UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number: 000-54998
CONSUMER CAPITAL GROUP INC.
(Exact name of registrant as specified in its charter)
| Delaware | 26-2517432 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 1125 Route 9W S Nyack, NY 10960 |
10960 | |
| (Address of principal executive offices) | (Zip Code) |
| (646) 346-3735 | ||
| (Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act: None.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 15, 2019, there were 27,208,849 shares of common stock issued and outstanding.
CONSUMER CAPITAL GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
March 31, 2019
TABLE OF CONTENTS
| PAGE | ||
| PART I | FINANCIAL INFORMATION | |
| Item 1. | Financial Statements (Unaudited) | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 34 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 46 |
| Item 4. | Controls and Procedures | 46 |
| PART II | OTHER INFORMATION | |
| Item 1. | Legal Proceedings | 47 |
| Item 1A. | Risk Factors | 47 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 47 |
| Item 3. | Defaults Upon Senior Securities | 47 |
| Item 4. | Mine Safety Disclosures | 47 |
| Item 5. | Other Information | 47 |
| Item 6. | Exhibits | 47 |
| SIGNATURES | 48 | |
USE OF CERTAIN DEFINED TERMS
In this Report, unless otherwise noted or as the context otherwise requires: “the Company,” “we,” “us,” and “our” refers to the combined company Consumer Capital Group, Inc. and its subsidiaries and variable interest entities.
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (IN U.S. $)
| March 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 870,273 | $ | 501,350 | ||||
| Prepayments and deposits (Note 4) | 560,103 | 508,499 | ||||||
| Other receivables (Note 6) | 37,599 | 35,544 | ||||||
| Loans receivable – third parties, net (Note 5) | - | 331,039 | ||||||
| Loans receivable – related parties, net (Note 5) | - | - | ||||||
| Total current assets | $ | 1,467,975 | $ | 1,376,432 | ||||
| Non-current assets: | ||||||||
| Property and equipment, net (Note 7) | $ | 68,812 | $ | 74,080 | ||||
| Total non-current assets | $ | 68,812 | $ | 74,080 | ||||
| Total Assets | $ | 1,536,787 | $ | 1,450,512 | ||||
See accompanying notes to the condensed consolidated financial statements.
1
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN U.S. $)
| March 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Loans payable to third parties, current portion (Note 8) | $ | 1,796,953 | $ | 1,994,667 | ||||
| Loans payable to related parties, current portion (Note 8) | 2,547,917 | 2,869,881 | ||||||
| Accrued interest payable | 2,238,590 | 2,099,427 | ||||||
| Other payable | 235,028 | 86,204 | ||||||
| Payable to shareholder (Note 9) | 109,009 | 117,767 | ||||||
| Due to related parties (Note 13) | 538,140 | 183,955 | ||||||
| Deferred tax liabilities (Note 12) | 81,203 | 79,232 | ||||||
| Total current liabilities | $ | 7,546,840 | $ | 7,431,133 | ||||
| Non-current liabilities: | ||||||||
| Loans payable to third parties, non-current (Note 8) | $ | 208,601 | $ | 203,538 | ||||
| Loans payable to related parties, non-current (Note 8) | 1,199,458 | 1,017,688 | ||||||
| Total non - current liabilities | $ | 1,408,059 | $ | 1,221,226 | ||||
| Total Liabilities | $ | 8,954,899 | $ | 8,652,359 | ||||
| Stockholders’ deficit: | ||||||||
| Common stock - $0.0001 par value, 100,000,000 shares authorized, 27,208,849 and 27,208,849 shares issued and outstanding as of March 31, 2019 and December 31, 2018 respectively. | $ | 2,721 | $ | 2,721 | ||||
| Additional paid-in capital | 8,021,677 | 8,021,677 | ||||||
| Accumulated deficit | (12,588,951 | ) | (12,247,478 | ) | ||||
| Accumulated other comprehensive loss | 255,755 | (138,453 | ) | |||||
| Stockholders’ deficit before non-controlling interests | $ | (4,308,798 | ) | $ | (4,361,533 | ) | ||
| Non-controlling interests | (3,109,314 | ) | (2,840,314 | ) | ||||
| Total stockholders’ deficit | $ | (7,418,112 | ) | $ | (7,201,847 | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 1,536,787 | $ | 1,450,512 | ||||
See accompanying notes to the condensed consolidated financial statement
2
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| For the three months ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue | ||||||||
| Interest income on loans-third parties | $ | - | $ | - | ||||
| Interest income on loans-related parties | - | 2,516 | ||||||
| Commission income-third parties | - | - | ||||||
| Commission income-related parties | 165,624 | - | ||||||
| Total Revenue | $ | 165,624 | $ | 2,516 | ||||
| Cost of revenue | - | - | ||||||
| Gross profit | $ | 165,624 | $ | 2,516 | ||||
| Operating expenses: | ||||||||
| General and administrative | (248,686 | ) | (405,911 | ) | ||||
| Total operating expenses | $ | (248,686 | ) | $ | (405,911 | ) | ||
| Loss from operations | $ | (83,062 | ) | $ | (403,395 | ) | ||
| Other income (expenses): | ||||||||
| Interest income | $ | 533 | $ | 24,648 | ||||
| Interest expense to third parties | (196,982 | ) | (191,512 | ) | ||||
| Interest expense to related parties | (328,996 | ) | (308,870 | ) | ||||
| Other expense | (104 | ) | (197 | ) | ||||
| Provision for loan losses | 3,407 | - | ||||||
| Total other expenses | $ | (522,142 | ) | $ | (475,931 | ) | ||
| Loss before provision for income taxes | $ | (605,204 | ) | $ | (879,326 | ) | ||
| Provision for income taxes | (5,269 | ) | - | |||||
| Net Loss before non-controlling interests | $ | (610,473 | ) | $ | (879,326 | ) | ||
| Less: Net loss attributable to the non-controlling interest | (269,000 | ) | (255,874 | ) | ||||
| Net loss attributable to the Company’s shareholders | $ | (341,473 | ) | $ | (623,452 | ) | ||
| Comprehensive Loss: | ||||||||
| Net Loss | $ | (610,473 | ) | $ | (879,326 | ) | ||
| Foreign currency translation adjustment | (394,208 | ) | 136,946 | |||||
| Comprehensive loss | $ | (1,004,681 | ) | $ | (742,380 | ) | ||
| Less: comprehensive loss attributable to non-controlling interest | $ | (269,000 | ) | $ | (255,874 | ) | ||
| Comprehensive loss attributable to the Company | $ | (735,681 | ) | $ | (486,506 | ) | ||
| Weighted average number of common shares outstanding basic and diluted | 27,208,849 | 32,208,849 | ||||||
| Loss per share – Basic and Diluted | ||||||||
| -Basic | $ | (0.01 | ) | $ | (0.02 | ) | ||
| -Diluted | (0.01 | ) | (0.02 | ) | ||||
| NET LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY | ||||||||
| -Basic | (0.01 | ) | (0.02 | ) | ||||
| -Diluted | $ | (0.01 | ) | $ | (0.02 | ) | ||
See accompanying notes to the condensed consolidated financial statements.
3
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND YEAR ENDED DECEMBER 31, 2018
(IN U.S. $)
| Discounts on | Additional | Accumulated | Accumulated other | Stockholders’ | Non- | |||||||||||||||||||||||||||||||
| Common stock | Common | paid-in | (deficit) / | comprehensive | equity / | controlling | ||||||||||||||||||||||||||||||
| Shares | Amount | stocks | capital | earnings | income | (deficit) | interest | Total | ||||||||||||||||||||||||||||
| Balance at December 31, 2017 | 32,208,849 | $ | 3,221 | $ | (130,741 | ) | $ | 8,152,418 | $ | (10,264,149 | ) | $ | 64,466 | $ | (2,303,717 | ) | $ | (1,260,676 | ) | $ | (3,564,393 | ) | ||||||||||||||
| Cancellation of shares | (5,000,000 | ) | (500 | ) | - | - | - | (500 | ) | - | (500 | ) | ||||||||||||||||||||||||
| Net Loss | - | - | - | (1,983.329 | ) | - | (1,983,329 | ) | (1,579,638 | ) | (3,562,967 | ) | ||||||||||||||||||||||||
| Foreign currency Translation adjustment | - | - | - | - | (73,987 | ) | (73,987 | ) | - | (73,987 | ) | |||||||||||||||||||||||||
| Balance at December 31, 2018 | 27,208,849 | $ | 2,721 | (130,741 | ) | $ | 8,152,418 | $ | (12,247,478 | ) | $ | (138,453 | ) | $ | (4,361,533 | ) | $ | (2,840,314 | ) | $ | (7,201,847 | ) | ||||||||||||||
| Net Loss | - | - | - | (341,473 | ) | - | (341,473 | ) | (269,000 | ) | (610,473 | ) | ||||||||||||||||||||||||
| Foreign currency Translation adjustment | - | - | - | - | 394,208 | 394,208 | - | 394,208 | ||||||||||||||||||||||||||||
| Balance at March 31, 2019 | 27,208,849 | $ | 2,721 | (130,741 | ) | $ | 8,152,418 | $ | (12,588,951 | ) | $ | 255,755 | $ | (4,308,798 | ) | $ | (269,000 | ) | $ | (7,418,112 | ) | |||||||||||||||
See accompanying notes to the condensed consolidated financial statements.
4
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| For the Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (610,473 | ) | $ | (879,326 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 6,135 | 5,510 | ||||||
| Reversal of allowance for loan losses | (3.407 | ) | - | |||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in prepaid expenses | (38,786 | ) | (47,776 | ) | ||||
| Increase in other receivables | (1,209 | ) | (3,443 | ) | ||||
| Increase in accrued liabilities | 146,873 | 4,913 | ||||||
| Increase (Decrease) in taxes payable | 31 | (86 | ) | |||||
| Increase in interest payable | 86,436 | 576,266 | ||||||
| Increase (Decrease) in due from related parties | 349,011 | (1.573 | ) | |||||
| Decrease in payable to Caesar Capital Mgmt Ltd | (8,758 | ) | (8,758 | ) | ||||
| Increase in received in advance | - | 39,692 | ||||||
| Cash flows used in operating activities | (74,147 | ) | (314,581 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Repayment of loans from customers | $ | 340,747 | $ | (471,810 | ) | |||
| Redemption of short-term investment | - | 471,810 | ||||||
| Cash flow provided by investing activities | 340,747 | - | ||||||
5
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| For the Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from loans payable – third parties | $ | 155,559 | $ | 33,027 | ||||
| Proceeds from loan payable – related parties | 533,344 | 695,133 | ||||||
| Repayment of loans payable – third parties | (248,894 | ) | (15,727 | ) | ||||
| Repayment of loans payable – related parties | (921499 | ) | (60,714 | ) | ||||
| Cash flows (used in) provide by financing activities | $ | (481,490 | ) | $ | 651,719 | |||
| Effect of exchange rate changes on cash, | $ | 583,813 | $ | (31,644 | ) | |||
| Net changes in cash and cash equivalents | $ | 368,923 | $ | 305,494 | ||||
| Cash and cash equivalents, beginning balance | $ | 501,350 | $ | 725,774 | ||||
| Cash and cash equivalents, ending balance | $ | 870,273 | $ | 1,031,268 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | 237,042 | $ | 6,141 | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
See accompanying notes to the condensed consolidated financial statements.
6
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018 (unaudited)
(IN U.S. $)
| 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 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.
Effective on June 26, 2018, one of the Company’s subsidiary, America Arki Fuxin Network Management Co. Ltd. (“America Arki”), ceased operation and cancelled its registration record in local industrial and commercial bureau in China. The disposal of America Arki did not represent a strategic shift that has a major effect on the Company’s operations and financial results, America Arki is not accounted for discontinued operation in the consolidated financial statements.
7
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018 (unaudited)
(IN U.S. $)
| 1. | ORGANIZATION (continued) |
On August 21, 2018, the Company incorporated Arki (Tianjin) E-Commerce Technology Corp (“Arki Tianjin E-Commerce”), a wholly-owned subsidiary of Arki Network and a limited liability company formed under the laws of the PRC. The Company developed the e-commerce business for art and antique through Arki Network and Arki Tianjin E-Commerce.
SHANGHAI ZHONGHUI FINANCIAL INFORMATION SERVICES CORP.
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, 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. In connection with the sale, Zhonghui Affiliates agreed to cancel 5,000,000 shares of our common stock obtained from the transaction. The Company has since ceased our peer-to-peer lending business.
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.
8
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018 (unaudited)
(IN U.S. $)
| 1. | ORGANIZATION (continued) |
Details of the Company’s wholly owned subsidiaries and its Affiliated PRC Entity as of March 31, 2019 are as follows:
| Company | Date of Establishment | Place of Establishment | Percentage of Ownership by the Company | Principal Activities | ||||||
| Consumer Capital Group Inc. (“CCG”) | 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 E-Commerce”) | 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”) | March 21, 2007 | PRC | 100 | %(1) | Assists in payment collection for e-commerce business. | |||||
| America Arki Network Service Beijing Co. Ltd. (“Arki Network” 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 | |||||
| America Arki (Tianjin) Capital Management Partnership (“Arki Capital”) | October 22, 2015 | PRC | 51 | %(3) | Offer asset management, management consulting, internet information services as well as advertising design, production, agent, publishing. | |||||
| Arki (Tianjin) E-Commerce, Ltd. (“Arki Tianjin E-Commerce”) | August 21, 2018 | PRC | 100 | % | Collects service fees of 25% of the sales amount for all the revenues realized on the platform for trading of antiques. | |||||
| Arki (Guangzhou) Investment Consulting Co. Ltd | March 21, 2019 | PRC | 100 | % | A wholly owned subsidiary of Arki Capital. It extends the business of Arki Capital from Northern China to the Grangdong-Hong Kong-Macao Great Bay Area to offer asset management and management consulting services to this area. | |||||
| (1) | Wholly foreign owned entities (WFOE) |
| (2) | VIE |
| (3) | Arki Network owned entities |
9
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(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, a 100% PRC owned entity. The equity interests of Arki Network are legally held directly by Mr. Jianmin Gao and Mr. Fei Gao, shareholders and directors of the Company. The effective control of Arki Network is held by Arki E-Commerce and America Arki (ceased operation on June 26, 2018) through a series of contractual arrangements (the “Contractual Agreements”). As a result of the Contractual Agreements and cessation of operation of America Arki, Arki E-Commerce maintain the ability to control Arki Network, 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 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, namely Mr. Jianmin Gao and Mr. Fei Gao, entered into a loan agreement with America Arki on February 3, 2011. Under this loan agreement, America Arki 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, as required by the PRC. The term of the loan is for ten years from the date of execution until the date when America Arki requests repayment. America Arki 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. As America Arki ceased operation subsequently, the recourse right of the RMB 1.0 million has been transferred to substituted controller, Arki E-Commerce.
10
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 1. | ORGANIZATION (continued) |
The shareholders of Arki Network entered into an option agreement with America Arki on February 3, 2011, under which the shareholders of Arki Network jointly and severally granted to America Arki an option to purchase their equity interests in Arki Network. The purchase price will be set off against the loan repayment under the loan agreement. America Arki may exercise such option at any time until it has acquired all equity interests of Arki Network or freely transferred the option to any third party and such third party assumes the rights and obligations of the option agreement. As America Arki ceased operation subsequently, the option rights are held by Arki E-Commerce.
America Arki and Arki Network entered into an exclusive business cooperation agreement deemed effective on November 26, 2010, under which Arki Network engaged America Arki as its exclusive provider of technical support, consulting services, maintenance and other commercial services. Arki Network shall pay to America Arki service fees determined based on the net income of Arki Network and which are eliminated in consolidation. America Arki 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 may not enter into any agreement with third parties for the provision of identical or similar service without the prior consent of America Arki. As America Arki ceased operation subsequently, the rights are held by Arki E-Commerce.
The shareholders of Arki Network entered into a share pledge agreement with America Arki on February 3, 2011 under which the shareholders pledged all of their equity interests in Arki Network to America Arki as collateral for all of the payments due to America Arki and to secure their obligations under the above agreements. The shareholders of Arki Network 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 America Arki without America Arki’s preapproval. America Arki is entitled to transfer or assign in full or in part the shares pledged. In the event of default, America Arki, will be entitled to request immediate repayment of the loan or to dispose of the pledged equity interests through transfer or assignment. As America Arki ceased operation subsequently, the rights are held by Arki E-Commerce.
The shareholders of Arki Network entered into a power of attorney agreement with America Arki effective on November 26, 2010 under which the shareholders irrevocably appointed Arki E-Commerce and America Arki 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. As America Arki ceased operation subsequently, the rights are held by Arki E-Commerce.
11
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(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, Arki E-Commerce, America Arki, 51% majority ownership in Arki Capital, and the discontinued operations of Shanghai Zhonghui and Yin Hang. As a result of contractual arrangements, the Company consolidates Arki Network 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 condensed consolidated financial statements 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 three months ended March 31, 2019 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 “$”).
12
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(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.
13
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Variable interest entity (continued)
The following financial statement amounts and balances of Arki Network Service, Inc. have been included in the accompanying consolidated financial statements:
| March 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| Cash and cash equivalent | $ | 794,597 | $ | 486,178 | ||||
| Loan receivables, net | - | 331,03 | ||||||
| Prepaid expenses | 530,332 | 478,222 | ||||||
| Due from inter-company | 7,573,776 | 7,181,347 | ||||||
| Due from related party | 1,624,125 | 1,584,983 | ||||||
| Other receivables | 19,838 | 17,065 | ||||||
| Total current assets | $ | 10,542,668 | $ | 10,078,834 | ||||
| Property and equipment, net | $ | 33,289 | $ | 35,529 | ||||
| Long-term investment | 151,927 | 300,679 | ||||||
| Total non-current assets | $ | 185,216 | $ | 336,208 | ||||
| Total assets | $ | 10,727,884 | $ | 10,415,042 | ||||
| Loans payable - current portion | $ | 4,531,703 | $ | 4,864,548 | ||||
| Interest payable | 2,238,590 | 2,099,427 | ||||||
| Accrued liabilities | 131,337 | 48,244 | ||||||
| Due to inter-company | 8,161,858 | 7,079,406 | ||||||
| Due to related parties | 1,759,985 | 1,722,601 | ||||||
| Deferred tax liability | 140,458 | 113,734 | ||||||
| Total Current liabilities | $ | 16,963,931 | $ | 15,927,960 | ||||
| Loans payable, non-current portion | 1,221,226 | 1,221,226 | ||||||
| Total non-current liabilities | $ | 1,221,226 | $ | 1,221,226 | ||||
| Total liabilities | $ | 18,185,157 | $ | 17,149,186 | ||||
14
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Variable interest entity (continued)
| For the Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Net revenue | $ | 165,624 | $ | 213,873 | ||||
| Net loss before provision for income taxes | $ | (523,395 | ) | $ | (198,331 | ) | ||
| Less: Provision for income taxes | (5,269 | ) | - | |||||
| Net losses | $ | (518,126 | ) | $ | (198,331 | ) | ||
| Less: Net income attributable to non-controlling interest | (269,000 | ) | (33,039 | ) | ||||
| Net losses attributable to the Company’s shareholders | $ | (249,126 | ) | $ | (165,292 | ) | ||
| For the Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flow provided by (used in) operating activities | $ | 285,476 | $ | (82,436 | ) | |||
| Cash flow provided by (used in) investing activities | $ | 496,089 | $ | (471,810 | ) | |||
| Cash flow (used in) provided by financing activities | $ | (486,932 | ) | $ | 662,107 | |||
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.”
15
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(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 March 31, 2019 | As of December 31, 2018 | |||||||
| (Unaudited) | ||||||||
| Balance sheet items, except for stockholders’ equity accounts | 0.1490 | 0.1454 | ||||||
| For the three months ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Items included in the statements of operations and comprehensive income (loss) and cash flows for the periods presented | 0.1482 | 0.1573 | ||||||
16
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Foreign currency translations (continued)
Foreign currency translation adjustments of $(394,208) and $136,946 for the three months ended March 31, 2019 and 2018, 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
ASC 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. Effective January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers – Topic 606 and all subsequent ASCs that modified ASC 606. The Company has elected to apply the standard utilizing the modified retrospective approach with a cumulative effect of adoption for the impact from uncompleted contracts as the date of adoption. The implementation of the new standard had no material impact to the measurement or recognition of revenue of prior periods.
The Company’s revenue is comprised of:
| 1) | Interest and fee income - Management determined that the primary sources of revenue emanating from interest and fee income on loans receivable are not within the scope of ASC 606. As a result, no changes were made during the period related to these sources of revenue. |
| 2) | Noninterest income – The primary sources of noninterest income are within the scope of ASC 606, which are presented in the income statements as commission income. |
17
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Revenue recognition (continued)
Interest and Fee Income
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.
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.
Noninterest Income
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.
18
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Revenue recognition (continued)
Commission income for art & antique trading platform
The Company started to operate the platform for art & antique trading in the 3rd quarter of 2018. On August 21, 2018, the Company incorporated Arki (Tianjin) E-Commerce Technology Corp (“Arki Tianjin E-Commerce”), a wholly-owned subsidiary of Arki Network and a limited liability company formed under the laws of the PRC. The Company plan to develop the e-commerce business for art and antique through Arki Network and Arki Tianjin E-Commerce. Sellers put their art & antique on our platform for sell. The Company get a 25% of the selling price as the commission income.
Cost of revenue
The cost of revenue represented the fees paid to agents for the introduction of customers.
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.
19
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(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 non-collectable are written off after exhaustive efforts at collection.
20
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(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 as allowance when management believes collection of amounts due are at risk. Interest receivable considered non-collectable 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.
Property and equipment, net
Property and equipment is recorded at cost and consists of computer equipment, office equipment, furniture and leasehold improvement and is depreciated using the straight-line method over the estimated useful lives of the related assets (generally five 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 March 31, 2019 and December 31, 2018, 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.
21
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(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 March 31, 2019 and December 31, 2018, 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 2018 and 2017 and 2016 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 $610,473 for the three months ended March 31, 2019 and an accumulated deficit of $12,588,951 as of March 31, 2019. 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.
22
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 3. | RECENTLY ISSUED ACCOUNTING STANDARDS |
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606). This guidance supersedes current guidance on revenue recognition in Topic 605, “Revenue Recognition.” In addition, there are disclosure requirements related to the nature, amount, timing, and uncertainty of revenue recognition. For publicly-traded business entities, Topic 606 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company will adopt the new revenue standard beginning January 1, 2018, using the modified retrospective method. The Company anticipates that the application of the new standard in the future may result in more disclosures, but its application is not likely to have a material impact on the timing and amounts of revenue recognized in the respective reporting periods.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which reduces the diversity in practice on how certain transactions are classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. The ASU sets forth a “current expected credit loss” (“CECL”) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing probable incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgements used in determining the allowance for loan losses, as well as the credit quality and underwriting standards of an organization’s loan portfolio. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. As we will no longer be treated as an emerging growth company beginning December 31, 2021, we are required to adopt this ASU no later than 2021. Early adoption is permitted in fiscal years beginning after December 31, 2018. The Company is currently evaluating the alternative methodologies available and assessing its data and system needs to implement this ASU.
On October 2, 2017, The FASB has issued Accounting Standards Update (ASU) No. 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments.” The ASU adds SEC paragraphs to the new revenue and leases sections of the Codification on the announcement the SEC Observer made at the 20 July 2017 Emerging Issues Task Force (EITF) meeting. The SEC Observer said that the SEC staff would not object if entities that are considered public business entities only because their financial statements or financial information is required to be included in another entity’s SEC filing use the effective dates for private companies when they adopt ASC 606, Revenue from Contracts with Customers, and ASC 842, Leases. This would include entities whose financial statements are included in another entity’s SEC filing because they are significant acquirees under Rule 3-05 of Regulation S-X, significant equity method investees under Rule 3-09 of Regulation S-X and equity method investees whose summarized financial information is included in a registrant’s financial statement notes under Rule 4-08(g) of Regulation S-X. The ASU also supersedes certain SEC paragraphs in the Codification related to previous SEC staff announcements and moves other paragraphs, upon adoption of ASC 606 or ASC 842. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.
On November 22, 2017, the FASB ASU No. 2017-14, “Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606): Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 116 and SEC Release 33-10403.” The ASU amends various paragraphs in ASC 220, Income Statement — Reporting Comprehensive Income; ASC 605, Revenue Recognition; and ASC 606, Revenue From Contracts With Customers, that contain SEC guidance. The amendments include superseding ASC 605-10-S25-1 (SAB Topic 13) as a result of SEC Staff Accounting Bulletin No. 116 and adding ASC 606-10-S25-1 as a result of SEC Release No. 33-10403. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-02, “Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income.” The ASU amends ASC 220, Income Statement — Reporting Comprehensive Income, to “allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act.” In addition, under the ASU, an entity will be required to provide certain disclosures regarding stranded tax effects. The ASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.
23
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 3. | RECENTLY ISSUED ACCOUNTING STANDARDS (continued) |
In March 2018, the FASB issued ASU 2018-05 — Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (“ASU 2018-05”), which amends the FASB Accounting Standards Codification and XBRL Taxonomy based on the Tax Cuts and Jobs Act (the “Act”) that was signed into law on December 22, 2017 and Staff Accounting Bulletin No. 118 (“SAB 118”) that was released by the Securities and Exchange Commission. The Act changes numerous provisions that impact U.S. corporate tax rates, business-related exclusions, and deductions and credits and may additionally have international tax consequences for many companies that operate internationally. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
In July 2018, the FASB issued ASU 2018-10, “Codification Improvements to Topic 842, Leases.” The ASU addresses 16 separate issues which include, for example, a correction to a cross reference regarding residual value guarantees, a clarification regarding rates implicit in lease contracts, and a consolidation of the requirements about lease classification reassessments. The guidance also addresses lessor reassessments of lease terms and purchase options, variable lease payments that depend on an index or a rate, investment tax credits, lease terms and purchase options, transition guidance for amounts previously recognized in business combinations, and certain transition adjustments, among others. For entities that early adopted Topic 842, the amendments are effective upon issuance of this Update, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
In July 2018, the FASB issued ASU 2018-11 - Leases (Topic 842): Targeted Improvements. The ASU simplifies transition requirements and, for lessors, provides a practical expedient for the separation of nonlease components from lease components. Specifically, the ASU provides: (1) an optional transition method that entities can use when adopting ASC 842 and (2) a practical expedient that permits lessors to not separate nonlease components from the associated lease component if certain conditions are met. For entities that have not adopted Topic 842 before the issuance of this Update, the effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements in Update 2016-02. For entities that have adopted Topic 842 before the issuance of this Update, the transition and effective date of the amendments in this Update are as follows: 1) The practical expedient may be elected either in the first reporting period following the issuance of this Update or at the original effective date of Topic 842 for that entity. 2) The practical expedient may be applied either retrospectively or prospectively. All entities, including early adopters, that elect the practical expedient related to separating components of a contract in this Update must apply the expedient, by class of underlying asset, to all existing lease transactions that qualify for the expedient at the date elected. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
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.
| 4. | PREPAID EXPENSES |
Prepaid expenses consisted of prepaid rent for our US Company and other prepaid expenses for Arki Network as of March 31, 2019 and December 31, 2018, respectively.
24
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 5. | LOANS RECEIVABLE, NET |
The monthly interest rates on loan issued at 2% and range from 8% to 30% for the three months ended March 31, 2019 and 2018, respectively.
As of March 31, 2019 and December 31, 2018, loans receivable were $0 and $331,039, net of provision for loan losses of $0, and $3,344, respectively; all the loans receivable are from related parties.
Loans receivable consisted of the following as of March 31, 2019 and December 31, 2018:
| March 31, 2019 | December 31, 2018 | |||||||
| (Unaudited) | ||||||||
| Loans receivable - third parties | $ | - | $ | - | ||||
| Loans receivable - related parties | - | 334.383 | ||||||
| Total loans receivable | $ | - | $ | 334.383 | ||||
| Allowance for loan losses | - | (3,344 | ) | |||||
| Loans receivable, net | $ | - | $ | 331,039 | ||||
The following table represents the aging of loan receivables as of December 31, 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 | $ | - | $ | - | $ | - | $ | 334,383 | $ | 334,383 | $ | - | $ | 334,383 | ||||||||||||||
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.
25
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(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 three months ended March 31, 2019 and 2018, the reversal and the provision of allowance for loan losses were and $(3,047) and $3,344, respectively.
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 March 31, 2019 and December 31, 2018.
| 6. | OTHER RECEIVABLES |
Other receivables consist of the following as of March 31, 2019 and December 31, 2018:
| March 31, 2019 | December 31, 2018 | |||||||
| (Unaudited) | ||||||||
| Advances to unrelated third-parties | $ | 37,599 | $ | 33,144 | ||||
| Other deposits | - | 2,400 | ||||||
| Total | $ | 37,599 | $ | 35,544 | ||||
| 7. | PROPERTY AND EQUIPMENT, NET |
Property and equipment consisted of the following as of March 31, 2019 and December 31, 2018:
| As of March 31, | As of December 31, | |||||||
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| Leasehold improvement | $ | 68,453 | $ | 67,187 | ||||
| Office equipment | 25,681 | 25,629 | ||||||
| Furniture & fixtures | 6,780 | 6,615 | ||||||
| Motor vehicles | 20,710 | 20,710 | ||||||
| $ | 121,624 | $ | 120,141 | |||||
| Less: accumulated depreciation | (52,812 | ) | (46,061 | ) | ||||
| Total property & equipment, net | $ | 68,812 | $ | 74,080 | ||||
For the three months ended March 31, 2019 and 2018, depreciation expenses were $6,135 and $5,510, respectively.
26
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 8. | LOANS PAYABLE |
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 54% per annum.
Loans payable consisted of the following as of March 31, 2019 and December 31, 2018:
| Remaining | March 31, | December 31, | ||||||||||
| Interest rate | maturity | 2019 | 2018 | |||||||||
| (Unaudited) | ||||||||||||
| 4 | % | Within 1 year | $ | - | $ | 103,223 | ||||||
| 12 | % | Within 1 year | 177,311 | 202,084 | ||||||||
| 13 | % | Within 1 year | 46,190 | 45,069 | ||||||||
| 14 | % | Within 1 year | - | 2,908 | ||||||||
| 18 | % | Within 1 year | 1,355,909 | 799,610 | ||||||||
| 25 | % | Within 1 year | 156,451 | |||||||||
| 40%-54 | % | Within 1 year | 2,609,008 | 3,711,654 | ||||||||
| 40%-54 | % | Between 1 to 2 years | 1,408,060 | 1,221,226 | ||||||||
| $ | 5,752,929 | $ | 6,085,774 | |||||||||
| Current portion | $ | 4,344,870 | $ | 4,864,548 | ||||||||
| Non-current portion | $ | 1,408,059 | $ | 1,221,226 | ||||||||
The Company has loans payable to related parties of $3,747,375 and $3,887,569, and loans payable to third parties of 2,005,554 and $2,198,205 as of March 31, 2018 and December 31, 2018, respectively. For the three months ended March 31, 2019 and 2018, the Company recorded $525,978 and $500,382 of interest expenses, respectively.
27
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 9. | PAYABLE TO SHAREHOLDER |
Caesar Capital Management Ltd. (“Caesar”) a shareholder of the Company, advanced $109,009 and $117,767 to the Company as of March 31, 2019 and December 31, 2018, respectively. The loans were borrowed by the Company for operating purposes, without collateral, and were originally due between July 2013 and 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.
| 10. | NONCONTROLLING INTEREST |
As of March 31, 2019 and December 31, 2018, non-controlling interest of Arki Capital of $3,109,314 and $2,840,314, respectively, was recognized in the Company’s consolidated balance sheets, representing Arki Capital’s cumulative results of operations attributable to shareholders other than CCG Group.
For the three months ended March 31, 2019 and 2018, net losses of $269,000 and $255,874, respectively, attributable to the non-controlling interest of Arki Capital were recognized in the Company’s consolidated statements of comprehensive loss, representing Arki Capital’s net losses attributable to shareholders other than CCG Group.
| 11. | INCOME TAXES |
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% for the three months ended March 31, 2019 and 2018, respectively.
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., America Arki (Tianjin) Capital Management Partnership, Arki (Tianjin) E-Commerce Ltd. and Arki (Guangzhou) Investment Consulting Co. Ltd. were incorporated in the People’s Republic of China and subject to PRC income tax at 25%.
28
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 11. | 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 March 31, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Tax expense at statutory rate US | 21 | % | 21 | % | ||||
| Foreign income not recognized in the U.S. | (21 | )% | (21 | )% | ||||
| PRC enterprise income tax rate | 25 | % | 25 | % | ||||
| Changes in valuation allowance and others | (25 | )% | (25 | )% | ||||
| Effective income tax rates | - | - | ||||||
Loss before income taxes consists of:
| For the three months ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Non-PRC | $ | (18,628 | ) | $ | (4,104 | ) | ||
| PRC | (586,576 | ) | (875,222 | ) | ||||
| Total | $ | (605,204 | ) | $ | (879,326 | ) | ||
The principal components of the Company’s deferred income tax assets and liabilities are as follows:
| March 31, 2019 | December 31, 2018 | |||||||
| (Unaudited) | ||||||||
| Deferred tax assets: | ||||||||
| Accrued interest payable | $ | 22,382 | $ | 21,839 | ||||
| Accrual | 33,356 | 32,546 | ||||||
| Provision for loan losses | 19,854 | 19,372 | ||||||
| Total deferred tax assets | $ | 75,593 | $ | 73,757 | ||||
| Less: Valuation allowance | (75,593 | ) | (73,757 | ) | ||||
| Net total deferred tax assets | $ | - | $ | - | ||||
| Deferred tax liabilities: | ||||||||
| Accrued interest receivable | $ | 35,375 | $ | 34,516 | ||||
| Accrued interest payable | 45,828 | 44,716 | ||||||
| Net total deferred liabilities | $ | 81,203 | $ | 79,232 | ||||
29
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 11. | INCOME TAXES (continued) |
As of March 31, 2019 and December 31, 2018, the Company has deferred tax asset of $0 and $0, respectively, and deferred tax liabilities of $81,203 and $79,232, respectively, resulting from certain net operating losses in the PRC. 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 March 31, 2019 and December 31, 2018, the Company does not have sufficient operations to generate taxable income in Arki E-Commerce, America Pine, Arki Network, Arki Capital and Arki Tianjin E-Commerce 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 E-Commerce, America Pine, Arki Network, Arki Capital and Arki Tianjin E-Commerce have sufficient operation to generate taxable income in future periods with a supportable trend; the valuation allowance will be reduced accordingly. As of March 31, 2019 and December 31, 2018, $75,593 and $73,758 valuation allowance was recorded respectively.
| 12. | RELATED PARTY TRANSACTIONS |
| a) | Related parties: |
| Name of related parties | Relationship with the Company | |
| Mr. Jianmin Gao | Stockholder, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of the Company | |
| Mr. Fei Gao | Stockholder, Director and Chief Operating Officer | |
| Mr. Dong Yao | Stockholder, Director and Chief Technology Officer | |
| Ms. Lihua Xiao | Stockholder, Management of the Company | |
| Beijing Daogao Trade Ltd. | Legal representative is Lihua Xiao, a stockholder and management of the Company. |
30
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 12. | RELATED PARTY TRANSACTIONS (continued) |
| b) | The Company had the following related party balances as of March 31, 2019 and December 31, 2018: |
| March 31 2019 | December 31, 2018 | |||||||
| (Unaudited) | ||||||||
| Due to/from related parties: | ||||||||
| Mr. Jianmin Gao | $ | (372,334 | ) | $ | (20,327 | ) | ||
| Mr. Fei Gao | (138,768 | ) | (136,338 | ) | ||||
| Ms Lihua Xiao | (522 | ) | (833 | ) | ||||
| Dong Yao | 304 | (288 | ) | |||||
| Related company controlled by a non-controlled stockholder | (26,820 | ) | (26,169 | ) | ||||
| $ | (538,140 | ) | $ | (183,955 | ) | |||
As of March 31, 2019 and December 31, 2018, the amounts owed to related parties are without interest and due on demand.
| c) | Loans receivable form related parties |
| March 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| Company controlled by non-controlled shareholders | $ | - | $ | 334,383 | ||||
| Less: Allowance for loan losses | (3,344 | ) | ||||||
| Total | $ | - | $ | 331,039- | ||||
Interest income derived from the above loans receivable from related parties were $0 and $0 for the three months ended March 31, 2019 and 2018, respectively. Fee income derived from the above loans receivable from related parties were $0 and $0 for the three months ended March 31, 2019 and 2018, respectively.
| d) | Loans payable to related parties |
| March 31, 2018 | December 31, 2018 | |||||||
| (Unaudited) | ||||||||
| Non-controlling stockholders | $ | 3,747,375 | $ | 3,230,433 | ||||
| Related companies of non-controlling stockholders | - | 657,136 | ||||||
| $ | 3,747,375 | $ | 3,887,569 | |||||
Interest expenses incurred on the above loans payable to related parties were $328,996 and $308,870 for the three months ended March 31, 2019 and 2018, respectively.
| e) | Commission income received from related parties |
| For the three months ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Non-controlling stockholders | $ | 165,624 | $ | - | ||||
| Related company of non-controlling stockholder | - | - | ||||||
| $ | 165,624 | $ | - | |||||
31
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 13. | COMMITMENTS AND CONTINGENCIES |
Operating Leases
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 March 31, 2019, the Company was obligated under non-cancellable operating leases minimum rentals as follows:
For the three months ended March 31,
| 2020 | $ | 154,794 | ||
| 2021 | 74,728 | |||
| 2022 | 51,852 | |||
| 2023 | 4,321 | |||
| Total | $ | 285,695 |
The rent expense for the three months ended March, 2019 and 2018 was $28,001 and $17,361 respectively.
Legal Proceedings
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.
| 14. | CONCENTRATION OF CREDIT AND BUSINESS RISKS |
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 March 31, 2019 and December 31, 2018, 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.
32
CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(IN U.S. $)
| 14. | CONCENTRATION OF CREDIT AND BUSINESS RISKS (continued) |
Non-performance by these institutions could expose the Company to losses for amounts in excess of insured balances. As of March 31, 2019 and December 31, 2018, we had no uninsured balances with the banks in U.S. Our bank balances in the PRC were $846,272 and $489,358, 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 a six-year agreement with the Chief Operating Officer, Mr. Fei Gao, for a compensation of approximately $2,655 (RMB 18,000) per month.
| 15. | SUBSEQUENT EVENT |
There was no subsequent event or transactions that would require recognition or disclosure in our unaudited condensed consolidated financial statements for the three months ended March 31, 2019.
33
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations.
This quarterly report on Form 10-Q and other reports filed by Consumer Capital Group, Inc. (“we,” “us,” “our,” or the “Company”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements (collectively the “Filings”) and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.
Overview
We are primarily engaged in the business of microfinancing services. We strive to become a one-stop shop that focuses on lending service for car dealerships in China. We operate our direct microfinancing business through our variable interest entity, or “VIE”, Arki Network and its subsidiaries, Arki Capital, Arki Tianjin E-Commerce and Arki Guangzhou. With the increased difficulty of obtaining sufficient financing through traditional channels by car dealerships, we offer them alternative financing means through risk-controlled private lending to meet their capital needs and develop their business. We offer advisory and risk assessment services to both lenders and borrowers to help increase the efficiency of loan origination by financial institutions. It is our belief that the growth of car dealerships will become an important factor of China’s economic growth in the next decade. We believe that our expertise in streamlining the microfinancing process will place our company in a unique position in the marketplace.
Microfinancing
Currently, we engage in the microfinancing business through our VIE, Arki Network and its subsidiaries, Arki Capital and Arki Tianjin E-Commerce, to provide direct loans primarily to car dealerships based in Liaoning Province. Our relationship with Arki Network is governed by a series of contractual relationships among Arki Network, the shareholders of Arki Network, and two of our subsidiaries, Arki E-Commerce and America Arki. However, effective in June 2018, America Arki ceased operations and cancelled its registration records. The cessation of America Arki’s operations does not represent a strategic shift with a material effect to our operations and financial results and America Arki is not accounted for discontinued operation in the consolidated financial statements. Subsequent to the cessation of America Arki’s operations, our relationship with Arki Network continues to be governed by the ongoing contractual arrangements with Arki E-Commerce.
Prior to focusing our targeted customer base on car dealerships, we provided loans to small and medium sized enterprises and sole proprietors. We do not lend to individuals. Through Arki Network’s collaboration with China UnionPay Merchant Service (Liaoning) Co. Ltd. (“UnionPay Liaoning”), Arki Capital provides private loans to borrowers (primarily, car dealerships) and receives interest payments for originating the loans. Arki Network and UnionPay Liaoning act as intermediaries to facilitate the loan transactions in consideration of which Arki Network charges a service fee of 3% of the loan proceeds, of which 0.5% is paid to UnionPay Liaoning.
We believe that UnionPay Liaoning is incentivized to recommend as many borrowers to us as possible as the potential for additional service fees is a source of revenue for their operations. In China, the UnionPay cards are directly connected to the related bank accounts of the end user. The limit of the card is the balance of the related bank accounts. We have a contractual arrangement with UnionPay to provide us with such information and related due diligence information on car dealers and their customers. The nature of the UnionPay bank card in China is similar to checking accounts that are widely used in the United States. Therefore, consumers in China purchase cars using their UnionPay bank cards, not credit cards, and through our relationship with UnionPay we can undertake due diligence on the car purchasers, the results of such due diligence helping us to analyze the volume and credit worthiness of the car dealers to whom we are making loans.
34
Since the beginning of 2017, we have been focusing our microfinancing business customer basis on car dealerships pre-screened by UnionPay Liaoning based on historical sales volume generated through bank card transactions using UnionPay’s system. Once a car dealership submits a loan application to us, along with a recommendation letter provided by UnionPay Liaoning, Arki Network’s loan servicing team conducts additional due diligence on the quality of the borrowers. The loan servicing team first makes sure that the business is duly incorporated and in good standing with the State Administration for Industry and Commerce. The servicing team will then check the business’s credit history based on public records provided by the National Enterprise Credit Information Publicity System. The servicing team will also check business’s history with local tax authority to ensure that it does not have any outstanding tax liability. Lastly, the servicing team will conduct phone or in-person interview with the applicant to verify all necessary information. In certain instance, the servicing team may conduct an arbitrary on-site visit to the business to assess the validity of the business. Upon completion of the background check by Arki Network’s servicing team, Arki Capital provides short-term loans in the form of original issue discount loans (“OID Loans”) to qualified borrowers with pre-set interest rate, terms and conditions.
Generally, the loan is made less upfront fees and payment of interest, and therefore we deem these loans original discount loans. While Arki E-Commerce collects the interest generated through these loans, Arki Network generates revenue through the service fee, typically 3%, due upon issuance of the OID Loans. As described above, Arki Network will then pay 0.5% of the service fee to UnionPay Liaoning. We typically charge interest at the rate of 1% per month for small loans and 2% per month for larger loans. With the exception of three companies for which we granted loans in the principal amount of RMB 1,000,000, through the middle of 2018 we generally provided loans to businesses with annual revenue of at least RMB 2,000,000 (approximately US$285,714) with the following terms in order to lower default risk by the borrowers:
| ● | Principal loan amount: RMB 300,000 |
| ● | Term: 3-6 months |
| ● | Security interest is not required |
| ● | Interest: 1% per month (in the form of original issue discount) |
| ● | Principal amount to be paid in equal monthly tranches with the first payment due at the end of the 1st month |
We granted the three larger loans outside of our general practice due our interest in diversifying our loan portfolio and testing out markets’ demand for such products. We did not receive any bad debt in the last fiscal year. We did not initiate new loans in the first quarter of 2019. Beginning in July 2018 and during the current fiscal year, we have focused our lending business on larger loans, typically in the principal amount between RMB 1,000,000 and RMB 2,000,000. The terms of these larger loans are substantially the same as for our smaller loan business, except that we charge interest at the rate of 2% per month.
Since the beginning of 2017, we have been focusing our microfinancing business customer basis on car dealerships. During 2018, we have provided 47 direct loans to car dealerships, totaling RMB98,300,000 (approximately $14,500,000), and we received full payment on all loans at maturity. We did not initiate new loans to car dealerships in the first quarter of 2019.
All the loans provided by us in 2018 have a term of three (3) months with an interest rate of either 1% or 2% per month, and the amount of the loans vary from RMB300,000 (approximately $43,801) to RMB4,000,000 (approximately $597,000). Once a loan application is approved by Arki Network, Arki Capital provides funding for the loan to Arki Network, which in turn transfers the funding, net of its service fee, to UnionPay Liaoning, which will wire the loan funds after deducting its service fee to borrower’s bank account stored in its system, which is the same account borrower uses for receivables from its bank card transactions with UnionPay Liaoning. Once payments are due from the borrower, the borrower will send each tranche of repayment directly to Arki Network through UnionPay’s payment processing system and Arki Network will transfer the repayment back to Arki Capital. Neither UnionPay nor Arki Network charges any service fee to process the repayments.
Because there are a growing number of car dealerships throughout China, we believe that our microfinancing model offers substantial market potential and intend to devote additional resources to apply the business model in other regions throughout China.
Investment Opportunity Marketing
Arki Network, through its 51%-owned subsidiary, Arki Capital, engages in the business of marketing investment opportunities. In essence, this business has provided a source of funds used to make loans to the microfinancing businesses. Arki Capital operates its business on its financial advisory platform “Bangnitou”, which translates to “Help You Invest” in English, and attracts capital from investors to invest in fixed income opportunities such as inter-bank loans, currency exchange products and other debt and equity investment opportunities to help investors obtain a return on their investment. Among the potential investment opportunities for this business are the car dealerships loans that are made through Arki Network. Still at its development stage, Bangnitou is seeking to offer a number of financial products that aim to generate annual return ranging from 8-12%. Once each product reaches its maximum subscription or the end of its offering period, the investments are held for a period of time before being redeemable by the investors, along with the return. For the three months ended March 31, 2019, Arki Capital received funds of RMB 4,650,000 (approximately $688,900), which were presented as cash as an asset and loan payable as a liability on our consolidated balance sheet. The funds carry terms between 6 months and 2 years, without interest. Upon the redemption date, the investors may demand back the funding or stay on as a limited partner. Since the beginning of 2018, we have been focusing on providing loans to car dealerships and Arki Capital is generating revenues from the borrowers’ interest payments.
Our subsidiaries in the PRC (primarily, Arki Capital) obtain loans from lenders/investors through the Bangnitou platform. Arki Capital receives the loan funds and allows investors two options regarding repayment. In alternative A, investors may elect to receive a return of principal together with the interest at the end of the investment period (other than the prepaid interest amount). No other interest is paid during the loan period. In alternative B, the investors may elect to receive repayment through shares of our common stock at a pre-determined conversion rate. Interest, other than prepaid interest, is payable at the end of the loan term, either in cash or in additional shares of our common stock. Any shares of our common stock that may be issued as part of this business line are shares previously obtained by Arki Capital from a third-party non-affiliate shareholder. This business is not conducted in the United States. We expect Arki Capital to derive substantially all of its revenues from the returns generated by the performance of the underlying investment products. It would keep all returns in excess of the return that is marketed to the retail investors for the product.
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Recent Development
On March 21 2019, the Company incorporated Arki (Guangzhou) Investment Consulting Co., Ltd. (Aiki Guangzhou) with a registered capital of RMB 200,000. Arki (Guangzhou) is 100% owned by Arki Capital and is engaged in providing financial management consulting services and internet information services. It extends Arki Capital’s business in Northern China to the Guangdong-Hong Kong-Macao Greater Bay Area in Southern China.
Key Factors that Affect Operating Results
Our operating subsidiaries are incorporated, and our operations and assets are primarily located, in the PRC. Accordingly, our results of operations, financial condition and prospects are affected by China’s economic and regulation conditions in the following factors: (a) an economic downturn in China or any regional market in China; (b) economic policies and initiatives undertaken by the PRC government; (c) changes in the PRC or regional business or regulatory environment affecting the SME and microenterprise sector; (d) changes to prevailing market interest rates; (e) a higher rate of bankruptcy; (f) the deterioration of the creditworthiness of SMEs and microenterprises in general; and (g) the change of currency exchange rate of RMB to USD. Unfavorable changes could affect demand for the services that we provide and could materially and adversely affect the results of operations. Although we have generally benefited from China’s economic growth and the policies to encourage lending to SMEs, we are also affected by the complexity, uncertainties and changes in the PRC economic conditions and regulations governing the non-banking financial industry.
Our results of operations are also affected by the provision for loan losses and impairment allowance for the investment in financial assets which are a noncash item and represent an assessment of the risk of future loan losses and impairment losses. The amount of provisions or allowances has been recorded based on management’s assessment. We may increase or decrease the allowance for loan losses and impairment losses for investment in financial assets based on any such change of economic conditions and the change of management’s assessment. Any change in the allowance for loan losses would have an effect on our financial condition and results of operations.
Significant Accounting Policies
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our management periodically evaluates the estimates and judgments made. Management bases its estimates and judgments on historical experience and on various factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates as a result of different assumptions or conditions.
The methods, estimates, and judgment we use in applying our most critical accounting policies have a significant impact on the results we report in our financial statements. The SEC has defined “critical accounting policies” as those accounting policies that are most important to the portrayal of our financial condition and results, and require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based upon this definition, our most critical estimates relate to the fair value of warrant liabilities, impairment of long-lived assets, commitments and contingencies, and revenue recognition. We also have other key accounting estimates and policies, but we believe that these other policies either do not generally require us to make estimates and judgments that are as difficult or as subjective, or it is less likely that they would have a material impact on our reported results of operations for a given period. For additional information see Note 2, “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements appearing elsewhere in this report. Although we believe that our estimates and assumptions are reasonable, they are based upon information presently available, and actual results may differ significantly from these estimates.
Use of Estimates
The preparation of consolidated financial statements in conformity with US GAAP requires our management to make estimates and assumptions that affect the 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 period. Actual results could differ from those estimates.
Foreign Currency Translation
The Company’s reporting currency is the U.S. dollar. The Company’s functional currency is the local currency in the PRC, the Chinese Yuan (RMB). The financial statements of the Company are translated into United States dollars in accordance with ASC 830, Foreign Currency Matters, using yearend rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income.
In accordance with ASC 830, Foreign Currency Matters, the Company translated the assets and liabilities into US $ using the rate of exchange prevailing at the applicable balance sheet date and the statements of income and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation are recorded in investors’ equity as part of accumulated other comprehensive income.
| March 31, 2019 | December 31, 2018 | |||||||
| Balance sheet items, except for the equity accounts | 6.7114 | 6.8783 | ||||||
| Items in the statements of income and comprehensive loss and statement of cash flow | 6.7499 | 6.6031 | ||||||
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Revenue Recognition
ASC 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. Effective January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers – Topic 606 and all subsequent ASCs that modified ASC 606. The Company has elected to apply the standard utilizing the modified retrospective approach with a cumulative effect of adoption for the impact from uncompleted contracts as the date of adoption. The implementation of the new standard had no material impact to the measurement or recognition of revenue of prior periods.
The Company’s revenue is comprised of:
| 1) | Interest and fee income - Management determined that the primary sources of revenue emanating from interest and fee income on loans receivable are not within the scope of ASC 606. As a result, no changes were made during the period related to these sources of revenue. |
| 2) | Noninterest income – The primary sources of noninterest income are within the scope of ASC 606, which are presented in the income statements as commission income. |
Interest and Fee Income
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 currently charge prepayment penalties from its customers.
Servicing fee income
Borrowers typically pay us a servicing fee on each payment received. The service fees compensate us for the costs we incur in servicing the related loan, including managing funding from investors, payments to investors and maintaining borrower’ account portfolios. We record servicing fees paid by borrower as a component of operating revenue when received.
Noninterest Income
E-commerce Revenue Recognition
We evaluate whether it is appropriate to record the net amount of sales earned as commissions. We are not the primary obligor nor are we subject to inventory risk as the agreements with our suppliers specify that they have the responsibility to provide the product or service to the customer. Also, the amounts we earn from our 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 our 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 we are not primarily obligated and amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two, we record our revenues as commissions earned on a net basis.
We record 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. Because of the lack of sales generated on our online retail platforms, we ceased our E-commerce business in first quarter of 2015.
Commission income for consumer product platform, and art & antique trading platform
The Company commenced a new business line which is a platform for consumer products and art & antique trading through a website, http://buy.ccmus.com, in the third quarter of 2018. On August 21, 2018, the Company incorporated Arki Tianjin E-Commerce, a wholly-owned subsidiary of Arki Network formed under the laws of the PRC. The Company develops and operates the e-commerce business through Arki Network and Arki Tianjin E-Commerce. Sellers place their art and antiques and consumer products on our platforms for sale. A variety of consumer products are placed on the platform, including food and health products, beauty and skin care products, household products, sporting goods, jewelry and office supplies. Consumers make purchase directly through the platform and we refer to them as “members”. The Company does not own the products that are sold on our platform, instead, we act as an intermediary between sellers and buyers for the consumer products. Additionally, we also offer investment products as a package for our members to purchase. The investment product is RMB10,000, and includes 4000 points (worth RMB4000 that members can buy items on our platform and 200 shares of common stock of the Company that are owned and controlled by Arki Capital. These shares were formerly issued to a shareholder of the Company who also was indebted to Arki Capital. The shareholder could not repay the debt and Arki Capital obtained ownership and control of 750,000 shares of the Company which were owned at that time by the defaulting shareholder. The Company is re-evaluating this product to comply with potential applicable various regulatory issues and its efficacy in generating revenue and may make changes. Arki Tianjin E-commerce receives 30% of the RMB 10,000 as commission income on sales of this investment product. Arki Tianin E-commerce receives 25% of the selling price as service fees when consumer products are purchased or points are exchanged for products on the platform. For the three months ended March 31, 2019, commission income in Arki Tianjin E-commerce was $165,624. During the quarter ended March 31, 2019, we did not generate any income from art & antique trading on the platform. The Company is constantly monitoring and developing the operations and offerings on the platform and may make changes thereto.
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Cash and Cash Equivalents
We consider all investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents primarily represent funds invested in bank checking accounts, money market funds and domestic Chinese bank certificates of deposit. As of March 31, 2019 and December 31, 2018 the Company had no cash equivalents.
Fair Value of Financial Instruments
The Company’s financial instruments include cash and cash equivalents, accounts receivable, prepaid expenses, other receivables, other assets, accounts payable, accrued liabilities, other payable, related party payable, short term debt and derivative liabilities. These financial instruments are measured at their respective fair values. For fair value measurement, US GAAP establishes a three-tier hierarchy which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1 observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 include other inputs that are directly or indirectly observable in the marketplace.
Level 3 unobservable inputs which are supported by little or no market activity.
Fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The carrying value of cash and cash equivalents, accounts receivable, advance to suppliers, prepaid expenses, other receivables, other assets, account payable, accrued liabilities, other payable, and short term debt approximates their fair value due to their short-term maturities.
The Company has determined the estimated fair value amounts presented in these financial statements using available market information and appropriate methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. The estimates presented in the financial statements are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
Management believes it is not practical to estimate the fair value of related party payable because the transactions cannot be assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.
Recent Accounting Pronouncements
A discussion of recently issued accounting pronouncements is described in Note 3 in the Notes to Consolidated Financial Statements filed with this Quarterly Report, and we incorporate such discussion by reference.
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Results of Operations - Comparison of the Three Months Ended March 31, 2019 and 2018
The following table sets forth the results of our operations for the periods indicated in U.S. dollars.
| For the three months ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| REVENUE | (Unaudited) | (Unaudited) | ||||||
| Interest income on loans-related parties | $ | - | $ | 2,516 | ||||
| Commission income-related parties | 165,624 | - | ||||||
| Total revenue | $ | 165,624 | $ | 2,516 | ||||
| COST OF REVENUE | - | - | ||||||
| GROSS PROFIT | 165,624 | 2,516 | ||||||
| General and administrative expenses | (248,686 | ) | (405,911 | ) | ||||
| LOSS FROM OPERATIONS | $ | (83,062 | ) | $ | (403,395 | ) | ||
| Interest income | 533 | 24,648 | ||||||
| Interest expense to third parties | (196,982 | ) | (191,512 | ) | ||||
| Interest expense to related parties | (328,996 | ) | (308,870 | ) | ||||
| Other expense | (104 | ) | (197 | ) | ||||
| Provision for loan losses | 3,407 | - | ||||||
| Total other expenses | $ | (522,142 | ) | $ | (475,931 | ) | ||
| Loss before income taxes | $ | (605,204 | ) | $ | (879,326 | ) | ||
| Income tax expense | (5,269 | ) | - | |||||
| Net losses | $ | (610,473 | ) | $ | (879,326 | ) | ||
| Less: Net loss attributable to the non-controlling interest | (269,000 | ) | (255,874 | ) | ||||
| Net losses attributable to the Company | $ | (341,473 | ) | $ | (623,452 | ) | ||
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Results of Operations - Comparison of the Three Months Ended March 31, 2019 and 2018
Revenue
For the three months ended March 31, 2019, we had revenue of $165,624, a $163,108 increase compared with the revenue of $2,516 for the three months ended March 31, 2018. The revenue of $165,624 for the three months ended March 31, 2019 is the service fee income earned by Arki Tianjin E-Commerce for the investment products sold on our online e-commerce platform. Arki Tianjin E-Commerce receives 30% commission income for the product sold on its platform. The $2,516 revenue for the three months ended March 31, 2018 was interest income on loans earned by Arki Capital.
We did not generate income from our art & antique trading platform for the three months ended March 31, 2019.
We did not generate interest income or service fee income from the lending business for the three months ended March 31, 2019 from our lending business with China UnionPay during the quarter ended March 31, 2019.
Cost of Sales
Cost of sales for the three months ended March 31, 2019 and 2018 were $0 and $0.
Gross Profit
Gross profit was $165,624 for the three months ended March 31, 2019, compared to gross profit of $2,516 for the three months ended March 31, 2018, an increase of $163,108, as discussed in the Revenue section.
Operating expenses.
| Operating expenses for the three months ended | March 31, 2019 | March 31, 2018 | ||||||
| Selling Expenses | $ | - | $ | - | ||||
| General and Administrative | 248,686 | 405,911 | ||||||
| Total | $ | 248,686 | $ | 405,911 | ||||
Operating expenses totaled $248,686 for the three months ended March 31, 2019, compared to $405,911 for the three months ended March 31, 2018, a decrease of $157,225 or 39%. The decrease is mainly attributed to lower professional fees and other related expenses we paid during the three months ended March 31, 2019 compared to the payments we made for the three months ended March 31, 2018. Operating expenses consist of general and administrative expenses we incur in operating our business, including salaries, office expenses, utilities, business travel, depreciation expenses, and public company expenses (including legal, accounting expenses and investor relations expenses, etc.).
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Other income (expenses).
Other income (expenses) was $(522,142) for the three months ended March 31, 2019, a net increase of $46,211, or 10%, compared to $(475,931) for the three months ended March 31, 2018. The net increase is caused partially by the interest expense increase of $25,596 from $500,382 for the three months ended March 31, 2018 to $525,978 for the three months ended March 31, 2019, and partially attributable to the $24,115 decrease of interest income earned for the three months ended March 31, 2019 compared to the three months ended March 31, 2018.
Provision for loan losses
Provision for loan losses is $3,407 for the three months ended March 31, 2019, compared to $0 for the three months ended March 31, 2018. We accrued 1% of total loan receivable as provision for loan losses.
Losses before income tax provision
As a result of the factors described above, we incurred a loss before income tax provision of $605,204 for the quarter ended March 31, 2019 as compared to $879,326 for the three months ended March 31, 2018, a net decrease of $274,122.
Provision for income tax
The provision for income tax is $5,269 for the three months ended March 31, 2019, compared to $0 for the three months ended March 31, 2018. The income tax of $5,269 for the three months ended March 31, 2019 was from Arki Tianjin E-Commerce because of the gain generated by the company. There was no gain, and therefore no corresponding income tax, for the three months ended March 31, 2018.
Net loss
Net loss for the three months ended March 31, 2019 was $610,473, compared to the net loss of $879,326 for the three months ended March 31, 2018, a decrease of loss of $268,853. The decrease of net loss is mainly due to the reduction of operating expenses and the increase of revenue.
Foreign currency translation
Our consolidated financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiary is RMB. Results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the financial statements denominated in RMB into U.S. dollars are included in determining comprehensive income. Foreign currency translation loss for the three months ended March 31, 2019 was $394,208, compared to translation gain of $136,946 for the three months ended March 31, 2019, an decrease of foreign currency translation gain of $531,154. The decrease in foreign currency translation gain is caused by the fluctuation of RMB versus US $ for the two comparison periods.
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Liquidity and Capital Resources
All of our business operations are carried out by our PRC subsidiaries or variable interest entities, and all of the cash generated by our operations has been held by those entity. In order to transfer such cash to our parent entity, Consumer Capital Group, Inc., which is a Delaware corporation, we would need to rely on dividends, loans or advances made by our PRC subsidiaries. Such transfers may be subject to certain regulations or risks. To date, our parent entity has paid its expenses by raising capital through private placement transactions. In the future, in the event that our parent entity is unable to raise needed funds from private investors, our PRC subsidiaries or variable interest entities would have to transfer funds to our parent entity.
As shown in our financial statements, we have negative cash flows from operations. Over the past years, we have been funded through advances from related parties, including our CEO Jianmin Gao and COO Fei Gao. These advances are non-interest bearing and have no specified maturity date. Because these individuals are also shareholders of the company, they are willing to provide continuing funding on an as-needed basis. However, as of the date of hereof, such related parties do not have any existing obligation to advance funds or working capital to support our business, nor can our company rely on any advance funds from such related parties. In the event that we do not have sufficient working capital to fund the expansion of our operations and to provide working capital necessary for our ongoing operations and obligations, we may need to raise additional capital to fund our operating expenses, pay our obligations and grow our company. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. In addition, a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. We may incur additional interest expense on new external debt due to paying market rates of interest if we decided to fund the operation through external debt. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations.
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The RMB cannot be freely exchanged into Dollars. The State Administration of Foreign Exchange (“SAFE”) administers foreign exchange dealings and requires that they be conducted though designated financial institutions.
These factors will limit the amount of funds that we can transfer from our PRC Subsidiaries to our parent entity and may delay any such transfer. In addition, upon repatriation of earnings of PRC Subsidiaries to the United States, those earnings may become subject to United States federal and state income taxes. We have not accrued any U.S. federal or state tax liability on the undistributed earnings of our foreign subsidiary because those funds are intended to be indefinitely reinvested in our international operations. Accordingly, taxes imposed upon repatriation of those earnings to the U.S. would reduce the net worth of the Company.
For the three months ended March 31, 2019 and 2018, there were no shares issued or retired.
As of March 31, 2019 and December 31, 2018, cash and cash equivalents were $870,273 and $501,350, respectively.
The following table sets forth information about our net cash flow for the three months ended March 31, 2019 and 2018:
Cash Flows Data:
| For three months ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| Net cash flows used in operating activities | $ | (74,147 | ) | $ | (314,581 | ) | ||
| Net cash flows provided by investing activities | 340,747 | - | ||||||
| Net cash flows (used in) provided by financing activities | (481,490 | ) | 651,719 | |||||
Net cash flow used in operating activities was $74,147 for the three months ended March 31, 2019, compared to $314,581 used in operating activities for the three months ended March 31, 2018, a decrease in cash used of $240,434 or 76%. The decrease in net cash flow used in operating activities was mainly due to the increase in cash flow brought by changes in accrued expenses and amounts due from related parties, net of the increase in interest payable and received in advance from customers for the three months ended March 31, 2018.
Net cash flow brought by investing activities was $340,747 for the three months ended March 31, 2019, compared to $0 provided by investing activities for the three months ended March 31, 2018, an increase of $340,747. The increase in cash flow provided by investing activities was brought by the less repayment of loan from customers of $340,747.
Net cash flow used in financing activities was $481,490 for the three months ended March 31, 2019, compared to cash provided of $651,719 for the three months ended March 31, 2018, a net decrease of cash provided of $1,133,209. The decrease is mainly caused by the increase in repayment of loans payable of $1,093,952, less the proceeds from loan payables of $39,257.
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Going Concern
We expect existing resources, revenues generated from operations, and proceeds received from other transactions we are considering (of which there can be no assurance) to satisfy working capital requirements for at least the next twelve months, however, no assurances can be given, that we will be able to generate sufficient cash flow from operations or complete other transactions to satisfy our other obligations. The accompanying consolidated financial statements do not include any adjustments to the recoverability and classification of assets carrying amounts or the amounts and classifications of liabilities that might result from the outcome of these uncertainties. Accordingly, the Company needs to raise additional capital and is exploring potential transactions to improve its capital position. Unless we increase revenues substantially or generate additional capital from other transactions, current cash resources will only satisfy working capital needs for a limited period of time.
Management has concluded that due to the conditions described above, there is substantial doubt about the entity’s ability to continue as a going concern. While our plan is to raise capital from commercial operations to address our capital deficiencies and meet our operating cash requirements, we will need to seek capital from other sources will need to seek capital from other sources. We would expect to raise additional funds through obtaining a credit facility from an institutional lender or undertaking a private or registered financing. Raising additional funds by issuing equity or convertible debt securities may cause stockholders to experience substantial dilution in their ownership interests and new investors may have rights superior to the rights of other stockholders. Raising additional funds through debt financing or preferred stock, if available, may involve covenants that restrict the Company’s business activities and options and such additional securities may have powers, designations, preferences or rights senior to currently outstanding securities. We may also enter into financing transactions which involve the granting of liens on the Company’s assets or which grant preferences of payment from its revenue streams, all of which could adversely impact the Company’s ability to rely on revenue from operations to support ongoing operating costs. Currently, we do not have any definitive agreements with any third parties for such transactions and there can be no assurance that we will be successful in raising additional capital or securing financing when needed or on terms satisfactory to the Company. We cannot assure you that financing will be available on favorable terms or at all. If we are unable to raise additional capital when required, or on acceptable terms, we will need to reduce costs and operations substantially, which would have a material adverse effect on the Company’s business, financial condition and results of operations.
Concentration of Credit Risk
Assets that potentially subject our Company to significant concentration of credit risk primarily consist of cash and cash equivalents, and accounts receivable. The maximum exposure of such assets to credit risk is our carrying amounts as of the balance sheet dates. As of March 31, 2019 and December 31, 2018, substantially all of our cash and cash equivalents were deposited in financial institutions located in the PRC, which management believes are of high credit quality. We believe the credit risk on bank deposits is limited because the counterparties 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. Nonperformance by these institutions could expose our Company to losses for amounts in excess of insured balances. As of March 31, 2019 and December 31, 2018, no bank balances with banks in U.S. exceeded the insured amount. As of March 31, 2019 and December 31, 2018, bank balances with banks in the PRC amounted to $846,272 and $489,358, 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 cash and cash equivalents, loan receivable from borrowers and the related accrued interest receivable. The aforementioned borrowers paid service fee and interest regularly according to the contract during the reporting period, and the Company believed that the default risk from this borrower is low in the foreseeable future.
Arki E-Commerce generally provides loans in the amount of RMB 300,000. However, under limited circumstances with the long-term qualified borrowers, Arki E-Commerce, based on its business needs at the time, provided clients with higher loan amount.
We had no bad debt from the loans since we started the micro-financing business in 2016. For conservative purposes, we maintain a bad debt reserve of 1% for any amounts that are past due. No single borrower has a loan balance over 10% of the total loan outstanding as of March 31, 2019 and December 31, 2018.
Lease commitments
Our corporate headquarters are located at 1125 Route 9W S., Nyack, NY 10960. On November 1, 2018, we entered into a three-year lease agreement (the “Lease”) with a related party, Lihua Xiao, a U.S. resident with Chinese passport, for our principal executive office. The Lease started on January 1, 2019 and will expire on December 31, 2021, subject to renewal. Based on the lease agreement, the Company pays a monthly rent of $5,000.
We operate our business in China in an office located on a premise leased by Arki Network in Beijing. On January 3, 2017, Arki Network entered into a Lease Transfer Agreement pursuant to which Arki Network became the lessee of an office located at Gaobeidian Section 1, Unit 7-2, Chaoyang District, Beijing, China. Pursuant to the terms of the Lease Transfer Agreement, Arki Network has agreed to pay an annual rent of RMB 350,000 (approximately US$50,000) for 450 square meters of office space. The Lease Transfer Agreement became effective on January 16, 2017 and will expire on January 15, 2022.
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Other Receivables
Other receivables were $37,599 as of March 31, 2019, comparing to $35,544 as of December 31, 2018. Other receivables consist of:
| a) | $16,047 and $13,483 as of March 31, 2019 and December 31, 2018, respectively, are incurred in Arki Network. It represents amount paid by Arki Network for other parties. Arki Network received all amounts subsequently after the end of the periods. |
| b) | $2,893 and $2,823 as of March 31, 2019 and December 31, 2018, respectively, were paid by Arki Capital for other parties. |
| c) | $16,281 and $15,886 as of March 31, 2019 and December 31, 2018, respectively, were paid by American Pine for other parties. |
| d) | $0 and $2,400 as of March 31, 2019 and December 31, 2018, respectively, were a refundable deposit for the rent of Consumer Capital Group Inc. in the U.S. This amount was treated as the late rent payment when the Company moved out of its former office at the end of 2018. |
| e) | $1,480 and $193 as of March 31, 2019 and December 31, 2018, respectively, were paid by Arki E-commerce for other parties. |
| f) | $898 and $759 as of March 31, 2019 and December 31, 2018, respectively, which belongs to Arki Tianjin E-commerce. |
Prepaid Expenses
Prepaid expenses were $560,103 and $508,499 as of March 31, 2019 and December 31, 2018, respectively. The prepaid expenses of $560,103 as of March 31, 2019 consists of three parts: 1)$435,039 of Arki Capital’s security deposit, 2) $95,264 was prepaid expense incurred in Arki Network mainly is the yearly rent paid at the beginning of the year, and 3) $29,800 were incurred in Arki E-Commerce. The prepaid expenses of $508,499 as of December 31, 2018 consists of 1) $54,064 prepaid expense in Arki Network, 2) a security deposit of $453,235, and 3) $1,200 prepaid rent of Consumer Capital Group, Inc.
Off-Balance Sheet Arrangements
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders’ equity or that are not reflected in our financial statements. Furthermore, we do not have any retained or contingent interests in assets transferred to an unconsolidated entity that serves as credit, liquidity, or market risk support to such entity. We do not have any variable interests in any unconsolidated entity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or research and development services with us.
45
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required because we are a smaller reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2019 due to the material weaknesses describe below.
As reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, our management identified the following material weaknesses in the Company’s internal control over financial reporting environment:
| a) | Inadequate segregation of duties. In various accounting processes, applications and systems we did not design, establish and maintain procedures and controls to adequately segregate job responsibilities for initiating, authorizing and recording transactions, nor were there adequate mitigating or monitoring controls in place. |
| b) | Inadequate policies and procedures. We did not design, establish and maintain effective GAAP compliant financial accounting policies and procedures. |
| c) | Inadequate personnel. We had a lack of experienced personnel with relevant accounting experience, due in part to our limited financial resources. |
To address the above material weakness, we intend to hire, as needed, key accounting personnel with technical accounting expertise and reorganize the finance department to ensure that accounting personnel with adequate experience, skills and knowledge relating to complex, non-routine transactions are directly involved in the review and accounting evaluation of our complex, non-routine transactions.
Changes in Internal Controls over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We will continue to monitor the deficiencies identified in our internal controls and make changes that our management deems necessary.
46
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
There are no other actions, suits, proceedings, inquiries or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 1A. Risk Factors.
Our operating results and financial condition have varied in the past and may in the future vary significantly depending on a number of factors. In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2018 and in our other reports filed with the SEC for a discussion of the risks associated with our business, financial condition and results of operations. These factors, among others, could have a material adverse effect upon our business, results of operations, financial condition or liquidity and cause our actual results to differ materially from those contained in statements made in this report and presented elsewhere by management from time to time. The risks identified by the Company in its reports are not the only risks facing it. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may materially adversely affect our business, results of operations, financial condition or liquidity. Other than the risks described elsewhere in this Quarterly Report, we believe there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Except as described under the caption “Revenue Recognition - Commission income for consumer product platform, and art & antique trading platform” in the Management’s Discussion and Analysis of Financial Conditions and Results of Operations in Part I of this Quarterly Report on Form 10-Q, there were no unregistered sales of the Company’s equity securities during the three months ended March 31, 2019 that were not otherwise reported in previous filings with the SEC. During the quarter ended March 31, 2019, we sold, through our affiliated entity, Arki Capital, an aggregate of 72,400 shares of our common stock to members of our e-commerce platform. The sales of these shares transpired solely in China and were believed by management to be exempt from the registration requirements of Securities Act of 1933, as amended. However, if these transactions were not properly executed pursuant to available exemptions under the Securities Act of 1933 or exemptions promulgated thereunder, the Company may be required to offer rescission rights to purchasers of such shares. The Company is re-evaluating these transactions in order to ensure compliance with applicable regulations and if necessary, will modify the structure of these transactions accordingly.
Item 3. Defaults Upon Senior Securities.
There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
There is no other information required to be disclosed under this item which was not previously disclosed.
Item 6. Exhibits.
| Exhibit Number |
Description | |
| 31.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002. | |
| 32.1+ | Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2+ | Certification of Principal Accounting Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Schema Document | |
| 101.CAL | XBRL Taxonomy Calculation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Definition Linkbase Document | |
| 101.LAB | XBRL Taxonomy Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Presentation Linkbase Document |
| + | In accordance with SEC Release 33-8238, Exhibits 32.1 and Exhibit 32.2 are being furnished and not filed. |
47
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CONSUMER CAPITAL GROUP, INC. | ||
| Dated: May 20, 2019 | By: | /s/ Jianmin Gao |
| Jianmin Gao | ||
| Chief Executive Officer | ||
| Dated: May 20, 2019 | By: | /s/ Crystal L. Chen |
| Crystal L. Chen | ||
| Chief Financial Officer |
48
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE
SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jianmin Gao, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Consumer Capital Group Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 20, 2019
| /s/ Jianmin Gao | |
| Jianmin Gao | |
| Chief Executive Officer | |
| (Principal executive officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE
SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Crystal Lijie Chen, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Consumer Capital Group Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 20, 2019
| /s/ Crystal Lijie Chen | |
| Crystal Lijie Chen | |
| Chief Financial Officer | |
| (Principal financial and accounting officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this quarterly report on Form 10-Q of Consumer Capital Group Inc. (the “Company”) for the quarter ended March 31, 2019 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
Date: May 20, 2019
| /s/ Jianmin Gao | |
| Jianmin Gao | |
|
Chief Executive Officer (Principal executive officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this quarterly report on Form 10-Q of Consumer Capital Group Inc. (the “Company”) for the quarter ended March 31, 2019 as filed with the Securities and Exchange Commission (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
Date: May 20, 2019
| /s/ Crystal Lijie Chen | |
| Crystal Lijie Chen | |
| Chief Financial Officer | |
| (Principal financial and accounting officer) |
Document and Entity Information - shares |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
May 15, 2019 |
|
| Document and Entity Information [Abstract] | ||
| Entity Registrant Name | Consumer Capital Group, Inc. | |
| Entity Central Index Key | 0001439299 | |
| Trading Symbol | CCGN | |
| Amendment Flag | false | |
| Current Fiscal Year End Date | --12-31 | |
| Document Type | 10-Q | |
| Document Period End Date | Mar. 31, 2019 | |
| Document Fiscal Year Focus | 2019 | |
| Document Fiscal Period Focus | Q1 | |
| Entity Filer Category | Non-accelerated Filer | |
| Entity Small Business | true | |
| Entity Emerging Growth Company | false | |
| Entity Ex Transition Period | false | |
| Entity Common Stock, Shares Outstanding | 27,208,849 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 27,208,849 | 27,208,849 |
| Common stock, shares outstanding | 27,208,849 | 27,208,849 |
Condensed Consolidated Statements of Changes in Stockholders’ Equity - USD ($) |
Common stock |
Discounts on Common stocks |
Additional paid-in capital |
Accumulated (deficit) /earnings |
Accumulated other comprehensive income |
Stockholders’ equity / (deficit) |
Non-controlling interest |
Total |
|---|---|---|---|---|---|---|---|---|
| Beginning balance at Dec. 31, 2017 | $ 3,221 | $ (130,741) | $ 8,152,418 | $ (10,264,149) | $ 64,466 | $ (2,303,717) | $ (1,260,676) | $ (3,564,393) |
| Beginning balance, shares at Dec. 31, 2017 | 32,208,849 | |||||||
| Net Loss | (1,983) | (1,983,329) | (1,579,638) | (3,562,967) | ||||
| Foreign currency Translation adjustment | (73,987) | (73,987) | (73,987) | |||||
| Cancellation of shares | $ (500) | (500) | (500) | |||||
| Cancellation of shares, shares | (5,000,000) | |||||||
| Ending balance at Dec. 31, 2018 | $ 2,721 | (130,741) | 8,152,418 | (12,247,478) | (138,453) | (4,361,533) | (2,840,314) | (7,201,847) |
| Ending balance, shares at Dec. 31, 2018 | 27,208,849 | |||||||
| Net Loss | (341,473) | (341,473) | (269,000) | (610,473) | ||||
| Foreign currency Translation adjustment | 394,208 | 394,208 | 394,208 | |||||
| Ending balance at Mar. 31, 2019 | $ 2,721 | $ (130,741) | $ 8,152,418 | $ (12,588,951) | $ (255,755) | $ (4,308,798) | $ (269,000) | $ (7,418,112) |
| Ending balance, shares at Mar. 31, 2019 | 27,208,849 |
Organization |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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 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.
Effective on June 26, 2018, one of the Company's subsidiary, America Arki Fuxin Network Management Co. Ltd. ("America Arki"), ceased operation and cancelled its registration record in local industrial and commercial bureau in China. The disposal of America Arki did not represent a strategic shift that has a major effect on the Company's operations and financial results, America Arki is not accounted for discontinued operation in the consolidated financial statements.
On August 21, 2018, the Company incorporated Arki (Tianjin) E-Commerce Technology Corp ("Arki Tianjin E-Commerce"), a wholly-owned subsidiary of Arki Network and a limited liability company formed under the laws of the PRC. The Company developed the e-commerce business for art and antique through Arki Network and Arki Tianjin E-Commerce.
SHANGHAI ZHONGHUI FINANCIAL INFORMATION SERVICES CORP.
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, 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. In connection with the sale, Zhonghui Affiliates agreed to cancel 5,000,000 shares of our common stock obtained from the transaction. The Company has since ceased our peer-to-peer lending business.
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.
Details of the Company's wholly owned subsidiaries and its Affiliated PRC Entity as of March 31, 2019 are as follows:
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, a 100% PRC owned entity. The equity interests of Arki Network are legally held directly by Mr. Jianmin Gao and Mr. Fei Gao, shareholders and directors of the Company. The effective control of Arki Network is held by Arki E-Commerce and America Arki (ceased operation on June 26, 2018) through a series of contractual arrangements (the "Contractual Agreements"). As a result of the Contractual Agreements and cessation of operation of America Arki, Arki E-Commerce maintain the ability to control Arki Network, 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 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, namely Mr. Jianmin Gao and Mr. Fei Gao, entered into a loan agreement with America Arki on February 3, 2011. Under this loan agreement, America Arki 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, as required by the PRC. The term of the loan is for ten years from the date of execution until the date when America Arki requests repayment. America Arki 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. As America Arki ceased operation subsequently, the recourse right of the RMB 1.0 million has been transferred to substituted controller, Arki E-Commerce.
The shareholders of Arki Network entered into an option agreement with America Arki on February 3, 2011, under which the shareholders of Arki Network jointly and severally granted to America Arki an option to purchase their equity interests in Arki Network. The purchase price will be set off against the loan repayment under the loan agreement. America Arki may exercise such option at any time until it has acquired all equity interests of Arki Network or freely transferred the option to any third party and such third party assumes the rights and obligations of the option agreement. As America Arki ceased operation subsequently, the option rights are held by Arki E-Commerce.
America Arki and Arki Network entered into an exclusive business cooperation agreement deemed effective on November 26, 2010, under which Arki Network engaged America Arki as its exclusive provider of technical support, consulting services, maintenance and other commercial services. Arki Network shall pay to America Arki service fees determined based on the net income of Arki Network and which are eliminated in consolidation. America Arki 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 may not enter into any agreement with third parties for the provision of identical or similar service without the prior consent of America Arki. As America Arki ceased operation subsequently, the rights are held by Arki E-Commerce.
The shareholders of Arki Network entered into a share pledge agreement with America Arki on February 3, 2011 under which the shareholders pledged all of their equity interests in Arki Network to America Arki as collateral for all of the payments due to America Arki and to secure their obligations under the above agreements. The shareholders of Arki Network 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 America Arki without America Arki's preapproval. America Arki is entitled to transfer or assign in full or in part the shares pledged. In the event of default, America Arki, will be entitled to request immediate repayment of the loan or to dispose of the pledged equity interests through transfer or assignment. As America Arki ceased operation subsequently, the rights are held by Arki E-Commerce.
The shareholders of Arki Network entered into a power of attorney agreement with America Arki effective on November 26, 2010 under which the shareholders irrevocably appointed Arki E-Commerce and America Arki 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. As America Arki ceased operation subsequently, the rights are held by Arki E-Commerce. |
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Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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, Arki E-Commerce, America Arki, 51% majority ownership in Arki Capital, and the discontinued operations of Shanghai Zhonghui and Yin Hang. As a result of contractual arrangements, the Company consolidates Arki Network 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 condensed consolidated financial statements 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 three months ended March 31, 2019 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 “$”).
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, Inc. have been included in the accompanying consolidated financial statements:
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:
Foreign currency translation adjustments of $(394,208) and $136,946 for the three months ended March 31, 2019 and 2018, 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
ASC 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. Effective January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers – Topic 606 and all subsequent ASCs that modified ASC 606. The Company has elected to apply the standard utilizing the modified retrospective approach with a cumulative effect of adoption for the impact from uncompleted contracts as the date of adoption. The implementation of the new standard had no material impact to the measurement or recognition of revenue of prior periods.
The Company’s revenue is comprised of:
Interest and Fee Income
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.
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.
Noninterest Income
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.
Commission income for art & antique trading platform
The Company started to operate the platform for art & antique trading in the 3rd quarter of 2018. On August 21, 2018, the Company incorporated Arki (Tianjin) E-Commerce Technology Corp (“Arki Tianjin E-Commerce”), a wholly-owned subsidiary of Arki Network and a limited liability company formed under the laws of the PRC. The Company plan to develop the e-commerce business for art and antique through Arki Network and Arki Tianjin E-Commerce. Sellers put their art & antique on our platform for sell. The Company get a 25% of the selling price as the commission income.
Cost of revenue
The cost of revenue represented the fees paid to agents for the introduction of customers.
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.
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 non-collectable 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:
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 as allowance when management believes collection of amounts due are at risk. Interest receivable considered non-collectable 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.
Property and equipment, net
Property and equipment is recorded at cost and consists of computer equipment, office equipment, furniture and leasehold improvement and is depreciated using the straight-line method over the estimated useful lives of the related assets (generally five 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 March 31, 2019 and December 31, 2018, 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.
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 March 31, 2019 and December 31, 2018, 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 2018 and 2017 and 2016 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 $610,473 for the three months ended March 31, 2019 and an accumulated deficit of $12,588,951 as of March 31, 2019. 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. |
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Recently Issued Accounting Standards |
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Mar. 31, 2019 | ||||
| Accounting Changes and Error Corrections [Abstract] | ||||
| RECENTLY ISSUED ACCOUNTING STANDARDS |
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606). This guidance supersedes current guidance on revenue recognition in Topic 605, "Revenue Recognition." In addition, there are disclosure requirements related to the nature, amount, timing, and uncertainty of revenue recognition. For publicly-traded business entities, Topic 606 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application (modified retrospective method). The Company will adopt the new revenue standard beginning January 1, 2018, using the modified retrospective method. The Company anticipates that the application of the new standard in the future may result in more disclosures, but its application is not likely to have a material impact on the timing and amounts of revenue recognized in the respective reporting periods.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which reduces the diversity in practice on how certain transactions are classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses. The ASU sets forth a "current expected credit loss" ("CECL") model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing probable incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgements used in determining the allowance for loan losses, as well as the credit quality and underwriting standards of an organization's loan portfolio. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. As we will no longer be treated as an emerging growth company beginning December 31, 2021, we are required to adopt this ASU no later than 2021. Early adoption is permitted in fiscal years beginning after December 31, 2018. The Company is currently evaluating the alternative methodologies available and assessing its data and system needs to implement this ASU.
On October 2, 2017, The FASB has issued Accounting Standards Update (ASU) No. 2017-13, "Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments." The ASU adds SEC paragraphs to the new revenue and leases sections of the Codification on the announcement the SEC Observer made at the 20 July 2017 Emerging Issues Task Force (EITF) meeting. The SEC Observer said that the SEC staff would not object if entities that are considered public business entities only because their financial statements or financial information is required to be included in another entity's SEC filing use the effective dates for private companies when they adopt ASC 606, Revenue from Contracts with Customers, and ASC 842, Leases. This would include entities whose financial statements are included in another entity's SEC filing because they are significant acquirees under Rule 3-05 of Regulation S-X, significant equity method investees under Rule 3-09 of Regulation S-X and equity method investees whose summarized financial information is included in a registrant's financial statement notes under Rule 4-08(g) of Regulation S-X. The ASU also supersedes certain SEC paragraphs in the Codification related to previous SEC staff announcements and moves other paragraphs, upon adoption of ASC 606 or ASC 842. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.
On November 22, 2017, the FASB ASU No. 2017-14, "Income Statement—Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606): Amendments to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 116 and SEC Release 33-10403." The ASU amends various paragraphs in ASC 220, Income Statement — Reporting Comprehensive Income; ASC 605, Revenue Recognition; and ASC 606, Revenue From Contracts With Customers, that contain SEC guidance. The amendments include superseding ASC 605-10-S25-1 (SAB Topic 13) as a result of SEC Staff Accounting Bulletin No. 116 and adding ASC 606-10-S25-1 as a result of SEC Release No. 33-10403. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.
In February 2018, the FASB issued ASU No. 2018-02, "Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income." The ASU amends ASC 220, Income Statement — Reporting Comprehensive Income, to "allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act." In addition, under the ASU, an entity will be required to provide certain disclosures regarding stranded tax effects. The ASU is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated financial statements.
In March 2018, the FASB issued ASU 2018-05 — Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 ("ASU 2018-05"), which amends the FASB Accounting Standards Codification and XBRL Taxonomy based on the Tax Cuts and Jobs Act (the "Act") that was signed into law on December 22, 2017 and Staff Accounting Bulletin No. 118 ("SAB 118") that was released by the Securities and Exchange Commission. The Act changes numerous provisions that impact U.S. corporate tax rates, business-related exclusions, and deductions and credits and may additionally have international tax consequences for many companies that operate internationally. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
In July 2018, the FASB issued ASU 2018-10, "Codification Improvements to Topic 842, Leases." The ASU addresses 16 separate issues which include, for example, a correction to a cross reference regarding residual value guarantees, a clarification regarding rates implicit in lease contracts, and a consolidation of the requirements about lease classification reassessments. The guidance also addresses lessor reassessments of lease terms and purchase options, variable lease payments that depend on an index or a rate, investment tax credits, lease terms and purchase options, transition guidance for amounts previously recognized in business combinations, and certain transition adjustments, among others. For entities that early adopted Topic 842, the amendments are effective upon issuance of this Update, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
In July 2018, the FASB issued ASU 2018-11 - Leases (Topic 842): Targeted Improvements. The ASU simplifies transition requirements and, for lessors, provides a practical expedient for the separation of nonlease components from lease components. Specifically, the ASU provides: (1) an optional transition method that entities can use when adopting ASC 842 and (2) a practical expedient that permits lessors to not separate nonlease components from the associated lease component if certain conditions are met. For entities that have not adopted Topic 842 before the issuance of this Update, the effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements in Update 2016-02. For entities that have adopted Topic 842 before the issuance of this Update, the transition and effective date of the amendments in this Update are as follows: 1) The practical expedient may be elected either in the first reporting period following the issuance of this Update or at the original effective date of Topic 842 for that entity. 2) The practical expedient may be applied either retrospectively or prospectively. All entities, including early adopters, that elect the practical expedient related to separating components of a contract in this Update must apply the expedient, by class of underlying asset, to all existing lease transactions that qualify for the expedient at the date elected. The Company does not believe this guidance will have a material impact on its consolidated financial statements.
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 |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 | |||
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||
| PREPAID EXPENSES |
Prepaid expenses consisted of prepaid rent for our US Company and other prepaid expenses for Arki Network as of March 31, 2019 and December 31, 2018, respectively. |
Loans Receivable, Net |
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| Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOANS RECEIVABLE, NET |
The monthly interest rates on loan issued at 2% and range from 8% to 30% for the three months ended March 31, 2019 and 2018, respectively.
As of March 31, 2019 and December 31, 2018, loans receivable were $0 and $331,039, net of provision for loan losses of $0, and $3,344, respectively; all the loans receivable are from related parties.
Loans receivable consisted of the following as of March 31, 2019 and December 31, 2018:
The following table represents the aging of loan receivables as of December 31, 2018:
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.
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 three months ended March 31, 2019 and 2018, the reversal and the provision of allowance for loan losses were and $(3,047) and $3,344, respectively.
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 March 31, 2019 and December 31, 2018. |
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Other Receivables |
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OTHER RECEIVABLES |
Other receivables consist of the following as of March 31, 2019 and December 31, 2018:
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Property and Equipment, Net |
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| Property, Plant and Equipment, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT, NET |
Property and equipment consisted of the following as of March 31, 2019 and December 31, 2018:
For the three months ended March 31, 2019 and 2018, depreciation expenses were $6,135 and $5,510, respectively. |
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Loans Payable |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOANS PAYABLE |
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 54% per annum.
Loans payable consisted of the following as of March 31, 2019 and December 31, 2018:
The Company has loans payable to related parties of $3,747,375 and $3,887,569, and loans payable to third parties of 2,005,554 and $2,198,205 as of March 31, 2018 and December 31, 2018, respectively. For the three months ended March 31, 2019 and 2018, the Company recorded $525,978 and $500,382 of interest expenses, respectively. |
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Payable to Shareholder |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 | |||
| Payables and Accruals [Abstract] | |||
| PAYABLE TO SHAREHOLDER |
Caesar Capital Management Ltd. ("Caesar") a shareholder of the Company, advanced $109,009 and $117,767 to the Company as of March 31, 2019 and December 31, 2018, respectively. The loans were borrowed by the Company for operating purposes, without collateral, and were originally due between July 2013 and 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. |
Noncontrolling Interest |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 | |||
| Noncontrolling Interest [Abstract] | |||
| NONCONTROLLING INTEREST |
As of March 31, 2019 and December 31, 2018, non-controlling interest of Arki Capital of $3,109,314 and $2,840,314, respectively, was recognized in the Company’s consolidated balance sheets, representing Arki Capital’s cumulative results of operations attributable to shareholders other than CCG Group.
For the three months ended March 31, 2019 and 2018, net losses of $269,000 and $255,874, respectively, attributable to the non-controlling interest of Arki Capital were recognized in the Company’s consolidated statements of comprehensive loss, representing Arki Capital’s net losses attributable to shareholders other than CCG Group. |
Income Taxes |
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| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAXES |
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% for the three months ended March 31, 2019 and 2018, respectively.
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., America Arki (Tianjin) Capital Management Partnership, Arki (Tianjin) E-Commerce Ltd. and Arki (Guangzhou) Investment Consulting Co. Ltd. were incorporated in the People’s Republic of China and subject to PRC income tax at 25%.
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:
Loss before income taxes consists of:
The principal components of the Company’s deferred income tax assets and liabilities are as follows:
As of March 31, 2019 and December 31, 2018, the Company has deferred tax asset of $0 and $0, respectively, and deferred tax liabilities of $81,203 and $79,232, respectively, resulting from certain net operating losses in the PRC. 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 March 31, 2019 and December 31, 2018, the Company does not have sufficient operations to generate taxable income in Arki E-Commerce, America Pine, Arki Network, Arki Capital and Arki Tianjin E-Commerce 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 E-Commerce, America Pine, Arki Network, Arki Capital and Arki Tianjin E-Commerce have sufficient operation to generate taxable income in future periods with a supportable trend; the valuation allowance will be reduced accordingly. As of March 31, 2019 and December 31, 2018, $75,593 and $73,758 valuation allowance was recorded respectively. |
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Related Party Transactions |
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| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RELATED PARTY TRANSACTIONS |
As of March 31, 2019 and December 31, 2018, the amounts owed to related parties are without interest and due on demand.
Interest income derived from the above loans receivable from related parties were $0 and $0 for the three months ended March 31, 2019 and 2018, respectively. Fee income derived from the above loans receivable from related parties were $0 and $0 for the three months ended March 31, 2019 and 2018, respectively.
Interest expenses incurred on the above loans payable to related parties were $328,996 and $308,870 for the three months ended March 31, 2019 and 2018, respectively.
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Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES |
Operating Leases
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 March 31, 2019, the Company was obligated under non-cancellable operating leases minimum rentals as follows:
For the three months ended March 31,
The rent expense for the three months ended March, 2019 and 2018 was $28,001 and $17,361 respectively.
Legal Proceedings
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. |
Concentration of Credit and Business Risks |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2019 | ||||
| Risks and Uncertainties [Abstract] | ||||
| CONCENTRATION OF CREDIT AND BUSINESS RISKS |
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 March 31, 2019 and December 31, 2018, 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 March 31, 2019 and December 31, 2018, we had no uninsured balances with the banks in U.S. Our bank balances in the PRC were $846,272 and $489,358, 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 a six-year agreement with the Chief Operating Officer, Mr. Fei Gao, for a compensation of approximately $2,655 (RMB 18,000) per month. |
Subsequent Event |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 | |||
| Subsequent Events [Abstract] | |||
| SUBSEQUENT EVENT |
There was no subsequent event or transactions that would require recognition or disclosure in our unaudited condensed consolidated financial statements for the three months ended March 31, 2019. |
Summary of Significant Accounting Policies (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of accounting and presentation | 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, Arki E-Commerce, America Arki, 51% majority ownership in Arki Capital, and the discontinued operations of Shanghai Zhonghui and Yin Hang. As a result of contractual arrangements, the Company consolidates Arki Network 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 condensed consolidated financial statements 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 three months ended March 31, 2019 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 "$"). |
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| Variable interest entity | 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, Inc. have been included in the accompanying consolidated financial statements:
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| Use of estimates | 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. |
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| Foreign currency translations | 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:
Foreign currency translation adjustments of $(394,208) and $136,946 for the three months ended March 31, 2019 and 2018, 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. |
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| Revenue recognition | Revenue recognition
ASC 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied. Effective January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers – Topic 606 and all subsequent ASCs that modified ASC 606. The Company has elected to apply the standard utilizing the modified retrospective approach with a cumulative effect of adoption for the impact from uncompleted contracts as the date of adoption. The implementation of the new standard had no material impact to the measurement or recognition of revenue of prior periods.
The Company's revenue is comprised of:
Interest and Fee Income
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.
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.
Noninterest Income
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.
Commission income for art & antique trading platform
The Company started to operate the platform for art & antique trading in the 3rd quarter of 2018. On August 21, 2018, the Company incorporated Arki (Tianjin) E-Commerce Technology Corp ("Arki Tianjin E-Commerce"), a wholly-owned subsidiary of Arki Network and a limited liability company formed under the laws of the PRC. The Company plan to develop the e-commerce business for art and antique through Arki Network and Arki Tianjin E-Commerce. Sellers put their art & antique on our platform for sell. The Company get a 25% of the selling price as the commission income. |
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| Cost of revenue | Cost of revenue
The cost of revenue represented the fees paid to agents for the introduction of customers. |
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| Non-controlling interest | 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. |
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| Comprehensive income (loss) | 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). |
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| Earnings per share | 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. |
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| Cash and cash equivalents | 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. |
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| Loans receivable | 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 non-collectable are written off after exhaustive efforts at collection. |
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| Allowance for loan losses | 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:
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| Interest receivable | 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 as allowance when management believes collection of amounts due are at risk. Interest receivable considered non-collectable is written off after exhaustive efforts at collection. |
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| Loans payable | 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. |
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| Property and equipment, net | Property and equipment, net
Property and equipment is recorded at cost and consists of computer equipment, office equipment, furniture and leasehold improvement and is depreciated using the straight-line method over the estimated useful lives of the related assets (generally five 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. |
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| Impairment of long-lived assets | 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 March 31, 2019 and December 31, 2018, 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. |
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| Income taxes | 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 March 31, 2019 and December 31, 2018, 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 2018 and 2017 and 2016 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. |
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| Going Concern | Going Concern
As shown in the consolidated financial statements, the Company has generated a net loss of $610,473 for the three months ended March 31, 2019 and an accumulated deficit of $12,588,951 as of March 31, 2019. 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. |
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Organization (Tables) |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of wholly owned subsidiaries and its Affiliated PRC Entity |
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Summary of Significant Accounting Policies (Tables) |
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accompanying consolidated financial statements |
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| Schedule of exchange rates used to translate amounts in RMB into US Dollars |
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Loans Receivable, Net (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of loan receivable |
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| Schedule of aging of loan receivables |
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Other Receivables (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of other receivables |
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Property and Equipment, Net (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment, Net [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property and equipment |
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Loans Payable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of loans payable |
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Income Taxes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of income tax laws of various jurisdictions |
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| Schedule of loss before income taxes from continuing operations |
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| Schedule of deferred income tax assets and liabilities |
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Related Party Transactions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of related party transactions |
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| Schedule of related party balances |
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| Schedule of loans receivable form related parties |
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| Schedule of loans payable from related party |
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| Schedule of commission income received |
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Commitments and Contingencies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||
| Schedule of non-cancellable operating leases minimum rentals |
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Organization (Details) - Affiliated Entity [Member] |
3 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||
| Consumer Capital Group Inc [Member] | ||||||||
| Condensed Financial Statements, Captions [Line Items] | ||||||||
| Date of Establishment | Oct. 14, 2009 | |||||||
| Place of Establishment | California USA | |||||||
| Percentage of Ownership by the Company | 100.00% | |||||||
| Principal Activities | 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 [Member] | ||||||||
| Condensed Financial Statements, Captions [Line Items] | ||||||||
| Date of Establishment | Mar. 06, 2008 | |||||||
| Place of Establishment | PRC | |||||||
| Percentage of Ownership by the Company | 100.00% | |||||||
| Principal Activities | Maintains the various computer systems, software and data. Owns the intellectual property rights of the "consumer market network". | |||||||
| America Pine Beijing Bio Tech Inc [Member] | ||||||||
| Condensed Financial Statements, Captions [Line Items] | ||||||||
| Date of Establishment | Mar. 21, 2007 | |||||||
| Place of Establishment | PRC | |||||||
| Percentage of Ownership by the Company | 100.00% | [1] | ||||||
| Principal Activities | Assists in payment collection for e-commerce business. | |||||||
| America Arki Network Service Beijing Co Ltd [Member] | ||||||||
| Condensed Financial Statements, Captions [Line Items] | ||||||||
| Date of Establishment | Nov. 26, 2010 | |||||||
| Place of Establishment | PRC | |||||||
| Percentage of Ownership by the Company | 0.00% | [2] | ||||||
| Principal Activities | 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 | |||||||
| Arki Tianjin [Member] | ||||||||
| Condensed Financial Statements, Captions [Line Items] | ||||||||
| Date of Establishment | Oct. 22, 2015 | |||||||
| Place of Establishment | PRC | |||||||
| Percentage of Ownership by the Company | 51.00% | [3] | ||||||
| Principal Activities | Offer asset management, management consulting, internet information services as well as advertising design, production, agent, publishing. | |||||||
| Arki Tianjin One [Member] | ||||||||
| Condensed Financial Statements, Captions [Line Items] | ||||||||
| Date of Establishment | Aug. 21, 2018 | |||||||
| Place of Establishment | PRC | |||||||
| Percentage of Ownership by the Company | 100.00% | |||||||
| Principal Activities | Collects service fees of the sales amount for all the revenues realized on the platform for trading of antiques. | |||||||
| Arki (Guangzhou) Investment Consulting Co. Ltd[Member] | ||||||||
| Condensed Financial Statements, Captions [Line Items] | ||||||||
| Date of Establishment | Mar. 21, 2019 | |||||||
| Place of Establishment | PRC | |||||||
| Percentage of Ownership by the Company | 100.00% | |||||||
| Principal Activities | A wholly owned subsidiary of Arki Capital. It extends the business of Arki Capital from Northern China to the Grangdong-Hong Kong-Macao Great Bay Area to offer asset management and management consulting services to this area. | |||||||
| ||||||||
Organization (Details Textual) |
1 Months Ended | 3 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Dec. 23, 2014 |
Mar. 31, 2019
CNY (¥)
shares
|
Mar. 31, 2019
USD ($)
$ / shares
shares
|
Mar. 31, 2019
CNY (¥)
shares
|
Dec. 31, 2018
$ / shares
shares
|
Dec. 01, 2016 |
Feb. 05, 2010 |
|
| Organization (Textual) | |||||||
| Common stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 | ||||
| Common stock, par value | $ / shares | $ 0.0001 | $ 0.0001 | |||||
| Reverse stock split, description | 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. | ||||||
| Business acquisition issued and outstanding shares | 5,000,000 | ||||||
| Advance notice period of loans | 30 days | ||||||
| Description of share exchange agreement | 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, 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. | ||||||
| RMB [Member] | |||||||
| Organization (Textual) | |||||||
| Interest-free loan | ¥ | ¥ 1,000,000 | ||||||
| Recourse right transferred | ¥ | ¥ 1,000,000 | ||||||
| Chief Executive Officer [Member] | |||||||
| Organization (Textual) | |||||||
| Percentage of ownership by company | 60.00% | 60.00% | |||||
| Business acquisition issued and outstanding shares | 2,500,000 | ||||||
| Cash payable | $ | $ 335,000 | ||||||
| Cancellation shares of common stock | 1,388,889 | ||||||
| Percentage of pre-merger holdings | 92.60% | ||||||
| Parent [Member] | |||||||
| Organization (Textual) | |||||||
| Common stock, shares issued | 390,444,109 | 390,444,109 | |||||
| Common stock, shares outstanding | 390,444,109 | 390,444,109 | |||||
| America Arki Network Service Beijing Co Ltd [Member] | Share Exchange Agreement [Member] | |||||||
| Organization (Textual) | |||||||
| Percentage of ownership by company | 100.00% | 100.00% | 100.00% | ||||
| Arki Beijing E Commerce Technology Corp [Member] | Stock Right Transfer Agreement [Member] | |||||||
| Organization (Textual) | |||||||
| Percentage of ownership by company | 100.00% | ||||||
| America Pine Beijing Bio Tech Inc [Member] | Stock Right Transfer Agreement [Member] | |||||||
| Organization (Textual) | |||||||
| Percentage of ownership by company | 100.00% | ||||||
Summary of Significant Accounting Policies (Details 1) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
| Accounting Policies [Abstract] | |||
| Balance sheet items, except for stockholders’ equity, as of years ended | 0.1490 | 0.1454 | |
| Amounts included in the statements of operations and comprehensive income (loss) and cash flows for the years presented | 0.1482 | 0.1573 | |
Summary of Significant Accounting Policies (Details Textual) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
| Summary of Significant Accounting Policies (Textual) | |||
| Loans receivable, description | The General Reserve is required to be no less than 1% of total loans receivable. | ||
| Loans receivable variable rate, description | The interest rates of such loans are 4% - 54% per annum with a term lasting from 6 months to two years. | ||
| Intangible assets estimated useful lives computed method, description | Straight-line method over the estimated useful lives of the related assets (generally five years or less). | ||
| Foreign currency translation adjustment | $ (394,208) | $ 136,946 | |
| Noncontrolling interests owned subsidiaries, percentage | 49.00% | ||
| Commission income from selling price, description | The Company get a 25% of the selling price as the commission income. | ||
| Income tax benefit, percentage | 50.00% | ||
| Net loss | $ (610,473) | $ (879,326) | |
| Accumulated deficit | $ (12,588,951) | $ (12,247,478) | |
Loans Receivable, Net (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Schedule of loan receivables | ||
| Loans receivable - third parties | ||
| Loans receivable - related parties | 334,383 | |
| Total loans receivable | 334 | |
| Allowance for loan losses | (3,344) | |
| Total loans |
Loans Receivable, Net (Details Textual) - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
| Loan Receivables, Net (Textual) | ||
| Monthly interest rate | 2.00% | |
| Allowance for loan losses | $ (3,407) | |
| Loans receivable net of provision for loan losses | 0 | $ 331,039 |
| Net of provision for loan losses related parties | $ 0 | $ 3,344 |
| Maximum [Member] | ||
| Loan Receivables, Net (Textual) | ||
| Monthly interest rate | 30.00% | |
| Minimum [Member] | ||
| Loan Receivables, Net (Textual) | ||
| Monthly interest rate | 8.00% |
Other Receivables (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Receivables [Abstract] | ||
| Advances to unrelated third-parties | $ 37,599 | $ 33,144 |
| Other deposits | 2,400 | |
| Total | $ 37,599 | $ 35,544 |
Property and Equipment, Net (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 121,624 | $ 120,141 |
| Less: accumulated depreciation | (52,812) | (46,061) |
| Total property and equipment, net | 68,812 | 74,080 |
| Vehicles [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 20,710 | 20,710 |
| Office Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 25,681 | 25,629 |
| Leasehold Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 68,453 | 67,187 |
| Furniture and Fixtures [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 6,780 | $ 6,615 |
Property and Equipment, Net (Details Textual) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Property and Equipment, Net (Textual) | ||
| Depreciation expenses | $ 6,135 | $ 5,510 |
Loans Payable (Details Textual) - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
| Loans Payable (Textual) | ||
| Loans payable to related parties | $ 2,547,917 | $ 2,869,881 |
| Loans payable to third parties | 2,005,554 | 2,198,205 |
| Interest expenses | $ 525,978 | $ 500,382 |
| Loan maturity, description | All the loans have maturities from six months to two years with interest rates varying from 4% to 54% per annum. |
Payable to Shareholder (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
| Payable to Shareholder (Textual) | ||
| Advance amount of shareholders | $ 109,009 | $ 117,767 |
| Annual interest rate | 6.00% | |
| Loans Payable [Member] | ||
| Payable to Shareholder (Textual) | ||
| Expiration date, description | The loans were borrowed by the Company for operating purposes, without collateral, and were originally due between July 2013 and November 2013, |
Noncontrolling Interest (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
| Noncontrolling Interest (Textual) | |||
| Noncontrolling interest | $ 3,109,314 | $ 2,840,314 | |
| Net loss | $ (269,000) | $ (255,874) | |
Income Taxes (Details) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
| Income Tax Disclosure [Abstract] | ||
| Tax expense at statutory rate US | 21.00% | 21.00% |
| Foreign income not recognized in the U.S. | (21.00%) | (21.00%) |
| PRC enterprise income tax rate | 25.00% | 25.00% |
| Changes in valuation allowance and others | (25.00%) | (25.00%) |
| Effective income tax rates |
Income Taxes (Details 1) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Income Taxes [Line Items] | ||
| Total | $ (605,204) | $ (879,326) |
| Peoples Republic Of China [Member] | ||
| Income Taxes [Line Items] | ||
| Total | (586,576) | (879,326) |
| Non Peoples Republic Of China [Member] | ||
| Income Taxes [Line Items] | ||
| Total | $ (18,628) | $ (4,104) |
Income Taxes (Details 2) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Deferred tax assets: | ||
| Accrued interest payable | $ 22,382 | $ 21,839 |
| Accrual | 33,356 | 32,546 |
| Provision for loan losses | 19,854 | 19,372 |
| Total deferred tax assets | 75,593 | 73,757 |
| Less: Valuation allowance | (75,593) | (73,757) |
| Net total deferred tax assets | ||
| Deferred tax liabilities: | ||
| Accrued interest receivable | 35,375 | 34,516 |
| Accrued interest payable | 45,828 | 44,716 |
| Net total deferred liabilities | $ 81,203 | $ 79,232 |
Related Party Transactions (Details) |
3 Months Ended |
|---|---|
Mar. 31, 2019 | |
| Jianmin Gao [Member] | |
| Relationship with the Company | Stockholder, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of the Company |
| Fei Gao [Member] | |
| Relationship with the Company | Stockholder, Director and Chief Operating Officer |
| Dong Yao [Member] | |
| Relationship with the Company | Stockholder, Director and Chief Technology Officer |
| Linhua Xiao [Member] | |
| Relationship with the Company | Stockholder, Management of the Company |
| Beijing Daogao Trade Ltd [Member] | |
| Relationship with the Company | Legal representative is Lihua Xiao, a stockholder and management of the Company. |
Related Party Transactions (Details 1) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Due to related parties: | ||
| Due to related parties | $ (183,955) | $ (538,140) |
| Jianmin Gao [Member] | ||
| Due to related parties: | ||
| Due to related parties | (372,334) | (20,327) |
| Fei Gao [Member] | ||
| Due to related parties: | ||
| Due to related parties | (138,768) | (136,338) |
| Linhua Xiao [Member] | ||
| Due to related parties: | ||
| Due to related parties | (522) | (833) |
| Dong Yao [Member] | ||
| Due to related parties: | ||
| Due to related parties | 304 | (288) |
| Beijing Daogao Trading Co. Ltd. (“Beijing Daogao”) [Member] | ||
| Due to related parties: | ||
| Due to related parties | $ (26,820) | $ (26,169) |
Related Party Transactions (Details 2) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Related Party Transactions [Abstract] | ||
| Related companies of non-controlling stockholders | $ 334,383 | |
| Allowance for loan losses | (3,344) | |
| Total |
Related Party Transactions (Details 3) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|
| Related Party Transactions [Abstract] | ||
| Non-controlling stockholders | $ 3,747,375 | $ 3,230,433 |
| Related companies of non-controlling stockholders | 657,136 | |
| Loans payable to related parties | $ 3,747,375 | $ 3,887,569 |
Related Party Transactions (Details 4) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Related Party Transactions [Abstract] | ||
| Non-controlling stockholders | $ 165,624 | |
| Related company of non-controlling stockholder | ||
| Commission income-related parties | $ 165,624 | |
Related Party Transactions (Details Textual) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Related Party Transactions (Textual) | ||
| Interest income derived | $ 0 | $ 0 |
| Interest expenses | 328,996 | 308,870 |
| Loans receivable from related parties | $ 0 | $ 0 |
Commitments and Contingencies (Details) |
Mar. 31, 2019
USD ($)
|
|---|---|
| Commitments and Contingencies Disclosure [Abstract] | |
| 2020 | $ 154,794 |
| 2021 | 74,728 |
| 2022 | 51,852 |
| 2023 | 4,321 |
| Total | $ 285,695 |
Commitments and Contingencies (Details Textual) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
| Commitments and Contingencies (Textual) | ||
| Operating leases, term | The terms of such non-cancellable operating leases are one to five years. | |
| Rent expense | $ 28,001 | $ 17,361 |
Concentration of Credit and Business Risks (Details) |
Dec. 15, 2014
USD ($)
|
Mar. 31, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
Dec. 15, 2014
CNY (¥)
|
|---|---|---|---|---|
| CHINA | ||||
| Concentration of Credit and Business Risks (Textual) | ||||
| Bank balances | $ 846,272 | $ 489,358 | ||
| Chief Operating Officer [Member] | ||||
| Concentration of Credit and Business Risks (Textual) | ||||
| Credit agreement term, description | The Company entered into a six-year agreement with the Chief Operating Officer, Mr. Fei Gao, for a compensation of approximately $2,655 (RMB 18,000) per month. | |||
| Compensation payable | $ 2,655 | |||
| Chief Operating Officer [Member] | RMB [Member] | ||||
| Concentration of Credit and Business Risks (Textual) | ||||
| Compensation payable | ¥ | ¥ 18,000 |