MDJM LTD Reports 2019 Financial Results

TIANJIN,China,April 29,2020 -- MDJM LTD (Nasdaq: MDJH) (the "Company" or "MDJH"),an integrated real estate services company in China,today announced its financial results for the 12 months ended December 31,2019.

For the Year Ended December 31,

($'000,except per share data)

2019

2018

% Change

Revenue

$

5,680

$

2,408

135.8

%

Operating expenses

$

5,321

$

2,973

79.0

%

Income (loss) from operations

$

359

$

(564)

163.7

%

Operating income (loss) margin

6.3

%

-23.4

%

126.9

%

Net profit (loss) attributable to MDJH

$

453

$

(516)

187.8

%

Net profit (loss) per share

$

0.04

$

(0.05)

180.0

%

* pp: percentage points

Revenue increased by 135.8% to $5.68 million for 2019,primarily attributable to contribution from new projects acquired since 2018.

The Company sold 1,960 units of properties for an aggregate of 186,971 square meters and $612.47 million in total sales value with an average commission rate of 0.94% in 2019,compared to 620 units for an aggregate of 86,533 square meters and $273.57 million in total sales value with an average commission rate of 0.87% in 2018.

Operating expenses increased by 79.0% to $5.32 million for 2019. The increase primarily resulted from increased payroll expenses and professional fees for being a Nasdaq listed public company since January 2019.

Operating margin was 6.3% for 2019,compared to operating loss margin of 23.4% for 2018. The improvement primarily resulted from increased revenue that more than offset increased operating expenses.

Net income attributable to shareholders was $0.45 million,or earnings per share of $0.04,for 2019. This compared to net loss attributable to shareholders of $0.52 million,or net loss per share of $0.05,for 2018.

As of December 31,2019,the Company had 17 outstanding projects with total sales value of $1.11 billion and total square meters of 316,699.

"Following a setback in 2018 against the backdrop of Chinese government's tightening policies and regulations implemented in the real estate market,we made a strong comeback in 2019 with the returns of both top-line growth and profitability,thanks to increased sale volume as well as improvement in average commission rate in our primary real estate agency service business," said Mr. Siping Xu,Chairman and Chief Executive Officer of the Company.

"The Tianjin market remained our stronghold,and we made inroads into the Yangzhou,Chengdu,and Suzhou markets with each contributing 9%,5%,and 3% of total revenue,respectively,in 2019. Our efforts in continuing to diversify our business also started to pay off with the real estate consulting services business growing by 199.5% and contributing 2.7% of total revenue in 2019. We also made progress in our tourism development services initiative with the signing of framework and cooperation agreements with several local governments and third parties. Looking ahead,despite the near-term challenges brought by the COVID-19 pandemic,we are confident in our long-term prospects and strategy and look forward to another strong year in 2020," concluded,Mr. Xu.

Financial Results for the Full Year of 2019

Revenue

For the 12 months ended December 31,revenue increased by $3.27 million,or 135.8%,to $5.68 million from $2.41 million for 2018. The increase of revenue was primarily attributable to new projects acquired since 2018. During 2019,the Company facilitated sales of 1,971 square meters and RMB 4.27 billion ($612.47 million) in total sales value with an average commission rate of 0.94%,compared to completed sales of 620 units for an aggregate of 86,533 square meters and RMB 1.88 billion ($273.57 million) in total sale value with an average commission rate of 0.87% for 2018.

As of December 31,the Company had 17 outstanding projects,including six ongoing projects from existing developer clients,five from new projects from existing developer clients and six from new clients/developers. These outstanding projects have total sales value of RMB7.70 billion (or $1.11 billion) and total square meters of 316,699. If all of the current outstanding projects were to be completed,the Company's estimated revenues from such projects would be approximately $10 million based on contracted commission rates. However,since a project will normally take two to three years to be completed,and given the nature of its industry and the volatility of the market,the Company cannot be certain of the length of time each project will take to complete,or whether the projects will be completed at all.

Operating Expenses

For the Year Ended December 31,

($'000)

2019

2018

% Change

Selling expenses

$

187

$

82

127.0

%

Payroll,payroll taxes and others

3,711

2,215

67.5

%

Professional fees

634

-

100

%

Operating lease expense

185

142

30.2

%

Depreciation and amortization

15

13

20.7

%

(Reduction) provision for doubtful accounts,net

(39)

(146)

-73.4

%

Other general and administrative

629

667

-5.8

%

Total operating expenses

$

5,973

79.0

%

Selling expenses increased by $0.10 million,or 127.0%,to $0.19 million for 2019 from $0.08 million for 2018. The increase of selling expenses was in line with the increased revenue in 2019.

Payroll,payroll taxes and others increased by $1.50 million,or 67.5%,to $3.71 million for 2019 from $2.21 million for 2018. Employee compensation is tied to sales. Sales related compensation,such as bonus and commission,increased as a result of the increased revenue in 2019.

Professional fees were $0.63 million for 2019,compared to $nil for 2018. The increase in professional fees resulted from being a U.S. public traded company since January 2019. Professional fees consist of legal,U.S. GAAP audit,consulting,investors relations,and other U.S. SEC filing related fees. Professional fees incurred in 2018 were included in offering costs,which was offset with additional paid in capital received in the Company's initial public offering.

Operating lease expenses increased by $0.04 million,or 30.2%,to $0.18 million for 2019 from $0.14 million for 2018. The Company leases its offices under various non-cancelable lease agreements. As of December 31,it had one long-term lease which became effective on January 1,2019 and will be valid through December 31,2023. For other leases with lease terms of 12 months or less,the Company made an election to not recognize lease assets and lease liabilities.

Depreciation and amortization expense increased to $0.02 million for 2019 from $0.01 million for 2018. The increase resulted from new purchases of fixed assets in the amount of $0.07 million during 2019.

Reversal of allowance for doubtful accounts was $0.04 million for 2019,compared to $0.15 million for 2018.

Other general and administrative expenses decreased by $0.04 million,or 5.8%,to $0.63 million for 2019 from $0.67 million for 2018. The decrease resulted from reduced office expenses.

As a result,total operating expenses increased by $2.35 million,or 79.0%,to $5.32 million for 2019 from $2.97 million for 2018. The increase in operating expenses was primarily related to increased payroll expenses and professional fees as mentioned above.

Operating margin was 6.3% for 2019,compared to operating loss margin of 23.4% for 2018. The improvement in operating margin resulted from increased revenue that more than offset increased operating expenses.

Other Income

Total other income,including gain on disposal of asset,interest income and others,increased by $0.02 million,or 58.8%,to $0.04 million for 2019 from $0.03 million for 2018.

Income (Loss) before Income Tax

Income before income tax was $0.40 million for 2019,compared to loss before income tax of $0.54 million for 2018.

The Company paid income tax of $0.10 million in 2019,compared to $nil in 2018.

Net Income (Loss)

Net income was $0.30 million for 2019,compared to net loss of $0.54 million for 2018. After deduction of noncontrolling interest,net income attributable to shareholders was $0.45 million,for 2018.

Financial Conditions

As of December 31,the Company had cash and cash equivalents of $6.55 million,compared to $6.69 million as of December 31,2018. Account receivable was $2.16 million at December 31,compared to $1.77 million as of December 31,2018. As of December 31,the Company had current assets of $8.84 million and current liabilities of $0.69 million,leading to working capital of $8.15 million,compared to current assets,current liabilities and working capital of $8.74 million,$0.71 million and $8.03 million,as of December 31,2018.

Net cash used in operating activities was $1,501 for 2019,compared to $0.64 million for 2018. Net cash used in investing activities was $0.19 million for 2019,compared to $1,215 for 2018. Net cash provided by financing activities was $0.07 million for 2019,compare to $4.10 million for 2018. The Company received net proceeds of $4.10 million and $0.07 million from the first and second closing of its initial public offering in late 2018 and January 2019,respectively.

Recent Developments

Because of the quarantines and travel restrictions mandated by the Chinese government in response to COVID-19,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 before the COVID-19 outbreak as of April 2020 and even though it currently expects to continue the promotion and sales of real estate projects as it typically did,to the extent that COVID-19 further impacts its promotion and sale of real estate projects,its financial condition,results of operations,and cash flows could be adversely affected.

About MDJM LTD

With branch offices in Tianjin,Suzhou,and Yangzhou,MDJM provides primary real estate agency services to real estate developer clients,as well as as-needed real estate consulting and independent training services. 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 announcement contains forward-looking statements. All statements other than statements of historical fact in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties 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:

Tony Tian,CFA

Weitian Group LLC

Email: ttian@weitianco.com

Phone: +1-732-910-9692

MDJM LTD and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Years Ended December 31,

2019

2018

2017

Revenue

$

5,679,977

$

2,408,448

$

5,532,244

Operating Expenses:

Selling expenses

186,641

82,225

263,797

Payroll,710,697

2,214,975

3,067,837

Professional fees

634,372

-

-

Operating leases expenses

184,802

141,959

115,615

Depreciation and amortization

15,180

12,575

7,232

Reduction for doubtful accounts,net

(38,883)

(146,174)

194,149

Other general and administrative

628,608

667,267

293,931

Total Operating Expenses

5,321,417

2,972,827

3,942,561

Income (loss) from Operations

358,560

(564,379)

1,589,683

Other income:

Gain on disposal of asset

1,705

-

(1,213)

Gain on foreign currency exchange

12,072

-

-

Loss on disposal of subsidiary

(4,970)

-

-

Interest income

30,662

26,565

32,112

Other income (expense)

2,707

-

(57,028)

Total other income

42,176

26,565

(26,129)

Income (loss) before income tax

400,736

(537,814)

1,563,554

Income tax

(101,372)

-

(396,552)

Net income (loss)

299,364

(537,167,002

Net loss attributable to noncontrolling interest

(153,742)

(21,843)

-

Net income (loss) attributable to MDJM Ltd shareholders

$

453,106

$

(515,971)

$

1,002

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

$

0.04

$

(0.05)

$

0.11

Weighted-average shares outstanding,basic and diluted

11,640,661

10,400,408

10,380,000

Comprehensive income (loss):

Net income (loss)

$

299,364

$

(537,814)

$

1,002

Other comprehensive income (loss),net of tax:

Change in foreign currency translation adjustments

(53,156)

(170,344)

270,019

Total other comprehensive income (loss)

246,208

(708,158)

1,437,021

Comprehensive lossattributable to noncontrolling interest

(2,398)

(823)

-

Comprehensive income (loss) attributable to MDJM Ltd shareholders

$

248,606

$

(707,335)

$

1,021

MDJM LTD and Subsidiaries

Consolidated Balance Sheets

As of December 31,

2019

2018

Assets

Current Assets

Cash and cash equivalents

$

6,552,677

$

6,692,557

Accounts receivable,net of allowance for doubtful accounts $10,774 and $49,963,respectively

2,155,158

1,767,804

Other receivables

69,977

38,701

Prepaid expenses

60,020

235,642

Prepaid income tax

-

3,620

Total Current Assets

8,837,832

8,738,324

Property and equipment,net

70,154

21,302

Other Assets

Deferred tax assets

33,440

135,471

Operating lease assets,net

391,871

-

Other receivable - long term

99,532

-

TotalOther Assets

524,843

135,471

Total Assets

$

9,432,829

$

8,895,097

Liabilities and Equity

Current Liabilities:

Accounts payable and accrued liabilities

$

460,690

$

575,087

VAT and other taxes payable

107,662

137,695

Deferred income

26,429

-

Operating lease liabilities,current

91,737

-

Total Current Liabilities

686,518

712,782

Long-term operating lease liabilities

247,382

-

Total Liabilities

933,900

712,782

Equity:

Ordinary shares: 50,000,000 shares authorized,par value: $0.001 per share,11,820 and 11,621,459 shares issued and outstanding as of December 31,2019 and 2018,respectively

11,641

11,621

Additional paid in capital

6,734,681

6,664,295

Statutory reserve

262,954

232,542

Retained earnings

1,948,804

1,526,110

Accumulated other comprehensive loss

(280,345)

(229,587)

Total MDJM Ltd stockholders' equity

8,677,735

8,204,981

Noncontrolling interest

(178,806)

(22,666)

Total Liabilities and Equity

$

9,097

MDJM LTD and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31,

2019

2018

2017

Cash Flows from Operating Activities:

Net income (loss)

$

299,002

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

Depreciation and amortization

15,232

(Reduction) increase of provision for doubtful accounts

(38,149

Gain on foreign currency exchange

(12,072)

-

-

(Gain) loss on disposal of assets

(1,705)

-

1,213

Decrease in deferred tax assets

101,166

72,975

102,099

Changes in operating assets and liabilities:

(Increase) decrease in accounts receivables

(374,592)

(83,189)

516,593

(Increase) decrease in other receivables

(4,630)

41,441

103,603

Decrease (increase) in prepaid expense

120,907

(150,273)

(297,392)

Decrease (increase) in prepaid income tax

3,605

(3,762)

-

(Decrease) increase in accounts payable and accrued expenses

(107,980)

131,876

(430,286)

(Decrease) increase in VAT and other tax payable

(28,518)

18,843

(50,753)

Increase in deferred income

26,657

-

-

Net Cash (Used in) Provided by Operating Activities

(1,501)

(643,502)

1,313,460

Cash Flows from Investing Activities:

Purchase of property and equipment

(66,354)

(1,215)

(19,659)

Advance made to deconsolidated subsidiary

(127,804)

-

-

Proceeds from disposal of asset

3,330

-

-

Net Cash Used in Investing Activities

(190,828)

(1,659)

Cash Flows from Financing Activities:

Proceeds from initial public offering - net of offering costs of $26,399,$2,103,816 and $0,respectively

70,406

4,479

-

Net Cash Provided by Financing Activities

70,479

-

Effect of exchange rate changes on cash and cash equivalents

(17,957)

116,055

161,593

Net (decrease) increase in cash and cash equivalents

(139,880)

3,574,817

1,455,394

Cash and cash equivalents - beginning of the year

6,557

3,117,740

1,662,346

Cash and cash equivalents - end of the year

$

6,557

$

3,740

Supplemental Disclosure Cash Flow Information:

Cash paid for:

Interest

$

-

$

-

$

-

Income taxes

$

-

$

271,817

$

294,454

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