0001213900-18-010683.txt : 20180810 0001213900-18-010683.hdr.sgml : 20180810 20180810123056 ACCESSION NUMBER: 0001213900-18-010683 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 60 CONFORMED PERIOD OF REPORT: 20180630 FILED AS OF DATE: 20180810 DATE AS OF CHANGE: 20180810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Jiucaitong Group Ltd CENTRAL INDEX KEY: 0001610607 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 383926700 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-197056 FILM NUMBER: 181007935 BUSINESS ADDRESS: STREET 1: 56 JIANGUO RD STREET 2: CHAOYANG QU CITY: BEIJING STATE: F4 ZIP: 00000 BUSINESS PHONE: 86 001 400-004-8181 MAIL ADDRESS: STREET 1: 56 JIANGUO RD STREET 2: CHAOYANG QU CITY: BEIJING STATE: F4 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: Jiucaitong Group Limited. DATE OF NAME CHANGE: 20171207 FORMER COMPANY: FORMER CONFORMED NAME: Spirit International, Inc. DATE OF NAME CHANGE: 20140611 10-Q 1 f10q0618_jiucaitonggroup.htm QUARTERLY REPORT

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2018

 

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 333-197056

 

JIUCAITONG GROUP LIMITED

(Exact name of registrant as specified in its charter)

 

Nevada   38-3926700

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

56 Jianguo Rd,

Chaoyang Qu, Beijing, China

  100020

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code +86 001 400-004-8181

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

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 Website, 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, a 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
(Do not check if 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  ☒ 

  

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.  

 

As of August 10, 2018, 9,110,000 shares of common stock of the registrant were issued and outstanding.

 

 

 

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION 1
ITEM 1. FINANCIAL STATEMENTS 1
BALANCE SHEETS 1
STATEMENTS OF OPERATIONS 2
STATEMENTS OF CASH FLOWS 3
NOTES TO FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 27
ITEM 4. CONTROLS AND PROCEDURES 27
   
PART II – OTHER INFORMATION 28
ITEM 1. LEGAL PROCEEDINGS 28
ITEM 1A. RISK FACTORS 28
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 28
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 28
ITEM 4. MINE SAFETY DISCLOSURES 28
ITEM 5. OTHER INFORMATION 28
ITEM 6. EXHIBITS 29
   
SIGNATURES 30

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Jiucaitong Group Limited

Condensed Consolidated Balance Sheets

(Stated in US Dollars)

 

   June 30,   December 31, 
   2018   2017 
   (Unaudited)     
ASSETS        
Current assets        
Cash and cash equivalents  $243,048   $1,941,150 
Restricted cash   181,283    184,437 
Accounts receivable   53,887    522 
Other receivable   905    19,327 
Prepaid expenses   -    32,298 
Advances to suppliers   73,538    49,672 
Security Deposit   71,407    - 
Loans receivable – related party   2,433,001    - 
Due from related parties   215,989    75,301 
Total current assets   3,273,058    2,302,707 
           
Non-current assets          
Security Deposit   -    72,649 
Property, plant and equipment, net   17,172    35,333 
Total non-current assets   17,172    107,982 
           
Total assets  $3,290,230   $2,410,689 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
LIABILITIES          
Current liabilities          
Other payable  $495,939   $133,093 
Due to related parties   15,723    23,682 
Advance from customers   275,903    114,191 
VAT payable   15,526    195,308 
Total current liabilities   803,091    466,274 
           
Total liabilities   803,091    466,274 
           
Commitments and contingencies          
           
STOCKHOLDERS’ EQUITY          
Common Stock, $0.0001 par value, 75,000,000 shares authorized; 9,110,000 and 9,110,000 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively   911    911 
Additional paid-in capital   4,358,269    4,358,269 
Accumulated deficit   (616,420)   (1,214,945)
Accumulated other comprehensive loss   (1,255,621)   (1,199,820)
Total stockholders’ equity   2,487,139    1,944,415 
Total liabilities and stockholders’ equity  $3,290,230   $2,410,689 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

1

 

 

Beijing Jiucheng Asset Management Co., Ltd.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Stated in US Dollars)

(Unaudited)

 

   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2018   2017   2018   2017 
Revenue  $870,590   $333,794   $1,642,604   $629,539 
                     
Operating expenses:                    
Selling expenses   85,302    35,112    116,907    65,877 
General and administrative expenses   467,058    204,500    874,192    499,248 
Total operating expenses   552,360    239,612    991,099    565,125 
                     
Income from operations   318,230    94,182    651,505    64,414 
                     
Other income (expense):                    
Other income   2,880    21,611    19,519    43,121 
Other income- related party   19,348    -    19,348    - 
Other expense   (52,090)   (274)   (106,149)   (1,638)
Gain from extinguishment of liability   3    -    14,302    - 
Total other income (expense), net   (29,859)   21,337    (52,980)   41,483 
Income before taxes   288,371    115,519    598,525    105,897 
                     
Net income  $288,371   $115,519   $598,525   $105,897 
                     
Comprehensive Income:                    
                     
Net income  $288,371   $115,519   $598,525   $105,897 
                     
Foreign currency translation adjustment   (127,382)   23,886    (55,801)   160,344 
                     
Comprehensive income  $160,989   $139,405   $542,724   $266,241 
                     
Earnings per common share – basic and diluted  $0.02   $0.02   $0.06   $0.03 
                     
Weighted average number of common shares outstanding – basic and diluted   9,110,111    8,000,000    9,110,111    8,000,000 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

2

 

 
Jiucaitong Group Limited

Condensed Consolidated Statements of Cash Flows

(Stated in US Dollars)

(Unaudited)

 

   For the   For the 
   Six Months Ended   Six Months Ended 
   June 30,   June 30, 
   2018   2017 
Cash flows from operating activities:        
Net income  $598,525   $105,897 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation expenses   18,244    27,838 
Gain from extinguishment of liability   (14,302)   - 
Changes in operating assets and liabilities:          
Accounts receivable   (55,463)   - 
Other receivable   18,800    372 
Prepaid expense   32,988    (39,312)
Advances to suppliers   (25,682)   5,818 
Security deposit   -    (68,756)
Due from related parties   (147,535)   554,662 
Due to related parties   -    63,498 
Advance from customers   170,072    - 
Accrued liabilities   -    13,208 
Other payables   393,719    4,522 
VAT payable   (183,350)   38,066 
Net cash provided by operating activities   806,016    705,813 
           
Cash flows from investing activities:          
Short-term borrowings to related party   (2,703,764)   - 
Repayment of short-term borrowings from related party   175,507    - 
Working capital advances to related parties   -    (9,318,854)
Repayments from related parties   -    6,474,695 
Net cash used in investing activities   (2,528,257)   (2,844,159)
           
Cash flows from financing activities:          
Working capital advances from related parties   -    4,004,754 
Repayments of working capital advances received from related parties   (7,849)   (389,450)
Net cash (used in) provided by financing activities   (7,849)   3,615,304 
           
Effect of exchange rate change   28,834    20,727 
           
Net change in cash, cash equivalents and restricted cash   (1,701,256)   1,497,685 
           
Cash, cash equivalents and restricted cash - beginning of period   2,125,587    12,924 
           
Cash, cash equivalents and restricted cash - end of period  $424,331   $1,510,609 
           
Supplemental disclosure of cash flow information          
Interest paid  $-   $- 
Income tax paid  $-   $- 
           
Non-cash investing and financing activities          
Security deposit returned and paid directly to related party by landlord  $-   $160,013 
           
Reconciliation to amounts on consolidated balance sheets          
Cash and cash equivalents  $243,048   $1,510,609 
Restricted cash   181,283    - 
Total cash, cash equivalents, and restricted cash  $424,331   $1,510,609 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3

 

 

Jiucaitong Group Limited

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

NOTE 1 - NATURE OF OPERATIONS

 

Jiucaitong Group Limited (“Jiucaitong” or the “Company”), a Nevada corporation (formerly Spirit International, Inc.), was incorporated on March 10, 2014. Through Beijing Jiucheng Asset Management Co., Ltd. (“Beijing Jiucheng”), the Company operates its business through an electronic online financial platform, www.9caitong.com (“website”). The Company generates revenue from the services that facilitate matching personal loan lenders with individual and small and medium sized enterprises (“SME”) borrowers in the People’s Republic of China (“PRC” or “China”). Beijing Jiucheng was incorporated in Beijing, China on January 13, 2012 under the laws of the PRC.

 

Reverse Merger

 

On August 1, 2017, Beijing Jiucheng IT Consulting Enterprise Co. Ltd. (“Jiucheng Consulting”), a wholly foreign-owned enterprise of I JIU JIU Limited, a British Virgin Islands company  (“I JIU JIU”), obtained the controlling interest of Beijing Jiucheng through a series of contractual arrangements including an Equity Pledge Agreement, an Exclusive Technical Consultancy and Services Agreement, an Exclusive Call Option Agreement, Shareholder Proxy Agreements, and an Operating Agreement (collectively, the “VIE Agreements”), as a result of which Beijing Jiucheng is considered a variable interest entity (“VIE”). 

 

On November 10, 2017, I JIU JIU, the holding company of Ruixiang Technology Group,Ltd. (“Rui Xiang”), and the shareholders of I JIU JIU entered into a Share Exchange Agreement, which closed on the same date (the “Exchange”). Pursuant to the terms of the Share Exchange Agreement, the Company exchanged 8,000,000 shares of its common stock for all of the outstanding capital stock of I JIU JIU with the result that I JIU JIU became a wholly owned subsidiary of the Company.

 

Pursuant to the Exchange, all of the issued and outstanding shares of I JIU JIU common stock were converted, at an exchange ratio of 160-for-1, into an aggregate of 8,000,000 shares of Spirit International Inc. common stock and I JIU JIU became a wholly owned subsidiary of Spirit International Inc. The holders of Spirit International Inc’s common stock as of immediately prior to the Exchange held an aggregate of 5,110,000 shares and in connection with the Share Exchange Agreement, the Company’s majority shareholder, Kimho Consultants Company Limited, (“Kimho” or the “Majority Shareholder”) entered into a share cancellation agreement with I JIU JIU’s stockholders whereby Kimho, owning an aggregate of 4,000,000 shares of the Company’s Common Stock agreed to cancel all its 4,000,000 shares of Common Stock in exchange of $440,000 paid by I JIU JIU’s stockholders (“Share Cancellation”).

 

The accompanying financial statements share and per share information has been retroactively adjusted to reflect the exchange ratio in the Exchange. Subsequent to the Exchnage, Spirit International Inc’s name was changed from “Spirit International, Inc.” to “Jiucaitong Group Limited.”.

 

Under generally accepted accounting principles in the United States, (“U.S. GAAP”) because I JIU JIU’s former stockholders received the greater portion of the voting rights in the combined entity and I JIU JIU’s senior management represents all of the senior management of the combined entity, the Exchange was accounted for as a recapitalization effected by a share exchange, wherein I JIU JIU is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of I JIU JIU, its wholly-owned subsidiaries and Beijing Jiucheng have been brought forward at their book value and no goodwill has been recognized. Accordingly, the assets and liabilities and the historical operations that are reflected in the Company’s consolidated financial statements are those of I JIU JIU, its wholly-owned subsidiaries and Beijing Jiucheng and are recorded at their historical cost basis.

 

Unless otherwise indicated or the context otherwise requires, references to “the Company” refer to Jiucaitong Group Limited and its subsidiaries. Disclosures relating to the pre-merger business of I JIU JIU, unless noted as being the business of Spirit International, Inc., prior to the Exchange, pertain to the business of I JIU JIU prior to the Exchange.   

 

4

 

 

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s financial statements are expressed in U.S. dollars.

 

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The unaudited condensed consolidated financial statements for the six months ended June 30, 2018 should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2017 and footnotes thereto included in the same document. The condensed consolidated balance sheet for the six months ended June 30, 2018 contained herein has been derived from the audited financial statements as of December 31, 2017 but does not include all disclosures required by U.S. GAAP.

 

Basis of Consolidation

 

The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries, I JIU JIU, Ruixiang, Jiucheng Consulting and its VIE, Beijing Jiucheng. All inter-company transactions and balances have been eliminated upon consolidation.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with generally accepted accounting principles requires 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 period. Actual results could differ from those estimates. Significant estimates as of and during the periods ended June 30, 2018 and December 31, 2017 include the allowance for doubtful accounts, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, valuation of deferred tax assets and accruals for taxes due.

 

Financial Instrument

 

The carrying amount reported in the consolidated balance sheet for cash, accounts receivable, other receivables, accrued liabilities and other payables approximate fair value because of the immediate or short-term maturity of these financial instruments.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of six months or less when purchased to be cash equivalents. The Company maintains with various financial institutions in the PRC. At June 30, 2018 and December 31, 2017, cash balances held in PRC banks are uninsured. The Company has not experienced any losses in bank accounts and believes it is not exposed to any risks on its cash in bank accounts.

 

Restricted Cash

 

Cash that is deposited in the bank but restricted for a specific purpose and therefore not available for immediate and general use by the Company is classified as restricted cash, which is presented separately from cash and cash equivalents on the consolidated balance sheets. The deposited balance is included in the Company’s bank account for guarantee of certain business purpose under an agreement until being used for the designated purpose or withdrawn due to expiration of the guarantee. As of June 30, 2018 and December 31, 2017, the Company had a restricted cash balance of $181,283 and $184,437, respectively.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation and impairment losses. Gains or losses on dispositions of property and equipment are included in operating income (loss). Major additions, renewals and improvements are capitalized, while maintenance and repairs are expensed as incurred.

 

Depreciation and amortization are provided over the estimated useful lives of the assets using the straight-line method from the time the assets are placed in service. Estimated useful lives are as follows, taking into account the assets’ estimated residual value:

 

Classification   Estimated useful life
Computer and office equipment   3 years
Furniture   3 years
Vehicles   3 years

 

5

 

 

Advances from Customers

 

Advances from customers at June 30, 2018 and December 31, 2017 amounted to $275,903 and $114,191, respectively, and consist of prepayments from customers for services that have not been performed. The Company will recognize the deposits as revenue when the services have been performed in accordance with the Company’s revenue recognition policy.

 

Earnings per Share

 

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income by the weighted-average number of common shares and dilutive potential common shares outstanding during the period.

 

For the six months ended June 30, 2018 and 2017, respectively, there were no outstanding securities or other contracts to issue common stock, such as options, warrants or conversion rights, which would have a dilutive effect on earnings per share.

 

Revenue Recognition

 

The Company provides intermediary services to the personal loan borrowers and the financial products investors. The Company charges fees for the intermediary services to the personal loan borrowers.

 

Prior to July 2017, the revenue process started when an individual who had financing needs submitted the loan application to Beijing Hengjiu Investment Management Co., Ltd. (“Hengjiu”). Hengjiu, along with its sub-contractor, Zhongcheng Zhengxin (Beijing) Co., Ltd. (“Zhongcheng Zhengxin”), provided financial consulting services such as loan origination criteria checkup, risk assessment, and assessment/evaluation of vehicle collateral. Hengjiu is a related party which was 75% owned by Jiuyuan Investment Co., Ltd. (“Jiuyuan”), a shareholder of Beijing Jiucheng, and 25% owned by Xiangbin Meng, the Company’s Chairman. Zhongcheng Zhengxin is a third party who provides credit assessment services. Upon completion of the background check, Xiangbin Meng (“Meng”), the maker of the loan, entered into the loan agreement with the qualified loan borrowers and initiated the transfer of the cash to the borrowers or borrowers’ agents. The loan usually matures in six months and using borrowers’ vehicle as collateral.

 

After the borrowers received the fund transfer, the Company then packaged the debt claims of Meng into corresponding financial products and placed in its physical stores or on its on-line platform for sale. Investors of those financial products were able to choose the financial products that met their needs. Meng transfered his debt upon signing the debt transfer agreement with the financial products investors. The services were originally provided in physical stores in Beijing, Baoding, Hebei province and Weihai, Shandong province. Since April 2016, Beijing Jiucheng started to move majority of the business to its financial advisory on-line platform, Jiucaitong (www.9caitong.com). As less labor was required, in June 2016, Beijing Jiucheng shut down the physical stores in Baoding and Weihai.

 

Meng was responsible for making the loans, transferring the funds to the borrowers and collecting the service fees on behalf of all parties involved. Meng collected a portion of the service fees upfront and the rest on a monthly basis over the term of the loan from loan borrowers.

 

The Company recognizes revenue, net of value-added taxes in the periods in which the related services were performed provided that persuasive evidence of an arrangement exists, the amount of the service fee is fixed in the loan agreements, and collectability is reasonably assured. The revenue was recognized when the loan agreements were executed and the funds were transferred to the loan borrowers, based on the predetermined service fee percentage of the total loan principal over the term of the loan. According to the service fee allocation agreement, Beijing Jiucheng was entitled to a service fee of 1% of the loan principal per month before July 1, 2016 and 1.5% per month effective July 1, 2016 and thereafter as Beijing Jiucheng increased the loan management and risk assessment services that were originally done by Beijing Hengjiu since May 2016.

 

6

 

 

Since July 2017, the Company officially launched the bank depository system and is providing intermediary services for all registered users, including consultation, information and all kinds of delegation service. The Company started to charge the service fee from the amount borrowed by the borrower at the difference between the borrowers’ actual rate and the investors’ yield rate. Upon launching of the bank depository system, Meng no longer serves as the maker of the loan for the borrowers who use Jiucaitong on-line platform. The borrowers and investors enter into loan agreements directly with the online platform, Jiucaitong. Since December 2017, the online platform also provides loan intermediary services to the restaurant owners which operate the same as the rest of the borrowers except for that the restaurant owners use restaurants as collateral.

 

Allowance for Doubtful Accounts

 

Service fee receivable is recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. The Company makes estimates for the allowance for doubtful accounts based upon the assessment of various factors, including historical, experience, the age of the accounts receivable balances, credit quality of the loan borrowers, current economic conditions, and other factors that may affect the borrowers’ ability to pay. No allowance has been provided for at June 30, 2018 and December 31, 2017 as the service fees have been fully collected from the loan borrowers during the respective periods or subsequently.

 

Advertising Expense

 

The Company expenses advertising costs as they incurred. Total advertising expenses were $85,302  and $35,112 for the three months ended June 30, 2018 and 2017, respectively. Total advertising expenses were $116,907 and $65,877 for the six months ended June 30, 2018 and 2017, respectively, and have been included as part of selling expenses in the accompanying statements of operations and comprehensive income.

 

Value-added Taxes

 

Pursuant to the PRC tax laws, in case of the financial services provided, generally the value added tax (“VAT”) rate is 3% of the gross sales for small scale VAT payer and 6% of the gross sales for general VAT payer. The accrued VAT is recorded as VAT payables in the consolidated financial statements. VAT is reported as a liability when incurred.

 

Income Taxes

 

The Company accounts for income taxes in accordance with U.S. GAAP for income taxes. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes.

 

The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. Deferred tax liabilities are recognized for all future taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable income will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled.

 

Deferred tax is charged or credited in the operations of statement, except when it is related to items credited or charged directly to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted by the U.S. government which included a wide range of tax reform affecting businesses including the corporate tax rates, international tax provisions, tax credits and deduction with majority of the tax provision effective after December 31, 2017.

 

Certain activities conducted in foreign jurisdictions may result in the imposition of U.S. corporate income taxes on the Company when its subsidiaries, controlled foreign corporations (“CFCs”), generate income that is subject to Subpart F or GILTI under the U.S. Internal Revenue Code beginning after December 31, 2017.

 

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. As of June 30, 2018 and December 31, 2017, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

 

7

 

 

Foreign Currency Translation

 

The functional currency of the Company’s operations in the PRC is the Chinese Yuan or Renminbi (“RMB”). The financial statements are translated to U.S. dollars using the period end rates of exchange for assets and liabilities, equity is translated at historical exchange rates, and average rates of exchange (for the period) are used for revenues and expenses and cash flows. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income / loss. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

 

All of the Company’s revenue transactions are transacted in its functional currency. The Company does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.

 

Asset and liability accounts at June 30, 2018 and December 31, 2017 were translated at 6.6195 RMB to $1.00 and at 6.5063 RMB to $1.00, respectively, which were the exchange rates on the balance sheet dates. Equity accounts were stated at their historical rates. The average translation rates applied to the statements of operations for the six months ended June 30, 2018 and 2017 were 6.3701 RMB and 6.8748 RMB to $1.00, respectively. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate.

 

Credit Risk and Concentration

 

The Company’s financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash equivalents. The majority of cash equivalents consists of short-term money market funds, which are managed by reputable financial institutions.

 

The Company performs ongoing credit evaluations of borrowers, and generally do not require additional collateral except for personal vehicles. No borrowers represented 10% or more of total revenue for the six months ended June 30, 2018 and 2017.

  

Comprehensive Income (Loss)

 

Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income (loss) but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. The Company’s other comprehensive income (loss) is comprised of foreign currency translation adjustments.

 

Fair Value Measurements

 

The Company applies the provisions of ASC Subtopic 820-10,” Fair Value Measurements”, for fair value measurements of financial assets and financial liabilities and for fair value measurements of non-financial items that are recognized or disclosed at fair value in the financial statements.  ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

 

8

 

 

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

 

  Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
     
  Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
     
  Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

 

There were no assets or liabilities measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of June 30, 2018 and December 31, 2017.

 

Related Parties

 

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

  

Recent Accounting Pronouncements

 

Revenue Recognition: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

 

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

  

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08) which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The Company adopted the new standard effective January 1, 2018. The new standard also 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 (the modified retrospective method). The Company elected the modified retrospective approach. In preparation for adoption of the new guidance, we reviewed representative samples of contracts and other agreements we had entered into with our customers and evaluated the five-step model specified by the new revenue standards. The Company completed its analysis and identified changes with respect to the timing of revenue recognition for its revenue streams and determined the impact of that guidance on revenue recognition. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements.   

 

9

 

 

Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

 

Statement of Cash Flows: In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) to clarify whether the following items should be categorized as operating, investing or financing in the statement of cash flows: (i) debt prepayments and extinguishment costs, (ii) settlement of zero-coupon debt, (iii) settlement of contingent consideration, (iv) insurance proceeds, (v) settlement of corporate-owned life insurance (COLI) and bank-owned life insurance (BOLI) policies, (vi) distributions from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) receipts and payments with aspects of more than one class of cash flows. The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The amendments are an improvement to GAAP because they provide guidance for each of the eight issues, thereby reducing the current and potential future diversity in practice described above. ASU 2016-15 is effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements.   

 

Statement of Cash Flows: In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): “Restricted Cash”(“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this guidance will result in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activity, which are currently recognized in other financing activities, on the Statements of Consolidated Cash Flows. Furthermore, an additional reconciliation will be required to reconcile Cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets to sum to the total shown in the Statements of Consolidated Cash Flows. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements.   

 

Business Combination: In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. The Company has adopted this guidance effective in the first quarter of 2018 on a prospective basis. This standard does not have a material impact on the consolidated financial statements until the Company plans to have an acquisition or deconsolidation in the future.

 

Revenue Recognition and Leases: In September 2017, the FASB issued ASU 2017-13, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842). The main objective of this pronouncement is to clarify the effective date of the adoption of ASC Topic 606 and ASC Topic 842 and the definition of public business entity as stipulated in ASU 2014-09 and ASU 2016-02. ASU 2014-09 provides that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. ASU 2016-12 requires that “a public business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020”. ASU 2017-13 clarifies that the SEC would not object certain public business entities to elect to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13, however, limits such election to certain public business entities that “otherwise would not meet the definition of a public business entity except for a requirement to include or inclusion of its financial statements or financial information in another entity’s filings with the SEC”. The Company elected to adopt ASC Topic 606 and ASC Topic 842 beginning January 1, 2018 and January 1, 2019, respectively. No material impact on the consolidated financial statements.

 

Stock Compensation: In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvement to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees. Under ASU 2018-07, most of the guidance on share-based payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. ASU 2018-07 is effective for interim and annual reporting periods beginning after December 15, 2018. The Company does not expect such adoption to have a material impact on our consolidated financial statements.

 

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NOTE 3 – OTHER RECEIVABLE

 

Other receivable consists of deposits and advances made to employees and other third parties to pay for operating expenses, such as property maintenance, water and sewer, and telephone bills. Other receivable as of June 30, 2018 and December 31, 2017 were $905 and $19,327, respectively.

 

NOTE 4 – SECURITY DEPOSIT

 

Pursuant to the terms of the Jinchangan Lease agreement, Beijing Jiucheng agreed to pay six months of rent and maintenance fee as security deposit for a total of RMB 472,678 (approximately $75,000). Beijing Jiucheng classified the security deposit as short term asset on the condensed consolidated balance sheets as of June 30, 2018 as the lease expires on May 21, 2019.  

 

NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following:

 

   June 30,   December 31, 
   2018   2017 
Office furniture  $23,742   $24,155 
Computer and office equipment   41,215    41,932 
Vehicle   108,849    110,743 
Total property and equipment   173,806    176,830 
Less: accumulated depreciation   (156,634)   (141,497)
Total  $17,172   $35,333 

 

Total depreciation expenses for the three months ended June 30, 2018 and 2017 were $ 9,124 and $ 12,925, respectively. Total depreciation expenses for the six months ended June 30, 2018 and 2017 were $18,244 and $27,838, respectively.

 

The Company did not capitalize the costs associated with building the online financial platform as the costs were nominal.

 

NOTE 6 - RELATED PARTY TRANSACTIONS

 

The following is a list of related parties to which the Company has transactions with:

 

  (a) Xiangbin Meng (“Meng”), the Company’s Chairman and a shareholder of Beijing Jiucheng;

 

  (b) Jiuyuan Investment Co., Ltd. (“Jiuyuan”), a shareholder of Beijing Jiucheng; 

 

  (c) Beijing JiuCheng Huijin Information Consulting Co., Ltd (“Jiucheng Huijin”), an affiliated Company;

 

  (d) Yasheng International Investment Ltd. (“Yasheng”), a former shareholder of Beijing Jiucheng;

 

  (e) Beijing Jiuyuan Investment Share Holding Co., Ltd (“Beijing Jiuyuan”), an affiliated company;

 

  (f) Beijing Jiuxiang Financing Lease Co., Ltd. (“Jiuxiang”), an affiliated company.
     
  (g) Beijing Hengjiu Investment Management Co.,Ltd (“Beijing Hengjiu”), an affiliated company
     
  (h) Yangming Development Limited (“Yangming”), a shareholder of the Company

 

Amount due from related parties:

 

Amount due from related parties consisted of the following as of:

 

   June 30,
2018
   December 31,
2017
 
Xiangbin Meng – Fees Receivable  $145,543   $3,444 
Jiuyuan   19,828    20,204 
Beijing Hengjiu   50,618    51,653 
Total  $215,989   $75,301 

 

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Prior to July 2017, Meng collected the service fees from the loan borrowers on behalf of the Company, Zhongcheng Zhengxin, and Hengjiu. Meng then distributed to each party in accordance to the predetermined service fees percentage. As of June 30, 2018 and December 31, 2017, amount due from Meng for service revenue collected by Meng on the Company’s behalf and not yet distributed to the Company was $145,543 and $3,444, respectively.

 

Beijing Jiucheng is 70% owned by Jiuyuan. From time to time, the Company and Jiuyuan paid general and administrative expenses for each other. During the six months ended June 30, 2018 and 2017, Jiuyuan paid on behalf of the Company for working capital totaled $31 and $17,043, respectively. The Company made advances to Jiuyuan for working capital totaled $0 and $9,311,772, respectively and received repayments totaled $0 and $5,481,020, respectively. The Company received advances from Jiuyuan for working capital totaled $0 and $4,004,754, respectively. The Company made repayments to Jiuyuan totaled $0 and $389,450, respectively. As of June 30, 2018 and December 31, 2017, the Company has an amount due from Jiuyuan of $19,828 and $20,204, respectively.

 

Beijing Hengjiu is 75% owned by Jiuyuan and 25% owned by Meng. During the six months ended June 30, 2018 and 2017, Beijing Hengjiu paid on behalf of the Company for working capital totaled $157 and $-0-, respectively.  As of June 30, 2018 and December 31, 2017, the Company has an amount due from Beijing Hengjiu of $50,618 and $51,653, respectively.

 

Amount due to related parties

 

Amount due to related parties consisted of the following as of:

   June 30,
2018
   December 31,
2017
 
Jiucheng Huijin  $2,471   $10,199 
Beijing Jiuyuan   2,418    2,460 
Jiuxiang   5,983    6,087 
Yangming   4,851    4,936 
Total  $15,723   $23,682 

 

Jiucheng Huijin is 30% owned by Meng. From time to time, Jiucheng Huijin paid general and administrative expenses on behalf of Beijing Jiucheng. Beijing Jiucheng also generated vehicle leasing income from Jiucheng Huijin. On June 30, 2016, Jiucheng Huijin and Beijing Jiucheng entered a contract to lease two vehicles from Beijing Jiucheng. The contract started on June 30, 2016 and expired on January 31, 2018. After the expiration, the contract was extended on a month to month basis. Pursuant to the terms of the contract, Jiucheng Huijin has agreed and paid a monthly rental fee of RMB 25,000 (approximately $3,600). As of June 30, 2018, and December 31, 2017, Beijing Jiucheng recorded $2,471 and $10,199 due to Jiucheng Huijin, respectively.

 

Beijing Jiuyuan is 51% owned by Meng. On October 21, 2015, Beijing Jiuyuan entered into a six-year lease (“Chaoyang Lease”) and the lease was subsequently transferred to Jiuxiang on August 12, 2016. The Company shares the office space with Beijing Jiuyuan and three other affiliated companies under the Chaoyang Lease. The rent expense allocated to the Company each month is in accordance to the number of employees occupied in the office space. As of June 30, 2018 and December 31, 2017, amounts due to Beijing Jiuyuan related to rent expense were $2,418 and $2,460, respectively.

 

Jiuxiang is 75% owned by Jiuyuan. As mentioned above, Jiuxiang took over the lease since August 12, 2016. As of June 30, 2018 and December 31, 2017, the Company recorded $5,983 and $6,087 due to Jiuxiang, respectively, for the rent expense.

 

Yangming owns 30% of the Jiucaitong Group and subsidiaries.   Yangming paid general and administrative expenses on behalf of the Company. As of June 30, 2018 and December 31, 2017, the Company recorded $4,851 and $4,936 due to Yangming, respectively.

12

 

 

For the six months ended June 30, 2018 and 2017, due to (from) related party activities consisted of the following:

  

   Jiuyuan   Meng   Meng - Receivable   Yasheng   Jiucheng Huijin   Beijing Jiuyuan   Jiuxiang   Beijing Hengjiu   Yangming   Total 
Balance due (from) to related parties, December 31, 2017  $(20,204)  $-   $(3,444)  $-   $10,199   $2,460   $6,087   $(51,653)  $4,936   $(51,619)
Operating activities - Due from related parties   31    -    (147,724)   -    -    -    -    157    -    (147,536)
Financing activities - Repayments to related parties   -    -    -    -    (7,849)   -    -    -    -    (7,849)
Effect of foreign currency exchange   345    -    5,625    -    121    (42)   (104)   878    (85)   6,738 
Balance due (from) to related parties, June 30, 2018  $(19,828)  $-   $(145,543)  $-   $2,471   $2,418   $5,983   $(50,618)  $4,851   $(200,266)

 

13

 

 

   Jiuyuan   Meng   Meng - Receivable   Yasheng   Jiucheng Huijin   Beijing Jiuyuan   Jiuxiang   Beijing Hengjiu   Yangming   Total 
Balance due (from) to related parties, December 31, 2016  $378,950   $(11,311,447)  $(1,877,130)  $8,917   $5,867   $2,304   $1,263   $-   $-   $(12,791,276)
Operating activities - Due from related parties   -    -    554,662    -    -    -    -    -    -    554,662 
Operating activities - Due to related parties   17,043    -    -    -    -    -    -    -    -    63,498 
Investing activities - Working capital advances to related parties   (9,311,772)   (7,082)   -    -    44,453    -    2,002    -    -    (9,318,854)
Investing activities - Repayments from related parties   5,481,020    993,675    -    -    -    -    -    -    -    6,474,695 
Financing activities - Advances from related parties   4,004,754    -    -    -    -    -    -              4,004,754 
Financing activities - Repayments made to related parties   (389,450)   -    -    -    -    -    -    -    -    (389,450)
Rent deposit returned and paid directly to related party by landlord   -    (160,013)   -         -    -    -              (160,013)
Non-cash capital reduction   8,145,748    3,491,035    -    -    -    -    -    -    -    11,636,783 
Shareholders transfer pursuant to debt transfer agreement   (8,195,280)   6,971,805    1,223,475    -    -    -    -    -    -    - 
Effect of foreign currency exchange   5,639    (117,689)   (20,677)   215    755    56    59    -    -    (131,642)
Balance due (from) to related parties, June 30, 2017  $136,652   $(139,716)  $(119,670)  $9,132   $51,075   $2,360   $3,324   $-   $-   $(56,843)

  

14

 

 

Loans receivable – related party

 

On April 23, 2018, a related party of the Company, Jiuyuan, entered into a loan agreement with Beijing Jiucheng to borrow RMB 15,000,000 (approximately $2.27 million). The loan matures in six months with a monthly interest rate of 0.3625%. On June 11, 2018, Jiuyuan entered into another loan agreement with Jiucheng to borrow RMB 3,400,000 (approximately $0.5 million) with a monthly interest of 0.3624% and matures on December 11, 2018 (“June 2018 Loan”). The Company recorded the principal and interest amount as loans receivable - related party. During the six months ended June 30, 2018, the Company transferred a total of RMB 17,100,000 ($2,684,416) to Jiuyuan under the loan agreements and received repayment from Jiuyuan in the amount of $168,895. On July 3, 2018, the Company transferred another RMB 1,300,000 (approximately $0.2 million) to Jiuyuan under the June 2018 Loan.

As of the date of this report, Jiuyuan promised to pay off all loans owed to the Company during the third quarter of 2018. The Company expects to implement remedial measures immediately to avoid arranging any personal and or related party loans to related parties in the future.

 

   June 30,
2018
   December 31,
2017
 
Loans principal receivable  $2,583,277   $          - 
Interest receivable   18,619    - 
Repayment   (168,895)   - 
Total  $2,433,001   $- 

 

NOTE 7 – OTHER PAYABLE

 

Other payable consists of the following as of June 30, 2018 and December 31, 2017:

 

   June 30,
2018
   December 31,
2017
 
Social security and provident fund payable  $354,425   $44,254 
Salary payable   139,528    64,653 
Other levies   1,986    24,186 
Total  $495,939   $133,093 

 

NOTE 8 – VAT PAYABLE

 

The Company’s VAT payable consists of 6% on the revenue generated and 3% on the other income generated from car leasing. VAT payable as of June 30, 2018 and December 31, 2017 were $15,526 and $195,308, respectively.    The VAT payable has been properly accrued for based on the required VAT rate as of June 30, 2018 and December 31, 2017.

 

NOTE 9 - STATUTORY RESERVE

 

Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end). The Company did not make appropriations to statutory reserve as of June 30, 2018 as the Company is able to use the current period (2018) net income after tax to offset against the accumulate loss from prior periods.

 

NOTE 10 - EQUITY TRANSACTIONS

 

Capital reduction of VIE, Beijing Jiucheng

 

Upon formation, Meng contributed RMB 30,000,000 ($4,800,811) and Jiuyuan contributed RMB 70,000,000 ($11,201,893) for a total of RMB 100,000,000 ($16,002,704) to Beijing Jiucheng. As Beijing Jiucheng’s main revenue source is from intermediary services and management was not anticipating to make significant capital expenditures, on February 15, 2017, the Board of directors of Beijing Jiucheng proposed to reduce the capital. Upon approval by the majority shareholders and Board of Directors of Beijing Jiucheng, on February 15, 2017, Beijing Jiucheng reduced the contributed capital from RMB 100,000,000 ($16,002,704) to RMB 20,000,000 ($4,482,799). Beijing Jiucheng has obtained the new business license reflecting the change. Capital reduction made subsequent to December 31, 2016 for the two shareholders are as follows:

 

In RMB:

 

   Formation   Capital Reduction   After Reduction   Ownership 
Meng   30,000,000    (24,000,000)   6,000,000    30%
Jiuyuan   70,000,000    (56,000,000)   14,000,000    70%
    100,000,000    (80,000,000)   20,000,000    100%

 

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In USD:

 

   Formation   Capital Reduction   After Reduction   Ownership 
Meng   4,800,811    (3,455,971)   1,344,840    30%
Jiuyuan   11,201,893    (8,063,934)   3,137,959    70%
    16,002,704    (11,519,905)   4,482,799    100%

   

A debt transfer agreement was signed between Meng and Jiuyuan on February 28, 2017. Pursuant to the terms of the agreement, Jiuyuan agreed to transfer to Meng a total of RMB 56,340,519 ($8,112,967) owed by Beijing Jiucheng.

 

On February 28, 2017, a debt offset agreement was signed between Beijing Jiucheng and Meng and pursuant to the terms of this agreement, the amount due to Jiuyuan which was transferred to Meng plus Meng’s portion of the capital reduction were offset by the amount due from Meng. As a result of the capital reduction, the debt offset agreement and repayment received, the amount due from related parties, Meng that was reclassified as contra-equity account at December 31, 2016 has been repaid and reduced to zero by $11,519,905 during the first quarter ended March 31, 2017.

 

Subscription receivable of the subsidiaries’ paid in capital

 

As of June 30, 2018 and December 31, 2017, the subscription receivable of the subsidiaries’ paid in capital (I JIU JIU and Ruixiang) was $51,289.

 

Reverse merger

 

On November 10, 2017, Jiucaitong, I JIU JIU Limited, a British Virgin Islands company (“I JIU JIU”), the holding company of Ruixiang Technology Group,Ltd. (“Rui Xiang”), and the shareholders of I JIU JIU entered into the Share Exchange Agreement, which closed on the same date (the “Exchange”). Pursuant to the terms of the Share Exchange Agreement, Jiucaitong exchanged 8,000,000 shares of their common stock for all of the outstanding capital stock of I JIU JIU with the result that I JIU JIU became a wholly owned subsidiary of Jiucaitong.

 

Pursuant to the Exchange, all of the issued and outstanding shares of I JIU JIU common stock were converted, at an exchange ratio of 160-for-1, into an aggregate of 8,000,000 shares of the Company or Jiucaitong, formerly known as Spirit International Inc. common stock and I JIU JIU became a wholly owned subsidiary of the Company. The holders of the Company’s common stock as of immediately prior to the Exchange held an aggregate of 5,110,000 shares and in connection with the Share Exchange Agreement, the Company’s former majority shareholder, Kimho Consultants Company Limited, (“Kimho” or the “Majority Shareholder”) entered into a share cancellation agreement with I JIU JIU’s stockholders whereby Kimho, owning an aggregate of 4,000,000 shares of the Company’s Common Stock agreed to cancel all its 4,000,000 shares of Common Stock in exchange of $440,000 paid by I JIU JIU’s stockholders (“Share Cancellation”).

 

There were 9,110,000 shares of common stocks issued and outstanding as of June 30, 2018 and December 31, 2017.

 

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NOTE 11 - COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

The Company shares its principal office with four other affiliated companies in Chaoyang, Beijing. On October 21, 2015, the Company entered into a six-year lease (“Chaoyang Lease”) and the lease was subsequently transferred to Jiuxiang on August 12, 2016. The Chaoyang Lease started on October 21, 2015 and expires on October 20, 2021. Pursuant to the terms of the lease, Jiuxiang has agreed to pay a monthly rent of RMB 491,168 (approximately $74,000) for the first three years and RMB 540,534 (approximately $81,000) for the remaining three years. The Company recognizes rent expense on a straight-line basis over the terms of the leases. The rent expense allocated to the Company each month is in accordance to the number of employees occupied in the office space.

 

The Company operates its business in an office located at Xizhimen, Beijing, China. The Company entered into a lease agreement (“Xizhimen Lease”) on January 1, 2015 pursuant to which the Company agreed to pay $24,000 per month and the lease expired on May 31, 2017.

  

On May 22, 2017, the Company entered into another operating lease agreement in Beijing as the successor of the Xizhimen Lease. Pursuant to the terms of the agreement, the lease started from May 22, 2017 and expires on May 21, 2019 and the Company agreed to pay monthly rent of RMB 142,241 (approximately $20,000) from June 22, 2017 to May 21, 2019 with the first month rent free and monthly maintenance fee of RMB 15,318 (approximately $2,200) from May 21, 2017 to May 21, 2019. The Company recognizes rent expense and maintenance fee on a straight-line basis over the terms of the lease.

 

As of June 30, 2018, the Company was obligated under operating leases minimum rentals as follows:

 

   Allocated Lease *   Non-Cancellable Lease **   Total 
2018  $4,173   $274,884   $279,057 
2019   4,173    107,146    111,319 
2020   4,173    -    4,173 
2021   3,477    -    3,477 
2022   -    -    - 
Total minimum lease payments  $15,996   $382,030   $398,026 

 

* - These are the Company’s portion of minimum lease payments allocated by the Company’s affiliated company, Jiuxiang, the leasee.
** - These are the minimum lease payments under the non-cancellable lease entered with a third party.

 

NOTE 12 – SUBSEQUENT EVENT

 

In July 2018, a related party of the Company, Jiuyuan, received an additional RMB 1,300,000 (approximately $0.2 million) under the June 2018 Loan from the Company and made RMB 2,570,000 repayment (approximately $0.4 million). Also, see Note 6 related to Note receivable – related party.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This report contains certain statements that may be deemed “forward-looking statements”.  All statements, other than statements of historical fact, that address activities, events or developments that we intend, expect, project, believe or anticipate and similar expressions or future conditional verbs such as will, should, would, could or may occur in the future are forward-looking statements. Such statements are based upon certain assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

 

These statements include, without limitation, statements about our anticipated expenditures, including those related to general and administrative expenses; the potential size of the market for our services, future development and/or expansion of our services in our markets, our ability to generate revenues, our ability to obtain regulatory clearance and expectations as to our future financial performance. Our actual results will likely differ, perhaps materially, from those anticipated in these forward-looking statements as a result of various factors, including: our need and ability to raise additional cash. The forward-looking statements included in this report are subject to a number of additional material risks and uncertainties, including but not limited to the risks described in our filings with the Securities and Exchange Commission.

 

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes to those statements included in this report. In addition to historical financial information, this discussion may contain forward-looking statements reflecting our current plans, estimates, beliefs and expectations that involve risks and uncertainties. As a result of many important factors, particularly those set forth under “Special Note Regarding Forward-Looking Statements”, our actual results and the timing of events may differ materially from those anticipated in these forward-looking statements.

 

Overview

 

Jiucaitong Group Limited (“Company”) was incorporated in Nevada on March 10, 2014, under the name of “Spirit International, Inc.” We amended our Articles of Incorporation and changed our corporate name to Jiucaitong Group Limited on November 27, 2017. On November 10, 2017, the Company consummated a share exchange (the “Share Exchange”) with I JIU JIU Limited, a British Virgin Islands company (“I JIU JIU”). Pursuant to and following the Share Exchange, we changed our corporate name and discontinued our pre-Share Exchange business such that the businesses of Beijing Jiucheng became our businesses. We are currently a holding company and operate through our wholly-owned subsidiaries, I JIU JIU, Ruixiang Technology Group, Ltd., a Hong Kong company (“Ruixiang”) and Beijing Jiucheng IT Consulting Enterprise Co. Ltd, a company organized in the People’s Republic of China (“Jiucheng Consulting” or “WFOE”) and our contractually controlled and managed company, Beijing Jiucheng Asset Management Co., Ltd., a company organized in the People’s Republic of China (“Beijing Jiucheng”). Beijing Jiucheng operates an electronic online financial platform, “www.9caitong.com,” which is designed to match investors with small and medium-sized enterprises (“SMEs”) and individual borrowers in China. We believe our services provide an effective solution for under-served SME and individual borrowers who need access to financing.

 

We generate revenue from our services that facilitate matching lenders, who we refer to as investors, with individual and SME borrowers. We typically charge borrowers a loan facilitation process and matching services fee between 1% and 1.5% per month of the loan amount, depending on the duration of the loan, for each effected loan facilitated by us. Additionally we charge a separate fee from borrowers for each loan repayment facilitated by us, which is based on an agreed upon percentage of approximately 0.5% of the total loan amount per month for the duration of the loan.

 

Critical Accounting Policies

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with generally accepted accounting principles requires 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 period. Actual results could differ from those estimates. Significant estimates as of and during the periods ended June 30, 2018 and December 31, 2017 include the allowance for doubtful accounts, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, valuation of deferred tax assets and accruals for taxes due.

 

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Revenue Recognition

 

The Company provides intermediary services to the personal loan borrowers and the financial products investors. The Company charges fees for the intermediary services to the personal loan borrowers.

 

Prior to July 2017, the revenue process started when an individual who had financing needs submited the loan application to Beijing Hengjiu Investment Management Co., Ltd. (“Hengjiu”). Hengjiu, along with its sub-contractor, Zhongcheng Zhengxin (Beijing) Co., Ltd. (“Zhongcheng Zhengxin”), provided financial consulting services such as loan origination criteria checkup, risk assessment, and assessment/evaluation of vehicle collateral. Hengjiu is a related party which was 75% owned by Jiuyuan Investment Co., Ltd. (“Jiuyuan”), a shareholder of Beijing Jiucheng, and 25% owned by Xiangbin Meng, the Company’s Chairman. Zhongcheng Zhengxin is a third party who provides credit assessment services. Upon completion of the background check, Xiangbin Meng (“Meng”), the maker of the loan, entered into the loan agreement with the qualified loan borrowers and initiated the transfer of the cash to the borrowers or borrowers’ agents. The loan usually matures in six months and using borrowers’ vehicle as collateral.

 

After the borrowers received the fund transfer, the Company then packaged the debt claims of Meng into corresponding financial products and placed in its physical stores or on its on-line platform for sale. Investors of those financial products were able to choose the financial products that met their needs. Meng transfered his debt upon signing the debt transfer agreement with the financial products investors. The services were originally provided in physical stores in Beijing, Baoding, Hebei province and Weihai, Shandong province. Since April 2016, Beijing Jiucheng started to move majority of the business to its financial advisory on-line platform, Jiucaitong (www.9caitong.com). As less labor was required, in June 2016, Beijing Jiucheng shut down the physical stores in Baoding and Weihai.

  

Meng was responsible for making the loans, transferring the funds to the borrowers and collecting the service fees on behalf of all parties involved. Meng collected a portion of the service fees upfront and the rest on a monthly basis over the term of the loan from loan borrowers.

 

The Company recognizes revenue, net of value-added taxes in the periods in which the related services were performed provided that persuasive evidence of an arrangement exists, the amount of the service fee is fixed in the loan agreements, and collectability is reasonably assured. The revenue was recognized when the loan agreements were executed and the funds were transferred to the loan borrowers, based on the predetermined service fee percentage of the total loan principal over the term of the loan. According to the service fee allocation agreement, Beijing Jiucheng was entitled to a service fee of 1% of the loan principal per month before July 1, 2016 and 1.5% per month effective July 1, 2016 and thereafter as Beijing Jiucheng increased the loan management and risk assessment services that were originally done by Beijing Hengjiu since May 2016.

 

Since July 2017, the Company officially launched the bank depository system and is providing intermediary services for all registered users, including consultation, information and all kinds of delegation service. The Company started to charge the service fee from the amount borrowed by the borrower at the difference between the borrowers’ actual rate and the investors’ yield rate. Upon launching of the bank depository system, Meng no longer serves as the maker of the loan for the borrowers who use Jiucaitong on-line platform. The borrowers and investors enter into loan agreements directly with the online platform, Jiucaitong. Since December 2017, the online platform also provides loan intermediary services to the restaurant owners which operate the same as the rest of the borrowers except for that the restaurant owners use restaurants as collateral.

 

Allowance for Doubtful Accounts

 

Service fee receivable is recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. The Company makes estimates for the allowance for doubtful accounts based upon the assessment of various factors, including historical, experience, the age of the accounts receivable balances, credit quality of the loan borrowers, current economic conditions, and other factors that may affect the borrowers’ ability to pay. No allowance has been provided for at June 30, 2018 and December 31, 2017 as the service fees have been fully collected from the loan borrowers during the respective periods or subsequently.

 

Related Parties

 

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

 

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Recent Accounting Pronouncements 

 

Revenue Recognition: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

 

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

  

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08) which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The Company adopted the new standard effective January 1, 2018.   The new standard also 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 (the modified retrospective method). The Company elected the modified retrospective approach. In preparation for adoption of the new guidance, we reviewed representative samples of contracts and other agreements we had entered into with our customers and evaluated the five-step model specified by the new revenue standards. The Company completed its analysis and identified changes with respect to the timing of revenue recognition for its revenue streams and determined the impact of that guidance on revenue recognition. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements. 

 

Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

 

Statement of Cash Flows: In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) to clarify whether the following items should be categorized as operating, investing or financing in the statement of cash flows: (i) debt prepayments and extinguishment costs, (ii) settlement of zero-coupon debt, (iii) settlement of contingent consideration, (iv) insurance proceeds, (v) settlement of corporate-owned life insurance (COLI) and bank-owned life insurance (BOLI) policies, (vi) distributions from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) receipts and payments with aspects of more than one class of cash flows. The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The amendments are an improvement to GAAP because they provide guidance for each of the eight issues, thereby reducing the current and potential future diversity in practice described above. ASU 2016-15 is effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements.   

 

Statement of Cash Flows: In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): “Restricted Cash”(“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this guidance will result in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activity, which are currently recognized in other financing activities, on the Statements of Consolidated Cash Flows. Furthermore, an additional reconciliation will be required to reconcile Cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets to sum to the total shown in the Statements of Consolidated Cash Flows. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements.   

 

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Business Combination: In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. The Company has adopted this guidance effective in the first quarter of 2018 on a prospective basis. This standard does not have a material impact on the consolidated financial statements until the Company plans to have an acquisition or deconsolidation in the future.

 

Revenue Recognition and Leases: In September 2017, the FASB issued ASU 2017-13, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842). The main objective of this pronouncement is to clarify the effective date of the adoption of ASC Topic 606 and ASC Topic 842 and the definition of public business entity as stipulated in ASU 2014-09 and ASU 2016-02. ASU 2014-09 provides that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. ASU 2016-12 requires that “a public business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020”. ASU 2017-13 clarifies that the SEC would not object certain public business entities to elect to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13, however, limits such election to certain public business entities that “otherwise would not meet the definition of a public business entity except for a requirement to include or inclusion of its financial statements or financial information in another entity’s filings with the SEC”. The Company elected to adopt ASC Topic 606 and ASC Topic 842 beginning January 1, 2018 and January 1, 2019, respectively. No material impact on the consolidated financial statements.

 

Stock Compensation: In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvement to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees. Under ASU 2018-07, most of the guidance on share-based payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. ASU 2018-07 is effective for interim and annual reporting periods beginning after December 15, 2018. The Company does not expect such adoption to have a material impact on our consolidated financial statements.   

 

Results of Operations

 

THREE-MONTH PERIOD ENDED JUNE 30, 2018 COMPARED TO THREE-MONTH PERIOD ENDED JUNE 30, 2017

 

Revenue

 

We have recognized $870,590 and $333,794 revenue for the three months ended June 30, 2018 and 2017, respectively. Prior to July 2017, our service fee was at 1.5% per month. Since July 2017, we started to charge the service fee as the spread between the borrowers’ interest rate and the investors’ yield rate. We had a total of 646 contracts signed for the three months ended June 30, 2018 compared to 341 contracts for the three months ended June 30, 2017.

 

Operating Expenses

 

Selling expenses: Our selling expenses primarily consist of expenses relating to advertising, marketing and promotional trips and other community activities for brand promotion purpose. Selling expenses increased from $35,112 for the three months ended June 30, 2017 to $ 85,302 for the three months ended June 30, 2018. An increase of $50,190, or 143%, was primarily attributable to the increase of the online interactive promotion expenses.

 

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General and administrative expenses: Our general and administrative expenses for the three months ended June 30, 2018 and 2017 consisted of the following:

 

   Three Months Ended         
   June 30,       Percentage 
   2018   2017   Change   Change 
Payroll and related benefits  $357,937   $87,800   $270,137    308%
Depreciation expense   9,124    12,925    (3,801)   (29%)
Software service fee   10,323    22,759    (12,436)   (55%)
Rent and property management expense   67,441    73,861    (6,420)   (9%)
Professional fee   18,980    -    18,980    100%
Other   3,253    7,155    (3,902)   (55%)
Total  $467,058   $204,500   $262,558    128%

 

  Payroll and related benefits for the three months ended June 30, 2018 increased by $270,137, or 308%, as compared to the three months ended June 30, 2017. We had more employees in 2018 as our online business expansion.
     
  Depreciation expense for the three months ended June 30, 2018 decreased by $3,801, or 29%, as compared to the three months ended June 30, 2017. In the mid of 2017, there were a portion of the fixed assets that have already been fully depreciated. Therefore, they no longer incur depreciation expense in 2018.
     
  Software service fee for the three months ended June 30, 2018 decreased by $12,436, or 55%, as compared to the three months ended June 30, 2017. The decrease was primarily attributable to Internet real-name authentication fees   of our on-line business occurred in 2017, we did not incur such expense during the three months ended June 30, 2018.
     
  Rent and property management expense for the three months ended June 30, 2018 decreased by $6,420, or 9%, as compared to the three months ended June 30, 2017. The majority of the change was attributable to the decrease in rent in the monthly rent for the new lease in Beijing was less than the prior lease.
       
  Professional fee increased from $0  for the three months ended June 30, 2017 to $18,980 for the three months ended June 30, 2018. The increase was primarily attributable to the increase of legal fees, audit fees, and other consulting fees after the reverse merger in November 2017. We did not incur such expense during the three months ended June 30, 2017.
     
  Other general and administrative expenses for the three months ended June 30, 2018 decreased by $3,902, or 55%, as compared to the three months ended June 30, 2017. The decrease was primarily attributable to the decrease in travel, seminar, printing, and car insurance expenses.

  

Income from operations

 

As a result of the factors described above, for the three months ended June 30, 2018, income from operations amounted to $318,230, as compared to income from operations of $94,182 for the three months ended June 30, 2017.

 

Other income (expenses)

 

Other incomeOther income decreased from $21,611 for the three months ended June 30, 2017 to $ 2,880 for the three months ended June 30, 2018. A decrease of $18,731 was primarily attributable to decrease of the vehicle leasing income. On June 30, 2016, Jiucheng Huijin, a related party, and the Company entered a contract to lease two vehicles from the Company. The contract started on June 30, 2016 and expired on January 31, 2018. Pursuant to the terms of the contract, Jiucheng Huijin had agreed to pay a monthly rental fee of RMB 25,000 (approximately $3,600) per vehicle. We recorded three months of such income in 2017 and one month in 2018.

 

Other income- related party: On April 23, 2018, a related party of the Company, Jiuyuan, entered into a loan agreement with Jiucheng to borrow 15,000,000 RMB (approximately $2.39 million). The loan matures in six months with a monthly interest rate of 0.3625%. The Company recorded the interest income - related party in the amount of $19,348 for the three months ended June 30, 2018.  

 

Other expense: Other expense increased from $274 for the three months ended June 30, 2017 to $52,090 for the three months ended June 30, 2018. The increase was primarily attributable to the increase of cash transfer volumes as we launched the bank depository system in July 2017.

 

Gain from extinguishment of liability:  As of March 31, 2018, we recorded $14,299 due to Hong Long Trading Co., Ltd. (“Hong Long”). Hong Long was closed in 2017 and we no longer need to pay the debt. Subject to exchange rate changes, we recorded a gain from extinguishment of liability in the amount of $3 for the three months ended June 30, 2018.

 

Income tax provision

 

As a result of accumulated net operating losses incurred that allowable tax deductions are greater than its taxable income, there has been no provision for income taxes from the date of inception. The Company has provided full valuation allowance for the deferred tax assets at June 30, 2018 and 2017, which arising from the losses incurred since inception.

 

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Net income

 

As a result of the factors described above, for the three months ended June 30, 2018, net income amounted to $288,371, as compared to net income of $115,519 for the three months ended June 30, 2017.

 

Foreign currency translation income (loss)

 

The functional currency of our operations in the PRC is the Chinese Yuan or Renminbi (“RMB”). The financial statements are translated to U.S. dollars using the period end rates of exchange for assets and liabilities, equity is translated at historical exchange rates, and average rates of exchange (for the period) are used for revenues and expenses and cash flows. Transaction gains and or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. As a result of foreign currency translations, which are a noncash adjustment, we reported a foreign currency translation loss of $127,382 for the three months ended June 30, 2018, as compared to a foreign currency translation income of $23,886 for the three months ended June 30, 2017. The noncash loss had the effect of decreasing our reported comprehensive income and noncash income had the effect of increasing our reported comprehensive income for the three months ended June 30, 2018 and 2017, respectively.

 

Comprehensive income

 

As a result of our foreign currency translation loss, we had comprehensive income for the three months ended June 30, 2018 of $160,989 compared to foreign currency translation income, we had comprehensive income of $139,405 for the three months ended June 30, 2017.

 

SIX-MONTH PERIOD ENDED JUNE 30, 2018 COMPARED TO SIX-MONTH PERIOD ENDED JUNE 30, 2017

 

Revenue

 

We have recognized $1,642,604 and $629,539 revenue for the six months ended June 31, 2018 and 2017, respectively. Prior to July 2017, our service fee was at 1.5% per month. Since July 2017, we started to charge the service fee as the spread between the borrowers’ interest rate and the investors’ yield rate. We had a total of 1,180 contracts signed for the six months ended June 30, 2018 compared to 612 contracts for the six months ended June 30, 2017.

 

Operating Expenses

 

Selling expenses: Our selling expenses primarily consist of expenses relating to advertising, marketing and promotional trips and other community activities for brand promotion purpose. Selling expenses increased from $65,877 for the six months ended June 30, 2017 to $116,907 for the six months ended June 30, 2018. An increase of $ 51,030, or 77%, was primarily attributable to the increase of the online interactive promotion expenses.

 

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General and administrative expenses: Our general and administrative expenses for the six months ended June 30, 2018 and 2017 consisted of the following:

   Six Months Ended         
   June 30,       Percentage 
   2018   2017   Change   Change 
Payroll and related benefits  $559,191   $196,264   $362,927    185%
Depreciation expense   18,244    27,838    (9,594)   (34%)
Software service fee   36,532    58,492    (21,960)   (38%)
Rent and property management expense   138,838    150,293    (11,455)   (8%)
Professional fee   115,350    30,000    85,350    285%
Other   6,037    36,361    (30,324)   (83%)
Total  $874,192   $499,248   $374,944    75%

 

  Payroll and related benefits for the six months ended June 30, 2018 increased by $362,927, or 185%, as compared to the six months ended June 30, 2017. We had more employees in 2018 as our online business expansion.
     
  Depreciation expense for the six months ended June 30, 2018 decreased by $9,594, or 34%, as compared to the six months ended June 30, 2017. In the mid of 2017, there were a portion of the fixed assets that have already been fully depreciated. Therefore, they no longer incur depreciation expense in the 2018.
     
  Software service fee for the six months ended June 30, 2018 decreased by $21,960, or 38%, as compared to the six months ended June 30 31, 2017. The decrease was primarily attributable to Internet real-name authentication fees   of our on-line business occurred in 2017, we did not incur such expense during the six months ended June 30, 2018.
     
  Rent and property management expense for the six months ended June 30, 2018 decreased by $11,455, or 8%, as compared to the six months ended June 30, 2017. The majority of the change was attributable to the decrease in rent in the monthly rent for the new lease in Beijing was less than the prior lease.
       
  Professional fee for the six months ended June 30, 2018 increased by $85,350, or 285%, as compared to the six months ended June 30, 2017. The increase was primarily attributable to legal fees, audit fees, and other consulting fees of listed company service fees.
     
  Other general and administrative expenses for the six months ended June 30, 2018 decreased by $30,324, or 83%, as compared to the six months ended June 30, 2017. The decrease was primarily attributable to the decrease in travel, seminar, printing, and car insurance expenses.

 

Income from operations

 

As a result of the factors described above, for the six months ended June 30, 2018, income from operations amounted to $651,505, as compared to income from operations of $64,414 for the six months ended June 30, 2017.

 

Other income (expenses)

 

Other income: Other income decreased from $43,121 for the six months ended June 30, 2017 to $19,519 for the six months ended June 30, 2018. A decrease of $23,602 was primarily attributable to decrease of the vehicle leasing income. On June 30, 2016, Jiucheng Huijin, a related party, and the Company entered a contract to lease two vehicles from the Company. The contract started on June 30, 2016 and expired on January 31, 2018. Pursuant to the terms of the contract, Jiucheng Huijin has agreed to pay a monthly rental fee of RMB 25,000 (approximately $3,600) per vehicle. We recorded six months of such income in 2017 and one month in 2018.

 

Other income- related party: On April 23, 2018, a related party of the Company, Jiuyuan, entered into a loan agreement with Beijing Jiucheng to borrow 15,000,000 RMB (approximately $2.39 million). The loan matures in six months with a monthly interest rate of 0.3625%. The Company recorded the interest income - related party in the amount of $19,348 for the six months ended June 30, 2018. 

 

Other expense: Other expense increased from $1,638 for the six months ended June 30, 2017 to $106,149 for the six months ended June 30, 2018. The increase was primarily attributable to the increase of cash transfer volumes as we launched the bank depository system in July 2017.

 

Gain from extinguishment of liability:  During the six months ended June 30, 2018, we recorded $14,302 due to Hong Long Trading Co., Ltd. (“Hong Long”). Hong Long was closed in 2017 and we no longer need to pay the debt.

 

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Income tax provision

 

As a result of accumulated net operating losses incurred that allowable tax deductions are greater than its taxable income, there has been no provision for income taxes from the date of inception. The Company has provided full valuation allowance for the deferred tax assets at June 30, 2018 and 2017, which arising from the losses incurred since inception.

 

Net income

 

As a result of the factors described above, for the six months ended June 30, 2018, net income amounted to $598,525, as compared to net income of $105,897 for the six months ended June 30, 2017.

 

Foreign currency translation income (loss)

 

The functional currency of our operations in the PRC is the Chinese Yuan or Renminbi (“RMB”). The financial statements are translated to U.S. dollars using the period end rates of exchange for assets and liabilities, equity is translated at historical exchange rates, and average rates of exchange (for the period) are used for revenues and expenses and cash flows. Transaction gains and or losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. As a result of foreign currency translations, which are a noncash adjustment, we reported a foreign currency translation loss of $55,801 for the six months ended June 30, 2018, as compared to a foreign currency translation income of $160,344 for the six months ended June 30, 2017. The noncash loss had the effect of decreasing our reported comprehensive income and noncash income had the effect of increasing our reported comprehensive income for the six months ended June 30, 2018 and 2017, respectively.

 

Comprehensive income (loss)

 

As a result of our foreign currency translation loss, we had comprehensive income for the six months ended June 30, 2018 of $542,724 compared to our foreign currency translation income, we had comprehensive income of $266,241 for the six months ended June 30, 2017.

 

Liquidity and Capital Resources

 

As of June 30, 2018, we had a cash balance of $243,048. During the six months ended June 30, 2018, net cash provided by operating activities totaled to $806,016. Net cash used in investing activities totaled to $2,528,257. Net cash used in financing activities totaled to $7,849 in connection with repayment of working capital advances from our related parties. Effect of exchange rate change on cash totaled $31,988. The resulting change in cash for the period was a decrease of $1,698,102, which was primarily due to increase of short-term borrowings to related party.

  

As of June 30, 2017, we had a cash balance of $1,510,609. During the six months ended June 30, 2017, net cash provided by operating activities totaled $705,813, net cash used in investing activities totaled $2,844,159 and net cash provided by financing activities totaled $3,615,304. Effect of exchange rate change on cash totaled $20,727. The resulting change in cash for the period was an increase of $1,497,685, which was primarily due to cash inflow of due from related parties.

 

The following table sets forth a summary of changes in cash flow from the six months ended June 30, 2018 to June 30, 2017:

 

   Six Months Ended         
   June 30,       Percentage 
   2018   2017   Change   Change 
Net cash provided by operating activities  $806,016   $705,813   $100,203    14%
Net cash used in investing activities   (2,528,257)   (2,844,159)   315,902    (11%)
Net cash (used in) provided by financing activities   (7,849)   3,615,304    (3,623,153)   (100%)
Effect of exchange rate change on cash   28,834    20,727    8,107    39%
Total net change in cash, cash equivalents and restricted cash  $(1,701,256)  $1,497,685   $(3,198,941)   (214%)

 

Net cash provided by operating activities increased by $100,203 to $806,016 during the six months ended June 30, 2018 from $705,813 during the six months ended June 30, 2017. This increase is primarily attributable to:

 

An increase in net income of $492,628
An increase in advance from customers of $170,072
An increase in other payables of $389,197

 

Offset by:

 

A decrease in due from related parties of $702,197
A decrease in VAT payable of $221,416

  

Net cash used in investing activities was $2,528,257 for the six months ended June 30, 2018 as compared to $2,844,159 for the six months ended June 30, 2017. During the six months ended June 30, 2018, we loaned a related party totaled $2,703,764 and received repayment in the amount of $175,507. During the six months ended June 30, 2017, we made advances to our related parties for working capital totaled $9,318,854 and received repayment from our related partiers totaled $6,474,695.

 

25

 

 

Net cash provided by (used in) financing activities was ($7,849) for the six months ended June 30, 2018 as compared to $3,615,304 for the six months ended June 30, 2017. During the six months ended June 30, 2018, we made repayment to our related parties totaled $7,849. During the six months ended June 30, 2017, we received working capital advances from our related parties totaled $4,004,754 and made repayment to our related parties totaled $389,450.

 

The following table sets forth a summary of changes in our working capital from December 31, 2017 to June 30, 2018:

 

   June 30,   December 31,       Percentage 
   2018   2017   Change   Change 
Current Assets  $3,273,058   $2,302,707   $970,351    42%
Current Liabilities   803,091    466,274    336,817    72%
   $2,469,967   $1,836,433   $633,534    34%

  

Our working capital increased by $633,534 to $2,469,967 at June 30, 2018 from $1,836,433 at December 31, 2017. This increase in working capital is primarily attributable to:  

 

  An increase in loans receivable-related party    of $2,433,001

 

Offset by:

  A decrease in cash and cash equivalents of $1,698,102

 

  An increase in other payable of $362,846

Because the exchange rate conversion is different for the balance sheets and the statements of cash flows, the changes in assets and liabilities reflected on the statements of cash flows are not necessarily identical with the comparable changes reflected on the balance sheets.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.

 

Quantitative and Qualitative Disclosures About Market Risk

 

Foreign Exchange Risk

 

While our reporting currency is the US dollar, all of our revenues and costs and expenses are denominated in RMB. All of our assets are denominated in RMB except for some cash and cash equivalents and accounts receivables. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between US dollar and RMB. If the RMB depreciates against the US dollar, the value of our RMB revenues, earnings and assets as expressed in our US dollar financial statements will decline. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

 

Inflation

 

Inflationary factors such as increases in the costs of our products and overhead costs may adversely affect our operating results. Inflation in China has recently increased substantially. The inflation rate in China was reported at approximately 2.2% for 2018 and 2.0% for 2017 (see http://www.statista.com/statistics/270338/inflation-rate-in-china/).

 

These factors have led to the adoption by the Chinese government, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. Price inflation can affect our ability to maintain current levels of gross margin and selling and distribution, general and administrative expenses as a percentage of net revenues if we are unable to pass along raw material price increases to customers. Accordingly, inflation in China may weaken our competitiveness domestically or in international markets.

  

Off-Balance Sheet Arrangements

 

As of June 30, 2018, we have no off-balance sheet arrangements.

 

26

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

We are a smaller reporting company and therefore, we are not required to provide information required by this Item 3 of Form 10-Q.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.

 

We carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2018. In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives. Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment. Based on the evaluation described above, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report because we did not document our Sarbanes-Oxley Act Section 404 internal controls and procedures.

 

As funds become available to us, we expect to implement additional measures to improve disclosure controls and procedures such as implementing and documenting our internal controls procedures.

 

Changes in internal controls over financial reporting

 

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on the Effectiveness of Controls

 

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The Company’s management, including its Principal Executive Officer and its Principal Financial Officer, do not expect that the Company’s disclosure controls will prevent or detect all errors and all fraud. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

27

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. We are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

 

Item 1A. Risk Factors

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosure

 

Not applicable to our operations.

 

Item 5. Other Information

 

None.

 

28

 

 

Item 6. Exhibits

 

Exhibit No.   Exhibit Description
     
31.1   Certification of the Chief Executive Officer required under Rule 13a-14(a)/15d-14(a) of the Exchange Act
     

31.2

 

Certification of the Chief Financial Officer required under Rule 13a-14(a)/15d-14(a) of the Exchange Act

     
32.1   Certification of the Chief Executive Officer required under Section 1350 of the Exchange Act
     

32.2

 

Certification of the Chief Financial Officer required under Section 1350 of the Exchange Act 

     
101 INS   XBRL Instance Document
     
101 SCH   XBRL Taxonomy Schema
     
101 CAL   XBRL Taxonomy Extension Calculation Linkbase
     
101 DEF   XBRL Taxonomy Extension Definition Linkbase
     
101 LAB   XBRL Taxonomy Extension Label Linkbase
     
101 PRE   XBRL Taxonomy Extension Presentation Linkbase

 

29

 

 

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.

 

  JIUCAITONG GROUP LIMITED
     
Date: August 10, 2018 By: /s/ Xuefei Kang
    Xuefei Kang
    Chief Executive Officer

 

 

30

 

 

EX-31.1 2 f10q0618ex31-1_jiucaitonggrp.htm CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER REQUIRED UNDER RULE 13A-14(A)/15D-14(A) OF THE EXCHANGE ACT

EXHIBIT 31.1

 

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Xuefei Kang, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 of Jiucaitong Group Limited.;
   
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 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)) 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 our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 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;
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our 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 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:
   
  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: August 10, 2018 By: /s/Xuefei Kang
   

Xuefei Kang

Chief Executive Officer

(Principal Executive Officer)

EX-31.2 3 f10q0618ex31-2_jiucaitonggrp.htm CERTIFICATION OF THE CHIEF FINANCIAL OFFICER REQUIRED UNDER RULE 13A-14(A)/15D-14(A) OF THE EXCHANGE ACT

 EXHIBIT 31.2

 

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jinhua Shao, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018 of Jiucaitong Group Limited.;
   
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 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)) 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 our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our 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;
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our 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 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:
   
  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: August 10, 2018 By: /s/Jinhua Shao
   

Jinhua Shao

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1 4 f10q0618ex32-1_jiucaitonggrp.htm CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER REQUIRED UNDER SECTION 1350 OF THE EXCHANGE ACT

 EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

SECTION 906 OF SARBANES-OXLEY ACT OF 2002

 

I, Xuefei Kang, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

  1. The Quarterly Report on Form 10-Q of Jiucaitong Group Limited. (the “Company”) for the quarterly period ended June 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

 

  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 10, 2018 By: /s/Xuefei Kang
    Xuefei Kang
   

Chief Executive Officer

(Principal Executive Officer)

 

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

EX-32.2 5 f10q0618ex32-2_jiucaitonggrp.htm CERTIFICATION OF THE CHIEF FINANCIAL OFFICER REQUIRED UNDER SECTION 1350 OF THE EXCHANGE ACT

EXHIBIT 32.2

 

Certification Pursuant To

Section 906 of Sarbanes-Oxley Act of 2002

 

I, Jinhua Shao, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

  1. The Quarterly Report on Form 10-Q of Jiucaitong Group Limited (the “Company”) for the quarterly period ended June 30, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

 

  2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 10, 2018 By: /s/Jinhua Shao
    Jinhua Shao
   

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of a separate disclosure document.

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Through Beijing Jiucheng Asset Management Co., Ltd. (&#8220;Beijing Jiucheng&#8221;), the Company operates its business through an electronic online financial platform, www.9caitong.com (&#8220;website&#8221;). The Company generates revenue from the services that facilitate matching personal loan lenders with individual and small and medium sized enterprises (&#8220;SME&#8221;)&#160;borrowers in the People&#8217;s Republic of China (&#8220;PRC&#8221; or &#8220;China&#8221;). 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(&#8220;Jiucheng Consulting&#8221;),&#160;a wholly foreign-owned enterprise of I JIU JIU Limited, a British Virgin Islands company&#160; (&#8220;I JIU JIU&#8221;), obtained the controlling interest of Beijing Jiucheng through a series of contractual arrangements including an Equity Pledge Agreement, an Exclusive Technical Consultancy and Services Agreement, an Exclusive Call Option Agreement, Shareholder Proxy Agreements, and an Operating Agreement (collectively, the &#8220;VIE Agreements&#8221;), as a result of which Beijing Jiucheng is considered a variable interest entity (&#8220;VIE&#8221;).&#160;</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">&#160;</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">On November 10, 2017, I JIU JIU, the holding company of Ruixiang Technology Group,Ltd. 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Pursuant to the terms of the Share Exchange Agreement, the Company exchanged 8,000,000 shares of its common stock for all of the outstanding capital stock of I JIU JIU with the result that I JIU JIU became a wholly owned subsidiary of the Company.</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">&#160;</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">Pursuant to the Exchange, all of the issued and outstanding shares of I JIU JIU common stock were converted, at an exchange ratio of 160-for-1, into an aggregate of 8,000,000 shares of Spirit International Inc. common stock and I JIU JIU became a wholly owned subsidiary of Spirit International Inc. The holders of Spirit International Inc&#8217;s common stock as of immediately prior to the Exchange held an aggregate of 5,110,000 shares and in connection with the Share Exchange Agreement, the Company&#8217;s majority shareholder, Kimho Consultants Company Limited, (&#8220;Kimho&#8221; or the &#8220;Majority Shareholder&#8221;) entered into a share cancellation agreement with I JIU JIU&#8217;s stockholders whereby Kimho, owning an aggregate of 4,000,000 shares of the Company&#8217;s Common Stock agreed to cancel all its 4,000,000 shares of Common Stock in exchange of $440,000 paid by I JIU JIU&#8217;s stockholders (&#8220;Share Cancellation&#8221;).</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">&#160;</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">The accompanying financial statements share and per share information has been retroactively adjusted to reflect the exchange ratio in the Exchange. Subsequent to the Exchnage, Spirit International Inc&#8217;s name was changed from &#8220;Spirit International, Inc.&#8221; to &#8220;Jiucaitong Group Limited.&#8221;.</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">&#160;</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; background-color: white; -webkit-text-stroke-width: 0px;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">Under generally accepted accounting principles in the United States, (&#8220;U.S. GAAP&#8221;) because I JIU JIU&#8217;s former stockholders received the greater portion of the voting rights in the combined entity and I JIU JIU&#8217;s senior management represents all of the senior management of the combined entity, the Exchange was accounted for as a recapitalization effected by a share exchange, wherein I JIU JIU is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of I JIU JIU, its wholly-owned subsidiaries and Beijing Jiucheng have been brought forward at their book value and no goodwill has been recognized. Accordingly, the assets and liabilities and the historical operations that are reflected in the Company&#8217;s consolidated financial statements are those of I JIU JIU, its wholly-owned subsidiaries and Beijing Jiucheng and are recorded at their historical cost basis.</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; background-color: white; -webkit-text-stroke-width: 0px;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">&#160;</font></p><p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><font style="font-family: 'times new roman', times, serif; font-size: 10pt;">Unless otherwise indicated or the context otherwise requires, references to &#8220;the Company&#8221; refer to&#160;Jiucaitong Group Limited and its subsidiaries.&#160;Disclosures relating to the pre-merger business of I JIU JIU, unless noted as being the business of Spirit International, Inc., prior to the Exchange, pertain to the business of&#160;I JIU JIU prior to the Exchange.&#160;</font></p> Hengjiu is a related party which was 75% owned by Jiuyuan Investment Co., Ltd. ("Jiuyuan"), a shareholder of Beijing Jiucheng, and 25% owned by Xiangbin Meng, the Company's Chairman. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. 1510609 243048 115519 105897 288371 598525 <div> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><b>NOTE 12 &#8211; SUBSEQUENT EVENT</b></p> <p style="font: 10pt/normal 'times new roman', times, serif; margin: 0pt 0px; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; font-stretch: normal; -webkit-text-stroke-width: 0px;"><b></b>&#160;</p> <p style="font: 13.33px/normal 'times new roman', times, serif; margin: 0pt 0px; text-align: justify; color: #000000; text-transform: none; text-indent: 0px; letter-spacing: normal; word-spacing: 0px; white-space: normal; widows: 1; -webkit-text-stroke-width: 0px;">In July 2018, a related party of the Company, Jiuyuan, received an additional RMB 1,300,000 (approximately $0.2 million) under the June 2018 Loan from the Company and made RMB 2,570,000 repayment (approximately $0.4 million). Also, see Note 6 related to Note receivable &#8211; related party.</p> </div> 200000 1300000 400000 2570000 These are the Company's portion of minimum lease payments allocated by the Company's affiliated company, Jiuxiang, the leasee. These are the minimum lease payments under the non-cancellable lease entered with a third party. 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Document and Entity Information - shares
6 Months Ended
Jun. 30, 2018
Aug. 10, 2018
Document and Entity Information [Abstract]    
Entity Registrant Name Jiucaitong Group Ltd  
Entity Central Index Key 0001610607  
Trading Symbol JCTG  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Document Type 10-Q  
Document Period End Date Jun. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q2  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   9,110,000
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Current assets    
Cash and cash equivalents $ 243,048 $ 1,941,150
Restricted cash 181,283 184,437
Accounts receivable 53,887 522
Other receivable 905 19,327
Prepaid expenses 32,298
Advances to suppliers 73,538 49,672
Security Deposit 71,407
Loans receivable - related party 2,433,001
Due from related parties 215,989 75,301
Total current assets 3,273,058 2,302,707
Non-current assets    
Security Deposit 72,649
Property, plant and equipment, net 17,172 35,333
Total non-current assets 17,172 107,982
Total assets 3,290,230 2,410,689
Current liabilities    
Other payable 495,939 133,093
Due to related parties 15,723 23,682
Advance from customers 275,903 114,191
VAT payable 15,526 195,308
Total current liabilities 803,091 466,274
Total liabilities 803,091 466,274
Commitments and contingencies
STOCKHOLDERS' EQUITY    
Common Stock, $0.0001 par value, 75,000,000 shares authorized; 9,110,000 and 9,110,000 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively 911 911
Additional paid-in capital 4,358,269 4,358,269
Accumulated deficit (616,420) (1,214,945)
Accumulated other comprehensive loss (1,255,621) (1,199,820)
Total stockholders' equity 2,487,139 1,944,415
Total liabilities and stockholders' equity $ 3,290,230 $ 2,410,689
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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Common stock, par value $ 0.0001 $ 0.0001
Common stock, authorized 75,000,000 75,000,000
Common stock, issued 9,110,000 9,110,000
Common stock, outstanding 9,110,000 9,110,000
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Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Income Statement [Abstract]        
Revenue $ 870,590 $ 333,794 $ 1,642,604 $ 629,539
Operating expenses:        
Selling expenses 85,302 35,112 116,907 65,877
General and administrative expenses 467,058 204,500 874,192 499,248
Total operating expenses 552,360 239,612 991,099 565,125
Income from operations 318,230 94,182 651,505 64,414
Other income (expense):        
Other income 2,880 21,611 19,519 43,121
Other income- related party 19,348 19,348
Other expense (52,090) (274) (106,149) (1,638)
Gain from extinguishment of liability 3 14,302
Total other income (expense), net (29,859) 21,337 (52,980) 41,483
Income before taxes 288,371 115,519 598,525 105,897
Net income 288,371 115,519 598,525 105,897
Comprehensive Income:        
Net income 288,371 115,519 598,525 105,897
Foreign currency translation adjustment (127,382) 23,886 (55,801) 160,344
Comprehensive income $ 160,989 $ 139,405 $ 542,724 $ 266,241
Earnings per common share - basic and diluted $ 0.02 $ 0.02 $ 0.06 $ 0.03
Weighted average number of common shares outstanding - basic and diluted 9,110,111 8,000,000 9,110,111 8,000,000
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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Cash flows from operating activities:    
Net income $ 598,525 $ 105,897
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation expenses 18,244 27,838
Gain from extinguishment of liability (14,302)
Changes in operating assets and liabilities:    
Accounts receivable (55,463)
Other receivable 18,800 372
Prepaid expense 32,988 (39,312)
Advances to suppliers (25,682) 5,818
Security deposit (68,756)
Due from related parties (147,535) 554,662
Due to related parties 63,498
Advance from customers 170,072
Accrued liabilities 13,208
Other payables 393,719 4,522
VAT payable (183,350) 38,066
Net cash provided by operating activities 806,016 705,813
Cash flows from investing activities:    
Short-term borrowings to related party (2,703,764)
Repayment of short-term borrowings from related party 175,507
Working capital advances to related parties (9,318,854)
Repayments from related parties 6,474,695
Net cash used in investing activities (2,528,257) (2,844,159)
Cash flows from financing activities:    
Working capital advances from related parties 4,004,754
Repayments of working capital advances received from related parties (7,849) (389,450)
Net cash (used in) provided by financing activities (7,849) 3,615,304
Effect of exchange rate change 28,834 20,727
Net change in cash, cash equivalents and restricted cash (1,701,256) 1,497,685
Cash, cash equivalents and restricted cash - beginning of period 2,125,587 12,924
Cash, cash equivalents and restricted cash - end of period 424,331 1,510,609
Supplemental disclosure of cash flow information    
Interest paid
Income tax paid
Non-cash investing and financing activities    
Security deposit returned and paid directly to related party by landlord 160,013
Reconciliation to amounts on consolidated balance sheets    
Cash and cash equivalents 243,048 1,510,609
Restricted cash 181,283
Total cash, cash equivalents, and restricted cash $ 424,331 $ 1,510,609
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Nature of Operations
6 Months Ended
Jun. 30, 2018
Nature of Operations [Abstract]  
NATURE OF OPERATIONS

NOTE 1 - NATURE OF OPERATIONS

 

Jiucaitong Group Limited (“Jiucaitong” or the “Company”), a Nevada corporation (formerly Spirit International, Inc.), was incorporated on March 10, 2014. Through Beijing Jiucheng Asset Management Co., Ltd. (“Beijing Jiucheng”), the Company operates its business through an electronic online financial platform, www.9caitong.com (“website”). The Company generates revenue from the services that facilitate matching personal loan lenders with individual and small and medium sized enterprises (“SME”) borrowers in the People’s Republic of China (“PRC” or “China”). Beijing Jiucheng was incorporated in Beijing, China on January 13, 2012 under the laws of the PRC.

 

Reverse Merger

 

On August 1, 2017, Beijing Jiucheng IT Consulting Enterprise Co. Ltd. (“Jiucheng Consulting”), a wholly foreign-owned enterprise of I JIU JIU Limited, a British Virgin Islands company  (“I JIU JIU”), obtained the controlling interest of Beijing Jiucheng through a series of contractual arrangements including an Equity Pledge Agreement, an Exclusive Technical Consultancy and Services Agreement, an Exclusive Call Option Agreement, Shareholder Proxy Agreements, and an Operating Agreement (collectively, the “VIE Agreements”), as a result of which Beijing Jiucheng is considered a variable interest entity (“VIE”). 

 

On November 10, 2017, I JIU JIU, the holding company of Ruixiang Technology Group,Ltd. (“Rui Xiang”), and the shareholders of I JIU JIU entered into a Share Exchange Agreement, which closed on the same date (the “Exchange”). Pursuant to the terms of the Share Exchange Agreement, the Company exchanged 8,000,000 shares of its common stock for all of the outstanding capital stock of I JIU JIU with the result that I JIU JIU became a wholly owned subsidiary of the Company.

 

Pursuant to the Exchange, all of the issued and outstanding shares of I JIU JIU common stock were converted, at an exchange ratio of 160-for-1, into an aggregate of 8,000,000 shares of Spirit International Inc. common stock and I JIU JIU became a wholly owned subsidiary of Spirit International Inc. The holders of Spirit International Inc’s common stock as of immediately prior to the Exchange held an aggregate of 5,110,000 shares and in connection with the Share Exchange Agreement, the Company’s majority shareholder, Kimho Consultants Company Limited, (“Kimho” or the “Majority Shareholder”) entered into a share cancellation agreement with I JIU JIU’s stockholders whereby Kimho, owning an aggregate of 4,000,000 shares of the Company’s Common Stock agreed to cancel all its 4,000,000 shares of Common Stock in exchange of $440,000 paid by I JIU JIU’s stockholders (“Share Cancellation”).

 

The accompanying financial statements share and per share information has been retroactively adjusted to reflect the exchange ratio in the Exchange. Subsequent to the Exchnage, Spirit International Inc’s name was changed from “Spirit International, Inc.” to “Jiucaitong Group Limited.”.

 

Under generally accepted accounting principles in the United States, (“U.S. GAAP”) because I JIU JIU’s former stockholders received the greater portion of the voting rights in the combined entity and I JIU JIU’s senior management represents all of the senior management of the combined entity, the Exchange was accounted for as a recapitalization effected by a share exchange, wherein I JIU JIU is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of I JIU JIU, its wholly-owned subsidiaries and Beijing Jiucheng have been brought forward at their book value and no goodwill has been recognized. Accordingly, the assets and liabilities and the historical operations that are reflected in the Company’s consolidated financial statements are those of I JIU JIU, its wholly-owned subsidiaries and Beijing Jiucheng and are recorded at their historical cost basis.

 

Unless otherwise indicated or the context otherwise requires, references to “the Company” refer to Jiucaitong Group Limited and its subsidiaries. Disclosures relating to the pre-merger business of I JIU JIU, unless noted as being the business of Spirit International, Inc., prior to the Exchange, pertain to the business of I JIU JIU prior to the Exchange. 

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Basis of Presentation and Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2018
Basis of Presentation and Summary of Significant Accounting Policies [Abstract]  
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s financial statements are expressed in U.S. dollars.

 

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The unaudited condensed consolidated financial statements for the six months ended June 30, 2018 should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2017 and footnotes thereto included in the same document. The condensed consolidated balance sheet for the six months ended June 30, 2018 contained herein has been derived from the audited financial statements as of December 31, 2017 but does not include all disclosures required by U.S. GAAP.

 

Basis of Consolidation

 

The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries, I JIU JIU, Ruixiang, Jiucheng Consulting and its VIE, Beijing Jiucheng. All inter-company transactions and balances have been eliminated upon consolidation.

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with generally accepted accounting principles requires 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 period. Actual results could differ from those estimates. Significant estimates as of and during the periods ended June 30, 2018 and December 31, 2017 include the allowance for doubtful accounts, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, valuation of deferred tax assets and accruals for taxes due.

 

Financial Instrument

 

The carrying amount reported in the consolidated balance sheet for cash, accounts receivable, other receivables, accrued liabilities and other payables approximate fair value because of the immediate or short-term maturity of these financial instruments.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of six months or less when purchased to be cash equivalents. The Company maintains with various financial institutions in the PRC. At June 30, 2018 and December 31, 2017, cash balances held in PRC banks are uninsured. The Company has not experienced any losses in bank accounts and believes it is not exposed to any risks on its cash in bank accounts.

 

Restricted Cash

 

Cash that is deposited in the bank but restricted for a specific purpose and therefore not available for immediate and general use by the Company is classified as restricted cash, which is presented separately from cash and cash equivalents on the consolidated balance sheets. The deposited balance is included in the Company’s bank account for guarantee of certain business purpose under an agreement until being used for the designated purpose or withdrawn due to expiration of the guarantee. As of June 30, 2018 and December 31, 2017, the Company had a restricted cash balance of $181,283 and $184,437, respectively.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation and impairment losses. Gains or losses on dispositions of property and equipment are included in operating income (loss). Major additions, renewals and improvements are capitalized, while maintenance and repairs are expensed as incurred.

 

Depreciation and amortization are provided over the estimated useful lives of the assets using the straight-line method from the time the assets are placed in service. Estimated useful lives are as follows, taking into account the assets’ estimated residual value:

 

Classification Estimated useful life
Computer and office equipment 3 years
Furniture 3 years
Vehicles 3 years

 

Advances from Customers

 

Advances from customers at June 30, 2018 and December 31, 2017 amounted to $275,903 and $114,191, respectively, and consist of prepayments from customers for services that have not been performed. The Company will recognize the deposits as revenue when the services have been performed in accordance with the Company’s revenue recognition policy.

 

Earnings per Share

 

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income by the weighted-average number of common shares and dilutive potential common shares outstanding during the period.

 

For the six months ended June 30, 2018 and 2017, respectively, there were no outstanding securities or other contracts to issue common stock, such as options, warrants or conversion rights, which would have a dilutive effect on earnings per share.

 

Revenue Recognition

 

The Company provides intermediary services to the personal loan borrowers and the financial products investors. The Company charges fees for the intermediary services to the personal loan borrowers.

 

Prior to July 2017, the revenue process started when an individual who had financing needs submitted the loan application to Beijing Hengjiu Investment Management Co., Ltd. (“Hengjiu”). Hengjiu, along with its sub-contractor, Zhongcheng Zhengxin (Beijing) Co., Ltd. (“Zhongcheng Zhengxin”), provided financial consulting services such as loan origination criteria checkup, risk assessment, and assessment/evaluation of vehicle collateral. Hengjiu is a related party which was 75% owned by Jiuyuan Investment Co., Ltd. (“Jiuyuan”), a shareholder of Beijing Jiucheng, and 25% owned by Xiangbin Meng, the Company’s Chairman. Zhongcheng Zhengxin is a third party who provides credit assessment services. Upon completion of the background check, Xiangbin Meng (“Meng”), the maker of the loan, entered into the loan agreement with the qualified loan borrowers and initiated the transfer of the cash to the borrowers or borrowers’ agents. The loan usually matures in six months and using borrowers’ vehicle as collateral.

 

After the borrowers received the fund transfer, the Company then packaged the debt claims of Meng into corresponding financial products and placed in its physical stores or on its on-line platform for sale. Investors of those financial products were able to choose the financial products that met their needs. Meng transfered his debt upon signing the debt transfer agreement with the financial products investors. The services were originally provided in physical stores in Beijing, Baoding, Hebei province and Weihai, Shandong province. Since April 2016, Beijing Jiucheng started to move majority of the business to its financial advisory on-line platform, Jiucaitong (www.9caitong.com). As less labor was required, in June 2016, Beijing Jiucheng shut down the physical stores in Baoding and Weihai.

 

Meng was responsible for making the loans, transferring the funds to the borrowers and collecting the service fees on behalf of all parties involved. Meng collected a portion of the service fees upfront and the rest on a monthly basis over the term of the loan from loan borrowers.

 

The Company recognizes revenue, net of value-added taxes in the periods in which the related services were performed provided that persuasive evidence of an arrangement exists, the amount of the service fee is fixed in the loan agreements, and collectability is reasonably assured. The revenue was recognized when the loan agreements were executed and the funds were transferred to the loan borrowers, based on the predetermined service fee percentage of the total loan principal over the term of the loan. According to the service fee allocation agreement, Beijing Jiucheng was entitled to a service fee of 1% of the loan principal per month before July 1, 2016 and 1.5% per month effective July 1, 2016 and thereafter as Beijing Jiucheng increased the loan management and risk assessment services that were originally done by Beijing Hengjiu since May 2016.

 

Since July 2017, the Company officially launched the bank depository system and is providing intermediary services for all registered users, including consultation, information and all kinds of delegation service. The Company started to charge the service fee from the amount borrowed by the borrower at the difference between the borrowers’ actual rate and the investors’ yield rate. Upon launching of the bank depository system, Meng no longer serves as the maker of the loan for the borrowers who use Jiucaitong on-line platform. The borrowers and investors enter into loan agreements directly with the online platform, Jiucaitong. Since December 2017, the online platform also provides loan intermediary services to the restaurant owners which operate the same as the rest of the borrowers except for that the restaurant owners use restaurants as collateral.

 

Allowance for Doubtful Accounts

 

Service fee receivable is recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. The Company makes estimates for the allowance for doubtful accounts based upon the assessment of various factors, including historical, experience, the age of the accounts receivable balances, credit quality of the loan borrowers, current economic conditions, and other factors that may affect the borrowers’ ability to pay. No allowance has been provided for at June 30, 2018 and December 31, 2017 as the service fees have been fully collected from the loan borrowers during the respective periods or subsequently.

 

Advertising Expense

 

The Company expenses advertising costs as they incurred. Total advertising expenses were $85,302  and $35,112 for the three months ended June 30, 2018 and 2017, respectively. Total advertising expenses were $116,907 and $65,877 for the six months ended June 30, 2018 and 2017, respectively, and have been included as part of selling expenses in the accompanying statements of operations and comprehensive income.

 

Value-added Taxes

 

Pursuant to the PRC tax laws, in case of the financial services provided, generally the value added tax (“VAT”) rate is 3% of the gross sales for small scale VAT payer and 6% of the gross sales for general VAT payer. The accrued VAT is recorded as VAT payables in the consolidated financial statements. VAT is reported as a liability when incurred.

 

Income Taxes

 

The Company accounts for income taxes in accordance with U.S. GAAP for income taxes. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes.

 

The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. Deferred tax liabilities are recognized for all future taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable income will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled.

 

Deferred tax is charged or credited in the operations of statement, except when it is related to items credited or charged directly to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted by the U.S. government which included a wide range of tax reform affecting businesses including the corporate tax rates, international tax provisions, tax credits and deduction with majority of the tax provision effective after December 31, 2017.

 

Certain activities conducted in foreign jurisdictions may result in the imposition of U.S. corporate income taxes on the Company when its subsidiaries, controlled foreign corporations (“CFCs”), generate income that is subject to Subpart F or GILTI under the U.S. Internal Revenue Code beginning after December 31, 2017.

 

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. As of June 30, 2018 and December 31, 2017, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

 

Foreign Currency Translation

 

The functional currency of the Company’s operations in the PRC is the Chinese Yuan or Renminbi (“RMB”). The financial statements are translated to U.S. dollars using the period end rates of exchange for assets and liabilities, equity is translated at historical exchange rates, and average rates of exchange (for the period) are used for revenues and expenses and cash flows. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income / loss. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

 

All of the Company’s revenue transactions are transacted in its functional currency. The Company does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.

 

Asset and liability accounts at June 30, 2018 and December 31, 2017 were translated at 6.6195 RMB to $1.00 and at 6.5063 RMB to $1.00, respectively, which were the exchange rates on the balance sheet dates. Equity accounts were stated at their historical rates. The average translation rates applied to the statements of operations for the six months ended June 30, 2018 and 2017 were 6.3701 RMB and 6.8748 RMB to $1.00, respectively. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate.

 

Credit Risk and Concentration

 

The Company’s financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash equivalents. The majority of cash equivalents consists of short-term money market funds, which are managed by reputable financial institutions.

 

The Company performs ongoing credit evaluations of borrowers, and generally do not require additional collateral except for personal vehicles. No borrowers represented 10% or more of total revenue for the six months ended June 30, 2018 and 2017.

  

Comprehensive Income (Loss)

 

Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income (loss) but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. The Company’s other comprehensive income (loss) is comprised of foreign currency translation adjustments.

 

Fair Value Measurements

 

The Company applies the provisions of ASC Subtopic 820-10,” Fair Value Measurements”, for fair value measurements of financial assets and financial liabilities and for fair value measurements of non-financial items that are recognized or disclosed at fair value in the financial statements.  ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

 

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

 

 Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
   
 Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
   
 Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

 

There were no assets or liabilities measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of June 30, 2018 and December 31, 2017.

 

Related Parties

 

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

  

Recent Accounting Pronouncements

 

Revenue Recognition: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

 

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

  

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08) which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The Company adopted the new standard effective January 1, 2018. The new standard also 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 (the modified retrospective method). The Company elected the modified retrospective approach. In preparation for adoption of the new guidance, we reviewed representative samples of contracts and other agreements we had entered into with our customers and evaluated the five-step model specified by the new revenue standards. The Company completed its analysis and identified changes with respect to the timing of revenue recognition for its revenue streams and determined the impact of that guidance on revenue recognition. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements.   

 

Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

 

Statement of Cash Flows: In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) to clarify whether the following items should be categorized as operating, investing or financing in the statement of cash flows: (i) debt prepayments and extinguishment costs, (ii) settlement of zero-coupon debt, (iii) settlement of contingent consideration, (iv) insurance proceeds, (v) settlement of corporate-owned life insurance (COLI) and bank-owned life insurance (BOLI) policies, (vi) distributions from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) receipts and payments with aspects of more than one class of cash flows. The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The amendments are an improvement to GAAP because they provide guidance for each of the eight issues, thereby reducing the current and potential future diversity in practice described above. ASU 2016-15 is effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements.   

 

Statement of Cash Flows: In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): “Restricted Cash”(“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this guidance will result in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activity, which are currently recognized in other financing activities, on the Statements of Consolidated Cash Flows. Furthermore, an additional reconciliation will be required to reconcile Cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets to sum to the total shown in the Statements of Consolidated Cash Flows. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements.   

 

Business Combination: In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. The Company has adopted this guidance effective in the first quarter of 2018 on a prospective basis. This standard does not have a material impact on the consolidated financial statements until the Company plans to have an acquisition or deconsolidation in the future.

 

Revenue Recognition and Leases: In September 2017, the FASB issued ASU 2017-13, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842). The main objective of this pronouncement is to clarify the effective date of the adoption of ASC Topic 606 and ASC Topic 842 and the definition of public business entity as stipulated in ASU 2014-09 and ASU 2016-02. ASU 2014-09 provides that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. ASU 2016-12 requires that “a public business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020”. ASU 2017-13 clarifies that the SEC would not object certain public business entities to elect to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13, however, limits such election to certain public business entities that “otherwise would not meet the definition of a public business entity except for a requirement to include or inclusion of its financial statements or financial information in another entity’s filings with the SEC”. The Company elected to adopt ASC Topic 606 and ASC Topic 842 beginning January 1, 2018 and January 1, 2019, respectively. No material impact on the consolidated financial statements.

 

Stock Compensation: In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvement to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees. Under ASU 2018-07, most of the guidance on share-based payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. ASU 2018-07 is effective for interim and annual reporting periods beginning after December 15, 2018. The Company does not expect such adoption to have a material impact on our consolidated financial statements.

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Other Receivable
6 Months Ended
Jun. 30, 2018
Receivables [Abstract]  
OTHER RECEIVABLE

NOTE 3 – OTHER RECEIVABLE

 

Other receivable consists of deposits and advances made to employees and other third parties to pay for operating expenses, such as property maintenance, water and sewer, and telephone bills. Other receivable as of June 30, 2018 and December 31, 2017 were $905 and $19,327, respectively.

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Security Deposit
6 Months Ended
Jun. 30, 2018
Security Deposit [Abstract]  
SECURITY DEPOSIT

NOTE 4 – SECURITY DEPOSIT

 

Pursuant to the terms of the Jinchangan Lease agreement, Beijing Jiucheng agreed to pay six months of rent and maintenance fee as security deposit for a total of RMB 472,678 (approximately $75,000). Beijing Jiucheng classified the security deposit as short term asset on the condensed consolidated balance sheets as of June 30, 2018 as the lease expires on May 21, 2019.

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Property and Equipment
6 Months Ended
Jun. 30, 2018
Property and Equipment [Abstract]  
PROPERTY AND EQUIPMENT

NOTE 5 – PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following:

 

  June 30,  December 31, 
  2018  2017 
Office furniture $23,742  $24,155 
Computer and office equipment  41,215   41,932 
Vehicle  108,849   110,743 
Total property and equipment  173,806   176,830 
Less: accumulated depreciation  (156,634)  (141,497)
Total $17,172  $35,333 

 

Total depreciation expenses for the three months ended June 30, 2018 and 2017 were $ 9,124 and $ 12,925, respectively. Total depreciation expenses for the six months ended June 30, 2018 and 2017 were $18,244 and $27,838, respectively.

 

The Company did not capitalize the costs associated with building the online financial platform as the costs were nominal.

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Related Party Transactions
6 Months Ended
Jun. 30, 2018
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 6 - RELATED PARTY TRANSACTIONS

 

The following is a list of related parties to which the Company has transactions with:

 

  (a) Xiangbin Meng (“Meng”), the Company’s Chairman and a shareholder of Beijing Jiucheng;

 

  (b) Jiuyuan Investment Co., Ltd. (“Jiuyuan”), a shareholder of Beijing Jiucheng; 

 

  (c) Beijing JiuCheng Huijin Information Consulting Co., Ltd (“Jiucheng Huijin”), an affiliated Company;

 

  (d) Yasheng International Investment Ltd. (“Yasheng”), a former shareholder of Beijing Jiucheng;

 

  (e) Beijing Jiuyuan Investment Share Holding Co., Ltd (“Beijing Jiuyuan”), an affiliated company;

 

  (f) Beijing Jiuxiang Financing Lease Co., Ltd. (“Jiuxiang”), an affiliated company.
     
  (g) Beijing Hengjiu Investment Management Co.,Ltd (“Beijing Hengjiu”), an affiliated company
     
  (h) Yangming Development Limited (“Yangming”), a shareholder of the Company

 

Amount due from related parties:

 

Amount due from related parties consisted of the following as of:

 

    June 30,
2018
    December 31,
2017
 
Xiangbin Meng – Fees Receivable   $ 145,543     $ 3,444  
Jiuyuan     19,828       20,204  
Beijing Hengjiu     50,618       51,653  
Total   $ 215,989     $ 75,301
 

Prior to July 2017, Meng collected the service fees from the loan borrowers on behalf of the Company, Zhongcheng Zhengxin, and Hengjiu. Meng then distributed to each party in accordance to the predetermined service fees percentage. As of June 30, 2018 and December 31, 2017, amount due from Meng for service revenue collected by Meng on the Company’s behalf and not yet distributed to the Company was $145,543 and $3,444, respectively.

 

Beijing Jiucheng is 70% owned by Jiuyuan. From time to time, the Company and Jiuyuan paid general and administrative expenses for each other. During the six months ended June 30, 2018 and 2017, Jiuyuan paid on behalf of the Company for working capital totaled $31 and $17,043, respectively. The Company made advances to Jiuyuan for working capital totaled $0 and $9,311,772, respectively and received repayments totaled $0 and $5,481,020, respectively. The Company received advances from Jiuyuan for working capital totaled $0 and $4,004,754, respectively. The Company made repayments to Jiuyuan totaled $0 and $389,450, respectively. As of June 30, 2018 and December 31, 2017, the Company has an amount due from Jiuyuan of $19,828 and $20,204, respectively.

 

Beijing Hengjiu is 75% owned by Jiuyuan and 25% owned by Meng. During the six months ended June 30, 2018 and 2017, Beijing Hengjiu paid on behalf of the Company for working capital totaled $157 and $-0-, respectively.  As of June 30, 2018 and December 31, 2017, the Company has an amount due from Beijing Hengjiu of $50,618 and $51,653, respectively.

 

Amount due to related parties

 

Amount due to related parties consisted of the following as of:

    June 30,
2018
    December 31,
2017
 
Jiucheng Huijin   $ 2,471     $ 10,199  
Beijing Jiuyuan     2,418       2,460  
Jiuxiang     5,983       6,087  
Yangming     4,851       4,936  
Total   $ 15,723     $ 23,682  

 

Jiucheng Huijin is 30% owned by Meng. From time to time, Jiucheng Huijin paid general and administrative expenses on behalf of Beijing Jiucheng. Beijing Jiucheng also generated vehicle leasing income from Jiucheng Huijin. On June 30, 2016, Jiucheng Huijin and Beijing Jiucheng entered a contract to lease two vehicles from Beijing Jiucheng. The contract started on June 30, 2016 and expired on January 31, 2018. After the expiration, the contract was extended on a month to month basis. Pursuant to the terms of the contract, Jiucheng Huijin has agreed and paid a monthly rental fee of RMB 25,000 (approximately $3,600). As of June 30, 2018, and December 31, 2017, Beijing Jiucheng recorded $2,471 and $10,199 due to Jiucheng Huijin, respectively.

 

Beijing Jiuyuan is 51% owned by Meng. On October 21, 2015, Beijing Jiuyuan entered into a six-year lease (“Chaoyang Lease”) and the lease was subsequently transferred to Jiuxiang on August 12, 2016. The Company shares the office space with Beijing Jiuyuan and three other affiliated companies under the Chaoyang Lease. The rent expense allocated to the Company each month is in accordance to the number of employees occupied in the office space. As of June 30, 2018 and December 31, 2017, amounts due to Beijing Jiuyuan related to rent expense were $2,418 and $2,460, respectively.

 

Jiuxiang is 75% owned by Jiuyuan. As mentioned above, Jiuxiang took over the lease since August 12, 2016. As of June 30, 2018 and December 31, 2017, the Company recorded $5,983 and $6,087 due to Jiuxiang, respectively, for the rent expense.

 

Yangming owns 30% of the Jiucaitong Group and subsidiaries.   Yangming paid general and administrative expenses on behalf of the Company. As of June 30, 2018 and December 31, 2017, the Company recorded $4,851 and $4,936 due to Yangming, respectively.

 

For the six months ended June 30, 2018 and 2017, due to (from) related party activities consisted of the following:

  

    Jiuyuan     Meng     Meng - Receivable     Yasheng     Jiucheng Huijin     Beijing Jiuyuan     Jiuxiang     Beijing Hengjiu     Yangming     Total  
Balance due (from) to related parties, December 31, 2017   $ (20,204 )   $ -     $ (3,444 )   $ -     $ 10,199     $ 2,460     $ 6,087     $ (51,653 )   $ 4,936     $ (51,619 )
Operating activities - Due from related parties     31       -       (147,724 )     -       -       -       -       157       -       (147,536 )
Financing activities - Repayments to related parties     -       -       -       -       (7,849 )     -       -       -       -       (7,849 )
Effect of foreign currency exchange     345       -       5,625       -       121       (42 )     (104 )     878       (85 )     6,738  
Balance due (from) to related parties, June 30, 2018   $ (19,828 )   $ -     $ (145,543 )   $ -     $ 2,471     $ 2,418     $ 5,983     $ (50,618 )   $ 4,851     $ (200,266 )
 
 

 

    Jiuyuan     Meng     Meng - Receivable     Yasheng     Jiucheng Huijin     Beijing Jiuyuan     Jiuxiang     Beijing Hengjiu     Yangming     Total  
Balance due (from) to related parties, December 31, 2016   $ 378,950     $ (11,311,447 )   $ (1,877,130 )   $ 8,917     $ 5,867     $ 2,304     $ 1,263     $ -     $ -     $ (12,791,276 )
Operating activities - Due from related parties     -       -       554,662       -       -       -       -       -       -       554,662  
Operating activities - Due to related parties     17,043       -       -       -       -       -       -       -       -       63,498  
Investing activities - Working capital advances to related parties     (9,311,772 )     (7,082 )     -       -       44,453       -       2,002       -       -       (9,318,854 )
Investing activities - Repayments from related parties     5,481,020       993,675       -       -       -       -       -       -       -       6,474,695  
Financing activities - Advances from related parties     4,004,754       -       -       -       -       -       -                       4,004,754  
Financing activities - Repayments made to related parties     (389,450 )     -       -       -       -       -       -       -       -       (389,450 )
Rent deposit returned and paid directly to related party by landlord     -       (160,013 )     -               -       -       -                       (160,013 )
Non-cash capital reduction     8,145,748       3,491,035       -       -       -       -       -       -       -       11,636,783  
Shareholders transfer pursuant to debt transfer agreement     (8,195,280 )     6,971,805       1,223,475       -       -       -       -       -       -       -  
Effect of foreign currency exchange     5,639       (117,689 )     (20,677 )     215       755       56       59       -       -       (131,642 )
Balance due (from) to related parties, June 30, 2017   $ 136,652     $ (139,716 )   $ (119,670 )   $ 9,132     $ 51,075     $ 2,360     $ 3,324     $ -     $ -     $ (56,843 )

Loans receivable – related party

 

On April 23, 2018, a related party of the Company, Jiuyuan, entered into a loan agreement with Beijing Jiucheng to borrow RMB 15,000,000 (approximately $2.27 million). The loan matures in six months with a monthly interest rate of 0.3625%. On June 11, 2018, Jiuyuan entered into another loan agreement with Jiucheng to borrow RMB 3,400,000 (approximately $0.5 million) with a monthly interest of 0.3624% and matures on December 11, 2018 (“June 2018 Loan”). The Company recorded the principal and interest amount as loans receivable - related party. During the six months ended June 30, 2018, the Company transferred a total of RMB 17,100,000 ($2,684,416) to Jiuyuan under the loan agreements and received repayment from Jiuyuan in the amount of $168,895. On July 3, 2018, the Company transferred another RMB 1,300,000 (approximately $0.2 million) to Jiuyuan under the June 2018 Loan.

As of the date of this report, Jiuyuan promised to pay off all loans owed to the Company during the third quarter of 2018. The Company expects to implement remedial measures immediately to avoid arranging any personal and or related party loans to related parties in the future.

 


    June 30,
2018
    December 31,
2017
 
Loans principal receivable   $ 2,583,277     $           -  
Interest receivable     18,619       -  
Repayment     (168,895 )     -  
Total   $ 2,433,001     $ -
 
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Other Payable
6 Months Ended
Jun. 30, 2018
Other Payable [Abstract]  
OTHER PAYABLE

NOTE 7 – OTHER PAYABLE

 

Other payable consists of the following as of June 30, 2018 and December 31, 2017:

 

  June 30,
2018
  December 31,
2017
 
Social security and provident fund payable $354,425  $44,254 
Salary payable  139,528   64,653 
Other levies  1,986   24,186 
Total $495,939  $133,093
XML 24 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
VAT Payable
6 Months Ended
Jun. 30, 2018
VAT Payable [Abstract]  
VAT PAYABLE

NOTE 8 – VAT PAYABLE

 

The Company’s VAT payable consists of 6% on the revenue generated and 3% on the other income generated from car leasing. VAT payable as of June 30, 2018 and December 31, 2017 were $15,526 and $195,308, respectively.    The VAT payable has been properly accrued for based on the required VAT rate as of June 30, 2018 and December 31, 2017.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
Statutory Reserve
6 Months Ended
Jun. 30, 2018
Statutory Reserve [Abstract]  
STATUTORY RESERVE

NOTE 9 - STATUTORY RESERVE

 

Pursuant to the laws applicable to the PRC, PRC entities must make appropriations from after-tax profit to the non-distributable “statutory surplus reserve fund”. Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end). The Company did not make appropriations to statutory reserve as of June 30, 2018 as the Company is able to use the current period (2018) net income after tax to offset against the accumulate loss from prior periods.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
Equity Transactions
6 Months Ended
Jun. 30, 2018
Equity Transactions [Abstract]  
EQUITY TRANSACTIONS

NOTE 10 - EQUITY TRANSACTIONS

 

Capital reduction of VIE, Beijing Jiucheng

 

Upon formation, Meng contributed RMB 30,000,000 ($4,800,811) and Jiuyuan contributed RMB 70,000,000 ($11,201,893) for a total of RMB 100,000,000 ($16,002,704) to Beijing Jiucheng. As Beijing Jiucheng’s main revenue source is from intermediary services and management was not anticipating to make significant capital expenditures, on February 15, 2017, the Board of directors of Beijing Jiucheng proposed to reduce the capital. Upon approval by the majority shareholders and Board of Directors of Beijing Jiucheng, on February 15, 2017, Beijing Jiucheng reduced the contributed capital from RMB 100,000,000 ($16,002,704) to RMB 20,000,000 ($4,482,799). Beijing Jiucheng has obtained the new business license reflecting the change. Capital reduction made subsequent to December 31, 2016 for the two shareholders are as follows:

 

In RMB:

 

  Formation  Capital Reduction  After Reduction  Ownership 
Meng  30,000,000   (24,000,000)  6,000,000   30%
Jiuyuan  70,000,000   (56,000,000)  14,000,000   70%
   100,000,000   (80,000,000)  20,000,000   100%

 

In USD:

 

  Formation  Capital Reduction  After Reduction  Ownership 
Meng  4,800,811   (3,455,971)  1,344,840   30%
Jiuyuan  11,201,893   (8,063,934)  3,137,959   70%
   16,002,704   (11,519,905)  4,482,799   100%

   

A debt transfer agreement was signed between Meng and Jiuyuan on February 28, 2017. Pursuant to the terms of the agreement, Jiuyuan agreed to transfer to Meng a total of RMB 56,340,519 ($8,112,967) owed by Beijing Jiucheng.

 

On February 28, 2017, a debt offset agreement was signed between Beijing Jiucheng and Meng and pursuant to the terms of this agreement, the amount due to Jiuyuan which was transferred to Meng plus Meng’s portion of the capital reduction were offset by the amount due from Meng. As a result of the capital reduction, the debt offset agreement and repayment received, the amount due from related parties, Meng that was reclassified as contra-equity account at December 31, 2016 has been repaid and reduced to zero by $11,519,905 during the first quarter ended March 31, 2017.

 

Subscription receivable of the subsidiaries’ paid in capital

 

As of June 30, 2018 and December 31, 2017, the subscription receivable of the subsidiaries’ paid in capital (I JIU JIU and Ruixiang) was $51,289.

 

Reverse merger

 

On November 10, 2017, Jiucaitong, I JIU JIU Limited, a British Virgin Islands company (“I JIU JIU”), the holding company of Ruixiang Technology Group,Ltd. (“Rui Xiang”), and the shareholders of I JIU JIU entered into the Share Exchange Agreement, which closed on the same date (the “Exchange”). Pursuant to the terms of the Share Exchange Agreement, Jiucaitong exchanged 8,000,000 shares of their common stock for all of the outstanding capital stock of I JIU JIU with the result that I JIU JIU became a wholly owned subsidiary of Jiucaitong.

 

Pursuant to the Exchange, all of the issued and outstanding shares of I JIU JIU common stock were converted, at an exchange ratio of 160-for-1, into an aggregate of 8,000,000 shares of the Company or Jiucaitong, formerly known as Spirit International Inc. common stock and I JIU JIU became a wholly owned subsidiary of the Company. The holders of the Company’s common stock as of immediately prior to the Exchange held an aggregate of 5,110,000 shares and in connection with the Share Exchange Agreement, the Company’s former majority shareholder, Kimho Consultants Company Limited, (“Kimho” or the “Majority Shareholder”) entered into a share cancellation agreement with I JIU JIU’s stockholders whereby Kimho, owning an aggregate of 4,000,000 shares of the Company’s Common Stock agreed to cancel all its 4,000,000 shares of Common Stock in exchange of $440,000 paid by I JIU JIU’s stockholders (“Share Cancellation”).

 

There were 9,110,000 shares of common stocks issued and outstanding as of June 30, 2018 and December 31, 2017.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 11 - COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

The Company shares its principal office with four other affiliated companies in Chaoyang, Beijing. On October 21, 2015, the Company entered into a six-year lease (“Chaoyang Lease”) and the lease was subsequently transferred to Jiuxiang on August 12, 2016. The Chaoyang Lease started on October 21, 2015 and expires on October 20, 2021. Pursuant to the terms of the lease, Jiuxiang has agreed to pay a monthly rent of RMB 491,168 (approximately $74,000) for the first three years and RMB 540,534 (approximately $81,000) for the remaining three years. The Company recognizes rent expense on a straight-line basis over the terms of the leases. The rent expense allocated to the Company each month is in accordance to the number of employees occupied in the office space.

 

The Company operates its business in an office located at Xizhimen, Beijing, China. The Company entered into a lease agreement (“Xizhimen Lease”) on January 1, 2015 pursuant to which the Company agreed to pay $24,000 per month and the lease expired on May 31, 2017.

  

On May 22, 2017, the Company entered into another operating lease agreement in Beijing as the successor of the Xizhimen Lease. Pursuant to the terms of the agreement, the lease started from May 22, 2017 and expires on May 21, 2019 and the Company agreed to pay monthly rent of RMB 142,241 (approximately $20,000) from June 22, 2017 to May 21, 2019 with the first month rent free and monthly maintenance fee of RMB 15,318 (approximately $2,200) from May 21, 2017 to May 21, 2019. The Company recognizes rent expense and maintenance fee on a straight-line basis over the terms of the lease.

 

As of June 30, 2018, the Company was obligated under operating leases minimum rentals as follows:

 

  Allocated Lease *  Non-Cancellable Lease **  Total 
2018 $4,173  $274,884  $279,057 
2019  4,173   107,146   111,319 
2020  4,173   -   4,173 
2021  3,477   -   3,477 
2022  -   -   - 
Total minimum lease payments $15,996  $382,030  $398,026 

 

*-These are the Company’s portion of minimum lease payments allocated by the Company’s affiliated company, Jiuxiang, the leasee.
**-These are the minimum lease payments under the non-cancellable lease entered with a third party.
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Event
6 Months Ended
Jun. 30, 2018
Subsequent Event [Abstract]  
SUBSEQUENT EVENT

NOTE 12 – SUBSEQUENT EVENT

 

In July 2018, a related party of the Company, Jiuyuan, received an additional RMB 1,300,000 (approximately $0.2 million) under the June 2018 Loan from the Company and made RMB 2,570,000 repayment (approximately $0.4 million). Also, see Note 6 related to Note receivable – related party.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2018
Basis of Presentation and Summary of Significant Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP. This basis of accounting involves the application of accrual accounting and consequently, revenues and gains are recognized when earned, and expenses and losses are recognized when incurred. The Company’s financial statements are expressed in U.S. dollars.

 

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The unaudited condensed consolidated financial statements for the six months ended June 30, 2018 should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2017 and footnotes thereto included in the same document. The condensed consolidated balance sheet for the six months ended June 30, 2018 contained herein has been derived from the audited financial statements as of December 31, 2017 but does not include all disclosures required by U.S. GAAP.

Basis of Consolidation

Basis of Consolidation

 

The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries, I JIU JIU, Ruixiang, Jiucheng Consulting and its VIE, Beijing Jiucheng. All inter-company transactions and balances have been eliminated upon consolidation.

Use of Estimates and Assumptions

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with generally accepted accounting principles requires 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 period. Actual results could differ from those estimates. Significant estimates as of and during the periods ended June 30, 2018 and December 31, 2017 include the allowance for doubtful accounts, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, valuation of deferred tax assets and accruals for taxes due.

Financial Instrument

Financial Instrument

 

The carrying amount reported in the consolidated balance sheet for cash, accounts receivable, other receivables, accrued liabilities and other payables approximate fair value because of the immediate or short-term maturity of these financial instruments.

Cash and Cash Equivalents

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of six months or less when purchased to be cash equivalents. The Company maintains with various financial institutions in the PRC. At June 30, 2018 and December 31, 2017, cash balances held in PRC banks are uninsured. The Company has not experienced any losses in bank accounts and believes it is not exposed to any risks on its cash in bank accounts.

Restricted Cash

Restricted Cash

 

Cash that is deposited in the bank but restricted for a specific purpose and therefore not available for immediate and general use by the Company is classified as restricted cash, which is presented separately from cash and cash equivalents on the consolidated balance sheets. The deposited balance is included in the Company’s bank account for guarantee of certain business purpose under an agreement until being used for the designated purpose or withdrawn due to expiration of the guarantee. As of June 30, 2018 and December 31, 2017, the Company had a restricted cash balance of $181,283 and $184,437, respectively.

Property and Equipment

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation and impairment losses. Gains or losses on dispositions of property and equipment are included in operating income (loss). Major additions, renewals and improvements are capitalized, while maintenance and repairs are expensed as incurred.

 

Depreciation and amortization are provided over the estimated useful lives of the assets using the straight-line method from the time the assets are placed in service. Estimated useful lives are as follows, taking into account the assets’ estimated residual value:

 

Classification Estimated useful life
Computer and office equipment 3 years
Furniture 3 years
Vehicles 3 years
Advances from Customers

Advances from Customers

 

Advances from customers at June 30, 2018 and December 31, 2017 amounted to $275,903 and $114,191, respectively, and consist of prepayments from customers for services that have not been performed. The Company will recognize the deposits as revenue when the services have been performed in accordance with the Company’s revenue recognition policy.

Earnings per Share

Earnings per Share

 

Basic earnings per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income by the weighted-average number of common shares and dilutive potential common shares outstanding during the period.

 

For the six months ended June 30, 2018 and 2017, respectively, there were no outstanding securities or other contracts to issue common stock, such as options, warrants or conversion rights, which would have a dilutive effect on earnings per share.

Revenue Recognition

Revenue Recognition

 

The Company provides intermediary services to the personal loan borrowers and the financial products investors. The Company charges fees for the intermediary services to the personal loan borrowers.

 

Prior to July 2017, the revenue process started when an individual who had financing needs submitted the loan application to Beijing Hengjiu Investment Management Co., Ltd. (“Hengjiu”). Hengjiu, along with its sub-contractor, Zhongcheng Zhengxin (Beijing) Co., Ltd. (“Zhongcheng Zhengxin”), provided financial consulting services such as loan origination criteria checkup, risk assessment, and assessment/evaluation of vehicle collateral. Hengjiu is a related party which was 75% owned by Jiuyuan Investment Co., Ltd. (“Jiuyuan”), a shareholder of Beijing Jiucheng, and 25% owned by Xiangbin Meng, the Company’s Chairman. Zhongcheng Zhengxin is a third party who provides credit assessment services. Upon completion of the background check, Xiangbin Meng (“Meng”), the maker of the loan, entered into the loan agreement with the qualified loan borrowers and initiated the transfer of the cash to the borrowers or borrowers’ agents. The loan usually matures in six months and using borrowers’ vehicle as collateral.

 

After the borrowers received the fund transfer, the Company then packaged the debt claims of Meng into corresponding financial products and placed in its physical stores or on its on-line platform for sale. Investors of those financial products were able to choose the financial products that met their needs. Meng transfered his debt upon signing the debt transfer agreement with the financial products investors. The services were originally provided in physical stores in Beijing, Baoding, Hebei province and Weihai, Shandong province. Since April 2016, Beijing Jiucheng started to move majority of the business to its financial advisory on-line platform, Jiucaitong (www.9caitong.com). As less labor was required, in June 2016, Beijing Jiucheng shut down the physical stores in Baoding and Weihai.

 

Meng was responsible for making the loans, transferring the funds to the borrowers and collecting the service fees on behalf of all parties involved. Meng collected a portion of the service fees upfront and the rest on a monthly basis over the term of the loan from loan borrowers.

 

The Company recognizes revenue, net of value-added taxes in the periods in which the related services were performed provided that persuasive evidence of an arrangement exists, the amount of the service fee is fixed in the loan agreements, and collectability is reasonably assured. The revenue was recognized when the loan agreements were executed and the funds were transferred to the loan borrowers, based on the predetermined service fee percentage of the total loan principal over the term of the loan. According to the service fee allocation agreement, Beijing Jiucheng was entitled to a service fee of 1% of the loan principal per month before July 1, 2016 and 1.5% per month effective July 1, 2016 and thereafter as Beijing Jiucheng increased the loan management and risk assessment services that were originally done by Beijing Hengjiu since May 2016.

 

Since July 2017, the Company officially launched the bank depository system and is providing intermediary services for all registered users, including consultation, information and all kinds of delegation service. The Company started to charge the service fee from the amount borrowed by the borrower at the difference between the borrowers’ actual rate and the investors’ yield rate. Upon launching of the bank depository system, Meng no longer serves as the maker of the loan for the borrowers who use Jiucaitong on-line platform. The borrowers and investors enter into loan agreements directly with the online platform, Jiucaitong. Since December 2017, the online platform also provides loan intermediary services to the restaurant owners which operate the same as the rest of the borrowers except for that the restaurant owners use restaurants as collateral.

 

Allowance for Doubtful Accounts

 

Service fee receivable is recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. The Company makes estimates for the allowance for doubtful accounts based upon the assessment of various factors, including historical, experience, the age of the accounts receivable balances, credit quality of the loan borrowers, current economic conditions, and other factors that may affect the borrowers’ ability to pay. No allowance has been provided for at June 30, 2018 and December 31, 2017 as the service fees have been fully collected from the loan borrowers during the respective periods or subsequently.

Advertising Expense

Advertising Expense

 

The Company expenses advertising costs as they incurred. Total advertising expenses were $85,302  and $35,112 for the three months ended June 30, 2018 and 2017, respectively. Total advertising expenses were $116,907 and $65,877 for the six months ended June 30, 2018 and 2017, respectively, and have been included as part of selling expenses in the accompanying statements of operations and comprehensive income.

Value-added Taxes

Value-added Taxes

 

Pursuant to the PRC tax laws, in case of the financial services provided, generally the value added tax (“VAT”) rate is 3% of the gross sales for small scale VAT payer and 6% of the gross sales for general VAT payer. The accrued VAT is recorded as VAT payables in the consolidated financial statements. VAT is reported as a liability when incurred.

Income Taxes

Income Taxes

 

The Company accounts for income taxes in accordance with U.S. GAAP for income taxes. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes.

 

The charge for taxation is based on the results for the fiscal year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred taxes are accounted for using the asset and liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. Deferred tax liabilities are recognized for all future taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable income will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled.

 

Deferred tax is charged or credited in the operations of statement, except when it is related to items credited or charged directly to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted by the U.S. government which included a wide range of tax reform affecting businesses including the corporate tax rates, international tax provisions, tax credits and deduction with majority of the tax provision effective after December 31, 2017.

 

Certain activities conducted in foreign jurisdictions may result in the imposition of U.S. corporate income taxes on the Company when its subsidiaries, controlled foreign corporations (“CFCs”), generate income that is subject to Subpart F or GILTI under the U.S. Internal Revenue Code beginning after December 31, 2017.

 

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. As of June 30, 2018 and December 31, 2017, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

Foreign Currency Translation

Foreign Currency Translation

 

The functional currency of the Company’s operations in the PRC is the Chinese Yuan or Renminbi (“RMB”). The financial statements are translated to U.S. dollars using the period end rates of exchange for assets and liabilities, equity is translated at historical exchange rates, and average rates of exchange (for the period) are used for revenues and expenses and cash flows. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income / loss. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

 

All of the Company’s revenue transactions are transacted in its functional currency. The Company does not enter into any material transaction in foreign currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.

 

Asset and liability accounts at June 30, 2018 and December 31, 2017 were translated at 6.6195 RMB to $1.00 and at 6.5063 RMB to $1.00, respectively, which were the exchange rates on the balance sheet dates. Equity accounts were stated at their historical rates. The average translation rates applied to the statements of operations for the six months ended June 30, 2018 and 2017 were 6.3701 RMB and 6.8748 RMB to $1.00, respectively. Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate.

Credit Risk and Concentration

Credit Risk and Concentration

 

The Company’s financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash equivalents. The majority of cash equivalents consists of short-term money market funds, which are managed by reputable financial institutions.

 

The Company performs ongoing credit evaluations of borrowers, and generally do not require additional collateral except for personal vehicles. No borrowers represented 10% or more of total revenue for the six months ended June 30, 2018 and 2017.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

 

Other comprehensive income (loss) refers to revenues, expenses, gains and losses that under generally accepted accounting principles are included in comprehensive income (loss) but are excluded from net income (loss) as these amounts are recorded directly as an adjustment to stockholders’ equity. The Company’s other comprehensive income (loss) is comprised of foreign currency translation adjustments.

Fair Value Measurements

Fair Value Measurements

 

The Company applies the provisions of ASC Subtopic 820-10,” Fair Value Measurements”, for fair value measurements of financial assets and financial liabilities and for fair value measurements of non-financial items that are recognized or disclosed at fair value in the financial statements.  ASC 820 also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

 

ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

 

  Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
     
  Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
     
  Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

 

There were no assets or liabilities measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 as of June 30, 2018 and December 31, 2017.

Related Parties

Related Parties

 

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

Revenue Recognition: In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

 

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

  

In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delays the effective date of ASU 2014-09 by one year. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. In March 2016, the FASB issued Accounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (ASU 2016-08) which clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers. The Company adopted the new standard effective January 1, 2018. The new standard also 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 (the modified retrospective method). The Company elected the modified retrospective approach. In preparation for adoption of the new guidance, we reviewed representative samples of contracts and other agreements we had entered into with our customers and evaluated the five-step model specified by the new revenue standards. The Company completed its analysis and identified changes with respect to the timing of revenue recognition for its revenue streams and determined the impact of that guidance on revenue recognition. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements.   


Leases: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. Early application is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial application, with an option to elect to use certain transition relief. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

 

Statement of Cash Flows: In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) to clarify whether the following items should be categorized as operating, investing or financing in the statement of cash flows: (i) debt prepayments and extinguishment costs, (ii) settlement of zero-coupon debt, (iii) settlement of contingent consideration, (iv) insurance proceeds, (v) settlement of corporate-owned life insurance (COLI) and bank-owned life insurance (BOLI) policies, (vi) distributions from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) receipts and payments with aspects of more than one class of cash flows. The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The amendments are an improvement to GAAP because they provide guidance for each of the eight issues, thereby reducing the current and potential future diversity in practice described above. ASU 2016-15 is effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements.   

 

Statement of Cash Flows: In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): “Restricted Cash”(“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017 and early adoption is permitted. The adoption of this guidance will result in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activity, which are currently recognized in other financing activities, on the Statements of Consolidated Cash Flows. Furthermore, an additional reconciliation will be required to reconcile Cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets to sum to the total shown in the Statements of Consolidated Cash Flows. This standard does not have a material impact on the Company’s interim condensed consolidated financial statements.   

 

Business Combination: In January 2017, the FASB issued Accounting Standards Update No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (ASU 2017-01), which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. The Company has adopted this guidance effective in the first quarter of 2018 on a prospective basis. This standard does not have a material impact on the consolidated financial statements until the Company plans to have an acquisition or deconsolidation in the future.

 

Revenue Recognition and Leases: In September 2017, the FASB issued ASU 2017-13, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842). The main objective of this pronouncement is to clarify the effective date of the adoption of ASC Topic 606 and ASC Topic 842 and the definition of public business entity as stipulated in ASU 2014-09 and ASU 2016-02. ASU 2014-09 provides that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. ASU 2016-12 requires that “a public business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020”. ASU 2017-13 clarifies that the SEC would not object certain public business entities to elect to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13, however, limits such election to certain public business entities that “otherwise would not meet the definition of a public business entity except for a requirement to include or inclusion of its financial statements or financial information in another entity’s filings with the SEC”. The Company elected to adopt ASC Topic 606 and ASC Topic 842 beginning January 1, 2018 and January 1, 2019, respectively. No material impact on the consolidated financial statements.

 

Stock Compensation: In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvement to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which is intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees. Under ASU 2018-07, most of the guidance on share-based payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. ASU 2018-07 is effective for interim and annual reporting periods beginning after December 15, 2018. The Company does not expect such adoption to have a material impact on our consolidated financial statements.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2018
Basis of Presentation and Summary of Significant Accounting Policies [Abstract]  
Summary of estimated useful lives
Classification Estimated useful life
Computer and office equipment 3 years
Furniture 3 years
Vehicles 3 years
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Tables)
6 Months Ended
Jun. 30, 2018
Property and Equipment [Abstract]  
Schedule of property and equipment
  June 30,  December 31, 
  2018  2017 
Office furniture $23,742  $24,155 
Computer and office equipment  41,215   41,932 
Vehicle  108,849   110,743 
Total property and equipment  173,806   176,830 
Less: accumulated depreciation  (156,634)  (141,497)
Total $17,172  $35,333
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Tables)
6 Months Ended
Jun. 30, 2018
Related Party Transactions [Abstract]  
Schedule of due from related parties
  June 30,
2018
  December 31,
2017
 
Xiangbin Meng – Fees Receivable $145,543  $3,444 
Jiuyuan  19,828   20,204 
Beijing Hengjiu  50,618   51,653 
Total $215,989  $75,301
Schedule of due to related parties
  June 30,
2018
  December 31,
2017
 
Jiucheng Huijin $2,471  $10,199 
Beijing Jiuyuan  2,418   2,460 
Jiuxiang  5,983   6,087 
Yangming  4,851   4,936 
Total $15,723  $23,682
Schedule of due to (from) related party activities
    Jiuyuan     Meng     Meng - Receivable     Yasheng     Jiucheng Huijin     Beijing Jiuyuan     Jiuxiang     Beijing Hengjiu     Yangming     Total  
Balance due (from) to related parties, December 31, 2017   $ (20,204 )   $ -     $ (3,444 )   $ -     $ 10,199     $ 2,460     $ 6,087     $ (51,653 )   $ 4,936     $ (51,619 )
Operating activities - Due from related parties     31       -       (147,724 )     -       -       -       -       157       -       (147,536 )
Financing activities - Repayments to related parties     -       -       -       -       (7,849 )     -       -       -       -       (7,849 )
Effect of foreign currency exchange     345       -       5,625       -       121       (42 )     (104 )     878       (85 )     6,738  
Balance due (from) to related parties, June 30, 2018   $ (19,828 )   $ -     $ (145,543 )   $ -     $ 2,471     $ 2,418     $ 5,983     $ (50,618 )   $ 4,851     $ (200,266 )

 

    Jiuyuan     Meng     Meng - Receivable     Yasheng     Jiucheng Huijin     Beijing Jiuyuan     Jiuxiang     Beijing Hengjiu     Yangming     Total  
Balance due (from) to related parties, December 31, 2016   $ 378,950     $ (11,311,447 )   $ (1,877,130 )   $ 8,917     $ 5,867     $ 2,304     $ 1,263     $ -     $ -     $ (12,791,276 )
Operating activities - Due from related parties     -       -       554,662       -       -       -       -       -       -       554,662  
Operating activities - Due to related parties     17,043       -       -       -       -       -       -       -       -       63,498  
Investing activities - Working capital advances to related parties     (9,311,772 )     (7,082 )     -       -       44,453       -       2,002       -       -       (9,318,854 )
Investing activities - Repayments from related parties     5,481,020       993,675       -       -       -       -       -       -       -       6,474,695  
Financing activities - Advances from related parties     4,004,754       -       -       -       -       -       -                       4,004,754  
Financing activities - Repayments made to related parties     (389,450 )     -       -       -       -       -       -       -       -       (389,450 )
Rent deposit returned and paid directly to related party by landlord     -       (160,013 )     -               -       -       -                       (160,013 )
Non-cash capital reduction     8,145,748       3,491,035       -       -       -       -       -       -       -       11,636,783  
Shareholders transfer pursuant to debt transfer agreement     (8,195,280 )     6,971,805       1,223,475       -       -       -       -       -       -       -  
Effect of foreign currency exchange     5,639       (117,689 )     (20,677 )     215       755       56       59       -       -       (131,642 )
Balance due (from) to related parties, June 30, 2017   $ 136,652     $ (139,716 )   $ (119,670 )   $ 9,132     $ 51,075     $ 2,360     $ 3,324     $ -     $ -     $ (56,843 )
Schedule of loan receivable related party
    June 30,
2018
    December 31,
2017
 
Loans principal receivable   $ 2,583,277     $           -  
Interest receivable     18,619       -  
Repayment     (168,895 )     -  
Total   $ 2,433,001     $ -
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
Other Payable (Tables)
6 Months Ended
Jun. 30, 2018
Other Payable [Abstract]  
Summary of other payable
  June 30,
2018
  December 31,
2017
 
Social security and provident fund payable $354,425  $44,254 
Salary payable  139,528   64,653 
Other levies  1,986   24,186 
Total $495,939  $133,093
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
Equity Transactions (Tables)
6 Months Ended
Jun. 30, 2018
Equity Transactions [Abstract]  
Summary of capital reduction to shareholders

In RMB:

 

  Formation  Capital Reduction  After Reduction  Ownership 
Meng  30,000,000   (24,000,000)  6,000,000   30%
Jiuyuan  70,000,000   (56,000,000)  14,000,000   70%
   100,000,000   (80,000,000)  20,000,000   100%

 

In USD:

 

  Formation  Capital Reduction  After Reduction  Ownership 
Meng  4,800,811   (3,455,971)  1,344,840   30%
Jiuyuan  11,201,893   (8,063,934)  3,137,959   70%
   16,002,704   (11,519,905)  4,482,799   100%
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies (Tables)
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies [Abstract]  
Schedule of operating leases minimum rentals
  Allocated Lease *  Non-Cancellable Lease **  Total 
2018 $4,173  $274,884  $279,057 
2019  4,173   107,146   111,319 
2020  4,173   -   4,173 
2021  3,477   -   3,477 
2022  -   -   - 
Total minimum lease payments $15,996  $382,030  $398,026 

 

*-These are the Company’s portion of minimum lease payments allocated by the Company’s affiliated company, Jiuxiang, the leasee.
**-These are the minimum lease payments under the non-cancellable lease entered with a third party.
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
Nature of Operations (Details) - shares
6 Months Ended
Nov. 10, 2017
Jun. 30, 2018
Nature of Operations (Textual)    
Entity Incorporation, Date of Incorporation   Mar. 10, 2014
Entity Incorporation, State Country Name   Beijing Jiucheng was incorporated in Beijing, China on January 13, 2012 under the laws of the PRC.
Reverse stock split   160-for-1
Common shares of capital stock issued 8,000,000 8,000,000
Reverse merger, description  

The holders of Spirit International Inc’s common stock as of immediately prior to the Exchange held an aggregate of 5,110,000 shares and in connection with the Share Exchange Agreement, the Company’s majority shareholder, Kimho Consultants Company Limited, (“Kimho” or the “Majority Shareholder”) entered into a share cancellation agreement with I JIU JIU’s stockholders whereby Kimho, owning an aggregate of 4,000,000 shares of the Company’s Common Stock agreed to cancel all its 4,000,000 shares of Common Stock in exchange of $440,000 paid by I JIU JIU’s stockholders (“Share Cancellation”).

XML 37 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Details)
6 Months Ended
Jun. 30, 2018
Computer and office equipment [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful life (in years) 3 years
Furniture [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful life (in years) 3 years
Vehicles [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful life (in years) 3 years
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Basis of Presentation and Summary of Significant Accounting Policies (Details Textual) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Basis of Presentation and Summary of Significant Accounting Policies (Textual)          
Restricted cash balance $ 181,283   $ 181,283   $ 184,437
Advances from customers 275,903   $ 275,903   $ 114,191
Distribution of equity method investment, description     Hengjiu is a related party which was 75% owned by Jiuyuan Investment Co., Ltd. ("Jiuyuan"), a shareholder of Beijing Jiucheng, and 25% owned by Xiangbin Meng, the Company's Chairman.    
Percentage of service fees, description     According to the service fee allocation agreement, Beijing Jiucheng was entitled to a service fee of 1% of the loan principal per month before July 1, 2016 and 1.5% per month effective July 1, 2016 and thereafter as Beijing Jiucheng increased the loan management and risk assessment services that were originally done by Beijing Hengjiu since May 2016.    
Description of tax examination.     The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination.    
Advertising expenses $ 85,302 $ 35,112 $ 116,907 $ 65,877  
Description of value added taxes    

In case of the financial services provided, generally the value added tax (“VAT”) rate is 3% of the gross sales for small scale VAT payer and 6% of the gross sales for general VAT payer.

   
Foreign currency translation adjustment, description    

Asset and liability accounts at June 30, 2018 and December 31, 2017 were translated at 6.6195 RMB to $1.00 and at 6.5063 RMB to $1.00, respectively, which were the exchange rates on the balance sheet dates. Equity accounts were stated at their historical rates. The average translation rates applied to the statements of operations for the six months ended June 30, 2018 and 2017 were 6.3701 RMB and 6.8748 RMB to $1.00, respectively.

   
Concentration risk, percentage     10.00% 10.00%  
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
Other Receivable (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Other Receivable (Textual)    
Other receivable amount $ 905 $ 19,327
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.10.0.1
Security Deposit (Details)
6 Months Ended
Jun. 30, 2018
USD ($)
Jun. 30, 2018
CNY (¥)
Dec. 31, 2017
USD ($)
Security Deposit (Textual)      
Security deposit $ 71,407  
Beijing Jiucheng [Member]      
Security Deposit (Textual)      
Security deposit $ 75,000 ¥ 472,678  
Lease expires date May 21, 2019    
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Property, Plant and Equipment [Line Items]    
Total property and equipment $ 173,806 $ 176,830
Less: accumulated depreciation (156,634) (141,497)
Total 17,172 35,333
Office furniture [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 23,742 24,155
Computer and office equipment [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment 41,215 41,932
Vehicles [Member]    
Property, Plant and Equipment [Line Items]    
Total property and equipment $ 108,849 $ 110,743
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Details Textual) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Property and Equipment (Textual)        
Depreciation expenses $ 9,124 $ 12,925 $ 18,244 $ 27,838
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Related Party Transaction [Line Items]    
Amount due from related parties $ 215,989 $ 75,301
Xiangbin Meng - Fees Receivable [Member]    
Related Party Transaction [Line Items]    
Amount due from related parties 145,543 3,444
Jiuyuan [Member]    
Related Party Transaction [Line Items]    
Amount due from related parties 19,828 20,204
Beijing Hengjiu [Member]    
Related Party Transaction [Line Items]    
Amount due from related parties $ 50,618 $ 51,653
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Details 1) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Related Party Transaction [Line Items]    
Amount due to related parties $ 15,723 $ 23,682
Jiucheng Huijin [Member]    
Related Party Transaction [Line Items]    
Amount due to related parties 2,471 10,199
Beijing Jiuyuan [Member]    
Related Party Transaction [Line Items]    
Amount due to related parties 2,418 2,460
Jiuxiang [Member]    
Related Party Transaction [Line Items]    
Amount due to related parties 5,983 6,087
Yangming [Member]    
Related Party Transaction [Line Items]    
Amount due to related parties $ 4,851 $ 4,936
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Details 2) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Related Party Transaction [Line Items]    
Beginning balance $ (51,619) $ (12,791,276)
Operating activities - Due from related parties 147,535 (554,662)
Operating activities - Due to related parties 63,498
Investing activities - Working capital advances to related parties 9,318,854
Investing activities - Repayments from related parties 6,474,695
Financing activities - Advances from related parties 4,004,754
Financing activities - Repayments to related parties (7,849) (389,450)
Rent deposit returned and paid directly to related party by landlord   (160,013)
Non-cash capital reduction   11,636,783
Shareholders transfer pursuant to debt transfer agreement  
Effect of foreign currency exchange 6,738 (131,642)
Ending balance (200,266) (56,843)
Jiuyuan [Member]    
Related Party Transaction [Line Items]    
Beginning balance (20,204) 378,950
Operating activities - Due from related parties 31
Operating activities - Due to related parties   17,043
Investing activities - Working capital advances to related parties   (9,311,772)
Investing activities - Repayments from related parties   5,481,020
Financing activities - Advances from related parties   4,004,754
Financing activities - Repayments to related parties (389,450)
Rent deposit returned and paid directly to related party by landlord  
Non-cash capital reduction   8,145,748
Shareholders transfer pursuant to debt transfer agreement   (8,195,280)
Effect of foreign currency exchange 345 5,639
Ending balance (19,828) 136,652
Meng [Member]    
Related Party Transaction [Line Items]    
Beginning balance (11,311,447)
Operating activities - Due from related parties
Operating activities - Due to related parties  
Investing activities - Working capital advances to related parties   (7,082)
Investing activities - Repayments from related parties   993,675
Financing activities - Advances from related parties  
Financing activities - Repayments to related parties
Rent deposit returned and paid directly to related party by landlord   (160,013)
Non-cash capital reduction   3,491,035
Shareholders transfer pursuant to debt transfer agreement   6,971,805
Effect of foreign currency exchange (117,689)
Ending balance (139,716)
Meng - Receivable [Member]    
Related Party Transaction [Line Items]    
Beginning balance (3,444) (1,877,130)
Operating activities - Due from related parties (147,724) 554,662
Operating activities - Due to related parties  
Investing activities - Working capital advances to related parties  
Investing activities - Repayments from related parties  
Financing activities - Advances from related parties  
Financing activities - Repayments to related parties
Rent deposit returned and paid directly to related party by landlord  
Non-cash capital reduction  
Shareholders transfer pursuant to debt transfer agreement   1,223,475
Effect of foreign currency exchange 5,625 (20,677)
Ending balance (145,543) (119,670)
Yasheng [Member]    
Related Party Transaction [Line Items]    
Beginning balance 8,917
Operating activities - Due from related parties
Operating activities - Due to related parties  
Investing activities - Working capital advances to related parties  
Investing activities - Repayments from related parties  
Financing activities - Advances from related parties  
Financing activities - Repayments to related parties
Rent deposit returned and paid directly to related party by landlord  
Non-cash capital reduction  
Shareholders transfer pursuant to debt transfer agreement  
Effect of foreign currency exchange 215
Ending balance 9,132
Jiucheng Huijin [Member]    
Related Party Transaction [Line Items]    
Beginning balance 10,199 5,867
Operating activities - Due from related parties
Operating activities - Due to related parties  
Investing activities - Working capital advances to related parties   44,453
Investing activities - Repayments from related parties  
Financing activities - Advances from related parties  
Financing activities - Repayments to related parties (7,849)
Rent deposit returned and paid directly to related party by landlord  
Non-cash capital reduction  
Shareholders transfer pursuant to debt transfer agreement  
Effect of foreign currency exchange 121 755
Ending balance 2,471 51,075
Beijing Jiuyuan [Member]    
Related Party Transaction [Line Items]    
Beginning balance 2,460 2,304
Operating activities - Due from related parties
Operating activities - Due to related parties  
Investing activities - Working capital advances to related parties  
Investing activities - Repayments from related parties  
Financing activities - Advances from related parties  
Financing activities - Repayments to related parties
Rent deposit returned and paid directly to related party by landlord  
Non-cash capital reduction  
Shareholders transfer pursuant to debt transfer agreement  
Effect of foreign currency exchange (42) 56
Ending balance 2,418 2,360
Jiuxiang [Member]    
Related Party Transaction [Line Items]    
Beginning balance 6,087 1,263
Operating activities - Due from related parties
Operating activities - Due to related parties  
Investing activities - Working capital advances to related parties   2,002
Investing activities - Repayments from related parties  
Financing activities - Advances from related parties  
Financing activities - Repayments to related parties
Rent deposit returned and paid directly to related party by landlord  
Non-cash capital reduction  
Shareholders transfer pursuant to debt transfer agreement  
Effect of foreign currency exchange (104) 59
Ending balance 5,983 3,324
Beijing Hengjiu [Member]    
Related Party Transaction [Line Items]    
Beginning balance (51,653)
Operating activities - Due from related parties 157
Operating activities - Due to related parties  
Investing activities - Working capital advances to related parties  
Investing activities - Repayments from related parties  
Financing activities - Advances from related parties  
Financing activities - Repayments to related parties
Rent deposit returned and paid directly to related party by landlord  
Non-cash capital reduction  
Shareholders transfer pursuant to debt transfer agreement  
Effect of foreign currency exchange 878
Ending balance (50,618)
Yangming [Member]    
Related Party Transaction [Line Items]    
Beginning balance 4,936
Operating activities - Due from related parties
Operating activities - Due to related parties  
Investing activities - Working capital advances to related parties  
Investing activities - Repayments from related parties  
Financing activities - Advances from related parties  
Financing activities - Repayments to related parties
Rent deposit returned and paid directly to related party by landlord  
Non-cash capital reduction  
Shareholders transfer pursuant to debt transfer agreement  
Effect of foreign currency exchange (85)
Ending balance $ 4,851
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Details 3) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Related Party Transaction [Line Items]    
Loans principal receivable $ 2,583,277
Interest receivable 18,619
Repayment (168,895)
Total $ 2,433,001
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Details Textual)
1 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Jun. 11, 2018
USD ($)
Apr. 23, 2018
USD ($)
Oct. 21, 2015
USD ($)
Oct. 21, 2015
CNY (¥)
Jun. 30, 2018
USD ($)
Jun. 30, 2017
USD ($)
Jun. 30, 2018
USD ($)
Jun. 30, 2018
CNY (¥)
Jun. 30, 2017
USD ($)
Dec. 31, 2017
USD ($)
Jun. 30, 2018
CNY (¥)
Jun. 11, 2018
CNY (¥)
Apr. 23, 2018
CNY (¥)
Related Party Transactions (Textual)                          
Owners percentage         100.00%   100.00%       100.00%    
Gain from extinguishment of liability         $ 3 $ 14,302          
Payment for monthly rental fee     $ 81,000 ¥ 540,534                  
General and administrative expenses paid         467,058 $ 204,500 874,192   499,248        
Working capital advances to related parties               9,318,854        
Loan agreement amount         200,000   200,000            
Meng [Member]                          
Related Party Transactions (Textual)                          
Working capital advances to related parties                 (7,082)        
Meng [Member] | Service revenue [Member]                          
Related Party Transactions (Textual)                          
Due from related party         145,543   145,543     $ 3,444      
Jiuyuan [Member]                          
Related Party Transactions (Textual)                          
Repayment of debt received             0   5,481,020        
Due from related party         $ 19,828   $ 19,828     20,204      
Owners percentage         70.00%   70.00%       70.00%    
Payment for working capital             $ 31   17,043        
Working capital advance received             0   4,004,754        
Total repayments             168,895   389,450        
Working capital advances to related parties                 (9,311,772)        
Loan agreement amount $ 500,000 $ 2,270,000     $ 2,684,416   2,684,416       ¥ 17,100,000 ¥ 3,400,000 ¥ 15,000,000
Percentage of interest rate 0.3624% 0.3625%                   0.3624% 0.3625%
Loan agreement terms   6 months                      
Maturity date Dec. 11, 2018                        
Beijing Hengjiu [Member]                          
Related Party Transactions (Textual)                          
Working capital advances             157   0        
Due from related party         50,618   $ 50,618     51,653      
Related party owned rate, description             Beijing Hengjiu is 75% owned by Jiuyuan and 25% owned by Meng. Beijing Hengjiu is 75% owned by Jiuyuan and 25% owned by Meng.          
Working capital advances to related parties                        
Yasheng [Member]                          
Related Party Transactions (Textual)                          
Working capital advances to related parties                        
Jiucheng Huijin [Member]                          
Related Party Transactions (Textual)                          
Due to related party         $ 2,471   $ 2,471     10,199      
Related party owned rate, description             Jiucheng Huijin is 30% owned by Meng. Jiucheng Huijin is 30% owned by Meng.          
Payment for monthly rental fee             $ 3,600 ¥ 25,000          
Working capital advances to related parties                 44,453        
Beijing Jiuyuan [Member]                          
Related Party Transactions (Textual)                          
Related party owned rate, description             Beijing Jiuyuan is 51% owned by Meng. Beijing Jiuyuan is 51% owned by Meng.          
Lease expires date             May 21, 2019 May 21, 2019          
Rent expense             $ 2,418     2,460      
Working capital advances to related parties                        
Jiuxiang [Member]                          
Related Party Transactions (Textual)                          
Related party owned rate, description             Jiuxiang is 75% owned by Jiuyuan. Jiuxiang is 75% owned by Jiuyuan.          
Payment for monthly rental fee     $ 74,000 ¥ 491,168                  
Rent expense             $ 5,983     6,087      
Working capital advances to related parties                 2,002        
Yangming [Member]                          
Related Party Transactions (Textual)                          
Related party owned rate, description             Yangming owns 30% of the Jiucaitong Group and subsidiaries Yangming owns 30% of the Jiucaitong Group and subsidiaries          
General and administrative expenses paid             $ 4,851     $ 4,936      
Working capital advances to related parties                        
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.10.0.1
Other Payable (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Other Payable [Abstract]    
Social security and provident fund payable $ 354,425 $ 44,254
Salary payable 139,528 64,653
Other levies 1,986 24,186
Total $ 495,939 $ 133,093
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.10.0.1
VAT Payable (Details) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Vat Payable (Textual)      
VAT payable $ 15,526   $ 195,308
Percentage of revenue 10.00% 10.00%  
Revenue [Member]      
Vat Payable (Textual)      
Percentage of revenue 6.00%    
Percentage of car leasing 3.00%    
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.10.0.1
Statutory Reserve (Details)
6 Months Ended
Jun. 30, 2018
Statutory Reserve (Textual)  
Statutory surplus reserve fund, description

Subject to certain cumulative limits, the “statutory surplus reserve fund” requires annual appropriations of 10% of after-tax profit until the aggregated appropriations reach 50% of the registered capital (as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) at each year-end).

XML 51 R40.htm IDEA: XBRL DOCUMENT v3.10.0.1
Equity Transactions (Details) - 6 months ended Jun. 30, 2018
USD ($)
CNY (¥)
Formation $ 16,002,704 ¥ 100,000,000
Capital Reduction (11,519,905) (80,000,000)
After Reduction $ 4,482,799 ¥ 20,000,000
Ownership percentage 100.00% 100.00%
Owners percentage 100.00% 100.00%
Meng [Member]    
Formation $ 4,800,811 ¥ 30,000,000
Capital Reduction (3,455,971) (24,000,000)
After Reduction $ 1,344,840 ¥ 6,000,000
Ownership percentage 30.00% 30.00%
Owners percentage 30.00% 30.00%
Jiuyuan [Member]    
Formation $ 11,201,893 ¥ 70,000,000
Capital Reduction (8,063,934) (56,000,000)
After Reduction $ 3,137,959 ¥ 14,000,000
Ownership percentage 70.00% 70.00%
Owners percentage 70.00% 70.00%
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.10.0.1
Equity Transactions (Details Textual)
6 Months Ended
Nov. 10, 2017
shares
Jun. 30, 2018
USD ($)
shares
Jun. 30, 2018
CNY (¥)
shares
Dec. 31, 2017
USD ($)
shares
Mar. 31, 2017
USD ($)
Feb. 28, 2017
USD ($)
Feb. 28, 2017
CNY (¥)
Feb. 15, 2017
USD ($)
Feb. 15, 2017
CNY (¥)
Dec. 31, 2016
USD ($)
Equity Transactions (Textual)                    
Reverse merger description  
The holders of the Company’s common stock as of immediately prior to the Exchange held an aggregate of 5,110,000 shares and in connection with the Share Exchange Agreement, the Company’s former majority shareholder, Kimho Consultants Company Limited, (“Kimho” or the “Majority Shareholder”) entered into a share cancellation agreement with I JIU JIU’s stockholders whereby Kimho, owning an aggregate of 4,000,000 shares of the Company’s Common Stock agreed to cancel all its 4,000,000 shares of Common Stock in exchange of $440,000 paid by I JIU JIU’s stockholders (“Share Cancellation”).
               
Reduction contributed capital on shareholders               $ 4,482,799 ¥ 20,000,000  
Common shares of capital stock issued 8,000,000 8,000,000                
Reverse stock split   160-for-1                
Common stock, authorized   75,000,000 75,000,000 75,000,000            
Subscription receivable | $   $ 51,289   $ 51,289            
Common stock, issued   9,110,000 9,110,000 9,110,000            
Common stock, outstanding   9,110,000 9,110,000 9,110,000            
Meng [Member]                    
Equity Transactions (Textual)                    
Contributed capital amount   $ 4,800,811 ¥ 30,000,000     $ 8,112,967 ¥ 56,340,519      
Reduction contributed capital on shareholders | $         $ 11,519,905         $ 0
Jiuyuan [Member]                    
Equity Transactions (Textual)                    
Contributed capital amount   11,201,893 70,000,000              
Beijing Jiucheng [Member]                    
Equity Transactions (Textual)                    
Contributed capital amount   $ 16,002,704 ¥ 100,000,000              
Reduction contributed capital on shareholders               $ 16,002,704 ¥ 100,000,000  
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies (Details)
Jun. 30, 2018
USD ($)
Operating Lease Type [Line Items]  
2018 $ 279,057
2019 111,319
2020 4,173
2021 3,477
2022
Total minimum lease payments 398,026
Allocated Lease [Member]  
Operating Lease Type [Line Items]  
2018 4,173 [1]
2019 4,173 [1]
2020 4,173 [1]
2021 3,477 [1]
2022 [1]
Total minimum lease payments 15,996 [1]
Non-Cancellable Lease [Member]  
Operating Lease Type [Line Items]  
2018 274,884 [2]
2019 107,146 [2]
2020 [2]
2021 [2]
2022 [2]
Total minimum lease payments $ 382,030 [2]
[1] These are the Company's portion of minimum lease payments allocated by the Company's affiliated company, Jiuxiang, the leasee.
[2] These are the minimum lease payments under the non-cancellable lease entered with a third party.
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies (Details Textual)
1 Months Ended
Jan. 01, 2015
USD ($)
May 22, 2017
USD ($)
May 22, 2017
CNY (¥)
Oct. 21, 2015
USD ($)
Oct. 21, 2015
CNY (¥)
Commitments and Contingencies (Textual)          
Payment for monthly rent       $ 81,000 ¥ 540,534
Chaoyang Lease [Member]          
Commitments and Contingencies (Textual)          
Lease expires date       Oct. 20, 2021 Oct. 20, 2021
Operating lease term       6 years 6 years
Jiuxiang [Member]          
Commitments and Contingencies (Textual)          
Payment for monthly rent       $ 74,000 ¥ 491,168
Xizhimen Lease [Member]          
Commitments and Contingencies (Textual)          
Lease expires date May 31, 2017 May 21, 2019 May 21, 2019    
Payment for monthly rent   $ 20,000 ¥ 142,241    
Payment of lease amount $ 24,000        
Monthly maintenance fee   $ 2,200 ¥ 15,318    
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Event (Details) - 1 months ended Jul. 31, 2018 - Jiuyuan [Member] - Subsequent Event [Member]
$ in Millions
USD ($)
CNY (¥)
Subsequent Event (Textual)    
Loan amount $ 0.2 ¥ 1,300,000
Repayment of loan $ 0.4 ¥ 2,570,000
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