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China Lending Corporation Reports Unaudited Financial Results for the Six Months Ended June 30, 2019

November 14, 2019 GMT

BEIJING, URUMQI and HANGZHOU, China, Nov. 14, 2019 /PRNewswire/ -- China Lending Corporation (“China Lending” or the “Company”) (OTC Pink Sheets: CLDOF), a non-bank financial corporation servicing micro-, small- and medium-sized enterprises in China, today reported its unaudited financial results for the six months ended June 30, 2019.

Highlights

Ms. Jingping Li, co-founder and chief executive officer of China Lending, commented, “As we shift our resources towards growing more promising businesses including supply chain financing and insurance facilitation, we have also increased our intensity in collecting past-due loans. The Company will seek collection of outstanding loan receivables—even if they are significantly delinquent—and will work for shareholders to seek all repayments due. In addition, since we stopped distributing loans to customers at the end of 2018, our need for loan loss provision has decreased drastically as well. Armed with a stronger balance sheet, we are forging ahead with our business restructuring. Step by step, we are transforming our business into a diversified and nimble non-bank financial services company.”

Financial Results for the Six Months Ended June 30, 2019

Interest and Fee Income

Total interest and fee income, including interest and fees on direct lending loans, financial advisory fees, and interest on deposits with banks, increased by $2.58 million, or 5,018%, to $2.63 million for the six months ended June 30, 2019, from $0.05 million for the six months ended June 30, 2018. The increase was attributable to interest income of $2.22 million generated from loans disbursed by Zhiyuan and financial advisory fees of $0.41 million generated by Zeshi.

Interest Expenses

The Company borrowed from banks, other financial institutions, and third parties to fund its direct lending business. The total interest expenses increased by $1.86 million, or 53%, to $5.38 million for the six months ended June 30, 2019 from $3.52 million for the six months ended June 30, 2018. The increase in interest expenses was mainly due to accrual of compound interest and penalties from overdue borrowings. As of June 30, 2019, the Company has overdue borrowings of $37.20 million.

Provision for Loan Losses

Provision for loan losses decreased by $22.44 million, or 47%, from $47.64 million for the six months ended June 30, 2018 to $25.20 million for the six months ended June 30, 2019. The decrease was caused by more “doubtful” loans rolled to “loss” loans during the six months ended June 30, 2018 than that for the same period ended June 30, 2019.

Loan aging as of June 30, 2019 and December 31, 2018 was as follows:

The following table represents the aging of loans as of June 30, 2019, by type of loan:



1-89 Days
Past Due



90-179 Days
Past Due



180-365 Days Past Due



Over 1 year
Past Due



Total
Past Due



Current



Total
Loans


Business loans


$

-



$

-



$

2,991,204



$

40,051,358



$

43,042,562



$

50,023,300



$

93,065,862


Personal loans



1,092,212




72,814




14,466,856




97,116,976




112,748,858




-




112,748,858




$

1,092,212



$

72,814



$

17,458,060



$

137,168,334



$

155,791,420



$

50,023,300



$

205,814,720


The following table represents the aging of loans as of December 31, 2018, by type of loan:



1-89 Days
Past Due



90-179 Days Past Due



180-365 Days Past Due



Over 1 year Past Due



Total
Past Due



Current



Total
Loans


Business loans


$

1,856,751



$

1,129,755



$

27,739,900



$

12,248,816



$

42,975,222



$

65,938,700



$

108,913,922


Personal loans



174,480




14,292,196




40,137,089




56,827,383




111,431,148




1,163,196




112,594,344




$

2,031,231



$

15,421,951



$

67,876,989



$

69,076,199



$

154,406,370



$

67,101,896



$

221,508,266


Non-Interest Income (Expense), net

The Company has a non-interest income of $1.32 million for the six months ended June 30, 2019, as compared to a non-interest expense of $1.05 million for the six months ended June 30, 2018. The change of $2.37 million was caused by a reversal of investment impairment of $3.35 million for the Company’s investment in a cost method investee as a result of the adjudication by the court to transfer the investment to a debtor as a repayment of the borrowings from the debtor, netting off against a provision of impairment of $869,488 for long-aged other assets.

Loss Before Tax and Net Loss

As a result of the above, loss before tax was $26.62 million and $52.15 million for the six months ended June 30, 2019 and 2018, respectively. Net loss was $26.78 million and $52.15 million for the six months ended June 30, 2019 and 2018, respectively.

After deducting dividend payable for Series A convertible redeemable preferred stocks and non-controlling interests, net loss attributable to ordinary shareholders was $27.13 million and $52.15 million for the six months ended June 30, 2019 and 2018, respectively.

Loan Portfolio

As of June 30, 2019, the Company’s loan portfolio encompasses a number of industries, including supply chain financing, commerce and service, construction and decoration, manufacturing, agriculture, real estate, energy and mining, communications, consumer credit, and others. The Company issued one loan with a total amount of $43.69 million during the six months ended June 30, 2019.

Financial Condition

As of June 30, 2019, the Company had cash and cash equivalents of $0.41 million, as compared to $1.31 million as of December 31, 2018. Net loans receivable due from third parties were $51.78 million as of June 30, 2019, as compared to $92.09 million as of December 31, 2018. Borrowings consisting of short-term bank loans, loans from a cost method investee, loans from third parties, and secured loans aggregated to $85.98 million as of June 30, 2019, as compared to $105.05 million as of December 31, 2018.

The Company’s loans consisted of short-term bank loans, secured loans, and loans from a third party, all of which were overdue as of June 30, 2019. In March 2018, the Company received two subpoenas from the People’s Supreme Court of Xinjiang. Zhengxin Financing Guarantee Co., Ltd. and Urumqi Changhe Financing Guarantee Co., Ltd. sued the Company and its guarantors for a default on the loan plus penalties. The Company has reached settlement agreements with Zhengxin Financing Guarantee Co., Ltd and Urumqi Changhe Financing Guarantee Co., Ltd. to transfer loan receivables to both debtors as repayments of the principals and penalties totaling RMB 61.71 million ($8.99 million) no later than October 30, 2020. As a result, Zhengxin Financing Guarantee Co., Ltd. and Urumqi Changhe Financing Guarantee Co., Ltd. withdrew the lawsuit cases from the court.

On January 16, 2018, the Company received a subpoena from People’s Supreme Court of Xinjiang. China Great Wall Assets Management Co, Ltd. sued the Company and its guarantors for a default on the loan plus penalties, aggregating US$16.4 million (RMB 112.6 million). The case is in progress. The Company is actively negotiating with China Great Wall Assets Management Co, Ltd. about the debt restructuring, but has not reached an agreement.

Recent Updates

On July 15, 2019, the Company entered into a five-year strategic partnership agreement with Rui Xin Insurance Technology (Ningbo) Co., Ltd (“Rui Xin”), a financial technology company providing comprehensive insurance solutions. Through the partnership, both parties expect to jointly grow their businesses and help each other to expand their customer base by leveraging each other’s unique and complementary strengths as well as resources in financial technology, the consumer finance market, and the insurance industry. Pursuant to the strategic partnership agreement, the Company would benefit from 80% of the net income generated in consumer finance market and 90% of the net income generated in the insurance industry.

The Company will work with Rui Xin to develop its own consumer financial platform. In collaboration with Rui Xin and its partners, the Company expects to provide value-added consumer financial services to insurance consumers of Rui Xin and its partners. Benefiting from the anticipated size of the business and the good credit record of insurance consumers, the Company will improve its asset quality and maintain sustainable business growth through the partnership. In addition, the Company and Rui Xin will also explore collaboration opportunities in areas such as insurance consumer acquisition, development of insurance products, expansion of insurance business, and customization of consumer financial solutions. Moreover, the Company will benefit from Rui Xin and its partners’ advanced technological capabilities in big data and artificial intelligence to improve its risk management and enhance its customer experience.

On July 29, 2019, the Company entered into a five-year strategic partnership with Zhong Lian Jin An Insurance Brokers Co., Ltd. (“ZLJA”), a leading insurance brokerage company in China with over 90 branches across the nation. The partnership will enable both companies to further expand each other’s customer base and to develop superior, customized consumer financing and insurance products by leveraging their industry expertise, service capabilities, and industry networks. China Lending will utilize its market resources to help ZLJA to effectively expand and manage its insurance customer base and sales channels. In return, ZLJA will leverage its existing customer base to identify potential sales leads for the Company’s consumer financing services. Pursuant to the strategic partnership agreement, the Company would benefit from 60% of the net income generated from the insurance customer base and sales channels facilitated by the Company.

On August 12, 2019, the Company’s subsidiary, China Fenghui Industrial Financial Holding Group Co., Ltd. has entered into a framework agreement (the “Agreement”) with Zhejiang Zhongfeng Investment Management Co., Ltd. (“Zhongfeng”), pursuant to which Zhongfeng will either acquire 100% of equity interest in Urumqi Fenghui Direct Lending Co., Ltd. (“Feng Hui”), a variable interest entity of the Company primarily engaged in the microloan business, or obtain control over and become the primary beneficiary of Feng Hui through contractual arrangements for a cash consideration of no less than RMB15 million. Feng Hui primarily provides loan facilitation services to micro, small and medium sized enterprises in the Xinjiang Uygur Autonomous Region.

On July 11, 2019, the Company received a delisting determination letter from Nasdaq Listing Qualifications (“Nasdaq”), indicating that the Company’s securities would be subject to delisting from the Nasdaq Capital Market based on its non-compliance with the continued listing requirements, unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”). The Company has requested a hearing before the Panel on August 22, 2019, to appeal the delisting determination. The hearing request has stayed the delisting action of the Company’s securities by Nasdaq pending the Panel’s final decision. There can be no assurance that the Panel will grant the Company’s request for continued listing.

On August 20, 2019, the Company received a notification letter from Nasdaq Listing Qualifications advising the Company that based upon the closing bid price for the Company’s common shares for the past 30 consecutive business days, the Company no longer met the minimum $1.00 per share Nasdaq continued listing requirement set forth in Nasdaq Listing Rule 5555(a)(2). The notification also stated that the Company would be provided 180 calendar days, or until February 11, 2020, to regain compliance with the foregoing listing requirement. To do so, the bid price of the Company’s common stock must close at or above $1.00 per share for a minimum of 10 consecutive business days prior to that date.

On September 6, 2019, the Company was notified by Nasdaq that the Panel denied the Company’s recent appeal and determined to delist the Company’s common shares from Nasdaq. The decision to delist the Company’s common shares was reached as a result of the Company’s inability to regain compliance with the continued listing requirement of a minimum of $2.5 million in stockholders’ equity, as set forth in Nasdaq Listing Rule 5550(b)(1). Accordingly, the trading of the Company’s common shares on Nasdaq ceased at the opening of business on September 6, 2019. Subsequently, Nasdaq will file a Form 25-NSE with the Securities and Exchange Commission to effect the removal of the Company’s securities from listing and registration on the Nasdaq Capital Market.

Subsequently, the Company’s securities has been quoted on the OTCBB, a centralized electronic quotation service for over-the-counter ‎securities, following the Nasdaq delisting; the trading symbol for the Company’s securities has changed to “CLDOF”. Such quotation will continue so long as market makers demonstrate an interest in trading in the Company’s common ‎shares; however, the Company can give no assurance that trading in its common shares will continue on ‎the Pink Sheets or any other securities exchange or quotation medium.‎ Further, trading of the Company’s common shares on the Pink Sheets may be restricted depending on the jurisdiction in which potential purchasers or sellers of shares reside.

The Company will remain a reporting company under the Securities Exchange Act of 1934 and continue to be subject to the public reporting requirements of the Securities and Exchange Commission.

About China Lending Corporation

Founded in 2009, China Lending is a non-bank financial corporation and provides comprehensive financial services to micro-, small- and medium-sized enterprises, and individuals. China Lending has headquarters in Urumqi, the capital of Xinjiang Autonomous Region, and Hangzhou, the capital of Zhejiang province. 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 remain quoted on the Pink Open Market of the OTC Markets Group; (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; (7) the Company’s ability to continue as a going concern; and (8) 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:
Jack Wang
ICR Inc.
Email: ICR-TMT@icrinc.com
Phone: +1 646-224-6936

CHINA LENDING CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in U.S. dollar, except for the number of shares)



June 30,
2019



December 31,
2018









ASSETS







Current Assets







Cash and cash equivalents


$

405,701



$

1,311,749


Loans receivable - third parties, net of provision for loan losses of $152,719,939 and $128,109,728 as of June 30, 2019 and December 31, 2018, respectively



51,784,127




92,089,942


Loans receivable - related parties, net of provision for loan losses of $1,310,654 and $817,872 as of June 30, 2019 and December 31, 2018, respectively



-




490,724


Interest and fee receivables, net of provision for interest and fee receivable losses of $76,455 and $nil, respectively



2,288,188




105,823


Property and equipment, net



22,368




28,546


Intangible asset, net



63,265




67,571


Other assets



840,831




1,574,175


Total Assets


$

55,404,480



$

95,668,530











LIABILITIES AND SHAREHOLDERS' DEFICIT









Liabilities









Short-term bank loans


$

7,988,915



$

7,983,640


Loans from a cost method investee



-




14,539,956


Loan from third parties



14,674,991




3,312,202


Secured loan payable



63,319,158




79,213,679


Dividends payable



480,000




480,000


Taxes payable



936,589




689,209


Warrant liabilities



583,823




550,800


Other liabilities



20,279,388




15,246,698


Total Liabilities



108,262,864




122,016,184











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 June 30, 2019 and December 31, 2018, respectively



9,995,727




9,652,527











Shareholders' Deficit









Ordinary Shares, no par value; unlimited shares authorized; 25,287,851 and 25,288,003 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively



-




-


Additional paid-in capital



98,036,152




98,036,152


Statutory reserve



6,621,063




6,621,063


Accumulated deficits



(163,747,238)




(136,620,068)


Accumulated other comprehensive loss



(3,766,483)




(4,037,404)


Total Shareholders' Deficit



(62,856,506)




(36,000,257)











Noncontrolling interests



2,395




76











Total Deficit



(62,854,111)




(36,000,181)











Total Liabilities and Deficit


$

55,404,480



$

95,668,530


CHINA LENDING CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Expressed in U.S. dollar, except for the number of shares)



For the Six Months Ended
June 30,




2019



2018









Interest and fee income







Interest and fees on loans


$

2,631,301



$

51,151


Interest on deposits with banks



175




264


Total interest and fee income



2,631,476




51,415











Interest expense









Interest expense on short-term bank loans



(606,646)




(825,284)


Interest expense and fees on secured loans



(3,400,192)




(1,275,128)


Interest expense on loans from third parties



(1,377,083)




-


Interest expense on loans from a cost investment investee



-




(1,422,219)


Total interest expenses



(5,383,921)




(3,522,631)











Provisions for loan losses



(25,198,186)




(47,636,098)











Net Interest Loss



(27,950,631)




(51,107,314)











Non-interest income (expenses)









Salaries and employee surcharge



(324,344)




(246,605)


Business taxes and other taxes



-




27,678


Other operating expenses



(1,662,341)




(826,499)


Reversal of investment impairment



3,346,760




-


Fair value changes in warrant liabilities



(33,023)




-


Total non-interest income (expenses)



1,327,052




(1,045,426)











Loss Before Tax



(26,623,579)




(52,152,740)


Income tax expense



(158,072)




-


Net Loss



(26,781,651)




(52,152,740)











Dividend – Convertible Redeemable Class A preferred stock



(343,200)




-


Net income attributable to noncontrolling interests



(2,319)




-


Net loss attributable to ordinary shareholders


$

(27,127,170)



$

(52,152,740)











Net Loss



(26,781,651)




(52,152,740)











Other comprehensive income









Foreign currency translation adjustments



270,921




836,601


Comprehensive loss



(26,510,730)




(51,316,139)


Less: Dividend – Convertible Redeemable Class A preferred stock



(343,200)




-


Net income attributable to noncontrolling interests



(2,319)




-


Comprehensive loss attributable to ordinary shareholders


$

(26,856,249)



$

(51,316,139)











Weighted-average common shares outstanding – basic and diluted



25,287,852




18,422,783











Loss per share to ordinary shareholders – basic and diluted


$

(1.07)



$

(2.83)


CHINA LENDING CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

(Expressed in U.S. dollar, except for the number of shares)



Ordinary share



Additional
paid-in



Statutory



Accumulated



Accumulated
other
comprehensive



Shareholder's
equity



Non
controlling



Total Equity




Number



Amount



capital



reserve



Deficit



loss



(deficit)



interests



(Deficit)


Balance as at December 31, 2017



23,758,817



$

-



$

96,977,528



$

6,621,063



$

(41,807,285)



$

(4,008,086)



$

57,783,220



$

-



$

57,783,220


Forfeiture of restricted shares



(1,150)




-




-




-




-




-




-




-




-


Dividends to shareholders



-




-




(343,200)




-




(222)




-




(343,422)




-




(343,422)


Net loss



-




-




-




-




(52,152,740)




-




(52,152,740)




-




(52,152,740)


Foreign currency translation adjustments



-




-




-




-




-




836,601




836,601




-




836,601


Balance as at June 30, 2018



23,757,667



$

-



$

96,634,328



$

6,621,063



$

(93,960,247)



$

(3,171,485)



$

6,123,659



$

-



$

6,123,659







































Balance as at December 31, 2018



25,288,003



$

-



$

98,036,152



$

6,621,063



$

(136,620,068)



$

(4,037,404)



$

(36,000,257)



$

76



$

(36,000,181)


Forfeiture of restricted shares



(152)




-




-




-




-




-




-




-




-


Net (loss) income



-




-




-




-




(26,783,970)




-




(26,783,970)




2,319




(26,781,651)


Dividends to shareholders



-




-




-




-




(343,200)




-




(343,200)




-




(343,200)


Foreign currency translation adjustments



-




-




-




-




-




270,921




270,921




-




270,921


Balance as at June 30, 2019



25,287,851



$

-



$

98,036,152



$

6,621,063



$

(163,747,238)



$

(3,766,483)



$

(62,856,506)



$

2,395



$

(62,854,111)


CHINA LENDING CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in U.S. dollar)



For the Six Months Ended
June 30,




2019



2018


Cash Flows from Operating Activities:







Net loss


$

(26,781,651)



$

(52,152,740)


Adjustments to reconcile net loss to net cash used in operating activities









Depreciation



6,936




8,405


Amortization



4,466




4,762


Reversal of investment impairment



(3,346,760)




-


Provisions for loan losses



25,198,186




47,636,098


Fair value changes in warrant liabilities



33,023




-


Changes in operating assets and liabilities:









Interest and fee receivables



(2,208,313)




(15,485)


Other assets



745,693




223,981


Taxes payable



249,244




(62,119)


Other liabilities



5,070,361




3,496,174


Net Cash Used in Operating Activities



(1,028,815)




(860,924)











Cash Flows from Investing Activities:









Originated loans disbursement



(44,211,271)




(330,017)


Repayment of loans from customers



60,445,167




613,527


Purchases of property and equipment



(638)




-


Net Cash Provided by Investing Activities



16,233,258




283,510











Cash Flows from Financing Activities:









Repayment of short-term bank borrowings



(7,369)




(21,216)


Proceeds from a third party



103,159




-


Proceeds from secured loans



44,211,271




-


Repayments of secured loans



(60,422,070)




-


Net Cash Used in Financing Activities



(16,115,009)




(21,216)











Effect of Exchange Rate Changes on Cash and Cash Equivalents



4,518




(628)











Net change in Cash and Cash Equivalents



(906,048)




(599,258)


Cash and Cash Equivalents at Beginning of period



1,311,749




1,220,380


Cash and Cash Equivalents at End of Period


$

405,701



$

621,122











Supplemental Cash Flow Information









Cash paid for interest expense


$

-



$

-


Cash paid for income tax


$

5,675



$

-


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SOURCE China Lending Corporation