Roan Holdings Group Co., Ltd. Reports Full Year 2019 Financial Results

Author: Roan Holdings Group Co., Ltd. / 2023-07-23 21:54 / Source: Roan Holdings Group Co., Ltd.

Roan Holdings Group Co., Ltd. Reports Full Year 2019 Financial Results

BEIJING and HANGZHOU,China,June 27,2020 -- Roan Holdings Group Co.,Ltd. ("Roan" or the "Company") (OTC Pink Sheets: RAHGF and RONWF),a non-bank financial corporation serving individuals and micro-,small-,and medium-sized enterprises in China that also provides health management,insurance technology,healthcare,and consumer financing services to the employees of large institutions,today reported its financial results for the twelve months ended December 31,2019.

Highlights

In the fiscal year ended December 31,2019,the Company conducted its management & assessment services and factoring business as well as its financial guarantee and consulting business. Additionally,the Company decreased its direct loan business and didn't conduct or renew any loans in 2019.

The following are some key measures of the Company's businesses.

For the year ended December 31,the Company provided management and assessment services to four customers,generating revenues of $135,938. The Company's management & assessment services include asset management services and financing services.

On December 20,the Company completed acquiring a 65.0177% equity interest in Lixin Financial Holdings Group Limited ("Lixin Cayman") and its subsidiaries (collectively "Lixin"),which were engaged in financial guarantee and consulting services,to diversify its business and generate additional revenue. The Company is able to consolidate operations of Lixin Cayman effective December 20,and now operates separate financial guarantee and consulting services.

As of December 31,the amount of outstanding loans and related interests that the Company has guaranteed was approximately $35.1 million. The Company estimates the fair market value of the collateral to be approximately $61.4 million as of December 31,2019. For the period since acquiring Lixin on December 20,to December 31,the Company generated financial guarantee commission of $8,797 and consulting services relating to debt collections of $176,984.

For the year ended December 31,the Company generated interest income of $2.8 million from providing financing arrangements to its customers through the factoring program of Zhiyuan Commercial Factoring (Guangzhou) Co.,Limited ("Zhiyuan").

From 2018,the Company decreased its direct loan business and didn't conduct or renew any loans in 2019. As of December 31,the Company had direct loan receivables due from four business customers and two individual customers.

Mr. Zhigang Liu,Chief Executive Officer of Roan,commented,"2019 was a crucially meaningful year for Roan. During the period,we decreased our direct lending business and disposed of Urumqi Fenghui Direct Lending Co.,Ltd. ('Feng Hui') by terminating our related VIE agreements and removing the VIE structure,both of which we regarded as key steps in adjusting our business structure,enhancing our financial indicators,and optimizing our development strategy. At the same time,we continued our national market strategy in 2019,with our subsidiaries conducting businesses mainly in Zhejiang and Guangdong provinces and contributing more revenue and profit to the Company. At the beginning of 2019,we began a strategic cooperation with Zhejiang Lixin Enterprise Management Holding Group Co.,Ltd. ('Zhejiang Lixin') and settled the terms for a business combination. This was ultimately accomplished through a share exchange with Lixin Cayman on December 20,and had helped to significantly improve the Company's performance. We firmly believe that Lixin's advantages in product development,market share,and management will help to enhance our asset quality,competitive advantages,and market value going forward. Importantly,starting at the end of 2019,we established subsidiaries in the healthcare industry and began to cultivate long-term relationships with a variety of insurance service partners,medical service partners,and technology and big data partners to provide innovative insurance services,smart health medical services,data mining,and operations. In April 2020,we officially launched a one-stop internet insurance and health care service platform after nearly eight months of preparation and systems development. This platform aims to provide modern households with one-stop systematic 'customized insurance + health management + family doctor + home medical testing' health management service solutions."

Mr. Liu added,"'Innovative Insurance Service + Healthcare' is a new business strategy for Roan in 2020. By leveraging our existing financial services for individuals and micro-,and medium-sized enterprises,we will collaborate with our partners to develop this platform. We will also continue to promote our consumer finance business while bolstering innovative applications of technologies in health care,artificial intelligence,and blockchain within integrated medical,health management,and insurance use cases. We are confident that,through our new business strategy and cross-industry cooperation with leading companies in other fields,we will significantly boost our core competencies in innovative insurance services,fuel our growth,and generate attractive financial returns to our shareholders and partners going forward."

Full Year 2019 Financial Results

Revenues from services

Revenues from services increased by $567,652,or 793%,from $71,568 for the year ended December 31,2018,to $639,220 for the year ended December 31,2019. The increase was mainly caused by the introduction of revenues from consulting services relating to debt collection as well as the significant increase in revenues from management and assessment services.

Revenues from management and assessment services increased by $64,370,or 90%,to $135,938 for the year ended December 31,2019. The primary reason for this increase was the Company's launch of management and assessment services on December 31,and the Company's recognition of management and assessment services using a time-based measure of progress,which resulted in a majority of revenues from the contracts obtained in 2018 being recognized in the year ended December 31,2019.

Revenues from consulting services relating to debt collection were $493,779 for the year ended December 31,2019.

Revenues from consulting services relating to financial guarantee services were $9,503 for the year ended December 31,2019. Revenues from consulting services relating to financial guarantee services were generated through Lixin for the period from the closing of the acquisition of Lixin on December 20,2019.

Interest and Fees Income

Total interest and fees income,including interest and fees on direct loans,interest income from factoring business,interest income on loans due from third parties,and interest income on deposits with banks,increased by $2,832,146,or 5,588%,from $50,682 for the year ended December 31,to $2,882,828 for the year ended December 31,2019. The increase was mainly attributable to increased interest and fees income generated from the Company's factoring business,which was launched in December 2018.

Interest expenses and fees on secured loans

Interest expenses and fees on secured loans increased by $2,193,697,or 8,734%,from $25,118 for the year ended December 31,218,815 for the year ended December 31,2019. The significant increase of interest expenses and fees on secured loans was primarily driven by borrowings of secured loans of $67,258,135 in December 2018 and borrowings of $43,422,881 during the year ended December 31,leading to a one-month interest expense that was recognized for the year ended December 31,while the remaining interest expenses were recognized for the year ended December 31,2019.

All secured loans were repaid during the year ended December 31,2019.

Provision for Loan Losses

Provision for loan losses increased by $68,385,or 3%,from $2,176,216 for the year ended December 31,244,601 for the year ended December 31,2019. The increase was caused by additional "doubtful" loans rolled to "loss" loans during the year ended December 31,as compared to that of the same period ended December 31,2018.

Operating expenses

Total operating expenses increased by $73,487,or 6%,from $1,293,223 for the year ended December 31,to $1,366,710 for the year ended December 31,2019. The increase was primarily attributable to a decrease of $217,483 in fair value changes of warrant liabilities as the Company was delisted from Nasdaq in September 2019,which offset (i) a decrease of $59,803 in salaries and employee surcharges due to the resignation of employees as the Company downsized its direct loan business,and (ii) a decrease in expenses related to the Company's direct loan business.

Net income

The Company had a net income of $24,288,908 for the year ended December 31,as compared to a net loss of $94,126,307 for the year ended December 31,2018.

Financial Condition

As of December 31,the Company had cash and cash equivalents of $6,911,592,as compared to $1,301,124 as of December 31,2018.

Recent Updates

Lixin Acquisition

In January 2019,the Company acquired a 1% equity interest in Zhejiang Lixin,a subsidiary of Lixin Cayman,at a cash consideration of $427,318 (RMB 2,858,600).

On June 13,and August 23,the Company entered into a share purchase agreement ("SPA") and a supplementary to the SPA with Lixin Cayman and certain shareholders of Lixin Cayman,pursuant to which the Company would acquire 65.0177% equity interests in Lixin Cayman and its subsidiaries at a consideration of approximately $39.38 million (RMB 276.00 million),which was later readjusted to $31.09 million (RMB 217.88 million) as a result of an independent valuation report issued by a professional valuation firm on December 20,2019. Lixin Cayman is engaged in financial guarantee business,asset management,supply chain financing,and business factoring through its subsidiaries based in Zhejiang Province,China.

The transaction was closed on December 20,upon the Company's issuance of 291,795,150 Class B convertible preferred shares. These convertible preferred shares are embedded with liquidation preference and dividend preference but with no voting rights. Upon the second anniversary of the closing date,one Class B preferred share may be convertible to one ordinary share or can be redeemed at a conversion price calculated at the average closing price per share for the ninety consecutive trading days before the conversion date.

Disposition of Feng Hui

On July 31,and November 22,the Company entered into a framework agreement (the "Agreement") and a supplementary to the Agreement with Zhejiang Zhongfeng Investment Management Co.,Ltd. ("Zhongfeng" or the "Purchaser"),pursuant to which Zhongfeng agreed to acquire a 100% equity interest in Feng Hui,a variable interest entity of the Company,or acquire control over and become a primary beneficiary of Feng Hui through contractual arrangements. Feng Hui primarily provides loan facilitation services to micro-,and medium-sized enterprises in the Xinjiang Uygur Autonomous Region. On November 22,the disposition transaction was closed at a consideration of approximately $1.44 million (RMB 10.0 million) and the Company transferred control over Feng Hui to Zhongfeng. For the year ended December 31,the Company received an aggregate of $504,713 (RMB 3.5 million). On April 30,2020,the Company received an additional $0.43 million (RMB 3.0 million) from Zhongfeng.

Upon the closing of the disposition on November 22,the Company released all Feng Hui equity interests to Feng Hui's shareholders and those interests were subsequently transferred to Zhongfeng by Feng Hui's shareholders. Zhongfeng assumed all assets and obligations of Feng Hui. Upon the closing of the transaction,the Company does not bear any contractual commitment or obligation to the microcredit business or the employees of Feng Hui,nor to the Purchaser.

About Roan Holdings Group Co.,Ltd.

Founded in 2009,Roan Holdings Group Co.,Ltd. ("Roan") is a non-bank financial corporation that provides comprehensive financial services to micro-,and individuals. Roan also provides health management,insurance,and consumer financing services to the employees of large institutions. Roan has offices in Beijing and Hangzhou and subsidiaries in Hangzhou,Guangzhou,Shaoxing,Urumqi,Tianjin,and Ningbo. For more information,please visit: www.roanholdingsgroup.com

Safe Harbor Statement

This announcement contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934,as amended,and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to,among others,the consummation of the proposed transaction,and can be identified by terminology such as "may," "will," "expect," "anticipate," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. Such statements are based upon management's current expectations of the consummation of the proposed transaction,and relate to events that involve known or unknown risks,uncertainties and other factors,all of which are difficult to predict and many of which are beyond the Company's control. Further information regarding these and other risks,uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement as a result of new information,future events or otherwise,except as required under law.

IR Contact:

At the Company:

Katrina Wu

Email: xiaoqing.wu@roanholdingsgroup.com

Phone: +86-571-8662 1775

Investor Relations:

Xinran Rao

ICR Inc.

Email: ICR-TMT@icrinc.com

Phone: +1 646-224-6936

ROAN HOLDINGS GROUP CO.,LTD.

CONSOLIDATED BALANCE SHEETS

As of December 31,2019 and 2018

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

December 31,

2019

December 31,

2018

ASSETS

Current Assets

Cash and cash equivalents

6,592

1,124

Restricted cash

15,233,933

Short-term investments

8,610,796

Accounts receivable,net

3,727,017

Loan receivable due from factoring customers

64,702,803

Loan receivable due from third parties

5,952,223

2,254,784

Due from related parties

2,906

Other current assets

2,305,642

813,409

Assets of discontinued operations

26,500,293

Total Current Assets

42,744,109

95,572,413

Pledged deposits

5,597,017

Property and equipment,net

852,525

27,980

Intangible assets,net

4,876,228

44,044

Right of use assets

400,720

Other noncurrent assets

918,683

Assets of discontinued operations,noncurrent

24,093

Total Assets

55,389,282

95,668,530

LIABILITIES AND EQUITY

Current Liabilities

Secured loan payable for factoring business

64,803

Customer pledged deposits

7,176

Unearned income

114,615

Reserve for financial guarantee losses

453,489

Dividends payable

480,000

Income tax payable

1,122,155

Due to related parties

280,714

Warrant liabilities

19,938

550,800

Operating lease liabilities,current portion

106,136

Accrued expenses and other liabilities

710,865

298,116

Current liabilities of discontinued operations

55,984,465

Total Current Liabilities

3,295,088

122,016,184

Operating lease liabilities,noncurrent portion

265,797

Deferred tax liabilities

1,735,576

Total Liabilities

5,296,461

122,184

Commitments and Contingencies

Class A convertible preferred shares,no par value,unlimited shares authorized; 715,000 shares issued and outstanding as of December 31,2019 and 2018,respectively

9,527

Shareholders' Equity (Deficit)

Ordinary Share (no par value,unlimited shares authorized; 25,287,851 and 25,003 shares issued and outstanding as of December 31,respectively)

Class A convertible preferred shares,respectively

10,338,927

Class B convertible preferred shares,unlimited shares authorized; 291,150 and nil shares issued and outstanding as of December 31,respectively

31,087,732

Additional paid-in capital

3,312,189

98,036,152

Statutory reserve

658,662

6,621,063

Accumulated deficit

(12,407,304)

(136,620,068)

Accumulated other comprehensive loss

(7,906)

(4,037,404)

Total Roan Holdings Group Co.,Ltd.'s Shareholders' Equity (Deficit)

32,982,300

(36,000,257)

Noncontrolling interests

17,110,521

Total Equity (Deficit)

50,092,821

(36,181)

Total Liabilities and Equity

55,530

ROAN HOLDINGS GROUP CO.,LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the Years Ended December 31,2018 and 2017

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

For the Years Ended

December 31,

2019

2018

2017

Revenues from services

639,220

71,568

Cost of revenues

(8,080)

Net revenues of services

631,140

71,568

Commissions and fees on financial guarantee services

8,797

Provision for financial guarantee services

(5,008)

Commission and fee income on guarantee services,net

3,789

Interest and fees income

Interest and fees on direct loans

1,153

15,035

1,628,525

Interest income on loans due from third parties

34,707

Interest income from factoring business

2,782,332

35,229

Interest income on deposits with banks

64,636

418

537

Total interest and fee income

2,828

50,682

1,629,062

Interest expense

Interest expenses and fees on secured loans

(2,815)

(25,118)

Net interest income

664,013

25,564

1,062

Provision for loan losses

(2,601)

(2,216)

(565,187)

Net interest (loss) income after provision for loan losses

(1,580,588)

(2,150,652)

1,063,875

Operating (loss) income

(945,659)

(2,079,084)

1,875

Total operating expenses

Salaries and employee surcharge

(512,314)

(572,117)

(518,015)

Business taxes and surcharge

(352)

(714)

(9,879)

Other operating expenses

(1,384,907)

(1,468,738)

(1,691,387)

Changes in fair value of warrant liabilities

530,863

748,346

Total operating expenses

(1,710)

(1,223)

(2,219,281)

Loss before income taxes

(2,369)

(3,372,307)

(1,155,406)

Income tax expenses

(244,741)

(17,635)

(250,245)

Net loss from continuing operations

(2,557,110)

(3,942)

(1,405,651)

Net income (loss) from discontinued operations,net of income tax

26,846,018

(90,736,365)

(53,377,622)

Net income (loss)

24,908

(94,307)

(54,783,273)

Dividend – convertible redeemable Class A preferred share

(686,400)

Net income attributable to noncontrolling interests

(76,108)

(76)

Net income (loss) attributable to Roan Holding Group Co.,Ltd.'s shareholders

23,526,400

(94,812,783)

(55,469,673)

Other comprehensive (loss) income

Foreign currency translation adjustment

1,435,262

(29,318)

5,608,353

Reclassified to net gain from discontinued operations

2,969

4,127,231

(29,318)

5,353

Comprehensive income (loss)

28,416,139

(94,625)

(49,174,920)

Other comprehensive income attributable to noncontrolling interests

(97,733)

Dividend – convertible redeemable Class A preferred share

(686,108)

(76)

Total comprehensive income (loss) attributable to Roan Holdings Group Co.,Ltd.'s shareholders

27,555,898

(94,842,101)

(49,861,320)

Weighted average number of ordinary share outstanding

Basic and Diluted*

25,887

24,380,051

17,343,763

Earnings (Loss) per share

Net earnings (loss) per share – Basic and Diluted

0.93

(3.89)

(3.20)

Net loss per share from continuing operations - Basic and Diluted

(0.13)

(0.17)

(0.12)

Net earnings (loss) per share from discontinued operations - Basic and Diluted

1.06

(3.72)

(3.08)

* The Company reported a discontinued operation for the year ended December 31,it used net loss from continuing operations as the control number to determine whether the warrants,Class A and Class B preferred shares are anti-dilutive. Because the Company incurred a net loss from continuing operations,the number of warrants,Class A preferred shares and Class B preferred shares are excluded from the computation as the anti-dilutive effect.

ROAN HOLDINGS GROUP CO.,LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

For the Years Ended December 31,except for the number of shares)

Attributable to Roan Holdings Group Co.,Ltd.'s Shareholders

Ordinary Share

Class A Preferred

Shares

Class B Preferred

Shares

Additional

paid-in

Statutory

Retained

earnings

(Accumulated

Accumulated

other

comprehensive

(loss)

Non-

controlling

Total

Shares

Amount

Shares

Amount

Shares

Amount

capital

Reserve

Deficit)

income

interest

equity

Balance as of January1,2017

22,898,864

91,644,559

6,536,238

15,462

(9,616,439)

104,255,820

Share dividend payment to shareholders

859,953

5,332,969

5,969

Net loss

(54,273)

Dividend to shareholders

(2,630,649)

(2,649)

Transfer to statutory reserve

84,825

(84,825)

Foreign currency translation loss

5,353

Balance as of December31,2017

23,758,817

96,977,528

6,063

(41,807,285)

(4,008,086)

57,220

Issuance of ordinary shares in a private placement with two investors

769,232

247,747

Issuance and exercise of Series B Warrants

390,579

504,238

Issuance of restricted shares

370,525

315,724

Forfeiture of restricted shares

(1,150)

(9,085)

Net income (loss)

(94,383)

(94,307)

Dividend to shareholders

(686,400)

Foreign currency translation adjustments

(29,318)

Balance as of December31,2018

25,003

98,152

6,063

(136,068)

(4,404)

(36,181)

Forfeiture of restricted shares

(152)

Acquisition of a subsidiary by issuance of Class B Preferred Shares (Note 4)

291,150

31,732

16,936,604

48,024,336

Disposal of a variable interest entity (Note 5)

(94,723,963)

(5,981,661)

100,705,624

2,969

Net income

24,212,800

76,108

24,908

Reclassification of Class A Preferred Shares

715,000

9,527

Dividend to shareholders

686,400

(686,400)

Transfer to statutory reserve

19,260

(19,260)

Foreign currency translation adjustments

1,337,529

97,733

1,262

Balance as of December31,2019

25,851

715,000

10,927

291,150

31,732

3,189

658,662

(12,304)

(7,906)

17,521

50,821

ROAN HOLDINGS GROUP CO.,LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31,except for the number of shares)

For the Years Ended

December 31,

2019

2018

2017

Cash Flows from Operating Activities:

Net income (loss)

24,908

(94,307)

(54,273)

Less: Net income (loss) from discontinued operations

26,622)

Net loss from continuing operations

(2,651)

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization expenses

48,322

22,122

13,228

Amortization of right of use assets

7,176

Provision for loan losses

2,601

2,216

565,187

Provision for financial guarantee losses

5,008

Deferred tax expenses

57,674

12,139

Changes in fair value of warrant liabilities

(530,863)

(748,346)

Share-based compensation expenses

306,639

Changes in operating assets and liabilities:

Accounts receivable

(206,442)

Interest and fees receivable

(149,013)

(108,158)

11,580

Other current assets

(289,694)

(308,635)

(41,803)

Advances from customers

(6,702)

Income tax payable

273,589

9,410

(579,719)

Accrued expenses and other liabilities

28,875

475,966

104,088

Net Cash Used in Operating Activities from Continuing Operations

(1,074,579)

(1,564,728)

(1,320,951)

Net Cash (Used in) Provided by Operating Activities from Discontinued Operations

(26,564)

(634,314)

11,771

Net Cash (Used in) Provided by Operating Activities

(1,101,143)

(2,199,042)

9,897,820

Cash Flows from Investing Activities:

Loans disbursement to factoring customers

(43,881)

(67,135)

(7,640,381)

Repayment of loans from factoring customers

107,833,488

4,838,119

Loans disbursement to third parties

(166,256)

Repayment of loans from third parties

1,133,564

Purchases of property and equipment

(833)

Acquisition of a subsidiary

(427,318)

Acquisition of cash from acquired subsidiary

21,442,122

Proceeds from disposal of discontinued operations

504,713

Net Cash Provided by (Used in) Investing Activities from Continuing Operations

85,929,291

(66,290,827)

(2,802,262)

Net Cash Provided by (Used in) Investing Activities from Discontinued Operations

35,765

(301,276)

(12,779,689)

Net Cash Provided by (Used in) Investing Activities

85,965,056

(66,103)

(15,581,951)

Cash Flows from Financing Activities:

Proceeds from private placement,net of issuance costs

1,190,000

Proceeds from private placements,deposited in escrow account

500,000

Proceeds from exercise of Series B Warrants

391

Repayments of convertible promissory note

(650,000)

Payments of dividends

(873,600)

Borrowing from a related party

279,020

Proceeds from secured loans

43,881

67,135

Repayment of secured loans

(107,488)

Net Cash (Used in) Provided by Financing Activities from Continuing Operations

(64,131,587)

68,948,526

(1,523,600)

Net Cash (Used in) Provided by Financing Activities from Discontinued Operations

(7,251)

(30,985)

4,068,058

Net Cash (Used in) Provided by Financing Activities

(64,138,838)

68,917,541

2,544,458

Effect of exchange rate changes on cash,cash equivalents,and restricted cash in banks

119,326

(5,150)

126,361

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

20,844,401

121,246

(3,013,312)

Cash,and restricted cash in banks at beginning of year

1,124

1,179,878

4,190

Cash,and restricted cash in banks at end of year

22,145,525

1,124

1,878

Supplemental Cash Flow Information

Cash paid for interest expense

Cash paid for income tax

Noncash investing activities

Acquisition of a subsidiary by issuance of Class B Preferred Shares

31,732

Receivable from disposal of discontinued operations

940,829

Right of use assets obtained in exchange for operating lease obligations

615,000

The following table provides a reconciliation of cash,cash equivalents and restricted cash reported within the statement of financial position that sum to the total of the same amounts shown in the consolidated statements of cash flows:

December 31,

2018

Cash and cash equivalents

6,124

Restricted cash in banks

15,933

Total Assets

22,124