MDJM LTD Reports Full Year 2020 Financial Results

TIANJIN,China,April 17,2021 -- MDJM LTD (Nasdaq: MDJH) (the "Company" or "MDJH"),a real estate services company in China,today announced its financial results for the fiscal year ended December 31,2020.

Fiscal Year 2020 Financial Highlights

For the Years Ended December 31,

($'000,except per share data)

2020

2019

% Change

Revenue

$5,869

$5,680

3.3%

Operating expenses

$5,628

$5,321

5.8%

Income from operations

$241

$359

-32.8%

Operating profit margin

4.1%

6.3%

-2.2%

Net income attributable to MDJH ordinary shareholders

$258

$453

-43.1%

Earnings per share

$0.02

$0.04

-50.0%

Revenue increased by 3.3% to $5.87 million for 2020,primarily attributable to the improvement of our commission rate in 2020.

Operating expenses increased by 5.8% to $5.63 million for 2020. The increase was primarily related to an increase in payroll expenses that offset the decrease in selling expenses,professional fees,operating lease expense,and other general and administrative expenses.

Operating profit margin was 4.1% for 2020,compared to 6.3% for the same period of last year.

Net income was $0.25 million for 2020,compared to $0.30 million for the same period of last year.

Net income attributable to MDJH ordinary shareholders was $0.26 million,or earnings per share of $0.02,for 2020,compared to $0.45 million,or earnings per share of $0.04,for the same period of last year.

Mr. Siping Xu,Chairman and Chief Executive Officer of the Company,commented,"With revenue increasing by 3.3% year-over-year,our full-year 2020 financial results underscore continued strength in our primary real estate agency services business despite the negative impact of the COVID-19 pandemic on our operations and the overall economy. However,our profit margin and net income decreased as a result of the increased operating expenses. We continued our planned geographical expansion,with Chengdu,Suzhou,and Yangzhou markets contributing 35% of our total revenue in 2020,while closely monitoring opportunities entering into other geographic markets. Looking ahead,we are cautiously optimistic about 2021 as the Chinese economy,particularly its housing market,recovers from the pandemic."

Full Year 2020 Financial Results

Revenue

For 2020,revenue increased by $0.19 million,or 3.3%,to $5.87 million from $5.68 million for the same period of last year. The increase in revenue was primarily attributable to the improvement of our commission rate in 2020. Primary real estate agency services and consulting and other services accounted for 98.2% and 1.8% of revenue,respectively,compared to 97.1% and 2.9%,for the same period of last year. On a geographical basis,revenue from primary real estate agency services in Tianjin,Chengdu,Yangzhou,and Suzhou accounted for 65%,30%,2%,and 3% of the primary real estate agency service revenue,compared to 83%,5%,9%,and 3%,for the same period of last year.

Operating Expenses

For the Years Ended December 31,

($'000)

2020

2019

% Change

Selling expenses

$

95

$

187

-49.0%

Payroll,payroll taxes and others

4,669

3,711

25.8%

Professional fees

405

634

-36.2%

Operating lease expense

117

185

-36.9%

Depreciation and amortization

22

15

44.9%

Provision (reduction) for doubtful accounts,net

4

(39)

-109.7%

Other general and administrative

317

629

-49.6%

Total operating expenses

$

5,628

$

5,321

-5.8%

Selling expenses decreased by $0.09 million,or 49.0%,to $0.10 million for 2020 from $0.19 million for the same period of last year. The decrease in selling expenses was attributable to reduced selling activities in the first half of 2020 due to the impact of the Covid-19 pandemic.

Payroll,payroll taxes and others increased by $0.96 million,or 25.8%,to $4.67 million for 2020 from $3.71 million for the same period of last year. Our employee compensation was based on sales performance,and our sales related compensation,such as bonuses and commission,increased primarily due to the increase of our revenue in 2020.

Professional fees were $0.40 million for 2020,compared to $0.63 for the same period of last year. Professional fees consist of attorney,audit,investor relationship,and other expenses. The decrease in professional fees was due to the Company incurring the majority of its expenses associated with its initial public offering in 2019.

Operating lease expenses decreased by $0.07 million,or 36.9%,to $0.12 million for 2020 from $0.18 million for the same period of last year. Currently,the Company has one long-term lease,which became effective on January 1,2019,and will expire on December 31,2023.

Depreciation and amortization expenses were $21,966 for 2020,compared to $15,180 for the same period of last year. The increase in depreciation and amortization expenses was a result of new equipment purchased for $13,416 and $66,354 in 2020 and 2019,respectively.

Changes in allowance for doubtful accounts was an increase of $3,786 for 2020,compared to the net decrease of $38,883 for the same period of last year.

Other general and administrative expenses decreased by $0.31 million,or 49.6%,to $0.32 million for 2020 from $0.63 million for the same period of last year.

As a result,total operating expenses increased by $0.31 million,or 5.8%,to $5.63 million for 2020 from $5.32 million for the same period of last year.

Operating Income (Loss)

Income from operations was $0.24 million for 2020,compared to $0.36 million for the same period of last year.

The operating profit margin was 4.1% for 2020,compared to 6.3% for the same period of last year. The decrease in operating margin was due to the increases in operating expenses as discussed above.

Other Income

Total other income,including government grants,interest income,and other income (expenses),was $45,935 for 2020,compared to $42,176 for the same period of last year.

Income before Income Tax

Income before income tax was $0.29 million for 2020,compared to $0.40 million for the same period of last year.

The Company incurred income tax of $0.03 million for 2020,compared to $0.10 million for the same period of last year.

Net Income

Net income was $0.25 million for 2020,compared to $0.30 million for the same period of last year. After deduction of non-controlling interest,net income attributable to MDJH ordinary shareholders was $0.26 million,for the same period of last year.

Financial Conditions

As of December 31,2020,the Company had cash and cash equivalents of $6.11 million,compared to $6.55 million as of December 31,2019. Account receivable was $4.06 million as of December 31,compared to $2.16 million as of December 31,2019. As of December 31,the Company had current assets of $10.29 million and current liabilities of $1.48 million,leading to working capital of $8.81 million,compared to current assets,current liabilities,and working capital of $8.84 million,$0.69 million and $8.15 million,as of December 31,2019.

Net cash used in operating activities was $0.60 million for 2020,compared to $1,501 for the same period of last year. Net cash provided by investing activities was $1,076 for 2020,compared to net cash used in investing activities of $0.19 million for the same period of last year. Net cash provided by financing activities was $0.11 million for 2020,compared to $0.07 million for the same period of last year.

Recent Developments

Because of the quarantines and travel restrictions mandated by the Chinese government in response to the COVID-19 pandemic,from the end of January to mid-March of 2020,many real estate projects the Company was promoting and selling were suspended,which adversely impacted its business during that period. However,because the Company's operating income and earnings have historically been lower during the first quarter than other quarters due to the winter and the Chinese New Year holiday period,the Company believes this seasonality partially mitigated the adverse impact on its full-year operating results. Starting from the end of March 2020,these real estate projects began to reopen. Although the Company believes its operations have resumed to the level prior to the COVID-19 outbreak and expects to continue its normal business operations going forward,any future development of the COVID-19 outbreak may further impact the Company's operations. If a new wave of the COVID-19 outbreak were to occur in the autumn and winter seasons,it could have a material adverse effect on the Company's business,results of operations,financial condition,and cash flows.

About MDJM LTD

With branch offices in Tianjin,and Yangzhou,MDJM provides primary real estate agency services to,as well as real estate consulting and independent training services to real estate developer clients. The Company also provides tourism development services,including real estate marketing and planning services,real estate agency services,and advertisement planning services. For more information regarding the Company,please visit: http://ir.mdjhchina.com.

Forward-Looking Statements

This press release contains forward-looking statements. All statements other than statements of historical fact in this press release are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties,including any future impact of the Covid-19 pandemic on our operations,and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition,business strategy and financial needs. Investors can identify these forward-looking statements by words or phrases such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances,or changes in its expectations,except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable,it cannot assure you that such expectations will turn out to be correct,and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company's annual report on Form 20-F and in its other filings with the Securities and Exchange Commission.

For more information,please contact Investor Relations at:

Sherry Zheng

Weitian Group LLC

Email: shunyu.zheng@weitian-ir.com

Phone: +1-718-213-7386

MDJM LTD and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Years Ended December 31,

2020

2019

2018

Revenue

$

5,868,725

$

5,679,977

$

2,408,448

Operating Expenses:

Selling expenses

95,207

186,641

82,225

Payroll,668,507

3,710,697

2,214,975

Professional fees

404,850

634,372

-

Operating leases expenses

116,532

184,802

141,959

Depreciation and amortization

21,996

15,180

12,575

Provision (reduction) for doubtful accounts,net

3,786

(38,883)

(146,174)

Other general and administrative

316,989

628,608

667,267

Total Operating Expenses

5,627,867

5,321,417

2,972,827

Income (loss) from Operations

240,858

358,560

(564,379)

Other income (Expense):

Gain on sale of asset

-

1,705

-

(Loss) gain on foreign currency transactions

(31,109)

12,072

-

Loss on disposal of subsidiary

-

(4,970)

-

Interest income

68,701

30,662

26,565

Other income

8,343

2,707

-

Total other income

45,935

42,176

26,565

Income (loss) before income tax

286,793

400,736

(537,814)

Income tax

(32,900)

(101,372)

-

Net income (loss)

253,893

299,364

(537,814)

Net loss attributable to noncontrolling interest

(4,146)

(153,742)

(21,843)

Net income (loss) attributable to MDJM Ltd ordinary shareholders

$

258,039

$

453,106

$

(515,971)

Net income (loss) per ordinary share attributable to MDJM Ltd ordinary shareholders

$

0.02

$

0.04

$

(0.05)

Weighted-average shares outstanding,basic and diluted

11,652,882

11,640,661

10,400,408

Comprehensive income (loss):

Net income (loss)

$

253,893

$

299,364

$

(537,814)

Other comprehensive income (loss),net of tax:

Change in foreign currency translation adjustments

251,919

(53,156)

(170,344)

Comprehensive income (loss)

505,812

246,208

(708,158)

Comprehensive income (loss)attributable to non-controlling interest

9,132

(2,398)

(823)

Comprehensive income (loss) attributable to MDJM Ltd ordinary shareholders

$

496,680

$

248,606

$

(707,335)

MDJM LTD and Subsidiaries

Consolidated Balance Sheets

December 31,

2020

December 31,

2019

Assets

Current Assets

Cash,cash equivalents,and restricted cash

$

6,110,693

$

6,552,677

Accounts receivable,net of allowance for doubtful accounts of $15,477 and $10,774,respectively

4,062,155,158

Prepaid expenses

23,346

60,020

Other receivables

92,168

69,977

Total Current Assets

10,288,550

8,837,832

Property and equipment,net

65,703

70,154

Other Assets

Deferred tax assets

24,890

33,440

Operating lease assets,net

319,828

391,871

Other receivable - long term

53,794

99,532

TotalOther Assets

398,512

524,843

Total Assets

$

10,752,765

$

9,432,829

Liabilities and Equity

Current Liabilities:

Accounts payable and accrued liabilities

$

1,147,530

$

460,690

VAT and other taxes payable

207,352

107,662

Deferred income

18,780

26,429

Operating lease liabilities,current

102,056

91,737

Total Current Liabilities

1,475,718

686,518

Long-term operating lease liabilities

161,559

247,382

Total Liabilities

1,637,277

933,900

Equity:

Ordinary shares: 50,000,000 shares authorized,par value: $0.001 per share,

11,675,216 and 11,820 shares issued and outstanding as of December 31,

2020 and 2019,respectively

11,675

11,641

Additional paid in capital

6,845,394

6,734,681

Statutory reserve

327,140

262,954

Retained earnings

2,142,657

1,948,804

Accumulated other comprehensive loss

(37,558)

(280,345)

Total MDJM Ltd stockholders' equity

9,289,308

8,677,735

Noncontrolling interest

(173,820)

(178,806)

Total Liabilities and Equity

$

10,829

MDJM LTD and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31,

2020

2019

2018

Cash Flows from Operating Activities:

Net Income (loss)

$

253,814)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization

21,575

Changes in allowance for doubtful accounts

3,174)

Gain on foreign currency transactions

31,109

(12,072)

-

Gain on sale of asset

-

(1,705)

-

Non cash operating lease expense

92,621

88,632

-

Non cash interest income

(5,926)

-

-

Decrease in deferred tax assets

10,180

101,166

72,975

Changes in operating assets and liabilities:

Increase in accounts receivables

(1,676,789)

(374,592)

(83,189)

Decrease (increase) in other receivables

24,282

(4,630)

41,441

Decrease (increase) in prepaid expense

38,346

174,113

(150,273)

Decrease (increase) in prepaid income tax

-

3,605

(3,762)

Increase (decrease) in accounts payable and accrued expenses

622,118

(107,980)

131,876

Increase (decrease) in VAT and other tax payable

87,761

(28,518)

18,843

Decrease in operating lease liabilities

(92,621)

(141,838)

-

(Decrease) increase in deferred income

(8,889)

26,657

-

Net Cash Used in Operating Activities

(598,133)

(1,501)

(643,502)

Cash Flows from Investing Activities:

Purchase of office equipment and software

(13,416)

(66,354)

(1,215)

Advance made to deconsolidated subsidiary

-

(127,804)

-

Loan repayment received

14,492

-

-

Proceeds from disposal of asset

-

3,330

-

Net Cash Provided by (Used in)Investing Activities

1,076

(190,828)

(1,215)

Cash Flows from Financing Activities:

Proceeds from Regulation S offering - August 26,net of offering costs of $2,760

110,747

-

-

Proceeds from initial public offering - net of offering costs of $26,399 and $2,103,816,respectively

-

70,406

4,479

Net Cash Provided by Financing Activities

110,747

70,479

Effect of exchange rate changes on cash,and restricted cash

44,326

(17,957)

116,055

Net (decrease) increase in cash,cash equivalents and restricted cash

(441,984)

(139,880)

3,574,817

Cash,and restricted cash - beginning of the period

6,677

6,692,557

3,117,740

Cash,and restricted cash - end of the period

$

6,677

$

6,557

Cash and cash equivalents

$

4,976,527

$

4,995,843

$

5,626,079

Restricted foreign currency

1,134,166

1,556,834

1,066,478

Total cash,557

Supplemental Disclosure Cash Flow Information:

Cash paid for:

Interest

$

-

$

-

$

-

Income taxes

$

39

$

-

$

271,817

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