China Lending Corporation Announces Fiscal Year 2017 Financial Results

BEIJING & URUMQI, China, April 30, 2018 /PRNewswire/ – China Lending Corporation ("China Lending" or the "Company") (Nasdaq: 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

• 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

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

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