XINIYA(US:DXF)2022-05-01 16:00Corporate Structure and Operations - The company completed a divestiture and acquisition on December 28, 2017, divesting Xiniya Holdings Limited for RMB 228 million (US$ 34.59 million) and acquiring True Silver for the same amount, along with the issuance of 772,283,308 ordinary shares at RMB 1.00 (US$ 0.15) per share [240]. - True Silver operates under a VIE structure, consolidating 80% of the financial results of Chutian, the company's microfinance lending business in Hubei Province, China [241]. - The VIE, Hubei Chutian Microfinance Co., Ltd., is the primary revenue generator for the company, and any deconsolidation of the VIE could materially affect operations and the value of securities [252]. - The company operates through a series of contractual arrangements with Chutian, which may not be as effective as direct ownership, posing risks to control over the VIE [252]. - The company has maintained cash management policies that dictate the purpose, amount, and procedure of cash transfers among itself, the VIE, and non-VIE subsidiaries [263]. - The company primarily engaged in providing loan facilities to micro-sized enterprises, SMEs, sole proprietors, and individuals in Hubei province, China [359]. - The company operates through a VIE structure, consolidating 80% of the financial results of Chutian, which holds all requisite licenses for microfinance lending [358]. Financial Performance - Total interest income on loans for the year ended December 31, 2021, was $20,627, while total interest expense was $(21,826), resulting in a net interest loss of $(1,199) [255]. - Credit impairment losses amounted to $(119,078) for the year ended December 31, 2021, leading to a net interest loss after impairment of $(120,277) [255]. - Non-interest and other income was $387 for the year ended December 31, 2021, while total operating costs and expenses were $(8,182), resulting in a net loss of $(128,072) [255]. - For the year ended December 31, 2020, interest income on loans was $105,570, with a net interest income after impairment of $28,093 [256]. - The company’s results are influenced by China's economic conditions, regulatory changes, and the complexity of the non-banking financial industry [361]. - Interest income on loans decreased by RMB85.0 million ($13.2 million) or 80.5% from RMB105.6 million in 2020 to RMB20.6 million ($3.2 million) in 2021, primarily due to the suspension of new loans since the second half of 2019 [392]. - Credit impairment losses increased significantly by RMB63.8 million ($10.0 million) or 115.5% from RMB55.3 million ($8.6 million) in 2020 to RMB119.1 million ($18.7 million) in 2021, reflecting the challenging economic environment for SMEs [396]. - Net profit decreased to RMB(128.1) million ($19.9 million) in 2021 from RMB19.9 million ($3.1 million) in 2020, indicating a substantial loss attributable to increased credit impairment losses [391]. Regulatory Environment - As of the date of the annual report, the company and its subsidiaries have received all necessary licenses and approvals to conduct business in China, with long-term validity for all permissions held [248]. - The company has not received any regulatory objections regarding securities offerings in the United States, but there remains uncertainty about future regulatory requirements that could impact operations [250]. - The PRC Measures for the Security Review of Foreign Investment require foreign investors acquiring PRC companies in military-related industries to undergo a security review before the acquisition [290]. - The CSRC has not issued any inquiries or sanctions regarding offshore offerings as of the date of the annual report [291]. - Companies with personal data of over 1 million users must apply for cybersecurity approval when seeking listings abroad due to national security risks [293]. - The Draft Rules Regarding Overseas Listing may impose additional compliance requirements for companies seeking to list overseas [296]. - The establishment of new online microfinance companies has been suspended as per the regulatory notice issued on November 21, 2017 [304]. - Non-compliance with regulatory requirements may result in penalties, including warnings, restrictions on operations, or revocation of operating permits [321]. Market Conditions and Strategy - The company suspended offering loans in the second half of 2019 due to severe financial restraints and is exploring new opportunities based on metaverse-related technologies [269]. - The company intends to improve its cash position by collecting existing loan and interest receivables while exploring new business opportunities in various sectors, including medical health and blockchain [278]. - SMEs account for over 99% of China's total enterprises and nearly 60% of the GDP, highlighting the significant demand for financing in this sector [270]. - The number of microfinance lending companies in Hubei Province decreased from 275 in September 2019 to 246 by December 2021, indicating a consolidation in the industry [287]. Corporate Governance and Management - The board of directors underwent changes with the resignation of two directors and the appointment of two new directors in April 2021, followed by another resignation and appointment in August 2021 [434][435]. - Ricky Qizhi Wei has served as the Chairman and CEO since December 2017, focusing on the development of China's micro-credit industry [437]. - The company was recognized as one of the "Top 100 Most Competitive Micro-credit Companies in China" for three consecutive years, emphasizing its commitment to customer-friendly services [438]. Financial Management and Liquidity - The company experienced severe liquidity issues, exacerbated by COVID-19, affecting its ability to meet obligations [414]. - The company's total debt obligations amounted to RMB 161,569,000, all due within one year, with a weighted average annual interest rate of 12.7% [432]. - The company plans to actively seek equity financing from private placements to meet its liabilities and continue operations [415]. - The provision for loan losses is a noncash item that reflects management's assessment of future loan loss risks, impacting financial condition and results of operations [362].