See accompanying notes to the condensed consolidated financial
statements.
See accompanying notes to the condensed consolidated financial
statements.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(unaudited)
(IN U.S. $)
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 the 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.
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 common stock of the Company.
YIN
HANG FINANCIAL INFORMATION SERVICE (SHANGHAI) CO., LIMITED
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 risk 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, 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. The shares are locked up for one year upon issuance and Yin Hang’s
investor may sell up to 2% of the shares after such lockup period. Further to a supplementary agreement dated March 28, 2017,
as a payment for assisting in the acquisition, the Company also agreed to issue 320,000 shares of Common Stock to a third party.
On
August 31, 2017, Arki and Yin Hang entered into a Supplementary Agreement and mutually agreed to terminate the Share Exchange
Agreement, effective immediately, because companies in the financial information industry are not permitted to be controlled by
foreign companies outside of China. As a result of the termination, Yin Hang is no longer consolidated in the Company’s
financial statements starting from September 1, 2017 and its operations are reflected in discontinued operations.
CONSUMER
CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(unaudited)
(IN U.S. $)
|
1.
|
ORGANIZATION
(continued)
|
Details
of the Company’s wholly owned subsidiaries and its Affiliated PRC Entity as of June 30, 2018 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 E commerce Technology Corp. (“Arki Beijing”)
|
|
March
6, 2008
|
|
PRC
|
|
|
100
|
%
|
|
Maintains
the various computer systems, software and data. Owns the intellectual property rights of the “consumer market network”.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
America
Pine Beijing Bio-tech, Inc. (“America Pine Beijing”)
|
|
March
21, 2007
|
|
PRC
|
|
|
100
|
%
(1)
|
|
Assists
in payment collection for e-commerce business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
America
Arki Fuxin Network Management Co. Ltd.
(“Arki
Fuxin”)
|
|
November
26, 2010
|
|
PRC
|
|
|
100
|
%
(1)
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yin
Hang Financial Information Service (Shanghai) Co., Ltd (“Yin Hang”)
|
|
November
22, 2013
|
|
PRC
|
|
|
0
|
%
(4)
|
|
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 as
of September 1, 2017, no longer owned by the Company. The results of operations of Yin Hang are reflected in the consolidated
financial statements as “discontinued operations”.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arki
Tianjin Asset Management LLP. (“Arki Tianjin”)
|
|
October
22, 2015
|
|
PRC
|
|
|
51
|
%
(3)
|
|
Offer
asset management, management consulting, internet information services as well as advertising design, production, agent, publishing.
|
|
(1)
|
Wholly
foreign owned entities (WFOE)
|
|
(2)
|
VIE
|
|
(3)
|
Arki
Network Service, Inc. owned entities
|
|
(4)
|
Discontinued
operation on August 31, 2017
|
CONSUMER
CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(IN
U.S. $)
|
1.
|
ORGANIZATION
(continued)
|
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 the Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) 810,
“Consolidation in accounting for a variable interest entity (“VIE”).”
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.
CONSUMER
CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(IN
U.S. $)
|
1.
|
ORGANIZATION
(continued)
|
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.
CONSUMER
CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(IN
U.S. $)
|
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, 51% majority ownership in Arki Tianjin, and the
discontinued operations of Yin Hang. 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
inter-company accounts and transactions have been eliminated in consolidation.
The
audited consolidated financial statements of the Company as of June 30, 2018 and 2017 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 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 consolidated financial information should be read in conjunction with the consolidated financial statements
and the notes thereto, included in the Company’s Form 10-Q 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 six months ended June 30, 2018 are not necessarily indicative of the
results to be expected for future years.
All
consolidated financial statements and notes to the consolidated financial statements are presented in United States dollars (“US
Dollar” or “US$” or “$”).
CONSUMER
CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
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.
CONSUMER
CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
The
following financial statement amounts and balances of Arki Network Service, Inc. have been included in the accompanying consolidated
financial statements:
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalent
|
|
$
|
1,386,534
|
|
|
$
|
686,368
|
|
|
Loan receivables, net
|
|
|
9,715,087
|
|
|
|
-
|
|
|
Prepaid expenses
|
|
|
82,495
|
|
|
|
57,025
|
|
|
Due from inter-company
|
|
|
1,612,491
|
|
|
|
1,386,108
|
|
|
Due from related party
|
|
|
97,259
|
|
|
|
96,968
|
|
|
Other receivables
|
|
|
15,642
|
|
|
|
11,890
|
|
|
Total current assets
|
|
|
12,909,508
|
|
|
|
2,238,359
|
|
|
Property and equipment, net
|
|
|
43,259
|
|
|
|
50,453
|
|
|
Long-term investment
|
|
|
312,480
|
|
|
|
317,888
|
|
|
Total non-current assets
|
|
|
355,739
|
|
|
|
368,341
|
|
|
Total assets
|
|
$
|
13,265,247
|
|
|
$
|
2,606,700
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable - current portion
|
|
$
|
11,777,465
|
|
|
$
|
1,192,750
|
|
|
Interest payable
|
|
|
1,213,563
|
|
|
|
531,812
|
|
|
Fee payables
|
|
|
51,747
|
|
|
|
-
|
|
|
Accrued liabilities
|
|
|
5,036
|
|
|
|
203
|
|
|
Received in advance
|
|
|
601,940
|
|
|
|
-
|
|
|
Other taxes payable
|
|
|
7,773
|
|
|
|
-
|
|
|
Due to inter-company
|
|
|
1,951,183
|
|
|
|
1,729,803
|
|
|
Due to related party
|
|
|
244,178
|
|
|
|
250,810
|
|
|
Deferred tax liability
|
|
|
118,196
|
|
|
|
120,243
|
|
|
Total Current liabilities
|
|
$
|
15,971,081
|
|
|
$
|
3,825,621
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable, non-current portion
|
|
|
2,011,008
|
|
|
|
2,906,562
|
|
|
Total non-current liabilities
|
|
$
|
2,011,008
|
|
|
$
|
2,906,562
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
17,982,089
|
|
|
|
6,732,183
|
|
CONSUMER
CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Net revenue
|
|
$
|
188,300
|
|
|
$
|
(1,099,698
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operation
|
|
$
|
(687,800
|
)
|
|
$
|
(1,099,698
|
)
|
|
Less: Net loss attributable to the non-controlling interest
|
|
|
(284,636
|
)
|
|
|
(455,895
|
)
|
|
Net loss attributable to the company – continuing operations
|
|
$
|
(403,164
|
)
|
|
$
|
(643,803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net income from discontinued operations
|
|
$
|
-
|
|
|
$
|
751,807
|
|
|
Less: Net income attributable to the non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
Net income attributable to the company – discontinued operations
|
|
$
|
-
|
|
|
$
|
751,807
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the periods
|
|
$
|
(687,800
|
)
|
|
$
|
(1,099,698
|
)
|
|
Net (loss) income attributable to the Company’s shareholders
|
|
$
|
(403,164
|
)
|
|
$
|
108,004
|
|
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in) operating activities
|
|
$
|
697,812
|
|
|
$
|
(1,185,473
|
)
|
|
-Net cash provided by (used in) operating activities from continuing operations
|
|
|
697,812
|
|
|
|
(1,434,436
|
)
|
|
-Net cash provided by operating activities from discontinued operations
|
|
|
-
|
|
|
|
248,963
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow used in investing activities
|
|
$
|
(10,112,461
|
)
|
|
$
|
(10,112,461
|
)
|
|
-Net cash used in investing activities from continuing operations
|
|
|
(10,112,461
|
)
|
|
|
(10,112,461
|
)
|
|
-Net cash used in investing activities from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
$
|
10,155,609
|
|
|
$
|
10,155,609
|
|
|
-Net cash provided by financing activities from continuing operations
|
|
|
10,155,609
|
|
|
|
10,155,609
|
|
|
-Net cash provided by financing activities from discontinued operations
|
|
|
-
|
|
|
|
-
|
|
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
.”
CONSUMER
CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Foreign
currency translations (continued)
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:
|
|
|
As
of
June 30,
2018
|
|
|
As
of
December 31,
2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
sheet items, except for stockholders’ equity accounts
|
|
|
0.1511
|
|
|
|
0.1537
|
|
|
|
|
For the three months ended
June 30,
|
|
|
For the six months ended
June 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items included in the statements of
operations and comprehensive income (loss) and cash flows for the periods presented
|
|
|
0.1569
|
|
|
|
0.1475
|
|
|
|
0.1571
|
|
|
|
0.1463
|
|
CONSUMER
CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Foreign
currency translations (continued)
Foreign
currency translation adjustments of $(101,036) and $147,390 for the six months ended June 30, 2018 and 2017, respectively, have
been reported as other comprehensive (loss) income. Other comprehensive (loss) income 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.
CONSUMER
CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Revenue
recognition (continued)
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 provided 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.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
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” is utilized by the Company to present the operations of Yin Hang which have been disposed of.
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 dispose
of Yin Hang as discontinued operations pursuant to this standard. Refer to Note 9 for additional details. The Company accounted
for the disposal of Yin Hang during 2017 as a discontinued operation pursuant to this standard. Refer to Note 11 for additional
details.
Non-controlling interest
Non-controlling interests held
49% shares of one of subsidiary is 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.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
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 dilute
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-dilute 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 noncollectable
are written off after exhaustive efforts at collection.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
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 noncollectable is written off after exhaustive efforts at
collection.
Loans payable
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 4% - 54% per annum with a term lasting from 6 months to two years.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
|
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 expended as incurred and expenditures for major replacements and improvements are capitalized and depreciated over
their estimated remaining useful lives.
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. 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 services will continue. Either of these could
result in the future impairment of long-lived assets. As of June 30, 2018 and December 31, 2017, 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.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
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 tables below present information
as of June 30, 2018 and December 31 2017, respectively, regarding the Company’s financial assets and financial liabilities
that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy reflecting the valuation
techniques utilized to determine such fair value.
|
June 30, 2018:
|
|
|
|
|
|
|
|
Level 1
|
|
|
Available-for-sale:
|
|
|
|
|
|
Short-term investments
|
|
$
|
-
|
|
|
December 31, 2017:
|
|
|
|
|
|
|
Level 1
|
|
|
Available-for-sale:
|
|
|
|
|
Short-term investments
|
|
$
|
461,115
|
|
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
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 taxing 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, 2018 and December 31, 2017, the Company does not have liability for
any unrecognized tax benefits. The Company’s tax filings are subject to examination by the tax authorities. The tax years
of 2017 and 2016 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. 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.
Going Concern
As shown in the consolidated
financial statements, the Company has generated a net loss of $1,122,120 for the six months ended June 30, 2018 and an accumulated
deficit of $11,101,633 as of June 30, 2018. The Company also experienced insufficient cash flows from operations and will be required
continuous financial support from the shareholder. The Company will need to raise capital to fund its operations until it is able
to generate sufficient revenue to support the future development. Moreover, the Company may be continuously raising capital through
the sale of debt and equity securities.
The Company’s ability
to achieve these objectives cannot be determined at this stage. If the Company is unsuccessful in its endeavors, it may be forced
to cease operations. These consolidated financial statements do not include any adjustments that might result from this uncertainty
which may include adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications
of liabilities that might be necessary should the Company be unable to continue as a going concern.
These factors have raised substantial
doubt about the Company’s ability to continue as a going concern. There can be no assurances that the Company will be able
to obtain adequate financing or achieve profitability. These financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
3.
|
RECENTLY ISSUED ACCOUNTING
STANDARDS
|
In January 2017, the FASB issued
Accounting Standards Update (“ASU”) 2017-04, Intangibles – Goodwill and Other (Topic 350). The amendments in
this update simplify the test for goodwill impairment by eliminating Step 2 from the impairment test, which required the entity
to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure
that would be required in determining fair value of assets acquired and liabilities assumed in a business combination. The amendments
in this update are effective for public companies for annual or any interim goodwill impairment tests in fiscal years beginning
after December 15, 2019. We are evaluating the impact of adopting this guidance on our Consolidated Financial Statements.
In January 2017, the FASB issued
ASU 2017-01, Business Combinations (Topic 805); Clarifying the Definition of a Business. The amendments in this update clarify
the definition of a business to help companies evaluate whether transactions should be accounted for as acquisitions or disposals
of assets or businesses. The amendments in this update are effective for public companies for annual periods beginning after December
15, 2017, including interim periods within those periods. The Company does not anticipate that this adoption will have a significant
impact on its financial position, results of operations, or cash flows.
In July 2017, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per
Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in
Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features)
with down round features. When determining whether certain financial instruments should be classified as liabilities or equity
instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to
an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
3.
|
RECENTLY ISSUED ACCOUNTING STANDARDS
(continued)
|
As a result, a freestanding
equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability
at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments,
the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of
the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common
shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject
to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion
and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this update recharacterize the
indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope
exception.
Those amendments do not have
an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including
adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected
as of the beginning of the fiscal year that includes that interim period. The Company is currently reviewing the impact of adoption
of ASU 2017-11on its financial statements. The Company does not anticipate that this adoption will have a significant impact on
its financial position, results of operations, or cash flows.
The
Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have
a material impact on results of operations, financial condition, or cash flows, based on current information.
Prepaid expenses consisted of
prepaid rent for our US company and other prepaid expenses for Arki Network as of June 30, 2018 and December 31, 2017.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
The monthly interest rates on
loan issued at 6% and range from 8% to 30% for the six months ended June 30, 2018 and 2017, respectively.
As of June 30, 2018 and December
31, 2017, loan receivables balance was $9,715,087 and $0, respectively.
Loan receivable consisted of
the following as of June 30, 2018 and December 31, 2017:
|
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable - third parties
|
|
$
|
2,115,260
|
|
|
$
|
-
|
|
|
Loans receivable - related parties
|
|
|
7,599,827
|
|
|
$
|
-
|
|
|
Allowance for loan losses
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
$
|
9,715,087
|
|
|
$
|
-
|
|
The loans primarily consist
of factoring loans. According to the outstanding contracts during the reporting period, the maturity terms are 3 months.
The following table represents
the aging of loan receivables as of June 30, 2018:
|
|
|
1-29 days
past due
|
|
|
30-59 days
past due
|
|
|
60-89
days
past due
|
|
|
Over 90
days
past due
|
|
|
Total
past due
|
|
|
Current
|
|
|
Total
Loans
|
|
|
Loans receivables
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,715,087
|
|
|
$
|
9,715,087
|
|
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 homogeneous 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.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
5.
|
LOANS RECEIVABLE, NET (continued)
|
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, 2018 and 2017, the Company believes that all loans can be collected and allowance for loan losses were nil 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. There were no loans considered
impaired as of June 30, 2018 and December 31, 2017.
Other receivables consist of
the following as of June 30, 2018 and December 31, 2017:
|
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advances to unrelated third-parties
|
|
$
|
32,201
|
|
|
$
|
28,736
|
|
|
Other deposits
|
|
|
2,400
|
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
34,601
|
|
|
$
|
31,136
|
|
|
7.
|
PROPERTY AND EQUIPMENT, NET
|
Property and equipment consisted
of the following as of June 30, 2018 and December 31, 2017:
|
|
|
As of
June 30,
|
|
|
As of
December 31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold improvement
|
|
$
|
52,882
|
|
|
$
|
53,797
|
|
|
Office equipment
|
|
|
25,711
|
|
|
|
25,748
|
|
|
Furniture & fixtures
|
|
|
6,875
|
|
|
|
6,994
|
|
|
Motor vehicles
|
|
|
20,710
|
|
|
|
20,710
|
|
|
|
|
|
106,178
|
|
|
|
107,249
|
|
|
Less: accumulated depreciation
|
|
|
(34,164
|
)
|
|
|
(24,065
|
)
|
|
Total property & equipment, net
|
|
$
|
71,564
|
|
|
$
|
83,184
|
|
For the six months ended
June 30, 2018 and 2017, depreciation expense from the continuing operations was $11,013 and $7,147, respectively.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
Short-term investment is highly
liquid available-for-sale securities in accounts maintained with Industrial and Commercial Bank of China within the PRC.
|
|
|
As of
June 30,
|
|
|
As of
December 31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
Short-term investment
|
|
$
|
-
|
|
|
$
|
719,859
|
|
|
Less: Redemption
|
|
|
-
|
|
|
|
(258,744
|
)
|
|
Total available-for-sale
|
|
$
|
-
|
|
|
$
|
461,115
|
|
Interest income earned from
the short-term investments for the six months ended June 30, 2018 and 2017 was $24,115 and $8,302, respectively.
Individuals can invest in loans
that are offered through the Company’s marketplace and network. All the loans have maturities from six months to two years
with interest rates varying from 4% to 100% per annum.
Loans payable consisted of the
following as of June 30, 2018 and December 31, 2017:
|
|
|
|
Remaining
|
|
June 30,
|
|
|
December 31,
|
|
|
Interest rate
|
|
|
maturity
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
%
|
|
Within 1 year
|
|
$
|
107,274
|
|
|
$
|
-
|
|
|
|
12
|
%
|
|
Within 1 year
|
|
|
96,697
|
|
|
|
-
|
|
|
|
13
|
%
|
|
Within 1 year
|
|
|
-
|
|
|
|
15,370
|
|
|
|
14
|
%
|
|
Within 1 year
|
|
|
78,567
|
|
|
|
158,316
|
|
|
|
18
|
%
|
|
Within 1 year
|
|
|
302,180
|
|
|
|
-
|
|
|
|
30
|
%
|
|
Within 1 year
|
|
|
1,122,599
|
|
|
|
-
|
|
|
|
40%-54
|
%
|
|
Within 1 year
|
|
|
10,070,148
|
|
|
|
1,019,064
|
|
|
|
40%-54
|
%
|
|
Between 1 to 2 years
|
|
|
1,376,430
|
|
|
|
2,906,562
|
|
|
|
80
|
%
|
|
Between 1 to 2 years
|
|
|
317,289
|
|
|
|
-
|
|
|
|
100
|
%
|
|
Between 1 to 2 years
|
|
|
317,289
|
|
|
|
-
|
|
|
|
|
|
|
|
|
$
|
13,788,473
|
|
|
$
|
4,099,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
11,777,465
|
|
|
$
|
1,192,750
|
|
|
|
|
|
|
Non-current portion
|
|
$
|
2,011,008
|
|
|
$
|
2,906,562
|
|
The Company has loans payable to related parties of $10,142,674 and $2,499,245, and loans payable to third
parties of 3,645,799 and $1,600,067 as of June 30, 2018 and December 31, 2017, respectively. For the six months ended June 30,
2018 and 2017, the Company accrued $718,209 and $860,379 of interest expenses, respectively.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
10.
|
PAYABLE TO SHAREHOLDER
|
Caesar Capital Management Ltd.
(“Caesar”) a shareholder of the Company, advanced $109,009 and $117,767 to the Company as of June 30, 2018 and December
31, 2017, respectively. The loans were borrowed by the Company for operating purposes, without collateral, and were due between
July 2013 to November 2013, with an annual interest rate of 6%. On July 1, 2013, the Company entered into an agreement with Caesar
Capital Management Ltd. which amended the maturity date for all the existing loans between the Company and Caesar Capital Management
Ltd. The loans became due on demand and are non-interest bearing.
|
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 non-current 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 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 the assisting with the acquisition, the Company
also issued 320,000 additional shares of the Common Stock to a third party, Yu Yang.
On August 31, 2017, Arki and
Yin Hang entered into a Supplementary Agreement and mutually agreed to terminate the Share Exchange Agreement, effective immediately,
because companies in the financial information industry are not permitted to be controlled by foreign companies outside of China.
As a result of the termination, Yin Hang shall no longer be consolidated in the Company’s financial statements as of September
1, 2017. As of June 30 2017, the results of operations of Yin Hang 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, 2017.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
11.
|
DISCONTINUED OPERATIONS (continued)
|
The significant
items included discontinued operations are as follow:
|
|
|
For the three months ended
June 30,
|
|
|
For the six months ended
June 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
1,092,962
|
|
|
$
|
-
|
|
|
$
|
1,631,673
|
|
|
Operating expenses
|
|
|
-
|
|
|
|
(269,241
|
)
|
|
|
-
|
|
|
|
(629,247
|
)
|
|
Interest expense
|
|
|
-
|
|
|
|
(46
|
)
|
|
|
-
|
|
|
|
(17
|
)
|
|
Other expense
|
|
|
-
|
|
|
|
(18,052
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Income from discontinued operations before income taxes
|
|
|
-
|
|
|
|
805,623
|
|
|
|
-
|
|
|
|
1,002,409
|
|
|
Provision for income taxes
|
|
|
-
|
|
|
|
(250,602
|
)
|
|
|
-
|
|
|
|
(250,602
|
)
|
|
Income from discontinued operations
|
|
$
|
-
|
|
|
$
|
555,021
|
|
|
$
|
-
|
|
|
$
|
751,807
|
|
Related party transactions from
discontinued operations
|
Name of related party
|
|
Relationship with the Company
|
|
|
|
|
|
Zhongxin Shitong (Beijing) Credit Investigation Co., Ltd. (“Zhongxin Credit”)
|
|
A related company of former shareholder of Yin Hang, Yunfeng Du
|
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
11.
|
DISCONTINUED OPERATIONS (continued)
|
|
b)
|
The Company had the following related party
balances at of June 30, 2018 and December 31, 2017:
|
|
|
|
June
30,
2018
|
|
|
December 31,
2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Due from related party:
|
|
|
|
|
|
|
|
|
|
Zhongxin Credit
|
|
$
|
-
|
|
|
$
|
207,203
|
|
Zhongxin
Credit borrowed $418,041 from Yin Hang, and repaid $212,450 in 2016. On December 31, 2016, Zhongxin Credit entered into a loan
agreement whereby Zhongxin Credit agreed to repay the outstanding receivable balance by scheduled payment within six months. As
of December 31, 2017, the outstanding receivable balance was $207,203.
|
12.
|
NONCONTROLLING INTEREST
|
As
of June 30, 2018 and December 31, 2017, non-controlling interest of Ark Tianjin of $1,545,312 and $1,260,676, respectively,
was recognized in the Company’s consolidated balance sheets, representing Ark Tianjin’s cumulative results of operations
attributable to shareholders other than CCG Group.
For
the six months ended June 30, 2018 and 2017, a $284,636 and a $455,895 net loss, respectively, attributable to the non-controlling
interest of Arki Tianjin was recognized in the Company’s consolidated statements of comprehensive loss, representing Arki
Tianjin’s net loss attributable to shareholders other than CCG Group.
The
income tax laws of various jurisdictions in which the Company and its subsidiaries operate are summarized as follows:
United
States
Consumer
Capital Group Inc. was incorporated in United States, and is subject to corporate income tax rate of 21%.
The
People's Republic of China (PRC)
Arki Beijing E-commerce Technology Corp., America Pine Beijing Bio-Tech, Inc., America Arki (Fuxin) Network
Management Co. Ltd., America Arki Network Service Beijing Co. Ltd. and America Arki (Tianjin) Capital Management Partnership were
incorporated in the People’s Republic of China and subject to PRC income tax at 25%. The Company did not generate taxable
income in the People’s Republic of China for the six months ended June 30, 2018 and 2017, respectively.
Yin Hang Financial Information Service (Shanghai) Co., Limited was incorporated in the People’s
Republic of China and subject to PRC income tax at 25%.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
13.
|
INCOME TAXES (continued)
|
The
new EIT Law also imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise to its immediate
holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment
or place within China or if the received dividends have no connection with the establishment or place of such immediate holding
company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China
that provides for a different withholding arrangement. Such withholding income tax was exempted under the previous income tax
regulations.
The
income tax laws of various jurisdictions in which the Company and its subsidiaries operate are summarized as follows:
|
|
|
For the three months ended
June 30,
|
|
|
For the six months ended
June 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense at statutory rate US
|
|
|
21
|
%
|
|
|
34
|
%
|
|
|
21
|
%
|
|
|
34
|
%
|
|
Foreign income not recognized in the U.S.
|
|
|
(21
|
%)
|
|
|
(34
|
%)
|
|
|
(21
|
%)
|
|
|
(34
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRC enterprise income tax rate
|
|
|
25
|
%
|
|
|
25
|
%
|
|
|
25
|
%
|
|
|
25
|
%
|
|
Changes in valuation allowance and others
|
|
|
(25
|
%)
|
|
|
(25
|
%)
|
|
|
(25
|
%)
|
|
|
(25
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rates
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Loss
before income taxes from continuing operations consists of:
|
|
|
For the three months
ended
June 30,
|
|
|
For the six months
ended
June 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-PRC
|
|
$
|
(31,573
|
)
|
|
$
|
(169,495
|
)
|
|
$
|
(35,677
|
)
|
|
$
|
(179,901
|
)
|
|
PRC
|
|
|
(211,221
|
)
|
|
|
(1,299,261
|
)
|
|
|
(1,086,443
|
)
|
|
|
(1,551,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(242,794
|
)
|
|
$
|
(1,468,756
|
)
|
|
$
|
(1,122,120
|
)
|
|
$
|
(1,731,119
|
)
|
The
principal components of the Company’s deferred income tax assets and liabilities are as follows:
|
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable
|
|
$
|
35,616
|
|
|
$
|
36,232
|
|
|
Accrued interest payable
|
|
|
46,470
|
|
|
|
47,275
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
82,086
|
|
|
$
|
83,507
|
|
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
AND 2017
(IN
U.S. $)
|
13.
|
INCOME TAXES (continued)
|
As
of June 30, 2018 and December 31, 2017, the Company has a deferred tax asset of $0 and $0, and a deferred tax liability of $82,086
and $83,507 resulting from certain net operating losses in the PRC, respectively. The ultimate realization of deferred tax assets
depends on the generation of future taxable income during the periods in which those net operating losses are available. The Company
considers projected future taxable income and tax planning strategies in making its assessment. As of June 30, 2018 and December
31, 2017, the Company did not have sufficient operations to generate taxable income in Arki Beijing, America Pine Beijing, Arki
Fuxin, Arki Network Service and Arki Tianjin to conclude that it is more-likely-than-not that the Company will be able to realize
all of its tax benefits in the near future and therefore a valuation allowance has been provided for the full value of the deferred
tax asset. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion
or all of the valuation allowance. Should Arki Beijing, America Pine Beijing, Arki Fuxin, Arki Network Service, Arki Tianjin and
Yin Hang have sufficient operation to generate taxable income in future periods with a supportable trend; the valuation allowance
will be reduced accordingly. As of June 30, 2018 and December 31, 2017, no valuation allowance was recorded.
The
components of deferred taxes are as follows from continuing operations as of June 30, 2018 and December 31, 2017:
|
|
|
June 30,
2018
|
|
|
December 31,
2017
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset from net operating loss carry-forwards
|
|
$
|
-
|
|
|
$
|
57,498
|
|
|
Valuation allowance
|
|
|
-
|
|
|
|
(57,498
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets, net
|
|
$
|
-
|
|
|
$
|
-
|
|
|
14.
|
RELATED PARTY TRANSACTIONS
|
As
of June 30, 2018 and December 31, 2017, the amounts owed to Mr. Jianmin Gao and Mr. Fei Gao are without interest and due on demand.
Interest
income derived from the above loans receivable from related parties were $101,289 and $131,670 for the six months ended June 30,
2018 and 2017, respectively.
Interest
expenses incurred on the above loans payable to related parties were $966,075 and $1,085,827 for the six months ended June 30,
2018 and 2017, respectively.
The
Company has entered into lease agreements with various third parties. The terms of such non-cancellable operating leases are one
to five years. As of June 30, 2018, the Company was obligated under non-cancellable operating leases minimum rentals as follows:
The
rent expense for the six months ended June 30, 2018 and 2017 was $36,212 and $8,758 respectively.
The
Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely
to have a material adverse effect on the business, financial condition or results of operations.
Assets
that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents,
loans receivable and other receivables. The maximum exposure of such assets to credit risk is their carrying amounts as of the
balance sheet dates.
As
of June 30, 2018 and December 31, 2017, substantially all of the Company’s cash and cash equivalents were deposited in financial
institutions located in the PRC, which management believes are of high credit quality. Management believes the credit risk on
bank deposits is limited because the counter-parties are banks with high credit-ratings assigned by international credit rating
agencies, or state-owned banks in China.
Cash
includes cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC and the United States of
America. Balances at financial institutions or state owned banks within the PRC are not covered by insurance.
Non-performance
by these institutions could expose the Company to losses for amounts in excess of insured balances. As of June 30, 2018 and December
31, 2017, we had no uninsured balances with the banks in U.S. As of June 30, 2018 and December 31, 2017, our bank balances in
the PRC were $1,470,675 and $706,771, respectively, which are uninsured and subject to credit risk. We have not experienced nonperformance
by these institutions.
Financial
instruments that potentially subject us to significant concentrations of credit risk consist principally of loans receivable from
borrowers and the related accrued interest receivable. The aforementioned borrowers paid service fees and interest regularly according
to the contract during the reporting period, and the Company believes that the default risk from these borrowers is low in the
foreseeable future.
The
Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although
the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC
government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event
of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic
and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent
or effective. The economy in the PRC has recently started to narrow.
On
December 15, 2014, the Company entered into six year agreements with the Chief Operating Officer, Mr. Fei Gao, for a compensation
of approximately $2,655 (RMB 18,000) per month.
There were no
events or transactions that would require recognition or disclosure in our unaudited condensed consolidated financial statements
for the six months ended June 30, 2018.