v3.7.0.1
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2017
Aug. 14, 2017
Document and Entity Information [Abstract]    
Entity Registrant Name Consumer Capital Group, Inc.  
Entity Central Index Key 0001439299  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Type 10-Q  
Document Period End Date Jun. 30, 2017  
Document Fiscal Year Focus 2017  
Document Fiscal Period Focus Q2  
Trading Symbol CCGN  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   32,178,849

v3.7.0.1
Consolidated Balance Sheets - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Current assets:    
Cash and cash equivalents $ 1,155,922 $ 1,461,176
Account receivable 632,757
Prepaid expenses 168,942 85,098
Interest receivable 17,699 19,350
Other receivables 1,687,840 3,331,128
Loans receivable, net 797,808 683,496
Due from related parties 831,073 418,968
Total current assets 5,292,041 5,999,216
Non-current assets:    
Property and equipment, net 90,298 101,825
Intangible assets, net 1,445,304 1,454,326
Deferred tax asset 35,832 57,498
Total non-current assets 1,571,434 1,613,649
TOTAL ASSETS 6,863,475 7,612,865
Current liabilities:    
Loans payable 3,821,398 2,332,330
Accrued interest payables 184,842 129,574
Accrued liabilities 43,800 17,570
Taxes payables 26,739 351,714
Deferred revenue 12,261
Other payables 156,919
Payable to shareholder 101,652 102,035
Due to related parties 32,874 1,108,137
Deferred tax liabilities 139,024 135,717
Total current liabilities 4,362,590 4,333,996
Stockholders' equity:    
Common stock - $0.0001 par value, 100,000,000 shares authorized, 32,178,849 and 32,178,849 shares issued and outstanding as of June 30, 2017, and December 31, 2016 3,218 3,218
Additional paid-in capital 7,990,637 7,990,637
Statutory reserve fund 75,787
Accumulated other comprehensive income 111,959 143,943
Accumulated deficit (4,998,796) (4,675,858)
Stockholders' equity before noncontrolling interests 3,182,805 3,461,940
Noncontrolling interests (681,920) (183,071)
Total stockholders' equity 2,500,885 3,278,869
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,863,475 $ 7,612,865

v3.7.0.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2017
Dec. 31, 2016
Consolidated Balance Sheets [Abstract]    
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 32,178,849 32,178,849
Common stock, shares outstanding 32,178,849 32,178,849

v3.7.0.1
Consolidated Statements Of Operations And Comprehensive Income (Loss) (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Consolidated Statements of Operations and Comprehensive Income [Abstract]        
Revenue $ 1,056,491 $ 1,725,827
Gross profit 1,056,491 1,725,827
Operating expenses:        
Selling and marketing 171,075 230,800
General and administrative 434,417 420,240 1,026,058 579,320
Total operating expenses 605,492 420,240 1,256,858 579,320
Operating income (loss) 450,999 (420,240) 468,969 (579,320)
Interest income (21,636) 25,676
Interest expense (968,092) (37,520) (1,028,246) (72,076)
Other income (18,052) 11,170 11,170
Provision for loan losses 18,170 (16,282)
Other income (expense): (989,610) (26,350) (1,018,852) (60,906)
(Loss) before provision for income taxes (538,611) (446,590) (549,883) (640,226)
Provision for income taxes 217,601 271,907
Net (loss) before noncontrolling interests (756,212) (446,590) (821,790) (640,226)
Noncontrolling interests (465,812) (36,575) (498,851) (53,473)
Net income (loss) attributable to common stockholders (290,400) (410,015) (322,939) (586,753)
Discontinued operations        
Net income from discounted operations, net of tax 1,404,452 1,231,518
Less: Net income attributable to the Noncontrolling interests (690,709) (605,661)
Net (loss) income attributable to common stockholders-discontinued operations 713,743 625,857
Net (loss) income (756,212) 957,862 (821,790) 591,292
Net (loss) income attributable to common stockholders $ (290,400) $ 303,728 $ (322,939) $ 39,104
Assuming dilution        
Continuing operations $ 0.01 $ (0.01) $ 0.00 $ (0.01)
Discontinued operations 0.02 0.02
Total 0.01 0.01 0.00 0.01
Basic        
Continuing operations 0.01 (0.01) 0.00 (0.01)
Discontinuing operations 0.02 0.02
Total $ 0.01 $ 0.01 $ 0.00 $ 0.01
Weighted average shares outstanding        
Basic and diluted 32,178,849 63,020,871 32,178,849 63,020,871
Comprehensive income        
Net income (loss) before noncontrolling interests $ (756,212) $ 957,862 $ (821,790) $ 591,292
Foreign currency translation adjustment 192,511 9,419 (31,984) (22,144)
Total comprehensive (loss) income (563,701) 967,281 (853,774) 569,148
Comprehensive (loss) income attributable to noncontrolling interests (156,483) 578,001 (514,523) 474,453
Net comprehensive (loss) income attributable to common stockholders $ (407,218) $ 389,280 $ (339,251) $ 94,695

v3.7.0.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Cash flows from operating activities:    
Net (loss) $ (821,790) $ 513,557
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities:    
Depreciation 20,549 14,804
Provision for (reduction of) allowance for loan losses 16,282 (269,487)
Deferred income taxes 24,974 67,372
Changes in operating assets and liabilities:    
(Increase) in accounts receivable (1,044,862)
(Increase) in loans receivable (130,594)
Decrease in advance to suppliers 38,078
(Increase) in deferred cost-related party (890,876)
(Increase) decrease in prepaid expenses (83,845) 2,038
Decrease in interest receivables 1,652 189,630
Decrease (increase) in other receivables 1,643,288 (98,634)
Increase in accounts payable 26,230
Increase in loans payable 1,489,068
(Decrease) in accrued expenses (596)
Increase (decrease) in deferred revenue 12,261 (3,698,309)
Increase in payable to shareholder 32,509
Increase in accrued interest payables 55,268
(Decrease) increase in taxes payable (324,975) 244,379
(Decrease) increase in other payables (156,919) 701,676
Net cash provided by (used in) operating activities 726,587 (3,153,859)
Cash flows from investing activities:    
Equipment purchased (102,409)
Loan receivable (3,212,038)
Net cash (used in) investing activities (3,314,447)
Cash flows from financing activities:    
Repayment of loans from customers 2,110,120
Proceeds from issuance of shares 200,968
Repayments of related party debt (1,075,263) (65,468)
Loan from individuals 4,140,259
Net cash provided by financing activities (1,075,263) 6,385,879
Effect of exchange rate changes on cash, 43,422 (706,936)
Net change in cash (305,254) (789,363)
Cash, beginning balance 1,461,176 2,739,145
Cash, ending balance 1,155,922 1,949,782
Supplemental disclosure of cash flow information    
Cash paid for interest 1,028,246 386,949
Cash paid for income taxes $ 558,688 $ 7,692

v3.7.0.1
Organization
6 Months Ended
Jun. 30, 2017
Organization [Abstract]  
ORGANIZATION
1. ORGANIZATION

 

Consumer Capital Group, Inc. (“CCG” or the “Company”) was incorporated in Delaware on April 25, 2008. The accompanying consolidated financial statements include the financial statements of the Company, its wholly owned subsidiaries, and an affiliated PRC entity (“Affiliated PRC Entity”) that is controlled through contractual arrangements. On February 5, 2010, in connection with the execution of a Stock Right Transfer Agreement, America Pine Group Inc. transferred both 100% of the stock rights of its wholly owned subsidiary Arki (Beijing) E-commerce Technology Co., Ltd. and 100% of its stock rights of America Pine (Beijing) Bio-Tech to Consumer Capital Group, Inc., a California corporation and wholly owned subsidiary of the Company (“CCG California”).

 

On February 4, 2011, pursuant to a Plan and Agreement of Merger by and among Mondas Minerals Corp., its wholly owned subsidiary, CCG Acquisition Corp., a Delaware corporation (“CCG Delaware”), CCG California, and Scott D. Bengfort, Mondas Minerals Corp. merged its wholly-owned subsidiary CCG Delaware into CCG California, with CCG California surviving and CCG Delaware ceasing to exist. On February 7, 2011, the Company formed a new wholly-owned subsidiary by the name of “Consumer Capital Group Inc.” (“CCG Name Sub”) in Delaware solely for purposes of changing its corporate name to “Consumer Capital Group Inc.” in conjunction with the closing of the Merger. On February 17, 2011, the Company changed its name to Consumer Capital Group Inc. pursuant to a Certificate of Ownership filed with the Secretary of State of Delaware by merging CCG Name Sub into the Company with the Company surviving and CCG Name Sub ceasing to exist. Unless the context specifies otherwise, references to the “Company” refers to CCG California prior to the Merger and the Company, its subsidiaries and Affiliated PRC Entity combined after the Merger. The Company is principally engaged in the development and operation of its nationwide online retailing platform “Chinese Consumer Market Network” at www.ccmus.com, which provides a variety of manufacturers and distributors a platform to promote and sell products and services directly to consumers. The Company’s principal operations and geographic markets are in the People’s Republic of China (“PRC”).

 

Post merger, Consumer Capital Group Inc. is authorized to issue up to 100,000,000 shares of common stock, par value $0.0001 per share. On February 4, 2011, Consumer Capital Group Inc. effected a reverse stock split (the “Stock Split”), as a result of which each 21.96 shares of Consumer Capital Group’s common stock then issued and outstanding was converted into one share of Mondas Minerals’ common stock.

 

Immediately prior to the Merger, Consumer Capital Group, Inc. had 390,444,109 shares of its common stock issued and outstanding. In connection with the Merger, Mondas Minerals issued 17,777,778 shares of its common stock in exchange for the issued and outstanding shares of common stock of CCG California. Immediately prior to the closing of the Merger, there were 2,500,000 issued and outstanding shares of the Company’s common stock, 60% of which were held by the then principal stockholder, CEO, and sole director of the Company, Mr. Bengfort. As a part of the Merger, CCG paid $335,000 in cash to Mr. Bengfort in exchange for his agreement to enter into various transaction agreements relating to the Merger, as well as the cancellation of 1,388,889 shares of the Company’s common stock directly held by him, constituting 92.6% of his pre-Merger holdings of Company common stock.

 

SHANGHAI ZHONGHUI

 

Established on May 26, 2014, under PRC laws, Shanghai Zhonghui Financial Information Services Corp. (“Shanghai Zhonghui”) offers financing and investment opportunities for small to medium sized business and investors, including outsource of financial information technologies, investment management, investment consulting, as well as other related asset management services in China. 

 

On December 23, 2014, the Company and Shanghai Zhonghui entered into a Share Exchange Agreement (the “Agreement”), pursuant to which the Company agreed to acquire 51% of the capital stock of Shanghai Zhonghui (the “Acquisition”). Pursuant to the terms of the Agreement, the Company agreed to issue 5,000,000 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), to certain individuals affiliated with Shanghai Zhonghui (the “Affiliates”), valued at $1.00 per share for a total of $5,000,000 or approximately 31,000,000 RMB, to exchange 51% of the capital stock of Shanghai Zhonghui.

 

On December 28, 2016, the Company and Yanbian Yaotian Gas Group Co., Ltd, (the “Purchaser”) a company incorporated under the laws of the People’s Republic of China, entered into a definitive agreement to sell all of its interests in Shanghai Zhonghui for nil consideration. As of December 31, 2016, the results of operations of Shanghai Zhonghui business are reflected in the Company’s consolidated financial statements as discontinued operations.

 

YIN HANG

 

Yin Hang Financial Information Service (Shanghai) Co., Limited (“Yin Hang”) was incorporated on November 22, 2013 under the laws of the People’s Republic of China (“PRC” or “China”). The Company collects service fees calculated based on the complexity, required time, contents and commercial value of the credit risks assessment services provided to lenders and borrowers on a third party peer to peer (“P2P”) online lending platform. On December 1, 2016, the Company through its variable interest entity, America Arki Network Service Beijing Co., Ltd entered into a Share Exchange Agreement with Yin Hang Financial Information Service (Shanghai) Co., Ltd, pursuant to the Agreement, the Company agreed to acquire 100% of the capital stock of Yin Hang in exchange for the issuance of 4,680,000 shares of Company’s common stock. Pursuant to the terms of the Agreement, all Acquisition Shares were locked up for one year upon issuance and Yin Hang’s investor may sell up to 2% of the Acquisition Shares after such lock-up period. Further to the supplementary agreement dated March 28, 2017, as a payment for assisting in the acquisition, the Company also agreed to issue 320,000 additional shares of Common Stock to a third party, Yu Yang. 

 

Details of the Company’s wholly owned subsidiaries and its Affiliated PRC Entity as of June 30, 2017 are as follows:

 

  Company   Date of Establishment     Place of Establishment   Percentage of Ownership by the Company     Principal Activities
  Consumer Capital Group Inc. (“CCG California”)     October 14, 2009     California USA     100%     U.S. holding company and headquarters of the consolidated entities. Commencing in July 2011, CCG performs the U.S. e-commerce operations.
                           
  Arki Beijing Ecommerce Technology Corp. (“Arki Beijing”)     March 6, 2008     PRC     100% (1)   Maintains the various computer systems, software and data. Owns the intellectual property rights of the “consumer market network”. Performed principal ecommerce operations prior to December 2010.



  Company   Date of Establishment   Place of Establishment   Percentage of Ownership by the Company     Principal Activities
  America Pine Beijing BioTech, Inc. (“America Pine Beijing”)     March 21, 2007   PRC     100% (1)   Import and sales of healthcare products from the PRC. This operation ceased February 5, 2010. It currently assists in payment collection for its e-commerce business.
                       
  America Arki Fuxin Network Management Co. Ltd. 
(“Arki Fuxin”)
    November 26, 2010   PRC     100% (1)   Commencing in December 2010, performs the principal daily e-commerce operations, transactions and management of the “consumer market network”.
                         
  America Arki Network Service Beijing Co. Ltd. (“Arki Network Service” and Affiliated PRC Entity”)     November 26, 2010   PRC     0% (2)   Entity under common control through relationships between Fei Gao and the Company. Holds the business license and permits necessary to conduct e-commerce operations in the PRC and maintains compliance with applicable PRC laws.
                         
  Yin Hang Financial Information  Service (Shanghai) Co., Ltd (“Yin Hang”)     November 22, 2013   PRC     100% (1)   Collects service fees calculated based on the complexity, required time, contents and commercial value of the credit risks assessment services provided to the lenders and borrowers on a third party peer to peer (“P2P”) online lending platform.
                         
  Arki Tianjin Asset Management LLP. (“Arki Tianjin”)     October 22, 2015   PRC     51% (3)   Offer assets management, management consulting, internet information service as well as advertising design, production, agent, publishing.
                         
  Shanghai Zhonghui Financial Information Services LTD. (“Shanghai Zhonghui”)     May 26, 2014   PRC     0% (4)  

Offer financing and investment opportunities for small to medium sized business and investors, including outsource of financial information technologies, investment management, investment consulting, as well as other related asset management services in China. As of December 31, 2016, the results of operations of Shanghai Zhonghui are reflected in the Company’s consolidated financial statements as “discontinued operations.”

 

  (1) Wholly foreign owned entities (WFOE)
  (2) VIE
  (3) Arki Network Service owned entities
  (4) Discontinued operation sold on December 28, 2016

 

In order to comply with PRC laws and regulations which prohibit foreign control of companies involved in internet content, the Company operates its website using the licenses and permits held by Arki Network Service, a 100% PRC owned entity. The equity interests of Arki Network Service are legally held directly by Mr. Jianmin Gao and Mr. Fei Gao, shareholders and directors of the Company. The effective control of Arki Network Service is held by Arki Beijing and Arki Fuxin through a series of contractual arrangements (the “Contractual Agreements”). As a result of the Contractual Agreements, Arki Beijing and Arki Fuxin maintain the ability to control Arki Network Service, and are entitled to substantially all of its economic benefits and are obligated to absorb all of its losses. Therefore, the Company consolidates Arki Network Service as a variable interest entity (“VIE”) in accordance with SEC Regulation SX-3A-02 and Accounting Standards Codification (“ASC”) 810, “Consolidation.”

 

The following is a summary of the Contractual Agreements of the Company’s VIE structure:

 

The shareholders of Arki Network Service, namely Mr. Jianmin Gao and Mr. Fei Gao, entered into a loan agreement with Arki Fuxin on February 3, 2011. Under this loan agreement, Arki Fuxin granted an interest-free loan of RMB 1.0 million to Mr. Jianmin Gao and Mr. Fei Gao, collectively, for their capital contributions to Arki Network Service, as required by the PRC. The term of the loan is for ten years from the date of execution until the date when Arki Fuxin requests repayment. Arki Fuxin may request repayment of the loan with 30 days’ advance notice. The loan is not repayable at the discretion of the shareholders and is eliminated upon consolidation.

 

The shareholders of Arki Network Service entered into an option agreement with Arki Fuxin on February 3, 2011, under which the shareholders of Arki Network Service jointly and severally granted to Arki Fuxin an option to purchase their equity interests in Arki Network Service. The purchase price will be set off against the loan repayment under the loan agreement. Arki Fuxin may exercise such option at any time until it has acquired all equity interests of Arki Network Service or freely transferred the option to any third party and such third party assumes the rights and obligations of the option agreement.


Arki Fuxin and Arki Network Service entered into an exclusive business cooperation agreement deemed effective on November 26, 2010, under which Arki Network Service engaged Arki Fuxin as its exclusive provider of technical support, consulting services, maintenance and other commercial services. Arki Network Service shall pay to Arki Fuxin service fees determined based on the net income of Arki Network Service and which are eliminated in consolidation. Arki Fuxin shall exclusively own any intellectual property arising from the performance of this agreement. This agreement has a term of ten years from the effective date and can only be terminated mutually by the parties in a written agreement. During the term of the agreement, Arki Network Service may not enter into any agreement with third parties for the provision of identical or similar service without the prior consent of Arki Fuxin.

 

The shareholders of Arki Network Service entered into a share pledge agreement with Arki Fuxin on February 3, 2011 under which the shareholders pledged all of their equity interests in Arki Network Service to Arki Fuxin as collateral for all of the payments due to Arki Fuxin and to secure their obligations under the above agreements. The shareholders of Arki Network Service may not transfer or assign the shares or the rights and obligations in the share pledge agreement or create or permit any pledges which may have an adverse effect on the rights or benefits of Arki Fuxin without Arki Fuxin’s preapproval. Arki Fuxin is entitled to transfer or assign in full or in part the shares pledged. In the event of default, Arki Fuxin, will be entitled to request immediate repayment of the loan or to dispose of the pledged equity interests through transfer or assignment.

 

The shareholders of Arki Network Service entered into a power of attorney agreement with Arki Fuxin effective on November 26, 2010 under which the shareholders irrevocably appointed Arki Beijing and Arki Fuxin to vote on their behalf on all matters they are entitled to vote on, including matters relating to the transfer of any or all of their respective equity interests in the entity and the appointment of the chief executive officer and other senior management members.


v3.7.0.1
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2017
Summary of Significant Accounting Policies [Abstract]  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of accounting and presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include those of the Company and its wholly-owned subsidiaries based in the PRC, which include America Pine Beijing, Arki Beijing, Arki Fuxin, Yin Hang, 51% majority ownership in Arki Tianjin, and the discontinued operation Shanghai Zhonghui, which was consolidated only for the three and six months ended June 30, 2016. As a result of contractual arrangements, the Company consolidates Arki Network Service in accordance with SEC Regulation SX-3A-02 and Accounting Standards Codification (“ASC”) 810, “Consolidation.” All significant intercompany accounts and transactions have been eliminated in consolidation.

 

The unaudited interim consolidated financial statements of the Company as of June 30, 2017, and for the three and six months ended June 30, 2017 and 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) which apply to interim financial statements. Accordingly, they do not include all of the information and footnotes normally required by accounting principles generally accepted in the United States of America for annual financial statements. The interim consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K filed with the SEC. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for the three and six months ended June 30, 2017 and 2016 are not necessarily indicative of the results to be expected for future quarters or for the year ending December 31, 2017.

 

All consolidated financial statements and notes to the consolidated financial statements are presented in United States dollars (“US Dollar” or “US$” or “$”).


Variable interest entity

 

Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Section 810, “Consolidation” (“ASC 810”), the Company is required to include in its consolidated financial statements, the financial statements of its variable interest entities (“VIEs”). ASC 810 requires a VIE to be consolidated if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. VIEs are those entities in which a company, through contractual arrangements, bears the risk of, and enjoys the rewards normally associated with ownership of the entity, and therefore the company is the primary beneficiary of the entity.

 

Under ASC 810, a reporting entity has a controlling financial interest in a VIE, and must consolidate that VIE, if the reporting entity has both of the following characteristics: (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance; and (b) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. The reporting entity’s determination of whether it has this power is not affected by the existence of kick-out rights or participating rights, unless a single enterprise, including its related parties and de - facto agents, have the unilateral ability to exercise those rights. Arki Network Service’s actual stockholders do not hold any kick-out rights that affect the consolidation determination.

 

Through the VIE agreements disclosed in Note 1, the Company is deemed the primary beneficiary of Arki Network Service. Accordingly, the results of Arki Network Service have been included in the accompanying consolidated financial statements. Arki Network Service has no assets that are collateral for or restricted solely to settle their obligations. The creditors of Arki Network Service do not have recourse to the Company’s general credit.

 

The following financial statement amounts and balances of Arki Network Service have been included in the accompanying consolidated financial statements:

 

     

June 30,

2017

    December 31, 
2016
 
      (Unaudited)        
               
  TOTAL ASSETS   $ 718,986     $ 1,092,474  
                   
  TOTAL LIABILITIES   $ 2,254,665     $ 2,445,343  

 

 

     

Three Months ended

June 30,

   

Six Months ended

June 30,

 
      2017     2016     2017     2016  
      (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
                                   
  Net loss   $ (130,904 )   $ (105,901 )   $ (147,781 )   $ (293,799 )

 

Use of estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

Foreign currency translations

 

Almost all of the Company assets are located in the PRC. The functional currency for the Company’s operations is the Renminbi (“RMB”). The Company uses the United States Dollar (“US Dollar” or “US$” or “$”) for financial reporting purposes. The financial statements of the Company have been translated into US Dollars in accordance with FASB ASC Section 830, “Foreign Currency Matters.”

 

All asset and liability accounts have been translated using the exchange rate in effect at the balance sheet date. Equity accounts have been translated at their historical exchange rates when the capital transactions occurred. Statements of operations and comprehensive income (loss) and cash flows have been translated using the average exchange rate for the periods presented. Adjustments resulting from the translation of the Company’s financial statements are recorded as other comprehensive income (loss). 

 

The exchange rates used to translate amounts in RMB into US Dollars for the purposes of preparing the financial statements are as follows:

 

     

June 30,

2017

    December 31,
2016
 
      (Unaudited)          
                   
  Balance sheet items, except for stockholders’ equity, as of periods end     0.1475       0.1440  

 

      Three Months Ended  
     

June 30,

2017

    June 30,
2016
 
      (Unaudited)          
                   
  Amounts included in the statements of operations and comprehensive income (loss) and cash flows for the  periods presented      0.1457       0.1533  

  

      Six Months Ended  
     

June 30,

2017

    June 30,
2016
 
      (Unaudited)     (Unaudited)  
                   
  Amounts included in the statements of operations and comprehensive income (loss) and cash flows for the  periods presented     0.1455       0.1531  

  

Foreign currency translation adjustments of $192,511 and $9,419 for the three months ended June 30, 2017 and 2016, respectively, and $(31,984) and $(22,144) for the six months ended June 30, 2017 and 2016, respectively, have been reported as other comprehensive income (loss). Other comprehensive income (loss) of the Company consists entirely of foreign currency translation adjustments.

 

Although PRC government regulations now allow convertibility of the RMB for current account transactions, significant restrictions still remain. Hence, such translations should not be construed as representations that the RMB could be converted into US Dollars at that rate or any other rate.

 

The value of the RMB against the US Dollar and other currencies may fluctuate and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of the RMB may materially affect the Company’s financial condition in terms of US Dollar reporting.

 

Revenue recognition

 

We recognize revenue from services rendered when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured.

 

E-commerce Revenue Recognition

 

The Company evaluates whether it is appropriate to record the net amount of sales earned as commissions. The Company is not the primary obligor nor is it subject to inventory risk as the agreements with its suppliers specify that they have the responsibility to provide the product or service to the customer. Also, the amounts it earns from its vendors/suppliers is based on a fixed percentage and bound contractually. Additionally, the Company does not have any obligation to resolve disputes between the vendors and the customers that purchase the products on its website. Any disputes involving damaged, non-functional, product returns, and/or warranty defects are resolved between the customer and the vendor.

 

The Company has no obligation for right of return and/or warranty for any of the sales completed using its website. Since the Company is not primarily obligated and amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two, it records its revenues as commissions earned on a net basis.

 

The Company records deferred revenue when cash is received in advance of the performance of services or delivery of goods. Deferred revenue is also recorded to account for the seven-day grace period offered to customers for potential product disputes, if any.

 

Servicing fee income

 

Borrowers typically pay the Company a servicing fee on each payment received. The service fees compensate the Company for the costs it incurs in servicing the related loan, including managing funding from investors, payments to investors and maintaining borrower’ account portfolios. The Company records servicing fees paid by borrower as a component of operating revenue when received.

 

Yin Hang provides credit risks assessment services to the borrowers and lenders on a third party P2P online lending platform. The service fees are calculated based on complexity, required time, contents and commercial value of the coordination services between borrowers and lenders and are collected when the loan agreements are signed by all parties but before releasing the money to the borrowers.

 

Interest income on loans

 

Interest on loan receivables is accrued monthly in accordance with their contractual terms and recorded in accrued interest receivable. The Company does not charge a prepayment penalty if they repay the loans in advance with or without notice.


Discontinued Operations

 

“Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” was effective for the Company during the three months ended December 31, 2016. The amendments contained in this update change the criteria for reporting discontinued operations and enhance the reporting requirements for discontinued operations. Under the revised standard, a discontinued operation must represent a strategic shift that has or will have a major effect on an entity’s operations and financial results. Examples could include a disposal of a major line of business, a major geographical area, a major equity method investment, or other major parts of an entity. The revised standard also allows an entity to have certain continuing cash flows or involvement with the component after the disposal. Additionally, the standard requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The Company accounted for the sales of Shanghai Zhonghui during 2016 as a discontinued operation pursuant to this standard. Refer to Note 15 for additional details.

 

Non-controlling interest

 

Noncontrolling interests in our 51% owned subsidiaries are recorded as a component of our equity, separate from the Company’s equity. Purchase or sales of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the non-controlling interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.

 

Comprehensive income (loss)

 

Comprehensive income (loss) includes all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, Accounting Standards Codification (ASC) 220, Comprehensive Income, requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. For the periods presented, the Company’s comprehensive income (loss) includes net income (loss) and foreign currency translation adjustments and is presented in the consolidated statements of operations and comprehensive income (loss).

 

Earnings per share

 

The Company calculates basic earnings per share by dividing its net income (loss) by the weighted average number of common shares outstanding for the period, without considering common stock equivalents.

 

Diluted EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period and the weighted average number of dilutive common stock equivalents, such as options and warrants.

 

Options and warrants are only included in the calculation of diluted EPS when their effect is not anti-dilutive or the Company has a loss


Cash and cash equivalents

 

The Company considers all demand and time deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents.

 

Loans receivable

 

Loans receivable primarily represents the principle lent to the borrowers. Management regularly reviews the aging of the loans receivable and changes in payment trends and records an allowance when management believes collection of amounts due are at risk. Loans receivable considered uncollectible are written off after exhaustive efforts at collection.

 

Allowance for loan losses

 

The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss history, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

 

The Company calculates the provision amount as below:

 

  1. General Reserve - is based on the total loan receivable balance and to be used to cover unidentified probable loan loss. The General Reserve is required to be no less than 1% of total loans receivable.
     
  2. Specific Reserve - is an allowance set aside covering losses due to risks related to a particular country, region, industry, borrower or type of loan. The reserve rate can also be decided based on management’s estimate of loan collectability.

 

Interest receivable

 

Interest receivable represents the amount of interest that has been earned as of the balance sheet date, but which has not yet been received in cash. Management regularly reviews the aging of interest receivable and changes in payment trends and records an allowance when management believes collection of amounts due are at risk. Interest receivable considered uncollectible is written off after exhaustive efforts at collection.


Loans from individuals

 

Loans from individuals primarily represent the principle of lending funds received from the individuals through the Company’s internet platform. The interest rates of such loans are 8% - 18% per annum with a term lasting from 6 months to one year.

 

Property and equipment, net

 

Property and equipment is recorded at cost and consists of computer equipment, office equipment and furniture and is depreciated using the straight-line method over the estimated useful lives of the related assets (generally three years or less). Costs incurred for maintenance and repairs are expensed as incurred and expenditures for major replacements and improvements are capitalized and depreciated over their estimated remaining useful lives.

 

Intangible assets, net

 

Intangible assets, comprising intellectual property rights (the credit risk assessment system) are stated at cost less accumulated amortization. Amortization is computed using the straight-line method over the estimated useful lives of 20 years. 

 

Impairment of long-lived assets

 

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances (such as a significant adverse change in market conditions that will impact the future use of the assets) indicate its net book value may not be recoverable. When these events occur, the Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over its estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. The Company’s management currently believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change or demand for the Company’s products will continue. Either of these could result in the future impairment of long-lived assets. As of June 30, 2017 and December 31, 2016, the Company has not experienced impairment losses on its long-lived assets for both the continuing and discontinued operations. However, there can be no assurances that demand for the Company’s products or services will continue, which could result in an impairment of long-lived assets in the future.


Fair value of financial instruments

 

FASB ASC 820, “Fair Value Measurement” specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:

 

  Level 1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.
     
  Level 2 Inputs – Inputs other than the quoted prices in active markets that are observable either directly or indirectly.
     
  Level 3 Inputs – Inputs based on valuation techniques that are both unobservable and significant to the overall fair value measurements.

 

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

 

The Company did not identify any assets or liabilities that are required to be presented at fair value on a recurring basis. Carrying values of non-derivative financial instruments, including cash, accounts receivable, prepaid expenses, other receivables, accounts payable, taxes payable, accrued liabilities and other payables, approximated their fair values due to the short nature of these financial instruments. There were no changes in methods or assumptions during the periods presented.


Income taxes

 

The Company accounts for income taxes in accordance with FASB ASC 740, “Income Taxes”, which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes. Deferred tax assets and liabilities represent the future tax consequences for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. As of June 30, 2017 and December 31, 2016, the Company does not have a liability for any unrecognized tax benefits. The Company’s tax filings are subject to examination by the tax authorities. The tax years of 2013 and 2014 and 2015 remain open to examination by tax authorities in the PRC.

 

Generally, the Company remains subject to PRC examination of its income tax returns annually. It believes that its income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. In addition, the Company did not record a cumulative effect adjustment related to the adoption of ASC 740. Its policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes. Its tax provision for interim periods is determined using an estimate of our annual effective tax rate based on rates established within the PRC and, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter the Company updates its estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company makes a cumulative adjustment.


v3.7.0.1
Recently Issued Accounting Standards
6 Months Ended
Jun. 30, 2017
Recently Issued Accounting Standards [Abstract]  
RECENTLY ISSUED ACCOUNTING STANDARDS
3. RECENTLY ISSUED ACCOUNTING STANDARDS

 

In November 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-18, “Statement of Cash Flows: Restricted Cash”. The amendments address diversity in practice that exists in the classification and presentation of changes in restricted cash on the statement of cash flows. The amendment is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

 

In June 2016 the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which eliminates the probable initial recognition threshold for credit losses in current U.S. GAAP, and instead requires an organization to record a current estimate of all expected credit losses over the contractual term for financial assets carried at amortized cost. This is commonly referred to as the current expected credit losses (“CECL”) methodology. Expected credit losses for financial assets held at the reporting date will be measured based on historical experience, current conditions, and reasonable and supportable forecasts. Another change from existing U.S. GAAP involves the treatment of purchased credit deteriorated assets, which are more broadly defined than purchased credit impaired assets in current accounting standards. When such assets are purchased, institutions will estimate and record an allowance for credit losses that is added to the purchase price rather than being reported as a credit loss expense. Furthermore, ASU 2016-13 updates the measurement of credit losses on available-for-sale debt securities, by mandating that institutions record credit losses on available-for-sale debt securities through an allowance for credit losses rather than the current practice of writing down securities for other-than-temporary impairment. ASU 2016-13 will also require the enhancement of financial statement disclosures regarding estimates used in calculating credit losses. ASU 2016-13 does not change the existing write-off principle in U.S. GAAP or current nonaccrual practices, nor does it change accounting requirements for loans held for sale or certain other financial assets which are measured at the lower of amortized cost or fair value. As a public business entity that is an SEC filer, ASU 2016-13 becomes effective for the Company on January 1, 2020, although early application is permitted for 2019. The Company is currently evaluating the potential effects on the Company’s financial statements, if any.


In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230)”: Classification of Certain Cash Receipts and Cash Payments, to provide guidance on the presentation and classification of certain cash receipts and cash payments on the statement of cash flows. The guidance specifically addresses cash flow issues with the objective of reducing the diversity in practice. The guidance will be effective for the Company in fiscal year 2018, but early adoption is permitted. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

 

In May 2016, the FASB issued ASU No. 2016-11 “Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815)”; Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

 

In May 2016, FASB issued ASU No. 2016-12 “Revenue from Contracts with Customers (Topic 606)”; Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

 

In April 2016, FASB issued Accounting Standards Update No. 2016-10, “Revenue from Contracts with Customers (Topic 606)”: Identifying Performance Obligations and Licensing. The amendments clarify the following two aspects of Topic 606: (a) identifying performance obligations; and (b) the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606. Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein (i.e., January 1, 2018, for a calendar year entity). Early application for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

 

In February 2016, the FASB issued ASU 2016-02 “Leases.” The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of its pending adoption of the new standard on its financial statements.

 

In March 2015, the FASB issued ASU 2015-03 “Interest – Imputation of Interest (Subtopic 835-30)”. This ASU addressed the simplification and presentation of debt issuance costs by presenting them in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts or premiums. This accounting standard update is not expected to have a material impact on the Company’s consolidated financial statements.


v3.7.0.1
Prepaid Expenses
6 Months Ended
Jun. 30, 2017
Prepaid Expenses [Abstract]  
PREPAID EXPENSES
4. PREPAID EXPENSES

 

Prepaid expenses consisted of the following as of June 30, 2017 and December 31, 2016:

 

     

June 30,

2017

    December 31,
2016
 
      (Unaudited)        
               
  Prepaid website services   $ -     $ 83,898  
  Prepaid income taxes     89,515       -  
  Prepaid rent     79,427       1,200  
                   
  Total prepaid expenses   $ 168,942     $ 85,098  

 


v3.7.0.1
Loans Receivable, Net
6 Months Ended
Jun. 30, 2017
Loans Receivable, Net/Other Receivables [Abstract]  
LOANS RECEIVABLE, NET
5. LOANS RECEIVABLE, NET

 

The monthly interest rates on loan issued range from 8% to 30% for the six months ended June 30, 2017.

 

As of June 30, 2017 and December 31, 2016, the total loan receivables balance was $797,808 and $683,496, and nil and 63% of the loan receivables were issued to three third-party small business borrowers.

 

Loan receivables consisted of the following as of June 30, 2017 and December 31, 2016:

 

     

June 30,

2017

    December 31,
2016
 
      (Unaudited)        
               
  Loans receivable   $ 814,090     $ 683,496  
                   
  Allowance for loan losses     (16,282 )     -  
                   
  Loans receivable, net   $ 797,808     $ 683,496  



The loans primarily consist of factoring loans. According to the outstanding contracts during the reporting period, the maturity terms ranged from 3 months to 6 months. The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Company’s past loan loss history, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

 

The allowance is calculated at portfolio-level since our loans portfolio is typically of smaller balance homogenous loans and is collectively evaluated for impairment.

 

Finally, as appropriate, the Company also considers individual borrower circumstances and the condition and fair value of the loan collateral, if any.

 

While management uses the best information available to make loan loss allowance evaluations, adjustments to the allowance may be necessary based on changes in economic and other conditions or changes in accounting guidance.

 

For the six months ended June 30, 2017 and the year ended December 31, 2016, the Company believes that all loans can be collected and allowance for loan losses were $16,282 and nil.

 

Loans with modified terms are classified as troubled debt restructurings if the Company grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary below market rate reduction in interest rate or an extension of a loan’s stated maturity date. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. Loans classified as troubled debt restructurings are designated as impaired.


v3.7.0.1
Other Receivables
6 Months Ended
Jun. 30, 2017
Loans Receivable, Net/Other Receivables [Abstract]  
OTHER RECEIVABLES
6.OTHER RECEIVABLES

 

Other receivables consist of the following as of June 30, 2017 and December 31, 2016:

 

   

June 30,

2017

  December 31,
2016
 
   (Unaudited)    
        
 Advances to unrelated third-parties $1,687,840  $2,913,273 
 Other deposits  -   417,855 
          
 Total $1,687,840  $3,331,128

v3.7.0.1
Property and Equipment, Net
6 Months Ended
Jun. 30, 2017
Property and Equipment, Net [Abstract]  
PROPERTY AND EQUIPMENT, NET
7. PROPERTY AND EQUIPMENT, NET

 

Property and equipment consisted of the following as of June 30, 2017 and December 31, 2016:

 

     

June 30,

2017

    December 31,
2016
 
      (Unaudited)        
               
  Office equipment & computers   $ 41,210     $ 40,233  
  Equipment     60,495       59,060  
  Office furniture & fixtures     64,082       62,560  
  Motor vehicles     21,213       20,710  
        187,000       182,563  
                   
  Less: accumulated depreciation     (96,702 )     (80,738 )
                   
  Total property and equipment, net   $ 90,298     $ 101,825  

 

Depreciation expense for the three months ended June 30, 2017 and 2016 was $11,527 and $9,674, and $5,764 and $14,804 for the six months ended for June 30, 2017 and 2016, respectively.


v3.7.0.1
Intangible Assets, Net
6 Months Ended
Jun. 30, 2017
Intangible Assets, Net [Abstract]  
INTANGIBLE ASSETS, NET
8. INTANGIBLE ASSETS, NET

 

     

June 30,

2017

    December 31,
2016
 
      (Unaudited)        
               
  Credit risks assessment system   $ 1,769,760     $ 1,727,912  
                   
  Less: accumulated amortization     (324,456 )     (273,586 )
                   
  Total intangible assets, net   $ 1,445,304     $ 1,454,326  

 

The Company obtained the intangible assets from the acquisition of Yin Hang. As of December 31, 2016, all of Yin Hang’s intangible assets are held by the Company. No significant residual value is estimated for these intangible assets. For the three months ended June 30, 2017 and 2016, the Company recorded $27,001 and $0 amortization respectively on the intangible asset - credit risk assessment system. For the six months ended June 30, 2017 and 2016, the Company recorded $50,870 and $0 amortization respectively on the intangible asset - credit risks assessment system.


v3.7.0.1
Loans from Individuals
6 Months Ended
Jun. 30, 2017
Loans From Individuals [Abstract]  
LOANS FROM PAYABLE
9. LOANS FROM INDIVIDUALS

 

The individuals can invest in loans that are offered through the Company’s marketplace and network. All the loans have maturities from six months to one year with interest rates varying from 8% to 18%.

 

Loans from individuals consisted of the following as of June 30, 2017 and December 31, 2016:

 

    June 30,
2017

    December 31,
2016
 
      (Unaudited)        
                   
  Loans from individuals   $ 3,821,398     $ 2,332,330  

 

For the three and six months ended June 30, 2017, the Company recorded $967,946 and $1,028,100 respectively on the interest.


v3.7.0.1
Payable to Shareholder
6 Months Ended
Jun. 30, 2017
Payable to Shareholder [Abstract]  
PAYABLE TO SHAREHOLDER
10. PAYABLE TO SHAREHOLDER

 

Caesar Capital Management Ltd. (“Caesar”) a shareholder of the Company, advanced $101,652 and $ 102,035 to the Company as of June 30, 2017 and December 31, 2016, respectively. The payable to Caesar. included amounts due to Caesar of $117,767 and amounts due from Caesar of $16,115 as of June 30, 2017, and amounts due Caesar of $117,767 and amounts due from Caesar of $15,732 as of December 31, 2016. The loans were borrowed by the Company for operating purposes, without collateral, and were due between July 2013 to November 2013, and with an annual interest rate of 6%. On July 1, 2013, the Company entered into an agreement with Caesar Capital Management Ltd. which extends or amends the maturity date for all the existing loans between the Company and Caesar Capital Management Ltd. The loans became due on demand and interest-fee, and the Company was not charged any late payment penalty. Interest expense of nil and nil have been accrued for the years ended June 30, 2017 and December 31, 2016, respectively.


v3.7.0.1
Discontinued Operations
6 Months Ended
Jun. 30, 2017
Discontinued Operations [Abstract]  
DISCONTINUED OPERATIONS
11. DISCONTINUED OPERATIONS

 

In accordance with ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity”, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as a component of net income (loss) separate from the net income (loss) of continued operations in accordance with ASC 205-20-45.

 

On December 28, 2016, the Company and Yanbian Yaotian Gas Group Co., Ltd, (the “Purchaser”) a company incorporated under the laws of the People’s Republic of China, entered into a definitive agreement to sell all of its interests in Shanghai Zhonghui for no consideration. As of December 31, 2016, the results of operations of Shanghai Zhonghui are reflected in the Company’s consolidated financial statements as “discontinued operations.”


The disposal represents a strategic shift and has a major effect on the Company’s results of operations. The disposed entities are accounted as discontinued operations in the consolidated financial statements for the six months ended June 30, 2016. A gain of $1,355,432 was recognized on the disposal, which is determined based on the excess of liabilities over assets in the same amount.

 

The significant items included discontinued operations are as follow:

 

      For the six months ended
June 30,
 
      2017     2106  
      (Unaudited)     (Unaudited)  
               
  Revenue   $ -     $ 5,344,290  
  Cost of revenue     -       (2,942,286 )
  Business taxes and surcharge     -       (62,811 )
  Operating expenses     -       (1,034,264 )
  Operating income from discontinued operations     -       1,304,929  
  Other expense     -       -  
  Provision for loan losses     -       -  
                   
  Income from discontinued operations before income taxes     -       1,304,929  
  Provision for income taxes     -       73,411  
                   
  Income from discontinued operations   $      -     $ 1,231,518  

 

Related parties’ transactions from discontinued operations

 

  a) Related parties:

 

  Name of related parties   Relationship with the Company
       
  Shanghai Huirong Asset Management Ltd. (“Huirong”)   Common Director, Hanzhen Li, between Shanghai Zhonghui Financial Service Information Co., Ltd. and Shanghai Huirong Asset Management Ltd.
       
  Arki Tianjin Asset Management LLP. (“Arki Tianjin”)   Subsidiary of the Company, Arki Network Service owned entities



  b) The Company had the following related party balances at of June 30, 2017 and December 31, 2016:

  

     

June 30,

2017

    December 31, 
2016
 
      (Unaudited)        
               
  Due to related party:            
  Huirong   $      -     $ 235,947  
  Arki Tianjin     -       287,942  
      $    -     $ 523,889  

 


v3.7.0.1
Business Acquisition
6 Months Ended
Jun. 30, 2017
Business Acquisition [Abstract]  
BUSINESS ACQUISITION
12. BUSINESS ACQUISITION

 

On December 1, 2016, the Company through its variable interest entity, America Arki Network Service Beijing Co., Ltd entered into certain Share Exchange Agreement with Yin Hang Financial Information Service (Shanghai) Co., Ltd, a company established under the laws of People’s Republic of China. Pursuant to the Agreement, the Company agreed to acquire 100% of the capital stock of Yin Hang in exchange for the issuance of 4,680,000 shares of Company’s common stock. Pursuant to the terms of the Agreement, all Acquisition Shares shall be locked up for one year upon issuance and Yin Hang’s investor may sell up to 2% of the Acquisition Shares after such lock-up period. Further to the supplementary agreement dated March 28, 2017, as a payment for assisting with the acquisition, the Company also issued 320,000 additional shares of the Common Stock to a third party, Yu Yang.

 

The aggregate consideration paid by the Company for the Yin Hang acquisition was 4,680,000 shares and 320,000 of Company’s common stock with stock price $0.51 at the acquisition date of December 1, 2016 to Yin Hang and shareholder Yu Yang, respectively. The fair value of shares exchanged for acquisition totaled $2,550,000.


The following table summarizes the purchase price allocation for Yin Hang and the amounts of the assets acquired and liabilities assumed which were based on their estimated fair values as of December 31, 2016:

 

  Cash and cash equivalents   $ 16,829  
  Prepayment     83,898  
  Deposit and other receivables     2,775,568  
  Due from a related company     205,591  
  Property and equipment, net     54,659  
  Intangible assets     1,454,326  
  Other payables and accruals     (156,919 )
  Taxes payable     (351,714 )
   Net assets   $ 4,082,238  

 

The operating results of Yin Hang have been included in the Company’s consolidated financial statements since December 1, 2016, the acquisition date. Intangible assets represent the Credit risk assessment system with an estimated useful life of 20 years

 

The Yin Hang acquisition was accounted for under the acquisition method of accounting, which requires, among other things, that the Company allocate the purchase price to the assets acquired and liabilities assumed based on their fair values as of the acquisition date. The following table summarized the allocation of the Yin Hang purchase price to the fair value of assets acquired and liabilities assumed.

 

      Fair value  
  Purchase price:      
  Fair value of common stock exchanged (5,000,000 shares @ $0.51)   $ (2,550,000 )
           
  Allocation of purchase price to net assets acquired:        
  Net assets acquired as of December 31, 2016     4,082,238  
  Net loss for the period from December 1 to December 31, 2016     61,481  
  Bargain purchase gain   $ 1,593,719