2016, during which Beijing Jinxuan Investment Co., Ltd. (“Beijing Jinxuan”) was the 100% owner of Liulin Junhao and Feiyue Mao was the beneficial owner of Beijing Jinxuan and in turn of Liulin Junhao. During the same period and currently, Feiyue Mao was and is a general manager and legal representative of Hongxing. Xinfei primarily supplies low and medium-low sulfur coking coal, and 72% of our raw material cost is paid to Xinfei. Hongxing primarily supplies high sulfur coking coal and 28% of our raw material cost is paid to Hongxing. The terms of our supply orders with Hongxing were similar to those we typically have with other third parties.

We are located in Shanxi Province, a region with many alternative suppliers who have access to various coal mining fields in Shanxi, a region with relatively abundant coal reserves. As of the date of this report, we are solely dependent on one supplier, our Partner Manufacturer, for blended coking coal. While we believe that we are able to establish relationship with alternative suppliers on commercially reasonable terms in a relatively short period of time due to the impact of production restrictions imposed at both the PRC national level and the Shanxi provincial level in 2017, and our primary suppliers’ response by prioritizing supply orders to their bigger customers,if we experienced difficulty in meeting the demand forstop sourcing blended coking coal from our Partner Manufacturer for any reason, in the event that we fail to do so, our results of our customers in 2017, even though our facility was able to operate at capacity. In 2018, we were able to meet the demand for coking coal of our customers through our suppliers.

operations and financial position may suffer.

In response to the new challenge in the supply of coking coal, we have carried out our new strategy of establishing relationship with a larger number of new suppliers, and are more actively identifying supplier targets to merge with and/or acquire. As of the date of this annual report, we have not entered into supply agreements or supply orders with new suppliers. Our ideal targets are suppliers with a minimum annual supply capacity of 1 million ton. While we are actively identifying and discussing with supplier targets to merge and/or acquire, there is no guarantee that we will be able to locate appropriate targets in our desired timeline. As of the date of this annual report, no acquisition or merger agreements have been entered into.

We enter into supply orders in the ordinary course of business with our suppliers, pursuant to a form of supply order typically for a term of three to six months. Pursuant to our supply orders, our supplier will provide us with a certain quantity of coking coal raw materials of specified characteristics, for a fixed price. While the fixed price of short term orders does not entirely protect us against volatility in raw material prices, typically we have been able to and believe we will continue be able to transfer the volatility in raw material prices to our customers by renegotiating the prices of our finished products, or using the Dalian Futures Exchange’s spot price for coking coal.

Our Strategies

Our long-term object is to establish our company as the regional leader in the coking coal industry while continuing to expand our supplier and customer base. Our key strategies to achieve this objective are described below:

Types of Coal and Coking Coal Characteristics

Physical and chemical characteristics of coal are very important in measuring quality and determining the best end use of particular coal types. Coal is generally classified as either coking coal or thermal coal (also known as steam and industrial coal). Sulfur, ash and moisture content as well as coking characteristics are key attributes in grading metallurgical coal while heat value, ash, and sulfur content are important variables in rating thermal coal.

We currently manufacture,distribute, market and transport blended coking coal with specific characteristics that meet the specifications of each of our customers, by blendingsourcing blended coking coals from our Partner Manufacturer with the various grades in characteristics, such as heat value, sulfur content, ash and moisture content, strength and volatility.

Coking coal is classified into three major categories of hard coking coal (“HCC”), semi-soft coking coal, and pulverized coal injection coal (“PCI”). PCI coal is not used in coke making but is rather injected directly into the lower region of blast furnaces to supply both energy and carbon for iron reduction. The use of PCI can be a substitute for some of the metallurgical coke that would otherwise have been used.

Thermal and industrial coal is the most abundant form of coal and is commonly referred to as steam coal. Such coal has a relatively high heat value and has long been used for steam generation in electric power and industrial boiler plants.

Anthracite coal is commonly used as a reduction agent for various applications such as briquetting, charcoal, and iron ore pellets. Anthracite coal is a crossover coal and has been successfully used in the PCI coal market.

Coking coal is high-grade bituminous coal used to produce coke. Specifically, coking coal is a carbon material resulting from the manufactured purification of multifarious blends of bituminous coal.

Coking coal is primarily used to produce coke, which is primarily utilized in the production of steel by steel mills. 1.4 to 1.6 ton of coking coal is needed to manufacture 1 ton of coke. Specifically, coke is a solid carbonaceous residue derived from coking coal from which the volatile constituents are driven off by baking in an oven without oxygen at high temperatures. Coke is produced by heating particulate coals of very specific properties in a refractory oven in the absence of oxygen to about 1,100 °C (2000 °F) or as high as 2,000 °C. As temperature increases inside the coal mass, it melts or becomes plastic, fusing together as devolatilization occurs, and ultimately resolidifies and condenses into particles large enough for blast furnace use. During this process, much of the hydrogen, oxygen, nitrogen, and sulfur are released as volatile by-products, leaving behind a poorly crystalline and porous carbon product. The quality and properties of the resulting coke is inherited from the selected coals, as well as how they are handled and carbonized in coke plant operations. In terms of coal properties, coke quality is largely influenced by coal rank, composition (reactive and inert macerals and minerals), and an inherent ability when heated to soften, become plastic, and resolidify into a coherent mass.

Bituminous coal must meet a set of criteria for use as coking coal as determined by particular coal assay techniques. These include moisture content, ash content, sulfur content, volatile content, tar and plasticity. The greater the volatile matter in coal, the more by-products can be produced. It is generally considered that levels of 26% to 29% percent of volatile matter in the coal blend are good for coking purposes. Thus different types of coal are proportionally blended to reach acceptable levels of volatility before the coking process begins.

PRC Coking Coal Resources and Reserves

Even though coal is generally an abundant resource in the PRC, coking coal reserves are much smaller.

TheAccording to a report on PRC coking coal issued by Changjiang Securities Co., Ltd. dated September 11, 2018, the identified coal reserves in the PRC consist of a majority of gas coal (1/3 of which is coking coal), while coking coal and fat coal constitute 23% and 13% of the coal reserves in China, respectively. China’s identified coking coal reserves amounts to 280,360 million tons, constituting 13% of the world’s coking coal reserves. Approximately 80% of coking coal resources in the PRC considered easy to mine, i.e. buried within 1 km underground, are located in Shanxi Province and Guizhou Province. Shanxi Province has identified 169.46 billion tons of coking coal in their reserves, accounting for 56% of the national coking coal reserves; 33.16 billion tons of which are obtainable, accounting for 51.3% of all obtainable coking coal in the country. The coking coal identified as well as obtainable in Shanxi Province’s ranks first in the PRC. The provinces ranked second, third, fourth, and fifth in identified coking coal reserves are Anhui Province with 23.62 billion tons, Shandong Province with 17.27 billion tons, Guizhou Province with 9.96 billion tons, and Heilongjiang Province with 9.82 billion tons.

Coking coal, especially high-quality coking coal is an important material for steel production. However, coking coal, especially high-quality coking coal has become a scarce resource in the PRC due to inappropriate mining or extraction where exhaustive mining has continued for quite some time, and high-quality coals were extracted and utilized as low-quality coals. Because of the scarcity of the coking coal resource, high-quality coking coal sometimes need to be imported from other countries. Australia isIn 2019, Mongolia was China’s largest coking coal import supplier, accounting for 11%10.9% of annual coking coal consumption in the PRC market.

Liulin Coal

The qualities of extracted coking coal in the PRC vary significantly from region to region, and from mine to mine. Coking coal with less than 1 percent sulfur content is generally considered high-quality coking coal, and the coal reserve in the PRC has a limited quantity of identified high-quality coking coal, especially outside of the Shanxi Province. Coking coal extracted from the Shanxi Liulin region is generally high-quality coking coal with low ash and sulfur content, while the No.4 Coking Coal of Central Hedong Coalfield, in the Shanxi Liulin region, is a rare type of high-quality coking coal. OurThe raw materials used by our Partner Manufacturer are mainly sourced from Shanxi Liuliu mines, and from time to time we source coking coal from No.4 Coking Coal of Central Hedong Coalfield.Liulin mines.

We generallyrequire our Partner Manufacturer to source and produce with coking coal raw materials with less than 1 percent sulfur content, and we areit is able to consistently produce blended coking coal with an approximately 0.8% sulfur content. According to the coal quality classification of People’s Republic of China, a sulfur content of 0.71-0.95% is classified as medium-lower-sulfur coal.

Coking Coke Blending Process

Blended coking coal is primarily used in coke making (for steel making blast furnaces) and electric power generation. We are a manufacturer of blended coking coal that is primarily used for coke making.

After coal is extracted from coal mines, the coal may be processed by a coal washing facility or coal preparation facility where coal is refined or cleaned of impurities. Coal preparation or washing plants are designed to control clean coal quality to meet contract quality specifications and normally focus on ash, sulfur, calorific value, size, and moisture contents of the clean coal. The coking quality of clean metallurgical coal is evaluated, but generally only limited attempts are made to influence it by changing operating conditions in the plant. 100% of the coking coal raw materials that we source are washed or prepared.

Washed or unwashed coking coal is then blended to produce coking coal of certain characteristics and grades suitable for coke making. Bituminous class coals of high volatile A, medium volatile, and low volatile rank possess the necessary properties, but not all produce a coke of desirable quality and some even may be detrimental to coke ovens. To compensate for the lack of individual coking coals with all the necessary properties, typically, blends of anywhere from 2 to 20 different coking coals are used in today’s coke making operations. These coking coal blends must be managed to optimize coke quality and reduce the cost of raw materials. Individual coals and coal blends need to have the proper proportions of reactive and inert components, must have a relatively low concentration of alkalis-containing minerals, low ash and sulfur yields and be sufficiently thermoplastic to bind all of the components together. At the same time they must provide a level of contraction that will allow the coke mass to be easily removed from a coke oven.

Coking coal blending is the process of mixing coking coal to achieve quality attributes that are desirable for the coal’s intended application, such as steam generation and coking. Bituminous coal must meet a set of criteria for use as coking coal, determined by particular coal assay techniques. These include moisture content, ash content, sulfur content, volatile content, tar, and plasticity. Blending coking coal is targeted at producing a coke of appropriate strength (generally measured by coke strength after reaction), while losing an appropriate amount of mass. As such, different blended coking coal of various characteristics is needed for use in the coke producing process. Other blending considerations include ensuring the coke does not swell too much during production and destroy the coke oven through excessive wall pressures.

Steel production is highly dependent on high-quality coking coal feedstock. Steel is a key component of manufacturing activities and, more generally, economic development. Based on information from Sina Finance, askci.com, worldsteel.org¹, and gold678.com², China’s steel consumption totaled 672 million ton in 2015, 800 million ton in 2016, and 757 million ton in 2017, or 44.8%, 52.5%,and 44.7% of total global steel consumption, respectively. We expect that China’s growing appetite for steel production to continue for the next few years. While China’s demand for steel grows, the central government and other local governments have taken steps to modernize the coal, coking and steel making industries. Starting from 2011, the Shanxi provincial government is not approving new minds that produce less than 30 million ton output per year, are closing mines that produce less than 30 million ton output per year and are consolidating existing mines into larger mines with outputs between 300,000 and 900,000 ton, in an effort to streamline coal mining and processing facilities around fewer and larger operations for safety and environmental reasons, as well as industry economies of scale.

¹ https://www.worldsteel.org/zh/dam/jcr:e5a8eda5-4b46-4892-856b-00908b5ab492/SSY_2018.pdf

² http://finance.sina.com.cn/roll/2016-06-07/doc-ifxsuypf5138615.shtml, dated June 7, 2016; http://finance.sina.com.cn/money/future/indu/2017-06-01/doc-ifyfuvpm6997013.shtml dated June 1, 2017; http://www.askci.com/news/chanye/2015/02/05/21010tar8.shtml dated February 5, 2015; http://www.gold678.com/C/20170306/201703061053332175.html dated March 6, 2017.

We have developed a proprietary machine, an electric coal-blending machine that can blend raw coal from different sources and of different grades, to produce coking coals that meet each of the clients’ specifications including moisture content, ash content, sulfur content, volatile content, tar, and plasticity. Our software applications first calculate the characteristics such as sulfur level and ash level and ratio of coking coal raw materials, through various software model calibrations. Our electric coal-blending machine then blends the coking coal based upon the specification results.

Our automatic coal blending process consists of the following: our coal machine first weighs the raw coal and then transports the coal through a conveyor belt to a screening system, which places different kinds of raw coal into their respective coal storage tanks. Through the adjustment of the coal feeder’s gate, the output size of the raw coal is controlled. After the screening process, the sorted coal is then sent to the coal blender and passes through the helical blade mounted on a pair of diametrically opposed biaxials, which ensures the exercise of all three dimensions of the material—radial, toroidal, and axial. During the blending process, the coal is continuously mixed multiple times to achieve a uniform mix in a short period of time. The end products will then be transported through the overhead conveyor belt to be stored or shipped, as the case may be.

Our access to high-quality coking coal raw materials and our proprietary blending technology have enabled us to produce blended coking coal that has consistently met the quality expectation and specifications of our customers.

Pricing and Backlog

To date, we price our blended coking coal on an order-to-order basis, based on Dalian Futures Exchange’s coking coal spot price, adjusted for both the qualities and characteristics of coking coal raw materials used for each order, and the qualities and characteristics of blended coking coal products. We sell our blended coking coal primarily to coke making facilities and coking coal resellers on an as-needed basis. Due to the variability and fluctuation of the PRC market price of blended coking coal, we enter into fixed term and fixed price sales orders that allow price adjustment. Our sale contracts are usually for a period of three months and we typically do not have long-term sales contracts, but we intend to maintain close business relationships with our major customers. Our sales orders with customers generally contain provisions that permit the parties to adjust the contract price of the blended coking coal upward or downward with the fluctuation of PRC market prices of raw coking coal, represented by the coking coal spot price of Dalian Futures Exchange. For example, we may adjust these contract prices because of increases or decreases in the price of raw coal from our suppliers, general inflation or deflation, or changes in the cost of producing blended coking coal caused by such things as changes in taxes, fees, royalties or the laws regulating the mining, production, sale or use of coal. However, if we fail to agree on an adjusted price with our customers under these provisions, the sales orders shall be executed at the PRC market price represented by coking coal spot price of Dalian Futures Exchange. In China, the purchase price of coking coal fluctuated greatly between RMB1,138 ($165) per ton and RMB1,438 ($208) per ton, in the period from January 2019 to December 2019, with an increase trend. The purchase price of coking coal fluctuated greatly between RMB1,091 (approximately $165) per ton and RMB1,464RMB1,461 (approximately $221) per ton, in the period from January 2018 to December 2018. The purchase price continues to fluctuate due to the demand exceeding supply in the PRC market coupled with import restrictions by the PRC government; however, in 2017 and 2018, the export demand for coking coal produced in the PRC has also increased. The purchase price of coking coal fluctuated greatly between RMB949 (approximately $138.3) per ton and RMB1,361.5 (approximately $206.2) per ton, in the period from January 2017 to December 2017, with a generally increasing trend. The purchase price of coking coal fluctuated greatly between RMB510 (approximately $75.22) per ton and RMB1,177 (approximately $173.61) per ton, in the period from January 2015 to December 2016, with a generally increasing trend. Top quality raw coking coal is critical for us to maintain our operating efficiencies and deliver blended coking coal to our customers which meets their specifications. Since top quality raw coking coal is more limited in supply, its price tends to be more volatile. A general rise in coking coal prices also may adversely affect the price of, and demand for, coke and products made with coke such as pig iron, steel and concrete. This may in turn lead to a fall in demand for our products.

We generally have not employed forward contracts or other financial instruments to hedge commodity price risk.

Our annual operating capacity for manufacturing and blending coking coal is 1 million tons. We are currently 1% at capacity. We intend to gradually increase our operating output to reach our capacity, before investing in new equipment to expand our operating capacity.

Inflation

Inflation has not had a material effect on our business because our supply orders and sales orders are both based in RMB, and we do not anticipate that inflation will materially affect our business in the foreseeable future

Seasonality

We believe our operation and sales do not experience seasonality.

Properties and Facilities

Prior to November 2018,January 2019, our corporate officeblending and manufacturing facility was located at South Zhonghuan Street 529, C-12, rooms 1204inside the Hongxing’s plant in Liulin County, 6,889.04 square meter (74,153 square feet). We subleased three offices, and 1205, Taiyuan, Shanxi, PRC at 290 square meters, which we had leasedadditional land to house our blending facility from Hongxing, for an annual rent of RMB 79,387.50,130,000 payable annually, with a term from an unrelated third-party.January 1, 2015, to December 31, 2020. The termproduction and operation of thisour company was carried out in the blending and manufacturing facility. Pursuant to our lease was from December 1, 2016,agreement with Hongxing, the lease agreement may be terminated by either Hongxing or us, with written notice to the other party three months in advance, and expired on November 30, 2018. We did not seek renewal or extensionthe terminating party shall pay the other party a termination fee in the amount of RMB 65,000 (approximately $9,750), which is 10% of the total rent amount for the entire lease term.

Interm from January 1, 2015 to December 2018, our corporate office was located at 8/F, Hongan Building, 84 Jin'an Street, Xiaodian District, Taiyuan, Shanxi, PRC at 67.62 square meters, which we lease for an annual rent of RMB88,000, payable annually, from an unrelated third-party. The term of this lease is from December 1, 2018,31, 2020. We elected to November 30, 2019. The corporate office was used for administrative and executive functions. This space is now used for storage.  

Beginningterminate the agreement in January 2019 and changed our corporatebusiness address.

Our office is located at T4-1802-1812, Huarun building,Building, No.1 Changxin road, Wanbailin District, Taiyuan, Shanxi, PRC at 816.96 square meters, which we lease for an annual rent of RMB680,000,RMB 680,000, payable annually, from an unrelated third-party. The term of this lease is from January 11, 2019, to March 31, 2022. The corporate office is used for administrative and executive functions.

We believe our blending and manufacturing facility and our corporate offices areoffice is sufficient for our current operation.

Employees

As of the date of this annual report, we had approximately 1815 employees, all of which are full-time. There is no labor union. We believe our relations with our employees are good.

Intellectual Property

We do not have any registered patents or other intellectual property and we rely on the confidentiality of our proprietary blending processes in producing a competitive product.product  . We may not be able to maintain the confidentiality of our blending processes.

Legal Proceedings

From time to time, we are subject to legal proceedings, investigations and claims incidental to the conduct of our business. We are not currently a party to any legal proceeding or investigation which, in the opinion of our management, is likely to have a material adverse effect on our business, financial condition or results of operations.

Regulations

The following summarizes the principal PRC regulations related to our business operations.

Regulations related to blended coking coal operation

OurBlended coking coal products are subject to price supervisions by the relevant PRC government bodies pursuant to the Law of the PRC on the Coal Industry (Revised in 2016) (“Coal(the “Coal Industry Law”). Our manufacturingdistribution and sales operationsale of blended coking coal is subject to the supervision and administration of relevant PRC government bodies pursuant to The Measures for the Supervision and Administration of Coal Business Operation.Industry Law.

The Coal Industry Law

The Law of the PRC on the Coal Industry (“Coal Industry Law”)Law was adopted on August 29, 1996, by the Standing Committee of the National People’s Congress (“NPCSC”) of the PRC and was revised in 2009, 2011, 2013, and 2016 respectively. The latest revised Coal Industry Law was effective as of November 7, 2016. According to the Coal Industry Law (revised in 2016), the coal mining enterprise shall gain a production safety license before a coal mine is put into production. Any enterprise that has not gained a production safety license may not be engaged in coal mining production. According to the Coal Industry Law (revised in 2016), coal trading enterprises shall abide by the relevant laws and regulations, improve services and ensure supply. Any illegal marketing activities shall be prohibited.

The Coal Industry Law (revised in 2016) also provides that the price administration department under the State Council, together with the department in charge of the coal industry under the State Council and other relevant departments, shall have the power to exercise supervision and control over the price of coal, that the quality of coal supplied to customers by coal mining and coal trading enterprises shall meet the national or trade standards and the quality of a specific type of coal shall match its grade and price, and that unified control shall be maintained over the import and export of coal in accordance with the relevant regulations of the State Council according to the Coal Industry Law.

According to the Measures for the Administration of Quotas for the Export of Coal, an order jointly issued by NDRC, Ministry of Commerce (“MOFCOM”), and the General Administration of Customs in January 2004, China’s coal exports have been subject to a government approval system since July 1, 2004, under which the NDRC and the MOFCOM are responsible for determining the total volume of China’s coal export quota and allocating the quota among the authorized coal exporters. The total quota will take into consideration China’s economic needs, national use of coal resources, the PRC government’s economic policy and the dynamics in the domestic and international coal markets.

As a manufacturerdistributor of coking coal, that does not operate a coal mine, we also do not import raw materials, nor do we export our products, and therefore we are not subject to the relevant production and/or export and import quotas. Our sales orders and supply orders are executed with prices that abide by the relevant rules and guidance.

The Measures for the Supervision and Administration of Coal Business Operation

Environmental Protection Laws

China has adopted extensive environmental laws and regulations that affect operation of coal production, storage, and transportation. There are national and local standards applicable to emissions control, discharges to surface and subsurface water and the generation, handling, storage, transportation, treatment, and disposal of waste materials. Pursuant to the PRC Environmental Protection Law (Revised in 2014), the competent department of environmental protection under the State Council shall supervise and manage environmental protection work throughout the country in a unified manner. The competent departments of environmental protection of the local people’s governments at the county level or above shall supervise and manage environmental protection work within their respective administrative areas in a unified manner. According to the Measures, any person or entity engaging in coal business operation shall ensure the quality of the coal and promote the environmental protection in conformity with the relevant laws, regulations and rules, coal industry policies and industrial standards. The coal storage yard for coal business operation use shall be scientific and reasonable in layout and conform to the overall plan for land utilization. The coal business operators shall take necessary measures to reduce dust emission in an unorganized manner during the course of coal loading and unloading, storage, processing and transportation.

We have abided by and plan to continue to abide by the relevant PRC environment protection law in our business operation. The Environmental Protection Bureau of Liulin County issued Liulin JunhaoShanxi Jinxuan a certificate on August 3, 2017 certifying that since January 1, 2015, Liulin JunhaoShanxi Jinxuan has abided by national and local laws and regulations on environmental protection, there has been no unlawful act in our operation, and that Liulin JunhaoShanxi Jinxuan has not been subjectedsubject to any environmental administrative penalty or complaint. For the fiscal yearyears ended December 31, 2019, 2018 Liulin Junhao hasand 2017, Shanxi Jinxuan had not been subjectedsubject to any environmental administrative penalty or complaint.

Provisions on Foreign Investment

All limited liability companies and joint stock limited companies incorporated and operating in the PRC are governed by theCompanyThe Foreign Investment Law of the People’s Republic of China,PRC, or the “CompanyForeign Investment Law,” which was amended and promulgatedformally adopted by the Standing Committee2^nd session of the thirteenth National People’s Congress on December 28, 2013,March 15, 2019, and came into effectbecame effective on MarchJanuary 1, 2014. In the latest amendment, paid-in capital registration, minimum requirement of registered capital and timing requirement of capital contribution were abolished.2020. The Foreign invested projects must also comply with the CompanyInvestment Law with exceptions as specified inis formulated to further expand opening-up, vigorously promote foreign investment laws.

With respect toand protect the establishmentlegitimate rights and operationinterests of wholly foreign-owned projects, or “WFOE,” the MOFCOM, and the National Development and Reform Commission, or “NDRC,” promulgated the Catalogue of Industries for Guiding Foreign Investment, or the Catalogue, as amended from time to time and an amendment was on June 28, 2017, which took effect on July 28, 2017 (“Catalogue (2017)”) and replaced the previous amendment (“Catalogue (2015)”). On June 28, 2018, the MOFCOM and NDRC promulgated the Special Measures for Foreign Investment Access (2018 version), or the “2018 Negative List,” terminating Catalogue (2017). The 2018 Negative List serves as the main basis for management and guidance for the MOFCOM to manage and supervise foreign investments. The 2018 Negative List divides industries for foreign investment into three categories: encouraged, restricted, and prohibited. Those industries not deemed to be “restricted” or “prohibited” shall be classified as industries permitted for foreign investment.investors. According to the 2018 Negative List,Foreign Investment Law, foreign investments are entitled to pre-entry national treatment and are subject to negative list management system. The pre-entry national treatment means that the treatment given to foreign investors and their investments at the stage of investment access is not lower than that of domestic investors and their investments. The negative list management system means that the state implements special administrative procedures for access of foreign investment in specific fields. Foreign investors shall not invest in any forbidden fields stipulated in the negative list and shall meet the conditions stipulated in the negative list before investing in any restrictive fields. According to the most updated negative list, the processing and selling of blending coking coal is neither restricted nor prohibited.

On September 3, 2016,

Foreign investors’ investment, earnings and other legitimate rights and interests within the Standing Committeeterritory of China shall be protected in accordance with the law, and all national policies on supporting the development of enterprises shall equally apply to foreign-invested enterprises. The state guarantees that foreign-invested enterprises participate in the formulation of standards in an equal manner. The state guarantees that foreign-invested enterprises participate in government procurement activities through fair competition in accordance with the law. The State shall not expropriate any foreign investment except under special circumstances. In special circumstances, the state may levy or expropriate the investment of foreign investors in accordance with the law for the needs of the National People’s Congress promulgatedpublic interest. The expropriation and requisition shall be conducted in accordance with legal procedures and timely and reasonable compensation shall be given. In carrying out business activities, foreign-invested enterprises shall comply with relevant provisions on labor protection, social insurance, tax, accounting, foreign exchange and other matters stipulated in laws and regulations.

From January 1, 2020, the DecisionWholly Foreign-Owned Enterprises Law of the Standing Committee of the National People’s Congress on Amending Four Laws IncludingPRC, together with the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises (the “Decision”),Sino-Foreign Equity Joint Ventures and the Law of the People’s Republic of China on Sino-Foreign Cooperative Joint Ventures shall be abolished. The organization form, organization and activities of foreign-invested enterprises shall be governed by the laws of the Company Law of the People’s Republic of China and the Partnership Enterprise Law of the People’s Republic of China. Foreign-invested enterprises established before the implementation of the Foreign Investment Law may retain the original business organization and so on within five years after the implementation of the Foreign Investment Law.

On December 26, 2019, the State Council promulgated the Implementation Regulations on the Foreign Investment Law, which provides record-filing in lieucame into effect on January 1, 2020, and it further requires that foreign-invested enterprises and domestic enterprises shall be treated equally with respect to policy making and implementation. Pursuant to the Implementation Regulations on the Foreign Investment Law, if the existing foreign-invested enterprises fail to change their original forms as of administrative approvalJanuary 1, 2025, the relevant market regulation departments will not process other registration matters for the establishmentsenterprises, and alterations of foreign invested enterprises (the “FIEs”) not subjectmay disclose their relevant information to special administrative measures. the public.

On October 8, 2016, the MOFCOM issued the Interim Measures for Record-filing for the Establishment and Alteration of Foreign-invested Enterprises (the “Interim Measure”), andDecember 30, 2019, the MOFCOM and the NDRCState Administration for Market Regulation jointly issued a statement (the “Joint Statement”), clarifying that the special administrative measures in this case are implemented by referencingMeasures for Reporting of Foreign Investment Information, or the Catalogue. To be specific,Foreign Investment Information Measures, which came into effect on January 1, 2020 and replaced the special administrative measures to be implemented areInterim Administrative Measures for the restrictedRecord-filing of the Establishment and prohibited industry categories as well as encouraged industry categories having shareholding and executive management requirements prescribedModification of Foreign-invested Enterprises. Since January 1, 2020, for foreign investors carrying out investment activities directly or indirectly in the Catalogue. Since then, FIEPRC, foreign investors or foreign-invested enterprises shall submit investment information through the Enterprise Registration System and the National Enterprise Credit Information Publicity System operated by the State Administration for Market Regulation. Foreign investors or foreign-invested enterprises shall disclose their investment information by submitting reports for their establishments, modifications and alterations that are not subject to special administrative measures have been changed from a pre-approval system to a more standardizedcancellations and convenient filing process. On June 30, 2017,their annual reports in accordance with the MOFCOM further revised the “Interim Measures”. The modification includes among others that where a non-foreign-invested enterprise changes intoForeign Investment Information Measures. If a foreign-invested enterprise due to acquisition, consolidation by merger or otherwise, which is subject to record-filing as stipulatedinvesting in the Measures, it shall completePRC has finished submitting its reports for its establishment, modifications and cancellation and its annual reports, the record-filing formalities for incorporationrelevant information will be shared by the competent market regulation department to the competent commercial department, and does not require such foreign-invested enterprise to submit the Incorporation Application in accordance with Paragraph 1 hereof mutatis mutandis.reports separately.

Liulin JunhaoShanxi Jinxuan has completed the registration as a whole foreign owned enterprise on June 19, 2017 and the Administrative Bureau for Industry and Commerce of Shanxi Province has issued Liulin JunhaoShanxi Jinxuan the relevant business license on the same date.

PRC Regulation of Intellectual Property Rights

The State Council and the NCAC have promulgated various rules and regulations and rules relating to protection of software in China. Under these rules and regulations, software owners, licensees, and transferees may register their rights in software with Copy Protection Center of China or its local branches and obtain software copyright registration certificates. Although such registration is not mandatory under PRC law, software owners, licensees and transferees are encouraged to go through the registration process and registered software rights may be entitled to better protections.

The PRC Trademark Law, adopted in 1982 and revised in 2001 and 2013, respectively, with its implementation rules adopted in 2002 and revised in 2014, protects registered trademarks. The Trademark Office of the SAIC handles trademark registrations and grants a protection term of ten years to registered trademarks.

Regulations on Foreign Exchange

Foreign Exchange Settlement

The Circular of the State Administration of Foreign Exchange on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or SAFE Circular No.19, which was promulgated by the SAFE on March 30, 2015 and became effective as of June 1, 2015, adopts the approach of discretional foreign exchange settlement, under which the foreign exchange capital in the capital account of a foreign-invested enterprise for which the foreign-invested enterprise has obtained confirmation by the local SAFE branches regarding the rights and interests of monetary contribution (or the book-entry registration of monetary contribution by the banks) can be settled at the banks based on the actual operation needs of such foreign-invested enterprise. The capital in Renminbi obtained by the foreign-invested enterprise from the discretionary settlement of foreign exchange capital shall be managed under the account pending for foreign exchange settlement payment. The proportion of discretionary settlement of foreign exchange capital is temporarily determined as 100%, subject to the adjustment of the SAFE.

Regulations Relating to Foreign Exchange Registration of Overseas Investment by PRC Residents

SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or “Circular 37,” issued by SAFE and effective in July 4, 2014, regulates foreign exchange matters in relation to the use of special purpose vehicles, or “SPV”s,“SPVs”, by PRC residents or entities to seek offshore investment and financing and conduct round trip investment in China. Under Circular 37, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate domestic or offshore assets or interests, while “round trip investment” refers to the direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. Circular 37 requires that, before making contribution into an SPV, PRC residents or entities are required to complete foreign exchange registration with the SAFE or its local branch. SAFE Circular 37 further provides that option or share-based incentive tool holders of a non-listed SPV can exercise the options or share incentive tools to become a shareholder of such non-listed SPV, subject to registration with SAFE or its local branch.

PRC residents or entities who have contributed legitimate domestic or offshore interests or assets to SPVs but have yet to obtain SAFE registration before the implementation of the Circular 37 shall register their ownership interests or control in such SPVs with SAFE or its local branch. An amendment to the registration is required if there is a material change in the SPV registered, such as any change of basic information (including change of such PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. Failure to comply with the registration procedures set forth in Circular 37, or making misrepresentation on or failure to disclose controllers of foreign-invested enterprise that is established through round-trip investment, may result in restrictions on the foreign exchange activities of the relevant foreign-invested enterprises, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations. As of the date of this report, Xiangyang Guo, Bingshan Guo, Yonghong Che, Haigang Yan, and Ji Li have initiated their application for the initial foreign exchange registrations.

Regulations Relating to Employment and Social Insurance

Pursuant to the PRC Labor Law effective as of January 1, 1995 (as amended on August 27, 2009), and the PRC Labor Contract Law effective as of January 1, 2008 (as amended on December 28, 2012), a written labor contract shall be executed by employer and an employee when the employment relationship is established, and an employer is under an obligation to sign an unlimited-term labor contract with any employee who has worked for the employer for ten consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract must have an unlimited term, with certain exceptions. All employers are required to establish a system for labor safety and sanitation, strictly abide by state rules and standards and provide employees with appropriate workplace safety training. Moreover, all PRC enterprises are generally required to implement a standard working time system of eight hours a day and forty hours a week, and if the implementation of such standard working time system is not appropriate due to the nature of the job or the characteristics of business operation, the enterprise may implement a flexible working time system or comprehensive working time system after obtaining approvals from the relevant authorities.

Pursuant to the Social Insurance Law of China effective from July 1, 2011, and the Housing Fund Regulation which was amended and became effective on March 24, 2002, employers in China shall pay contributions to the social insurance plan and the housing fund plan for their employees, and such contribution amount payable shall be calculated based on the employee actual salary in accordance with the relevant regulations. As of December 31, 2019, we have been making full contributions to the social insurance plan and the housing plan for our employees. 

Regulations on Tax

PRC Enterprise Income Tax Law

In January 2008, the PRC Enterprise Income Tax Law, or the “EIT Law,” took effect, (revised and took effectwhich was last amended by the Standing Committee of the National People’s Congress on February 24, 2017).December 29, 2018. The EIT Law applies a uniform 25% enterprise income tax rate to both foreign-invested enterprises and domestic enterprises, except where tax incentives are granted to special industries and projects. An enterprise established outside China with “de facto management bodies” within China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. According to the EIT Law and its implementation regulations, certain high and new technology enterprises which have proprietary intellectual property rights and simultaneously meet the prescribed requirements as stipulated in the implementation regulations of the EIT Law and other relevant regulations are permitted to enjoy a reduced EIT rate of 15%.

Under the EIT Law and its implementation regulations, dividends generated from the business of a PRC subsidiary after January 1, 2008 and payable to its foreign investor may be subject to a withholding tax rate of 10% if the PRC tax authorities determine that the foreign investor is a non-resident enterprise, unless there is a tax treaty with China that provides for a preferential withholding tax rate. Distributions of earnings generated before January 1, 2008 are exempt from PRC withholding tax.

Under the PRC Enterprise Income Tax Law, an enterprise established outside China with “de facto management bodies” within China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. The implementing regulations of the EIT Law define the term “de facto management bodies” as a management body which substantially manages, or has control over the business, personnel, finance and assets of an enterprise. On April 22, 2009, the State Administration of Taxation, or SAT issued the Circular on Issues Concerning the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance With the Actual Standards of Organizational Management, or Circular 82, which provides certain specific criteria for determining whether the “de facto management bodies” of a PRC-controlled enterprise that is incorporated offshore is located in China. However, there are no further detailed rules or precedents governing the procedures and specific criteria for determining “de facto management body.”

PRC Value-added Tax Law

Pursuant to the Interim Regulations on Value-added Tax of China, or VAT Regulations which was promulgated by the State Council on December 13, 1993 and became effective as of January 1, 1994 and further amended on November 10, 2008, February 6, 2016 and November 19, 2017, and the last amendment of which became effective on November 19, 2017, all units and individuals engaging in the sale of goods, provision of processing, repair and fitting services, and importation of goods within the territory of China are taxpayers of value-added tax ( or VAT), and shall pay VAT in accordance with the VAT Regulations. According to the VAT Regulations, sales revenues are subject to VAT, and athe VAT tax rate atfor the PRC enterprises was 16% applies tobefore April 1, 2019 and 13% after that date, unless the Chinese enterprisesVAT for selling goods, labor services, or tangible movable property leasing services or importing goods, except otherwise specified; 10% for taxpayers leasing services, or freight, except otherwise specified, oran enterprise is otherwise exempted or reduced according to the VAT Regulations and other relevant regulations. Enterprises that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in the line item of taxes payable on the consolidated balance sheets.

We have abided by the relevant PRC tax laws in our operation. The local office of State Administration of Taxation of Liulin County issued Liulin JunhaoShanxi Jinxuan a certificate dated August 25, 2017, certifying that since January 1, 2015, Liulin JunhaoShanxi Jinxuan has abided by current national and local laws and regulations on taxation, made timely tax return filings and does not have outstanding tax arrears. ForAs of the fiscal year ended December 31, 2018,date of this report, we believe that Liulin Junhao has abided by current national and localhave not been found in violation of the VAT Regulations or other applicable laws and regulations on taxation, made timely tax return filings and does not have outstanding tax arrears.regulations.

Labor Laws and Social Insurance

Pursuant to the PRC Labor Law and the PRC Labor Contract Law, employers must execute written labor contracts with full-time employees. All employers must comply with local minimum wage standards. Violations of the PRC Labor Contract Law and the PRC Labor Law may result in the imposition of fines and other administrative and criminal liability in the case of serious violations.

In addition, according to the PRC Social Insurance Law, employers in China must provide employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance, medical insurance, and housing funds.

C.Organizational Structure

The following diagram illustrates our corporate structure as of the date of this annual report:

D. Property, Plants and Equipment

Our office is located at T4-1802-1812, Huarun building, No.1 Changxin road, Wanbailin District, Taiyuan, Shanxi, PRC, where we lease the office space with an aggregate floor area of approximately 817 square meters.

Item 4A. UNRESOLVED STAFF COMMENTS

None.Not applicable.

Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this annual report. This report contains forward-looking statements.See “Item 5. Operating and Financial Review and Prospectus—G. Safe Harbor.“Special Note Regarding Forward-looking Statements.” In evaluating our business, you should carefully consider the information provided under the caption “Item 3. Key Information—D. Risk Factors” in this annual report. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

A.Operating Results

Overview

We are a Shanxi Province-based manufacturer and supplier currently engagedcompany engaging in distributing and reselling blended coking coal in People’s Republic of China (“PRC” or “China”).China. The blended coking coal we selldistribute is also known as metallurgical coke, used to produce coke for use mainly in the steel-making process.

We

For our blended coking coal distribution services, in September 2019, we entered into the Cooperation Agreement with Xin’an Yuanda, our Partner Manufacturer, through our subsidiary Shanxi Jinxuan, pursuant to which Xin’an Yuanda shall produce blended coking coal according to our instructions and under our supervision. Our technical personnel directs the mixing ratio of the products on our Partner Manufacturer’s site and supervise the entire blending process. Pursuant to the Cooperation Agreement, Xin’an Yuanda shall purchase raw materialscoal according to our specifications, provide plant for coal washing and blending, provide manufacturing facilities, and operate such facilities. We take delivery of various grades in characteristics ofthe blended coking coal after the blending process completes. Therefore, we act as the principal and recognize revenue in the amount of total consideration charged to customers, upon the completion of our performance obligation. The Cooperation Agreement is a framework agreement which remains effective for one year since September 26, 2019.

When serving as an agent, we accept orders from suppliers such as coal washing plants, which are primarily based in Shanxi Province, China. We use our proprietary electriccustomers, purchase blended coking coal blenderthat meets the specific requirements of the customers, and hire third-party carriers to blenddeliver blended coking coal products to the premises of our customers. We sign contracts with customers, suppliers and manufacture coking coalscarriers separately. Unlike with respect to our Partner Manufacturer, we do not provide instructions to or supervise the manufacturing process of various grades in characteristics into a uniform mix based on customer specification. Our customers are all basedthe suppliers we cooperate with for our agent services. As we satisfy our performance obligations, we recognize revenue in the PRCamount we expect to be entitled to for arranging the supplier to provide its goods. Our fee is the net amount of consideration we retain after paying the supplier and currently mainlythe carrier the consideration received in exchange for the goods to be provided by the supplier and transport services to be provided by the carrier. In addition, the supplier assumes our performance obligations and contractual rights in the Shanxi Province. Some of our customerscontract signed with customer so that we are resellers ofno longer obliged to satisfy the performance obligations to transfer the blended coking coal while others are coke-manufacturers.to the customer. Our contracts with our agency service customers specify the prices and terms for our service provided.

Liquidity and Capital Resources

Our net loss for the years ended December 31, 2018 and 2017 were $61,924 and $745,660, respectively. The net cash used in operating activities was $2,217,943 and $875,222 for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, we had cash and cash equivalents of $848,522 and our consolidated current assets exceeded its consolidated current liabilities by $456,906.

In assessing our going concern in the next 12 months following the issuance of the financial statements for the years ended December 31, 2018, management monitors and analyzes our cash on-hand, our ability to generate sufficient revenue sources in the future, and our operating expenditure commitments. We believe that available cash and cash equivalents, the cash provided by operating activities, should enable us to meet anticipated cash needs in the next 12 months after the issuance of the financial statements. If we encounter unforeseen circumstances that place constraints on our capital resources, management will be required to take various measures to conserve liquidity, which could include, but not necessarily be limited to, decreasing operating expense, increasing advance receipts and reducing indirect cost. The continuing financial support from our major shareholders, if necessary, in the near future will also be provided to ensure sufficient working capital. Thus the accompanying consolidated financial statements assuming us will continue as a going concern.

Our customers from above two revenue streams are both based in the Shanxi Province, the PRC.

All of our revenue and workforce are concentrated in China. Consequently, the COVID-19 outbreak may materially adversely affect our business operations and our financial condition and operating results for the fiscal year ending December 31, 2020, including, but not limited to, a decrease in our total revenues, slower collection of accounts receivables, increase in allowance for doubtful accounts and significant downward adjustments or impairment to our long-lived assets. We have been closely monitoring the impact of COVID-19 on macro economy and coking coal industry in general, as well as the extent to which COVID-19 impacts our business, results of operations and financial condition. Because of the significant uncertainties surrounding the COVID-19 outbreak, the extent of the business disruption and the related financial impact cannot be estimated with confidence at this time.

Factors and Trends Affecting Our Financial Performance

We believe that the following factors will affect our financial performance:

Our customer base in Shanxi Province and nearby provinces- Our keyonly customers are mainly coal companies and steel companies that have awith steady demand for our blended coking coal, which containcontains moderate level of sulfa to meet stringent environmental requirements.regulations. The Chinese government has reduced its regulatory restrictions on the coal industry in recent years, which has positively impacted our business. We have generated substantially all of our revenues from sales of blended coking coal and agent services. We expect the sales of blended coking coal to expandcontinue to be the primary source of our customer baserevenues in the Northern part of China where there is more stringent environmental regulation for coals.foreseeable future. Our medium-low sulfur contentsuccess, therefore, depends on our customers’ continued reliance on blended coking coal meets such stringent environmental regulation and therefore we are confident that we will be ableour ability to expand our customer base. The reduced restriction onsource the industry has positive effect of our business. And the number of our customer has increased significantly in 2018. As we continue to grow business relationships with new customers,specified coal. However, we expect we willthat the novel coronavirus (COVID-19), which spread rapidly to many countries around the world, would negatively affect the demand for coking coal and would have more salesa material adverse impact on our business, results of operations and therefore growing revenue.financial condition.

AccessSecuring suppliers with access to high quality coking coal raw materials- Our plantPartner Manufacturer is located in Liulin, Shanxi Province, which is accessibleand has access to the high quality raw coking coal in Liulin, - an area famed as China’s “King of Coal,” which has higher processing yield and lower processing cost than lower quality raw coking coal. As such, utilizingour Partner Manufacturer could access a greatergreat quantity of high quality raw coking coal enables us to lower ourwith low raw material costs and savelow transportation costs. Therefore, if we failstop sourcing from our Partner Manufacturer or secure suppliers with access to secure sufficient amount of high quality coking coal raw materials with low costs, we will experience higher productionpurchase cost and thus lower margin. We are dedicated in securing the raw materials supplies by coal washing plants that come from various mines in Shanxi Province.

PRC coal market’s supply of blended coking coal raw materials– we rely heavily on the sufficient supply of blended coking coal raw materials in the PRC market to fulfill our customers’ orders. Therefore, if the PRC market supply of blended coking coal raw materials decreases or if we are not able to secure sufficient quantity to fulfill our customers’ orders, then we may not be able to generate revenue and may suffer net loss, in addition to potential reputation loss associated with the failure to fulfill customer orders.

Our operation capacity - Our proprietary coking coal-blending machine uses predictive model to blend coking coal based upon customer specification and the various grades of available raw materials, minimizing the quantity of high-quality coking coal needed to produce high quality uniform mix coking coal. The higher the operation capacity, the better cost efficiency and thus higher margin. We expect to increase our operation capacity gradually as our customer base expands, so that our cost efficiency will continue to improve that result in a higher margin.

PRC Government’s Policypolicy on Coal Production, Coal Price,coal production, coal price, and Steel Productionsteel production – The PRC government’s policies concerning the coal and steel industries have changed in response to the broader economic circumstances and any supply and demand disequilibrium of the coal and steel industries.market conditions. Further restrictions on coal production and limitations on coal prices may both increase the cost for our operation. While we have been and believe that we may continue to pass on the increased raw material cost to our customers, steel mills may seek alternative resources in producing coke-replacement products needed in steel making, and thus lower the general demand for coke, and in turn, coking coal. Additionally, any restriction or limitation on steel production may negatively impactaffect the demand for our blended coking coal, which is primarily used to produce the coke used in steel making. While our blended coking coal has medium-low levelswith medium to low level of sulfur makes our productsit more environmentally friendly than high sulfur coking coal, more stringent environmental policypolicies may still negatively impact the demand for our products.the blended coking coal we distribute, as blended coking coal with lower level of sulfur is more costly to manufacture and priced higher.

Taxation

The U.S. Tax Cuts and Jobs Act (the “2017 Act”) signed on December 22, 2017 may have changed the consequences to U.S. shareholders that own, or are considered to own, as a result of the attribution rules, 10% or more of the voting power or value of the stock of a non-U.S. corporation (a “10% U.S. shareholder”) under the U.S. Federal income tax law applicable to owners of U.S. controlled foreign corporations (“CFCs”). We do not believe any of our shareholders, or our subsidiaries were CFCs, and there will be no such impact for 2017 Act for the year ended December 31, 2018. We are an exempted company incorporated in the Cayman Islands and conduct our primary business operations through our subsidiary in the PRC.Taxation

Cayman Islands 

Under the current laws of the Cayman Islands, companies incorporated in the Cayman Islands are not subject to taxation on income or capital gains. Additionally, upon payments of dividends to our shareholders, no Cayman Islands withholding tax will be imposed.

The Cayman Islands currently havehas no exchange control restrictions. The Cayman Islands currently levylevies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the government of the Cayman Islands, save certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are not a party to any double tax treaties.

British Virgin Islands

Jinxuan JHBVI is incorporated in the British Virgin Islands (“BVI”). Under the current law of the BVI, Jinxuan JHBVI is not subject to tax on income or capital gains. Additionally, if dividends are paid by Jinxuan JHBVI to its shareholders, no BVI withholding tax will be imposed  imposed.

Hong Kong

In accordance with the relevant tax laws and regulations of Hong Kong, a company registered in Hong Kong is subject to income taxes within Hong Kong at the applicable tax rate on taxable income. From year of assessment of 2018/2019 onwards, Hong Kong profit tax rates are 8.25% on assessable profits up to HK$2,000,000, and 16.5% on any part of assessable profits over HK$2,000,000.

Jacqueline HK and Junhao InternationalHK are both incorporated in Hong Kong and do not conduct any substantial operations of their own. As such, under the Hong Kong tax laws, both Jacqueline HK and Junhao InternationalHK are exempted from income tax on their foreign-derived income and are not subject to withholding taxes on remittance of dividends. Since neither Jacqueline HK nor Junhao InternationalHK have any assessable profits for the year ended December 31, 20182019 and 2017,2018, no provision for Hong Kong profits tax has been made in the financial statements. We have not provided for deferred income tax liabilities on the PRC entities’ undistributed earnings of RMB nil as of December 31, 20182019 and 2017,2018, because we control the timing of the undistributed earnings and it is probable that the earnings will not be distributed. We plan to reinvest those earnings in the PRC indefinitely in the foreseeable future.

China

Under the New EIT Law, domestic enterprises and foreign investment enterprises, or FIE,FIEs, are subject to a unified 25% enterprise income tax rate, except for certain entities that are entitled to tax holidays or exemptions.

Under the New EIT Law, dividends paid by an FIE to any of its foreign non-resident enterprise investors are subject to a 10% withholding tax. Thus, the dividends, if and when payable by our PRC subsidiary to its offshore parent entities, would be subject to a 10% withholding tax. A lower tax rate will be applied if such foreign non-resident enterprise investor’s jurisdiction of incorporation has signed a tax treaty or arrangement for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income with China. There is such a tax arrangement between the PRC and Hong Kong. Thus, the dividends, if and when payable by Liulin Junhao,Shanxi Jinxuan, our PRC subsidiary to the offshore parent entity located in Hong Kong, would be subject to a 5% withholding tax rather than the statutory rate of 10%, provided that the offshore entities located in Hong Kong meet the requirements stipulated by relevant PRC tax regulations. Furthermore, pursuant to the applicable circular and interpretations of the New EIT Law, dividends from earnings created prior to 2008 but distributed after 2008 are not subject to withholding income tax. TheOur effective tax rate of us were (23.0)%, 0%was 24% and 25.6%-23% for the years ended December 31, 2018, 20172019 and 2016,2018, respectively. As a result, $11,567, $nil$292,956 and $257,547$11,567 income tax expense were recognized for the years ended December 31 2019 and 2018, 2017 and 2016, respectively.

Economic and Political Risks

Our operations are conducted primarily in the PRC. Accordingly, our business, financial conditions and results may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

Our operations in the PRC are subject to risks relating to, among others, the political, economic and legal environment and foreign currency exchange. Our Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, industry production regulations and guidance, anti-inflationary measures, currency conversions, remittances abroad, and rates and methods of taxation, among other things.

On December 23, 2018, the State Council submitted the draft version of the Foreign Investment Law to the Standing Committee of the National People’s Congress, which was promulgated by the National People’s Congress on its official site on December 26, 2018 for public consultation until February 24, 2019. On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which On December 23, 2018, the PRC State Council submitted the draft version of the Foreign Investment Law to the Standing Committee of the National People’s Congress, which was promulgated by the National People’s Congress on its official site on December 26, 2018 for public consultation until February 24, 2019. On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which will comecame into effect on January 1, 2020 and replace the trio ofreplaced existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations.

Results of Operations

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018