Related Party Transactions

6 Months Ended

Jun. 30, 2018

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		$	-