Exhibit 10.4

 

Translation of Assets and Business Transfer Agreement

 

Transferor (“Party A”): Henan Pingdingshan Hongli Coal and Coking Co., Ltd.
(“Hongli”) and its branch Baofeng Coking Factory of Henan Pingdingshan Hongli
Coal and Coking Co., Ltd. (“Baofeng Coking”)     Transferee (“ Party B”):
Pingdingshan Hongfeng Coal Processing and Coking Factory (“Hongfeng”)

 

Considering that: the transferor (“Party A”) is the main operational entity of
listed company, it does not obtain exploitation license for its holding coal
mine in long term neither certainly for future because of policy adjustment; the
underground coal gasification (science and technology demonstration) project
carried out in the coal mine held by Party A has not yet obtained substantial
test demonstrative process, and underground coal gasification (science and
technology demonstration) project cannot bring substantial economic benefits for
Party A in forseeable short term; in order to adjust the economic structure of
listed company and solve the burden caused by subsidence assets to listed
company, upon the consent of board of directors of listed company, Party A
transfers the assets related to coal mining and underground coal gasification
project;

 

Considering that: the transferee (“Party B”) is acquainted with and aware of the
status of object to be transferred by Party A, and it is capable of accepting
and disposing this object. Upon the consent of high authority of Party B, Party
B will purchase these assets and business.

 

Party A and Party B have checked every asset on the basis of data preliminarily
examined and approved by Party A, namely, the listed company, on Dec. 31, 2015
and have confirmed following clauses for both parties’ joint compliance through
negotiation:

 

I. Scope and Price of Transferred Assets/Business Object:

 

Party A and Party B make following summarization regarding objects such as
transferred assets/stock right etc as well as contracted price within the scope
of this contract:

 

   Details of Assets/Stock Right Items  Book Value   Consideration for Disposal 
1、  Assets Transfer of Baofeng Coking   1,507, 039. 76    1.00  2、  Underground
coal gasification engineering scheme and asset under construction   199, 800,
000. 00    1.00  3、  Stock Right Transfer of Baofeng Hongchang Coal Co., Ltd. 
 3, 000, 000.00    12, 483, 530. 32  4、  Stock Right Transfer of Baofeng
Xingsheng Coal Mining Co., Ltd.   42, 000, 000. 00    3, 360, 000. 00  5、  Stock
Right Transfer of Henan Zhonghong Energy Investment Co.   51,000,000.00    1.00 
6、  Stock Right Transfer of Baofeng Hongrun Coal Chemical Co., Ltd.   30, 000,
000. 00    1. 00     Total   327,307, 039. 76    15,843, 534. 32 

 

 

 

 

 

Party A and Party B make following appointments regarding the specific scope and
price of every object:

 

1.1. Baofeng Coking: (assets transfer)

 

Party A transfers all assets used in the operation of coal mining, coal washing,
coal dressing, coking and underground coal gasification within Baofeng Cokin to
Party B. Up to Dec. 31, 2015, the list of this assets is as follows. The book
value is 1,507, 039. 76 Yuan and transfer price is 1 Yuan.

 

No.  Name of Asset  Book Value
Dec. 31, 2015   No.  Name of Asset  Book Value
Dec. 31, 2015  1  Input and output power grid   74, 872.73   69  Coal washing
production system   395. 20  2  High Tension Reactive Compensation Equipment 
 13, 261. 00   70  Filter Press   5, 490. 45  3  High-voltage wire (in-plant) 
 2, 077.00   71  Sewage Restrictor   2, 040. 00  4  High Tension Reactive
Compensation Equipment   16,850. 72   72  Coal washing production system   2,
311. 36  5  Underground water supply and drainage network within factory   96,
504.83   73  Coal washing production system   870. 75  6  Underground water
supply and drainage network out of factory   64, 057. 87   74  Coal washing
production system   1,661.40  7  Offset water supply of deep well pump   1,953.
17   75  Voltage reducing starter   171. 00  8  Deep well submersible pump 
 1,736. 31   76  Reduction drive   145.20  9  Offset water supply of deep well
submersible pump   1,864. 00   77  High speed pulverizer   579.38  10   Deep
well water pump Han Mining   13,452.47   78  Automatic drainer   750.00  11 
Water ring vacuum pump   43, 549. 62   79   Voltage reducing starter   330.00 
12  Coal washing workshop and plant   13, 110. 63   80  Clarified water pump 
 1, 188. 00  13  Coal washing workshop and plant   77, 545. 91   81  Reduction
drive   150. 40  14  Coal deposition pool, offsite   9, 341. 10   82  Jaw
crusher   323.85  15  No. 1 cleaned coal plant   54, 860. 27   83  Deep well
pump   132.68  16  cleaned coal plant   7, 380. 62   84  Deep well pump   2,
259. 67  17  Hardening of cleaned coal plant   25, 384. 90   85  Deep well pump 
 2,482.95  18  Terrace of cleaned coal plant   65,902.43   86  Deep well pump 
 450.00  19  Other-self-supply source water   347, 166. 19   87  Roots vacuum
pumping well   5, 250. 00  20  Water pump   285. 80   88  Deep well pump   815.
20  21  Wagon balance   631.80   89  Electric machine   267.83  22  Train wheel
measuring instrument   421. 43   90  Vibrating motor   286.20  23  Fork-lift
truck   8, 417. 33   91   Motorized pulley   1, 089.08  24  Fork-lift truck 
 783. 60   92  Gap electric machine   27. 30  25  Fork-lift truck   12,836.48  
93   Motorized pulley   500.93  26  Fork-lift truck   11, 325. 00   94  Vertical
machine   54. 80  27  Fork-lift truck   21, 025. 62   95  Electric machine 
 298.00  28  Fork-lift truck   3, 574. 38   96  Electric machine   166.20  29 
Fork-lift truck   2,460.00   97   Motorized pulley   439.60  30  Production
sharing system   954.00   98  Vibrating motor   47.40 

 

 

 

 

31  Transformer   1, 679. 48   99  Vibrating screen   41,997. 17  32 
Transformer   765. 38   100  Fluid coal warehouse   21, 271. 61  33 
Transformer   649.73   101   Air conditioning   149.00  34  Oil tank   198.60  
102   Air conditioning   105. 50  35  Electronic scale   3, 375. 00   103   Air
conditioning   63. 30  36  Installation cost for wagon balance   75. 00   104 
 Air conditioning   28.80  37  Adjustable electric hot plate   26. 10   105 
 Air conditioning   390. 00  38  Crusher   136. 50   106   Air conditioning 
 84.80  39  Sealed grinding machine   204.80   107  Air conditioning   182.60 
40  Rapid sulfur determinator   2, 700. 00   108   Air conditioning   159.80 
41  Electric welding machine   41. 70   109   Air conditioning   225. 00  42 
Cutting machine   21.30   110  Air conditioning   726. 00  43  Lathe 
 1,042.35   111  Air conditioning   309.20  44  Grinding machine   14.40   112 
Satellite receiving antenna   19. 80  45  Drilling machines   412.80   113 
Mobile phone   149.90  46  Electric hammer   10. 50   114  Mobile phone 
 500.20  47  Adjustable-speed motor   21. 30   115  Retractable door (factory) 
 767.60  48   Bench drill   97.95   116  Computer   1,213. 20  49   Electric
welding machine   90.00   117   Fax machine   35.90  50  Bench screw   18. 00  
118  Printer   92. 30  51  Electric machine   54.80   119  Printer   93. 30  52 
Adjustable-speed motor   95. 20   120  Lenovo computer   226.90  53   Reduction
drive   137.60   121  Fixed assets of management system   236.20  54  Switching
starting cabinet   164.40   122  Laptop   825. 00  55  Electric machine 
 37.20   123   Fax machine   54. 00  56  Coal washing production line   91,556.
70   124  Computer   2, 709. 00  57  Coal washing production line   40, 927.
05   125  Printer   54. 80  58  Coal washing production line   22, 535. 13  
126  Fixed assets of management system   1,591. 70  59  Coal washing production
line   42, 959. 82   127  Fixed assets of management system   17,490.00  60 
Squeegee machine   1,099. 60   128  Laptop   590. 20  61  Coal washing
production line   71,581. 50   129  Computer   240. 00  62   Sieving machine for
raw coal   885. 74   130  Copying machine   435. 00  63  Sieving machine for raw
coal   1,052. 85   131  Printer   180.20  64  Flotation machine   37,483. 05  
132  Filing cabinet   1,652. 60  65  Flotation machine   22, 625. 45   133  1002
j-112 pump   1, 200. 00  66  Flotation machine   11,670. 31   134  Air
conditioning   906.40  67  Coal filter production line   24,232.94   135 
Computer   140.91  68  Coal washing production system   4, 699. 60              
Total         1,507, 039. 76 

 

 

 

  

1.2. Underground coal gasification engineering (transfer project scheme and
construction in progress)

 

Party A will transfer relevant scheme and facilities used in construction in
progress of underground coal gasification science and technology experiment
engineering project planned and prepared by Party A in 2014 and implemented in
midterm of 2015 to Party B. Up to Dec. 31, 2015, the investment and assets
contributed by Party A in underground coal gasification engineering are shown in
following table. Party A and Party B agree that the total transfer price of
scheme and construction in progress regarding the underground coal gasification
engineering is 1 Yuan.

 

Details of Assets  Book Amount Dec. 31,  2015  Underground coal gasification
engineering- Prepaid project payments   16, 000, 000.00   Underground coal
gasification engineering-underground coal gasification reform   183, 800, 000.
00  Total   199, 800, 000. 00 

 

1.3. Baofeng Hongchang Coal Co., Ltd. and 100% stock right held by it in Baofeng
Shuangrui Coal Mining Co., Ltd.: (100% stock right transfer) Party A transfers
all stock rights held by it in its 100% holding Baofeng Hongchang Coal Co., Ltd.
to Party B. Up to Dec. 31, 2015, details of book assets and liabilities of
Hongchang are shown in following table. Party A agrees to completely give up the
internal RMB receivable of 101, 907,817.80 Yuan formed with Hongchang in
previous operation, and other liabilities in Hongchang’s account shall be
assumed by transferee after the transfer, and the transfer price of stock right
under this condition is 12,483,530.32 Yuan;

 

   Book Value  Item  Dec. 31, 2015  Assets:      145-Cash deposit for safety
production   700, 000. 00  18102-Long-term investment-Shuangrui coal mining 
 70, 000, 000. 00  153-Fixed assets   75,872,830. 74  154-Accumulated
depreciation   (35, 341, 318. 53)  16202-Cost of mining right   126,976, 793.
00  16203-Change of purchase right FEI   4, 455, 500. 00  163-Accumulated
amortization   (83,688,876.97) Subtotal of Assets   158, 974,928.24 
Liabilities      117001-Hongli Company   (50, 452, 862. 68)  117002-Coking
Plant   (51, 454, 955. 12)  21605-Income tax payable   (1,890, 000. 00) 
21606-Resources tax   (1, 040, 799.18)  Subtotal of liabilities 
 (104,838,616.98) Total net assets   54,136,311.26 

 

 

 

  

1.4. Baofeng Xingsheng Coal Mining Co., Ltd. (60% stock right transfer)

 

Party A holds 60% stock right of Baofeng Xingsheng Coal Mining Co., Ltd., and
Party A agrees to transfer this actually controlled stock right to Party B. Up
to Dec. 31, 2015, the book assets of Xingsheng Coal includes coal mining right
of 70 Million Yuan book value and excludes other asset liabilities. Party A
holds 60% stock right of Xingsheng Coal, then the book value is 42 Million Yuan.
Party A and Party B agree to regard 3,360,000.00 Yuan as the transfer price for
60% stock right held by Party A in Xingsheng Coal.

 

1.5. Henan Zhonghong Energy Investment Co., Ltd. (100% stock right transfer)

 

Party A actually controls 100% stock right of Henan Zhonghong Energy Investment
Co., Ltd. through shareholding entrustment. Henan Zhonghong Energy Investment
Co., Ltd. is a company jointly exploited by Party A and Henan Coal Seam Gas and
is established for Party A’s holding of coal seam gas business under this
agreement, which has greater relation with the exploitation business of coal
mine. Given this, and considering the overall transfer of coal mine exploitation
business, Party A and Party B agree that Party A shall transfer its
substantially controlled 100% stock right to Party B. Up to Dec. 31, 2015, the
book assets of Henan Zhonghong Energy Investment Co., Ltd. are shown in
following table. Both parties agree that Party A shall give up the internal
credit and debt formed with Henan Zhonghong Energy Investment Co., Ltd. during
the operating process. After deducting Party A’s credit and debt, the net assets
of Henan Zhonghong Energy Investment Co., Ltd. are 9,864,509.58 Yuan. Both
parties agree that the transfer price of 100% stock right of Henan Zhonghong
Energy Investment Co., Ltd. is 1 Yuan through negotiation.

 

Subject  Book Value
Dec. 31, 2015  Assets:      10201-Bank deposit-China CITIC Bank Zhengzhou
Branch   25,304.91  11702-Inter-company accounts—Baofeng Coking Plant   116,
301,273. 41  14001-Long-term investment-Hongyuan CBM Engineering Technology Co.,
Ltd.   9, 839, 204. 67  Subtotal of Assets   126,165,782,99  Liabilities     
11701-Inter-company accounts—Hongli Coal Co., Ltd.   (75, 538, 185. 75) 
11703-Inter-company accounts-Hongyuan   (19, 820, 166. 00)  11704-Inter-company
accounts-Long’en Company   (12, 000, 000. 00)  Subtotal of liabilities 
 (107,358,851.75) Total of net assets   18,807,431.24  Net assets after
disposing of inter-company accounts   9,864,509.58 

 

 

 

  

Party A and Party B notice that Party A filed a lawsuit to Zhengzhou
Intermediate People’s Court on Aug. 7, 2015 regarding 30 Million Yuan investment
guarantee deposit owed by Henan Coal Seam Gas to Zhonghong Energy. This kind of
lawsuit is not involved in the scope of this transaction, subject of litigation
is not changed, and litigation outcome will not change this transaction result.
Party A and Party B confirm that both parties will cooperate with the
requirement of litigation by following the beneficial principles to Party A
after this transaction.

 

1.6. Baofeng Hongrun Coal Chemical Co., Ltd. (100% stock right)

 

Party A holds 100% stock right of Baofeng Hongrun Coal Chemical Co., Ltd.
Baofeng Hongrun Coal Chemical Co., Ltd. is one operating company established by
Party A for expanding original coking production. Hongrun is not substantially
operated since its establishment till now. Except the inter-company accounts
with Baofeng Coking, there are no other credits and debts in Hongrun. Party A
and Party B unanimously agreed that Baofeng Hongrun Coal Chemical Co., Ltd.
gives up taking 1 Yuan as transfer price for its 100% stock right on the basis
of creditor's rights of Baofeng Coking.

 

1.7.

 

II. Definition of Trading Day

 

Party A and Party B agree that all transactions under this agreement shall
regard Mar. 25, 2016 as the base day of transaction.

 

Rights and interests as well as risk regarding assets/stock right under this
agreement shall be totally transferred from Party A to Party B since base day of
transaction. The risk and right transfer shall not be affected by whether
ownership transfer procedure for objects under this contract is completed or not
since the base day of transaction.

 

III. Payment Terms

 

Total price under this contract is 15,843,534.32 Yuan. Party A and Party B agree
that Party B shall pay 50% of total amount, namely, 7,921,767.16 Yuan to Party A
within 6 months after this contract entering into effect; Party B shall pay
residual 50% of contract price to Party A after completing main alteration
procedure such as industrial and commercial alteration etc. Party A and Party B
shall complete ownership alteration procedure such as industrial and commercial
alteration etc within 12 months.

 

If Party B cannot pay off corresponding price according to the time appointed in
above clause and the overdue period is more than 30 days, Party B agrees to
calculate overdue penalty regarding account payable according to 10% interest
per year in the exceeded period till paying off principals and interests.

 

IV. Procedure Handling and Cooperation After Assets/Stock Rights Handover

 

Considering that more object ownership alteration is involved in this contract
and complexity of ownership alteration under current environment, Party A and
Party B agree to closely cooperate with each other to complete ownership
alteration of corresponding object after the effectiveness of this contract. One
party shall not delay the normal ownership alteration of the other party with
any reasons.

 

 

 

  

Party A and Party B unanimously agree that the postponed period of ownership
alteration of objects in this contract shall neither affect the transaction
aging of objects nor affect the bargain price agreed in this contract.

 

Ownership alteration of objects in this contract includes but not limited to
following matters:

 

4.1. Disposal and transfer of all assets of Baofeng Coking as well as
acquisition or alteration of house property right;

 

4.2. Transfer and taking over of underground coal gasification technology
experiment project, including collaboration to the third party, register
alteration of technology experiment project, handover of engineering scheme and
cooperative alteration with construction team etc;

 

4.3. Industrial and commercial alteration of stock right transfer and alteration
of mining right etc;

 

4.4. Collaboration and alteration of follow-up matters after the cooperation
between Zhonghong Energy and Coal Seam Gas, including the collaboration with
current lawsuit.

 

4. 5. Other normal alteration procedures

 

V. Promise and Guarantee of Party A and Party B

 

1. Promise and Guarantee of Party A:

 

1.1 It is established according to laws and is validly existed. It has
completely authorized to implement objects transfer in this agreement and can
independently undertake civil liability;

 

1.2 All objects such as assets/stock rights etc in this agreement are legally
and validly owned by Party A, and there is no uninformed rights;

 

1.3 Party A has nothing to do with any profits produced by the objects involved
in this contract upon the signature and effectiveness of this contract,
meanwhile, Party A has nothing to do with losses produced by the objects
involved in this contract;

 

2. Promise and Guarantee of Party B

 

1.1 It is established according to laws and is validly existed. It has
completely authorized to implement objects transfer in this agreement and can
independently undertake civil liability;

 

1.2 Party B has fully understood the status of objects involved in this contract
and is acquainted with the assigned assets;

 

1.3 Party B is capable of accepting and operating all objects under the
contract, besides, it guarantees that it will completely accept this assigning
and hold all earnings and duties produced by these objects;

 

1. 4 Party B promises and ensures that it possesses enough financial resources
to pay the consideration of these

objects.

 

 

 

  

3. Joint Promises of Party A and Party B:

 

Both parties shall go back on their words after this contract entering into
effect, and they shall undertake legal rights and duties caused thereby. Both
parties agree that once one party violates the guarantee, promise or any other
duties appointed in this agreement, which results in liabilities such as damage,
losses or claiming for compensation etc for the opposite party, the default
party shall make comprehensive compensation to the damaged party.

 

VI. If part of this agreement is confirmed as invalidation or is cancelled, both
parties shall continuously fulfill obligations regarding other parts of this
contract in accordance with the original contract and other legal documents.

 

VII. Both parties can conclude a supplementary agreement regarding unmentioned
matters in this agreement, but the supplementary agreement shall not conflict
with basic clauses of this agreement.

 

VIII. This agreement shall enter into effect upon the signature of both parties.
This agreement is in duplicate, Party A and Party B hold one copy respectively.

 

Transferor (“Party A”) (Seal):

 

Henan Pingdingshan Hongli Coal & Coking Co., Ltd.

 

Baofeng Coking Factory of Henan Pingdingshan Hongli Coal & Coking Co., Ltd.

 

Henan Pingdingshan Hongli Coal & Coking Co., Ltd. (Seal)

 

Baofeng Coking Factory of Henan Pingdingshan Hongli Coal & Coking Co., Ltd.
(Seal)

 

Signature of Authorizer: Jianhua Lv

 

Transferee (“Party B”) (Seal)

 

Pingdingshan Hongfeng Coal Processing and Coking Factory

 

Pingdingshan Hongfeng Coal Processing and Coking Factory (Seal)

 

Authorizer: Yanwei Wang

 

Signing Date: Mar. 25, 2016