UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2017March 31, 2019

☐ 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: 001-36055

China Commercial Credit,Bat Group, Inc.

(Exact name of registrant as specified in its charter)

No.1 Zhongying Commercial Plaza,

Zhong Ying Road,

Wujiang, Suzhou,

Jiangsu Province, China

(Address of principal executive offices)

Room 104, No. 33 Section D, No. 6 Middle Xierqi Road, Haidian District, Beijing, China		100085
(Address of principal executive offices)		(Zip Code)

+86-512 6396-002286 (010) 59441080

 (Registrant’s(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 10, 2017, 19,030,915May 14, 2019, 7,206,992 shares of the Company’s Common Stock, $0.001 par value per share, were issued and outstanding.

PART I.1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHINA COMMERCIAL CREDIT,BAT GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to the unaudited condensed consolidated financial statements

CHINA COMMERCIAL CREDIT,BAT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

See notes to the unaudited condensed consolidated financial statements 

CHINA BAT GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to the unaudited condensed consolidated financial statements

CHINA COMMERCIAL CREDIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to the unaudited condensed consolidated financial statements

CHINA COMMERCIAL CREDIT,BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

China Bat Group, Inc., (formerly known as China Commercial Credit, Inc. ) (“CCC”GLG” or “the Company”) is a holding company that was incorporated under the laws of the State of Delaware on December 19, 2011.

VIE AGREEMENTS WITH WUJIANG LUXIANG On January 11, 2019, the Company filed a Certificate of Amendment of the Certificate of Incorporation with the Secretary of State of Delaware to effect a name change to China Bat Group, Inc. (the “Name Change”) and a 1 for 5 reverse stock split (the “Reverse Split”) of the shares of the Company’s issued and outstanding common stock, par value $0.001. (collectively, the “Charter Amendment”). The Charter Amendment became effective on January 17, 2019. As a result of the Name Change, the Company’s CUSIP number changed to 16955B106. As a result of the Reverse Split, all references to numbers of common shares and per-share data in the accompanying unaudited condensed consolidated financial statements have been adjusted to reflect such issuance of shares on a retrospective basis. As such, the 25,119,532 shares issued and outstanding as of December 31, 2018 decreased to 5,023,906 shares. On March 8, 2019, the Company issued 502,391 restricted shares to its employees. As of March 31, 2019 and December 31, 2018, the Company had 5,526,297 shares and 5,023,906 shares issued and outstanding, respectively.

On September 26, 2012,March 22, 2018, the Company formed HC High Summit Holding Limited (“HC High BVI”), a wholly owned subsidiary, in British Virgin Island (“BVI”). HC High BVI is authorized to issue a maximum of 50,000 shares of one class, at par value of $1.00 per share.

On April 16, 2018, HC High BVI formed a wholly owned subsidiary, HC High Summit Limited (“HC High HK”) in Hong Kong. On April 17, 2018, the Company, through its indirectly wholly owned subsidiary, Wujiang Luxiang InformationHC High HK, established Hao Limo Technology Consulting(Beijing) Co. Ltd.  (“WFOE”Hao Limo”),.

On May 17, 2018, Hao Limo entered into a series of agreements (the “Tianxing VIE Agreements”) with Beijing Tianxing Kunlun Technology Co. Ltd. (“Beijing Tianxing”) and Shun Li and Jialin Cui, the shareholders of Beijing Tianxing. The Tianxing VIE Agreements are designed to provide Hao Limo with Wujiang Luxiangthe power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Beijing Tianxing, including absolute control rights and the Wujiang Luxiang Shareholders.rights to the management, operations, assets, property and revenue of Beijing Tianxing. The purpose of the VIE Agreements is solely to give WFOEHao Limo the exclusive control over Wujiang Luxiang’sBeijing Tianxing’s management and operations. Beijing Tianxing has the requisite license to carry out used luxurious car leasing business in China.

During the year ended December 31, 2018, Beijing Tianxing has acquired five subsidiaries, each with a license to hold a car in Beijing or Zhejiang. On acquisition date, the asset, liability and net asset of the five companies are comprised of followings:

VIE AGREEMENTS WITH BEIJING YOUJIAO AND TERMINATION OF VIE AGREEMENTS WITH BEIJING YOUJIAO

On June 19, 2018, Hao Limo entered into a series of agreements (the “Youjiao VIE Agreements”) with Beijing Youjiao and Aizhen Li. The significantYoujiao VIE Agreements were designed to provide Hao Limo with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Beijing Youjiao, including absolute control rights and the rights to the management, operations, assets, property and revenue of Beijing Youjiao. On November 8, 2018, Hao Limo entered into certain termination agreement with Beijing Youjiao and Aizhen Li to terminate the Youjiao VIE Agreements entered in June 19, 2018 (the “Termination Agreement”). The Termination Agreement became effective immediately upon its execution.

DESPOSITION OF GLG BVI

On June 19, 2018, the Company, HK Xu Ding Co, Limited, a private limited company duly organized under the laws of Hong Kong (the “Purchaser”) and CCCR International Investment Ltd., a business company incorporated in the British Virgin Islands with limited liability which was previously 100% owned by the Company (“GLG BVI”) entered into certain Share Purchase Agreement (the “Purchase Agreement”). Pursuant to the Purchase Agreement, the Purchaser agreed to purchase GLG BVI in exchange of cash purchase price of $500,000.

GLG BVI is the sole shareholder of GLG International Investment Ltd. (“GLG HK”), a company incorporated under the laws of the Hong Kong S.A.R. of the PRC, which is the sole shareholder of WFOE. WFOE, via a series of contractual arrangements, controls Wujiang Luxiang. GLG HK is the sole shareholder of PFL.

Upon closing of the disposition on June 21, 2018, the Purchaser became the sole shareholder of GLG BVI and as a result, assume all assets and obligations of all the subsidiaries and VIE entities owned or controlled by GLG BVI, including but not limited to Wujiang Luxiang and PFL.

CHINA BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

VIE AGREEMENTS WITH BEIJING TIANXING

Material terms of each of the Tianxing VIE Agreements are summarizeddescribed below:

Exclusive Business Cooperation Agreement

Pursuant to the Exclusive Business Cooperation Agreement between Wujiang LuxiangBeijing Tianxing and WFOE, WFOEHao Limo, Hao Limo provides Wujiang LuxiangBeijing Tianxing with technical support, consulting services and other management services relating to its day-to-day business operations and management, on an exclusive basis, utilizing its advantages in technology, human resources, and information. Additionally, Wujiang Luxiang grantsBeijing Tianxing granted an irrevocable and exclusive option to WFOEHao Limo to purchase from Wujiang LuxiangBeijing Tianxing, any or all of itsBeijing Tianxing’s assets at the lowest purchase price permitted under the PRC laws. Should Hao Limo exercise such option, the parties shall enter into a separate asset transfer or similar agreement. For services rendered to Wujiang LuxiangBeijing Tianxing by WFOEHao Limo under the Agreement, thethis agreement, Hao Limo is entitled to collect a service fee Wujiang Luxiang is obligated to pay shall be calculated based on the time of services rendered multiplied by the corresponding rate, plus amount of the services fees or ratio decided by the board of directors of Hao Limo based on the value of services rendered by Hao Limo and the actual income of Beijing Tianxing from time to time, which is approximatelysubstantially equal to all of the net income of Wujiang Luxiang.Beijing Tianxing.

The Exclusive Business Cooperation Agreement shall remain in effect for ten years unless it is terminated by WFOEHao Limo with 30-day prior written notice. Wujiang LuxiangBeijing Tianxing does not have the right to terminate the agreement unilaterally. WFOEHao Limo may unilaterally extend the term of this agreement with prior written notice.

Share Pledge Agreement

Under the Share Pledge Agreement betweenamong Beijing Tianxing, the Wujiang Luxiang Shareholdersshareholders of Beijing Tianxing, and WFOE,Hao Limo, the 12 Wujiang Luxiang Shareholdersshareholders of Beijing Tianxing pledged all of theirher equity interests in Wujiang LuxiangBeijing Tianxing to WFOEHao Limo to guarantee the performance of Wujiang Luxiang’sBeijing Tianxing’s obligations under the Exclusive Business Cooperation Agreement. Under the terms of the agreement, in any event of default, as set forth in the eventShare Pledge Agreement, including that Wujiang LuxiangBeijing Tianxing or itsthe shareholders of Beijing Tianxing breach their respective contractual obligations under the Exclusive Business Cooperation Agreement, WFOE,Hao Limo, as pledgee, will be entitled to certain rights, including, but not limited to, the right to collect dividends generated by the pledged equity interests. The Wujiang Luxiang Shareholders also agreed that upon occurrence of any event of default, as set forth in the Share Pledge Agreement, WFOE is entitled to dispose of the pledged equity interest in accordance with applicable PRC laws. Hao Limo shall have the right to collect any and all dividends declared or generated in connection with the equity interest during the term of pledge.

The Wujiang Luxiang Shareholders further agree not to disposeShare Pledge Agreement shall be effective until all payments due under the Exclusive Business Cooperation Agreement have been paid by Beijing Tianxing. Hao Limo shall cancel or terminate the Share Pledge Agreement upon Beijing Tianxing’s full payment of fees payable under the pledged equity interests or take any actions that would prejudice WFOE’s interest.Exclusive Business Cooperation Agreement.

CHINA BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

Exclusive Option Agreement

Under the Exclusive Option Agreement, the Wujiang Luxiang Shareholdersshareholders of Beijing Tianxing irrevocably granted WFOEHao Limo (or its designee) an exclusive option to purchase, to the extent permitted under PRC law, once or at multiple times, at any time, part or all of their equity interests in Wujiang Luxiang.Beijing Tianxing. The option price is equal to the capital paid in by the Wujiang Luxiang Shareholdersshareholders of Beijing Tianxing subject to any appraisal or restrictions required by applicable PRC laws and regulations.

The agreement remains effective for a term of ten years and may be renewed at Hao Limo’s election.

Power of Attorney

Under the Power of Attorney, the Wujiang Luxiang Shareholders authorize WFOEshareholders of Beijing Tianxing authorized Hao Limo to act on theirher behalf as theirher exclusive agent and attorney with respect to all rights as shareholders,shareholder, including but not limited to: (a) attending shareholders’ meetings; (b) exercising all the shareholder’s rights, including voting, that shareholders are entitled to under the laws of China and the Articles of Association of Beijing Tianxing, including but not limited to the sale or transfer or pledge or disposition of shares held by the shareholders of Beijing Tianxing in part or in whole; and (c) designating and appointing on behalf of the shareholders of Beijing Tianxing the legal representative, the executive director, supervisor, the chief executive officer and other senior management members of Wujiang Luxiang. TheBeijing Tianxing.

Although it is not explicitly stipulated in the Power of Attorney, the term of the Power of Attorney shall be the same as the term of that of the Exclusive Option Agreement.

This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of Attorney, so long as the Wujiang Shareholdershareholders of Beijing Tianxing is a shareholder of the Company.Beijing Tianxing.

CHINA COMMERCIAL CREDIT, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Timely Reporting Agreement

To ensure Wujiang LuxiangBeijing Tianxing promptly provides all of the information that WFOEHao Limo and the Company need to file various reports with the SEC, a Timely Reporting Agreement was entered between Wujiang LuxiangBeijing Tianxing and the Company.

Under the Timely Reporting Agreement, Wujiang Luxiang agreesBeijing Tianxing agreed that it is obligated to make its officers and directors available to the Company and promptly provide all information required by the Company so that the Company can file all necessary SEC and other regulatory reports as required.

INCORPORATION OF PFL

On September 5, 2013, our wholly owned subsidiary, CCC International Investment Holding Ltd. (“CCC HK”), established Pride Financial Leasing (Suzhou) Co. Ltd. (“PFL”) in Jiangsu Province, China. PFL was expected to offer financial leasing of machinery and equipment, transportation vehicles, and medical devices to municipal government agencies, hospitals and SMEs in Jiangsu Province and beyond. As of September 30, 2017, PFL had one finance lease transaction.

The unaudited condensed interim consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilitiesAlthough it is not explicitly stipulated in the normal course of business. The realization of assets andTimely Reporting Agreement, the satisfaction of liabilities inparties agreed its term shall be the normal course of business are dependent on, among other things, the Company’s ability to operate profitably, to generate cash flows from operations, and to pursue financing arrangements to support its working capital requirements. The conditions described below raises substantial doubt about the Company’s ability to continuesame as a going concern within one year from the date of this filing.

The Company had an accumulated deficit of US$78,764,900 as of September 30, 2017. In addition, the Company had a negative net asset of US$774,251 as of September 30, 2017.  As of September 30, 2017, the Company had cash and cash equivalents of US$3,030,468, and total short-term borrowings of nil. Caused by the limited funds, the management assessed that the Company was not able to keep the size of lending business within one year from the filing of Form 10-Q.

The Company is actively seeking other strategic investors with experience in lending business. If necessary, the shareholders of Wujiang Luxiang will contribute more capital into Wujiang Luxiang.

During the nine months ended September 30, 2017, the Company incurred operating loss of US$8,530,244. Affected by the reduction of lending business and guarantee business and increased loss loans, the management was in the opinion that recurring operating losses would be made within one year from the issuance of the filing.

Exclusive Business Cooperation Agreement. The Company continues to use its best effort to improve collection of loan receivable and interest receivable. Management engaged two PRC law firms to represent the Company in the legal proceedings against the borrowers andTianxing VIE Agreements became effective immediately upon their counter guarantors.

During the nine months ended September 30, 2017, the Company incurred negative operating cash flow of US$1,248,629. Affected by significant balance of charged-off interest receivable, the management assessed the Company would continue to have negative operating cash flow within one year from the issuance of the filing.

The Company continues to reduce the redundant headcount and entered into a new office lease with lower rent commitment since January 1, 2017 to improve operating cash flow.

execution.

CHINA COMMERCIAL CREDIT,BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

Below is the Company’s structure chart after the completion of the Termination Agreement with Youjiao and Purchase Agreement with HK Xu Ding Co., Ltd.

CHINA BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

Most loan customers are from textile industry which has been facing downward pressure. Additionally adversely affected by emergence of internet finance entities, the Company was facing fierce competition. Considering the high risks from both customers and competitors, management assessed the Company would further reduced the loan business without strong financial support.

Considering the above factors, the Company, on August 9, 2017, entered into Certain Share Exchange Agreement (“Exchange Agreement”) with the parent company of Sorghum Investment Holdings Limited (“Sorghum”). Pursuant to the terms of the Exchange Agreement, CCCR will acquire 100% of the outstanding shares of Sorghum through issuance of 152,587,000 of its common shares. This transaction will be accounted for as a “reverse acquisition” since, immediately following completion of the transaction, the shareholders of Sorghum immediately prior to the transaction will effectuate control of the Company, through its 87.9% ownership interest in the post-merger entity.

While management believes that the measures in the liquidity plan will be adequate to satisfy its liquidity and cash flow requirements for the twelve months after the financial statements are available to be issued, there is no assurance that the liquidity plan will be successfully implemented. Failure to successfully implement the liquidity plan will have a material adverse effect on the Company’s business, results of operations and financial position, and may materially adversely affect its ability to continue as a going concern.

The interim unaudited condensed interim consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

The unaudited condensed interim financial information as of September 30, 2017March 31, 2019 and for the three and nine months ended September 30, 2017March 31, 2019 and 20162018 have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”)SEC and pursuant to Regulation S-X. Certain information and footnote disclosures, which are normally included in annual financial statements prepared in accordance with U.S. GAAP, have been omitted pursuant to those rules and regulations. As of March 31, 2019, the Company has one VIE –Beijing Tianxing, and Beijing Tianxing has five subsidiaries (See Note 1 for subsidiary information), each of which is entitled to a license to hold a car in Beijing. The unaudited condensed interim financial information should be read in conjunction with the audited financial statements and the notes thereto, included in the Form 10-K for the fiscal year ended December 31, 20162018, which was filed with the SEC on April 6, 2017.5, 2019.

In the opinion of management, all adjustments (which include(including normal recurring adjustments) necessary to present a fair statement of the Company’s unaudited condensed financial position as of September 30, 2017,March 31, 2019, its unaudited condensed results of operations for the three and nine months ended September 30March 31, 2019 and 2016,2018, and its unaudited condensed cash flows for the ninethree months ended September 30, 2017March 31, 2019 and 2016,2018, as applicable, have been made. The unaudited interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

All significant inter-company accounts

In October 2018, the FASB issued ASU2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. ASU 2018-17 expands the accounting alternative that allows private companies the election not to apply the variable interest entity guidance to qualifying common control leasing arrangements. ASU 2018-17 broadens the scope of the private company alternative to include all common control arrangements that meet specific criteria (not just leasing arrangements). ASU 2018-17 also eliminates the requirement that entities consider indirect interests held through related parties under common control in their entirety when assessing whether a decision-making fee is a variable interest. Instead, the reporting entity will consider such indirect interests on a proportionate basis. The amendments are effective for public business entities for fiscal years ending after December 15, 2019. Early adoption is permitted. The Company is currently assessing the timing and transactions have been eliminated in consolidation.impact of adopting the updated provisions to its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance if effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions to its consolidated financial statements.

The Company does not believe other recently issued but not yet effective accounting standards would have a material effect would have a material effect on the consolidated financial position, statements of operations and cash flows.

CHINA COMMERCIAL CREDIT,BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). The new guidance permits, but does not require, companies to reclassify the stranded tax effects of the Tax Cuts and Jobs Act (the “Act”) on items within accumulated other comprehensive income to retained earnings. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted this standard in the first quarter of 2019 and did not elect to reclassify the stranded tax effects of the Act on items within accumulated other comprehensive income to retained earnings. The Company uses the portfolio method for releasing the stranded tax effects from accumulated other comprehensive income.

InterestIn February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update (ASC Topic 842) that amends the accounting guidance on loans receivable is accruedleases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record an ROU asset and credited toa lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income as earned.statement. The Company determines a loan past due status by the number of days that have elapsed since a borrower has failed to make a contractual loan payment. Accrual of interest is generally discontinued when either (i) reasonable doubt exists asFASB also subsequently issued amendments to the full, timely collection of interest or principal or (ii) when a loan becomes past due by more than 90 days. Additionally, any previously accrued but uncollected interest is reversed. Subsequent recognition of income occurs onlystandard, including providing an additional and optional transition method to adopt the extent payment is received, subjectnew standard, described below, as well as certain practical expedients related to management’s assessment of the collectability of the remaining interestland easements and principal. Loans are generally restored to an accrual status when it is no longer delinquent and collectability of interest and principal is no longer in doubt and past due interest is recognized at that time.lessor accounting.

The interest reversed dueaccounting standard update originally required the use of a modified retrospective approach reflecting the application of the standard to leases existing at, or entered into after, the above reason was US$2,604,172 and US$2,604,172 asbeginning of September 30, 2017 and December 31, 2016, respectively.

Certain itemsthe earliest comparative period presented in the financial statements with the option to elect certain practical expedients. A subsequent amendment to the standard provides an additional and optional transition method that allows entities to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative period have been reclassified to conform toperiods presented in the financial statements in which it adopts the new leases standard will continue to be in accordance with current GAAP (ASC Topic 840) if the optional transition method is elected. The new accounting standard is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. We adopted this accounting standard effective January 1, 2019, using the optional transition method with no restatement of comparative periods. Therefore, the comparative information has not been adjusted and continues to be reported under ASC Topic 840. Our adoption of the new standard did not result in a cumulative effect adjustment to retained earnings.

We elected certain practical expedients available under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification of our existing leases. We did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to us. The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. As a result, for those leases that qualify, we will not recognize ROU assets or lease liabilities, and we did not recognize ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non-lease components of leases for the current period.majority of our classes of underlying assets. Consequently, on adoption and as of March 31, 2019, we did not recognize ROU assets or lease liabilities as we did not enter into new lease agreements with lease term over 12 months for the three months ended March 31, 2019 (Note 16).

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews these estimates using the currently available information. Changes in facts and circumstances may cause the Company to revise its estimates. Significant accounting estimates reflected in the financial statements include: (i) useful lives and residual value of long-lived assets; (ii) the impairment of long-lived assets; (iii) the valuation allowance of deferred tax assets; and (iv) contingencies and litigation.

CHINA BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

The reporting currency of the Company is United States Dollars (“US$”), which is also the Company’s functional currency. The PRC subsidiaries and VIEs maintain their books and records in its local currency, the Renminbi Yuan (“RMB”), which is their functional currencies as being the primary currency of the economic environment in which these entities operate.

For financial reporting purposes, the financial statements of the CompanyPRC subsidiaries and VIEs prepared using RMB, are translated into the Company’s reporting currency, United States Dollars,US$, at the exchange rates quoted by www.oanda.com. 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.rates, except for the change in accumulated deficit during the year which is the result of the income statement translation process. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in shareholders’ equity.

Transactions denominated in currencies other than the functional currency are translated into prevailing functional currency at the exchange rates prevailing at the dates of the transactions. The resulting exchange differences are included in the condensed consolidated statements of comprehensive loss.

Pursuant to ASC 830-30-40-1, upon sale or upon complete or substantially complete liquidation of an investment in a foreign entity, the amount attributable to that entity and accumulated in the translation adjustment component of equity shall be both:

CHINA COMMERCIAL CREDIT,BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

Financial guarantee service contracts provides guarantee which protects the holder of a debt obligation against default. Pursuant to such guarantee, the Company makes payments if the obligor responsible for making payments fails to do so as scheduled.

The contract amounts reflect the extent of involvement the Company has in the guarantee transaction and also represent the Company’s maximum exposure to credit loss in its guarantee business.

The Company ishas adopted ASC Topic 820, Fair Value Measurement and Disclosure, which defines fair value, establishes a partyframework for measuring fair value in GAAP, and expands disclosures about fair value measurements. It does not require any new fair value measurements, but provides guidance on how to financial instruments with off-balance-sheet risk inmeasure fair value by providing a fair value hierarchy used to classify the normal coursesource of businessthe information. It establishes a three-level valuation hierarchy of valuation techniques based on observable and unobservable inputs, which may be used to meetmeasure fair value and include the financing needs of its customers. Financial instruments representing credit risk are as follows:following:

A provision for possible lossClassification within the hierarchy is determined based on the lowest level of input that is significant to be absorbed bythe fair value measurement. The carrying value of financial items of the Company forincluding cash and cash equivalents approximate their fair values due to their short-term nature and are classified within Level 1 of the financial guarantee it provides is recorded as an accrued liability when the guarantees are made and recorded as “Accrual for financial guarantee services” on the condensed consolidated balance sheets. This liability represents probable losses and is increased or decreased by accruing a “(Provision)/ Reversal of provision for financial guarantee services” against the income of commissions and fees on guarantee services.fair value hierarchy.

During the three months ended March 31, 2018, the Company recorded $147,540 in “Changes in fair value of noncurrent liabilities”. This is done throughoutrelated to distribution of the Settlement Shares to the class plaintiffs approved by the Court in December 2017. On January 19, 2018 and April 10, 2018, the Company issued 712,500 and 237,500 class settlement shares, at the market share price of $1.68 and $1.18 per share, respectively. The Company recorded expenses of $147,540 for the year ended December 31, 2018 under the account of “Changes in fair value of noncurrent liabilities”. As the Company is a public entity with quoted market price, the fair value of other noncurrent liabilities were classified as level 1. The expenses were accrued by reference to the quoted market share price per share on each reporting date.

Operating lease asset, net, represents the automobiles that are underlying our automotive lease contracts and is reported at cost, less accumulated depreciation and net of impairment charges and origination fees or costs. Depreciation of vehicles is recorded on a straight-line basis to an estimated residual value over the useful life of nine years. We periodically evaluate our depreciation rate for leased vehicles based on expected residual values and adjust depreciation expense over the remaining life of the lease if deemed necessary.

We have significant investments in the residual values of the assets in our operating lease portfolio. The residual values represent an estimate of the values of the assets at the end of the lease contracts. At contract inception, we determine pricing based on the projected residual value of the lease vehicle. This evaluation is primarily based on a proprietary model, which includes variables such as age, expected mileage, seasonality, segment factors, vehicle type, economic indicators, production cycle, automotive manufacturer incentives, and shifts in used vehicle supply. This internally-generated data is compared against third-party, independent data for reasonableness. Realization of the residual values is dependent on our future ability to market the vehicles under the prevailing market conditions. Over the life of the guarantee, aslease, we evaluate the adequacy of our estimate of the residual value and make adjustments to the depreciation rates to the extent the expected value of the vehicle at lease termination changes. In addition to estimating the residual value at lease termination, we also evaluate the current value of the operating lease asset and test for impairment to the extent necessary when additional relevant information becomes available. The methodology usedthere is an indication of impairment based on market considerations and portfolio characteristics. Impairment is determined to estimate the liability for possible guarantee loss considers the guarantee contract amount and a variety of factors, which include, depending on the counterparty, latest financial position and performanceexist if fair value of the borrowers, actual defaults, estimated future defaults, historical loss experience, estimatedleased asset is less than carrying value and it is determined that the net carrying value is not recoverable. The net carrying value of collaterals or guaranteesa leased asset is not recoverable if it exceeds the customers or third parties offered,sum of the undiscounted expected future cash flows expected to result from the lease payments and other economic conditions suchthe estimated residual value upon eventual disposition. If our operating lease assets are considered to be impaired, the impairment is measured as the economy trendamount by which the carrying amount of the area andassets exceeds the country. The estimates are based upon currently available information.

Based on the past experience and expected customer default status of financial guarantee services, the Company estimates the probable loss for immature financial guarantee services to be approximately 62% and 55% of contract amountfair value as of September 30, 2017 and December 31, 2016, respectively, for possible credit risk of its guarantees. In addition, the Company accrued specific provisions for repayment on behalf of guarantee customers who defaulted on their loans. The Company reviews the provision on a quarterly basis. The allowance are detailed in following table:

The Company recorded a provision of US$1,142,807 and US$599,808 forestimated by discounted cash flows. For the three months ended September 30, 2017March 31, 2019, we accrued impairment of $96,318 for one operating lease asset. We accrue rental income on our operating leases when collection is reasonably assured.

When a lease vehicle is returned to us, either at the end of the lease term or through repossession, the asset is reclassified from operating lease assets to property and 2016, respectively,equipment, net and recorded at the lower-of-cost or estimated fair value, less costs to sell. Any losses recognized at this time are recorded as depreciation expense. Subsequent decline in value and any gain or loss recognized at the time of sale is recognized presented as a provisioncomponent of US$830,140depreciation expense and reversed a provision of US$385,352 for the nine months ended September 30, 2017 and 2016, respectively. As the Company collected from guarantee customers for payments on behalf of in the amount of US$44,075 and US$1,825,730, for the nine month ended September 30, 2017 and 2016, respectively. Among the collection, US$44,075 and US$1,825,730 were accrued of 100% allowance as of pervious year end.

As of September 30, 2017 and December 31, 2016, the management charged off specific provision for three and two customers in the amount of US$164,220 and US$142,966, considering remote collectability from the customers.

remarketing gain or loss.

CHINA COMMERCIAL CREDIT,BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

Non-interest expenses primarily consistIncome from operating lease represents lease origination fees and rental fee, netting off lease origination costs. In accordance with ASC 842, Leases, the Company recognized the income from operating lease on a straight-line basis over the scheduled lease term. For the three months ended March 31, 2019, the Company generated income from operating lease of salary and benefits for employees, traveling cost, entertainment expenses, depreciation of equipment, office rental expenses, professional service fee, office supplies, etc.$399,999.

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

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

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis. Deferred tax assets are recognized to the extent that it is probable that taxable income to be utilized with prior net operating loss carried forward. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income tax expensestaxes are provided for in accordance with the laws of the relevant taxing authorities. As part

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the process of preparing financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates.period incurred. The Company accountsdid not have unrecognized uncertain tax positions or any unrecognized liabilities, interest or penalties associated with unrecognized tax benefit as of March 31, 2019 and December 31, 2018. As of March 31, 2019, income tax returns for income taxes using the liability approach. Under this method, deferred income taxes are recognized for tax consequences in future years of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements at each year-end andyears ended December 31, 2013 through December 31, 2018 remain open for statutory examination by PRC tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates applicable for the differences that are expected to affect taxable income.authorities.

Basic loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is the same as basic loss per share due to the lack of dilutive items in the Company for the three months ended March 31, 2019 and 2018. The number of warrants is omitted excluded from the computation as the anti-dilutive effect.

Comprehensive loss includes net loss and other comprehensive foreign currency adjustments.adjustments income. Comprehensive loss is reported in the statements of operations and comprehensive loss.

Accumulated other comprehensive income, as presented on the balance sheets are the cumulative foreign currency translation adjustments.

CHINA BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations and tax matters. In accordance with ASC No. 450 Sub topic 20, “Loss Contingencies”, the Company records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

Share-based awards granted to the Company’s employees are measured at fair value on grant date and share-based compensation expense is recognized (i) immediately at the grant date if no vesting conditions are required, or (ii) using the accelerated attribution method, net of estimated forfeitures, over the requisite service period. The fair value of restricted shares is determined with reference to the fair value of the underlying shares.

At each date of measurement, the Company reviews internal and external sources of information to assist in the estimation of various attributes to determine the fair value of the share-based awards granted by the Company, including but not limited to the fair value of the underlying shares, expected life, expected volatility and expected forfeiture rates. The Company is required to consider many factors and make certain assumptions during this assessment. If any of the assumptions used to determine the fair value of the share-based awards changes significantly, share-based compensation expense may differ materially in the future from that recorded in the current reporting period.

The Company leases its principal office under a lease agreement that qualifieshad warrants to four individuals in private placements, through which the Company issued both common shares and warrants as an operating lease.separable units, and neither instrument is registered when issued. Warrants requiring share settlement are classified as equity.

The capital raised from the private placement is allocated between the fair value of the common stocks and warrants. The Company recordsdetermined the rental underfair value of warrants by application of the lease agreement in the operating expense when incurred.Black-Scholes-Merton formula.

In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the normal coursedisposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of business,an entity meets the Company is subjectcriteria in paragraph 205-20-45-1E to loss contingencies, suchbe classified as legal proceedingsheld for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and claims arising outnoncurrent liabilities shall be reported as components of its business, that cover a wide rangetotal assets and liabilities separate from those balances of matters, including, among others, government investigations and tax matters. Inthe continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC No. 450 Sub topic 20, “Loss Contingencies”,205-20-45.

The Company disposed of its microcredit service segment in June 2018, which met all the conditions required in order to be classified as a discontinued operation (Note 1). Accordingly, the operating results of microcredit service segment are reported as an income from discontinued operations in the accompanying unaudited condensed consolidated financial statements for the three months ended March 31, 2018. For additional information, see Note 6, “Disposition of GLG BVI”.

In addition, the Company records accruals for such loss contingencies whendisposed of Beijing Youjiao in November 2018 which was a VIE of the Company since May 2018 (Note 1). Though Beijing Youjiao met all the conditions required in order to be classified as a discontinued operation, it is probable that a liability has been incurredhad no financial impact on the condensed consolidated balance sheet as of March 31, 2019 and December 31, 2018, and the amountcondensed consolidated statements of operations and comprehensive loss can be reasonably estimated.for the three months ended March 31, 2019 and 2018.

CHINA COMMERCIAL CREDIT,BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

In assessing the Company’s liquidity and its ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. The Company’s liquidity needs are to meet its working capital requirements and operating expenses obligations.

Since the Company disposed its microcredit business and launched luxurious car leasing business in May 2018. As of March 31, 2019, the Company had cash balance of $340,695 and a negative working capital of $30,135. In April 2019, the Company raised a gross proceed of $3.7 million through a public placement. The management estimated the operating expenses obligation for the next twelve months after issuance of the financial statements to be $500,000. Therefore, the management believes that the Company will continue as a going concern in the following 12 months.

As a result of September 30, 2017,Termination Agreements into which Hao Limo and Beijing Youjiao entered on November 8, 2018, the Company had Beijing Tianxing as its only one VIE as of March 31, 2019 and December 31, 2018.

On June 19, 2018, Hao Limo entered into VIE Agreements with Beijing Tianxing. The key terms of these VIE Agreements are summarized in “Note 1 - Organization and Nature of Operation” above.

VIE is an entity that have either a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling financial interest, such as through voting rights, right to receive the expected residual returns of the entity or obligation to absorb the expected losses of the entity. The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary beneficiary and must consolidate the VIE. Hao Limo is deemed to have a controlling financial interest and be the primary beneficiary of Beijing Tianxing, because it has both of the following characteristics:

Pursuant to the VIE Agreements, Beijing Tianxing pays service fees equal to all of its net income to Hao Limo. At the same time, Hao Limo is entitled to receive all of expected residual returns. The VIE Agreements are designed so that Beijing Tianxing operates for the benefit of the Company. Accordingly, the accounts of Beijing Tianxing are consolidated in the accompanying financial statements pursuant to ASC 810-10, Consolidation. In addition, their financial positions and results of operations are included in the Company’s unaudited condensed consolidated financial statements.

In addition, as all of these VIE agreements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit the Company’s ability to enforce these VIE agreements. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event the Company is unable to enforce these VIE agreements, it may not be able to exert effective control over Beijing Tianxing and its ability to conduct its business may be materially and adversely affected.

All of the Company’s main current operations are conducted through Beijing Tianxing and its subsidiaries since June 2018. Current regulations in China permit Beijing Tianxing to pay dividends to the Company only out of its accumulated distributable profits, if any, determined in accordance with their articles of association and PRC accounting standards and regulations. The ability of Beijing Tianxing to make dividends and other payments to the Company may be restricted by factors including changes in applicable foreign exchange and other laws and regulations.

CHINA BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

The following financial statement balances and amounts only reflect the financial position and balancesfinancial performances of the VIEBeijing Tianxing, which were included in the unaudited condensed interim consolidated financial statements as of September 30, 2017March 31, 2019 and December 31, 2016 and for the three and nine months ended September 30, 2017, 2017 and 2016:2018:

CreditAssets that potentially subject the Company to significant concentration of credit risk primarily consist of cash and cash equivalents. The maximum exposure of such assets to credit risk is onetheir carrying amount as at the balance sheet dates. As of March 31, 2019, approximately $55,907 was deposited with a bank in the most significant risks for the Company’s business. Credit risk exposures arise principally in lending activities, finance lease and financial guarantee activitiesUnited States which is an off-balance sheet financial instrument.

Credit risk is controlledwas insured by the applicationgovernment up to $250,000. As of credit approvals, limitsMarch 31, 2019 and monitoring procedures. The Company managesDecember 31, 2018, approximately $284,788 and $1,067,657, respectively, were primarily deposited in financial institutions located in Mainland China, which were uninsured by the government authority. To limit exposure to credit risk through in-house research and analysis of the Chinese economy and the underlying obligors and transaction structures. To minimize credit risk,relating to deposits, the Company requires collateralprimarily place cash deposits with large financial institutions in the formChina which management believes are of rights to cash, securities or property and equipment.high credit quality.

The Company identifies credit risk collectively based on industry, geographyCompany’s operations are carried out in Mainland China. Accordingly, the Company’s business, financial condition and customer type. This information is monitored regularly by management.

1.1 Lending activities

In measuring the credit riskresults of lending loans to corporate customers, the Company mainly reflects the “probability of default”operations may be influenced by the customer on its contractual obligationspolitical, economic and considerslegal environments in the current financial positionPRC as well as by the general state of the customer and the exposures to the customer and its likely future development. For individual customers, the Company uses standard approval procedures to manage credit risk for personal loans.

PRC’s economy. In addition, the Company calculates the provision amount as below:

CHINA COMMERCIAL CREDIT, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.2 Guarantee activities

The off-balance sheet commitments arising from guarantee activities carry similar credit riskCompany’s business may be influenced by changes in governmental policies with respect to loanslaws and regulations, anti-inflationary measures, currency conversion and remittance abroad, rates and methods of taxation, and the Company takes a similar approach on risk management.

Off-balance sheet commitments with credit exposures are also assessed and categorized with reference to the Guideline and include additional amounts on a specific basis.extraction of mining resources, among other factors.

The Company is also exposed to liquidity risk which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, the Company will turn to other financial institutions and the owners to obtain short-term funding to meet the liquidity shortage.

CHINA BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

A majoritySubstantially all of the Company’s operating activities and a significant portion of the Company’s major assets and liabilities are denominated in RMB, except for the cash deposit of approximately$55,907 which was in U.S. dollars as of March 31, 2019, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the Peoples’ Bank of China (“PBOC”) or other authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts. The value of RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. Where there is a significant change in value of RMB, the gains and losses resulting from translation of financial statements of a foreign subsidiary will be significant affected.

As of September 30, 2017It is possible that the VIE Agreements among Beijing Tianxing, Hao Limo, and December 31, 2016,the Beijing Tianxing Shareholders would not be enforceable in China if PRC government authorities or courts were to find that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event that the Company held cash and cash equivalent of US$3,030,468 and US$768,501, respectively, that is uninsured by the government authority.

To limit exposurewere unable to credit risk relating to deposits,enforce these contractual arrangements, the Company primarily places cash deposits only with large financial institutionswould not be able to exert effective control over the VIE. Consequently, the VIE’s results of operations, assets and liabilities would not be included in the Company’s consolidated financial statements. If such were the case, the Company’s cash flows, financial position, and operating performance would be materially adversely affected. The Company’s contractual arrangements with Beijing Tianxing, Hao Limo, and the Beijing Tianxing Shareholders are approved and in place. Management believes that such contracts are enforceable, and considers the possibility remote that PRC regulatory authorities with acceptable credit ratings.jurisdiction over the Company’s operations and contractual relationships would find the contracts to be unenforceable.

The Company’s operations and businesses rely on the operations and businesses of Beijing Tianxing, the VIE of the Company, which holds certain recognized revenue-producing assets including the luxury used cars. The VIE also has an assembled workforce, focused primarily on promotion and marketing, whose costs are carried out in the PRC. Accordingly, theexpensed as incurred. The Company’s business, financial conditionoperations and results of operationsbusinesses may be influencedadversely impacted if the Company loses the ability to use and enjoy assets held by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. The business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

No customer accounted for more than 10% of total loan balance as of September 30, 2017 and December 31, 2016.its VIE.

CHINA COMMERCIAL CREDIT,BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

On June 19, 2018, the Company, HK Xu Ding Co., Limited, a private limited company duly organized under the laws of Hong Kong (the “Purchaser”) and CCCR International Investment Ltd., a business company incorporated in the British Virgin Islands with limited liability (“GLG BVI”) entered into certain Share Purchase Agreement (the “Purchase Agreement”). Pursuant to the Purchase Agreement, the Purchaser agreed to purchase GLG BVI in exchange of cash purchase price of $500,000. The interest rates on loan issued ranged between 9.6%~ 19.44% and 9.6%~ 19.44% % for the nine months ended Septemberconsideration was paid as of June 30, 2017 and 2016, respectively.2018.

6.1 Loans receivable consistGLG BVI is the sole shareholder of GLG International Investment Ltd. (“GLG HK”), a company incorporated under the laws of the following:

The Company originates loans to customers located primarily inHong Kong S.A.R. of the PRC, which is the sole shareholder of WFOE. WFOE, via a series of contractual arrangements, controls Wujiang City, Jiangsu Province. This geographic concentrationLuxiang. GLG HK is the sole shareholder of credit exposes the Company to a higher degree of risk associated with this economic region.PFL.

All loans are short-term loans thatOn July 10, 2018, the parties completed all the share transfer registration procedure as required by the laws of British Virgin Islands and all the other closing conditions have been satisfied, as a result, the Disposition contemplated by the Purchase Agreement is completed. Upon completion of the Disposition, the Purchaser became the sole shareholder of GLG BVI and as a result, assumed all assets and obligations of all the subsidiaries and VIE entities owned or controlled by GLG BVI. Upon the closing of the transaction, the Company has madedoes not bear any contractual commitment or obligation to eitherthe microcredit business or individual customers. the employees of GLG BVI and its subsidiaries and VIEs, nor to the Purchaser.

On June 17, 2018, management was authorized to approve and commit to a plan to sell GLG BVI, therefore the major assets and liabilities relevant to the disposal are reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes, are reported as components of net income (loss) separate from the net loss of continuing operations in accordance with ASC 205-20-45. The assets relevant to the sale of GLG BVI with a carrying value of $6.2 million were classified as assets held for sale as of June 19, 2018. The liabilities relevant to the sale of GLG BVI with a carrying value of $10.5 million were classified as liabilities held for sale as of June 19, 2018. A net gain of $9.7 million was recognized as the net gain from disposal of discontinued operation in 2018.

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

As the transaction was closed on June 17, 2018, the Company had no assets and liabilities held for sale in the in the condensed consolidated balance sheet as of September 30, 2017March 31, 2019 and December 31, 2016, the Company had 67 and 70 business loan customers, and 40 and 41 personal loan customers, respectively. Most loans are either guaranteed by a third party whose financial strength is assessed by the Company to be sufficient or secured by collateral. Allowance on loan losses are estimated loan by loan on a quarterly basis based on an assessment of specific evidence indicating doubtful collection, historical experience, loan balance aging and prevailing economic conditions.

For the three months ended September 30, 2017 and 2016, a reversal of provision of US$452,786 and US$226,694 were charged to the condensed consolidated statements of operation, respectively. For the nine months ended September 30, 2017 and 2016, a provision of US$2,420,698 and a reversal of provision of US$133,177 were charged to the condensed consolidated statements of operation, respectively. Write-offs of $1,579,009 against allowances have occurred for the three and nine months ended September 30, 2017. No write-offs against allowances have occurred for the three and nine months ended September 30, 2016, respectively.

The following table presents nonaccrual loans with aging over 90 days by classes of loan portfolio as of September 30, 2017 and December 31, 2016, respectively:

2018.

CHINA COMMERCIAL CREDIT,BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

The following table represents the aging of loans as of September 30, 2017 by type of loan:

The following table representsis a reconciliation of the agingamounts of major classes of income from operations classified as discontinued operations in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2019 and 2018:

Total operating cash flows used in discontinued operations for the three months ended March 31, 2019 and 2018 were $nil and $193,759, respectively. For the three months ended March 31, 2018, the operating cash flows provided by discontinued operations was mainly caused by net income generated by discontinued operations of $176,520 against a reversal of provision for loan losses of $330,282.

Total investing cash flows provided discontinued operations for the three months ended March 31, 2019 and 2018 were $nil and $332,996. The cash provided by investing activities for the three months ended March 31, 2018 was net effects of disbursement of loans asto third parties of December 31, 2016 by type$1,635,683 against collection of loan:$1,402,912 from third party customers of direct loan services, collection from guarantees for loan paid on behalf of customers of $172,544, and collection of short-term investments of $393,193 from financial institutions.

Loan to third parties and interest receivable

In January 2019, the Company entered into loan agreements with two third parties, pursuant to which the Company disbursed loans aggregating $592,724 to the third parties, both with a loan period matured on September 30, 2019. The Company charged both third parties an interest rate of 10% per annum. Principal and interest are repaid on maturity of the loan. As of March 31, 2019, the Company recorded a balance of interest receivable of $12,429.

CHINA COMMERCIAL CREDIT,BAT GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

6.2 Analysis of loans by credit quality indicatorThe Company started its used luxurious car leasing business in China since May 2018.

The following table summarizesAs of December 31, 2018, the Company’s loan portfolio by credit quality indicator asCompany had investments in six used luxurious cars. During the three months ended March 31, 2019, the Company purchased two used luxurious cars. As of September 30, 2017March 31, 2019, the Company had investments in eight used luxurious cars.

As of March 31, 2019 and December 31, 2016, respectively:2018, the Company, by reference to the market price, determined the fair value of two and one used luxurious cars was below the original carrying amount of the leased asset and had accumulated impairment of $278,859 and $177,630, respectively. As a result, the Company accrued impairment of $96,318 for the additional one operating lease asset for the three months ended March 31, 2019.

As of the March 31, 2019, the balance of the used luxurious cars is comprised of the following:

6.3 Analysis

For the three months ended March 31, 2019, the Company charged depreciation expenses of loans by collateral

$46,858 and impairment losses of $96,318 on used luxurious cars. The following table summarizes the Company’s loan portfolio by collateral asdepreciation expenses of September 30, 2017:$23,588 and $23,270 were charged to accounts of “net depreciation expense on operating lease assets” and “other operating expenses”, respectively.

As of March 31, 2019, one of the eight used luxurious cars was pledged for borrowings from third parties. The pledge of the car will be released in May 2019.

The following table summarizes the Company’s loan portfolio by collateral as of December 31, 2016:

Guarantee Backed Loans

A guaranteed loan is a loan guaranteed by a third party who is usually a corporation or high net worth individual. As of September 30, 2017March 31, 2019 and December 31, 2016, guaranteed loans make up 95.0%2018, the Company had borrowings of $819,440 and 94.8%$218,100 from seven and two third parties. The interest rate charged on the borrowings ranged between 7% and 10.5%. For the three months ended March 31, 2019 and 2018, the Company charged interest expenses of our direct loan portfolio,$6,869 and $nil on the borrowings, respectively.