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LiNiu Technology Group Announces First Half 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 since
April 2017 through Guangzhou LiNiu Network Technology Co., Ltd. ("LiNiu
Network"), today announced unaudited financial results for the first
half year ended June 30, 2017. All currency amounts are stated in United
States dollars.

First Half 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 temporarily
    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 half of
    2017 was $5.7 million, or $0.48 net loss per share (basic and
    diluted), compared to net loss attributable to ordinary shareholders
    of $129.3 million, or $12.29 net loss per share (basic and diluted),
    for the six months ended June 30, 2016.
  • Non-GAAP loss attributable to ordinary shareholders, which is
    operating loss before amortization of intangible assets, was $5.7
    million, or $0.48 per share (basic and diluted), for the six months
    ended June 30, 2017, as compared to non-GAAP loss of $24.0 million,
    or $2.27 per share (basic and diluted), for the six months ended June
    30, 2016.

Business Developments in the First Half of 2017

  • In March 2017, the Company completed the acquisition of 51% of
    Jia-Heng Industrial Ltd., the holding company of LiNiu Network, an
    electronic B2C, C2C and O2O trading platform focused on the Chinese
    agricultural industry. The operational results of Jia-Heng and its
    subsidiaries, including LiNiu Network, 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 more than 20,000 suppliers
    registered and over 100,000 products currently available through the
    platform. The LiNiu Network generates revenue through commissions.

"During the first half of 2017, we concentrated on launching the LiNiu
Network and creating awareness for agricultural customers and suppliers
to utilize our new platform," said Mr. Wang Shun Yang, co-Chief
Executive Officer of the Company. "As we move into 2018, we plan to
further ramp up our efforts to drive customer awareness and traffic by
establishing new relationships with larger online platforms. We also
plan to work more closely with our partners at Shou Guang Agriculture
Logistic Park (SGALP) and People's Insurance Company of China Limited
(PICC) to make progress in improving Chinese agriculture and generate
increased commissions."

First Half 2017 Results

Net loss attributable to ordinary shareholders of $5.7 million for the
six months ended June 30, 2017 improved compared to net loss of $129.3
million for the same period of 2016, primarily due to the following
factors:

  • a significant decrease in commissions to junket agents as a result of
    minimal revenue in the gaming operation in the first half of 2017;
  • a significant decrease in amortization of intangible assets ($8.1
    million) due to the full impairment of intangible assets ($97.3
    million) in the prior-year period; and
  • the lower selling, general and administrative expenses for the six
    months ended June 30, 2017 primarily due to no longer paying
    management fees to Pak Si and lower salaries as a result of 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 June 30, 2017 was HKD312 million
(approximately $41 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 in the Sang Lung case. Currently, the bankruptcy process has been
stopped in the stage of liquidation. The appeal is still in process and
there has been no outcome as of today. 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).

Effective August 29, 2017, the Company adopted a one-for-six reverse
share split. The reverse share split reduced the number of outstanding
ordinary shares from approximately 74.9 million to approximately 12.5
million.

On September 13, 2017, the Company received a letter from NASDAQ noting
the Company has regained compliance with Listing Rule 5550(a)(2), which
requires the Company to maintain a minimum closing bid price of $1.00
per share. NASDAQ staff made the determination after LINU's bid price
closed above $1.00 per share for the prior 10 consecutive business days.
Accordingly, NASDAQ will continue to list LINU's securities on The
NASDAQ Capital Market and considers the matter closed.

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)

     
 

For the six months ended
June 30, 2017

For the six months ended
June 30, 2016

Revenue from VIP Gaming Operations $ 1,410 $   28,500,970
Revenue from Trading Platform   43       -  
Total Revenues   1,453       28,500,970  
 
Expenses
- Commission to Junket Agents 1,464 22,760,102
- Selling, General and Administrative Expenses 5,899,274 7,973,559
- Special Rolling Tax - 205,836
- Amortization of Intangible Assets - 8,136,369
- Impairment of Intangible Assets - 97,279,517
- Gain on Settlement of Line of Credit Payable (694,071 ) -
- Bad Debts – Other Assets 997,617 -
- Restructuring Charges 97,900 -
- Bad Debts Recovery – Marker Receivable (190,398 ) 21,461,434
   
Total Expenses   6,111,786       157,816,817  
 
Operating Loss (6,110,333 ) (129,315,847 )
 
Non-Controlling Interest   408,173       -  
 
Net Loss Attributable to Ordinary Shareholders   (5,702,160 )     (129,315,847 )
 
Other Comprehensive Loss
Foreign Currency
- Translation Adjustment   (133,443 )     (374,176 )
Total Comprehensive Loss $ (5,835,903 ) $   (129,690,023 )
 

Net Loss Per Share*

Basic $ (0.48 ) $   (12.29 )
Diluted $ (0.48 ) $   (12.29 )

Weighted Average Shares Outstanding*

Basic   11,938,211       10,519,456  
Diluted   11,938,211       10,519,456  
 

* all shares and per share information has been retroactively
adjusted to reflect one-for-six reverse share split.

 

 

 

LINIU TECHNOLOGY GROUP

(f/k/a IAO KUN GROUP HOLDING COMPANY LIMITED)

CONSOLIDATED BALANCE SHEETS
     
 
June 30, 2017 December 31, 2016
(unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 128,244 $ 73,305
Accounts Receivable, Net - 669,767
Prepaid Expenses and Other Assets   517,445     1,832,965  
Total Current Assets 645,689 2,576,037
 

Markers Receivable (net of allowance for doubtful accounts of
$87,274,369 and
$100,198,392 at June 30, 2017 and December
31, 2016, respectively)

53,688,556 74,765,307
 
Goodwill 134,371,460

-

Property and Equipment (net of accumulated depreciation of $41,916
and $185,604 at June
30, 2017 and December 31, 2016,
respectively)

  206,769     135,920  
TOTAL ASSETS $ 188,912,474   $ 77,477,264  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Lines of Credit Payable $ 41,661,075 $ 45,417,314
Accrued Expenses 10,263,562 3,621,743
Bao Li Gaming Acquisition-Purchase Price Obligation - 14,228,500
Loan Payable – related parties   4,021,180     12,078,017  
Total Current Liabilities 55,945,817 75,345,574
 
LONG-TERM LIABILITIES
Jia-Heng Acquisition – contingent payable, net of current portion 63,050,948 -
   
Total Liabilities   118,996,765     75,345,574  
 
COMMITMENTS AND CONTINGENCIES
 
SHAREHOLDERS' EQUITY
Preferred Shares, $0.0001 par value Authorized 1,150,000 shares;
none issued
- -

Ordinary Shares, $0.0006* par value
Authorized 83,333,333*
shares; 12,491,789* and 10,411,122* issued and outstanding at June
30,
2017 and December 31, 2016, respectively.

7,493 6,245
Additional Paid-in Capital 143,286,797 133,436,640
Accumulated Deficit (137,323,355 ) (131,621,195 )
Accumulated Other Comprehensive Income   198,306     310,000  
Total Ordinary Shareholders' Equity 6,169,241 2,131,690
Non-Controlling Interest   63,746,468     -  
Total Shareholders' Equity   69,915,709     2,131,690  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 188,912,474   $ 77,477,264  

* all shares and per share information has been retroactively adjusted
to reflect one-for-six reverse share split.

       

Cash flow information (in thousands) (unaudited)

 

For the Six
Months Ended
June 30, 2017

For the Six
Months Ended
June 30, 2016

 
Net cash (used in) provided by operating activities $ (401 ) $ 1,421
Net cash from investing activities 2 2
Net cash provided by financing activities   455     1,184
Net increase in cash and cash equivalents $ 56   $ 2,607
 
 

Non-GAAP Financial Measures

The Company's calculation of Non-GAAP income (operating income before
amortization of intangible assets and impairment of intangible assets)
and Non-GAAP EPS differs from EPS based on net income because it does
not include amortization of intangible assets and impairment 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 Six Months
Ended June 30,
2017

   

For the Six Months
Ended June 30,
2016

 
Net loss attributable to ordinary shareholders $ (5,702,160 ) $ (129,315,847 )
 
Amortization of intangible assets

-

8,136,369
 
Impairment of intangible assets  

-

  97,279,517  
 

Non-GAAP loss attributable to ordinary shareholders
(before
amortization of intangible assets and impairment
of
intangible assets)

$ (5,702,160 ) $ (23,899,961 )
 
Weighted Average Shares Outstanding
 
Basic   11,938,211     10,519,456  
Diluted   11,938,211     10,519,456  
 
         

For the Six Months Ended
June 30, 2017

For the Six Months Ended
June 30, 2016

   
Basic

Fully Diluted

Basic

Fully Diluted

 

Net loss per share attributable to ordinary
shareholders

$ (0.48 ) $ (0.48 ) $ (12.29 ) $ (12.29 )
 
Amortization of intangible assets - - 0.77 0.77
 
Impairment of intangible assets   -     -     9.25     9.25  
 

Non-GAAP Loss per share attributable to ordinary
shareholders
(before amortization of intangible
assets and impairment of
intangible assets)

$ (0.48 ) $ (0.48 ) $ (2.27 ) $ (2.27 )
 

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