UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2015

 

or

 

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

 

For the transition period from ________________ to _____________________

 

Commission File Number:   000-54429

 

China Xingbang Industry Group Inc.

(Exact name of registrant as specified in its charter)

 

Nevada   99-0366034

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

No. 1108 Sai Wei Avenue,

Hi-Tech Development Zone,

Xinyu City,

Jiangxi Province, P.R.C. 338004

(Address of principal executive offices) (Zip Code)

 

(011) 86 79 07123318

(Registrant*s telephone number, including area code)

 

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

 

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

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of ※large accelerated filer,§ ※accelerated filer§ and ※smaller reporting company§ in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer Accelerated filer
Non-accelerated filer   (Do not check if a smaller reporting company) Smaller reporting company

 

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: 81,244,000 shares of common stock, par value $0.001, as of May 15, 2015.

 

 

 

 
 

 

CHINA XINGBANG INDUSTRY GROUP INC.

 

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2015

 

TABLE OF CONTENTS
 

Title   Page No.
     
PART I - FINANCIAL INFORMATION  
       
Item 1. Financial Statements   F-1 - F-15
       
Item 2. Management*s Discussion and Analysis of Financial Condition and Results of Operations   3
       
Item 3. Quantitative and Qualitative Disclosures About Market Risk   17
       
Item 4. Controls and Procedures   17
       
PART II - OTHER INFORMATION    
       
Item 1. Legal Proceedings   18
       
Item 1A. Risk Factors   18
       
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   18
       
Item 3. Defaults Upon Senior Securities   19
       
Item 4. Mine Safety Disclosures   19
       
Item 5. Other Information   19
       
Item 6. Exhibits   19

 

* * *

 

In this quarterly report, unless otherwise specified or the context otherwise requires, the terms ※we§ ※us,§ ※our,§ and the ※Company§ refer to China Xingbang Industry Group Inc. and our consolidated subsidiaries and variable interest entities taken together as a whole.

 

Pursuant to Item 10(f) of Regulation S-K promulgated under the Securities Act of 1933, as amended, we have elected to comply throughout this quarterly report with the scaled disclosure requirements applicable to ※smaller reporting companies.§ Except as specifically included in the quarterly report, items not required by the scaled disclosure requirements have been omitted.

 

2
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

CHINA XINGBANG INDUSTRY GROUP INC.

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2015

 

CONTENTS

 

  Pages
   
Condensed Consolidated Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014 F-2
   
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2015 and 2014 (Unaudited) F-3
   
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (Unaudited) F-4
   
Notes to the Condensed Consolidated Financial Statements (Unaudited) F-5 - F-15

 

F- 1
 

 

CHINA XINGBANG INDUSTRY GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    As of     As of  
    March 31,     December 31,  
    2015     2014  
    (Unaudited)        
ASSETS            
             
CURRENT ASSETS            
Cash and cash equivalents   $ 395,852     $ 198,744  
Accounts receivable, net     16,132       16,117  
Prepaid expenses and other current assets     1,182,248       262,668  
Total Current Assets     1,594,232       477,529  
                 
PROPERTY AND EQUIPMENT, NET     700,716       703,951  
TOTAL ASSETS   $ 2,294,948     $ 1,181,480  
                 
LIABILITIES AND STOCKHOLDERS* DEFICIT                
                 
CURRENT LIABILITIES                
Deferred revenue   $ 53,208     $ 53,161  
Other payables and accrued expenses     2,190,725       1,622,263  
Due to a stockholder     1,613,164       1,611,708  
Due to related companies     7,679,382       5,173,317  
Total Current Liabilities     11,536,479       8,460,449  
                 
COMMITMENTS AND CONTINGENCIES     -       -  
                 
STOCKHOLDERS' DEFICIT                
Preferred stock ($0.001 par value, 60,000,000 shares authorized, no shares issued as of March 31, 2015 and December 31, 2014)     -       -  
Common stock ($0.001 par value, 300,000,000 shares authorized, 81,244,000 shares issued and outstanding as of March 31, 2015 and December 31, 2014)     81,244       81,244  
Additional paid-in capital     959,330       959,330  
Unappropriated accumulated deficits     (10,444,855 )     (8,500,442 )
Appropriated retained earnings     72,493       72,493  
Accumulated other comprehensive income     90,257       108,406  
Total Stockholders' Deficit     (9,241,531 )     (7,278,969 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS* DEFICIT   $ 2,294,948     $ 1,181,480  

 

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

F- 2
 

 

CHINA XINGBANG INDUSTRY GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)

 

    Three months ended
March 31,
 
    2015     2014  
REVENUE   $ 43,836     $ 1,284  
                 
COST OF REVENUE     848,534       184,460  
                 
GROSS LOSS     (804,698 )     (183,176 )
                 
OPERATING EXPENSES                
Selling expenses     727,271       137,344  
General and administrative expenses     372,190       178,023  
Depreciation 每 property and equipment     40,071       22,323  
Total Operating Expenses, net     1,139,532       337,690  
                 
NET LOSS FROM OPERATIONS     (1,944,230 )     (520,866 )
                 
OTHER (EXPENSES) INCOME, NET                
Interest income     268       154  
Other income     817       185  
Other expenses     (861 )     (335 )
(Loss) gain on disposal of property and equipment     (407 )     2,516  
Total Other (Expenses) Income, net     (183 )     2,520  
                 
NET LOSS BEFORE TAXES     (1,944,413 )     (518,346 )
Income tax expense     -       -  
NET LOSS     (1,944,413 )     (518,346 )
                 
OTHER COMPREHENSIVE (LOSS) INCOME                
Foreign currency translation (loss) gain     (18,149 )     111,249  
                 
TOTAL COMPREHENSIVE LOSS   $ (1,962,562 )   $ (407,097 )
                 
Net loss per share - basic and diluted   $ (0.02 )   $ (0.01 )
                 
Weighted average number of shares outstanding during the period - basic and diluted     81,244,000       81,244,000  

 

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

 

F- 3
 

 

CHINA XINGBANG INDUSTRY GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

    Three months ended
March 31,
 
    2015     2014  
CASH FLOWS FROM OPERATING ACTIVITIES            
Net loss   $ (1,944,413 )   $ (518,346 )
Adjusted to reconcile net loss to net cash used in operating activities:                
Depreciation 每 property and equipment     40,071       22,323  
Loss (gain) on disposal of property and equipment     407       (2,516 )
Changes in operating assets and liabilities                
Increase in:                
Prepaid expenses and other current assets     (913,853 )     (22,602 )
Increase (decrease) in:                
Other payables and accrued expenses     563,542       (80,228 )
Accrued rent payable to a related company     8,178       8,357  
Net cash used in operating activities     (2,246,068 )     (593,012 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of property and equipment     (36,824 )     (90,665 )
Proceeds from disposals of property and equipment     194       3,300  
Net cash used in investing activities     (36,630 )     (87,365 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Repayments to a related company     (8,499 )     -  
Advances from related companies     2,486,870       458,828  
Repayments to stockholders     -       20,987  
Net cash provided by financing activities     2,478,371       479,815  
                 
EFFECT OF EXCHANGE RATES ON CASH     1,435       (4,672 )
                 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS      197,108       (205,234 )
                 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     198,744       284,001  
                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 395,852     $ 78,767  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                
                 
Cash paid for interest expenses   $ -     $ -
                 
Cash paid for income tax   $ -     $ -

 

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

F- 4
 

 

CHINA XINGBANG INDUSTRY GROUP INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated group financial statements of China Xingbang Industry Group Inc. ("China Xingbang" or the ※Company§), its subsidiaries and variable interest entities (※VIEs§) (collectively the ※Group§) have been prepared in accordance with generally accepted accounting principles in the United States of America (※GAAP§) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (※SEC§). Accordingly, they do not include all of the information and footnotes required by GAAP for complete audited financial statements. Unless otherwise specified, all amounts set out in the condensed consolidated financial statements are expressed in US Dollars.

 

In the opinion of management, the unaudited condensed consolidated financial statements contain all adjustments consisting only of normal recurring accruals considered necessary to present fairly the Company's consolidated financial position as of March 31, 2015, the results of operations and comprehensive loss for the three months ended March 31, 2015 and 2014 and statements of cash flows for the three months ended March 31, 2015 and 2014. The consolidated results for the three months ended March 31, 2015 are not necessarily indicative of the results to be expected for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and footnotes of the Company for the year ended December 31, 2014.

 

NOTE 2 GOING CONCERN

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company*s operations resulted in a net loss of $1,944,413 and used cash in operations of $2,246,068 for the three months ended March 31, 2015. As of March 31, 2015, the Company had an unappropriated accumulated deficit of $10,444,855 and a working capital deficiency of $9,942,247.

 

In the course of its development activities, the Company continues to sustain losses. The Company expects to finance its operations primarily through capital contributions from stockholders and its affiliates. The Company borrowed from related companies a net amount of $2,478,371 during the first quarter of 2015, and the related parties agreed to lend more funds to the Company as needed for management to execute its business plan for at least the next twelve months.

 

These conditions raise substantial doubt about the Company*s ability to continue as a going concern. The Company*s continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required until such time as it can generate sources of recurring revenues and to ultimately attain profitability when the Company*s e-commerce business is fully developed. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

NOTE 3 ORGANIZATION

 

The Company was incorporated in Nevada on April 12, 2011 as a holding company.

 

Xing Bang Industry Group Limited (※Xingbang BVI§) was incorporated in the British Virgin Islands (※BVI§) on March 24, 2011 as a holding company and is wholly owned by China Xingbang.

 

China Group Purchase Alliance Limited (※Xingbang HK§) was incorporated in Hong Kong on August 5, 2008 as a holding company and is wholly owned by Xingbang BVI. Xingbang HK established Guangzhou Xingbang Information Consulting Co., Ltd., a wholly foreign owned enterprise (the ※WFOE§), on May 12, 2011 in the People*s Republic of China (※PRC§) to provide consulting, investment and technical services to Guangdong Xingbang Industry Information & Media Co., Ltd. (※Guangdong Xingbang§).

 

Guangdong Xingbang was incorporated in the PRC on January 17, 2005 as a limited liability company. Guangdong Xingbang is a print media advertising operator serving the home furnishing industry in the PRC. Guangdong Xingbang also provides marketing consulting service to clients in the home furnishing industry and local government in the PRC. Starting from August 2011, Guangdong Xingbang began to provide e-commerce services, namely B2B2C (Business-to-Business-to-Consumer), to manufacturers and distributors, and brick-and-mortar stores located in different parts of the PRC through an e-commerce platform, referred to as ju51 Mall, developed by Guangdong Xingbang. On December 31, 2013, the Company ceased its advertising and consulting service business.

 

F- 5
 

 

Xinyu Xingbang Information Industry Co., Ltd (※Xinyu Xingbang§) was incorporated in the PRC on June 11, 2012 for the purpose of continuing the business of Guangdong Xingbang in the near future as Guangdong Xingbang winds down its operations. Pursuant to the Articles of Association of Xinyu Xingbang, Guangdong Xingbang and the WFOE each invested $787,030 (RMB 5,000,000) in Xinyu Xingbang and each owns 50% of the equity interest of Xinyu Xingbang. Under the Xinyu Xingbang Articles of Association, the WFOE is entitled to appoint the sole director and all members of the management team of Xinyu Xingbang and the WFOE is entitled to receive 99.99% of Xinyu Xingbang*s net profit. Based on the relevant PRC regulations, an Internet Content Provider license, or ICP license, issued by the Chinese Ministry of Industry and Information Technology, is required for Xinyu Xingbang to conduct business as currently contemplated. In order to be granted the ICP license, foreign investor*s ownership of Xinyu Xingbang cannot exceed 50%. Xinyu Xingbang obtained its ICP license in February 2013. Guangdong Xingbang will gradually wind down its operations and Xinyu Xingbang will carry out Guangdong Xingbang*s business except that Guangdong Xingbang will fulfill its contractual obligations under the existing customer contracts. On June 30, 2012, Guangdong Xingbang granted an exclusive license to Xinyu Xingbang to permit Xinyu Xingbang to use the trademark, domain names, intellectual property rights and any know-how Guangdong Xingbang owns for the period from July 1, 2012 to June 30, 2022. Guangdong Xingbang also assigned the management right and right to receive revenue from the ju51 Mall to Xinyu Xingbang. Guangdong Xingbang will continue its corporate existence to hold the equity interest in Xinyu Xingbang for the same period.

 

Pursuant to (i) a series of contractual arrangements between the WFOE, Guangdong Xingbang and all the stockholders of Guangdong Xingbang, (ii) the share exchange agreement between China Xingbang, Xingbang BVI and all the stockholders of Xingbang BVI, and (iii) the WFOE*s 50% equity ownership of Xinyu Xingbang, the results of all these entities are consolidated together. Since they are under common control, the contractual arrangements and share exchange were accounted for as a reorganization of entities under common control.
 

The Company accounts for its VIEs in accordance with ASC 810, which requires the consolidation of VIEs in which a company has both the power to direct the activities of the VIE that most significantly impact the VIE*s economic performance and the obligation to absorb losses or the right to receive the benefits from the VIE that could potentially be significant to the VIE. The Company assesses all newly created entities and those with which the Company becomes involved to determine whether such entities are VIEs and, if so, whether or not the Company is their primary beneficiary.

 

As required by ASC 810-10, the Company performs a qualitative assessment to determine whether the Company remains the primary beneficiary of Guangdong Xingbang, which also owns 50% of Xinyu Xingbang. A qualitative assessment begins with an understanding of the nature of the risks in the entity as well as the nature of the entity*s activities including terms of the contracts entered into by the entity, ownership interests issued by the entity and the parties involved in the design of the entity. The Company*s assessment on the involvement with Guangdong Xingbang reveals that the Company has the absolute power to direct the most significant activities that impact the economic performance of Guangdong Xingbang. Under the accounting guidance, the Company is deemed to be the primary beneficiary of Guangdong Xingbang and the results of Guangdong Xingbang and Xinyu Xingbang are consolidated in the Company*s group financial statements for financial reporting purposes. As of March 31, 2015 and December 31, 2014, the Company has no equity interest in Guangdong Xingbang; none of the Company*s assets serve as collateral for Guangdong Xingbang; creditors of Guangdong Xingbang have no recourse to the Company; and the Company has not provided any guarantees to Guangdong Xingbang.

 

The assets and liabilities associated with Guangdong Xingbang and Xinyu Xingbang are combined and presented on a gross basis, prior to consolidation adjustments with other entities in the Group, and are as follows:

 

    As of
March 31,
2015
    As of
December 31,
2014
 
    (Unaudited)        
Cash and cash equivalents   $ 334,898     $ 137,870  
Accounts receivable, net     16,132       16,117  
Prepaid expenses and other current assets     1,182,248       255,660  
Due from group companies     1,476,568       1,401,127  
Property and equipment, net     700,716       703,951  
Total assets   $ 3,710,562     $ 2,514,725  
                 
Deferred revenue   $ 53,208     $ 53,161  
Other payables and accrued expenses     2,167,886       1,577,392  
Due to group companies     401,355       400,993  
Due to a stockholder     806,582       805,854  
Due to related companies     7,679,382       5,173,317  
Total current liabilities     11,108,413       8,010,717  
Deficit of variable interest entities     (7,397,851 )     (5,495,992 )
Total liabilities and deficit   $ 3,710,562     $ 2,514,725  

 

F- 6
 

 

In 2011, the Company agreed to waive the management fee payable by Guangdong Xingbang for a period of 3 years from May 13, 2011 to May 12, 2014 in order for Guangdong Xingbang to preserve enough cash to fund its e-commerce business. In 2014, the Company agreed to extend the waiver of management fee payable by Guangdong Xingbang for an additional 3 years from May 13, 2014 to May 12, 2017.

 

The liabilities recognized as a result of combining the VIEs do not necessarily represent additional claims on the Company*s general assets; rather, they represent claims against the specific assets of the combined VIEs. Conversely, assets recognized as a result of combining the VIEs do not represent additional assets that could be used to satisfy claims by the Company*s creditors as they are not legally included within the Company*s general assets.

 

Immediately prior to the PRC restructuring transactions that were completed on May 13, 2011, the Chief Executive Officer of the Company and his spouse controlled Guangdong Xingbang as they owned 90% and 10% respectively, of its registered capital. The Chief Executive Officer also indirectly controlled WFOE as he owned 56.25% of the issued share capital of Xingbang BVI, the sole stockholder of WFOE. As WFOE and Guangdong Xingbang are under common control, the contractual arrangements have been accounted for as a reorganization of entities under common control and the Group*s financial statements were prepared as if the reorganization occurred at the beginning of the first period presented.

 

Share exchange

 

On May 13, 2011, China Xingbang entered into a share exchange agreement with Xingbang BVI and the stockholders of Xingbang BVI in which the stockholders of Xingbang BVI exchanged 100% of the issued share capital of Xingbang BVI, valued at $80,000, for 79,999,000 shares of common stock of China Xingbang. Xingbang BVI became a wholly owned subsidiary of China Xingbang. Prior to the share exchange, the sole stockholder of China Xingbang owned 56.25% of the issued share capital of Xingbang BVI. As both companies are under common control, the share exchange involving China Xingbang and Xingbang BVI is being treated for accounting purposes as a capital transaction and a reorganization of entities under common control with China Xingbang as the accounting acquirer and Xingbang BVI as the accounting acquiree. The consolidated financial statements were prepared as if the reorganization occurred at the beginning of the first period presented.

 

Accordingly, these group financial statements include the following:

 

1. The balance sheets consisting of the net assets of the acquirer and acquiree at historical cost; and
2. The statement of operations including the operations of the acquirer and acquiree for the periods presented.

 

NOTE 4 PRINCIPLES OF CONSOLIDATION

 

The accompanying group financial statements for the three months ended March 31, 2015 and 2014 include the financial statements of China Xingbang, its wholly owned subsidiaries, Xingbang BVI, Xingbang HK and the WFOE, its contractually controlled affiliate, Guangdong Xingbang, and Xinyu Xingbang which is 50% owned by Guangdong Xingbang and 50% owned by WFOE.

 

All significant inter-company accounts and transactions have been eliminated in consolidation.

 

F- 7
 

   

NOTE 5 USE OF ESTIMATES

 

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

 

NOTE 6 THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

 

In May 2014, the Financial Accounting Standards Board (※FASB§) issued Accounting Standards Update ("ASU") 2014-09 "Revenue from Contracts with Customers" (Topic 606) ("ASU 2014-09"). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is not permitted. The Company will adopt ASU 2014-09 during the first quarter of fiscal 2017. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2014-09 will have on the Company's financial position or results of operations.

 

In August 2014, FASB issued ASU No. 2014-15 Preparation of Financial Statements 每 Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity*s Ability to Continue as a Going Concern. Under GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity*s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity*s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements〞Liquidation Basis of Accounting. Even when an entity*s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity*s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Accounting Standards Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU, however, management does not believe that it met conditions which would make the Company's financial statements for this period be subject to additional disclosure requirements.

 

In February 2015, FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a VIE, and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. A reporting entity may apply a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or may apply the amendments retrospectively. The Company is currently assessing the impact of the adoption of this guidance on the consolidated financial statements.

 

All other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 

NOTE 7 OTHER PAYABLES AND ACCRUED EXPENSES

 

Other payables and accrued expenses consisted of the following:

 

    As of
March 31,
2015
    As of
December 31,
2014
 
    (unaudited)        
Customers deposits and prepayments   $ 1,388,684     $ 1,202,093  
Business and other taxes payable     21,139       9,720  
Other payables     3,812       6,744  
Accrued expenses     777,090       403,706  
    $ 2,190,725     $ 1,622,263  

 

F- 8
 

 

NOTE 8 SEGMENTS

 

E-commerce is the only business segment of the Company since 2014.

 

NOTE 9 STOCKHOLDERS* EQUITY

 

Appropriated retained earnings

 

The Company*s PRC subsidiaries are required to make appropriation to the statutory surplus reserve at 10% of the after-tax net income annually until the total contributions equal to 50% of the entities* registered capital. The statutory reserve funds are restricted for use to set off against prior period losses, expansion of production and operations or for the increase in the registered capital of the respective companies. This reserve is therefore not available for distribution except in liquidation.

 

As of March 31, 2015 and December 31, 2014, the appropriated retained earnings was both $72,493 in accordance with the laws and regulations of the PRC.

 

NOTE 10 COMMITMENTS AND CONTINGENCIES

 

(a)    Defined contribution retirement plans

 

The full time employees of Guangdong Xingbang and Xinyu Xingbang are entitled to employee benefits including medical care, welfare subsidies, unemployment insurance and pension benefits through a Chinese government mandated multi-employer defined contribution plan. The Company is required to accrue for those benefits based on certain percentages of the employees* salaries and make contributions to the plans out of the amounts accrued for medical and pension benefits. The total provision and contributions made for such employee benefits for the three months ended March 31, 2015 and 2014 were $229,998 and $44,774 respectively. The Chinese government is responsible for the medical benefits and the pension liability to be paid to these employees.

 

(b)    Rental leases commitment

 

Guangdong Xingbang leases office premises from two stockholders (Mr. Yao and his spouse) under an operating lease at a monthly rental of $15,486 until December 31, 2016 pursuant to certain lease agreement.

 

In September 2013, Guangdong Xingbang leased Zhongshan office premises from an independent third party, Zhongshan Guzhen Asset Management Ltd, pursuant to a lease agreement and pays a monthly rental of $1,847. The lease shall expire on August 31, 2018.

 

Xinyu Xingbang leases office premises from Xinyu Xingbang Industry Co., Ltd (※Xinyu Industry§) under an operating lease at a monthly rental of $2,742, which expires on June 30, 2015. Mr. Yao and his spouse own 90% and 10% respectively, of the registered capital of Xinyu Industry.

 

In August 2014, Xinyu Xingbang leased Guangzhou office premises from an independent third party, Jingyan Yang, pursuant to a lease agreement and pays a monthly rental of $1,049. The lease shall expire on August 27, 2015.

 

As of March 31, 2015, the Company had outstanding commitments with respect to the above operating leases, which are due as follows:

 

Nine months ending December 31, 2015   $ 118,700  
Fiscal years ending December 31,        
2016     222,772  
2017     36,935  
2018     24,624  
Total   $ 403,031  

 

Rental expenses for the three months ended March 31, 2015 and 2014 was $62,996 and $61,179 respectively.

 

(c) Capital commitment

 

As of March 31, 2015, the Company had contracted capital commitment of $370,785 for the purchase of office equipment.

 

F- 9
 

 

NOTE 11 RELATED PARTY TRANSACTIONS

 

Rental expenses paid to stockholders and a related company

 

Guangdong Xingbang leases office premises from two stockholders (Mr. Yao and his spouse) under an operating lease at a monthly rental of approximately RMB96,000 (approximately $15,486) which is due to expire on December 31, 2016. For the three months ended March 31, 2015 and 2014, Guangdong Xingbang paid rent to these two stockholders of $46,183 and $47,194 respectively.

 

In June 2012, Xinyu Xingbang entered into a lease agreement with Xinyu Industry for office premises whereby the monthly rental is $2,742. The lease started on July 1, 2012 and will expire on June 30, 2015. For the three months ended March 31, 2015 and 2014, Xinyu Xingbang paid the rent to Xinyu Industry of $8,178 and $8,357 respectively.

  

Due to a stockholder

 

As of March 31, 2015 and December 31, 2014, WFOE owed $806,582 and $805,854 respectively, to Mr. Yao. The loan is interest free and unsecured. The loan was entered into on May 31, 2012, and the loan period started on June 11, 2012 and was due on June 10, 2013. On May 31, 2013 and August 7, 2014, the loan was renewed with the same terms and a renewed due date of June 11, 2015. The proceeds of the loan were used as the capital investment in Xinyu Xingbang, which is 50% owned by WFOE and 50% owned by Guangdong Xingbang.

 

As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $806,582 and $805,854 respectively, to Mr. Yao. The loan is interest free and unsecured. The loan was entered into on May 31, 2012, and the loan period started on June 19, 2012 and was due on June 18, 2013. On June 10, 2013 and July 30, 2014, the loan was renewed with the same terms and a renewed due date of June 18, 2015. The proceeds of the loan were used as the capital investment in Xinyu Xingbang, which is 50% owned by WFOE and 50% owned by Guangdong Xingbang.

 

Accrued rental expenses repaid to stockholders during the three months ended March 31, 2015 and year ended December 31, 2014 were as follows:

 

    March 31,
2015
    December 31,
2014
 
             
Accrued rental expenses repaid to stockholders   $ -     $ (181,110 )
    $ -     $ (181,110 )

 

F- 10
 

 

Due to related companies

 

As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $20,472 and $14,566 respectively to Xinyu Zhongxing Decoration Technical Network Company Limited (※ Zhongxing Decoration§) for certain expenses paid on behalf of Xinyu Xingbang. Mr. Yao and his spouse own 80% and 20% respectively, of the registered capital of Zhongxing Decoration. The amount due is unsecured, interest free and repayable on demand.

 

As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $1,221 and $0 respectively to Xinyu Qiuying Technology Network Co., Ltd (※Xinyu Qiuying§) for deposits received on behalf of Xinyu Qiuying. Mr. Yao is the director of Xinyu Qiuying. The amount due is unsecured, interest free and repayable on demand.

 

As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $1,779 and $0 respectively to Guangzhou EFee Pay Network Co., Ltd,. (※Guangzhou EFee Pay§) for certain expenses paid on behalf of Xinyu Xingbang. Mr. Yao is the director of Guangzhou EFee Pay. The amount due is unsecured, interest free and repayable on demand.

  

As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $74,045 and $65,760 respectively to Xinyu Industry for rental expense of office used by Xinyu Xingbang. The amount due is unsecured, interest free and repayable on demand.

  

On January 3, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a loan period started on January 5, 2013 and became due on January 4, 2014. On January 3, 2014 and January 4, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of January 4, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $161,316 and $161,171 respectively to Xinyu Industry for the relevant loan.

 

On January 10, 2013, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB5,000,000. The loan is interest free and unsecured with a loan period started on January 15, 2013 and became due on January 14, 2014. On January 10, 2014, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of January 14, 2015. RMB3,000,000 was repaid on December 3, 2014. On January 14, 2015, the loan agreement with Xinyu Industry was renewed with an amount of RMB2,000,000, the same terms and a renewed due date of January 14, 2016. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $322,633 and $322,341 respectively to Xinyu Industry for the relevant loan.

 

On May 30, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on June 6, 2013 and was due on June 5, 2014. On July 30, 2014, the loan was renewed with the same terms and a renewed due date of June 5, 2015. The use of this loan is only for the operation of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On July 25, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on July 31, 2013 and was due on July 30, 2014. On July 30, 2014, the loan was renewed with the same terms and a renewed due date of July 30, 2015. The use of this loan is only for the operation of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On September 5, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on September 10, 2013 and was due on September 10, 2014. On September 9, 2014, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of September 9, 2015. The use of this loan is only for the operation of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On September 5, 2013, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on September 12, 2013 and was due on September 11, 2014. On September 11, 2014, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of September 11, 2015. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

F- 11
 

 

On December 8, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on December 12, 2013 and was due on December 11, 2014. On December 12, 2014, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of December 11, 2015. The use of this loan is only for the operation of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On December 8, 2013, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB4,000,000. The loan is interest free and unsecured with a loan period started on December 12, 2013 and was due on December 11, 2014. On December 12, 2014, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of December 11, 2015. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $645,265 and $644,683 respectively to Xinyu Industry for the relevant loan.

 

On January 14, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on January 14, 2014 and was due on January 13, 2015. On January 13, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of January 13, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On February 11, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a term from February 13, 2014 and was due on February 12, 2015. On February 12, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of February 12, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On February 11, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from February 12, 2014 and was due on February 11, 2015. On February 11, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of February 11, 2016. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $161,316 and $161,171 respectively to Xinyu Industry for the relevant loan.

 

On March 8, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB300,000. The loan is interest free and unsecured with a term from March 12, 2014 and was due on March 11, 2015. On March 11, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of March 11, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $48,394 and $48,351 respectively to Xinyu Industry for the relevant loan.

 

On March 8, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a term from March 12, 2014 and was due on March 11, 2015. On March 11, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of March 11, 2016. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On April 10, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,500,000. The loan is interest free and unsecured with a term from April 14, 2014 and was due on April 13, 2015. On April 13, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of April 13, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $241,975 and $241,756 respectively to Xinyu Industry for the relevant loan.

 

F- 12
 

 

On April 10, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,000,000. The loan is interest free and unsecured with a term from April 14, 2014 and was due on April 13, 2015. On April 13, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of April 13, 2016. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $322,633 and $322,341 respectively to Xinyu Industry for the relevant loan.

 

On April 20, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB5,000,000. The loan is interest free and unsecured with a term from April 23, 2014 and was due on April 22, 2015. On April 22, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of April 22, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $806,582 and $805,854 respectively to Xinyu Industry for the relevant loan.

 

On August 26, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from August 27, 2014 and is due on August 26, 2015. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $161,316 and $161,171 respectively to Xinyu Industry for the relevant loan.

 

On September 8, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,500,000. The loan is interest free and unsecured with a term from September 9, 2014 and is due on September 8, 2015. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $403,291 and $402,927 respectively to Xinyu Industry for the relevant loan.

 

On September 17, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from September 18, 2014 and is due on September 17, 2015. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $161,316 and $161,171 respectively to Xinyu Industry for the relevant loan.

 

On October 14, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,000,000. The loan is interest free and unsecured with a term from October 14, 2014 and is due on October 13, 2015. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $322,633 and $322,341 respectively to Xinyu Industry for the relevant loan.

 

On December 1, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,000,000. The loan is interest free and unsecured with a term from December 1, 2014 and is due on November 30, 2015. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $322,633 and $322,341 respectively to Xinyu Industry for the relevant loan.

 

On December 11, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB300,000. The loan is interest free and unsecured with a term from December 11, 2014 and is due on December 10, 2015. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $48,394 and $48,351 respectively to Xinyu Industry for the relevant loan.

 

On December 12, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,000,000. The loan is interest free and unsecured with a term from November 12, 2014 and is due on November 11, 2015. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $322,633 and $322,341 respectively to Xinyu Industry for the relevant loan.

 

F- 13
 

 

On January 12, 2015, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,000,000. The loan is interest free and unsecured with a term from January 13, 2015 and is due on January 12, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $322,633 and $0 respectively to Xinyu Industry for the relevant loan.

 

On January 12, 2015, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from January 13, 2015 and is due on January 12, 2016. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $161,316 and $0 respectively to Xinyu Industry for the relevant loan.

 

On February 8, 2015, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,400,000. The loan is interest free and unsecured with a term from February 9, 2015 and is due on February 8, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $225,843 and $0 respectively to Xinyu Industry for the relevant loan.

 

On February 10, 2015, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from February 11, 2015 and is due on February 10, 2016. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $161,316 and $0 respectively to Xinyu Industry for the relevant loan.

 

On March 10, 2015, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from March 11, 2015 and is due on March 10, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $161,316 and $0 respectively to Xinyu Industry for the relevant loan.

 

On March 11, 2015, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB3,000,000. The loan is interest free and unsecured with a term from March 12, 2015 and is due on March 11, 2016. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $483,949 and $0 respectively to Xinyu Industry for the relevant loan.

 

On March 19, 2015, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB3,000,000. The loan is interest free and unsecured with a term from March 20, 2015 and is due on March 19, 2016. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $483,949 and $0 respectively to Xinyu Industry for the relevant loan.

 

On March 25, 2015, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB3,000,000. The loan is interest free and unsecured with a term from March 26, 2015 and is due on March 25, 2016. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $483,949 and $0 respectively to Xinyu Industry for the relevant loan.

 

F- 14
 

 

Movements of amounts due to related companies during the three months ended March 31, 2015 and the year ended December 31, 2014 were as follows:

 

    March 31,
2015
    December 31,
2014
 
             
Advances from related companies   $ 2,486,870     $ 3,586,498  
Expenses accrued to related companies     8,178       59,811  
Repayments to related companies     (8,499 )     (498,896 )
    $ 2,486,549     $ 3,147,413  

 

NOTE 12 CONCENTRATIONS AND CREDIT RISKS

 

As of March 31, 2015 and December 31, 2014, all of the Company*s assets were located in the PRC and Hong Kong and all of the Company*s revenues were derived from customers located in the PRC.

 

For the three months ended March 31, 2015 and 2014, there were no suppliers accounting for 10% or more of the Company*s purchases.

  

For the three months ended March 31, 2015 and 2014, there were no customers accounting for 10% or more of the Company*s sales.

 

NOTE 13 SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855-10, the company has analyzed its operations subsequent to March 31, 2015 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements, other than noted herein.

 

On April 21, 2015, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of $64,527 (RMB400,000). The loan is interest free and unsecured with a due date of April 21, 2016. The use of this loan is solely for the operation of Guangdong Xingbang.

  

On April 21, 2015, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of $112,921 (RMB700,000). The loan is interest free and unsecured with a due date of April 21, 2016. The use of this loan is solely for the operation of Guangdong Xingbang.

 

F- 15
 

 

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

 

The following discussion and analysis of our results of operations and financial condition should be read together with our consolidated group financial statements and the notes thereto and other financial information, which are included in our annual report on Form 10-K for fiscal year ended December 31, 2014. Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles. In addition, our financial statements and the financial information included in this report reflect our organization transactions and have been prepared as if our current corporate structure had been in place throughout the relevant periods.

 

This section contains forward-looking statements. These forward-looking statements are subject to various factors, risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Further, as a result of these factors, risks and uncertainties, the forward-looking events may not occur. Relevant factors, risks and uncertainties include, but are not limited to, those discussed in ※Item 1. Business,§ ※Item 1A. Risk Factors§ and elsewhere in our annual report on Form 10-K for fiscal year ended December 31, 2014. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management*s beliefs and opinions as of the date of this report. We are not obligated to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

 

Overview and Strategy

 

In this Quarterly Report on Form 10-Q, unless the context requires or is otherwise specified, references to the ※Company,§ ※we,§ ※us,§ ※our§ and similar expressions include the following entities (as defined herein):

 

(i)            China Xingbang Industry Group Inc., a Nevada corporation (※ China Xingbang §);

 

(ii)           Xing Bang Industry Group Limited, a British Virgin Islands company and a wholly-owned subsidiary of China Xingbang (※ Xingbang BVI §);

 

(iii)          China Group Purchase Alliance Limited, a Hong Kong company and a wholly-owned subsidiary of Xingbang BVI (※ Xingbang HK §);

 

(iv)          Guangzhou Xingbang Information Consulting Co., Ltd., a wholly foreign-owned enterprise, or the ※ WFOE §, formed in the People*s Republic of China (※ PRC §) and a wholly-owned subsidiary of Xingbang HK;

 

(v)           Guangdong Xingbang Industry Information & Media Co. Ltd., our principal operating subsidiary, which is a Chinese variable interest entity that the WFOE controls through certain contractual arrangements (※ Guangdong Xingbang §); and

 

(vi)          Xinyu Xingbang Information Industry Co., Ltd., an entity incorporated in the PRC which the WFOE and Guangdong Xingbang each owns 50% of its equity interest, (※ Xinyu Xingbang §). Xinyu Xingbang will continue the business of Guangdong Xingbang.

 

Through our wholly owned subsidiaries, Xingbang BVI and Xingbang HK, we own the WFOE, which controls Guangdong Xingbang, a variable interest entity (※VIE§), through a series of variable interest entity, or VIE contractual arrangements.  Guangdong Xingbang is currently our source of income and operations.  A summary of our business is described below.

 

We were formed as a Nevada corporation on April 12, 2011 to acquire operational control over Guangdong Xingbang. Since foreign investors are restricted by the laws and regulations of the PRC to operate media and e-commerce business in China, we operate our business through ownership of the WFOE that provides management, consulting, investment and technical services to Guangdong Xingbang. We do not own any direct equity interest in Guangdong Xingbang. In May 2011, the WFOE entered into a series of contractual arrangements which effectively give the WFOE operational control over Guangdong Xingbang despite the lack of direct ownership. As a result of these contractual arrangements, we treat Guangdong Xingbang as a variable interest entity, or VIE, under U.S. generally accepted accounting principles, and we have included its historical financial results in our consolidated financial statements.

 

Our subsidiaries, Xingbang BVI and Xingbang HK are holding companies which do not have any operations or own any assets except for the ownership of the WFOE.  The only current operation of the WFOE is to provide consulting and management services to Guangdong Xingbang.  Currently, we rely on results of operations of Guangdong Xingbang and Xinyu Xingbang. If the PRC government declares the VIE agreements are not enforceable, we will not be able to exercise effective control over Guangdong Xingbang and consolidate the financial results of Guangdong Xingbang.  In such case, our results of operations and financial position will be materially adversely affected.

 

3
 

 

Guangdong Xingbang was founded in 2005 as a print-media based advertising operator and consulting services provider.  In 2010, we made a significant shift of our business model and began laying the groundwork to transition to the business of operating a home furnishings e-commerce platform, ju51 Online Mall. Since 2012, we have been phasing out our advertising and consulting segments. On December 31, 2013, Guangdong Xingbang ceased its advertising and consulting service business. We derive all of our revenue from e-commerce business since 2014.

 

Xinyu Xingbang was incorporated in the PRC in June 2012 for the purpose of continuing the business of Guangdong Xingbang in the near future as Guangdong Xingbang winds down its operations. Pursuant to the Articles of Associations of Xinyu Xingbang, Guangdong Xingbang and the WFOE each invested $787,030 (RMB 5,000,000) in Xinyu Xingbang and each owns 50% of the equity interest of Xinyu Xingbang. Under the Xinyu Xingbang Articles of Association, the WFOE is entitled to appoint the sole director and all members of the management team of Xinyu Xingbang and the WFOE is entitled to receive 99.99% of Xinyu Xingbang*s net profit. Based on the relevant PRC regulations, an Internet Content Provider license, or ICP license, issued by the Chinese Ministry of Industry and Information Technology, is required for Xinyu Xingbang to conduct business as currently contemplated.  In order to be granted the ICP license, foreign investor*s ownership of Xinyu Xingbang cannot exceed 50%. Xinyu Xingbang obtained its ICP license in February 2013. Guangdong Xingbang will gradually wind down its operations and Xinyu Xingbang will carry out Guangdong Xingbang*s business except that Guangdong Xingbang will fulfill its contractual obligations under the existing customer contracts. On June 30, 2012, Guangdong Xingbang granted an exclusive license to Xinyu Xingbang to permit Xinyu Xingbang to use trademark, domain names, intellectual property rights and any know-how Guangdong Xingbang owns for the period from July 1, 2012 to June 30, 2022. Guangdong Xingbang also assigned the management right and right to receive revenue from the ju51 Mall to Xinyu Xingbang. Guangdong Xingbang will continue its corporate existence to hold the equity interest in Xinyu Xingbang for the same period.

 

 Below is our updated organizational structure after the incorporation of Xinyu Xingbang.

 

 

 

4
 

 

Since 2012, the Company has been shifting its business strategies from being a print media based advertising operator and consulting services provider to an operator of a B2B2C e-commerce platform in the home furnishing industry.

 

We had a publication named  ※Industry Economy Review§  which was published as a supplement to ※Shopping Guide§, a nationally circulated newspaper. As of December 31, 2013, we have ceased the production of this newspaper.

 

In addition, we have ceased consulting business activities as a result of the change of our business model to focus on revamping our e-commerce business.

 

Since 2013, the development under e-commerce business includes:

 

  Operate a B2B2C e-commerce platform, called ju51 Online Shopping Mall (※ju51 Online Mall§ or ※ju51 Mall§), to be an e-commerce platform to be the significant revenue contributor of our whole business.
     
  Provide searching, directory and other services through ※Qiuying§ to help home furnishing companies setting up a franchise service platform on Ju51 Mall.
     
  Phasing in other home furnishing sectors, including bathroom supplies, hardware, home textiles, closets, tiles and floor, doors and windows, furniture, home appliances, interior painting and home d谷cor by having dedicated newspaper and dedicated market places in the ju51 Online Mall.

 

E-Commerce P latform Services through Ju51 online mall.

 

We have two different type of flagship stores in the Ju51 Mall, i.e. product flagship stores and service flagship stores.

 

Product flagship stores

 

We expect to receive franchise fee from businesses in the home furnishing industry when they open flagship stores in the Ju51 Mall and commission from manufacturers for their sales through the flagship stores on Ju51 Mall.  

 

In addition, we also plan to generate revenue from e-commerce platform services through ju51 Online Mall. We intend to provide an extensive e-commerce platform to provide value added services to manufacturers, distributors, retailers, decoration companies, and decoration technicians in the home furnishing industry while serving consumers through the ju51 Mall. ※Ju51§ sounds similar to the Chinese words of ※juwu you,§ which means ※worry-free living§ in Mandarin. When fully constructed, the ju51 Mall is expected to have ten marketplaces targeting ten sectors in the home furnishing industry, including light and lighting, bath and kitchen supplies, hardware, home textiles, residential furniture, office furniture, tiles, floor, doors and windows, home appliances, interior painting and home d谷cor and security monitoring system. Since its launch in August 2011, we explored different business strategies to maximize revenue generation through the ju51 Mall.

 

5
 

 

In the ju51 Mall, the manufacturers open flagship stores where they showcase and sell their products, list prices for products and process orders placed online by consumers. We also have technical service stations (previously named ※direct sales stores§ prior to February 2012) on our ju51Mall, which are primarily operated by brick-and-mortar retailers and decoration companies which have physical stores. A technical service station acts as a shopping guide and provides product support and services. When a consumer places orders online directly with flagship stores, the technical service station located closest to the consumer will receive the order simultaneously and provide product support and services, such as returns, exchanges, refunds and installation, through its own brick-and-mortar store. The reason for having technical service stations as shopping guides is to address the Chinese consumers* concern about return or exchange of products ordered online. Generally we only develop one technical service station within a county or a district of a city to protect their economic interest. We currently intend to have the technical service stations act as distributors and promote our services in local markets. Customers may avoid paying the shipping fees by picking up the product at a local technical service station. In addition to technical service stations, we also intend to have decoration technicians to act as shopping guides to help increase sales volume in the ju51 Mall. Xinyu Zhongxing Decoration Technicians Network Company Limited, (※Zhongxing Decoration§), an entity which is 80% owned by Mr. Xiao hong Yao (※ Mr. Yao§), our Chairman of the Board, CEO and 20% owned by his spouse, founded a web portal named China Decoration Technician at http://www.zgzxjg.com, which is intended to review and certify decoration technicians. Customers placing orders through the decoration technicians will enjoy special discounts compared to the retail price listed on the ju51 Mall. We also expect to develop different categories of Ju51 Mall memberships where the members will enjoy special discounts in order to promote sales in the ju51 Mall. A technical service station can earn commission as a percentage of the retail price, and the technical service station is related to the e-commerce platform. A decoration technician will also earn commissions, paid by flagship stores, based on a percentage of the amount he or she sells as a shopping guide. Our business model is designed to make sure consumers will receive quality products and services and have a quality shopping experience at the ju51 Mall. We expect the current business model will keep retail prices at the ju51 Mall at a competitive level.

   

We have not completed any transactions from product flagship stores within the e-commerce platform. No commission has therefore been generated for the three months ended March 31, 2015.

 

6
 

 

We had an agency agreement with Zhongxing Decoration. Pursuant to the Agency Agreement, Zhongxing Decoration agreed to identify appropriate candidate to serve as technical service station. We were obligated to pay Zhongxing Decoration a commission of 5% of the sales closed by flagship stores on Ju51 Mall, 100% of the technical service station annual fee, and a commission of 10% of the franchise annual fee. Starting from January 2015, in order to have a more direct cooperation with technical service stations, Xinyu Xingbang, Zhongxing Decoration and technical service stations entered into certain three party agreements pursuant to which Zhongxing Decoration shall no longer act as the middle person, allowing Xinyu Xingbang to directly enter into cooperation agreement with technical service stations. 

 

Xinyu Xingbang entered into cooperation agreement with technical service stations since January 2015. Xinyu Xingbang is entitled to receive from the technical service stations a service charge of RMB10,000 for one year of training and guidance service to technical service stations since January 2015. As of March 31, 2015, 12 technical service stations have paid the service charges.

 

Service flagship stores

 

Ju51 Mall also provides a platform for service flagship stores to list their company information and allow customers to reach out to each of them directly. Each business shall pay a service charge of RMB2,000 for 1-2 years of services. Businesses are required to have their own stores prior to be franchised as service flagship stores in the platform. As of March 31, 2015, 1,121 companies have signed the franchise agreements as service flagship stores, paid the service charges and had their online stores set up.

  

We have generated $43,836 and $1,284 revenue from e-commerce platform during the three months ended March 31, 2015 and 2014. We have made substantial progress in setting up our infrastructure and have established 255 technical service stations as of March 31, 2015.

   

Advertising services through e-commerce platform

 

We may generate advertising revenue on the e-commerce platform. We anticipate to get paid by businesses in the home furnishing industry that put advertisements in the Ju51 Mall. Moreover, we plan to develop distinct newspapers for each of these sectors, as well as have a distinct ※market place§ or ※channel§ for each such sector in the ju51 Mall.

 

Since 2014, we started to promote a Media Integrated Advertising Communication Package at a flat fee, ranging from RMB50,000 to RMB500,000 depending on the broadcasting frequency. The services to be provided include corporate press release writing, integrated, industry or local portal press release, classification website news release, Ju51 website platform front page display, Ju51 website ※Recommendation§ column display, and IT industry channel first screen banner. The service also includes advertising services to businesses in the home furnishing industry through various media including Internet, TV, newspaper, periodicals, outdoor media and etc. For the three months ended March 31, 2015, we still have no further business in this service. We entered into a contract with one client in July 2014, and expect to sign up more customers during 2015; though there can be no assurance that we will be successful in doing so.

  

7
 

 

Critical Accounting Policies and Estimates

 

In preparing our condensed consolidated group financial statements in conformity with accounting principles generally accepted in the United States, we make estimates and assumptions that affect the accounting, recognition and disclosure of our assets, liabilities, stockholders* equity, revenues and expenses. We make these estimates and assumptions because certain information that we use is dependent upon future events, which cannot be calculated with a high degree of precision from data available or cannot be readily calculated based upon generally accepted methodologies. In some cases, these estimates are particularly difficult and therefore require a significant amount of judgment. Actual results could differ from the estimates and assumptions that we use in the preparation of our consolidated group financial statements.

 

During the three months ended March 31, 2015, there were no significant changes to our critical accounting policies and estimates as reported in our Annual Report on Form 10-K for the year ended December 31, 2014.

 

Results of Operations 〞 Three Months Ended March 31, 2015 Compared to Three Months Ended March 31, 2014.

 

The following table presents, for the three months indicated, our consolidated statements of operations information.

 

    Three months ended
March 31,
 
    2015     2014  
             
REVENUE   $ 43,836   $ 1,284
                 
COST OF REVENUE     848,534     184,460
                 
GROSS LOSS     (804,698 )     (183,176 )
                 
OPERATING EXPENSES                
Selling expenses     727,271       137,344  
General and administrative expenses     372,190       178,023  
Depreciation 每 property and equipment     40,071       22,323  
Total Operating Expenses, net     1,139,532       337,690  
                 
NET LOSS FROM OPERATIONS     (1,944,230 )     (520,866 )
                 
OTHER (EXPENSES) INCOME, NET                
Interest income     268       154  
Other income     817       185  
Other expenses     (861 )     (335 )
(Loss) g ain on disposal of property and equipment     (407 )     2,516  
Total Other (Expenses) Income, net     (183 )     2,520  
                 
NET LOSS BEFORE TAXES     (1,944,413 )     (518,346 )
Income tax expense     -       -  
NET LOSS     (1,944,413 )     (518,346 )
                 
OTHER COMPREHENSIVE (LOSS) INCOME                
Foreign currency translation (loss) gain     (18,149 )     111,249  
                 
TOTAL COMPREHENSIVE LOSS   $ (1,962,562 )   $ (407,097 )
                 
Net loss per share - basic and diluted   $ (0.02 )   $ (0.01 )
                 
Weighted average number of shares outstanding during the period - basic and diluted     81,244,000       81,244,000  

 

8
 

 

Revenue

 

During the three months ended March 31, 2015 and 2014, we had total revenue of $43,836 and $1,284 respectively, with an increase of $42,552, or approximately 3,314% compared to the same period in 2014. $41,993 was attributed to revenue generated from service flagship stores, and $1,843 was attributed to revenue generated from technical service stations. During the three months ended March 31, 2014, total revenue was $1,284 which was attributed to revenue generated from service flagship stores. The increase of $42,552 was mainly due to increase in number of service flagship stores from 34 at March 31, 2014 to 1,121 at March 31, 2015.

 

Cost of revenue

 

Cost of revenue is mainly comprised of salaries of website administrators, business tax relating to e-commerce and commission paid to technical service stations.

  

Cost of revenue for the three months ended March 31, 2015 was $848,534, compared to $184,460 for the three months ended March 31, 2014, an increase of $664,074, or approximately 360%. The increase was due to the increase in salaries of website administrators and commission paid to technical service stations.

 

Gross loss

 

Gross loss was $804,698 for the three months ended March 31, 2015, an increase of $621,522, or approximately 339%, compared to a gross loss of $183,176 of the same period in 2014. The increase was mainly due to the increase in cost in the e-commerce business outweigh the increase in e-commerce revenue.

 

Operating expenses

 

Operating expenses consist of selling, general and administrative expenses and depreciation.

 

Operating expenses for the three months ended March 31, 2015 were $1,139,532, composed of $727,271 in selling expenses, $372,190 in general and administrative expenses, and $40,071 in depreciation. Operating expenses for the three months ended March 31, 2014 were $337,690, composed of $137,344 in selling expenses, $178,023 in general and administrative expenses, and $22,323 in depreciation. The increase in operating expenses from the three months ended March 31, 2014 to the three months ended March 31, 2015 was $801,842, or approximately 237%, which was mainly due to the increase of information technology expense, staff cost and advertising expenses.

 

Other (expenses) income, net

 

Other (expenses) income, net, consists mainly of interest income, other income, other expenses, and (loss) gain on disposal of property and equipment.

 

Other expense, net, for the three months ended March 31, 2015 was $183 compared to other income, net of $2,520 for the three months ended March 31, 2014, a decrease of $2,703, or approximately 107%. The decrease in other income, net, was mainly due to the fact that there was a loss on disposal of property and equipment of $407 for the first quarter ended March 31, 2015, whereas there was a gain on disposal of property and equipment of $2,516 for the same period in 2014.

 

9
 

 

Net Loss

 

Net loss was $1,944,413 and $518,346 for the three months ended March 31, 2015 and 2014 respectively. The increase was mainly due to the result of the increase in selling, general and administrative expenses and cost of revenue.

 

Other comprehensive (loss) income

 

Other comprehensive loss was $18,149 for the three months ended March 31, 2015. Other comprehensive income was $111,249 for the three months ended March 31, 2014. The change of foreign currency translation loss was primarily caused by the fluctuation in the RMB to U.S. dollar exchange rate in 2015 compared to 2014.

 

Liquidity and Capital Resources

 

Cash and cash equivalents

 

Cash and cash equivalents consist primarily of cash on hand and demand deposits at banks. We had $395,852 and $198,744 of cash and cash equivalents on hand as of March 31, 2015 and December 31, 2014 respectively. There was an increase of $197,108 in our cash and cash equivalents from December 31, 2014 to March 31, 2015.

 

The increase in our cash and cash equivalents from December 31, 2014 to March 31, 2015 was largely attributable to the combined effect of net cash used in operating activities increased by $2,246,068, payments for purchase of property and equipment increased by $36,824, offset by net advances from related companies increased by $2,478,371 during the three months ended March 31, 2015.

 

We require cash for working capital, capital expenditures, repayment of debt, salaries, commissions and related benefits and other operating expenses and income taxes. We expect that our working capital needs will increase for the foreseeable future, as we continue to develop and grow our business. See ※Business 〞 General§ in our 10-K filed with the SEC on March 27, 2015. For the second to fourth quarter of 2015, we are estimating a cash inflow of approximately $6 million and an outflow of approximately $6 million as we are starting to generate revenue from e-commerce platform.

 

The following table summarizes our cash flows for the three months ended March 31, 2015 and 2014:

 

    Three months ended
March 31,
 
    2015     2014  
Net cash used in operating activities   $ (2,246,068 )   $ (593,012 )
Net cash used in investing activities   $ (36,630 )   $ (87,365 )
Net cash provided by financing activities   $ 2,478,371     $ 479,815  

 

10
 

 

Net Cash Used in Operating Activities. Net cash used in operating activities was $2,246,068 and $593,012 for the three months ended March 31, 2015 and 2014 respectively. The most significant items affecting the comparison of our operating cash flow for the three months ended March 31, 2015 and 2014 are summarized below:

 

 

In crease in cash loss from operations - Our net loss from operations, excluding depreciation, and (loss) gain on disposal of property and equipment, increased by $1,405,396 on a period-to-period basis, from cash loss of $498,539 for the three months ended March 31, 2014 to cash loss of $1,903,935 for the three months ended March 31, 2015, which negatively impacted our cash flows from operations. The increase in cash loss from operations was mainly due to the increase in cost of revenue, information technology expenses, advertising expenses and staff costs in the first quarter in 2015 compared to the same period last year.

 

  Increase in prepaid expenses and other current assets - Prepaid expenses and other current assets increased by $913,853 for the first quarter in 2015, and increased by $22,602 for the same period in 2014. Prepaid expenses and other current assets consisted of prepaid information technology expenses and advertising expenses, rental and other deposits and advances to staff. The increase in prepaid expenses and other current assets was mainly due to increase in prepaid information technology expenses and advertising expenses.

 

  In crease in other payables and accrued expenses - Other payables and accrued expenses increased by $563,542 for the first quarter in 2015, and decreased by $80,228 for the same period in 2014. Other payables and accrued expenses consisted of other tax payables, accrued expenses, deposits received from customers, other payables and accrued wages. The increase in other payables and accrued expenses was due to increase in deposits received from customers and accrued expenses.

 

Net Cash Used in Investing Activities. Our investing activities for the three months ended March 31, 2015 and 2014 used cash of $36,630 and $87,365 respectively. The decrease in cash used in investing activities was mainly due to decrease in purchase of property and equipment of $53,841.

 

Net Cash Provided by Financing Activities. Net cash provided by financing activities for the three months ended March 31, 2015 and 2014 was $2,478,371 and $479,815 respectively. The increase was mainly due to the increase in advances from related companies for $2,028,042.

 

Capital Resources

 

We had negative working capital of $9,942,247 as of March 31, 2015 and $7,982,920 as of December 31, 2014 respectively. The reason for the increase in negative working capital from December 31, 2014 to March 31, 2015 was primarily due to the increase in amounts due to related companies and prepaid expenses and other current assets and continuous loss for the period.

 

Under the VIEs* agreements, Guangdong Xingbang shall pay the WFOE a consulting service fee, payable in RMB each quarter, equivalent to all of its net income for such quarter based on its quarterly financial statements, prepared in accordance with generally accepted accounting principles of the PRC. The WFOE then may transfer the cash payment to the offshore holding companies (Xingbang HK, Xingbang BVI and China Xingbang) via dividend payment, after deduction of relevant taxes.  If we obtain funds through financing in the US, Xingbang HK may invest in the WFOE. It is generally prohibited for PRC resident enterprises, including foreign owned entities, to make inter-company loans. However, management believes it is in compliance with the current PRC law for the WFOE to deposit the funds into a PRC bank account and request the PRC bank to lend the funds to Guangdong Xingbang, and may use such means to obtain capital funding in the future.

 

We are a holding company with no significant revenue-generating operations of our own, and thus any cash flows from operations are and will be generated by Guangdong Xingbang through our WFOE*s existing consulting service management arrangement with Guangdong Xingbang. Our ability to service our debt and fund our ongoing operations is dependent on the results of these operations and their ability to provide us with cash. The WFOE*s ability to make loans or pay dividends are restricted under PRC law and may be restricted under the terms of future indebtedness, its governing documents or other agreements. With the cash on hand and the anticipated cash to be received from our operations, we may not be able to generate enough cash to support the expansion of the business operations. However, the Guangdong Xingbang*s Stockholders are committed to provide cash as needed to support the Company*s ongoing operations and continued growth. Therefore, we believe that our sources of liquidity will be sufficient to enable us to meet our cash needs for at least the next 12 months.

 

11
 

 

Nonetheless, our liquidity and capital position could be adversely affected by:

 

  continued failure to generate sufficient revenue in the e-commerce business;
     
  the enactment of new laws and regulations;

 

  our inability to grow our business as we anticipate by expanding our revamped e-commerce business;
     
  any other changes in the cost structure of our underlying business model; and
     
  any of the other risks and uncertainties described in ※Item 1A. Risk Factors§ in our annual report on Form 10-K for the fiscal year ended December 31, 2014.

 

Debt Obligations

 

The following is a summary of amounts outstanding under our debt obligations as of March 31, 2015 and December 31, 2014.

 

    As of
March 31,
2015
    As of
December 31,
2014
 
Due to related companies   $ 7,679,382     $ 5,173,317  
Due to a stockholder     1,613,164       1,611,708  
Total debt   $ 9,292,546     $ 6,785,025  

 

Due to related companies

 

As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $20,472 and $14,566 respectively to Xinyu Zhongxing Decoration Technical Network Company Limited (※Zhongxing Decoration§) for certain expenses paid on behalf of Xinyu Xingbang. Mr. Yao and his spouse own 80% and 20% respectively, of the registered capital of Zhongxing Decoration. The amount due is unsecured, interest free and repayable on demand.

 

As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $1,221 and $0 respectively to Xinyu Qiuying Technology Network Co., Ltd (※Xinyu Qiuying§) for deposits received on behalf of Xinyu Qiuying. Mr. Yao is the director of Xinyu Qiuying. The amount due is unsecured, interest free and repayable on demand.

 

As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $1,779 and $0 respectively to Guangzhou EFee Pay Network Co., Ltd,. (※Guangzhou EFee Pay§) for certain expenses paid on behalf of Xinyu Xingbang. Mr. Yao is the director of Guangzhou EFee Pay. The amount due is unsecured, interest free and repayable on demand.

  

As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $74,045 and $65,760 respectively to Xinyu Industry for rental expense of office used by Xinyu Xingbang. The amount due is unsecured, interest free and repayable on demand.

  

On January 3, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a loan period started on January 5, 2013 and became due on January 4, 2014. On January 3, 2014 and January 4, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of January 4, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $161,316 and $161,171 respectively to Xinyu Industry for the relevant loan.

 

On January 10, 2013, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB5,000,000. The loan is interest free and unsecured with a loan period started on January 15, 2013 and became due on January 14, 2014. On January 10, 2014, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of January 14, 2015. RMB3,000,000 was repaid on December 3, 2014. On January 14, 2015, the loan agreement with Xinyu Industry was renewed with an amount of RMB2,000,000, the same terms and a renewed due date of January 14, 2016. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $322,633 and $322,341 respectively to Xinyu Industry for the relevant loan.

 

On May 30, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on June 6, 2013 and was due on June 5, 2014. On July 30, 2014, the loan was renewed with the same terms and a renewed due date of June 5, 2015. The use of this loan is only for the operation of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On July 25, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on July 31, 2013 and was due on July 30, 2014. On July 30, 2014, the loan was renewed with the same terms and a renewed due date of July 30, 2015. The use of this loan is only for the operation of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

12
 

 

On September 5, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on September 10, 2013 and was due on September 10, 2014. On September 9, 2014, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of September 9, 2015. The use of this loan is only for the operation of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On September 5, 2013, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on September 12, 2013 and was due on September 11, 2014. On September 11, 2014, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of September 11, 2015. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On December 8, 2013, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on December 12, 2013 and was due on December 11, 2014. On December 12, 2014, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of December 11, 2015. The use of this loan is only for the operation of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On December 8, 2013, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB4,000,000. The loan is interest free and unsecured with a loan period started on December 12, 2013 and was due on December 11, 2014. On December 12, 2014, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of December 11, 2015. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $645,265 and $644,683 respectively to Xinyu Industry for the relevant loan.

 

On January 14, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a loan period started on January 14, 2014 and was due on January 13, 2015. On January 13, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of January 13, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On February 11, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a term from February 13, 2014 and was due on February 12, 2015. On February 12, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of February 12, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On February 11, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from February 12, 2014 and was due on February 11, 2015. On February 11, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of February 11, 2016. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $161,316 and $161,171 respectively to Xinyu Industry for the relevant loan.

 

On March 8, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB300,000. The loan is interest free and unsecured with a term from March 12, 2014 and was due on March 11, 2015. On March 11, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of March 11, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $48,394 and $48,351 respectively to Xinyu Industry for the relevant loan.

 

On March 8, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB500,000. The loan is interest free and unsecured with a term from March 12, 2014 and was due on March 11, 2015. On March 11, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of March 11, 2016. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $80,658 and $80,585 respectively to Xinyu Industry for the relevant loan.

 

On April 10, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,500,000. The loan is interest free and unsecured with a term from April 14, 2014 and was due on April 13, 2015. On April 13, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of April 13, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $241,975 and $241,756 respectively to Xinyu Industry for the relevant loan.

 

13
 

 

On April 10, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,000,000. The loan is interest free and unsecured with a term from April 14, 2014 and was due on April 13, 2015. On April 13, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of April 13, 2016. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $322,633 and $322,341 respectively to Xinyu Industry for the relevant loan.

 

On April 20, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB5,000,000. The loan is interest free and unsecured with a term from April 23, 2014 and was due on April 22, 2015. On April 22, 2015, the loan agreement with Xinyu Industry was renewed with the same terms and a renewed due date of April 22, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $806,582 and $805,854 respectively to Xinyu Industry for the relevant loan.

 

On August 26, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from August 27, 2014 and is due on August 26, 2015. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $161,316 and $161,171 respectively to Xinyu Industry for the relevant loan.

 

On September 8, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,500,000. The loan is interest free and unsecured with a term from September 9, 2014 and is due on September 8, 2015. The use of this loan is only for the operation of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $403,291 and $402,927 respectively to Xinyu Industry for the relevant loan.

 

On September 17, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from September 18, 2014 and is due on September 17, 2015. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $161,316 and $161,171 respectively to Xinyu Industry for the relevant loan.

 

On October 14, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,000,000. The loan is interest free and unsecured with a term from October 14, 2014 and is due on October 13, 2015. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $322,633 and $322,341 respectively to Xinyu Industry for the relevant loan.

 

On December 1, 2014, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,000,000. The loan is interest free and unsecured with a term from December 1, 2014 and is due on November 30, 2015. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $322,633 and $322,341 respectively to Xinyu Industry for the relevant loan.

 

On December 11, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB300,000. The loan is interest free and unsecured with a term from December 11, 2014 and is due on December 10, 2015. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $48,394 and $48,351 respectively to Xinyu Industry for the relevant loan.

 

On December 12, 2014, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,000,000. The loan is interest free and unsecured with a term from November 12, 2014 and is due on November 11, 2015. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $322,633 and $322,341 respectively to Xinyu Industry for the relevant loan.

 

14
 

 

On January 12, 2015, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB2,000,000. The loan is interest free and unsecured with a term from January 13, 2015 and is due on January 12, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $322,633 and $0 respectively to Xinyu Industry for the relevant loan.

 

On January 12, 2015, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from January 13, 2015 and is due on January 12, 2016. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $161,316 and $0 respectively to Xinyu Industry for the relevant loan.

 

On February 8, 2015, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,400,000. The loan is interest free and unsecured with a term from February 9, 2015 and is due on February 8, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $225,843 and $0 respectively to Xinyu Industry for the relevant loan.

 

On February 10, 2015, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from February 11, 2015 and is due on February 10, 2016. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $161,316 and $0 respectively to Xinyu Industry for the relevant loan.

 

On March 10, 2015, Guangdong Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB1,000,000. The loan is interest free and unsecured with a term from March 11, 2015 and is due on March 10, 2016. The use of this loan is solely for the operations of Guangdong Xingbang. As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $161,316 and $0 respectively to Xinyu Industry for the relevant loan.

 

On March 11, 2015, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB3,000,000. The loan is interest free and unsecured with a term from March 12, 2015 and is due on March 11, 2016. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $483,949 and $0 respectively to Xinyu Industry for the relevant loan.

 

On March 19, 2015, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB3,000,000. The loan is interest free and unsecured with a term from March 20, 2015 and is due on March 19, 2016. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $483,949 and $0 respectively to Xinyu Industry for the relevant loan.

 

On March 25, 2015, Xinyu Xingbang entered into a loan agreement with Xinyu Industry, with an amount of RMB3,000,000. The loan is interest free and unsecured with a term from March 26, 2015 and is due on March 25, 2016. The use of this loan is solely for the operations of Xinyu Xingbang. As of March 31, 2015 and December 31, 2014, Xinyu Xingbang owed $483,949 and $0 respectively to Xinyu Industry for the relevant loan.

 

15
 

 

Movements of amount due to related companies during the three months ended March 31, 2015 and the year ended December 31, 2014 were as follows:

 

    March 31,
2015
    December 31,
2014
 
             
Advances from related companies   $ 2,486,870     $ 3,586,498  
Expenses accrued to related companies     8,178       59,811  
Repayments to related companies     (8,499 )     (498,896 )
    $ 2,486,549     $ 3,147,413  

 

Due to a stockholder

 

As of March 31, 2015 and December 31, 2014, WFOE owed $806,582 and $805,854 respectively, to Mr. Yao. The loan is interest free and unsecured. The loan was entered into on May 31, 2012, and the loan period started on June 11, 2012 and was due on June 10, 2013. On May 31, 2013 and August 7, 2014, the loan was renewed with the same terms and a renewed due date of June 11, 2015. The proceeds of the loan were used as the capital investment in Xinyu Xingbang, which is 50% owned by WFOE and 50% owned by Guangdong Xingbang.

 

As of March 31, 2015 and December 31, 2014, Guangdong Xingbang owed $806,582 and $805,854 respectively, to Mr. Yao. The loan is interest free and unsecured. The loan was entered into on May 31, 2012, and the loan period started on June 19, 2012 and was due on June 18, 2013. On June 10, 2013 and July 30, 2014, the loan was renewed with the same terms and a renewed due date of June 18, 2015. The proceeds of the loan were used as the capital investment in Xinyu Xingbang, which is 50% owned by WFOE and 50% owned by Guangdong Xingbang.

 

Accrued rental expenses repaid to stockholders during the three months ended March 31, 2015 and year ended December 31, 2014 were as follows:

 

    March 31,
2015
    December 31,
2014
 
             
Accrued rental expenses repaid to stockholders   $ -     $ (181,110 )
    $ -     $ (181,110 )

 

Off-Balance Sheet Arrangements

 

As of March 31, 2015 and December 31, 2014, we did not have any off-balance sheet obligations involving unconsolidated subsidiaries that provide financing or potentially expose us to unrecorded financial obligations. All of our obligations with respect to Guangdong Xingbang have been presented on our consolidated balance sheets as of each such date.   

 

16
 

 

Recently Issued Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (※FASB§) issued Accounting Standards Update ("ASU") 2014-09 "Revenue from Contracts with Customers" (Topic 606) ("ASU 2014-09"). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is not permitted. The Company will adopt ASU 2014-09 during the first quarter of fiscal 2017. Management is evaluating the provisions of this statement and has not determined what impact the adoption of ASU 2014-09 will have on the Company's financial position or results of operations.

 

In August 2014, FASB issued ASU No. 2014-15 Preparation of Financial Statements 每 Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entity*s Ability to Continue as a Going Concern. Under GAAP, continuation of a reporting entity as a going concern is presumed as the basis for preparing financial statements unless and until the entity*s liquidation becomes imminent. Preparation of financial statements under this presumption is commonly referred to as the going concern basis of accounting. If and when an entity*s liquidation becomes imminent, financial statements should be prepared under the liquidation basis of accounting in accordance with Subtopic 205-30, Presentation of Financial Statements〞Liquidation Basis of Accounting. Even when an entity*s liquidation is not imminent, there may be conditions or events that raise substantial doubt about the entity*s ability to continue as a going concern. In those situations, financial statements should continue to be prepared under the going concern basis of accounting, but the amendments in this Update should be followed to determine whether to disclose information about the relevant conditions and events. The amendments in this Accounting Standards Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company will evaluate the going concern considerations in this ASU, however, management does not believe that it met conditions which would make the Company's financial statements for this period be subject to additional disclosure requirements.

 

In February 2015, FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The new consolidation standard changes the way reporting enterprises evaluate whether (a) they should consolidate limited partnerships and similar entities, (b) fees paid to a decision maker or service provider are variable interests in a VIE, and (c) variable interests in a VIE held by related parties of the reporting enterprise require the reporting enterprise to consolidate the VIE. The guidance is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2015. Early adoption is allowed, including early adoption in an interim period. A reporting entity may apply a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or may apply the amendments retrospectively. The Company is currently assessing the impact of the adoption of this guidance on the consolidated financial statements.

 

All other accounting standards that have been issued or proposed by the FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable to smaller reporting companies.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures.

 

The Company*s management, including our Chief Executive Officer and interim Chief Financial Officer, reassessed the effectiveness of the design and operation of the Company*s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of March 31, 2015 and has subsequently determined that our disclosure controls and procedures were not effective as of March 31, 2015 due to certain material weaknesses, including: (i) a lack of sufficient accounting personnel with appropriate understanding of U.S. GAAP and SEC reporting requirements; and (ii) a lack of standard charter of accounts and written accounting manual and closing procedures to facilitate preparation of financial statements under U.S. GAAP for financial reporting processes. As a result of such material weaknesses, our disclosure controls and procedures were not effective.

 

Limitations on the Effectiveness of Disclosure Controls.

 

Readers are cautioned that our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls.

 

Changes in Internal Control over Financial Reporting.

 

There were no changes in our internal control over financial reporting during the first quarter of 2015 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

17
 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

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

 

Item 1A. Risk Factors.

 

As a smaller reporting company, we are not required to provide the information required by this Item.

 

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

 

There were no issuances of our equity securities during the quarter ended March 31, 2015.

 

Limitations on Our Payment of Dividends

 

We have not paid any cash dividends to date and we do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of our business.

 

In the future, we may be a party to agreements that limit or restrict our ability to pay dividends.

 

In addition, Nevada corporate law prohibits us from making any distribution (including a dividend) on our capital stock at a time when:

 

  we would not be able to pay our debts as they become due in the usual course of business; or
     
  our total assets would be less than the sum of (i) our total liabilities plus (ii) the amount that would be needed, if we were to be dissolved at the time of distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution (although we presently do not have any stockholders with such preferential rights).

 

WFOE is a wholly-foreign owned enterprise under the laws of the PRC. The principal regulations governing dividend distributions by wholly foreign owned enterprises and Sino-foreign equity joint ventures include:

 

  The Wholly Foreign Owned Enterprise Law (1986), as amended;
     
  The Wholly Foreign Owned Enterprise Law Implementing Rules (1990), as amended;
     
  The Sino-foreign Equity Joint Venture Enterprise Law (1979), as amended; and
     
  The Sino-foreign Equity Joint Venture Enterprise Law Implementing Rules (1983), as amended.

 

Under these regulations, wholly foreign owned enterprises and sino-foreign equity joint ventures in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, before paying dividends to their stockholders, these foreign invested enterprises are required to set aside at least 10% of their profits each year, if any, to fund certain reserve funds until the amount of the cumulative total reserve funds reaches 50% of the relevant company*s registered capital. Accordingly, the WFOE is allowed to distribute dividends only after having set aside the required amount of its profits into the reserve funds as required under applicable PRC laws and regulations.

 

18
 

 

Item 3. Defaults Upon Senior Securities.

 

Not applicable.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

Not applicable.

 

Item 6. Exhibits.

 

Exhibit No.   Description
31.1*   Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2*   Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1*   Certification of Chief 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 Chief Financial 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 Extension Schema Document
101.CAL**   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**   XBRL Taxonomy Extension Label Linkbase Document
101.PRE**   XBRL Taxonomy Extension Presentation Linkbase Document

 

* filed herein.

 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

19
 

 

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.

 

  China Xingbang Industry Group Inc.
     
Date: May 15, 2015 By: /s/ Xiaohong Yao
   

Xiaohong Yao, Chairman, President and

Chief Executive Officer

    (principal executive officer)
     
  By: /s/ Haigang Song
   

Haigang Song, Chief Financial Officer

(principal financial and accounting officer)

  

20
 

  

EXHIBIT INDEX

 

Exhibit No.   Description
31.1   Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
31.2   Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
32.1   Certification of Chief 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 Chief Financial 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 Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

 

21


 

EXHIBIT 31.1

 

I, Xiaohong Yao, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2015 of China Xingbang Industry Group Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: May 15, 2015 By: /s/ Xiaohong Yao
   

Xiaohong Yao

Chief Executive Officer

(Principal Executive Officer)

EXHIBIT 31.2

 

I, Haigang Song, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2015 of China Xingbang Industry Group Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: May 15, 2015 By: /s/ Haigang Song
   

Haigang Song

Chief Financial Officer

(Principal Finance and Accounting Officer)

EXHIBIT 32.1

 

Certification Pursuant To

Section 906 of Sarbanes-Oxley Act of 2002

 

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

 

  1. The Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2015 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

 

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

 

Date: May 15, 2015 By: /s/ Xiaohong Yao
    Xiaohong Yao
   

Chief Executive Officer

(Principal Executive Officer)

 

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

EXHIBIT 32.2

 

Certification Pursuant To

Section 906 of Sarbanes-Oxley Act of 2002

 

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

 

  1. The Quarterly Report on Form 10-Q of the Company for the period ended March 31, 2015 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (U.S.C. 78m or 78o(d)); and

 

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

 

Date: May 15, 2015 By: /s/ Haigang Song
    Haigang Song
   

Chief Finance Officer

(Principal Financial and Accounting Officer)

 

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