Consumer Capital Group, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.2 - CERTIFICATION - Consumer Capital Group, Inc.	f10q0618ex32-2_consumercap.htm
EX-32.1 - CERTIFICATION - Consumer Capital Group, Inc.	f10q0618ex32-1_consumercap.htm
EX-31.2 - CERTIFICATION - Consumer Capital Group, Inc.	f10q0618ex31-2_consumercap.htm
EX-31.1 - CERTIFICATION - Consumer Capital Group, Inc.	f10q0618ex31-1_consumercap.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2018

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

For the transition period from ___________ to ___________

Commission File Number: 000-54998

CONSUMER CAPITAL GROUP INC.

(Exact name of registrant as specified in its charter)

Delaware		26-2517432
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

136-82 39th Ave, 4th Floor, Unit B Flushing, New York		11354
(Address of principal executive offices)		(Zip Code)

	(646) 346-3735
	(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
(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 issuer’s classes of common stock, as of the latest practicable date: As of August 14, 2018, there were 27,208,849 shares of common stock issued and outstanding.

CONSUMER CAPITAL GROUP, INC.

QUARTERLY REPORT ON FORM 10-Q

June 30, 2018

TABLE OF CONTENTS

		PAGE

PART I	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50

Item 4.	Controls and Procedures	50

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	51

Item 1A.	Risk Factors	51

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51

Item 3.	Defaults Upon Senior Securities	51

Item 4.	Mine Safety Disclosures	51

Item 5.	Other Information	51

Item 6.	Exhibits	51

SIGNATURES		52

USE OF CERTAIN DEFINED TERMS

In this Report, unless otherwise noted or as the context otherwise requires: “the Company,” “we,” “us,” and “our” refers to the combined company Consumer Capital Group, Inc. and its subsidiaries and variable interest entities.

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (IN U.S. $)

	June 30,		December 31,
	2018		2017
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,491,515	$	725,774
Loans receivable, net (Note 5)		9,715,087		-
Prepaid expense (Note 4)		83,695		58,225
Other receivables (Note 6)		34,601		31,136
Short-term investment (Note 8)		-		461,115

Total current assets		11,324,898		1,276,250

Non-current assets:
Property and equipment, net (Note 7)		71,564		83,184

Total non-current assets		71,564		83,184

Total Assets	$	11,396,462	$	1,359,434

See accompanying notes to the condensed consolidated financial statements.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (IN U.S. $)

	June 30,			December 31,
	2018			2017
	(Unaudited)
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Loans payable, current portion (Note 9)	$	11,777,465		$	1,192,750
Accrued interest payable		1,213,563			531,812
Accrued fee payable		51,747			-
Taxes payable		7,773			442
Received in advance		601,940			-
Other payable		5,037			260
Payable to shareholders (Note 10)		109,009			117,767
Due to related parties (Note 14)		122,811			90,727
Deferred tax liabilities (Note 13)		82,086			83,507
Total current liabilities		13,971,431			2,017,265

Non-current liabilities:
Loans payable, non-current portion (Note 9)	$	2,011,008		$	2,906,562
Total non - current liabilities		2,011,008			2,906,562

Total Liabilities		15,982,439			4,923,827

Stockholders’ deficit:
Common stock - $0.0001 par value, 100,000,000 shares authorized, 27,208,849 and 32,208,849 shares issued and outstanding as of June 30, 2018 and December 31, 2017 respectively.		2,721			3,221
Additional paid-in capital		8,021,677			8,021,677
Accumulated deficit		(11,101,633	)		(10,264,149	)
Accumulated other comprehensive income (loss)		36,570			(64,466	)

Stockholders’ deficit before non-controlling interests		(3,040,665	)		(2,303,717	)

Non-controlling interests		(1,545,312	)		(1,260,676	)

Total stockholders’ deficit		(4,585,977	)		(3,564,393	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	11,396,462		$	1,359,434

See accompanying notes to the condensed consolidated financial statement

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017 (IN U.S. $)

	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018			2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Revenue	$	239,584		$	3,143		$	242,100		$	133,768
Cost of revenue		(53,800	)		-			(53,800	)		-
Gross profit		185,784			3,143			188,300			133,768

Operating expenses:
General and administrative		211,610			466,007			(617,521	)		(811,672	)
Total operating expenses		211,610			466,007			(617,521	)		(811,672	)

Loss from operations		(25,826	)		(462,864	)		(429,221	)		(677,904	)

Other income (expenses):
Interest income		893			(41,939	)		25,541			5,344
Interest expense		(217,829	)		(814,855	)		(718,211	)		(875,009	)
Other income		7			-			(30	)			-
Other expense		(39	)		(183,550	)		(199	)		(183,550	)
Reversal of provision for loan loss		-			34,452			-			-
Total other income (expenses)		(216,968	)		(1,005,892	)		(692,899	)		(1,053,215	)

Loss before provision for income taxes		(242,794	)		(1,468,756	)		(1,122,120	)		(1,731,119	)

Provision for income taxes		-			-			-			-
Loss from operations		(242,794	)		(1,468,756	)		(1,122,120	)		(1,731,119	)
Less: Net loss attributable to the non-controlling interest		(28,762	)		(422,856	)		(284,636	)		(455,895	)
Net loss attributable to the Company’s shareholders - continuing operations		(214,032	)		(1,045,900	)	$	(837,484	)	$	(1,275,224	)

Discontinued operations
Income from discontinued operations before income taxes (Note 11)	$	-		$	805,623		$	-		$	1,002,409
Provision for income taxes		-			(250,602	)		-			(250,602	)
Income from discontinued operations, net of income taxes		-			555,021			-			751,807

Net loss		(242,794	)		(913,735	)		(1,122,120	)		(979,312	)
Net loss attributable to the Company’s shareholders	$	(214,032	)		(490,879	)	$	(837,484	)	$	(523,417	)

Comprehensive Loss:
Net Loss		(242,794	)		(913,735	)		(1,122,120	)		(979,312	)

Foreign currency translation adjustment		(237,982	)		77,141			(101,036	)		(147,390	)

Comprehensive loss		(480,776	)		(836,594	)		(1,223,156	)		(1,126,702	)

Less: comprehensive income (loss) attributable to non-controlling interest		3,394			(134,461	)		-			-
Comprehensive loss attributable to the Company		(484,170	)		(702,133	)	$	(1,223,156	)	$	(1,126,702	)

Weighted average number of common shares outstanding basic and diluted		27,868,190			32,178,849			30,026,529			32,178,849

Loss per share – Basic and Diluted
CONTINUING OPERATIONS
-Basic	$	(0.01	)	$	(0.03	)	$	(0.03	)	$	(0.04	)
-Diluted		(0.01	)		(0.03	)	$	(0.03	)	$	(0.04	)

DISCONTINUED OPERATIONS
-Basic		(0.00	)		0.02		$	(0.00	)	$	0.02
-Diluted		(0.00	)		0.02		$	(0.00	)	$	0.02

NET LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY
-Basic		(0.01	)		(0.02	)	$	(0.03	)	$	(0.02	)
-Diluted		(0.01	)		(0.02	)	$	(0.03	)	$	(0.02	)

See accompanying notes to the condensed consolidated financial statements.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

	For the Six Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(1,122,119	)	$	(979,312	)
Less: Net income from discontinued operations		-			751,807
Net loss from continuing operations		(1,122,119	)		(1,731,119	)

Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		11,013			7,147
Deferred tax expense		-			1,905

Changes in operating assets and liabilities:
Increase in accounts receivable		-			(5,062	)
Increase in prepaid expenses		(27,490	)		(56,795	)
(Increase) Decrease in other receivables		(4,112	)		1,271,479
Decrease in interest receivables		-			19,350
Increase (Decrease) in accrued liabilities		4,970			(4,987	)
Increase in taxes payable		7,642			6,324
Increase in fees payable		53,800			-
Increase in interest payable		718,211			113,369
(Decrease) Increase in due from related parties		(7,123	)		411,780
(Decrease) Increase in payable to Caesar Capital Mgmt Ltd		(8,758	)		15,732
Increase (Decrease) in received in advance		625,825			(129,574	)
Decrease in other payable		-			(5,994	)

Net cash provided by (used in) operating activities from continuing operations		251,859			(86,445	)

Net cash provided by operating activities from discontinuing operations		-			248,963

Cash flows provided by operating activities		251,859			162,518

Cash flows from investing activities:
Originated loans disbursement		(10,571,843	)		-
Repayment of loans from customers		471,256			683,496
Proceeds of short-term investments		-			(51,205	)
Proceeds of long-term investment		-			(442,440	)
Redemption of short-term investment		471,256			-

Net cash (used in) provided by investing activities from continuing operation		(9,629,331	)		189,851
Net cash provided by investing activities from discontinued operation		-			-
Cash flow (used in) provided by investing activities		(9,629,331	)		189,851

See accompanying notes to the condensed consolidated financial statements.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

	For the Six Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)
Cash flows from financing activities:
Proceeds from related party debt		40,385			(1,254,111	)
Withdrawal of capital		(500	)		(10,054	)
Proceeds from loans payable		10,887,584			2,394,931
Repayment of loans payable		(741,443	)		(1,718,669	)

Net cash provided by (used in) financing activities from continuing operations		10,186,026			(587,903	)
Net cash provided by financing activities from discontinued operations		-			-

Cash flows provide by (used in) financing activities		10,186,026			(587,903	)

Effect of exchange rate changes on cash,		(42,813	)		(184,012	)

Net change in cash and cash equivalents		765,741			(419,546	)

Cash and cash equivalents, beginning balance	$	725,774		$	1,461,176
Cash and cash equivalents, ending balance		1,491,515			1,041,630
Less: Cash and equivalents from discontinued operations		-			268,209
Cash and equivalents from continuing operations		1,491,515			773,421

Supplemental disclosure of cash flow information
Cash paid for interest	$	69,652		$	1,327,673

Cash paid for income taxes	$	-		$	-

See accompanying notes to the condensed consolidated financial statements.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(unaudited) (IN U.S. $)

ORGANIZATION

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

On February 4, 2011, pursuant to a Plan and Agreement of Merger by and among Mondas Minerals Corp., its wholly owned subsidiary, CCG Acquisition Corp., a Delaware corporation (“CCG Delaware”), CCG California, and Scott D. Bengfort, Mondas Minerals Corp. merged its wholly-owned subsidiary CCG Delaware into CCG California, with CCG California surviving and CCG Delaware ceasing to exist. On February 7, 2011, the Company formed a new wholly-owned subsidiary by the name of “Consumer Capital Group Inc.” (“CCG Name Sub”) in Delaware solely for purposes of changing its corporate name to “Consumer Capital Group Inc.” in conjunction with the closing of the Merger. On February 17, 2011, the Company changed its name to Consumer Capital Group Inc. pursuant to a Certificate of Ownership filed with the Secretary of State of Delaware by merging CCG Name Sub into the Company with the Company surviving and the CCG Name Sub ceasing to exist. Unless the context specifies otherwise, references to the “Company” refers to CCG California prior to the Merger and the Company, its subsidiaries and Affiliated PRC Entity combined after the Merger.

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

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

YIN HANG FINANCIAL INFORMATION SERVICE (SHANGHAI) CO., LIMITED

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

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(unaudited) (IN U.S. $)

ORGANIZATION (continued)

Details of the Company’s wholly owned subsidiaries and its Affiliated PRC Entity as of June 30, 2018 are as follows:

Company	Date of Establishment	Place of Establishment	Percentage of Ownership by the Company			Principal Activities
Consumer Capital Group Inc. (“CCG California”)	October 14, 2009	California USA		100	%	U.S. holding company and headquarters of the consolidated entities. Commencing in July 2011, CCG performs the U.S. e-commerce operations.

Arki Beijing E commerce Technology Corp. (“Arki Beijing”)	March 6, 2008	PRC		100	%	Maintains the various computer systems, software and data. Owns the intellectual property rights of the “consumer market network”.

America Pine Beijing Bio-tech, Inc. (“America Pine Beijing”)	March 21, 2007	PRC		100	%⁽¹⁾	Assists in payment collection for e-commerce business.

America Arki Fuxin Network Management Co. Ltd. (“Arki Fuxin”)	November 26, 2010	PRC		100	%⁽¹⁾	Performs the principal daily e-commerce operations, transactions and management of the “consumer market network”.

America Arki Network Service Beijing Co. Ltd. (“Arki Network Service” and Affiliated PRC Entity”)	November 26, 2010	PRC		0	%⁽²⁾	Entity under common control through relationships between Fei Gao and the Company. Holds the business license and permits necessary to conduct e-commerce operations in the PRC

Yin Hang Financial Information Service (Shanghai) Co., Ltd (“Yin Hang”)	November 22, 2013	PRC		0	%⁽⁴⁾	Collects service fees calculated based on the complexity, required time, contents and commercial value of the credit risks assessment services provided to the lenders and borrowers on a third party peer to peer (“P2P”) online lending platform as of September 1, 2017, no longer owned by the Company. The results of operations of Yin Hang are reflected in the consolidated financial statements as “discontinued operations”.

Arki Tianjin Asset Management LLP. (“Arki Tianjin”)	October 22, 2015	PRC		51	%⁽³⁾	Offer asset management, management consulting, internet information services as well as advertising design, production, agent, publishing.

	(1)	Wholly foreign owned entities (WFOE)
	(2)	VIE
	(3)	Arki Network Service, Inc. owned entities
	(4)	Discontinued operation on August 31, 2017

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

ORGANIZATION (continued)

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

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

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

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

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

ORGANIZATION (continued)

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

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

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

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting and presentation

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

The audited consolidated financial statements of the Company as of June 30, 2018 and 2017 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”) which apply to financial statements. Accordingly, they do not include all of the information and footnotes normally required by accounting principles generally accepted in the United States of America for annual financial statements. The consolidated financial information should be read in conjunction with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-Q filed with the SEC. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. The results of operations for the six months ended June 30, 2018 are not necessarily indicative of the results to be expected for future years.

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

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Variable interest entity

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

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

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

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

	June 30,		December 31,
	2018		2017
	(Unaudited)

Cash and cash equivalent	$	1,386,534	$	686,368
Loan receivables, net		9,715,087		-
Prepaid expenses		82,495		57,025
Due from inter-company		1,612,491		1,386,108
Due from related party		97,259		96,968
Other receivables		15,642		11,890
Total current assets		12,909,508		2,238,359
Property and equipment, net		43,259		50,453
Long-term investment		312,480		317,888
Total non-current assets		355,739		368,341
Total assets	$	13,265,247	$	2,606,700

Loans payable - current portion	$	11,777,465	$	1,192,750
Interest payable		1,213,563		531,812
Fee payables		51,747		-
Accrued liabilities		5,036		203
Received in advance		601,940		-
Other taxes payable		7,773		-
Due to inter-company		1,951,183		1,729,803
Due to related party		244,178		250,810
Deferred tax liability		118,196		120,243
Total Current liabilities	$	15,971,081	$	3,825,621

Loans payable, non-current portion		2,011,008		2,906,562
Total non-current liabilities	$	2,011,008	$	2,906,562

Total liabilities		17,982,089		6,732,183

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	For the Six Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)

Net revenue	$	188,300		$	(1,099,698	)

Net loss from continuing operation	$	(687,800	)	$	(1,099,698	)
Less: Net loss attributable to the non-controlling interest		(284,636	)		(455,895	)
Net loss attributable to the company – continuing operations	$	(403,164	)	$	(643,803	)

Net income from discontinued operations	$	-		$	751,807
Less: Net income attributable to the non-controlling interest		-			-
Net income attributable to the company – discontinued operations	$	-		$	751,807

Net loss for the periods	$	(687,800	)	$	(1,099,698	)
Net (loss) income attributable to the Company’s shareholders	$	(403,164	)	$	108,004

	For the Six Months Ended June 30,
	2018			2017
	(Unaudited)			(Unaudited)

Cash flow provided by (used in) operating activities	$	697,812		$	(1,185,473	)
-Net cash provided by (used in) operating activities from continuing operations		697,812			(1,434,436	)
-Net cash provided by operating activities from discontinued operations		-			248,963

Cash flow used in investing activities	$	(10,112,461	)	$	(10,112,461	)
-Net cash used in investing activities from continuing operations		(10,112,461	)		(10,112,461	)
-Net cash used in investing activities from discontinued operations		-			-

Net cash provided by financing activities	$	10,155,609		$	10,155,609
-Net cash provided by financing activities from continuing operations		10,155,609			10,155,609
-Net cash provided by financing activities from discontinued operations		-			-

Use of estimates

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

Foreign currency translations

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

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign currency translations (continued)

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

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

	As of June 30, 2018		As of December 31, 2017
	(Unaudited)

Balance sheet items, except for stockholders’ equity accounts		0.1511		0.1537

	For the three months ended June 30,				For the six months ended June 30,
	2018		2017		2018		2017
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

Items included in the statements of operations and comprehensive income (loss) and cash flows for the periods presented		0.1569		0.1475		0.1571		0.1463

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign currency translations (continued)

Foreign currency translation adjustments of $(101,036) and $147,390 for the six months ended June 30, 2018 and 2017, respectively, have been reported as other comprehensive (loss) income. Other comprehensive (loss) income of the Company consists entirely of foreign currency translation adjustments.

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

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

Revenue recognition

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

E-commerce Revenue Recognition

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

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue recognition (continued)

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

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

Servicing fee income

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

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

Interest income on loans

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

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Discontinued Operations

“Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” is utilized by the Company to present the operations of Yin Hang which have been disposed of. The amendments contained in this update change the criteria for reporting discontinued operations and enhance the reporting requirements for discontinued operations. Under the revised standard, a discontinued operation must represent a strategic shift that has or will have a major effect on an entity’s operations and financial results. Examples could include a disposal of a major line of business, a major geographical area, a major equity method investment, or other major parts of an entity. The revised standard also allows an entity to have certain continuing cash flows or involvement with the component after the disposal. Additionally, the standard requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The Company accounted for the dispose of Yin Hang as discontinued operations pursuant to this standard. Refer to Note 9 for additional details. The Company accounted for the disposal of Yin Hang during 2017 as a discontinued operation pursuant to this standard. Refer to Note 11 for additional details.

Non-controlling interest

Non-controlling interests held 49% shares of one of subsidiary is recorded as a component of our equity, separate from the Company’s equity. Purchase or sales of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the non-controlling interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Comprehensive income (loss)

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

Earnings per share

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

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

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

Cash and cash equivalents

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

Loans receivable

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

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Allowance for loan losses

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

The Company calculates the provision amount as below:

General Reserve - is based on the total loan receivable balance and to be used to cover unidentified probable loan loss. The General Reserve is required to be no less than 1% of total loans receivable.

Specific Reserve - is an allowance set aside covering losses due to risks related to a particular country, region, industry, borrower or type of loan. The reserve rate can also be decided based on management’s estimate of loan collectability.

Interest receivable

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

Loans payable

Loans from individuals primarily represent the principle of lending funds received from the individuals through the Company’s internet platform. The interest rates of such loans are 4% - 54% per annum with a term lasting from 6 months to two years.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Property and equipment, net

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

Impairment of long-lived assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances (such as a significant adverse change in market conditions that will impact the future use of the assets) indicate its net book value may not be recoverable. The Company compares the projected undiscounted future cash flows associated with the related asset or group of assets over its estimated useful lives against their respective carrying amount. Impairment, if any, is based on the excess of the carrying amount over the fair value, based on market value when available, or discounted expected cash flows, of those assets and is recorded in the period in which the determination is made. The Company’s management currently believes there is no impairment of its long-lived assets. There can be no assurance, however, that market conditions will not change or demand for the Company’s services will continue. Either of these could result in the future impairment of long-lived assets. As of June 30, 2018 and December 31, 2017, the Company has not experienced impairment losses on its long-lived assets for both the continuing and discontinued operations. However, there can be no assurances that demand for the Company’s products or services will continue, which could result in an impairment of long-lived assets in the future.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair value of financial instruments

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

Level 1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

Level 2 Inputs – Inputs other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3 Inputs – Inputs based on valuation techniques that are both unobservable and significant to the overall fair value measurements.

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

The tables below present information as of June 30, 2018 and December 31 2017, respectively, regarding the Company’s financial assets and financial liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy reflecting the valuation techniques utilized to determine such fair value.

June 30, 2018:
	Level 1
Available-for-sale:
Short-term investments	$	-

December 31, 2017:
	Level 1
Available-for-sale:
Short-term investments	$	461,115

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income taxes

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

ASC 740 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position would be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. As of June 30, 2018 and December 31, 2017, the Company does not have liability for any unrecognized tax benefits. The Company’s tax filings are subject to examination by the tax authorities. The tax years of 2017 and 2016 and 2015 remain open to examination by tax authorities in the PRC.

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

Going Concern

As shown in the consolidated financial statements, the Company has generated a net loss of $1,122,120 for the six months ended June 30, 2018 and an accumulated deficit of $11,101,633 as of June 30, 2018. The Company also experienced insufficient cash flows from operations and will be required continuous financial support from the shareholder. The Company will need to raise capital to fund its operations until it is able to generate sufficient revenue to support the future development. Moreover, the Company may be continuously raising capital through the sale of debt and equity securities.

The Company’s ability to achieve these objectives cannot be determined at this stage. If the Company is unsuccessful in its endeavors, it may be forced to cease operations. These consolidated financial statements do not include any adjustments that might result from this uncertainty which may include adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

These factors have raised substantial doubt about the Company’s ability to continue as a going concern. There can be no assurances that the Company will be able to obtain adequate financing or achieve profitability. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, Intangibles – Goodwill and Other (Topic 350). The amendments in this update simplify the test for goodwill impairment by eliminating Step 2 from the impairment test, which required the entity to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining fair value of assets acquired and liabilities assumed in a business combination. The amendments in this update are effective for public companies for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. We are evaluating the impact of adopting this guidance on our Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805); Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business to help companies evaluate whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The amendments in this update are effective for public companies for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

RECENTLY ISSUED ACCOUNTING STANDARDS (continued)

As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception.

Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently reviewing the impact of adoption of ASU 2017-11on its financial statements. The Company does not anticipate that this adoption will have a significant impact on its financial position, results of operations, or cash flows.

The Company has considered all new accounting pronouncements and has concluded that there are no new pronouncements that may have a material impact on results of operations, financial condition, or cash flows, based on current information.

PREPAID EXPENSES

Prepaid expenses consisted of prepaid rent for our US company and other prepaid expenses for Arki Network as of June 30, 2018 and December 31, 2017.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

LOANS RECEIVABLE, NET

The monthly interest rates on loan issued at 6% and range from 8% to 30% for the six months ended June 30, 2018 and 2017, respectively.

As of June 30, 2018 and December 31, 2017, loan receivables balance was $9,715,087 and $0, respectively.

Loan receivable consisted of the following as of June 30, 2018 and December 31, 2017:

	June 30, 2018		December 31, 2017
	(Unaudited)

Loans receivable - third parties	$	2,115,260	$	-
Loans receivable - related parties		7,599,827	$	-
Allowance for loan losses		-		-

Loans receivable, net	$	9,715,087	$	-

The loans primarily consist of factoring loans. According to the outstanding contracts during the reporting period, the maturity terms are 3 months.

The following table represents the aging of loan receivables as of June 30, 2018:

			1-29 days past due				30-59 days past due				60-89 days past due				Over 90 days past due				Total past due				Current				Total Loans
	Loans receivables		$	-			$	-			$	-			$	-			$	-			$	9,715,087			$	9,715,087

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

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

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

LOANS RECEIVABLE, NET (continued)

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

For the six months ended June 30, 2018 and 2017, the Company believes that all loans can be collected and allowance for loan losses were nil and nil.

Loans with modified terms are classified as troubled debt restructurings if the Company grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary below market rate reduction in interest rate or an extension of a loan’s stated maturity date. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for six consecutive months after modification. Loans classified as troubled debt restructurings are designated as impaired. There were no loans considered impaired as of June 30, 2018 and December 31, 2017.

OTHER RECEIVABLES

Other receivables consist of the following as of June 30, 2018 and December 31, 2017:

	June 30, 2018		December 31, 2017
	(Unaudited)

Advances to unrelated third-parties	$	32,201	$	28,736
Other deposits		2,400		2,400

Total	$	34,601	$	31,136

PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following as of June 30, 2018 and December 31, 2017:

	As of June 30,			As of December 31,
	2018			2017
	(Unaudited)

Leasehold improvement	$	52,882		$	53,797
Office equipment		25,711			25,748
Furniture & fixtures		6,875			6,994
Motor vehicles		20,710			20,710
		106,178			107,249
Less: accumulated depreciation		(34,164	)		(24,065	)
Total property & equipment, net	$	71,564		$	83,184

For the six months ended June 30, 2018 and 2017, depreciation expense from the continuing operations was $11,013 and $7,147, respectively.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

SHORT-TERM INVESTMENT

Short-term investment is highly liquid available-for-sale securities in accounts maintained with Industrial and Commercial Bank of China within the PRC.

	As of June 30,		As of December 31,
	2018		2017
	(Unaudited)
Available-for-sale:
Short-term investment	$	-	$	719,859
Less: Redemption		-		(258,744	)
Total available-for-sale	$	-	$	461,115

Interest income earned from the short-term investments for the six months ended June 30, 2018 and 2017 was $24,115 and $8,302, respectively.

LOANS PAYABLE

Individuals can invest in loans that are offered through the Company’s marketplace and network. All the loans have maturities from six months to two years with interest rates varying from 4% to 100% per annum.

Loans payable consisted of the following as of June 30, 2018 and December 31, 2017:

			Remaining	June 30,		December 31,
Interest rate			maturity	2018		2017
				(Unaudited)

	4	%	Within 1 year	$	107,274	$	-
	12	%	Within 1 year		96,697		-
	13	%	Within 1 year		-		15,370
	14	%	Within 1 year		78,567		158,316
	18	%	Within 1 year		302,180		-
	30	%	Within 1 year		1,122,599		-
	40%-54	%	Within 1 year		10,070,148		1,019,064
	40%-54	%	Between 1 to 2 years		1,376,430		2,906,562
	80	%	Between 1 to 2 years		317,289		-
	100	%	Between 1 to 2 years		317,289		-
				$	13,788,473	$	4,099,312

			Current portion	$	11,777,465	$	1,192,750
			Non-current portion	$	2,011,008	$	2,906,562

The Company has loans payable to related parties of $10,142,674 and $2,499,245, and loans payable to third parties of 3,645,799 and $1,600,067 as of June 30, 2018 and December 31, 2017, respectively. For the six months ended June 30, 2018 and 2017, the Company accrued $718,209 and $860,379 of interest expenses, respectively.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

10.

PAYABLE TO SHAREHOLDER

Caesar Capital Management Ltd. (“Caesar”) a shareholder of the Company, advanced $109,009 and $117,767 to the Company as of June 30, 2018 and December 31, 2017, respectively. The loans were borrowed by the Company for operating purposes, without collateral, and were due between July 2013 to November 2013, with an annual interest rate of 6%. On July 1, 2013, the Company entered into an agreement with Caesar Capital Management Ltd. which amended the maturity date for all the existing loans between the Company and Caesar Capital Management Ltd. The loans became due on demand and are non-interest bearing.

11.

DISCONTINUED OPERATIONS

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

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

The disposal represents a strategic shift and has a major effect on the Company’s results of operations. The disposed entities are accounted as discontinued operations in the consolidated financial statements for the six months ended June 30, 2017.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

11.

DISCONTINUED OPERATIONS (continued)

The significant items included discontinued operations are as follow:

	For the three months ended June 30,					For the six months ended June 30,
	2018		2017			2018		2017
	(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)

Revenue	$	-	$	1,092,962		$	-	$	1,631,673
Operating expenses		-		(269,241	)		-		(629,247	)
Interest expense		-		(46	)		-		(17	)
Other expense		-		(18,052	)		-		-
Income from discontinued operations before income taxes		-		805,623			-		1,002,409
Provision for income taxes		-		(250,602	)		-		(250,602	)
Income from discontinued operations	$	-	$	555,021		$	-	$	751,807

Related party transactions from discontinued operations

Related parties:

	Name of related party		Relationship with the Company

	Zhongxin Shitong (Beijing) Credit Investigation Co., Ltd. (“Zhongxin Credit”)		A related company of former shareholder of Yin Hang, Yunfeng Du

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

11.

DISCONTINUED OPERATIONS (continued)

The Company had the following related party balances at of June 30, 2018 and December 31, 2017:

	June 30, 2018		December 31, 2017
	(Unaudited)
Due from related party:
Zhongxin Credit	$	-	$	207,203

Zhongxin Credit borrowed $418,041 from Yin Hang, and repaid $212,450 in 2016. On December 31, 2016, Zhongxin Credit entered into a loan agreement whereby Zhongxin Credit agreed to repay the outstanding receivable balance by scheduled payment within six months. As of December 31, 2017, the outstanding receivable balance was $207,203.

12.

NONCONTROLLING INTEREST

As of June 30, 2018 and December 31, 2017, non-controlling interest of Ark Tianjin of $1,545,312 and $1,260,676, respectively, was recognized in the Company’s consolidated balance sheets, representing Ark Tianjin’s cumulative results of operations attributable to shareholders other than CCG Group.

For the six months ended June 30, 2018 and 2017, a $284,636 and a $455,895 net loss, respectively, attributable to the non-controlling interest of Arki Tianjin was recognized in the Company’s consolidated statements of comprehensive loss, representing Arki Tianjin’s net loss attributable to shareholders other than CCG Group.

13.

INCOME TAXES

The income tax laws of various jurisdictions in which the Company and its subsidiaries operate are summarized as follows:

United States

Consumer Capital Group Inc. was incorporated in United States, and is subject to corporate income tax rate of 21%.

The People's Republic of China (PRC)

Arki Beijing E-commerce Technology Corp., America Pine Beijing Bio-Tech, Inc., America Arki (Fuxin) Network Management Co. Ltd., America Arki Network Service Beijing Co. Ltd. and America Arki (Tianjin) Capital Management Partnership were incorporated in the People’s Republic of China and subject to PRC income tax at 25%. The Company did not generate taxable income in the People’s Republic of China for the six months ended June 30, 2018 and 2017, respectively.

Yin Hang Financial Information Service (Shanghai) Co., Limited was incorporated in the People’s Republic of China and subject to PRC income tax at 25%.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

13.

INCOME TAXES (continued)

The new EIT Law also imposes a withholding income tax of 10% on dividends distributed by a foreign invested enterprise to its immediate holding company outside of China, if such immediate holding company is considered as a non-resident enterprise without any establishment or place within China or if the received dividends have no connection with the establishment or place of such immediate holding company within China, unless such immediate holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. Such withholding income tax was exempted under the previous income tax regulations.

The income tax laws of various jurisdictions in which the Company and its subsidiaries operate are summarized as follows:

	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018			2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Tax expense at statutory rate US		21	%		34	%		21	%		34	%
Foreign income not recognized in the U.S.		(21	%)		(34	%)		(21	%)		(34	%)

PRC enterprise income tax rate		25	%		25	%		25	%		25	%
Changes in valuation allowance and others		(25	%)		(25	%)		(25	%)		(25	%)

Effective income tax rates		-			-			-			-

Loss before income taxes from continuing operations consists of:

	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018			2017
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Non-PRC	$	(31,573	)	$	(169,495	)	$	(35,677	)	$	(179,901	)
PRC		(211,221	)		(1,299,261	)		(1,086,443	)		(1,551,218	)

Total	$	(242,794	)	$	(1,468,756	)	$	(1,122,120	)	$	(1,731,119	)

The principal components of the Company’s deferred income tax assets and liabilities are as follows:

	June 30, 2018		December 31, 2017
	(Unaudited)
Deferred tax liabilities:
Accrued interest receivable	$	35,616	$	36,232
Accrued interest payable		46,470		47,275

Total	$	82,086	$	83,507

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

13.

INCOME TAXES (continued)

As of June 30, 2018 and December 31, 2017, the Company has a deferred tax asset of $0 and $0, and a deferred tax liability of $82,086 and $83,507 resulting from certain net operating losses in the PRC, respectively. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those net operating losses are available. The Company considers projected future taxable income and tax planning strategies in making its assessment. As of June 30, 2018 and December 31, 2017, the Company did not have sufficient operations to generate taxable income in Arki Beijing, America Pine Beijing, Arki Fuxin, Arki Network Service and Arki Tianjin to conclude that it is more-likely-than-not that the Company will be able to realize all of its tax benefits in the near future and therefore a valuation allowance has been provided for the full value of the deferred tax asset. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of any portion or all of the valuation allowance. Should Arki Beijing, America Pine Beijing, Arki Fuxin, Arki Network Service, Arki Tianjin and Yin Hang have sufficient operation to generate taxable income in future periods with a supportable trend; the valuation allowance will be reduced accordingly. As of June 30, 2018 and December 31, 2017, no valuation allowance was recorded.

The components of deferred taxes are as follows from continuing operations as of June 30, 2018 and December 31, 2017:

	June 30, 2018		December 31, 2017
	(Unaudited)

Deferred tax asset from net operating loss carry-forwards	$	-	$	57,498
Valuation allowance		-		(57,498	)

Deferred tax assets, net	$	-	$	-

14.

RELATED PARTY TRANSACTIONS

Related parties:

	Name of related parties		Relationship with the Company
	Mr. Jianmin Gao		Stockholder, Chief Executive Officer, Chief Financial Officer and Chairman of the Board of the Company
	Mr. Fei Gao		Stockholder, Director and Chief Operating Officer
	Mr. Dong Yao		Stockholder, Director and Chief Technology Officer
	Ms. Lihua Xiao		Stockholder, Management of the Company
	Ms. Li Juan		Stockholder, procurement manager
	Ms. Zheng Zhong		Stockholder, procurement manager
	Mr. Hao Siheng		Stockholder, Son of Lihua Xiao

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

14.

RELATED PARTY TRANSACTIONS (continued)

The Company had the following related party balances as of June 30, 2018 and December 31, 2017:

	June 30 2018		December 31, 2017
	(Unaudited)
Due to related parties:
Mr. Jianmin Gao	$	115,950	$	83,747
Mr. Fei Gao		6,861		6,980

	$	122,811	$	90,727

As of June 30, 2018 and December 31, 2017, the amounts owed to Mr. Jianmin Gao and Mr. Fei Gao are without interest and due on demand.

Loans receivable form related parties

	As of June 30,		As of December 31,
	2018		2017
	(Unaudited)		(Unaudited)

Related companies of non-controlling stockholders	$	7,599,827	$	-

Total	$	7,599,827	$	-

Interest income derived from the above loans receivable from related parties were $101,289 and $131,670 for the six months ended June 30, 2018 and 2017, respectively.

Loans payable to related parties

	June 30 2018		December 31, 2017
	(Unaudited)

Non-controlling stockholders	$	3,450,897	$	2,499,245
Related companies of non-controlling stockholders		6,691,777		-

	$	10,142,674	$	2,499,245

Interest expenses incurred on the above loans payable to related parties were $966,075 and $1,085,827 for the six months ended June 30, 2018 and 2017, respectively.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

15.

COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company has entered into lease agreements with various third parties. The terms of such non-cancellable operating leases are one to five years. As of June 30, 2018, the Company was obligated under non-cancellable operating leases minimum rentals as follows:

For the six months ended June 30,

2019	$	64,297
2020		54,984
2021		54,984
2022		4,582

Total	$	178,847

The rent expense for the six months ended June 30, 2018 and 2017 was $36,212 and $8,758 respectively.

Legal Proceedings

The Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial condition or results of operations.

16.

CONCENTRATION OF CREDIT AND BUSINESS RISKS

Assets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents, loans receivable and other receivables. The maximum exposure of such assets to credit risk is their carrying amounts as of the balance sheet dates.

As of June 30, 2018 and December 31, 2017, substantially all of the Company’s cash and cash equivalents were deposited in financial institutions located in the PRC, which management believes are of high credit quality. Management believes the credit risk on bank deposits is limited because the counter-parties are banks with high credit-ratings assigned by international credit rating agencies, or state-owned banks in China.

Cash includes cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC and the United States of America. Balances at financial institutions or state owned banks within the PRC are not covered by insurance.

CONSUMER CAPITAL GROUP, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(IN U.S. $)

16.

CONCENTRATION OF CREDIT AND BUSINESS RISKS (continued)

Non-performance by these institutions could expose the Company to losses for amounts in excess of insured balances. As of June 30, 2018 and December 31, 2017, we had no uninsured balances with the banks in U.S. As of June 30, 2018 and December 31, 2017, our bank balances in the PRC were $1,470,675 and $706,771, respectively, which are uninsured and subject to credit risk. We have not experienced nonperformance by these institutions.

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of loans receivable from borrowers and the related accrued interest receivable. The aforementioned borrowers paid service fees and interest regularly according to the contract during the reporting period, and the Company believes that the default risk from these borrowers is low in the foreseeable future.

The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective. The economy in the PRC has recently started to narrow.

On December 15, 2014, the Company entered into six year agreements with the Chief Operating Officer, Mr. Fei Gao, for a compensation of approximately $2,655 (RMB 18,000) per month.

17.

SUBSEQUENT EVENT

There were no events or transactions that would require recognition or disclosure in our unaudited condensed consolidated financial statements for the six months ended June 30, 2018.

Item 2.

Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

This quarterly report on Form 10-Q and other reports filed by Consumer Capital Group, Inc. (“we,” “us,” “our,” or the “Company”) from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements (collectively the “Filings”) and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this report.

Overview

We strive to become a one-stop shop that focuses on microfinancing service for micro, small-to-medium sized enterprises (“SMEs”) in China. We are primarily engaged in the businesses of microfinancing. We operate our direct microfinancing business through our subsidiary, Arki E-Commerce, and variable interest entity, Arki Network. With the increased difficulty of obtaining sufficient financing through traditional channels by SMEs, we offer SMEs alternative financing means through risk-controlled private lending to meet their capital needs and develop their business. It is our belief that the growth of SMEs will become an important factor of China’s economic growth in the next decade. We believe that our expertise in streamlining microfinancing process will place our company in a unique position in the marketplace.

Microfinancing

Currently, we engage in microfinancing business through our subsidiary, Arki E-Commerce and VIE, Arki Network, to provide direct loans to SMEs and sole proprietors based in Liaoning Province. Through Arki Network’s collaboration with China UnionPay Merchant Service (Liaoning) Co. Ltd (“UnionPay Liaoning”), Arki E-Commerce provides private loans for borrowers and Arki Network and UnionPay act as intermediary to facilitate the loan transactions for a 5% service fee. Arki E-Commerce’s practice of microfinancing has been limited to certain businesses and sole proprietors pre-screened and recommended by UnionPay Liaoning based on historical sales volume generated through credit card transactions using UnionPay’s system.

Wealth Management

Arki Network through its 51%-owned subsidiary, America Arki (Tianjin) Capital Management Partnership (“Capital”), engages wealth management business. Arki Capital operates its business on its financial advisory platform “Bangnitou”, which translates to “Help You Invest” in English and attracts capital from investors to invest in fixed income opportunities such as inter-bank loans, currency exchange products and other equity investment opportunities to help investor obtain return on their investment. Still at its development stage, Bangnitou will have a number of financial products that aims to generate annual return ranging from 8-12%. The platform will allow retail investors to invest in products for as little as RMB 100 (or approximately US$15). Once each product reaches its maximum subscription or the end of its offering period, the investments are held for a period of time before being redeemable by the investors, along with the return.

Recent Development

On November 17, 2017, Arki Network, Beijing Shenzhou Rongtong Investment Management Co. Ltd. (“Shenzhou Rongtong”), a company organized under the law of People’s Republic of China, and all the shareholders of Shenzhou Rongtong entered into an equity transfer agreement, pursuant to which Arki Network agreed to acquire 100% of the issued and outstanding equity securities of Shenzhou Rongtong from its shareholders, in exchange for the issuance of an aggregate of 4,175,417 shares of common stock of the Company, to the shareholders of Shenzhou Rongtong within 15 days of the closing of the transaction. The transaction failed to go through as at December 31, 2017.On March 29, 2018, all shareholders of Shenzhou signed agreement to return all shares of CCGN to the Company. On April 13, 2018, the shareholders of Shenzhou returned all the shares to the Company.

Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with US GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Translation

The Company’s reporting currency is the U.S. dollar. The Company’s functional currency is the local currency in the PRC, the Chinese Yuan (RMB). The financial statements of the Company are translated into United States dollars in accordance with ASC 830, Foreign Currency Matters, using year end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income.

In accordance with ASC 830, Foreign Currency Matters, the Company translated the assets and liabilities into US $ using the rate of exchange prevailing at the applicable balance sheet date and the statements of income and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation are recorded in investors’ equity as part of accumulated other comprehensive income.

	June 30, 2018		December 31, 2017
Balance sheet items, except for the equity accounts		6.6186		6.5060
Items in the statements of income and comprehensive loss and statement of cash flow		6.3660		6.7442

Revenue Recognition

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

E-commerce Revenue Recognition

We evaluate whether it is appropriate to record the net amount of sales earned as commissions. We are not the primary obligor nor are we subject to inventory risk as the agreements with our suppliers specify that they have the responsibility to provide the product or service to the customer. Also, the amounts we earn from our vendors/suppliers is based on a fixed percentage and bound contractually. Additionally, the Company does not have any obligation to resolve disputes between the vendors and the customers that purchase the products on our website. Any disputes involving damaged, non-functional, product returns, and/or warranty defects are resolved between the customer and the vendor. The Company has no obligation for right of return and/or warranty for any of the sales completed using its website. Since we are not primarily obligated and amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two, we record our revenues as commissions earned on a net basis.

Our sales are net of promotional discounts and rebates and are recorded when the products are shipped and title passes to customers. Revenues are recorded net of sales and consumption taxes. We periodically provide incentive offers to our customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, inducement offers, such as daily sweepstakes reward opportunities that is based on volume of purchases, and other similar offers. Current discount offers and inducement offers are presented as a net amount in “Net revenues.”

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

Because of the lack of sales generated on our online retail platforms, we ceased our E-commerce business in first quarter of 2015.

Servicing fee income

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

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

The service fees are paid typically by borrowers as a one time payment for each loan. The service fees compensate for the costs that incurred in servicing the related loan, including managing funding from investors, payments to investors and maintaining borrowers’ account portfolios. Arki E-Commerce record service fees paid by borrower as a component of operating revenue when received. Arki E-Commerce provides funding of the private loans for borrowers and Arki Network and UnionPay collectively act as intermediary to facilitate the loan transactions. UnionPay Liaoning provides the qualified borrowers (based on historical sales volume generated through credit card transactions using UnionPay’s system). Arki Network would receive a one-time service fee for each loan when the clients receive the loan.

Arki E-commerce receives interest income and Arki Network receives service fee from the transactions.

Interest income on loans

Interest on loan receivables is accrued monthly in accordance with their contractual terms and recorded in accrued interest receivable. The Company does not charge prepayment penalty from customers.

Distribution Revenue Recognition

We record product sales and shipping revenues, net of return allowances, when the products are shipped and title passes to customers. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales and consumption taxes.

Discontinued Operations

See “Note 11 — DISCONTINUED OPERATIONS” to the consolidated financial statements for additional information.

Cash and Cash Equivalents

We consider all investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents primarily represent funds invested in bank checking accounts, money market funds and domestic Chinese bank certificates of deposit. As of June 30, 2018 and December 31, 2017, the Company had no cash equivalents.

Fair Value of Financial Instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, prepaid expenses, other receivables, other assets, accounts payable, accrued liabilities, other payable, related party payable, short term debt and derivative liabilities. These financial instruments are measured at their respective fair values. For fair value measurement, US GAAP establishes a three-tier hierarchy which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 include other inputs that are directly or indirectly observable in the marketplace.

Level 3 unobservable inputs which are supported by little or no market activity.

Fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The carrying value of cash and cash equivalents, accounts receivable, advance to suppliers, prepaid expenses, other receivables, other assets, account payable, accrued liabilities, other payable, and short term debt approximates their fair value due to their short-term maturities.

The Company has determined the estimated fair value amounts presented in these financial statements using available market information and appropriate methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. The estimates presented in the financial statements are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Management believes it is not practical to estimate the fair value of related party payable because the transactions cannot be assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.

Recent Accounting Pronouncements

As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception.

Results of Operations - Comparison of the Three and Six Months Ended June 30, 2018 and 2017

The following table sets forth the results of our operations for the periods indicated in U.S. dollars.

	For the three months ended June 30,						For the six months ended June 30,
	2018			2017			2018			2017
REVENUE	$	239,584		$	3,143		$	242,100		$	133,768

COST OF REVENUE		(53,800	)		-			(53,800	)		-

GROSS PROFIT		185,784			3,143			188,300			133,768

Selling expenses		-			-			-			-
General and administrative expenses		(211,610	)		(466,007	)		(617,521	)		(811,672	)
LOSS FROM OPERATIONS		(25,826	)		(462,864	)		(429,221	)		(677,904	)

Other income		7			-			30			-
Interest income		893			(41,939	)		25,541			5,344
Interest expense		(217,829	)		(814,855	)		(718,211	)		(875,009	)
Other expense		(39	)		(183,550	)		(199	)		(183,550	)
Reversal of provision for loan losses		-			34,452			-			-
Total other income (expenses)		(216,968	)		(1,005,892	)		(692,899	)		(1,053,215	)

Loss from continuing operations before income taxes		(242,794	)		(1,468,756	)		(1,122,120	)		(1,731,119	)

Income tax expense		-			-			-			-

Loss from continuing operations		(242,794	)		(1,468,756	)		(1,122,120	)		(1,731,119	)
Less: Net loss attributable to the non-controlling interest		(28,762	)		(422,856	)		(284,636	)		(455,895	)
Net loss attributable to the Company – continuing operations	$	(214,032	)	$	(1,045,900	)	$	(837,484	)	$	(1,275,224	)

	For the three months ended June 30						For the six months ended June 30,
	2018			2017			2018			2017
Discontinued operations
Income (loss) from discontinued operations before income taxes (including pretax income (loss) on Yinhang in 2017	$	-		$	805,623		$	-		$	1,002,409
Income tax expense		-			(250,602	)		-			(250,602	)
Income from discontinued operations		-			555,021			-			751,807
Less: Net income attributable to the non-controlling interest		-			-			-			-

Net income attributable to the Company – discontinued operations	$	-		$	555,021		$	-		$	751,807

Net loss for the year	$	(242,794	)	$	(913,735	)	$	(1,122,120	)	$	(979,312	)
Net loss attributable to the Company	$	(214,032	)	$	(490,879	)	$	(837,484	)	$	(523,417	)

Weighted average number of common shares outstanding basic and diluted		27,868,190			32,178,849			30,026,529			32,178,849

(Loss) earnings per share – Basic and Diluted
CONTINUING OPERATIONS
-Basic	$	(0.01	)	$	(0.03	)	$	(0.03	)	$	(0.04	)
-Diluted	$	(0.01	)	$	(0.03	)	$	(0.03	)	$	(0.04	)

DISCONTINUED OPERATIONS
-Basic	$	0.00		$	(0.02	)	$	(0.00	)	$	0.02
-Diluted	$	0.00		$	(0.02	)	$	(0.00	)	$	0.02

NET LOSS PER SHARE ATTRIBUTABLE TO THE COMPANY
-Basic	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.02	)
-Diluted	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.02	)

Results of Operations - Comparison of the Three Months Ended June 30, 2018 and 2017

Gross Profit

During the three months ended June 30, 2018, we had gross profit of $185,784, compared to gross profit of $3,143 for the three months ended June 30, 2017, an increase of $182,641. The increase in gross profit was mainly attributable to increase of microfinancing and financial advisory services.

Operating expenses.

Operating expenses for the three months ended	June 30, 2018		June 30, 2017
Selling Expenses	$	-	$	-
General and Administrative		211,610		466,007
Total	$	211,610	$	466,007

Operating expenses totaled $211,610 for the three months ended June 30, 2018, compared to $466,007 for the three months ended June 30, 2017, a decrease of $254,397 or 55%. The decrease is mainly attributed to the professional fees we paid for potential acquisitions and the changing of auditors, etc for the three month ended June 30, 2017. Operating expenses consist of salaries, office expenses, utilities, business travel, depreciation expenses, public company expenses (including legal, accounting expenses and investor relations expenses, etc.).

Other income (expenses).

Other income (expenses) was ($216,968) for the three months ended June 30, 2018, a decrease of 788,924, compared to ($1,005,892) for the three months ended June 30, 2017. The decrease is mainly caused by the interest expense decrease of $597,026 from $814,855 for the three months ended June 30, 2017 to $217,829 for the three months ended June 30, 2018.

Provision for loan losses

We recognized a reversal of provision for loan loss of $34,452 for the three months ended June 30, 2017, compared with $0 for the three months ended June 30, 2018.

Loss from operations.

As a result of the factors described above, operating loss was $242,794 for the three months ended June 30, 2018, compared to the loss of $1,468,756 for the three months ended June 30, 2017, a decrease of $1,225,962.

Discontinued Operations

On August 31, 2017, Arki and Yin Hang entered into a Supplementary Agreement and mutually agreed to terminate the Share Exchange Agreement, effective immediately, because companies in the financial information industry are not permitted to be controlled by foreign companies outside of China. As a result of the termination, Yin Hang shall no longer be consolidated in the Company’s financial statements as of September 1, 2017. As of June 30, 2017, the results of operations of Yin Hang are reflected in the Company’s consolidated financial statements as “discontinued operations.” The disposal represents a strategic shift and has a major effect on the Company’s results of operations. The disposed entities are accounted as discontinued operations in the consolidated financial statements for the three and six months ended June 30, 2017.

We generated $555,021 in net income from discontinued operations for the three months ended June 30, 2017.

Net income/loss

Net loss for the three months ended June 30, 2018 was $242,794, compared to the net loss of $913,735 for the three months ended June 30, 2017, a decrease of $670,941. The decrease of net loss is mainly due to the reduction of operating expenses and the increase of revenue.

Foreign currency translation

Our consolidated financial statements are expressed in U.S. dollars but the functional currency of our operating subsidiary is RMB. Results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the financial statements denominated in RMB into U.S. dollars are included in determining comprehensive income. Foreign currency translation loss for the three months ended June 30, 2018 was $237,982, compared to translation gain of $77,141 for the three months ended June 30, 2017, a net decrease of $315,123.

Result of Operations - Comparison of the Six Months Ended June 30, 2018 and 2017

Revenue

During the six months ended June 30, 2018, we generated revenue of $242,100, compared to revenue of $133,768 for the six months ended June 30, 2017, an increase of $108,332 or 81%. The increase in revenue was mainly attributable to increase of microfinancing and financial advisory services.

Revenue for the six months ended	June 30, 2018		June 30, 2017
Arki E-commerce:
Interest Income	$	-	$	133,768
Arki Network:
Interest Income		161,400		-
Service Fee Income		80,700		-
Total	$	242,100	$	133,768

Cost of Revenue.

Cost of revenue was $53,800 and $0 for the six months ended June 30, 2018 and 2017, respectively. It was the service fee we paid for the micro-financing business. Cost of goods sold from Yin Hang (discontinued operation in 2017) for the six months ended June 30, 2018 and 2017 were $0 and $0, respectively and were included in net loss from discontinued operations.

Gross Profit

As a result of our revenue and cost of revenue described above, we had gross profit of $188,300 for the six months ended June 30, 2018, an increase of $54,532 or 41% comparing to gross profit of $133,768 for the six months ended June 30, 2017. The increase was mainly caused by the increase of microfinancing business in the six months ended June 30, 2018 compared with the same period of 2017.

Selling, general and administrative expenses.

Operating expenses for the six months ended	June 30, 2018		June 30, 2017
Selling Expenses		-		-
General and Administrative		617,521		811,672
Total		617,521		811,672

Selling expenses from Yin Hang (discontinued business) for the six months ended June 30, 2018 and 2017 were $0 and $225,855, respectively and were included in net loss from discontinued operations.

General and administrative expenses consist of salaries, professional fees, office expenses, rent, utilities, business travel, depreciation and amortization expenses, public company expenses (including legal expenses, accounting expenses and investor relations expenses, etc.). General and administrative expenses were $617,521 for the six months ended June 30, 2018, compared to $811,672 for the six months ended June 30, 2017, a decrease of $194,151 or 24%. The decrease is mainly attributed to the decrease of audit fee, attorney fee, filing fees and other professional fees etc in 2018 while we attempted to do acquisition in 2017.

General and administrative expenses from Yin Hang (discontinued business) for the six months ended June 30, 2018 and 2017 were $0 and $403,392, respectively and were included in net loss from discontinued operations.

Loss from operations.

As a result of the factors described above, operating loss was $429,221 for the six months ended June 30, 2018, comparing to operating loss of $677,904 for the six months ended June 30, 2017. The loss decrease of $248,683 was mainly due to the decrease of general and administrative expense reduction for the six months ended June 30, 2018 compared to the same period in 2017.

The loan payable primarily represents the principal of lending funds received by America Arki (Tianjin) Capital Management Partnership from the limited partners. Arki Capital’s core business is wealth management and has establishes a limited liability partnership with investors. The provision of contracts specified the period of investment, fixed interest return and crudely plans of use funds. The fixed interest return rate was based on the amount of investment, which ranged from 4% to 100% per annum with a term of 6 months, one year or two years. The amounts of loan payables were $13,788,473 and $4,099,312 respectively as of June 30, 2018 and December 31, 2017. Total interest accrued was $718,209 and $860,379 respectively for the six months ended June 30, 2018 and 2017.

Other income and expenses.

Other expenses were $692,899 for the six months ended June 30, 2018, a decrease of $360,316 compare with $1,053,215 other expenses for the six months ended June 30, 2017. Other income for the six months ended June 30, 2018 and 2017 were $30 and $183,550. $183,550 was the refund from IRS in 2017 for the wrongful garnishment from our bank account in previous years. We incurred $199 and $0 respectively in other expense for the six months ended June 30, 2018 and 2017, Interest income was $25,541 and $5,344, respectively for the six months ended June 30, 2018 and 2017. $25,541 was paid by ICBC for the RMB 3,000,000 financial product we redeemed in six months ended June 30, 2018, and $5,344 was caused by the same product that had a balance of RMB5,000,000 as of June 30, 2017.

Income tax.

We had tax expense of $0 and $0 respectively for the six months ended June 30, 2018 and 2017 due to the operating loss in both periods.

Net loss from continuing operations.

As a result of the factors described above, our net loss was $1,122,120 and $1,731,119 respectively from continuing operations for the six months ended June 30,2018 and 2017, a decrease in loss of $608,999 or 35%. The decrease was mainly caused by the exclusion of Yin Hang in 2018.

Net (loss) income from discontinued operations.

Net income from Yin Hang (discontinued business) for the six months ended June 30, 2018 and 2017 was $0 and $751,807, respectively and were included in net loss from discontinued operations.

Net loss.

As a result of the factors above, net loss for the six months ended June 30, 2018 was $1,122,120, comparing to net loss of $979,312 for the six months ended June 30, 2017, an increase of net loss of $142,808 or 15%.

Net (loss) income attributable to the company.

Net loss attributable to our company was $837,484, or losses of $0.03 per share (basic and diluted), for the six months ended June 30, 2018, comparing to a net loss of $523,417 or earnings of $0.04 per share (basic and diluted), for the six months ended June 30, 2017.

Foreign currency translation.

Our consolidated financial statements are expressed in U.S. dollars while the functional currency of our operating subsidiary is RMB. Results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the periods and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the financial statements denominated in RMB into U.S. dollars are included in determining comprehensive income. Foreign currency translation loss for the six months ended June 30, 2018 was $101,036, comparing to translation loss of 147,390 for the six months ended June 30, 2017. The gain and loss is due to the fluctuation of the exchange rate between USD and RMB.

Liquidity and Capital Resources

All of our business operations are carried out by our PRC subsidiaries or variable interest entities, and all of the cash generated by our operations has been held by those entity. In order to transfer such cash to our parent entity, Consumer Capital Group, Inc., which is a Delaware corporation, we would need to rely on dividends, loans or advances made by our PRC subsidiaries. Such transfers may be subject to certain regulations or risks. To date, our parent entity has paid its expenses by raising capital through private placement transactions. In the future, in the event that our parent entity is unable to raise needed funds from private investors, our PRC subsidiaries or variable interest entities would have to transfer funds to our parent entity.

As shown in our financial statements, we have negative cash flows from operations. Over the past years, we have been funded through advances from related parties, including our CEO Jianmin Gao and COO Fei Gao. These advances are non-interest bearing and have no specified maturity date. Because these individuals are also shareholders of the company, they are willing to provide continuing funding on an as-needed basis. However, as of the date of hereof, such related parties do not have any existing obligation to advance funds or working capital to support our business, nor can our company rely on any advance funds from such related parties. In the event that we do not have sufficient working capital to fund the expansion of our operations and to provide working capital necessary for our ongoing operations and obligations, we may need to raise additional capital to fund our operating expenses, pay our obligations and grow our company. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. In addition, a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. We may incur additional interest expense on new external debt due to paying market rates of interest if we decided to fund the operation through external debt. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations.

The RMB cannot be freely exchanged into Dollars. The State Administration of Foreign Exchange (“SAFE”) administers foreign exchange dealings and requires that they be conducted though designated financial institutions.

These factors will limit the amount of funds that we can transfer from our PRC Subsidiaries to our parent entity and may delay any such transfer. In addition, upon repatriation of earnings of PRC Subsidiaries to the United States, those earnings may become subject to United States federal and state income taxes. We have not accrued any U.S. federal or state tax liability on the undistributed earnings of our foreign subsidiary because those funds are intended to be indefinitely reinvested in our international operations. Accordingly, taxes imposed upon repatriation of those earnings to the U.S. would reduce the net worth of the Company.

For the six months ended June 30, 2018 and 2017 there are 4,175,417 shares retired during the six months ended June 30, 2018 due to the failure of acquisition of Shenzhou Rongtong, while there were no share issued or retired for the six months ended June 30, 2017.

As of June 30, 2018 and December 31, 2017, cash and cash equivalents were $1,491,515 and $725,774, respectively.

The following table sets forth information about our net cash flow for the six months ended June, 2018 and 2017:

Cash Flows Data:

	For six months ended June 30,
	2018			2017
Net cash flows provided by (used in) operating activities – continuing operations	$	251,859		$	(86,445	)
Net cash flows provided by operating activities – discontinued operations		-			248,963
Cash flow provided by in operating activities		251,859			162,518
Net cash flows (used in) provided by investing activities – continuing operations	$	(9,629,331	)	$	189,851
Net cash flows provided by investing activities-discontinued operations		-			-
Cash flows (used in) provided by investing activities		(9,629,331	)		189,851
Net cash flows provided by (used in) financing activities – continuing operations	$	10,186,026		$	(587,903	)
Net cash flows provided by financing activities – discontinued operations		-			-
Cash flows provided by (used in) financing activities		10,186,026			(587,903	)

Net cash flow provided in operating activities was $251,859 for the six months ended June 30, 2018, comparing to $86,445 used in operating activities for the six months ended June 30, 2017, a net increase in cash provided of $338,304. The increase in net cash flow provided in operating activities was mainly due to the increase of interest payable and the increase of cash received in advance from customers for the six months ended June 30, 2018.

Net cash flow used in investing activities was $9,629,331 for the six months ended June 30, 2018, comparing to $189,851 provided by investing activities for the six months ended June 30, 2017, a net increase in usage of $9,819,182. The increase is mainly due to the origination of loan of 10,571,843 incurred for the six months ended June 30, 2018, while there is no loan disbursement for the six months ended June 30, 2017.

Net cash flow provided by financing activities was $10,186,026 for the six months ended June 30, 2018, comparing to the usuage of $587,903 for the six months ended June 30, 2017, a net increase of cash provided of $10,773,929. The increase is mainly caused by the proceeds from loan from individuals of $10,887,584 for the six months ended June 30, 2018, comparing to the proceeds from loan from individual of $2,394,931 for the six months ended June 30, 2017.

Concentration of Credit Risk

Assets that potentially subject our Company to significant concentration of credit risk primarily consist of cash and cash equivalents, and accounts receivable. The maximum exposure of such assets to credit risk is our carrying amounts as of the balance sheet dates. As of June 30, 2018 and December 31, 2017, substantially all of our cash and cash equivalents were deposited in financial institutions located in the PRC, which management believes are of high credit quality. We believe the credit risk on bank deposits is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies, or state-owned banks in China. Cash includes cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC and the United States of America. Balances at financial institutions or state-owned banks within the PRC are not covered by insurance. Nonperformance by these institutions could expose our Company to losses for amounts in excess of insured balances. As of June 30, 2018 and December 31, 2017, no bank balances with the banks in U.S. exceeded the insured amount. As of June 30 2018 and December 31, 2017, bank balances with the Banks in the PRC amounted to $1,470,675 and $706,771, respectively, which are uninsured and subject to credit risk. We have not experienced nonperformance by these institutions.

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents, loan receivable from borrowers and the related accrued interest receivable. As of December 31, 2016, we have three significant borrowers, which accounted for 63% of total loan receivable balance. The aforementioned borrowers paid service fee and interest regularly according to the contract during the reporting period, and the Company believed that the default risk from this borrower is low in the foreseeable future.

Arki E-Commerce generally provide loans in the amount of RMB 300,000. However, under limited circumstances with the long-term qualified borrowers, Arki E-Commerce, based on its business needs at the time, provided clients with higher loan amount.

We had no bad debt from the loans since we started the micro-financing business in 2016. No single borrower has loan balance over 10% of the total loan outstanding as of June 30, 2018 and December 31, 2017.

Lease commitments

Our corporate headquarter is located at 136-82 39th Ave, 4th Floor, Unit B, Flushing, NY 11354. On December 21, 2014, we entered into a one-year lease agreement (the “Lease”) with Days Service Group, LLC, a New York limited liability company (“Days Service”) for our principal executive office. The Lease started on January 1, 2015 and expired on December 31, 2015. We subsequently renewed the Lease for the fiscal year ended December 31, 2016 and then again for the fiscal years ended December 31, 2017 and 2018. Pursuant to the current terms of the Lease, we have agreed to pay a monthly basic rent of $1200.00 plus CAM fees.

We operate our business in China in an office located on a premise leased by Arki Network in Beijing. On January 3, 2017, Arki Network entered into a Lease Transfer Agreement pursuant to which Arki Network became the leasee of an office located at Gaopidian Section 1, Unit 7-2, Chaoyang District, Beijing, China. Pursuant to the terms of the Lease Transfer Agreement, Arki Network has agreed to pay an annual rent of RMB 350,000 (approximately US$50,000) for 450 square meters of office space. The Lease Transfer Agreement became effective on January 16, 2017 and will expire on January 15, 2022.

Other Receivables

Other receivable was $34,601 as of June 30, 2018, comparing to $31,136 as of December 31, 2017. Other receivables consists of:

$14,128 and $11,557 as of June 30, 2018 and December 31, 2017, respectively, belongs to Arki Network. It represents amount paid by Arki Network for other parties. Arki Network received all amount subsequently after the end of the period.

$1,513 and $332 as of June 30, 2018 and December 31, 2017, respectively, belongs to Arki Capital.

$16,510 and $16,795 as of June 30, 2018 and December 31, 2017, respectively, belongs to American Pine, which is the amount paid for others and will get paid back after the year end.

$2,400 and $2400 as of June 30, 2018 and December 31, 2017, respectively, belongs to Consumer Capital Group Inc. in U.S. which represent refundable rent deposit.

$50 and $52 as of June 30, 2018 and December 31, 2017, respectively, belongs to Arki E-commerce.

Prepaid Expenses

Prepaid expenses were $83,695 and $58,225 as of June 30, 2018 and December 31, 2017, respectively, consists of $82,495 of prepaid expense in Arkie Network as of June 30, 2018, and $57,025 prepaid expense in Arki Network and $1,200 prepaid rent in Consumer Capital Group Inc.as of December 31, 2018.

Short-term investment

Short-term investment of $461,115 as of December 31, 2017 is an available-for-sale investment of RMB3,000,000 for Arki E-Commerce, comparing to $0 as of June 30, 2018, a decrease of $461,115 or RMB 3,000,000.

Off-Balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders’ equity or that are not reflected in our financial statements. Furthermore, we do not have any retained or contingent interests in assets transferred to an unconsolidated entity that serves as credit, liquidity, or market risk support to such entity. We do not have any variable interests in any unconsolidated entity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or research and development services with us.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Not required because we are a smaller reporting company.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2018 for the material weakness describe below.

●

Lack of US GAAP expertise - Despite our efforts to improve the Company’s controls and procedures, our accounting personnel do not have sufficient knowledge, experience and training in maintaining our books and records and preparing financial statements in accordance with US GAAP standards and SEC rules and regulations. As such, our personnel do not have adequate accounting skills and understanding necessary to fulfill the requirements of US GAAP-based reporting, including the skills of US GAAP-based period end closing, consolidation of financial statements, and US GAAP conversion, and they are inadequately supervised by persons with requisite qualifications.

To address the above material weakness, we intend to hire, as needed, key accounting personnel with technical accounting expertise and reorganize the finance department to ensure that accounting personnel with adequate experience, skills and knowledge relating to complex, non-routine transactions are directly involved in the review and accounting evaluation of our complex, non-routine transactions.

Changes in Internal Controls over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We will continue to monitor the deficiencies identified in internal controls and make changes that our management deems necessary.

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings.

There are no other actions, suits, proceedings, inquiries or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A.

Risk Factors.

Not applicable because we are a smaller reporting company.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of the Company’s equity securities during the three months ended June 30, 2018 that were not otherwise disclosed in a Current Report on Form 8-K.

Item 3.

Defaults Upon Senior Securities.

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

There is no other information required to be disclosed under this item which was not previously disclosed.

Item 6.

Exhibits.

Exhibit Number		Description

31.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1+		Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2+		Certification of Principal Accounting Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Schema Document
101.CAL		XBRL Taxonomy Calculation Linkbase Document
101.DEF		XBRL Taxonomy Definition Linkbase Document
101.LAB		XBRL Taxonomy Label Linkbase Document
101.PRE		XBRL Taxonomy Presentation Linkbase Document

In accordance with SEC Release 33-8238, Exhibits 32.1 and Exhibit 32.2 are being furnished and not filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CONSUMER CAPITAL GROUP, INC.

Dated: August 14, 2018	By:	/s/ Jianmin Gao
		Jianmin Gao
		Chief Executive Officer

Dated: August 14, 2018	By:	/s/ Crystal Lijie Chen
		Crystal Lijie Chen
		Chief Financial Officer

Attached files

Stock widget

Investing forum

Consumer Capital Group, Inc. Reports