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China Lending Corporation Announces Fiscal Year 2017 Financial Results

BEIJING & URUMQI, China, April 30, 2018 /PRNewswire/ – China Lending Corporation ("China Lending" or the "Company") (CLDC), a leading non-bank direct lending corporation servicing micro, small and medium sized enterprises (MSME), currently underserved by commercial banks in China, today reported its financial results for the fiscal year ended December 31, 2017.

Fiscal Year 2017 Financial Matrix



For the Twelve Months Ended December 31,

($ millions, except per share data)


2017


2016


% Change








Revenues


$16.53


$35.54


-53.5%

Interest expenses


($7.37)


($4.98)


48.0%

Provision for loan losses


($55.30)


($4.65)


1089.0%

Net interest income (loss)


($46.14)


$25.92


-278.0%

Non-interest expenses


($6.13)


($4.52)


35.8%

Income (loss) before tax


($52.03)


$21.40


-343.1%

Income tax expense


($2.75)


($4.12)


-33.2%

Net income (loss)


($54.78)


$17.28


-417.1%

Dividend - Series A convertible preferred stock


($0.69)


($0.33)


105.9%

Net income (loss) attributable to common shareholders


($55.47)


$16.95


-427.3%

Earnings (loss) per share – basic


($3.20)


$0.92


-446.4%

Earnings (loss) per share – diluted


($3.20)


$0.77


-512.8%

 

  • The Company issued 309 loans with aggregates amount of $192.63 million during 2017, compared to 459 loans with aggregate amount of $331.72 million for 2016.
  • Interest and fee income decreased by $19.01 million, or 53.5%, to $16.53 million from $35.54 million for the same period of last year. The decrease in interest and fee income was mainly due to reduced interest rates this year as a result of competitive pressure and the significant decrease in interest received on certain supply chain financing loans related to certain customers who were facing financial difficulties.
  • Net loss attributable to ordinary shareholders was $55.47 million, or net loss of $3.20 per diluted share for 2017. This compared to net income attributable to ordinary shareholders of $16.95 million, or net income of $0.77 per diluted share, for 2016.
  • Loans receivable, net of provision for loan losses, was $117.26 million as of December 31, 2017, compared to $148.29 million at the end of 2016. Provision for loan losses was $55.30 million for 2017, compared to $4.65 million for 2016. The increase was mainly related to certain overdue loans as certain customers particularly tire supply chain financing customers were facing financial difficulties during 2017.

Jingping Li, Co-founder and Chief Executive Officer of China Lending, commented, "Our 2017 financial results highlighted increasing headwinds facing the micro lending industry as the industry growth momentum slowed and competition heated up during the year. Our 2017 financial results were also adversely affected by financial difficulties at certain supply chain financing customers that led to significant decrease in our total interest and fee income, dramatic increase in provisions for loan losses and quickly deteriorating cash flow situation. We are closely monitoring the situation at those customers and expect further impact on our business as additional loans become due over time based on management's current assessment."

Fiscal Year 2017 Financial Results

Interest and fee income

For the twelve months ended December 31, 2017, total interest and fee income, which include interest and fees on direct lending loans, financial advisory fees and interest on deposits with banks, decreased by $19.01 million, or 53.5%, to $16.53 million from $35.54 million for the same period of last year.

The decrease in interest and fee income was mainly due to reduced interest rates this year as a result of competitive pressure and the significant decrease in monthly interest received during the period on certain supply chain financing loans related to certain customers who were facing financial difficulties. We are closely monitoring the situation at those customers and expect further impact on our business as additional loans become due over time based on management's current assessment.

Interest expense

The Company borrows funds, which include short-term bank loans, a secured loan and loans from cost investment investee, to fund its direct lending business. For the twelve months ended December 31, 2017, total interest expense increased by $2.39 million, or 48.0%, to $7.37 million from $4.98 million for the same period of last year. The increase was mainly related to interest penalty from overdue loans.

Provision for loan losses

For the twelve months ended December 31, 2017, provision for loan losses was $55.30 million, compared to $4.65 million for the same period of last year. The increase was mainly related to certain overdue loans as certain customers particularly tire supply chain financing customers were facing financial difficulties during 2017 which caused increased provision percentages.

Net interest income/ (loss)

After deducting for interest expense and provision for loan losses, net interest loss was $46.14 million for the twelve months ended December 31, 2017, compared to net interest income of $25.92 million for the same period of last year. The decrease was mainly due to a decrease in total interest income and an increase in provision for loan losses.

Non-interest expenses

Salaries and employee surcharge for the twelve months ended December 31, 2017 decreased by $0.46 million, or 36.4%, to $0.81 million from $1.27 million for the same period of last year. Business taxes and other taxes for the twelve months ended December 31, 2017 decreased by $0.55 million, or 79.4%, to $0.14 million from $0.69 million for the same period of last year. Other operating expenses increased by $0.62 million, or 23.0%, to $2.05 million from $2.67 million for the same period of last year. Investment impairment incurred $3.70 million for the twelve months ended December 31, 2017. As a result, total non-interest expenses for the twelve months ended December 31, 2017 decreased by $2.08 million, or 44.9%, to $6.70 million from $4.62 million for the same period of last year, which mainly due to the following reasons: (1) the decrease in employee expenses due to departure of certain employees in the period; (2) the decrease in business tax and other taxes in line with the decrease in total interest income; and (3) the decrease in expenses related to travel, entertainment and other professional activities as a result of headcount reduction.

Income/ (loss) before income tax, net income/ (loss) and EPS

For the twelve months ended December 31, 2017, loss before income tax was $52.03 million, compared to income before tax of $21.40 million for the same period of last year. Income tax expenses was $2.75 million for the twelve months ended December 31, 2017, compared to income tax expense of $4.12 million for the same period of last year.

As a result of the above, for the twelve months ended December 31, 2017, net loss was $54.78 million, compared to net income of $17.28 million for the same period of last year. After deducting for dividends paid for Series A Convertible Redeemable Preferred Stock, net loss allocated to ordinary shareholders was $55.47 million, compared to net income allocated to ordinary shareholders of $16.95 million for the same period of last year.

Basic and diluted loss per share were $3.20 and $3.20, respectively, for the twelve months ended December 31, 2017, compared to basic and diluted earnings per share of $0.92 and $0.77, respectively, for the same period of last year.

Loan Portfolio



For the Twelve Months Ended December 31,



2017


2016



No. of loans


%


Loan amount ($M)


%


No. of loans


%


Loan amount ($M)


%

Supply chain financing


103


33.3%


89.66


46.5%


186


40.5%


159.70


48.1%

Commerce & service


175


56.6%


76.63


39.8%


181


39.4%


104.45


31.5%

Manufacturing


6


1.9%


2.74


1.4%


22


4.8%


13.39


4.0%

Real estate


8


2.6%


11.92


6.7%


21


4.6%


19.94


6.0%

Agriculture


5


1.6%


4.92


2.6%


27


5.9%


24.23


7.3%

Energy and mining


6


1.9%


3.55


1.8%


6


1.3%


7.64


2.3%

Consumer credit


2


0.6%


0.05


0.0%


12


3.1%


1.17


0.4%

Others


4


1.3%


3.17


1.6%


4


0.9%


1.20


0.4%

Total


309


100.0%


192.63


100.0%


459


100.0%


331.72


100.0%




As of December 31, 2017, the Company's loans covered over seven industries, including supply chain financing, commerce & service, agriculture, real estate, manufacturing, energy and mining and consumer credit. The Company issued 309 loans which aggregated to $192.63 million for the twelve months ended December 31, 2017, compared to 459 loans which aggregated to $331.72 million for the same period of last year. Supply chain financing was the largest segment, accounting for 46.5% of total loan amount with 103 loans issued for the twelve months ended December 31, 2017. Commerce and service was the second largest segment, accounting for 39.8% of total loan amount with 175 loans issued for the twelve months ended December 31, 2017.

Financial Condition

As of December 31, 2017, the Company had cash and cash equivalents of $1.22 million, compared to $4.50 million at the end of 2016. Net loans receivable was $117.26 million as of December 31, 2017, compared to $148.29 million as of December 31, 2016. Short-term bank loans, loans from a cost investment investee, and secured loans were $11.97 million, $15.37 million and $15.34 million, respectively, as of December 31, 2017, compared to $7.47 million, $14.40 and $14.15 million, respectively, as of December 31, 2016.

The net cash provided by operating activities for the year ended December 31, 2017 decreased by $13.53 million to $9.90 million, comparing with $23.43 million for the year ended December 31, 2016. The net decrease in cash and cash equivalents was mainly result from our supply chain finance customers have difficulties in repaying the loans due to the market pressure.

The capital liquidity of the Company was also influenced consequently due to a decrease in cash inflows provided by operating activities. As of December 31, 2017, $11.97 million short-term bank loans and $15.37 million loans from a cost investment investee were overdue.

The Company's operating results for future periods are subject to numerous uncertainties and it is uncertain if the Company will be able to maintain profitability and continue growth for the foreseeable future. If management is not able to increase revenue and/or manage operating expenses in line with revenue forecasts, the company may not be able to maintain profitability.

The Company's accounts have been prepared assuming that the company will continue as a going concern basis. The going concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed in the financial statements. The Company's ability to continue as a going concern depends upon aligning its sources of funding (debt and equity) with the expenditure requirements of the Company and repayment of the debt facilities as and when they fall due.

Recent Update

On January 16, 2018, the Company received a subpoena from Xinjiang superior people's court. China Great Wall Assets Management Co, Ltd. sued the Company and its guarantors for a default on the loan, plus penalties. The case is in the process. The Company is actively negotiating with China Great Wall Assets Management Co, Ltd. regarding the debt restructuring.

On March 6, 2018, the Company filed a registration statement on Form F-3 statement with the SEC. The registration statement was declared effective on March 22, 2018.

About China Lending Corporation

Founded in 2009, China Lending is a non-bank direct lending corporation and provides services to micro, small and medium sized enterprises, farmers, and individuals, who are currently underserved by commercial banks in China. Headquartered in Urumqi, the capital of Xinjiang Autonomous Region, with a registered capital of $94.7 million as of December 31, 2016, China Lending is one of the largest direct lending companies in the region in terms of registered capital. For more information, please visit: www.chinalending.com.  

Forward-Looking Statements

This press release may include forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that China Lending expects or anticipates will or may occur in the future are forward-looking statements and are identified with, but not limited to, words such as "may," "believe" and "expect." These statements are based on certain assumptions and analyses made by China Lending in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances. Actual results may differ materially from those expressed herein due to many factors such as, but not limited to, (1) the ability to obtain or maintain the listing of the Company's securities on the NASDAQ Capital Market; (2) the risk that our recent business combination disrupts the Company's current plans and operations; (3) the ability to recognize the anticipated benefits of our recent business combination, which may be affected by, among other things, closing proceeds, competition and the ability of the business to grow and manage growth profitably; (4) the outcome of any legal proceedings that may be instituted against the Company; (5) changes in applicable laws or regulations; (6) the possibility that the Company may be adversely affected by other economic, business, and/or competitive factors; and (7) other risks and uncertainties indicated from time to time in the proxy statement filed by the Company in connection with the business combination, including those under "Risk Factors" therein, and other factors identified in the Company's prior and future filings with the SEC, available at www.sec.gov.

These forward-looking statements are based on information available as of the date of this press release and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date and the Company undertakes no obligation to update any forward-looking statements contained herein to reflect events or circumstances which arise after the date of this press release, whether as a result of new information, future events or otherwise, except as may be required under applicable securities law.

For investors and media inquiries please contact:

At the Company:
Katrina Wu
Email:
wuxiaoqing@chinalending.com
Phone: +86-991-316-9617

Investor Relations:
Tony Tian, CFA
Weitian Group LLC
Email: tony.tian@weitian-ir.com
 Phone: +1-732-910-9692


  



CHINA LENDING CORPORATION

CONSOLIDATED BALANCE SHEETS



December 31,


2017


2016

ASSETS




Cash and cash equivalents

$

1,220,380


$

4,496,588

Loans receivable - third parties, net of provision for loan losses of $61,882,048 and $6,404,997 as of December 31, 2017 and 2016, respectively


116,017,356



146,183,647

Loans receivable - related parties, net of provision for loan losses of $2,412,642 and $21,311 as of December 31, 2017 and 2016, respectively


1,244,739



2,109,780

Interest and fee receivables


6,035



1,075,410

Cost method investment, net


-



3,599,831

Property and equipment, net


46,334



88,463

Intangible asset, net


80,729



55,480

Deferred tax assets


-



861,607

Other assets


1,004,696



485,765

Total Assets

$

119,620,269


$

158,956,571







LIABILITIES AND SHAREHOLDERS' EQUITY






Liabilities






Short-term bank loans

$

11,969,976


$

7,472,530

Loans from a cost investment investee


15,367,146



14,399,324

Loan from a third party


-



-

Secured loan payable


15,336,412



14,154,968

Dividends payable


480,000



4,108,721

Taxes payable


763,736



1,125,379

Convertible promissory note payable


-



650,000

Other liabilities


8,953,652



3,876,502

Total liabilities


52,870,922



45,787,424







Commitments and Contingencies






Convertible Redeemable Class A Preferred Shares






Preferred Shares, no par value, unlimited shares authorized; 715,000 shares issued and outstanding as of December 31, 2017 and 2016, respectively


8,966,127



8,913,327







Shareholders' Equity






Ordinary Shares, no par value; unlimited shares authorized; 23,758,817 and 22,898,864 shares issued and outstanding as of December 31, 2017, and 2016, respectively


-



-

Additional paid-in capital


96,977,528



91,644,559

Statutory reserves


6,621,063



6,536,238

Retained earnings (deficit)


(41,807,285)



15,691,462

Accumulated other comprehensive loss


(4,008,086)



(9,616,439)

Total Shareholders' Equity


57,783,220



104,255,820

Total Liabilities and Shareholders' Equity

$

119,620,269


$

158,956,571

 


  



CHINA LENDING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)



For The Years Ended
December 31,


2017


2016


2015

Interest and fee income









Interest and fees on loans

$

16,231,844


$

35,048,167


$

27,392,936

Interest and fees on loans-related parties


293,395



491,080



779,832

Interest on deposits with banks


1,076



4,652



5,883

Total interest and fee income


16,526,315



35,543,899



28,178,651










Interest expense









Interest expense on short-term bank loans


(1,583,491)



(715,535)



(425,139)

Interest expense and fees on secured loan


(3,253,472)



(2,442,527)



(2,302,136)

Interest expense on  loans from related parties


-



-



(61,542)

Interest expense on loans from a cost investment investee


(2,530,586)



(1,818,656)



(1,101,871)

Total interest expenses


(7,367,549)



(4,976,718)



(3,890,688)










Provisions for loan losses


(55,299,749)



(4,650,887)



(2,166,110)

Net Interest Income (Loss)


(46,140,983)



25,916,294



22,121,853










Non-interest income


570,756



107,512



13,212










Non-interest expenses









Salaries and employee surcharge


(808,657)



(1,271,650)



(917,159)

Business taxes and other taxes


(141,284)



(686,266)



(1,449,993)

Other operating expenses


(2,053,401)



(2,666,148)



(2,790,192)

Investment impairment


(3,698,868)



-



-

Total non-interest expenses


(6,702,210)



(4,624,064)



(5,157,344)










Non-operating expenses


243,913



-



-

Income (Loss) Before Tax


(52,028,524)



21,399,742



16,977,721

Income tax expense


(2,754,749)



(4,121,338)



(2,857,907)

Net Income (Loss)


(54,783,273)



17,278,404



14,119,814










Dividend – Convertible Redeemable Class A preferred stock


(686,400)



(333,327)



-

Net income (loss) allocated to ordinary shareholders


(55,469,673)



16,945,077



14,119,814










Other comprehensive income (loss)









Foreign currency translation adjustments


5,608,353



(7,530,549)



(5,714,112)

Comprehensive Income (loss)


(49,174,920)



9,747,855



8,405,702










Weighted-average common shares outstanding – basic


17,343,763



18,353,249



20,859,953

Weighted-average common shares outstanding – diluted


17,343,763



21,871,632



20,859,953

Earnings (loss) per share to ordinary shareholders – Basic

$

(3.20)


$

0.92


$

0.68

Earnings (loss) per share to ordinary shareholders – Diluted

$

(3.20)


$

0.77


$

0.68

 




CHINA LENDING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



For the Years Ended
December 31,


2017


2016


2015

Cash Flows from Operating Activities:






Net income (loss)

$

(54,783,273)


$

17,278,404


$

14,119,814

Adjustments to reconcile net income (loss) to net cash provided by operating activities









Share-based compensation expenses


-



21,330



-

Depreciation


37,084



37,448



39,415

Amortization


8,009



4,003



-

Loss on disposal of property and equipment


13,070



58



(12,971)

Loss on debt restructuring


140,938



-



-

Investment impairment


3,698,868



-



-

Deferred tax (benefit) expense


885,311



(662,741)



(274,924)

Provisions for loan losses


55,299,749



4,650,887



2,166,110

Changes in operating assets and liabilities:









Interest and fee receivables


958,248



(465,901)



(79,061)

Other assets


(589,456)



(413,772)



(72,426)

Taxes payable


(394,803)



(30,601)



(764,741)

Other liabilities


4,624,075



3,009,560



820,988

Net Cash Provided by Operating Activities


9,897,820



23,428,675



15,942,204










Cash Flows from Investing Activities:









Originated loans disbursement


(192,628,156)



(331,721,346)



(237,371,565)

Repayment of loans from customers


176,801,788



307,589,717



212,716,218

Purchases of property and equipment


-



(16,341)



(156,847)

Purchases of investment


-



-



(4,013,614)

Purchases of intangible assets


(28,729)



(61,993)



-

Proceeds from sales of property and equipment


-



-



28,898

Proceeds from disposal of loans receivable to a  related party


-



-



6,737,574

Net Cash Used in Investing Activities


(15,855,097)



(24,209,963)



(22,059,336)










Cash Flows from Financing Activities:









Cash acquired from reverse merger


-



6,083,009



-

Proceeds from issuing ordinary shares


-



-



1

Proceeds from short-term bank borrowings


5,178,415



13,997,380



5,619,060

Repayment of short-term bank borrowings


(1,331,846)



(6,020,378)



(12,843,565)

Proceeds from secured loan


-



-



25,783,457

Repayment of secured loan


-



(9,150,975)



(15,942,076)

Proceeds from loans from a cost investment investee


-



15,050,946



16,054,457

Repayment from loans from a cost investment investee


-



(15,050,946)



-

Proceeds from a related party


-



1,615,903



-

Repayment of convertible promissory note


(650,000)



-



-

Payments of dividends


(873,600)



(7,795,182)



(5,647,881)

Amortization of secured loans


221,489



-



-

Net Cash (used in) / Provided by Financing Activities


2,544,458



(1,270,243)



13,023,453










Effect of Exchange Rate Changes on Cash and Cash Equivalents


136,611



(184,482)



(289,852)










Net change in Cash and Cash Equivalents


(3,276,208)



(2,236,013)



6,616,469

Cash and Cash Equivalents at Beginning of year


4,496,588



6,732,601



116,132

Cash and Cash Equivalents at End of Year

$

1,220,380


$

4,496,588


$

6,732,601










Supplemental Cash Flow Information









Cash paid for interest expense

$

3,106,480


$

5,136,312


$

3,846,128

Cash paid for income tax

$

1,895,652


$

3,624,437


$

3,648,094

 



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