| Summary of Significant Accounting Policies | NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (a) Basis of presentation The consolidated financial statements of the
Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”). (b) Principles of Consolidation The consolidated financial statements include
the financial statements of all the subsidiaries and VIEs of the Company. All transactions and balances between the Company and
its subsidiaries and VIEs have been eliminated upon consolidation (c) Foreign currency translation and
transactions The functional currency of HUSN and HKFS is
United States dollars (“US$” or “$”). The functional currency of Yingxin Yijia, CIFS (Xiamen) Financial
Leasing, Sheng Ying Xin and its subsidiaries are Renminbi (“RMB”), and the PRC is the primary economic environment
in which the Company operates. Transactions denominated in currencies other
than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions.
The resulting exchange differences are included in the determination of net income (loss) for the respective periods. For financial reporting purposes, the financial
statements of the Company’s PRC subsidiary and the financial statements of the VIEs are prepared using RMB and are translated
into the Company’s reporting currency, the US$. Assets and liabilities are translated using the exchange rate at each balance
sheet date. Revenue and expenses are translated using average rates prevailing during each reporting period, and Shareholders’
equity is translated at historical exchange rates except for the change in retained earnings during the year which is the result
of the net income (loss). The cumulative translation adjustments are recorded in accumulated other comprehensive income (loss)
in the accompanying consolidated statements of shareholders’ equity. The exchange rates used are as follows:
December 31, 2019 December 31, 2018
RMB exchange rate at balance sheets dates, 6.9762 6.8632
Year Ended December 31,
2019 2018 2017
Average exchange rate for each year 6.8944 6.6174 6.7518 No representation is made that the RMB amounts
could have been, or could be, converted into U.S. dollars at the rates used in translation. The source of the exchange rates is
generated from the People’s Bank of China. (d) Use of estimates The preparation of these consolidated financial
statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and the related disclosures of contingent assets and liabilities. Management makes its
estimates based on historical experience and on various other assumptions it believes to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could
differ from those estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements
mainly include the allowance for doubtful accounts, the valuation allowance of deferred tax assets, the estimated useful lives
of long-lived assets, the impairment assessment of goodwill, intangibles and other long-lived assets, and the fair value of identifiable
assets and liabilities acquired through business combination. (e) Cash Cash and cash equivalents consist of cash on
hand, cash on deposit and other highly liquid investments which are unrestricted as to withdrawal or use, and which have original
maturities of three months or less when purchased. The Company maintains cash with various financial institutions mainly in the
PRC. As of December 31, 2019 and 2018, the Company had no cash equivalents. (f) Accounts receivable and loans to
third parties Accounts receivable and loans to third parties
are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts as needed.
The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s
existing accounts receivable and loans receivable. The Company determines the allowance based on aging data, historical collection
experience, customer specific facts and economic conditions. Based on management’s assessment of the collectability of the
accounts receivable and loans to third party, allowance for loans to third party was $39,402,683as of December 31, 2019, and, allowance
for loans to third party was $7,119,594 as of December 31, 2018. The value-added tax receivable from customers included in the
accounts receivable in the balance sheet were $97,287and $1,006,361 as of December 31, 2019 and 2018, respectively. The accounts
receivable, except for the principal of factoring as of December 31, 2019 were 0.07% collected as of March 31, 2020. (g) Property and Equipment The Company records equipment at cost less
accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated useful lives of the
assets with a 5% residual value for electronic equipment, and a 5% residual value for furniture and a 0% residual value for leasehold
improvement. Estimated useful lives of property and equipment:
Useful Life
Furniture 10 years
Electronic equipment 3 years
Leasehold improvements Shorter of life of asset or lease The Company eliminates the cost and related
accumulated depreciation of assets sold or otherwise retired from the accounts and includes any gain or loss in the statement of
operations. The Company charges maintenance, repairs and minor renewals directly to expense as incurred. (h) Intangible Assets Intangible assets, comprising accounting software
and big data platform, which are separable from the property and equipment, are stated at cost less accumulated amortization. Amortization
is computed using the straight-line method over the estimated useful lives of the assets. (i) Impairment of Long-lived Assets The Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future net undiscounted cash
flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured
by the amount by which the carrying amount of the asset exceeds its fair value. For the year ended December 31, 2019, the Company
did not recognize any impairment loss of its long-lived assets. For the year ended December 31, 2018, the Company recognized $73,999
impairment loss of its long-lived assets. For the year ended December 31, 2017, the Company did not recognize any impairment loss
of its long-lived assets. (j) Statutory Reserve The Company is required to make appropriations
to reserve funds, comprising the statutory surplus reserve and discretionary surplus reserve, based on after-tax net income determined
in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve
is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to
50% of the entities’ registered capital. Appropriations to the discretionary surplus reserve are made at the discretion of
Board of Directors. (k) Revenue recognition The Company adopted ASC Topic 606, “Revenue
from Contracts with Customers” effective January 1, 2019, applying the modified retrospective method. In accordance with ASC Topic 606, revenues
are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that
reflects the consideration the Company expects to be entitled to in exchange for those goods or services. In determining when and
how much revenue is recognized from contracts with customers, the Company performs the following five-step analysis: (1) identify
the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;
(4) allocate the transaction price to the performance obligations in the contract; (5) recognize revenue when (or as) the entity
satisfies a performance obligation. The Company’s services include commercial
payment advisory services, intermediary bank loan advisory services, international corporate financing advisory services, technical
services and factoring services. For commercial payment advisory service after
signing contracts with the client, the Company starts to identify and select banks and financial products and coordinates with
banks to structure financing solutions for the client. Then the client prepares application materials and sends them to the bank.
When approved by the bank, the client will deposit cash with the bank or purchases wealth management products sold by the bank.
After this step, the bank will issue a letter of guarantee, which the client will pledge as security for the acceptance bills.
The letter of guarantee is a document that the bank provides certifying itself as guarantor. The Company’s service fee is
a percentage of the amount of cash deposited with or wealth management products purchased from the bank by the client. The Company
recognizes revenue after the client receives a credit contract from the bank and when the Company receives a contract completion
confirmation from the client. For intermediary bank loan advisory services,
the Company matches small-to-medium sized enterprises (“SMEs”) with financing sources. The Company charges borrowers
an introduction fee which is calculated at a percentage of the loan. The Company recognizes revenue after the client receives a
bank credit contract from the bank and when the Company receives a contract completion confirmation from the client. The Company
typically receives the contract completion confirmation when the client receives the bank financing and signs off on the contract
completion confirmation. For international corporate financing advisory
services, the Company works with overseas banks to structure and provide clients with financing solutions to obtain facilities
from overseas banks for the clients’ offshore affiliates. After signing the contract with the client, the Company will identify
overseas banks and domestic banks, structure financing solutions and facilitate application processes. After the client provides
security to the domestic bank, the domestic bank will issue a letter of guarantee to the overseas bank. The overseas bank will
provide credit to the affiliate designated by the client. The Company’s service fee is a percentage of credit granted by
the overseas bank to the offshore affiliate. The Company recognizes revenue after the offshore affiliate receives credit approval
notice from the offshore bank and when the Company receives a contract completion confirmation from the client. The Company typically
receives the contract completion confirmation when the affiliate receives the bank financing and the client signs off on the contract
completion confirmation. For technical services, after signing the contract,
the Company provides the clients with the technical services and charges a fee for the technical service. The Company recognizes
revenue when the services are rendered. For factoring services, generally after we
checked the documents such as client information, contracts, invoices supporting the client’s credit worth, authenticity
of the business contracts and the collectability of receivables, we will sign the factoring service contract with client. Upon
signing the contract, we request the client to pay us the management fee which we record as revenue upon receipt. After signing
the factoring contract, we will wire the factored amount to the client’s designated party, generally its suppliers, and will
collect the amount over the contact period. At each month end we will record the factoring service revenue based on the service
fee ratio and the amount we factored. There is no claw back provisions or other guarantees.
Full services fees are due upon the contract completion confirmation from the client. (l) Taxation The Company follows the guidance of ASC Topic
740 “Income taxes” and uses the assets and liability method to account for income taxes. Under this method, deferred
tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities
using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records
a valuation allowance to offset deferred tax assets, if based on the weight of available evidence, it is more-likely-than-not that
some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is
recognized in statement of operations and comprehensive income (loss) in the period that includes the enactment date. The Company follows a more likely than not
threshold and a two-step approach for the measurement of tax positions and financial statement recognition. Under the two-step
approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates
that it is more likely than not that the position will be sustained, including the resolution of related appeals or litigation
process, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized
upon settlement. The Company has elected to classify interest
related to an uncertain tax position (if and when required) to interest expense, and classify penalties related to an uncertain
tax position (if and when required) as part of other expense in the consolidated statements of operations and comprehensive income
(loss). The tax authority of the PRC government conducts
periodic and ad hoc tax filing reviews on business enterprises operating in the PRC after those enterprises had completed their
relevant tax filings, hence the Company’s tax filings may not be finalized. It is therefore uncertain as to whether the PRC
tax authority may take different views about the Company’s tax filings which may lead to additional tax liabilities. The
tax returns of the Company’s PRC subsidiaries and VIEs are subject to examination by the relevant tax authorities. According
to the PRC Tax Administration Law on the Levying and Collection of Taxes, the statute of limitations is three years if the underpayment
of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to
five years under special circumstances, where the underpayment of taxes is more than RMB100,000. In the case of transfer pricing
issues, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. The Company did
not have any material interest or penalties associated with tax positions for the years ended December 31, 2019, 2018 and 2017
and did not have any significant unrecognized uncertain tax positions as of December 31, 2019, 2018 and 2017. The Company does
not expect that the position of unrecognized tax benefits will significantly increase or decrease within 12 months of December
31, 2019. (m) Cost of revenues The Company’s cost of revenues mainly
consists of revenue-generating staff costs. (n) Research and development expenses The Company accounts for expenses for the enhancement,
maintenance and technical support for the Company’s Internet platforms and intellectual property that are used in its daily
operations as research and development expenses. Research and development costs are charged to expense when incurred. Expenses
for research and development for the years ended December 31, 2019, 2018 and 2017 were approximately nil and US$3,512,512, US$92,683,
respectively. (o) Comprehensive income (loss) The Company presents comprehensive income (loss)
in accordance with ASC 220, “Comprehensive Income” (p) Earnings (loss) per Share Earnings (loss) per share (“EPS”)
are calculated in accordance with ASC Topic 260, “Earnings Per Share”. Basic earnings (loss) per share is computed
by dividing net income (loss) attributable to common shareholders by the weighted average number of shares of common stock outstanding
during the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts
to issue common shares were exercised or converted into common stock. The dilutive effect of outstanding common share warrants
and options are reflected in the diluted earnings per share by application of the treasury stock method when the impact is dilutive.
Potential common shares that have an anti-dilutive effect are excluded from the calculation of diluted EPS. There is no dilutive
effect for the years ended December 31, 2019, 2018 and 2017. (q) Fair Value of Financial Instruments The carrying value of cash and cash equivalents,
accounts receivable, other receivable and short-term loans approximate their fair values because of the short-term nature of these
instruments. (r) Deferred offering costs The Company capitalized all direct and incremental
professional fees incurred relating to the Company’s Initial public offering (“IPO”), which were offset against
the gross proceeds of the offering. Total deferred offering costs as of December 31, 2016 and December 31, 2017 are $312,202 and
$nil, respectively. During the year ended December 31, 2017, deferred offering costs of $864,673 were deducted from the proceeds
from IPO. (s) Goodwill Goodwill
is the excess of the consideration transferred over the fair value of the acquired assets and assumed liabilities in a business
combination. The
Company tests goodwill for impairment at the reporting unit level on an annual basis and between annual tests when an event occurs
or circumstances change that could indicate that the asset might be impaired. The Company first has the option to assess qualitative
factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
If the company decides, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting
unit is less than its carrying amount, the quantitative impairment test is mandatory. Otherwise, no further testing is required. (t) Jobs Act accounting election The Company is an “emerging growth company,”
as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth
companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such
time as those standards apply to private companies. The Company has elected to use the extended transition period for complying
with new or revised accounting standards under Section 102(b)(2) of the Jobs Act, that allows the Company to delay the adoption
of new or revised accounting standards that have different effective dates for public and private companies until those standards
apply to private companies. As a result of this election, the financial statements may not be comparable to companies that comply
with public company effective dates. (u) Recently issued accounting standards In May 2014, the Financial Accounting Standard
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with
Customers (Topic 606)” (as further amended or clarified by other related ASUs issued subsequently in 2015, 2016 and 2017).
ASU No. 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and IFRS.
Simultaneously, this ASU supersedes the revenue recognition requirements in ASC Topic 605-Revenue Recognition and most industry-specific
guidance throughout the Industry Topics of the Codification. The core principle of this ASU requires an entity to recognize revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following
five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine
the transaction price; (4) allocate the transaction price to the performance obligations in the contract; (5) recognize revenue
when (or as) the entity satisfies a performance obligation. For public business entities, certain not-for-profit entities, and
certain employee benefit plans, the amendments in ASU No. 2014-09 and the amendments in other related ASUs that affected the guidance
in ASU 2014-09 should be applied to annual reporting periods beginning after December 15, 2017, including interim reporting periods
within that reporting period. The Company, as an EGC, adopted these ASUs related to ASC topic 606 from January 1, 2019. Management
assessed that there is no material impact to the beginning balance of its retained earnings. In February 2016, the FASB issued ASU No. 2016-02,
“Leases (Topic 842)”. The amendments in this ASU requires that a lessee recognize the assets and liabilities that arise
from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the
lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with
a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize
lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning
of the earliest period presented using a modified retrospective approach. For public business entities, the amendments in this
ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early
application of the amendments in this ASU is permitted for all entities. In July 2018, the FASB issued ASU No. 2018-11, “Leases
(Topic 842)–Targeted Improvements”, which provide another transition method in addition to the existing transition
method by allowing entities to initially apply the new lease standard at the adoption date (such as January 1, 2019, for calendar
year-end public business entities) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in
the period of adoption, and provide lessors with a practical expedient, by class of underlying asset, to not separate nonlease
components from the associated lease component and, instead, to account for those components as a single component if the nonlease
components otherwise would be accounted for under the new revenue guidance (Topic 606). The Company adopted the amendments in these
ASUs on January 1, 2019 using the additional modified retrospective transition method provided by ASU No. 2018-11. The adoption
didn’t result in a material adjustment to the Company’s retained earnings as of January 1, 2019. Based on the Company’s
current office space lease agreements as of December 31, 2019, the lease term are 12 months or less. The company asses lease, which
qualify for the short-term lease measurement and recognition exemption. In June 2016, the FASB issued ASU No. 2016-13,
“Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendments
in this ASU require the measurement and recognition of expected credit losses for financial assets held at amortized cost. The
amendments in this ASU replace the existing incurred loss impairment model with an expected loss methodology, which will result
in more timely recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, “Codification Improvements
to Topic 326, Financial Instruments-Credit Losses”, which among other things, clarifies that receivables arising from operating
leases are not within the scope of Subtopic 326-20. Instead, impairment of receivables arising from operating leases should be
accounted for in accordance with Topic 842, Leases. The guidance is effective for an EGC for annual reporting periods beginning
after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The Company is currently evaluating
the impact on its consolidated financial position and results of operations upon adopting these amendments. In January 2017, the FASB issued ASU No. 2017-04,
“Intangibles-Goodwill and Others (Topic 350)-Simplify the Test for Goodwill Impairment”. To simplify the subsequent
measurement of goodwill, the amendments in this ASU eliminated Step 2 from the goodwill impairment test. In computing the implied
fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing
date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required
in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments
in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting
unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds
the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to
that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying
amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The amendments in this ASU also eliminated
the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it
fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies
to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or
negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit
to determine if the quantitative impairment test is necessary. An entity should apply the amendments in this ASU on a prospective
basis. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this
ASU for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is
permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has early
adopted the amendments in this ASU, and the adoption of this ASU did not have a material impact on its consolidated financial position
and results of operations. In June 2018, the FASB issued ASU No. 2018-07:
“Compensation—Stock Compensation (Topic 718)-Improvements to Nonemployee Share-Based Payment Accounting”. The
Board is issuing this Update as part of its Simplification Initiative. The amendments in this Update expand the scope of Topic
718 to include share based payment transactions for acquiring goods and services from nonemployees. An entity should apply the
requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution
of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period).
The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services
to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that
Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted
in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts
with Customers. The amendments in this Update are effective for public business entities for fiscal years beginning after December
15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years
beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is
permitted, but no earlier than an entity’s adoption date of Topic 606. An entity should only remeasure liability-classified
awards that have not been settled by the date of adoption and equity-classified awards for which a measurement date has not been
established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. Upon
transition, the entity is required to measure these nonemployee awards at fair value as of the adoption date. The entity must not
remeasure assets that are completed. Disclosures required at transition include the nature of and reason for the change in accounting
principle and, if applicable, quantitative information about the cumulative effect of the change on retained earnings or other
components of equity. Based on the Company’s evaluation, the Company does not expect the adoption of the amendments in this
ASU to have a material impact on its consolidated financial position and results of operations. In August 2018, the FASB issued ASU No. 2018-13,
“Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”.
The amendments in this ASU eliminate, add and modify certain disclosure requirements for fair value measurements. The amendments
in this ASU, among other things, require public companies to disclose the range and weighted average used to develop significant
unobservable inputs for Level 3 fair value measurements. The amendments in this ASU are effective for all entities for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2019, and entities are permitted to early adopt either
the entire standard or only the provisions that eliminate or modify the requirements. The Company does not expect the adoption
of these amendments to have a material impact on its consolidated financial position and results of operations. Other than the above, management does not believe
that any of the recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect
on the Company’s consolidated financial statements. 2(v) Going Concern The Company has suffered from losses from operation
and significant accumulated deficits. It’s net loss for the year ended December 31, 2019 was 61,995,758, and turned the retained
earnings as of December 31, 2018 to 2019 from $36,653,460 to (25,379,698). As of December 31, 2019, the Company has cash and cash
equivalents of 13,567 and net cash used in operating activities during the year ended December 31, 2019 was 1,071,378. The Company
comes to have insufficient cash flows generated from operations and provided for development. In addition, the Company continues
to experience negative cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue
as a going concern. The management determines that additional effort will be required to improve the operation so that the Company
may generate more profits to sustain its continuous. The Company may explore the channels to raise additional capital or any opportunities
to improve the cash flow in the years to come. |
