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LiNiu Technology Group Announces First Quarter 2017 Financial Results

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LiNiu Technology Group (f/k/a Iao Kun Group Holding Company Limited)
("LINU" or the "Company") (NASDAQ:LINU), which launched its electronic
trading platform focused on the Chinese agricultural industry in April
2017 through Guangzhou LiNiu Network Technology Co., Ltd. ("Guangzhou
LiNiu"), today announced unaudited and unreviewed financial results for
the first quarter ended March 31, 2017. All currency amounts are stated
in United States dollars.

First Quarter 2017 Highlights

  • After the Company closed four VIP gaming rooms at the Sands Cotai
    Central Casino, Galaxy Macau, StarWorld and Le Royal Arc in Macau in
    2016, the Company maintained minimal operations and temporary
    relocated the Macau VIP gaming operation to Altira Complex, which
    provides remuneration at a predetermined fixed rate commission.
  • Net loss attributable to ordinary shareholders for the first quarter
    of 2017 was $0.4 million, or $0.01 per share (basic and diluted),
    compared to net loss attributable to ordinary shareholders of $3.5
    million, or $0.06 per share (basic and diluted), for the prior-year
    period. During the first quarter of 2017, the Company recorded a
    reversal of bad debts of $0.2 million.
  • Non-GAAP loss attributable to ordinary shareholders, which is
    operating loss before amortization of intangible assets, was $0.4
    million, or $0.01 per share (basic and diluted), for the three months
    ended March 31, 2017, as compared to non-GAAP income of $0.5 million,
    or $0.01 per share (basic and diluted), for the three months ended
    March 31, 2016.

Business Developments in 2017

  • In March 2017, the Company completed the acquisition of 51% of
    Jia-Heng Industrial Ltd., the holding company of Guangzhou LiNiu
    Network Technology Co. Ltd. ("Guangzhou LiNiu"), a software technology
    development company. The operational results of Jia-Heng and its
    subsidiaries, including Guangzhou LiNiu, have been consolidated in the
    financial statements of LINU since March 2017.
  • The Company launched the LiNiu Network, an electronic B2C, C2C and O2O
    trading platform focused on the Chinese agricultural industry in early
    April 2017. Since its launch, the site has seen daily traffic of over
    50,000 visitors, with more than 130,000 users, more than 20,000
    suppliers registered and over 80,000 products currently sold through
    the platform. The Guangzhou LiNiu generates revenue through
    commissions, advertising, management fees and guarantee deposits. In
    May 2017, Guangzhou LiNiu started generating revenue from commissions
    on transactions despite having yet to promote and advertise the site.

"The first quarter was marked by the official transformation of the
Company toward its new strategy of using technology to create solutions
for the vast Chinese agricultural industry," said Mr. Wang Shun Yang,
co-Chief Executive Officer of LiNiu Technology Group. "Since launching
the LiNiu Network last month, we have been seeing consistent traffic and
believe the platform has been well received by both our customers and
the suppliers. We have started to generate revenue from the site and
plan to launch a marketing campaign to generate greater awareness of the
LiNiu Network and our ability to more efficiently improve Chinese
agriculture in the months ahead."

First Quarter 2017 Results

Net loss attributable to ordinary shareholders of $0.4 million for the
three months ended March 31, 2017 improved compared to net loss of $3.5
million for the same period of 2016, primarily due to a significant
decrease in commission to junket agents as a result of minimal revenue
in the first quarter of 2017. The lower selling, general and
administrative expenses for the three months ended March 31, 2017 was
primarily due to no longer paying management fees to Pak Si and lower
salaries due to the closure of four VIP rooms in 2016.

On December 12, 2016, the first civil court of the Macao Special
Administrative Region Court of First Instance publicly announced that
Sang Heng and Sang Lung were summoned by such court to respond to a
request for bankruptcy filed by Galaxy Casino in connection with its
desire to liquidate Sang Heng and Sang Lung. The outstanding balance for
Sang Heng and Seng Lung as of December 31, 2016 was HKD312 million
(approximately $40.4 million) and is included in lines of credit payable
in the Consolidated Balance Sheet. The lines of credit for Sang Heng and
Sang Lung are guaranteed by Mr. Lam or Mr. Vong and are secured by their
personal checks and a deposit paid by Mr. Lam. Additionally, as a result
of the default, the Company is subject to monthly interest of 1.5% and
potential losses and expenses caused by the default.

On March 13, 2017, the court ruled in favor of Sang Heng (the defendant)
in the case. However, on the same day, the court ruled in favor of the
plaintiff in the Sang Lung case. The Company's management, upon receipt
of further legal advice, filed an appeal to the Macau First Instance
Court. Currently, the bankruptcy process will be stopped in the stage of
liquidation. However, if the appeal is not successful, the plaintiff may
claim the relevant credits against the debtors of Sang Lung which may
equal the entire default of lines of credit in the amount of
approximately $26.9 million (HKD 203.8 million).

On February 28, 2017, management entered into an agreement with the
shareholders - Mr. Lam Man Pou and Mr. Vong Hong Kun (Mr. Lam and
Mr.Vong) – to settle the shareholders' loan by delivering certain
markers receivable. Of an approximate $11.7 million shareholders' loan,
$11.6 million was offset by taking over certain markers receivable with
a net carrying amount of approximately $9.6 million (gross amount was
$14.8 million) as of February 28, 2017. The difference (approximately
$2.0 million) between the shareholders' loan and the net carrying amount
of such markers receivable would be treated as a capital transaction and
recorded as additional paid-in capital contributed by shareholders as of
February 28, 2017.

On February 28, 2017, management entered into another agreement with Mr.
Lou Kan Kuong (Mr. Lou) to settle the purchase price obligation by
taking over certain markers receivable. An approximate $14.2 million
purchase price obligation was offset by delivering certain markers
receivable with a net carrying amount of approximately $10.1 million
(gross amount was $17.2 million) as of February 2017. The difference
(approximately $4.1 million) between the purchase price obligation and
the net carrying amount of such markers receivable would be treated as a
capital transaction and recorded as additional paid-in capital
contributed by shareholders.

Both parties agreed and the agreement became effective on February 28,
2017. Mr. Lam, Mr. Vong and Mr. Lou will assume all the un-collection
risk on assigned markers receivable.

About LiNiu Technology Group

LiNiu Technology Group (NASDAQ:LINU) recently launched the LiNiu
Network, a Business to Customer ("B2C"), Customer to Customer ("C2C")
and Online to Offline ("O2O") electronic trading platform focused on the
Chinese agricultural industry. The Company also currently participates
in the promotion of VIP gaming at the Altira Macau. For more information
on the LiNiu Network, please visit www.liniuyang.com.

Forward-Looking Statements

This press release includes forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995 that involve risks and uncertainties. Forward-looking
statements are statements that are not historical facts. Such
forward-looking statements, based upon the current beliefs and
expectations of the Company's management, are subject to risks and
uncertainties, which could cause actual results to differ from the
forward-looking statements. Factors that could cause actual results to
differ materially from management's current expectations include but not
limited to those risks and uncertainties relating to future business
development; ability to maintain the reputation and brand; privacy and
regulatory concerns; competition; security breaches; the continued
growth of the e-commerce market in China; and fluctuations in general
economic and business conditions in China and assumptions underlying or
related to any of the foregoing. The Company expressly disclaims any
obligation or undertaking to release publicly any updates or revisions
to any forward-looking statements contained herein to reflect any change
in our expectations or any changes in events, conditions or
circumstances on which any such statement is based, except as required
by law. Investors and potential investors should consult all of the
information set forth herein and should also refer to the risk factors
set forth in the Company's Annual Report on Form 20-F filed in April
2017, and other reports filed or to be filed from time-to-time with
the Securities and Exchange Commission.

     
LINIU TECHNOLOGY GROUP
(f/k/a IAO KUN GROUP HOLDING COMPANY LIMITED)
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(unaudited and unreviewed)
 
For the three months ended For the three months ended
March 31, 2017 March 31, 2016
Revenue from VIP Gaming Operations $ 1,410 $ 17,922,185
Total Revenues   1,410   17,922,185
 
Expenses
- Commission to Junket Agents 1,464 13,724,981
- Selling, General and Administrative Expenses 696,702 3,501,190
- Special Rolling Tax - 119,829
- Amortization of Intangible Assets - 4,071,738
- Restructuring charges 26,993 -
- Bad debts (207,464) -
   
Total Expenses   517,695   21,417,738
Operating loss (516,285) (3,495,553)
Non-controlling interest   69,651   -
Net Loss Attributable to Ordinary Shareholders   (446,634)   (3,495,553)
 
Other Comprehensive Loss
Foreign Currency
- Translation Adjustment   (57,680)   (184,414)
Total Comprehensive Loss $ (504,314) $ (3,679,967)
 
Net Loss Per Share
Basic $ (0.01) $ (0.06)
Diluted $ (0.01) $ (0.06)
Weighted Average Shares Outstanding
Basic   67,501,680   63,103,781
Diluted   67,501,680   63,103,781
 
 
LINIU TECHNOLOGY GROUP
(f/k/a IAO KUN GROUP HOLDING COMPANY LIMITED)
CONSOLIDATED BALANCE SHEETS
(unaudited and unreviewed)
     
 
March 31, 2017 December 31, 2016
 
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 132,439 $ 73,305
Accounts Receivable, Net 759,828 669,767
Prepaid Expenses and Other Assets   1,597,644   1,832,965
Total Current Assets 2,489,911 2,576,037
 
Markers Receivable (net of allowance for doubtful accounts of
$100,198,392 and $0 at December 31, 2016 and 2015, respectively)
54,085,867 74,765,307
Goodwill 134,212,574 -
Property and Equipment (net of accumulated depreciation of $178,989
and $169,798 at December 31, 2016 and 2015, respectively)
  273,329   135,920
TOTAL ASSETS $ 191,061,681 $ 77,477,264
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Lines of Credit Payable $ 45,320,884 $ 45,417,314
Accrued Expenses 4,083,552 3,621,743
Bao Li Gaming Acquisition-Purchase Price Obligation - 14,228,500
Jia-Heng Acquisition – contingent payable 787,124 -
Loan Payable, current – related parties   3,179,362   12,078,017
Total Current Liabilities 53,370,922 75,345,574
 
LONG-TERM LIABILITIES
Jia-Heng Acquisition – contingent payable, net of current portion 62,182,792 -
   
Total Liabilities   115,553,714   75,345,574
 
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS' EQUITY
Preferred Shares, $0.0001 par value Authorized 1,150,000 shares;
none issued
- -

Ordinary Shares, $0.0001 par value, Authorized 500,000,000 shares;
74,791,794 and 62,453,774 issued and outstanding at March 31, 2017
and December 31, 2016, respectively.

7,493 6,245
Additional Paid-in Capital 143,286,797 133,436,640
Retained Deficit (132,067,829) (131,621,195)
Accumulated Other Comprehensive Income   252,320   310,000
Total Ordinary Shareholders' Equity 11,478,781 2,131,690
Non-Controlling Interest   64,029,186   -
Total Shareholders' Equity   75,507,967   2,131,690
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 191,061,681 $ 77,477,264
 

Cash flow information (in thousands) (unaudited and unreviewed)

     
For the Three For the Three
Months Ended Months Ended
March 31, 2017 March 31, 2016
 
Net cash provided by operating activities $ 429 $ 4,893
Net cash from investing activities 18 -
Net cash (used in) from financing activities   (387)   683
Net increase in cash and cash equivalents $ 60 $ 5,576
 

Non-GAAP Financial Measures

The Company's calculation of Non-GAAP income (operating income before
amortization of intangible assets) and Non-GAAP EPS differs from EPS
based on net income because it does not include amortization of
intangible assets. The Company uses this information internally in
evaluating its operations and believes this information is important to
investors because it provides users of the Company's financial
information with additional useful information in evaluating operating
performance for the periods and is more consistently comparable to the
prior periods. Notwithstanding the foregoing, Non-GAAP income and EPS
should not be considered an alternative to, or more meaningful than, net
income and EPS as determined in accordance with GAAP. The following is a
reconciliation of the Company's net income to Non-GAAP income and GAAP
EPS to its Non-GAAP EPS:

   
For the Three For the Three
Months Months
Ended March 31, Ended March 31,
2017 2016
 
Net loss attributable to ordinary shareholders $ (446,634) $ (3,495,553)
 
Amortization of intangible assets   -   4,071,738
 
Non-GAAP (loss) income attributable to ordinary shareholders (before
amortization of intangible assets)
$ (446,634) $ 576,185
 
Weighted Average Shares Outstanding
 
Basic   67,501,680   63,103,781
Diluted   67,501,680   63,103,781
 
   

For the Three Months Ended
March 31, 2017

For the Three Months
Ended March 31, 2016

Basic   Fully Diluted Basic   Fully Diluted
 
Net loss per share attributable to ordinary shareholders $ (0.01) $ (0.01) $ (0.06) $ (0.06)
 
Amortization of intangible assets   -   -   0.07   0.07
 
Non-GAAP (Loss) Income per share attributable to ordinary
shareholders (before amortization of intangible assets)
$ (0.01) $ (0.01) $ 0.01 $ 0.01
 

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