FINCERA INC. (Form: 20-F, Received: 05/01/2017 17:33:28)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For fiscal year ended December 31, 2016

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report______________

For the transition period from __________ to ___________

Commission file number 001-34477

FINCERA INC.

(Exact name of the Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

27/F, Kai Yuan Finance Center, No. 5, East Main Street

Shijiazhuang, Hebei

People’s Republic of China

Tel: +86 311 8382 7688

Fax: +86 311 8381 9636

(Address of principal executive offices)

Yong Hui Li

27/F, Kai Yuan Finance Center, No. 5, East Main Street

Shijiazhuang, Hebei

People’s Republic of China

Tel: +86 311 8382 7688

Fax: +86 311 8381 9636

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of each exchange on which registered
Ordinary Shares, par value $0.001 per share		OTC QB

Securities registered or to be registered pursuant to Section 12(g) of the Act:

N/A

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the Issuer’s classes of capital or ordinary shares as of the close of the period covered by the annual report: 23,561,949 ordinary shares, par value $0.001 per share, as of December 31, 2016.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.

☐ Large Accelerated filer

☐ Non-accelerated filer

☒ Accelerated filer

☐ Emerging growth company

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

☒ US GAAP	☐ International Financial	☐ Other
	Reporting Standards as issued by
	the International Accounting
	Standards Board

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

Table of Contents

		Page
PART I		3
ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	3
ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	3
ITEM 3.	KEY INFORMATION	3
ITEM 4.	INFORMATION ON OUR COMPANY	22
ITEM 4A.	UNRESOLVED STAFF COMMENTS	36
ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	36
ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	51
ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	61
ITEM 8.	FINANCIAL INFORMATION	62
ITEM 9.	THE OFFER AND LISTING	62
ITEM 10.	ADDITIONAL INFORMATION	64
ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	73
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	73

PART II		74
ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	74
ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	74
ITEM 15.	CONTROLS AND PROCEDURES	74
ITEM 16.	[RESERVED]	76
ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	76
ITEM 16B.	CODE OF ETHICS	76
ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	76
ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	77
ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	77
ITEM 16F.	CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT	77
ITEM 16G.	CORPORATE GOVERNANCE	77
ITEM 16H.	MINE SAFETY DISCLOSURE	77

PART III		78
ITEM 17.	FINANCIAL STATEMENTS	78
ITEM 18.	FINANCIAL STATEMENTS	78
ITEM 19.	EXHIBITS	78

CERTAIN INFORMATION

Unless otherwise indicated and except where the context otherwise requires, in this Annual Report on Form 20-F references to:

●

“Fincera”, “we,” “us”, “our” or “Company” refer to Fincera Inc., its subsidiaries and its consolidated variable interest entities;

●

“ACG” refers to AutoChina Group Inc. (together with its subsidiaries and affiliated entities);

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“Auto Kaiyuan Companies” refers to Kaiyuan Logistics, Kaiyuan Auto Trade Co., Ltd. (“Kaiyuan Auto Trade”), and Hebei Xuhua Trading Co., Ltd.;

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“PRC” or “China” refer to the People’s Republic of China;

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“dollars” or “$” refer to the legal currency of the United States; and

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“Renminbi” or “RMB” refer to the legal currency of China.

FORWARD-LOOKING STATEMENTS

We believe that some of the information in this Annual Report on Form 20-F constitutes forward-looking statements within the definition of the Private Securities Litigation Reform Act of 1995. You can identify these statements by forward-looking words such as “may,” “expect,” “anticipate,” “contemplate,” “believe,” “estimate,” “intends,” and “continue” or similar words. You should read statements that contain these words carefully because they discuss future expectations, contain projections of future results of operations or financial condition or state other “forward-looking” information.

We believe it is important to communicate our expectations to our security holders. However, there may be events in the future that we are not able to predict accurately or over which we have no control. The risk factors and cautionary language included in this Annual Report on Form 20-F provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by us in such forward-looking statements, including, among other things:

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changing principles of generally accepted accounting principles;

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outcomes of government reviews, inquiries, investigations and related litigation;

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continued compliance with government regulations;

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legislation or regulatory environments, requirements or changes adversely affecting the financial industry in China;

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fluctuations in customer demand;

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management of rapid growth;

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general economic conditions;

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changes in government policy;

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the fluctuations in sales of commercial vehicles in China;

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China’s overall economic conditions and local market economic conditions;

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our business strategy and plans;

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our ability to expand through strategic acquisitions, the establishment of new locations, and the introduction of new products and services;

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our ability to successfully integrate recent acquisitions;

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credit risk affecting our revenue and profitability, including our ability to manage the default risk of customers;

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geopolitical events.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report.

All forward-looking statements included herein attributable to us are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we do not undertake any obligation to update these forward-looking statements to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events.

This Annual Report should be read in conjunction with our audited financial statements and the accompanying notes thereto, which are included in Item 18 of this Annual Report.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not required.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not required.

ITEM 3. KEY INFORMATION

A. Selected financial data

The following selected consolidated financial data as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014 have been derived from the audited consolidated financial statements of Fincera included in this Annual Report beginning on page F-1. The following summary consolidated financial data as of December 31, 2013 and 2012, and for the years ended December 31, 2013 and 2012, have been derived from the audited consolidated financial statements of Fincera. Such financial data is not included in this Annual Report. The consolidated financial data for all periods presented is retrospectively adjusted to reflect the acquisition of Eastern Eagle International Ltd. (“Eastern Eagle”) and its subsidiaries, which were under common control with us both immediately before and after the acquisition (refer to Note 2 to the Consolidated Financial Statements). Prior period amounts also have been adjusted to exclude discontinued operations (refer to Note 4 to the Consolidated Financial Statements). This information is only a summary and should be read together with the consolidated financial statements, the related notes, the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Fincera” and other financial information included in this Annual Report.

The consolidated financial statements are prepared and presented in accordance with generally accepted accounting principles in the United States, or “U.S. GAAP.” The results of operations of Fincera in any period may not necessarily be indicative of the results that may be expected for any future period. See “Risk Factors” included elsewhere in this Annual Report.

FINCERA INC. AND SUBSIDIARIES

Selected Consolidated Financial Data

(In thousands of U.S. Dollars, except per share amounts)

	As of December 31,
	2016	2015	2014	2013	2012

Balance Sheet Data –
Cash and cash equivalents	$ 104,123	$ 72,262	$ 28,112	$ 45,577	$ 75,929
Restricted cash	$ 6,129	$ 157	$ 988	$ 1,244	$ 160
Total current assets	$ 798,024	$ 666,820	$ 475,218	$ 499,721	$ 498,564
Total assets	$ 1,030,997	$ 924,423	$ 808,604	$ 761,921	$ 545,073
Total current liabilities	$ 879,610	$ 550,039	$ 382,216	$ 441,036	$ 363,418
Total liabilities	$ 1,008,357	$ 671,050	$ 538,668	$ 489,093	$ 363,418
Total stockholders’ equity	$ 22,640	$ 253,373	$ 269,936	$ 272,828	$ 181,655

	For the Years Ended December 31,
	2016	2015	2014	2013	2012

Statement of Income Data –

Income	$ 132,028	$ 72,773	$ 20,023	$ 5,301	$ —

Income (loss) from continuing operations before income taxes	3,290	(12,295 )	(36,649 )	(29,976 )	—

Income tax provision (benefit)	1,286	(2,863 )	(7,309 )	(3,674 )	—

Income (loss) from continuing operations	2,004	(9,432 )	(29,340 )	(26,302 )	—

Income from discontinued operations, net of taxes	165	8,205	26,488	27,441	22,031

Net income (loss) attributable to shareholders	$ 2,169	$ (1,227 )	$ (2,852 )	$ 1,139	$ 22,031

Earnings (loss) per share –

Basic
Continuing operations	$ 0.08	$ (0.40 )	$ (1.24 )	$ (1.12 )	$ —
Discontinued operations	0.01	0.35	1.12	1.17	0.94
	$ 0.09	$ (0.05 )	$ (0.12 )	$ 0.05	$ 0.94
Diluted
Continuing operations	$ 0.08	$ (0.40 )	$ (1.24 )	$ (1.12 )	$ —
Discontinued operations	0.01	0.35	1.12	1.17	0.94
	$ 0.09	$ (0.05 )	$ (0.12 )	$ 0.05	$ 0.94

B. Capitalization and Indebtedness

Not required.

C. Reasons for the Offer and Use of Proceeds

Not required.

D. Risk Factors

An investment in our securities involves risk. The discussion of risks related to our business contained in this Annual Report on Form 20-F comprises material risks of which we are aware. If any of the events or developments described actually occurs, our business, financial condition or results of operations would likely suffer. The discussion of risks related to our business contained in this Annual Report on Form 20-F also includes forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.”

You should carefully consider the following risk factors, together with all of the other information included in this Annual Report on Form 20-F.

Risks Relating to our Business

We have recently made significant changes to our business model, and our new model may not be successful.

We have undergone a strategic shift which involves growing our new internet-based businesses (launched in 2014 and 2015) and ceasing our legacy commercial vehicle sales, leasing and support business. There is no guarantee that our new businesses will be successful, profitable or provide an equal or greater return on investment as compared to the businesses we are winding down.

Our changing business model, limited operating history and the new and evolving nature of our industry makes evaluating our future prospects difficult.

China’s internet-based financial services industry is relatively new and may not develop as expected. Its regulatory framework is also evolving and may remain uncertain for the foreseeable future.

Our first two internet-based businesses, the CeraVest lending platform and the CeraPay payments platform, were launched at the end of 2014. Since then we have launched three ecommerce platforms: in October 2015 we launched TruShip, in March 2016 we launched AutoChekk and in July 2016 we launched PingPing (for a description of these platforms please see “Item 4. Information on our Company – B. Business Overview – Internet-based Businesses – Ecommerce). We are also in the process of developing and launching additional internet-based businesses. Our new businesses have a limited operating history. Therefore, it is difficult to effectively assess our future prospects. There are many risks and challenges we are subject to including, but not limited to:

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Transitioning to new business models;

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Navigating an evolving regulatory environment;

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achieving and maintaining our profitability and margins;

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acquiring and retaining customers;

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attracting, training and retaining qualified personnel;

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broadening our product offering;

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maintaining adequate control over our costs and expenses;

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maintaining the security of our platforms and the confidentiality of the information provided and utilized across our platforms;

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managing credit risk in our portfolio of loans;

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responding to competitive and changing market conditions.

If we are unsuccessful in addressing any of the above risks, our business may be materially and adversely affected.

If we fail to adequately assess, monitor and control the credit risks of our customers, we could experience an increase in credit loss.

We are subject to the credit risk of our customers. We use various methods to screen potential customers and establish appropriate credit limits, but these methods cannot eliminate all potential credit risks and may not always prevent us from approving customer applications that are not credit worthy or are fraudulently completed. Changes in our industry and customer demand may result in periodic increases to customer credit limits and spending and, as a result, could lead to increased credit losses. We may also fail to detect changes to the credit risk of customers over time. Further, during a declining economic environment, we experience increased customer defaults and preference claims by bankrupt customers. If we fail to adequately manage our credit risks, our bad debt expense could be significantly higher than historic levels and adversely affect our business, operating results and financial condition.

Significant defaults by financing customers could materially and adversely affect our business and results of operations.

We are subject to credit risk associated with potential loan defaults. If a significant number of customers fail to make payments when due, we may not be able to fully recover the outstanding principal of loans we make, which could significantly affect our profitability.

A security breach or malicious attack could damage our reputation, expose us to the risks of litigation and liability, disrupt our business or otherwise harm our results of operations.

In the normal course of business, we collect, process and retain sensitive and confidential customer information. Despite the security measures we have in place, which includes performing security scans, penetration testing and server activity monitoring, our facilities and systems, and those of third-party service providers, could be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human errors or other similar events. Any security breach or malicious attack involving the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us or by third-party service providers, could damage our reputation, expose us to the risks of litigation and liability, disrupt our business or otherwise harm our results of operations.

The laws and regulations governing the internet-based finance industry in China are developing and evolving and subject to changes. If our practice is deemed to violate any PRC laws or regulations, we could be forced to change our business practices or be subject to penalties.

Due to the relatively short history of the internet finance industry in China, the regulatory framework governing our industry is still developing. On July 18, 2015 the People’s Bank of China, together with nine other PRC regulatory agencies, jointly issued a series of policy measures applicable to the industry titled the Guidelines on Promoting the Healthy Development of Internet Finance, or the Guidelines. The Guidelines introduced formally for the first time the regulatory framework and some basic principles for administering the industry in China. The Guidelines call for active government support of China’s internet finance industry and clarify the division of responsibility among regulatory agencies. The Guidelines specify that the China Banking Regulatory Commission, or the CBRC, will have primary regulatory responsibility for the online peer-to-peer lending service industry in China while the People’s Bank of China (“PBOC”) will oversee the online payment businesses. The Guidelines only set out the basic principles for promoting and administering the internet-based finance industry, and were not accompanied by any implementing rules. The Guidelines instead urge the relevant regulatory agencies to adopt implementing rules at the appropriate time.

On December 28, 2015, the PBOC issued the final rules on online payments for third party payment platforms. There are three main areas covered by the rules: 1) strict know your customer (“KYC”) checks to support anti-money laundering and counter-terrorism efforts; 2) limits on daily transaction volume to force payment platforms to focus on providing small e-commerce transaction services; and 3) tiered regulation for platforms based on a government rating system instead of a blanket approach. The final online payment rules took effect on July 1, 2016. Although our CeraPay product offers online payment processing services, we are not a licensed third party payment service provider. Therefore, it is unclear whether the PBOC rules on online payments apply to us. We continue to evaluate the need to modify our business practices to conform to the final regulations. Doing so may adversely affect our ability to attract, retain or profitability service customers and therefore have a material adverse effect on our business.

On August 24, 2016 the CBRC together with three other PRC regulatory agencies jointly issued temporary rules for regulating the online lending businesses in China (the “Temporary Rules”). As previously communicated in the Guidelines, the rules state that online lending platforms are designated as information intermediaries for borrowers and lenders, and should not participate in the transaction in any other way. The official preface to the rules states that the main purpose of the regulations is to promote risk management and establish ground rules to limit the prevalence of unsound practices and illegal activity in the industry. The draft rules ordered platforms to seek bank custody services for customer funds and also set forth a list of 13 prohibited activities:

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Use the platform for self-financing or financing of related parties

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Directly or indirectly accept and manage lender funds

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Provide guarantees to lenders or promise guaranteed returns on principal and interest

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Beyond the approved internet, telecom, and other electronic channels, advertise or recommend specific loan investments to lenders through physical locations managed by the platform or third parties authorized by the platform

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Directly make loans to borrowers, unless stated otherwise by applicable laws and regulations

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Structure loans into investment products with liquidity timing that differs from the original loan term

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Sell self-managed wealth management or other financial products to accumulate funds or broker bank wealth management products, mutual funds, insurance annuities, or trust products and other financial products

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Conduct securitization like businesses or facilitate the secondary sale and transfer of packaged assets, securitized assets, trust products, or fund interests

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Collaborate with other investment or brokerage businesses to bundle, sell or broker investment products, unless stated otherwise by applicable laws and regulations

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Provide false loan information or exaggerate return expectations; conceal investment risk; use biased language or other fraudulent methods to engage in false advertising or marketing; fabricate and disseminate false or incomplete information to damage the business reputation of another or to mislead borrowers or lenders

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Facilitate loans for the purpose of making investments in the stock market, futures contracts, structured products or other high-risk investments

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Provide equity crowdfunding services

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Other activities forbidden by applicable laws and regulations

In addition to the prohibited activities, borrowers are subject to borrowing limits on a single platform as well as across multiple platforms. Under the temporary rules, natural persons may only carry a loan balance of up to RMB 200,000 on a single platform and no more than RMB 1 million across multiple platforms. While legal representatives of organizations and other legal entities may only borrow up to RMB 1 million on a single platform and no more than RMB 5 million across multiple platforms.

The Temporary Rules granted a 12-month transition period during which platforms can work toward full compliance as more detailed measures and guidelines are communicated by local financial bureaus tasked with enforcement. Our online lending platform is registered as a business in Shijiazhuang, Hebei; currently the province has not issued its own guidelines for online lenders operating in the region.

Following the release of the regulations for online lending, on Feb 22, 2017, the CBRC issued guidelines on fund custody services for online lending businesses to offer further details on bank custody requirement for lending platforms. These guidelines mandated that lending platforms must employ third party fund custody services from commercial banks in order to prevent unauthorized use of customer funds by the platform. The regulations protected banks by declaring that custodian banks are not liable for any fraudulent activity or investment losses from defaults that occur on lending platforms. Custodian banks are responsible for facilitating and authenticating the custody account opening process and any transactions that involve the customer funds in custody. Lending platforms may only designate a single commercial bank to provide the custody services. These guidelines granted a 6-month compliance deadline which coincidently falls on about the same day as the online lending regulations compliance deadline. We are currently in preliminary discussions with several Chinese commercial banks regarding custody services. If we are unable to secure a fund custodian by the regulatory deadline we may be subject to disciplinary action or fines from the local regulators.

We have determined that we will need to modify our business practices to conform to the regulations issued by the CBRC and may be required to make further modifications depending on guidance from local regulators in Hebei. Doing so may adversely affect our ability to attract, retain or profitability service customers and therefore have a material adverse effect on our business.

As of the date of this filing, we have not been subject to any material fines or other penalties under any PRC laws or regulations including those governing the peer-to-peer lending service industry or online payments industry in China. Although regulations to date do not set out the liabilities that will be imposed on the service providers who fail to comply with the principles and requirements contained thereunder, nor do other applicable rules, laws and regulations contain specific liability provisions applicable to us. However, if our practice is deemed to violate any rules, laws or regulations, we may face injunctions, including orders to cease illegal activities, and may be exposed to other penalties as determined by the relevant government authorities as well. If such situations occur, our business, financial condition and prospects would be materially and adversely affected. In addition, given the evolving regulatory environment in which we operate, we cannot rule out the possibility that the PRC government will institute a licensing regime covering our industry. If such a licensing regime were introduced, we cannot assure you that we would be able to obtain any newly required license in a timely manner, or at all, which could materially and adversely affect our business and impede our ability to continue our operations. We currently do not hold any licenses or permits related to online payments or online lending.

The internet-based finance industry in China is becoming increasingly competitive and such increasing competition may limit our growth.

The internet-based finance industry in China is intensely competitive and evolving rapidly. Although we primarily focus on the transportation industry vertical, in which we have many years of experience operating, there are a large number of broader internet-based financial product offerings and e-commerce platforms that may compete with our products and may be provided by competitors that are larger and more established than us. With respect to lending competition, we primarily compete with offline boutique financing providers and in some cases internet-based financing providers. With respect to investors, we primarily compete with other investment products and asset classes, such as equities, bonds, investment trust products, bank savings accounts, real estate and alternative asset classes. If we are unable to compete effectively, our business and results of operations could be harmed. In addition, if we begin lending to other industries, we will face more competition in those markets from more established lenders.

New competition may also reduce our growth prospects or level of profitability. Competitors may also attempt to copy or replicate our business model. This could have an adverse effect on our business.

We have incurred net losses in the past and the new internet-based business may incur net losses in the future.

Our revenues of legacy commercial vehicle sales, leasing and support business have declined as a result of our strategic shift towards internet-based businesses. We cannot assure you that our new internet-based businesses will be able to generate sufficient revenues to generate net income in the future.

Fraudulent activity on our internet-based financial product platforms could negatively impact our operating results, brand and reputation and cause the use of our products to decrease.

We are subject to the risk of fraudulent activity on our internet-based platforms, primarily from prospective borrowers. Borrowers could use fraudulent means to procure credit that they would otherwise not be extended. Our resources, technologies and fraud detection tools may be insufficient to accurately detect and prevent such fraud from occurring. Significant increases in fraudulent activity could negatively impact our brand and reputation, reduce the volume of transactions facilitated through our platform and lead us to take additional steps to reduce fraud risk, which could increase our costs. High profile fraudulent activity could even lead to regulatory intervention, and may divert our management’s attention and cause us to incur additional expenses and costs. Although we have not experienced any material business or reputational harm as a result of fraudulent activities in the past, we cannot rule out the possibility that any of the foregoing may occur causing harm to our business or reputation in the future. If any of the foregoing were to occur, our results of operations and financial conditions could be materially and adversely affected.

Content displayed on our ecommerce websites by merchants may be found objectionable by PRC regulatory authorities and may subject us to penalties and other administrative actions.

The PRC government has adopted regulations governing internet access and the distribution of information over the internet. Under these regulations, Internet content providers and Internet publishers are prohibited from posting or displaying over the Internet any content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, fraudulent or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide internet content or other licenses, the closure of the concerned websites and reputational harm. The website operator may also be held liable for the content displayed on or linked to its website that is subject to censorship. If we are unable to control and screen out inappropriate content posted by merchants on our ecommerce sites, then our ecommerce sites may be subject to penalties and other administrative actions.

We could be subject to allegations and lawsuits claiming that items listed on our ecommerce websites by merchants are pirated, counterfeit or illegal.

Goods and services made available for sale by merchants on our ecommerce platforms could be subject to allegations that they infringe third-party copyrights, trademarks, patents or other intellectual property rights. If we are unable to prevent counterfeiting and infringement of intellectual property, we could be subject to penalties, administrative actions and suffer damage to our reputation and brand.

Misconduct, errors and failure to function by our employees and third-party service providers could harm our business and reputation.

We are exposed to many types of operational risks, including the risk of misconduct and errors by our employees and third-party service providers. Our business depends on our employees and third-party service providers to interact with potential borrowers and investors, process large numbers of transactions and support the loan collection process, all of which involve the use and disclosure of personal information. We could be materially adversely affected if transactions were redirected, misappropriated or otherwise improperly executed, if personal information was disclosed to unintended recipients or if an operational breakdown or failure in the processing of transactions occurred, whether as a result of human error, purposeful sabotage or fraudulent manipulation of our operations or systems. In addition, the manner in which we store and use certain personal information and interact with borrowers and investors through our internet-based finance platforms is governed by various PRC laws. It is not always possible to identify and deter misconduct or errors by employees or third-party service providers, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses. If any of our employees or third-party service providers take, convert or misuse funds, documents or data or fail to follow protocol when interacting with borrowers and investors, we could be liable for damages and subject to regulatory actions and penalties. We could also be perceived to have facilitated or participated in the illegal misappropriation of funds, documents or data, or the failure to follow protocol, and therefore be subject to civil or criminal liability.

Furthermore, as we rely on certain third-party service providers, such as third-party payment platforms and custodian banks, to conduct our business, if these third-party service providers fail to function properly, we cannot assure you that we will be able to find an alternative in a timely and cost-efficient manner or at all. Any of these occurrences could result in our diminished ability to operate our business, potential liability to borrowers and investors, inability to attract borrowers and investors, reputational damage, regulatory intervention and financial harm, which could negatively impact our business, financial condition and results of operations.

Increases in fees incurred by third-party service providers could adversely affect our profitability.

We rely on certain third-party service providers, such as third-party payment platforms, custodian banks and cloud infrastructure providers, to conduct our business. If these third-party service providers were to increase the fees that they charge us, our profitability could be adversely affected. Furthermore, we may not be able offset any increase in expenses incurred. We could also incur additional expenses to find other suitable third-party service providers.

A severe or prolonged downturn in the Chinese or global economy could materially reduce our revenues.

Any prolonged slowdown in the Chinese or global economy may have a negative impact on our business, results of operations and financial condition. In particular, general economic factors and conditions in China or worldwide, including the general interest rate environment and unemployment rates, may affect borrower willingness to seek loans and investor ability and desire to invest in loans. Economic conditions in China are sensitive to global economic conditions. The global financial markets have experienced significant disruptions since 2008 and the United States, Europe and other economies have experienced periods of recession. The recovery from the lows of 2008 and 2009 has been uneven and there are new challenges, including the escalation of the European sovereign debt crisis from 2011 and the slowdown of China’s economic growth since 2012, which may continue. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. There have also been concerns over unrest in Ukraine, North Korea, the Middle East and Africa, which have resulted in volatility in financial and other markets, as well as concerns about the economic effect of the tensions in the relationship between China and surrounding Asian countries. If present Chinese and global economic uncertainties persist, many of our investors may delay or reduce their investment in the loans facilitated through our platform.

Adverse economic conditions could also reduce the number of qualified borrowers seeking loans on our CeraVest platform, as well as their ability to make payments. Should any of these situations occur, the amount of loans facilitated through CeraVest and our net revenues will decline, and our business and financial conditions will be negatively impacted. Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.

Our operations depend on the performance of the internet infrastructure and fixed telecommunications networks in China.

Almost all access to the internet in China is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology, or the MIIT. We primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity through local telecommunications lines and internet data centers to host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with China’s internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our platform. We cannot assure you that the internet infrastructure and the fixed telecommunications networks in China will be able to support the demands associated with the continued growth in internet usage.

In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and internet services rise significantly, our results of operations may be adversely affected. Furthermore, if internet access fees or other charges to internet users increase, our user traffic may decline and our business may be harmed.

Any significant disruption in service on our platform or in our computer systems, including events beyond our control, could prevent us from processing payments or posting loans on our marketplace, reduce the attractiveness of our online products and result in a loss of users.

In the event of an outage affecting our internet-based businesses and physical data loss, our ability to perform our servicing obligations, process payments, process applications or make loans available to investors would be materially and adversely affected. The satisfactory performance, reliability and availability of our platforms and our underlying network infrastructure are critical to our operations, customer service, reputation and our ability to retain existing and attract new borrowers and investors. Much of our system hardware is hosted in a leased facility located in Beijing that is maintained and serviced by our IT Staff. We also periodically make backups to servers located at a separate facility also located in Beijing. Some internal systems are hosted on servers at our headquarters in Shijiazhuang, which would also disrupt our operations if affected. Our operations depend on our ability to protect our systems against damage or interruption from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm our systems, criminal acts and similar events. If there is a lapse in service or damage to our leased Beijing facilities or our offices in Shijiazhuang, we could experience interruptions in our service as well as delays and additional expense in arranging new facilities.

Any interruptions or delays in our service, whether as a result of third-party error, our error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with our borrowers and investors and our reputation. Additionally, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage. These factors could prevent us from processing or posting payments on loans, damage our brand and reputation, divert our employees’ attention, subject us to liability and cause borrowers and investors to abandon our marketplace, any of which could adversely affect our business, financial condition and results of operations.

Our internet-based businesses and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.

Our internet-based businesses and internal systems rely on software that is highly technical and complex. For example, our CeraVest and CeraPay platforms and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely has contained, and may now or in the future contain, undetected errors or bugs. Some errors may only be discovered after the code has been released for external or internal use. Errors or other design defects within the software on which we rely may result in a negative experience for our customers, delay introductions of new features or enhancements, result in errors or compromise our ability to protect customer data or our intellectual property. Any errors, bugs or defects discovered in the software on which we rely could result in harm to our reputation, loss of customers or liability for damages, any of which could adversely affect our business, results of operations and financial conditions.

Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.

We believe our success depends on the efforts and talent of our employees, including risk management, software engineering, financial and marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for highly skilled technical, risk management and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.

In addition, we invest significant time and expenses in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services and our ability to serve borrowers and investors could diminish, resulting in a material adverse effect to our business.

Increases in labor costs in the PRC may adversely affect our profitability.

The economy in China has experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected to continue to increase. In addition, we are required by PRC laws and regulations to pay various statutory employee benefits, including pension, housing fund, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance to designated government agencies for the benefit of our employees. The relevant government agencies may examine whether an employer has made adequate payments to the statutory employee benefits, and those employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. We expect that our labor costs, including wages and employee benefits, will continue to increase. Unless we are able to control our labor costs or pass on these increased labor costs to our users by increasing the fees of our services, our financial condition and results of operations may be adversely affected.

If we fail to promote and maintain our brand in an effective and cost-efficient way, our ability to grow our business may be impaired.

We believe that developing and maintaining awareness of our brand effectively is critical to attracting new and retaining existing borrowers and investors to our marketplace. Successful promotion of our brand and our ability to attract qualified borrowers and sufficient investors depend largely on the effectiveness of our marketing efforts and the success of the channels we use to promote our marketplace. Our efforts to build our brand have caused us to incur significant expenses, and it is likely that our future marketing efforts will require us to incur significant additional expenses. These efforts may not result in increased revenues in the immediate future or at all and, even if they do, any increases in revenues may not offset the expenses incurred. If we fail to successfully promote and maintain our brand while incurring substantial expenses, our results of operations and financial condition would be adversely affected, which may impair our ability to grow our business.

Any harm to our brand or reputation or any damage to the reputation of the online finance industry may materially and adversely affect our business and results of operations.

Enhancing the recognition and reputation of our brand is critical to our business and competitiveness. Factors that are vital to this objective include but are not limited to our ability to:

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maintain the quality and reliability of our platforms;

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provide borrowers and investors with a superior experience in our marketplace;

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enhance and improve our credit assessment and decision-making models;

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effectively manage and resolve borrower and investor complaints; and

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effectively protect personal information and privacy of borrowers and investors.

Any malicious or innocent negative allegation made by the media or other parties about our company, including but not limited to our management, business, compliance with law, financial conditions or prospects, whether with merit or not, could severely hurt our reputation and harm our business and operating results. As the market for online finance in China is new and the regulatory framework for this market is also evolving, negative publicity about this industry has and may arise from time to time. Negative publicity about China’s online consumer finance marketplace industry in general may also have a negative impact on our reputation, regardless of whether we have engaged in any inappropriate activities.

In addition, certain factors that may adversely affect our reputation are beyond our control. Negative publicity about our partners, outsourced service providers or other counterparties and any failure by them to adequately protect the information of borrowers and investors, to comply with applicable laws and regulations or to otherwise meet required quality and service standards could harm our reputation. Furthermore, any negative development in the online finance industry, such as bankruptcies or failures of other finance marketplaces, and especially a large number of such bankruptcies or failures, or negative perception of the industry as a whole, such as that arises from any failure of other finance marketplaces to detect or prevent money laundering or other illegal activities, even if factually incorrect or based on isolated incidents, could compromise our image, undermine the trust and credibility we have established and impose a negative impact on our ability to attract new borrowers and investors. Negative developments in the online finance industry, such as widespread borrower defaults, fraudulent behavior and/or the closure of other online consumer finance marketplaces, may also lead to tightened regulatory scrutiny of the sector and limit the scope of permissible business activities that may be conducted by online consumer finance marketplaces like us. If any of the foregoing takes place, our business and results of operations could be materially and adversely affected.

Our reputation may be harmed if information supplied by borrowers is inaccurate, misleading or incomplete, including if the borrowers use the loan proceeds for purposes other than as originally provided.

Borrowers supply a variety of information to us before we grant them a loan. Although we take steps to verify the information we receive from borrowers, it is possible that we are unable to detect all instances where a borrower provides false or misleading information. Although we also take steps to ensure a borrower uses loan proceeds for specified purposes, it is possible that we are unable to detect all instances where a borrower may use loan proceeds for other purposes that may involve increased risk than as originally provided.

We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.

We regard our trademarks, domain names, know-how, proprietary technologies and similar intellectual property as critical to our success, and we rely on a combination of intellectual property laws and contractual arrangements, including confidentiality, invention assignment and non-compete agreements with our employees and others to protect our proprietary rights.

It is often difficult to register, maintain and enforce intellectual property rights in China. Statutory laws and regulations are subject to judicial interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Confidentiality, invention assignment and non-compete agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China. Preventing any unauthorized use of our intellectual property is difficult and costly and the steps we take may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. To the extent that our employees or consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related know-how and inventions. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.

We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate trademarks, patents, copyrights, know-how or other intellectual property rights held by third parties. We may be from time to time in the future subject to legal proceedings and claims relating to the intellectual property rights of others. In addition, there may be third-party trademarks, patents, copyrights, know-how or other intellectual property rights that are infringed by our products, services or other aspects of our business without our awareness. Holders of such intellectual property rights may seek to enforce such intellectual property rights against us in China, the United States or other jurisdictions. If any third-party infringement claims are brought against us, we may be forced to divert management’s time and other resources from our business and operations to defend against these claims, regardless of their merits.

Additionally, the application and interpretation of China’s intellectual property right laws and the procedures and standards for granting trademarks, patents, copyrights, know-how or other intellectual property rights in China are still evolving and are uncertain, and we cannot assure you that PRC courts or regulatory authorities would agree with our analysis. If we were found to have violated the intellectual property rights of others, we may be subject to liability for our infringement activities or may be prohibited from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives of our own. As a result, our business and results of operations may be materially and adversely affected.

Store closings result in unexpected costs that could result in write downs and expenses relating to the closings.

From time to time, in the ordinary course of our business, we may close certain underperforming office branches, generally based on considerations of branch profitability, competition, strategic factors and other considerations. Closing an office branch could subject us to costs, including the write-down of leasehold improvements, equipment, furniture and fixtures. In addition, we could remain liable for future lease obligations.

The loss of any key members of the management team may impair our ability to identify and secure new contracts with customers or otherwise manage our business effectively.

Our success depends, in part, on the continued contributions of our senior management. In particular, Mr. Yong Hui Li, our Chief Executive Officer, has been appointed by the Board of Directors to oversee and supervise the strategic direction and overall performance of Fincera.

Fincera relies on its senior management to manage its business successfully. In addition, the relationships and reputation that members of our management team have established and maintained with our customers contribute to our ability to maintain good customer relations, which is important to the direct selling strategy that we adopt. Employment contracts entered into between us and our senior management cannot prevent our senior management from terminating their employment, and the death, disability or resignation of Mr. Yong Hui Li or any other member of our senior management team may impair our ability to maintain business growth and identify and develop new business opportunities or otherwise to manage our business effectively.

We rely on our information technology, billing and credit control systems, and any problems with these systems could interrupt our operations, resulting in reduced cash flow.

Fincera’s business cannot be managed effectively without its integrated information technology system. Accordingly, we run various “real time” integrated information technology management systems for our financing business.

In addition, sophisticated billing and credit control systems are critical to our ability to increase revenue streams, avoid revenue loss and potential credit problems, and bill customers in a proper and timely manner. If adequate billing and credit control systems and programs are unavailable, or if upgrades are delayed or not introduced in a timely manner, or if we are unable to integrate such systems and software programs into our billing and credit systems, we may experience delayed billing which may negatively affect our cash flow and the results of operations.

In case of a failure of our data storage system, we may lose critical operational or billing data or important email correspondence with our customers and suppliers. Any such data stored in the core data center may be lost if there is a lapse or failure of the disaster recovery system in backing up these data, or if the periodic offline backup is insufficient in frequency or scope, which may result in reduced cash flow and reduce revenues.

Adverse economic conditions in Shijiazhuang, China that negatively impact the demand for office space and hotel accommodations may result in lower occupancy and rental rates for our property lease and management business, which would adversely affect its results of operations.

Generally speaking, economic growth and employment levels in a local market are important factors in determining the success of a local property lease and management business. Since we only lease office space and manage hotel operations in one building that is located in Shijiazhuang, China, the economic conditions of this city are likely to be important factors in determining the occupancy levels and rental rates that our property lease and management business is able to achieve. Therefore, any deterioration in the economic conditions of Shijiazhuang may adversely affect the results of operations of our property lease and management business.

We face considerable competition in the leasing market and may be unable to renew existing leases or re-let space on terms similar to the existing leases, or we may spend significant capital in our efforts to renew and re-let space, which may adversely affect our results of operations.

In addition to seeking to increase our average occupancy by leasing current vacant space, we also concentrate our leasing efforts on renewing existing leases. Because we compete with a number of other developers, owners and operators of office and office-oriented, mixed-use properties, we may be unable to renew leases with our existing customers and, if our current customers do not renew their leases, we may be unable to re-let the space to new customers. To the extent that we are able to renew existing leases or re-let such space to new customers, heightened competition resulting from adverse market conditions may require us to utilize rent concessions and tenant improvements to a greater extent than we have historically. Further, changes in space utilization by our customers due to technology, economic conditions and business culture also affect the occupancy of our properties. As a result, customers may seek to downsize by leasing less space from us upon any renewal.

If our competitors offer space at rental rates below current market rates or below the rental rates we currently charge our customers, we may lose existing and potential customers, and we may be pressured to reduce our rental rates below those we currently charge in order to retain customers upon expiration of their existing leases. Even if our customers renew their leases or we are able to re-let the space, the terms and other costs of renewal or re-letting, including the cost of required renovations, increased tenant improvement allowances, leasing commissions, reduced rental rates and other potential concessions, may be less favorable than the terms of our current leases and could require significant capital expenditures. From time to time, we may also agree to modify the terms of existing leases to incentivize customers to renew their leases. If we are unable to renew leases or re-let space in a reasonable time, or if our rental rates decline or our tenant improvement costs, leasing commissions or other costs increase, our financial condition and results of operations of the property lease and management business could be materially adversely affected.

Bankruptcy or insolvency of tenants may decrease our revenue, net income and available cash.

The bankruptcy or insolvency of a major tenant could cause us to suffer lower revenues and operational difficulties, including leasing the remainder of the property. As a result, the bankruptcy or insolvency of a major tenant could result in decreased revenue, net income and funds available to pay our indebtedness.

We may not be successful in integrating or operating our recently acquired hotel business.

In August 2016 we entered into the hotel business with our acquisition of Eastern Eagle. The profitability of this business depends on our ability to effectively manage and integrate the acquired business into our existing operations. In addition, the performance of the hotel business may be affected by local economic conditions and competition, among other factors, which may have adverse effects on occupancy rates and on our ability to generate income from hotel operations.

Fincera’s ability to pay dividends and utilize cash resources of its subsidiaries is dependent upon the earnings of, and distributions by, Fincera’s subsidiaries and jointly-controlled enterprises, which could result in Fincera having little if any cash available for dividends.

Fincera is a holding company with substantially all of its business operations conducted through its subsidiaries. Fincera paid a special cash dividend in the amount of $0.25 per ordinary share in February 2012. Fincera does not currently intend to pay dividends in the near future. However, If Fincera did decide to pay dividends, Fincera’s ability to make future dividend payments would depend upon the receipt of dividends or distributions from its subsidiaries. The ability of its subsidiaries to pay dividends or other distributions may be subject to their earnings, financial position, cash requirements and availability, applicable laws and regulations and to restrictions on making payments to Fincera contained in financing or other agreements. These restrictions could reduce the amount of dividends or other distributions that Fincera receives from its subsidiaries, which could restrict its ability to fund its business operations and to pay dividends to its shareholders. Fincera’s future declaration of dividends may or may not reflect its historical declarations of dividends and will be at the absolute discretion of the Board of Directors.

Operating Fincera’s internet-based financial services requires a large amount of capital and its growth may require additional capital that may not be available on favorable terms or at all, which could limit our ability to continue our operations.

To the extent that the loans we extend to customers as part of our internet-based businesses are not fully funded by investors on our CeraVest platform, we must find a way to fund the shortfall ourselves. We have, in the past, entered into loan agreements in order to raise additional capital. Although we believe that our current cash, other loan facilities and financing arrangement with related parties will be sufficient to meet our present and reasonably anticipated cash needs, it may, in the future, require additional cash resources due to changed business conditions, implementation of our strategy to expand our branch network or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our shareholders. Our existing debt service obligations do not have any operating and financial covenants that would restrict our operations, however, the incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by Fincera to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

A significant portion of our working capital is funded through loans from related parties of our Chairman and CEO, Mr. Yong Hui Li, some of which may be called by the lenders at any time, which could materially and adversely affect Fincera’s liquidity and Fincera’s ability to fund and expand its business.

As of December 31, 2016, we had outstanding borrowings from related parties of our Chairman and Chief Executive officer, Mr. Yong Hui Li, of approximately $307.0 million. These borrowings are interest bearing and for various terms, and some are callable at any time by the lenders. The lenders have not indicated to us if there is a maximum amount they are willing to lend to us or that they will not call the loans for repayment. In the event such lenders determine to call these loans we will have to repay the loans from our cash reserves or financing provided by third-party financial institutions. There can be no assurance that we will have sufficient cash reserves or that we could secure additional financing from third parties on favorable terms or at all. If cash reserves or suitable financing were not available, we would have to divert working capital from growing our commercial leasing business, and we would not be able to expand our commercial leasing business as quickly as expected.

We may have difficulty adjusting our existing offerings to customers, including introducing new products and services, which could reduce our profits and growth.

As we have done in the past, we plan to continue adjusting our existing offerings to customers and to introduce new products and services such as our CeraVest and CeraPay businesses. Any inability to successfully modify our offerings or introduce new products and services that meet the demands of our customers could result in reduced profits and growth.

We do not have any business insurance coverage.

Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies. Currently, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured business disruptions may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our results of operations and financial condition.

Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.

We are required under PRC laws and regulations to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. We have not made adequate employee benefit payments in the past and we may be required to make up the contributions for these plans as well as to pay late fees and fines. If we are subject to late fees or fines in relation to the underpaid employee benefits, our profitability could be adversely affected.

If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.

We believe that a critical component of our success is our corporate culture, which we believe fosters innovation, encourages teamwork and cultivates creativity. As we continue to develop the infrastructure of a public company and continue to grow and change, we may find it difficult to maintain these valuable aspects of our corporate culture. Any failure to preserve our culture could negatively impact our future success, including our ability to attract and retain employees, encourage innovation and teamwork and effectively focus on and pursue our corporate objectives.

Our profitability will be adversely affected if we are unable to successfully collect receivables from our commercial vehicle sales, leasing and support business, which have been classified as discontinued operations.

We have discontinued our legacy truck leasing business by exiting the leasing industry. This involves servicing the remaining leases and collecting the outstanding amounts due to us. If we are unable to effectively and efficiently collect these amounts, the profitability of this discontinued business segment will be reduced, which in turn will adversely affect our profitability.

Risks to Fincera’s Shareholders

Because Fincera may not pay regular dividends on its ordinary shares, shareholders will generally benefit from an investment in Fincera’s ordinary shares only if the shares appreciate in value.

Although Fincera declared and paid a special cash dividend in the amount of $0.25 per ordinary share in February 2012 to its shareholders, Fincera has not declared any dividends since then and may not declare or pay any regular cash dividends on its ordinary shares in the future. Fincera currently intends to retain future earnings, if any, for use in the operations and expansion of the business. As a result, Fincera does not anticipate paying regular cash dividends in the foreseeable future. Any future determination as to the declaration and payment of cash dividends will be at the discretion of Fincera’s Board of Directors and will depend on factors Fincera’s Board of Directors deems relevant, including among others, Fincera’s results of operations, financial condition and cash requirements, business prospects, and the terms of Fincera’s credit facilities and other financing arrangements. If no dividends are paid, realization of a gain on a shareholder's investments will depend solely on the appreciation of the price of Fincera’s ordinary shares. There is no guarantee that Fincera’s ordinary shares will appreciate in value.

Our ordinary shares are quoted on the over the counter market, which may limit the liquidity and price of our ordinary shares more than if the ordinary shares were quoted or listed on a National Securities Exchange.

Our ordinary shares are currently quoted on the over the counter market, as opposed to being listed on a national securities exchange such as the Nasdaq Stock Market or the New York Stock Exchange. Quotation of our ordinary shares on the over the counter market limits the liquidity and price of our ordinary shares more than if the ordinary shares were quoted or listed on a national securities exchange. In addition, certain institutional investors may be prohibited from purchasing our ordinary shares because the ordinary shares are not listed on a national securities exchange.

Yong Hui Li, the Chairman and Chief Executive Officer of Fincera, is the beneficial owner of a substantial amount of Fincera’s ordinary shares and Mr. Li may take actions with respect to such shares which are not consistent with the interests of the other shareholders.

Yong Hui Li, the Chairman and Chief Executive Officer of Fincera, beneficially owns approximately 81.4% of the outstanding ordinary shares of Fincera as of the date of this Annual Report on Form 20-F, assuming that there are no other changes to the number of ordinary shares outstanding. Mr. Li may take actions with respect to such shares without the approval of other shareholders and which are not consistent with the interests of the other shareholders, including the election of the directors and other corporate actions of Fincera such as:

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its merger with or into another company;

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a sale of substantially all of its assets; and

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amendments to its memorandum and articles of incorporation.

The decisions of Mr. Li may conflict with Fincera’s interests or the interests of Fincera’s other shareholders.

Risks Related to Fincera’s Corporate Structure and Restrictions on its Industry

Contractual arrangements in respect of certain companies in the PRC may be subject to challenge by the relevant governmental authorities and may affect our investment and control over these companies and their operations.

Foreign ownership of internet-based businesses, such as distribution of online information, is subject to restrictions under current PRC laws and regulations. For example, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except e-commerce) and any such foreign investor must have experience in providing value-added telecommunications services overseas and maintain a good track record in accordance with the Guidance Catalog of Industries for Foreign Investment promulgated in 2007, as amended in 2011 and in 2015, respectively, and other applicable laws and regulations.

Since our wholly-owned subsidiary ACG is a Cayman Islands company and it holds the equity interests of its PRC subsidiaries indirectly through Fancy Think Limited, a Hong Kong company, our PRC subsidiaries are treated as foreign invested enterprises under PRC laws and regulations. To comply with PRC laws and regulations, we conduct our operations in China through a series of contractual arrangements, (the “Enterprise Agreements”), entered into with the Auto Kaiyuan Companies, Hebei Yarui Trade Co., Ltd. (“Hebei Yarui Trading”) and Hebei Shengrong Investment Co., Ltd. (“Hebei Shengrong Investment”, under which with Hebei Yarui Trading are collectively known as the “AKC Shareholders”). Pursuant to the Enterprise Agreements, we, through our wholly-owned subsidiary ACG, have exclusive rights to obtain the economic benefits and assume the business risks of the Auto Kaiyuan Companies from their shareholders, and have control of the Auto Kaiyuan Companies. The Auto Kaiyuan Companies are considered variable interest entities, and Fincera is the primary beneficiary. ACG’s relationships with the Auto Kaiyuan Companies and the AKC Shareholders are governed by the Enterprise Agreements between Hebei Chuanglian Finance Leasing Co. Ltd. (“Chuanglian”), an indirect wholly-owned subsidiary of ACG, and each of the Auto Kaiyuan Companies, which are the operating companies of ACG in the PRC. The Auto Kaiyuan Companies and their subsidiaries hold the relevant business licenses to carry out the business (see note 21 to the Consolidated Financial Statements for additional information).

Pursuant to these Enterprise Agreements, we are able to consolidate the financial results of the Auto Kaiyuan Companies, which are accounted for as VIEs of us under the prevailing accounting principles. There can be no assurance that the relevant governmental authority will not challenge the validity of these contractual arrangements or that the governmental authorities in the PRC will not promulgate laws or regulations to invalidate such arrangements in the future.

If Fincera’s ownership structure, contractual arrangements and businesses, or its PRC subsidiaries and Auto Kaiyuan Companies, are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:

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revoking the business and operating licenses of Fincera’s PRC subsidiaries or Auto Kaiyuan Companies, which business and operating licenses are essential to the operation of Fincera’s business;

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levying fines;

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confiscating Fincera’s income or the income of its PRC subsidiaries or Auto Kaiyuan Companies;

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discontinuing or restricting our operations or the operations of Fincera’s PRC subsidiaries or Auto Kaiyuan Companies;

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imposing conditions or requirements with which Fincera, ACG, Fincera’s PRC subsidiaries or Auto Kaiyuan Companies may not be able to comply;

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requiring Fincera, Fincera’s PRC subsidiaries or Auto Kaiyuan Companies to restructure their relevant ownership structure, operations or contractual arrangements;

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restricting or prohibiting Fincera’s use of the proceeds from Fincera’s initial public offering to finance its business and operations in China; and

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taking other regulatory or enforcement actions that could be harmful to the business of the Auto Kaiyuan Companies.

The Ministry of Commerce, or MOFCOM, published a discussion draft of the proposed Foreign Investment Law on January 19, 2015 which would replace the three existing laws regulating foreign investment in China (namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sinoforeign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law) together with their implementation rules and ancillary regulations. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The draft Foreign Investment Law, if enacted as proposed, may materially impact the entire legal framework regulating the foreign investments in China and may also impact viability of our current corporate structure, corporate governance and business operations to some extent.

Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. As such, the jurisdiction of incorporation of an entity is not the ultimate determining factor as to whether or not it’s an FIE. The draft Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investors will be treated as FIEs, whereas an entity set up in a foreign jurisdiction would nonetheless be, upon market entry clearance by the MOFCOM or its local branches, treated as a PRC domestic investor provided that the entity is “controlled” by PRC entities and/or citizens. In this connection, “control” is broadly defined in the draft law to cover, among others, having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. Once an entity is determined to be an FIE and its investment amount exceeds certain thresholds or its business operation falls within a “negative list”, to be separately issued by the State Counsel in the future, market entry clearance by the MOFCOM or its local braches would be required.

It is likely that we would not be considered as ultimately controlled by Chinese parties. To our knowledge, ultimate beneficial owners of our shares who are PRC nationals may not, in the aggregate, control more than 50% of our total voting power as of March 8, 2017. The draft Foreign Investment Law has not taken a position on what actions will be taken with respect to the existing companies with a VIE structure, whether or not these companies are controlled by Chinese parties, while it is soliciting comments from the public on this point by illustrating several possible options. Under these varied options, a company that has a VIE structure and conducts the business on the “negative list” at the time of enactment of the new Foreign Investment Law has either the option or obligation to disclose its corporate structure to the authorities, while the authorities, after reviewing the ultimate share control structure of the company, may either permit the company to continue to maintain the VIE structure (if the company is deemed ultimately controlled by PRC nationals), or require the company to dispose of its businesses and/or VIE structure based on circumstantial considerations. Moreover, it is uncertain whether online lending and online payments, in which our variable interest entities operate, will be subject to the foreign investment restrictions or prohibitions set forth in the “negative list” to be issued. If the enacted version of the Foreign Investment Law and the final “negative list” mandate further actions, such as MOFCOM market entry clearance or certain restructuring of our corporate structure and operations, to be completed by companies with existing VIE structure like us, we face substantial uncertainties as to whether these actions can be timely completed, or at all, and our business and financial condition may be materially and adversely affected.

However, until “The foreign investment law” is enacted, which may take some time, the Company’s current VIE contractual arrangement structure will not be affected.

The draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from investment implementation report and investment amendment report that are required at each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.

The shareholders of the Auto Kaiyuan Companies may have potential conflicts of interest with Fincera, which may materially and adversely affect Fincera’s business and financial condition.

We, through our wholly-owned subsidiary ACG, have contractual arrangements with respect to operating the business with the Auto Kaiyuan Companies, and the shareholders of Auto Kaiyuan Companies are Hebei Yarui Trading and its parent company, Hebei Shengrong Investment, companies registered in the PRC and indirectly owned by our Chairman and CEO, Mr. Yong Hui Li. Although Auto Kaiyuan Companies, Hebei Yarui Trading and Hebei Shengrong Investment have given undertakings to act in the best interests of Fincera, Fincera cannot assure you that when conflicts arise, these individuals will act in Fincera’s best interests or that conflicts will be resolved in Fincera’s favor.

Contractual arrangements that our wholly-owned subsidiary ACG has entered into through its subsidiaries with the Auto Kaiyuan Companies may be subject to scrutiny by the PRC tax authorities and a finding that Fincera, ACG or the Auto Kaiyuan Companies owe additional taxes could substantially reduce Fincera’s consolidated net income and the value of your investment.

Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. Fincera could face adverse tax consequences if the PRC tax authorities determine that the contractual arrangements and transactions among its subsidiaries and the Auto Kaiyuan Companies do not represent an arm’s length price and adjust the income of Fincera’s subsidiaries or that of the Auto Kaiyuan Companies in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by the Auto Kaiyuan Companies, which could in turn increase their respective tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties on Fincera’s affiliated entities for underpayment of taxes. Fincera’s consolidated net income may be materially and adversely affected if its affiliated entities’ tax liabilities increase or if it is found to be subject to late payment fees or other penalties.

General Risks Relating to Conducting Business in China

Adverse changes in political and economic policies of the PRC government could impede the overall economic growth of China, which could adversely affect the transportation industry and damage Fincera’s business and prospects.

Fincera conducts substantially all of its operations and generates all its sales in China. Accordingly, Fincera’s business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. The PRC economy differs from the economies of most developed countries in many respects, including:

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the higher level of government involvement and regulation;

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the early stage of development of the market-oriented sector of the economy;

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the rapid growth rate;

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the higher rate of inflation;

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the higher level of control over foreign exchange; and

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government control over the allocation of many resources.

As the PRC economy has been transitioning from a planned economy to a more market-oriented economy, the PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. While these measures may benefit the overall PRC economy, they may also have a negative effect on Fincera.

Although the PRC government has in recent years implemented measures emphasizing the utilization of market forces for economic reform, the PRC government continues to exercise significant control over economic growth in China through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and imposing policies that impact particular industries or companies in different ways.

In the past 20 years, the PRC has been one of the world’s fastest growing economies measured in gross domestic product. However, in conjunction with recent slowdowns in economies of the United States and European Union, the growth rate in China has declined in recent quarters. Any further adverse change in the economic conditions or any adverse change in government policies in China could have a material adverse effect on the overall economic growth and the level of consumer spending in China, which in turn could lead to a reduction in demand for automobiles and consequently have a material adverse effect on Fincera’s business and prospects.

The PRC legal system embodies uncertainties that could limit the legal protections available to Fincera and its shareholders.

Unlike common law systems, the PRC legal system is based on written statutes and decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation since then has been to significantly enhance the protections afforded to various forms of foreign investment in China. Fincera’s PRC subsidiary, Chuanglian, is a wholly foreign-owned enterprise, and will be subject to laws and regulations applicable to foreign investment in China in general and laws and regulations applicable to wholly foreign-owned enterprises in particular. Fincera’s PRC affiliated entities, the Auto Kaiyuan Companies, will be subject to laws and regulations governing the formation and conduct of domestic PRC companies. Relevant PRC laws, regulations and legal requirements may change frequently, and their interpretation and enforcement involve uncertainties. For example, Fincera may have to resort to administrative and court proceedings to enforce the legal protection that Fincera enjoys either by law or contract. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection Fincera enjoys than under more developed legal systems. Such uncertainties, including the inability to enforce Fincera’s contracts and intellectual property rights, could materially and adversely affect Fincera’s business and operations. In addition, confidentiality protections in China may not be as effective as in the United States or other countries. Accordingly, Fincera cannot predict the effect of future developments in the PRC legal system, particularly with respect to its commercial vehicle sales servicing, leasing and support business, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to Fincera and other foreign investors, including you.

Fluctuations in exchange rates could result in foreign currency exchange losses.

Because substantially all of our revenues, expenditures and cash are denominated in Renminbi and we report our financial results in U.S. dollars, appreciation or depreciation in the value of the Renminbi relative to the U.S. dollar would affect our financial results reported in U.S. dollars terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will also affect the relative value of earnings from and the value of any U.S. dollar-denominated investments Fincera makes in the future.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions and foreign exchange policies. The conversion of RMB into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The PRC government allowed the RMB to appreciate by more than 20% against the U.S. dollar between July 2005 and July 2008. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within a narrow band. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably, and in recent years the RMB has depreciated significantly against the U.S. dollar. Since October 1, 2016, the RMB has joined the International Monetary Fund (IMF)’s basket of currencies that make up the Special Drawing Right (SDR), along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the RMB has depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system and there is no guarantee that the RMB will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future.

Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedging transactions may be limited and we may not be able to successfully hedge our exposure at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency.

Under the PRC EIT Law, we, Eastern Eagle, ACG, and/or Fancy Think Limited , ACG’s wholly-owned subsidiary, each may be classified as a “resident enterprise” of the PRC. Such classification could result in tax consequences to us, our non-PRC resident security holders and Eastern Eagle, ACG, and/or Fancy Think Limited.

Under the EIT Law, enterprises are classified as resident enterprises and non-resident enterprises. An enterprise established outside of China with its “de facto management bodies” located within China is considered a “resident enterprise”, meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax ("EIT") purposes. The implementing rules of the EIT Law define “de facto management bodies” as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise; however, it remains unclear whether the PRC tax authorities would deem our managing body as being located within China. The PRC tax authorities would determine the PRC tax resident treatment of a foreign (non-PRC) company, either by (i) applying for determination by tax authorities after a self-assessment by the enterprises or (ii) determination by tax authorities upon investigation and discovery by the tax authorities.

If the PRC tax authorities determine that we, Eastern Eagle, ACG, and/or Fancy Think Limited is a “resident enterprise” for PRC enterprise income tax purposes, a number of PRC tax consequences could follow. First, we, Eastern Eagle, ACG, and/or Fancy Think Limited may be subject to enterprise income tax at a rate of 25% on our, Eastern Eagle, ACG’s, and/or Fancy Think Limited’s worldwide taxable income, as well as PRC enterprise income tax reporting obligations. Second, under the EIT Law and its implementing rules, dividends paid between “qualified resident enterprises” are exempt from enterprise income tax. As a result, if we, Eastern Eagle, ACG, and Fancy Think Limited are treated as PRC “resident enterprises,” all dividends to us (through Eastern Eagle, Fancy Think Limited and ACG) would be exempt from PRC tax.

If Eastern Eagle and/or Fancy Think Limited were treated as a PRC “non-resident enterprise” under the EIT Law, then dividends that Eastern Eagle receives and/or Fancy Think Limited receives (assuming such dividends were considered sourced within the PRC) (i) may be subject to a 5% PRC withholding tax, provided that Eastern Eagle and Fancy Think Limited were considered beneficial owners of such dividend income and the treaty benefit regarding favorable 5% withholding tax rate was granted by PRC tax authority according to the Tax Arrangement between the PRC and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (PRC-HK Tax Arrangement) and PRC domestic tax laws, or (ii) if such PRC-HK Tax Arrangement does not apply (because the PRC tax authorities may deem Eastern Eagle and/or Fancy Think Limited to be a conduit not entitled to treaty benefits), may be subject to a 10% PRC withholding tax. Similarly, if we or ACG were treated as a PRC “non-resident enterprise” under the EIT Law, and Eastern Eagle and/or Fancy Think Limited were treated as a PRC “resident enterprise” under the EIT Law, then dividends that (i) we receive from Eastern Eagle or (ii) ACG receives from Fancy Think Limited (assuming such dividends were considered sourced within the PRC) may be subject to a 10% PRC withholding tax. Any such PRC withholding taxes on dividends could materially reduce the net amount of dividends, if any, we could pay to our shareholders.

The new “resident enterprise” classification could result in a situation in which a 10% PRC tax is imposed on dividends we pay to our investors that are non-resident enterprises so long as such non-resident enterprise investors do not have an establishment or place of business in China or, despite the existence of such establishment of place of business in China, the dividends we pay are not effectively connected with such establishment or place of business in China, to the extent that such dividends have their sources within the PRC. In such event, we may be required to withhold a 10% PRC tax on any dividends paid to our investors that are non-resident enterprises. Our investors that are non-resident enterprises also may be responsible for paying PRC tax at a rate of 10% on any gain realized from the sale or transfer of our securities in certain circumstances. We would not, however, have an obligation to withhold PRC tax with respect to such gain.

To date, the SAT has been monitoring all kinds of offshore indirect transfers, and on February 3, 2015, the SAT released the Announcement on Several Issues Concerning the Enterprise Income Tax on the Indirect Transfers of Properties by Non-resident Enterprises, as a Public Announcement ("Circular 7") to supersede the most of rules under Circular 698. Circular 7 introduces a new tax regime that is significant different from that under Circular 698. Firstly, it expands the transactions covered under Circular 698 (i.e. offshore indirect equity transactions) into covering transactions involving the transfer of "China Taxable Properties" , which includes (i) assets attributed to an establishment in China, (ii) immovable property in China (illustrated below as applicable to the current transaction), and (iii) shares in Chinese resident enterprises. Second, Circular 7 provides clearer criteria than Circular 698 on how to assess the reasonable commercial purposes and introduces "safe harbor" and "blacklisted" scenarios. Third, Circular 7 encourages the transaction parties of an indirect transfer that are neither within the Safe Harbour Scenario nor the Blacklisted Scenario to voluntarily file a report to the in-charge China tax authority for assessment of reasonable business purpose. If the parties of the indirect transfer fail to file such a report, but the indirect transfer is identified as short of reasonable business purpose, the China tax authority will be entitled to collect the EIT on the capital gain and also impose a heavy penalty and a late payment interest. Circular 7 brings challenges to both the foreign transferor and the transferee of the offshore indirect transfer as they have to make a self-assessment on whether the transaction should be subject to PRC taxes and to file or withhold the PRC taxes accordingly. If the SAT’s challenge of an indirect transfer according to Circular 7 is successful, it will deny the existence of the offshore holding company that is used for tax planning purposes. We (or a foreign investor) may become at risk of being taxed under Circular 7 and may be required to expend valuable resources to comply with Circular 7 or to establish that we (or such foreign investor) should not be taxed under Circular 7, which could have a material adverse effect on our financial condition and results of operations (or such foreign investor’s investment in us).

If any such PRC taxes apply, a non-PRC resident security holder may be entitled to a reduced rate of PRC taxes under an applicable income tax treaty and/or a foreign tax credit against such security holder’s domestic income tax liability (subject to applicable conditions and limitations). Prospective investors should consult with their own tax advisors regarding the applicability of any such taxes, the effects of any applicable income tax treaties, and any available foreign tax credits. For further information, see the discussion in the section of this Annual Report on Form 20-F entitled “Taxation—PRC Taxation” below.

PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent Fincera from making loans to our PRC subsidiaries and PRC affiliated entity or to make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Fincera is a Cayman Islands holding company conducting its operations in China through its PRC subsidiaries and its PRC affiliated entities, the Auto Kaiyuan Companies. Any loans Fincera makes to the PRC subsidiaries cannot exceed statutory limits and must be registered with the State Administration of Foreign Exchange, or SAFE, or its local counterparts. Under applicable PRC law, the government authorities must approve a foreign-invested enterprise’s registered capital amount, which represents the total amount of capital contributions made by the shareholders that have registered with the registration authorities. In addition, the authorities must also approve the foreign-invested enterprise’s total investment, which represents the total statutory capitalization of the Company, equal to the Company’s registered capital plus the amount of loans it is permitted to borrow under the law. The ratio of registered capital to total investment cannot be lower than the minimum statutory requirement and the excess of the total investment over the registered capital represents the maximum amount of borrowings that a foreign invested enterprise is permitted to have under PRC law. Fincera might have to make capital contributions to the PRC subsidiaries to maintain the statutory minimum registered capital and total investment ratio, and such capital contributions involve uncertainties of their own, as discussed below. Furthermore, even if Fincera makes loans to its PRC subsidiaries that do not exceed their current maximum amount of borrowings, Fincera will have to register each loan with SAFE or its local counterpart for the issuance of a registration certificate of foreign debts. In practice, it could be time-consuming to complete such SAFE registration process.

Any loans Fincera makes to a PRC affiliated entity, which is treated as a PRC domestic company rather than a foreign-invested enterprise under PRC law, are also subject to various PRC regulations and approvals. Under applicable PRC regulations, international commercial loans to PRC domestic companies are subject to various government approvals.

Fincera cannot assure you that it will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by Fincera to its PRC subsidiaries or PRC affiliated entities or with respect to future capital contributions by Fincera to its PRC subsidiaries. If Fincera fails to complete such registrations or obtain such approvals, Fincera’s ability to capitalize or otherwise fund its PRC operations may be negatively affected, which could adversely and materially affect its liquidity and its ability to fund and expand its business.

Restrictions on currency exchange may limit our ability to utilize our revenues effectively and the ability of our PRC subsidiaries to obtain financing.

Substantially all of our revenues and operating expenses are denominated in Renminbi. Restrictions on currency exchange imposed by the PRC government may limit our ability to utilize revenues generated in Renminbi to fund our business activities outside China, if any, or expenditures denominated in foreign currencies. Under current PRC regulations, Renminbi may be freely converted into foreign currency for payments relating to “current account transactions,” which include among other things dividend payments and payments for the import of goods and services, by complying with certain procedural requirements. Our PRC subsidiaries may also retain foreign exchange in their respective current account bank accounts, subject to a cap set by SAFE or its local counterpart, for use in payment of international current account transactions.

However, conversion of Renminbi into foreign currencies, and of foreign currencies into Renminbi, for payments relating to “capital account transactions,” which principally includes investments and loans, generally requires the approval of SAFE and other relevant PRC governmental authorities. Restrictions on the convertibility of the Renminbi for capital account transactions could affect the ability of our PRC subsidiaries to make investments overseas or to obtain foreign exchange through debt or equity financing, including by means of loans or capital contributions from the parent entity.

Any existing and future restrictions on currency exchange may affect the ability of our PRC subsidiaries or affiliated entities to obtain foreign currencies, limit our ability to utilize revenues generated in Renminbi to fund our business activities outside China that are denominated in foreign currencies, or otherwise materially and adversely affect our business.

In August 2008, SAFE promulgated Circular 142, a notice regulating the conversion by foreign investment enterprises, or FIEs, of foreign currency into Renminbi by restricting how the converted Renminbi may be used. Circular 142 requires that Renminbi converted from the foreign currency-dominated capital of a FIE may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within the PRC unless specifically provided for otherwise. In addition, SAFE strengthened its oversight over the flow and use of Renminbi funds converted from the foreign currency-dominated capital of a FIE. The use of such Renminbi may not be changed without approval from SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Violations of Circular 142 may result in severe penalties, including substantial fines as set forth in the SAFE rules.

You may experience difficulties enforcing foreign judgments or bringing original actions in China based on U.S. judgments against Fincera, ACG, their subsidiaries and variable interest entities, officers, directors and shareholders, and others.

We have appointed CT Corporation System located at 111 Eighth Avenue, 13/F, New York, New York 10011 as our agent to receive service of process with respect to any action brought against us in the United States District Court for the Southern District of New York under the federal securities laws of the United States or of any state in the United States or any action brought against us in the Supreme Court of the State of New York in the County of New York under the securities laws of the State of New York, and intend to abide by judgments entered by such courts in such actions.

Notwithstanding, substantially all of Fincera’s assets are located outside of the United States, and most of Fincera’s current directors and executive officers reside outside of the United States. In addition, the PRC does not have treaties providing for reciprocal recognition and enforcement of judgments of courts with the United States or many other countries. As a result, recognition and enforcement in the PRC of these judgments in relation to any matter, including United States securities laws and the laws of the Cayman Islands, may be difficult or impossible. Furthermore, an original action may be brought in the PRC against Fincera’s assets, its subsidiaries, officers, directors, shareholders and advisors only if the actions are not required to be arbitrated by PRC law and the facts alleged in the complaint give rise to a cause of action under PRC law. In connection with such an original action, a PRC court may award civil liabilities, including monetary damages.

We may qualify as a passive foreign investment company, or “PFIC,” which could result in adverse U.S. federal income tax consequences to U.S. investors.

In general, we will be treated as a PFIC for any taxable year in which either (1) at least 75% of our gross income (looking through certain 25% or more-owned corporate subsidiaries) is passive income or (2) at least 50% of the average value of our assets (looking through certain 25% or more-owned corporate subsidiaries) is attributable to assets that produce, or are held for the production of, passive income. Passive income generally includes, without limitation, dividends, interest, rents, royalties, and gains from the disposition of passive assets. If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined in the section of this Annual Report on Form 20-F captioned “Taxation—United States Federal Income Taxation—General”) of our ordinary shares, the U.S. Holder may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements. Based on the composition (and estimated values) of the assets and the nature of the income of us and our subsidiaries for our 2016 taxable year, we may be treated as a PFIC for our 2016 taxable year. However, since we have not performed a definitive analysis with respect to our PFIC status for our 2016 taxable year, there can be no assurance with respect to our status as a PFIC for such taxable year. There also can be no assurance with respect to our PFIC status for our current (2017) taxable year or any future taxable year. We urge U.S. Holders to consult their own tax advisors regarding the possible application of the PFIC rules. For a more detailed explanation of the U.S. federal income tax consequences of PFIC classification to U.S. Holders, see the section of this Annual Report on Form 20-F captioned ’‘Taxation—United States Federal Income Taxation—Tax Consequences to U.S. Holders—Passive Foreign Investment Company Rules.”

ITEM 4. INFORMATION ON OUR COMPANY

A. History and Development of the Company

We were incorporated in the Cayman Islands on October 16, 2007 under the name “Spring Creek Acquisition Corp.” as a blank check company formed for the purpose of acquiring, through a stock exchange, asset acquisition or other similar business combination, or controlling, through contractual arrangements, an operating business, that had its principal operations in China. Our only business operations are conducted through our wholly-owned subsidiary, ACG. Prior to our acquisition of ACG, we had no operating business.

ACG, which was formerly known as “KYF Inc.”, was a holding company incorporated in the Cayman Islands in July 2007 by Mr. Yong Hui Li. On the date of incorporation, 1,000 ordinary shares at $0.001 each were issued to Mr. Yong Hui Li. Mr. Yong Hui Li subsequently transferred all of the issued and outstanding shares to his related parties. On the date immediately prior to our acquisition of ACG, the sole shareholder of ACG was Honest Best Int’l Ltd., a company which was at the time wholly owned by Ms. Yan Wang, Mr. Li’s wife. Mr. Li is currently the sole owner of Honest Best.

On April 9, 2009, we acquired all of the outstanding securities of ACG, an exempt company incorporated in the Cayman Islands, from Honest Best Int’l Ltd., resulting in ACG becoming our wholly-owned subsidiary. Promptly after our acquisition of ACG, we changed our name to “AutoChina International Limited.”

In September 2010, we established a new wholly foreign owned enterprise in China, Ganglian Finance Leasing Co., Ltd., or Ganglian Finance Leasing, which is in the business of leasing commercial vehicles. In December 2010, we increased the paid-in capital of Ganglian Finance Leasing through our VIE, Kaiyuan Auto Trade, and converted Ganglian Finance Leasing from a wholly foreign-owned enterprise to a Chinese-foreign joint venture. In December 2010, Hebei Chuanglian Trade Co., Ltd., or Chuanglian, changed its name to “Hebei Chuanglian Finance Leasing Co., Ltd.”

On August 30, 2012, the Company’s independent directors approved, and the Company entered into, an equity transfer agreement through its wholly owned subsidiary, ACG, to purchase 100% of the equity of Heat Planet Holdings Limited (“Heat Planet”) and its subsidiaries, whose primary asset consists of 23 floors, or over 60,000 square meters, of newly constructed office space in the Kai Yuan Center building (the “Real Estate Asset”). Heat Planet was controlled by the Company’s Chairman and Chief Executive Officer, Mr. Yong Hui Li (“Mr. Li”). The total transaction value of approximately RMB1 billion ($159.3 million) was negotiated and approved by the Company’s Audit Committee and equals the appraisal value that was determined by a third party appraisal of the Real Estate Asset. Located at 5 East Main Street in Shijiazhuang, where the Company is currently based, the 245-meter tall Kai Yuan Center is the tallest building in Shijiazhuang and Hebei Province and is also occupied by a Hilton Worldwide-operated hotel. Fincera’s headquarters are located in the Kai Yuan Center, which serves as the control center for the Company’s operations throughout China. The Company does not occupy the entire office space purchased, and has been leasing out the unoccupied space, the proceeds from which are reported as rental income.

Heat Planet’s equity was purchased for approximately $56.4 million. In connection with the acquisition, the Company assumed approximately $102.9 million in debt, resulting in a total transaction value of approximately $159.3 million. The $56.4 million purchase price was payable within six months of occupation of the Real Estate Asset, and any unpaid amounts after such six months began to accrue interest at the one-year rate announced by the People’s Bank of China (4.35% as of December 31, 2016). As of December 31, 2016 approximately $4.3 million is still owed for the acquisition of Heat Planet.

From February 2012 to April 2015, the Company, through its VIEs and direct holdings, established a series of subsidiaries, including Beijing One Auto Technology, Lian Sheng Investment Co. (“Lian Sheng Investment”), Dian Fu Bao Investments Limited, Easy Technology Limited, Chuang Jin World Investment Limited (“Chuang Jin World”), Hebei Remittance Guarantee Limited (“Hebei Remittance”), Shenzhen Kaiyuan Financial Services, and Shenzhen Kaiyuan Inclusive Financial Services. All of these subsidiaries were established to facilitate the Company’s internet-based operations, including a new peer-to-peer lending platform called CeraVest and an online payments platform for the transportation industry called CeraPay.

In November 2014, the Company launched its CeraPay product, which is a proprietary online payments platform for participants in the transportation industry that allows its users to make purchases at participating merchants. CeraPay has features similar to traditional credit cards, such as no fees for users if the outstanding monthly balance is paid on time. The Company charges service fees to merchants who accept CeraPay as a form of payment.

In November 2014, the Company also launched its CeraVest product, which is a P2P lending platform that acts as an intermediary to allow the Company to provide short-term financing primarily to SMBs in the transportation industry, as well as source funding for the financing from individual investors. The Company earns service fees for loans facilitated through CeraVest.

In June 2015 the Company changed its name from AutoChina International Ltd. to Fincera Inc. to better suit its new internet-based businesses. Similarly, in April 2015 the Company had also changed the name of the Kai Yuan Center to the Kai Yuan Finance Center.

In October 2015 the Company launched TruShip, its first ecommerce platform, which allows trucking industry merchants, such as dealerships and leasing companies, to establish online store-fronts and conveniently conduct sales transactions through CeraPay.

In January 2016 the Company’s wholly-owned subsidiary Chuangjie Trading was wound up. In March 2016 the Company’s wholly-owned subsidiary Lian Sheng Investment was wound up and ownership of Dian Fu Bao Investment was transferred from Chuanglian to Kaiyuan Auto Trade Group.

In March 2016, the Company launched AutoChekk, its first ecommerce platform for the passenger vehicle industry. AutoChekk provides consumers in China with online tools and information designed to make researching and purchasing passenger cars or maintenance services more convenient and affordable.

In July 2016, the Company launched PingPing, an ecommerce platform that allows small businesses to establish an online presence while providing an intuitive, full-service online shopping experience for their customers.

On October 19, 2016, the Company closed its purchase of 100% of the equity interest of Eastern Eagle and its subsidiaries, whose primary asset consists of the remaining portions of the Kai Yuan Finance Center that the company did not already own, namely 31 floors and an underground parking garage, together totaling over 119,000 square meters, which house the Shijiazhuang Hilton Hotel (the “Building Assets”). Eastern Eagle was controlled by the Company’s Chairman and Chief Executive Officer, Mr. Yong Hui Li (“Mr. Li”). The total transaction value, as adjusted to account for changes in the net asset carrying value determined for Eastern Eagle, was $409.3 million, consisting of cash of $111.5 million and assumed liabilities of $297.8 million.

In an effort to streamline the Company’s corporate structure, certain companies have been eliminated. Top Auto International Inc. was eliminated in July 2016. First Auto Limited was eliminated in December 2016. Heat Planet is in the process of being eliminated and its holdings were transferred to Hebei Remittance Guarantee in November 2016.

In December 2016, Hebei Kaiyuan Real Estate Development Co., Ltd. (“Hebei Kaiyuan”) was replaced in our corporate structure by Hebei Yarui Trading. The related Enterprise Agreements involving Hebei Kaiyuan were replaced by identical agreements involving Hebei Yarui Trading instead.

The following chart illustrates our corporate structure as of December 31, 2016:

(1)

The public company, quoted on the OTC QB Board under the symbol “AUTCF”.

(2)

Eastern Eagle International and its subsidiaries were acquired in October 2016. Eastern Eagle holds the ownership of the hotel segment of the Kai Yuan Finance Center building.

(3)

In December 2016 Hebei Yarui Trading replaced Kai Yuan Real Estate in the corporate structure.

(4)

Hebei Xuwei Trading is an investment holding entity.

(5)

Hebei Ruiliang Trading holds the ownership of the office segment of Kai Yuan Finance Center building.

(6)

Hebei Ruiliang Property Services was formed in June 2013. It engages in property management of the Kai Yuan Finance Center.

(7)

Chuangjin World Investment was formed in September 2014 to facilitate the CeraVest business.

(8)

Hebei Remittance Guarantee was formed in October 2014 to facilitate the CeraVest business.

(9)

Hebei Shengrong Investment is an entity 100% indirectly controlled by Mr. Yong Hui Li, our Chairman and Chief Executive Officer. (“Mr. Li”)

(10)

Hebei Xuhua Trading is the entity that Fincera indirectly acquired control of through contractual arrangements and which held the cash consideration paid to Fincera in connection with its sale of its automobile dealership business in December 2009. Currently, its main purpose is to act as an intermediary in the faciliation process for certain CeraVest Loans .

(11)

Shenzhen Kaiyuan Financial Services was formed in April 2015 to facilitate the new internet-based businesses.

(12)

Shenzhen Kaiyuan Inclusive Financial Services was formed in April 2015 to facilitate the new internet-based businesses.

(13)

Dian Fu Bao Investment was formed in August 2014 to facilitate the CeraVest and CeraPay businesses.

(14)

Easy Technology was formed in September 2014 and operates the CeraVest platform.

(15)

Beijing One Auto Technology was originally formed in February 2012 as Kaiyuan Information Processing. It engages in developing and management of the Companies internet-based businesses.

(16)

Ganglian Finance Leasing was formed in September 2010 for the purpose of conducting our leasing business. It commenced the leasing business in the fourth quarter of 2010.

(17)

Each truck financing center is held by a separate legal entity, most of which are jointly owned by Kaiyuan Auto Trade Group and Hebei Xuhua Trading.

(18)

Kaiyuan Auto Trade Group was established in January 2008. Currently, its main purpose is to act as an intermediary in the faciliation process for certain CeraVest Loans .

Fincera’s principal executive office is located at 27/F, Kai Yuan Finance Center, No. 5, East Main Street, Shijiazhuang, Hebei, People’s Republic of China. Our telephone number is +86 311 8382 7688. Our principal website is located at http://www.fincera.net. The information on our website is not part of this Annual Report.

B. Business Overview

Fincera focuses on providing innovative web-based financing and ecommerce services for small and medium-sized businesses (“SMBs”) and individuals in China. Our goal is to promote the success of SMBs by providing them with access to affordable credit and online marketing tools, while at the same time providing individuals with attractive investment opportunities and financing for retail products. Through our product offerings, we aim to enable a new era of inclusive finance and Offline to Online (O2O) shopping experiences in China.

We currently operate two distinct businesses lines: 1) internet-based and 2) property lease and management. Our internet-based segment is its own reportable segment. Within our property lease and management business are two additional reportable segments: hotel and office leasing. We are in the process of winding down our commercial vehicle sales, leasing and support business and insurance agency business.

From 2009 to 2015 we focused principally on our commercial vehicle sales, leasing and support business which provides commercial vehicle leasing solutions for small and medium-sized businesses in China’s transportation industry. During this time we accumulated significant knowledge and experience regarding the transportation industry and how to effectively underwrite credit and manage risk for its participants. Due to our experience providing financing to customers in the commercial vehicle industry, we have initially targeted the transportation industry for our first internet-based products, which are: CeraVest, CeraPay, AutoChekk, PingPing and TruShip.

Internet-based Businesses

We classify our internet-based businesses into three categories: financial services, payment and settlement, and ecommerce.

Financial Services

CeraVest, launched at the end of 2014, is our proprietary peer-to-peer (“P2P”) lending platform, through which the Company offers SMBs short-term, 6-month financing at competitive interest rates. The platform’s website is www.qingyidai.com . Its loans are funded through CeraVest investors, who can invest in notes through the CeraVest platform, and by the Company for any remaining unfunded portion.

Currently, CeraVest loans bear interest at approximately 8.62% per annum. The loan is guaranteed by the SMBs and 7.5% of the loan is remitted to the Company as a security deposit. The CeraVest agreement entered into with the borrower states that the ownership of the debt may be transferred to CeraVest investors at the Company’s option during the six-month loan period. The Company may transfer the debt, partly or in full, to CeraVest investors through a transfer agreement at a quoted rate of return which is currently approximately 8.62% per annum and the lending period is also six months.

In September 2015, we launched the CeraVest Flex product, which gives investors flexibility with respect to the term of their investment. As opposed to the fixed 6-month term of the regular CeraVest product, CeraVest Flex allows investors to add or withdraw funds as they please. It transfers the underlying assets, which are CeraPay or CeraVest receivables, to investors through a transfer agreement at a quoted rate of approximately 8.03% per annum. The transferred notes have either a 6 month term or no specific lending period or maturity date. The investors, once they have purchased these notes, are free to add to or withdraw their investment at any time by requiring the Company to repurchase the assets from the investors. The rate of return is fixed regardless of the holding period. The Company adjusts the size of the underlying pool of receivables according to the total amount of investment in CeraVest Flex. All of the foregoing is reflected in the applicable transfer agreements.

No clauses in the CeraVest transfer agreements require the Company to repurchase any default loans. However, the Company voluntarily commits to assist the investors to eliminate investment risks, and retain the principal and the stated interest. The Company also voluntarily commits to repurchasing notes from investors who would like to withdraw their funds prior to loan maturity; after which the Company then relists these repurchased loans for sale to other investors. All investments received are secured by the same amount of the counterpart loans, net and other financing receivables the Company is due from the borrowers and the CeraPay users, respectively. We generate revenue from CeraVest primarily by charging origination fees and from interest on the loans we make.

Payment and Settlement

CeraPay, launched at the end of 2014, is our proprietary online payments platform that operates on our own closed-loop network. The platform’s website is www.dianfubao.com . CeraPay users are provided with a credit line that can be utilized at participating CeraPay merchants or be used to pay other CeraPay users. Having features similar to a credit card, there are no fees (other than late fees and penalties for CeraPay users who become delinquent on amounts borrowed) for using the CeraPay payments service as long as any outstanding balances are paid in full each month. We generate revenue from CeraPay primarily by charging transaction fees, which are currently approximately 2.4%, which was raised from 2.0% in January 2016, to merchants participating in the network. Merchants may use CeraPay funds to make payments to other CeraPay users or merchants or cash out the funds via transfer to a bank account. CeraPay users are subject to an application and credit approval process and provide guarantees and collateral (which can include a commercial vehicle, a security deposit or real estate) before they are provided with a credit line. CeraPay, in conjunction with our third party payment partners, serves as the sole online payment method for all of our ecommerce platforms.

CeraPay can also now be used to purchase Sinochem and PetroChina fuel cards, which are valid for fuel purchases at all Sinochem and PetroChina service stations. In addition, CeraPay may be used to pay for tolls incurred at electronic toll collection (ETC) booths. We earn money from these arrangements by collecting rebates ranging from 1-5% from the merchants.

Ecommerce

TruShip, launched in October 2015, is our online ecommerce platform whereby trucking industry merchants, such as dealerships and leasing companies, can establish an online store-front and conveniently conduct sales transactions through CeraPay. The platform’s website is www.che001.com . In December 2015, the TruShip Logistics shipping marketplace was launched on the platform. It allows participants in China’s fragmented long-haul trucking industry to publish, browse, and connect on shipping jobs across the country at no cost. Payment transactions resulting from connections made on TruShip Logistics can be completed with CeraPay, and the subsequent data is used as underwriting metrics for CeraVest loans to small businesses. The primary strategic objective of TruShip is to provide our customers with a useful transaction platform that facilitates the increased use of CeraPay. The platform charges approximately 0.2‰ facilitation fees to the registered merchants for each successful transaction conducted with the customers.

AutoChekk, launched in March 2016, is our ecommerce platform for the passenger vehicle industry. AutoChekk provides consumers in China with a powerful and intuitive tool that makes researching and purchasing passenger cars or maintenance services convenient and affordable. The platform’s website is www.chekk.com . The platform provides information regarding passenger cars that are available for sale and facilitates purchases. AutoChekk also provides consumers with search tools and a procurement platform for maintenance services. Similar to Fincera's TruShip Logistics feature, payment transactions resulting from connections made on AutoChekk can be completed with CeraPay, and the resulting data could be used as underwriting metrics for CeraVest loans to small businesses.

PingPing, launched in July 2016, is our ecommerce platform for small businesses. PingPing provides businesses with an easy-to-use online platform to establish an online presence while providing an intuitive, full-service online shopping experience for their customers. The platform’s website is www.pingpw.com . PingPing plans to offer B2B, B2C, and real estate ecommerce services, which are all complemented by Fincera's core financial service offerings. As with Fincera's TruShip and AutoChekk platforms, payment transactions are processed using CeraPay and other third-party payment platforms, and the resulting data will be used as underwriting metrics for CeraVest loans to small businesses.

We also operate a network of branch offices in 31 provinces, municipalities, and autonomous regions across China. These branches support local sales staff for our internet-based businesses.

Property Lease and Management Business

We own the Kai Yuan Finance Center, which is a 53-floor large-scale commercial building with hotel, office and ancillary facilities, erected on a land parcel with a site area of approximately 10,601 square meters in the central business district of Shijiazhuang, China. The office space in the building comprises a total gross floor area of approximately 62,972 square meters. Our corporate headquarters is located in the building and we lease out the space that we do not occupy (approximately 56,092 square meters). As of December 31, 2016 approximately 64% of this space has been leased out pursuant to leases that expire at various dates through 2021.

Hotel Business

The Kai Yuan Finance Center also houses the Shijiazhuang Hilton Hotel. This full-service hotel property totals over 119,000 square meters and includes guest rooms, restaurants, conference facilities, a fitness center, spa and an underground parking garage. The Company has entered into a management and franchise agreement with Hilton Worldwide Holdings Inc. to manage and operate the hotel.

We believe that the Kai Yuan Finance Center is one of the premiere commercial properties in Shijiazhuang, making it highly attractive to both office tenants and hotel guests. It is currently the tallest building in Hebei province and is situated in a central location next to a large luxury shopping mall, the Hebei Provincial Museum and the Hebei Provincial Library. Its convenient location places it steps away from one of Shijiazhuang’s main thoroughfares, Zhongshan Road, where the city’s first subway line is being built.

Our Chairman and CEO has significant experience developing, owning and operating real estate assets. We aim to continually improve the operating results of our existing property through concentrated leasing, asset management, cost control and customer service efforts. We focus on meeting our customers’ needs and provide them with cost-effective services such as build-to-suit construction and space modification, including tenant improvements and expansions. Our property competes for customers with similar properties located in our market primarily on the basis of location, rent, services provided and the design, quality, amenities and condition of the facilities.

Our Strategy

We are undergoing a significant business transformation. Before launching our internet-based businesses, we considered ourselves the preeminent provider of commercial vehicle sales, servicing and leases in China. However, we envisioned an even larger market opportunity and even better ways to help even more businesses succeed and directly serve China’s growing consumer population. Therefore, we decided to wind down our commercial vehicle sales, leasing and support business and launch new businesses to pursue potentially greater opportunities instead. Thus far, we have done this by launching the online platforms CeraVest, CeraPay and TruShip. These platforms are designed to enhance the productivity and success of small and medium-sized businesses. Due to our years of experience in the transportation industry and knowledge of its participants, we have chosen to initially target this same vertical with these new products. In addition, we have also launched the AutoChekk and PingPing ecommerce platforms that work in conjunction with our financial services to create a convenient O2O shopping experience for Chinese consumers of retail goods and passenger vehicles.

CeraVest primarily provides a funding solution for capital constrained small and medium sized businesses. After they become our customers through CeraVest, we encourage these businesses to use, and to encourage their own customer base to use our other platforms to conduct transactions or browse inventory. For example, CeraPay provides a convenient and standardized payment solution for borrowers that take out a credit line with us, while an ecommerce platform that we provide for a particular industry vertical (i.e. TruShip for the trucking industry) allows merchants to interact and conduct transactions with their customers online. Together, these platforms create powerful network effects. For example, merchants are incentivized to conduct transactions with their customers via CeraPay on one of our ecommerce platforms. Then for the end consumers, we also offer financing for the purchases they make from the merchants. By offering financial solutions to both sides of the transaction and providing a convenient tool to facilitate it, we are able to convert a typically offline business scenario to an online one where rich data can be collected. We then utilize transactional data from all of our platforms to help make underwriting decisions for our loan products. Starting with the industry that we are familiar with, CeraPay, CeraVest, and TruShip together provide a comprehensive ecommerce, funding and payment solution for trucking businesses nationwide. Replicating this model, we are able to create the same package of solutions by combining CeraPay and CeraVest with AutoChekk or PingPing, each targeting a different industry vertical in which we have operational expertise.

We believe that our online payments platform, CeraPay will be our primary profit driver. This is because CeraPay will be a core payment channel for all of our ecommerce platforms and we earn transaction fees from processing these payments. This makes the business model highly scalable since increased transaction volumes do not typically directly increase most operating expenses like they would when dealing in physical products.

Given that our internet-based businesses are relatively new, establishing a large customer base is a top priority. We facilitate this by leveraging our nationwide network of branch offices to promote our new businesses. In addition, we employ various referral and commissions strategies to gain new customers.

Our Industry

We do not believe that the financing needs of small and medium-sized businesses in China have effectively been met for several years. The needs of this market have driven the growth of the P2P lending industry. According to Wangdaizhijia, a portal for China’s P2P lending industry, the total P2P lending market in China totaled approximately 2,064 billion RMB in 2016, which is more than double the 2015 market size of 982 billion RMB. According to iResearch, the market is forecast to grow to 3,545.2 billion RMB in 2019, representing a 4 year compound annual growth rate (CAGR) of approximately 38% per year.

The passenger vehicle and ecommerce industries in China also have tremendous potential. According to the China Passenger Car Association, China has the largest passenger car market in the world, with sales of 23.9 million cars, sports utility and multipurpose vehicles during 2016. According to eMarketer, China also has the largest retail ecommerce market in the world, with 2016 retail ecommerce sales expected to top $899.09 billion.

The online payments industry in China is driven mostly by consumer-facing payments apps such as Alipay and Tenpay and the rise of ecommerce platforms that require such payment methods. Payments between businesses across various industry verticals remain an opportunity relatively uncaptured by these consumer-facing apps. For example, we believe the heavy trucking industry represents a huge untapped market for online payments. We estimate there are approximately 5,000,000 heavy trucks with total annual revenue and expense per truck of 1,000,000 RMB and 800,000 RMB, respectively. These assumptions represent a potential market size of 9 trillion RMB in transactions per year and represent the initial target market for our CeraPay product.

Payment apps that offer consumer credit are also nascent products introduced in recent years by Alipay and JD.com , around the same time when we launched CeraPay for the trucking industry. We believe that Internet-based consumer credit offerings present an attractive opportunity as more traditional services such as credit cards have a relatively low penetration in China.

Our CeraPay and TruShip platforms currently primarily service the trucking industry in China. According to numerous sources, including the 2012 China Commercial Vehicle Outlook published by ACT Research, China’s medium and heavy duty truck markets are the largest in the world and account for over 50% of the world’s commercial vehicle production. According to the China Association of Automobile Manufacturers (CAAM), there was an all-time record of 1,017,400 heavy trucks sold in China in 2010. Demand has slowed somewhat since then, and, in 2014, there were 742,600 heavy trucks sold according to CAAM, a decrease of 3.7% from 2013. In 2015 there were 546,800 heavy trucks sold according to CAAM, a decrease of 26% from 2014. In 2016 there were 733,000 heavy trucks sold according to CAAM, an increase of 34% from 2015. We believe that demand for credit should remain strong despite fluctuations in the business environment.

Our Customers

Our target customers are small and medium-sized businesses and individuals. We primarily target customers in the transportation industry because of our experience operating in that sector. However, we also target other industries such as retail, and plan to continue expanding our products to other industry verticals in the future. We are generally of the belief that most SMBs in China are capital constrained because they are not adequately serviced by the current financial system. This presents opportunities for us to step in where we feel we can efficiently both provide capital and control risk.

We also aim to provide individuals with attractive fixed-income investment opportunities and financing for retail and vehicle purchases. At the present time, all individuals in China who possess an official government-issued resident identity card are eligible to invest in CeraVest loans. We rely heavily on referrals, word of mouth advertising and our branch office sales staff to acquire individual customers.

Sales and Marketing

We primarily utilize a highly targeted multi-tiered approach to selling and marketing our products. We employ a direct sales force, partner with SMBs, utilize commission-only sales agents and offer a customer referral system relying on word of mouth advertising to market our products. For branding and promotional purposes, we invest a small portion of our budget on ads on various traditional and digital media sources such as news outlets, social media, app stores, and other third party web or mobile app platforms. While we currently rely heavily on our sale force for customer acquisition, we expect digital and multimedia marketing to be our main channels going forward as we build capabilities in this area.

We are in the process of converting our commercial vehicle financing sales and service centers into branch offices. These branch offices will provide office space for our employees who are engaged in the selling and marketing of our internet-based products. During this process certain existing commercial vehicle financing sales and service center locations will be eliminated while new branch offices will be opened. We will also hire certain staff on a non-salaried, commission-only basis. We feel that having a physical presence across China is a competitive advantage at this transitional point in our business compared to other companies offering online products that do not.

CeraVest borrowers must first become a franchise store before being eligible to borrow. Franchise stores have the opportunity to promote our products and earn incentives. Incentives include commissions and other incentives for successful referrals of individual investors to CeraVest or users for CeraPay. A majority of franchise stores also become CeraVest loan borrowers, in which case the referral incentives that we are able to offer them include increased loans from CeraVest within a maximum credit limit as deemed appropriate by the Company’s risk control system. We also have begun partnering with larger corporations in a similar manner, where these companies help us acquire more franchise store partners and direct their own workforce to refer investors to CeraVest.

Finally, we provide a variety of incentives to CeraVest investors for new customer referrals that convert to sustained investment. Because we sell our financial products in China, where public sentiment is wary of fraud, word of mouth referrals are the most cost effective way for us to acquire loyal customers that trust our brand.

Our Risk Management

We have extensive experience underwriting credit and managing risk with respect to small and medium-sized businesses in the transportation industry. In order to manage the credit risk from the credit extended to customers through CeraVest and CeraPay, we have developed new procedures utilizing this experience. These procedures can be divided into two parts: screening and underwriting, and cases of non-repayment.

Screening and Underwriting

Our initial screening process consists of standardized application and evaluation processes that combine a mix of both manual and automated procedures in order to carefully screen and underwrite applicants. Businesses must first become franchise stores to be an eligible CeraVest borrower. This process includes a legal background check and a detailed 10-step documentation process to collect and verify information about the customer. Thereafter, several different criteria are used to determine if the customer is eligible for credit and if so, the amount that is extended including but not limited to the type of the borrower’s business and the industry they operate in, the amount of CeraVest deposits referred by the borrower, the amount of any unused cash balance in the borrower’s CeraPay account and the borrower’s transaction volume on TruShip.

CeraPay users can be individuals or businesses. The CeraPay screening and underwriting process for businesses is similar to that for CeraVest. In addition, as with CeraVest, businesses must first apply and be approved to be franchise stores. The screening process for individuals involves a legal background check and a detailed documentation process to collect and verify information about the customer such as official government documents, proof of assets, bank statements and tax returns. Individuals must also pledge property, such as a commercial vehicle or real estate, as collateral in order to be approved for CeraPay. Upon approval, proprietary formulas are used to determine the amount of credit extended.

We are also in the process of implementing credit risk models that utilize both internal and external data sources to rate borrowers’ credit worthiness and calculate default risk to be used in our screening process. Since China has an underdeveloped credit rating system, we must rely on our own proprietary models and data sources to rate and underwrite prospective borrowers. Aside from internal data sources such as transaction history and user activity on our platform websites, we also purchase external data such as an applicant’s cell phone activity, bank card activity, traffic violations record, and highway toll data. Using a wide array of data that we collect over time, we can optimize our risk models to better calculate ratings and default risk.

Cases of Non-Repayment

We have developed a standardized risk rating system for our existing borrowers, which dictates the procedures to follow in case of non-repayment. In these situations, a series of escalating follow-up procedures are implemented depending on the status of the non-repayment and the risk rating of the customer, ranging from simple telephone reminder calls to legal action and repossession of any collateral. Personnel at our local branch offices are typically utilized heavily during the process due to their proximity and familiarity with the borrower in question. After a case is escalated past a certain threshold, our regional offices and headquarters also provide direct supervision. Local legal counsel, who is typically the most familiar with the specific region’s laws, is also customarily retained to assist in the process.

Our Strengths

Significant Experience with Small and Medium-Sized Businesses in the Transportation Industry. Prior to winding down our legacy commercial vehicle business, we considered ourselves the leading provider of commercial vehicle leases to owners and owner operators. Over time we have accumulated significant knowledge and experience in the industry and about its participants. This experience includes underwriting and managing credit risk in the sector. We have also developed a strong reputation and many business relationships through our commercial vehicle sales, leasing and support business. We believe this experience will be crucial to making our new internet-based businesses successful in the sector and others.

Our Target Markets are Very Large and Present Significant Opportunities. Our initial target market is large. According to CAAM, there were approximately 733,000 heavy trucks sold in 2016 in China, making it the largest market for heavy trucks in the world. Furthermore, we estimate this market supports approximately 9 trillion RMB in transactions per year, which our CeraPay product directly targets. Also, according to Wangdaizhijia, the total P2P lending market in China totaled approximately 982 billion RMB in 2015 and according to iResearch is forecast to grow to 3,545.2 billion RMB in 2019, representing a 4 year CAGR of approximately 38% per year. According to the China Passenger Car Association, China’s passenger vehicle market is also the largest in the world, totaling 23.9 million cars, sports utility and multipurpose vehicles sold in 2016. According to eMarketer, China also has the largest retail ecommerce market in the world, with 2016 retail ecommerce sales expected to top $899.09 billion.

Our proprietary closed-loop payment network is a significant barrier to entry. Our CeraPay payments service is only accepted at merchants who we have established a direct relationship with. Since a competitor would need to establish a direct relationship with each of the merchants that comprise the network in order to create a similar network, this presents a significant barrier to entry.

Our Experience Developing Proprietary Credit Controls and Information Systems Minimizes Risk and Potential Losses. We have several years of experience developing standardized underwriting and credit control procedures. We believe that this knowledge and experience allows us to profitably service underserved market segment with a minimum amount of risk. Our screening and approval process helps to ensure that we only accept customers who we believe will be able to fulfill the terms of our loans.

Our Branch Office Network Provides us with a Strong Competitive Advantage. We believe that our vast branch office network differentiates us from our competitors. Having a broad physical presence facilitates our sales, marketing and service efforts with customers. It also enhances our brand and recognition. We believe that having access to a large, branch office network can be a key consideration in our customers’ borrowing decision.

Our Management Team has Significant Experience in Real Estate. In particular, our founder has significant experience in developing, owning, and operating real estate assets. Through Hebei Kaiyuan Real Estate Development Co., Ltd. he has become one of the preeminent developers of real estate in Shijiazhuang. He leverages this expertise in owning and operating the Kai Yuan Finance Center.

Competition

There are a large number of P2P lending companies that operate in China that could be considered direct competitors to our CeraVest lending business. However, most of these competitors are not specifically focused on specific industry verticals such as the transportation industry like we are. Likewise, our CeraPay business faces competition from numerous other forms of payment methods including credit cards and debit cards, most of which are not specifically focused on serving a specific industry. In addition, our targeted CeraPay merchants are typically small businesses located in rural areas who did not previously accept any forms of electronic or online payment. There are also many online truck media platforms or shipping marketplaces that compete directly against our TruShip product.

We face considerable competition for individual CeraVest investors. We compete with a multitude of different investment products in different asset classes. These include but are not limited to equities, bonds, peer-to-peer loans, investment trust products, bank savings accounts, real estate and alternative asset classes. Our AutoChekk and PingPing ecommerce platforms also face considerable competition against many larger and more established platforms.

Discontinued Operations

In late 2015 we began winding down the operations of our commercial vehicle sales, leasing and support business because we felt that our internet-based business presented both a better opportunity and more efficient way to operate. Our commercial vehicle sales, leasing and support business provided commercial vehicle leasing solutions for small and medium-sized businesses in China’s transportation industry. We provided sales-type leases that include after-sales service and support for Class 8 heavy trucks (gross vehicle weight rating “GVWR” of over 33,000 lbs). Our insurance agency business, in which we established an insurance agency company, Shijie Kaiyuan Insurance Agency Co., Ltd (“Kaiyuan Insurance”), to act as a direct insurance agent in China, is part of this segment. Due to this strategic shift, our commercial vehicle sales, leasing and support business is presented as a discontinued operation in our financial statements.

Corporate Information

Capital Expenditures

Our capital expenditure primarily includes leasehold improvements of the Kai Yuan Finance Center that we acquired in September 2012. For fiscal 2013 we incurred $0.6 million in construction costs and leasehold improvement for Kai Yuan Finance Center. We did not incur any significant capital expenditures related to the Kai Yuan Finance Center in fiscal 2014. For fiscal 2015 we incurred $1.2 million in leasehold improvement for the Kai Yuan Finance Center. For fiscal 2016 we incurred $0.6 million in leasehold improvement for the Kai Yuan Finance Center.

Trademarks and Intellectual Property

Fincera, CeraPay and CeraVest are registered trademarks of the Company. We have also been granted software copyrights in China for our mobile applications. We have several trademark applications in China that are pending.

Governmental Regulations

This section sets forth a summary of the most significant rules and regulations that affect our business activities in China.

Since we operate websites, a peer-to-peer lending platform and an online payments platform, we are regulated by various government authorities, including among others:

●

the Ministry of Industry and Information Technology, or the MIIT, regulating the telecommunications and telecommunications-related activities, including, but not limited to, the internet information services and other value-added telecommunication services;

●

the People’s Bank of China, or the PBOC, as the central bank of China, regulating the formation and implementation of monetary policy, issuing the currency, supervising the commercial banks, assisting the administration of the financing and acting as the regulator for third party payment platforms;

●

China Banking Regulatory Commission, or the CBRC, regulating financial institutions, promulgating the regulations related to the administration of financial institutions and acting as the regulator for the online lending industry.

Regulations on Loans between Individuals

The PRC Contract Law governs the formation, validity, performance, enforcement and assignment of contracts. The PRC Contract Law confirms the validity of loan agreements between individuals and provides that the loan agreement becomes effective when the individual lender provides the loan to the individual borrower. The PRC Contract Law requires that the interest rates charged under the loan agreement must not violate the applicable provisions of the PRC laws and regulations. In accordance with the Provisions on Several Issues Concerning Laws Applicable to Trials of Private Lending Cases issued by the Supreme People’s Court on August 6, 2015, or the Private Lending Judicial Interpretations, which came into effect on September 1, 2015, private lending is defined as financing between individuals, legal entities and other organizations. When private loans between individuals are paid by wire transfer, through online peer-to-peer lending platforms or by other similar means, the loan contracts between individuals are deemed to be validated upon the deposit of funds to the borrower’s account. In the event that the loans are made through an online peer-to-peer lending platform and the platform only provides intermediary services, the courts shall dismiss the claims of the parties concerned against the platform demanding the repayment of loans by the platform as guarantors. However, if the online peer-to-peer lending service provider guarantees repayment of the loans as evidenced by its web page, advertisements or other media, or the court is provided with other proof, the lender’s claim alleging that the peer-to-peer lending service provider shall assume the obligations of a guarantor will be upheld by the courts. The Private Lending Judicial Interpretations also provide that agreements between the lender and borrower on loans with interest rates below 24% per annum are valid and enforceable. As to loans with interest rates per annum between 24% and 36%, if the interest on the loans has already been paid to the lender, and so long as such payment has not damaged the interest of the state, the community and any third parties, the courts will turn down the borrower’s request to demand the return of the interest payment. If the annual interest rate of a private loan is higher than 36%, the excess will not be enforced by the courts. The APR for our term loans is currently approximately 8.6%, which comprises a fixed interest rate. The interest rate component, which is stipulated in the loan agreements, does not and is not expected to exceed the mandatory limit for loan interest rates.

Pursuant to the PRC Contract Law, a creditor may assign its rights under an agreement to a third party, provided that the debtor is notified. Upon due assignment of the creditor’s rights, the assignee is entitled to the creditor’s rights and the debtor must perform the relevant obligations under the agreement for the benefit of the assignee. We operate a secondary loan market on our platform where investors can transfer the loans they hold to other investors before the loan reaches maturity. To facilitate the assignment of the loans, the template loan agreement applicable to the lenders and borrowers on our platform specifically provides that a lender has the right to assign his/her rights under the loan agreement to any third parties and the borrower agrees to such assignment.

Internet Finance Laws and Regulations

The PRC government is in the process of creating specific rules, laws and regulations to specially regulate the online peer-to-peer lending industry and the online payments industry. The Guidelines for Promoting Healthy Development of Internet Finance (the "Guidelines") that introduced the regulatory framework were released on July 18, 2015 and temporary rules for online lending were released on August 24, 2016; and on April 12, 2016, the General Office of the State Council released an implementation working plan on how to regulate and protect from internet finance risks. There are also certain rules, laws and regulations that are applicable, including the PRC Contract Law, the General Principles of the Civil Law of the PRC, and related judicial interpretations promulgated by the Supreme People’s Court.

Anti-money Laundering Regulations

The PRC Anti-money Laundering Law, which became effective in January 2007, sets forth the principal anti-money laundering requirements applicable to financial institutions as well as non-financial institutions with anti-money laundering obligations, including the adoption of precautionary and supervisory measures, establishment of various systems for client identification, retention of clients’ identification information and transactions records, and reports on large transactions and suspicious transactions. According to the PRC Anti-money Laundering Law, financial institutions subject to the PRC Anti-money Laundering Law include banks, credit unions, trust investment companies, stock brokerage companies, futures brokerage companies, insurance companies and other financial institutions as listed and published by the State Council, while the list of the non-financial institutions with anti-money laundering obligations will be published by the State Council. The PBOC and other governmental authorities issued a series of administrative rules and regulations to specify the anti-money laundering obligations of financial institutions and certain non-financial institutions, such as payment institutions. However, the State Council has not promulgated the list of the non-financial institutions with anti-money laundering obligations.

The Guidelines jointly released by ten PRC regulatory agencies in July 2015, purport, among other things, to require internet finance service providers, including online peer-to-peer lending platforms, to comply with certain anti-money laundering requirements, including the establishment of a customer identification program, the monitoring and reporting of suspicious transactions, the preservation of customer information and transaction records, and the provision of assistance to the public security department and judicial authority in investigations and proceedings in relation to anti-money laundering matters. The Temporary Rules jointly issued by four PRC regulatory agencies in August 2016 require the online lending information intermediaries, among other things, to comply with certain anti-money laundering obligations, including verifying customer identification, reporting suspicious transactions and preserving customer information and transaction records. The Custodian Guidelines issued by PBOC in February 2017 require the online lending platforms to set up custody accounts with commercial banks and comply with the anti-money laundry requirements of the relevant commercial banks.

In cooperation with our partnering custody banks and payment companies, we have adopted various policies and procedures, such as internal controls and “know-your-customer” procedures, for anti-money laundering purposes. Although we are in the process of ensuring that all of our policies and procedures fully comply with the requirements set forth in the Temporary Rules, we cannot assure you that the anti-money laundering policies and procedures we adopt will be effective in protecting our marketplace from being exploited for money laundering purposes or will be deemed to be in compliance with applicable anti-money laundering implementing rules if and when adopted.

Regulations on Value-Added Telecommunication Services

The Telecommunications Regulations promulgated by the State Council and its related implementation rules, including the Catalog of Classification of Telecommunications Business issued by the MIIT, categorize various types of telecommunications and telecommunications-related activities into basic or value-added telecommunications services, and internet information services, or ICP services, are classified as value-added telecommunications businesses. In 2009, the MIIT promulgated the Administrative Measures on Telecommunications Business Operating Licenses, which set forth more specific provisions regarding the types of licenses required to operate value-added telecommunications services, the qualifications and procedures for obtaining such licenses and the administration and supervision of such licenses. Under these regulations, a commercial operator of value-added telecommunications services must first obtain a license for value-added telecommunications business, or VATS License, from the MIIT or its provincial level counterparts.

In September 2000, the State Council also issued the Administrative Measures on Internet Information Services, which was amended in January 2011. Pursuant to these measures, “internet information services” refer to provision of internet information to online users, and are divided into “commercial internet information services” and “non-commercial internet information services.” A commercial internet information services operator must obtain a VATS License for internet information services, or ICP License, from the relevant government authorities before engaging in any commercial internet information services operations in China. The ICP License has a term of five years and can be renewed within 90 days before expiration.

Easy Technology has obtained an ICP license. Beijing One Auto Technology and Dian Fu Bao Investments Limited have each applied for the applicable ICP License for provision of commercial internet information services issued by the applicable local Telecommunication Administration Bureau and have the necessary file number to operate until the final ICP license is granted. Easy Technology, Beijing One Auto Technology and Dian Fu Bao Investments Limited are all our consolidated variable interest entities. The Guidelines jointly released by ten PRC regulatory agencies in July 2015, purport, among other things, to require internet finance service providers to complete registration with the relevant local counterpart of the MIIT in accordance with implementation regulations that may be promulgated by the MIIT or/and the Office for Cyberspace Affairs pursuant to the Guidelines. The Temporary Rules issued by four PRC regulatory agencies in August 2016 require the online lending information intermediaries, among other things, to apply for appropriate telecommunication business license in accordance with the relevant requirements of telecommunication authorities subsequent to completion of the record-filing with the local financial regulatory department. In accordance with the Guidelines and the Temporary Rules, the relevant authorities are in the process of making detailed implementation rules in relation to the record-filing procedures, as well as the application procedures for appropriate telecommunication business license by online lending information intermediaries. We plan to apply for any requisite telecommunication services license once the detailed implementation rules become available.

On September 7, 2016, MIIT released the Trial Administrative Measures on Use, Operation and Maintenance of Internet Information Security Management System to regulate internet-based service providers' internet information security management systems' operation and maintenance.

Regulations on Internet Information Security

Internet information in China is also regulated and restricted from a national security standpoint. The National People’s Congress, China’s national legislative body, has enacted the Decisions on Maintaining Internet Security, which may subject violators to criminal punishment in China for any effort to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights. The Ministry of Public Security has promulgated measures that prohibit use of the internet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing content. If an internet information service provider violates these measures, the Ministry of Public Security and the local security bureaus may revoke its operating license and shut down its websites.

In addition, the Guidelines jointly released by ten PRC regulatory agencies in July 2015 purport, among other things, to require internet finance service providers to improve technology security standards, and safeguard customer and transaction information. The Temporary Rules jointly issued by four PRC regulatory agencies in August 2016 requires the online lending information intermediaries, among other things, to (i) carry out grading filing and testing for their information systems, (ii) implement thorough cyberspace security facilities and management measures, including firewall, intrusion detect, data encryption, and disaster recovery, etc., (iii) establish information technology management, technology risk management, technology auditing and related systems, (iv) allocate sufficient resources and implement thorough management and control measures and technological means to ensure safe and steady operation of their information systems, (v) protect the security of the information of lenders and borrowers, (vi) carry out a comprehensive security evaluation at least once every two years, (vii) accept the information security inspection and auditing by competent authorities, and (viii) establish or adopt application-level disaster recovery systems and facilities compatible with their business scales within two years after their establishment.

Regulations on Privacy Protection

In recent years, PRC government authorities have enacted laws and regulations on internet use to protect personal information from any unauthorized disclosure. Under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT in December 2011, an ICP service operator may not collect any user personal information or provide any such information to third parties without the consent of a user. An ICP service operator must expressly inform the users of the method, content and purpose of the collection and processing of such user personal information and may only collect such information necessary for the provision of its services. An ICP service operator is also required to properly maintain the user personal information, and in case of any leak or likely leak of the user personal information, the ICP service operator must take immediate remedial measures and, in severe circumstances, make an immediate report to the telecommunications regulatory authority. In addition, pursuant to the Decision on Strengthening the Protection of Online Information issued by the Standing Committee of the National People’s Congress in December 2012 and the Order for the Protection of Telecommunication and Internet User Personal Information issued by the MIIT in July 2013, any collection and use of user personal information must be subject to the consent of the user, abide by the principles of legality, rationality and necessity and be within the specified purposes, methods and scopes. An ICP service operator must also keep such information strictly confidential, and is further prohibited from divulging, tampering or destroying of any such information, or selling or providing such information to other parties. An ICP service operator is required to take technical and other measures to prevent the collected personal information from any unauthorized disclosure, damage or loss. Any violation of these laws and regulations may subject the ICP service operator to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of filings, closedown of websites or even criminal liabilities. The Guidelines jointly released by ten PRC regulatory agencies in July 2015 also prohibit internet finance service providers from illegally selling or disclosing customers’ personal information. The PBOC and other relevant regulatory authorities will jointly adopt the implementing rules. Pursuant to the Ninth Amendment to the Criminal Law issued by the Standing Committee of the National People’s Congress in August 2015 and becoming effective in November, 2015, any internet service provider that fails to fulfill the obligations related to internet information security administration as required by applicable laws and refuses to rectify upon orders, shall be subject to criminal penalty for the result of (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client’s information; (iii) any serious loss of criminal evidence; or (iv) other severe situation, and any individual or entity that (i) sells or provides personal information to others in a way violating the applicable law, or (ii) steals or illegally obtain any personal information, shall be subject to criminal penalty in severe situation.

In operating our online consumer finance marketplace, we collect certain personal information from borrowers and investors, and also need to share the information with our business partners such as third-party online payment companies and loan collection service providers for the purpose of facilitating loan transactions between borrowers and investors over our marketplace. We have obtained consent from the borrowers and investors on our marketplace to collect and use their personal information, and have also established information security systems to protect the user information and privacy. We are currently in the process of ensuring that our policies and procedures will be deemed to be in full compliance with the Temporary Rules released in August 2016.

Anti-terrorism Legislation

In December 2015 China passed its first comprehensive anti-terrorism bill. The new laws require telecoms and Internet companies to cooperate with the government on counter-terrorism investigations. For example, companies are required to provide “technical interfaces, decryption and other technical support assistance to public security organs and state security organs conducting prevention and investigation of terrorist activities in accordance with law.” In addition, “Telecommunications operators and internet service providers shall, according to provisions of law and administrative regulations, put into practice network security systems and information content monitoring systems, technical prevention and safety measures, to avoid the dissemination of information with terrorist or extremist content.”

Government Regulations Relating to Foreign Exchange Controls

The principal regulation governing foreign exchange in the PRC is the Foreign Currency Administration Rules (2008), as amended. Under these rules, the Renminbi, the PRC’s currency, is freely convertible for trade and service related foreign exchange transactions (such as normal purchases and sales of goods and services from providers in foreign countries), but not for direct investment, loan or investment in securities outside of China unless the prior approval of the State Administration for Foreign Exchange, or SAFE, of the PRC is obtained. Foreign investment enterprises, or FIEs, are required to apply to the SAFE for Foreign Exchange Registration Certificates for FIEs. Fincera is a FIE. With such registration certificates, which need to be renewed annually, FIEs are allowed to open foreign currency accounts including a basic account and capital account. Currency translation within the scope of the basic account, such as remittance of foreign currencies for payment of dividends, can be effected without requiring the approval of the SAFE. Such transactions are subject to the consent of investment banks which are authorized by the SAFE to review basic account currency transactions. However, conversion of currency in the capital account, including capital items such as direct investment, loans and securities, still require approval of the SAFE. On July 14, 2014, the SAFE issued Circular No. 37 on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles. Circular No. 37 confirms that the use of offshore special purpose vehicles as holding companies for PRC investments are permitted, but proper foreign exchange registration applications are required to be reviewed and accepted by the SAFE.

Regulation of Foreign Currency Exchange and Dividend Distribution

Foreign Currency Exchange . Foreign currency exchange in the PRC is governed by a series of regulations, including the Foreign Currency Administrative Rules (1996), as amended, and the Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange (1996), as amended. Under these regulations, the Renminbi is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loans or investments in securities outside China without the prior approval of the SAFE. Pursuant to the Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange, foreign-invested enterprises in China may purchase foreign exchange without the approval of the SAFE for trade and service-related foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange, subject to a cap approved by SAFE, to satisfy foreign exchange liabilities or to pay dividends. However, the relevant Chinese government authorities may limit or eliminate the ability of foreign-invested enterprises to purchase and retain foreign currencies in the future. In addition, foreign exchange transactions for direct investment, loan and investment in securities outside China are still subject to limitations and require approvals from the SAFE.

Dividend Distribution . The principal laws and regulations in China governing distribution of dividends by foreign-invested companies include:

●

The Sino-foreign Equity Joint Venture Law (1979), as amended;

●

The Regulations for the Implementation of the Sino-foreign Equity Joint Venture Law (1983), as amended;

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The Company Law (2005), as amended;

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The Foreign Investment Enterprise Law (1995), as amended;

●

The Foreign Investment Enterprise Law (1986), as amended.

Under these regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, wholly foreign-owned enterprises in China are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds unless such reserve funds have reached 50% of their respective registered capital. These reserves are not distributable as cash dividends.

Periodic Reporting and Audited Financial Statements

Fincera has registered its securities under the Securities Exchange Act of 1934 and has reporting obligations, including the requirement to file annual reports with the SEC. In accordance with the requirements of the Securities Exchange Act of 1934, Fincera’s annual report contains financial statements audited and reported on by Fincera’s independent registered public accounting firm.

As a foreign private issuer, we are exempt from the rules under the Securities Exchange Act of 1934, as amended, prescribing the furnishing and content of proxy statements. In addition, we will not be required under the Exchange Act to file current reports with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act.

Legal Proceedings

To the knowledge of the Company, there is no material litigation currently pending or, to our knowledge, contemplated against Fincera or ACG or any of our officers or directors in their capacity as such.

C. Organizational Structure.

See Item 4.A. “Information on the Company — A. History and Development of the Company.”

D. Property and Equipment.

Our headquarters are located in Shijiazhuang, China, where we own the Kai Yuan Finance Center building and occupy a portion of it. This space has served as our headquarters since April 2013. Fincera leases out the unoccupied space, consisting of 56,092 square meters. Our principal offices are located at 27/F, Kai Yuan Finance Center, No. 5 East Main Street, Shijiazhuang, Hebei Province, 050011, People’s Republic of China, and its telephone number is +86 311 8382 7688.

We lease 2,530 square meters of office space in Beijing where our technology development and management operations are administered. We also lease the properties where our branch offices are located.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

OVERVIEW

Fincera Inc. (“Fincera,” the “Company,” or “we”) is a holding company whose business operations are conducted through its wholly owned subsidiaries, AutoChina Group Inc. (“ACG”) and Eastern Eagle International Ltd. ACG’s operations consist of the internet-based business, which provides financing and ecommerce services for small and medium-sized businesses and individuals in China, and the property lease and management business, which leases out office space. Eastern Eagle’s operations consist of hotel business which owns the Shijiazhuang Hilton Hotel in the Kai Yuan Finance Center building.

Prior to our acquisition of ACG, we had no operating business.

RESULTS OF OPERATIONS

2016 Compared to 2015

Overview

The year 2016 marked the second full-year of operations for our new internet-based business segment. During the year, we also continued winding down our legacy commercial vehicle sales, leasing and support business and insurance agency business, which have been classified as discontinued operations. Our revenues increased during the period as we continued to ramp-up our internet-based businesses. We were also able to generate a profit from our operations. The Company classifies service charges and interest income as part of its internet-based segment, and measures segment performance as income from operations less provision for credit losses, interest expenses, interest expenses of related parties, and property and management cost. The consolidated financial data for all periods presented is retrospectively adjusted to reflect the acquisition of Eastern Eagle and its subsidiaries, which were under common control with us both immediately before and after the acquisition (refer to Note 2 to the Consolidated Financial Statements for additional information). Prior period amounts have been adjusted to exclude discontinued operations (refer to Note 4 to the Consolidated Financial Statements for additional information).

CeraPay and CeraVest

Our most prominent internet-based businesses experienced significant growth during 2016. As shown in the table below, transaction volume of CeraPay (our online credit advance and payment processing platform) and CeraVest (our online lending platform for small businesses) increased significantly during 2016 over the prior year.

(RMB in millions)	For the Year Ended
	December 31, 2016	December 31, 2015
	Amount	Amount	% Change
CeraPay Transaction Volume	22,390.1	9,699.2	130.8 %
CeraVest Loans Issued	4,708.3	2,625.9	79.3 %

CeraPay (https://www.dianfubao.com/) allows customers to pay for their everyday needs at participating merchants through the online CeraPay transaction network. With functionality similar to a credit card, the Company issues revolving credit lines to customers, which they can use to make purchase transactions via the CeraPay application. Fincera earns transaction fees through its CeraPay platform.

CeraVest (https://www.qingyidai.com/) provides an online lending marketplace that provides short-term operating capital for small and medium-sized businesses. CeraVest originates loans and sells these loans to the public. Currently, individuals may invest on the CeraVest platform and earn an annual interest rate of up to approximately 8.03% on a flexible term investment, or 8.62% for a 6-month investment if held to maturity. Fincera earns origination fees on CeraVest loans.

Income

The table below sets forth certain line items from the Company’s Consolidated Statement of Income as a percentage of income:

(in thousands)	Year ended December 31, 2016		Year ended December 31, 2015
	Amount	% of Revenue	Amount	% of Revenue	Y-O-Y %CHANGE
			(Combined – Note 2)
Service charges	$ 71,642	54.3 %	$ 32,110	44.1 %	123.1 %
Interest income	33,976	25.7 %	14,226	19.5 %	138.8 %
Other income	821	0.6 %	62	0.1 %	1,224.2 %
Property lease and management	25,589	19.4 %	26,375	36.3 %	-3.0 %
Total income	$ 132,028	100.0 %	$ 72,773	100.0 %	81.4 %

Income for the year ended December 31, 2016 was $132.0 million, an increase of $59.2 million from $72.8 million in the prior year period, as a result of the ramp-up of our internet-based business segment, in particular our CeraVest and CeraPay products, which were launched in November 2014.

Service charges, which represents, CeraPay’s transaction fees and penalty and late fees, totaled $71.6 million in the year ended December 31, 2016, an increase of $39.5 million compared to the prior year. This was due to the significant increase in the volume of CeraPay transactions processed. During 2015, 9.7 billion RMB (approximately $1.6 billion) of transactions were processed through CeraPay. During 2016, 22.4 billion RMB (approximately $3.4 billion) of transactions were processed through CeraPay.

Interest income, which mainly represents CeraVest origination fees, interest earned on CeraVest loans, and penalty and late fees for CeraVest, totaled $34.0 million in the year ended December 31, 2016, an increase of $19.8 million compared to the prior year. This was due to a significant increase in the volume of CeraVest loans facilitated by the Company. During 2015 a total of 2.6 billion RMB (approximately $422.0 million) of CeraVest loans were facilitated by the Company. During 2016 a total of 4.7 billion RMB (approximately $708.4 million) of CeraVest loans were facilitated by the Company.

Other income, which represents governmental subsidies, totaled $0.8 million in the year ended December 31, 2016, an increase of $0.7 million compared to the prior year.

Property lease and management revenues, which represent the revenues of the property lease and management business and consist of revenue derived from the Kai Yuan Finance Center, which includes the Shijiazhuang Hilton Hotel and office leasing operations, totaled $25.6 million in the year ended December 31, 2016. This represents a slight decrease of 3.0% compared to the prior year. During the year ended December 31, 2016, revenues of the Shijiazhuang Hilton Hotel were approximately $16.6 million, compared to $16.5 million during the prior year, representing a slight increase of 0.6%. Office leasing revenues declined primarily due to lower occupancy rates at the Kai Yuan Finance Center. During the year ended December 31, 2015, the average occupancy rate of the Kai Yuan Finance Center was 86%, as compared to 74% during the year ended December 31, 2016.

Operating Costs and Expenses

The table below sets forth the components of our operating costs and expenses as a percentage of income, for the periods indicated (in thousands):

(in thousands)	Year ended December 31, 2016		Year ended December 31, 2015
	Amount	% of Revenues	Amount	% ofRevenues	Y-O-Y %CHANGE
			(Combined – Note 2)
Interest expense	$ 39,606	30.0 %	$ 24,806	34.1 %	59.7 %
Interest expense, related parties	6,231	4.7 %	6,109	8.4 %	2.0 %
Provision for credit losses	17,490	13.2 %	10,021	13.8 %	74.5 %
Product development expense	9,443	7.2 %	6,157	8.5 %	53.4 %
Property and management cost	16,515	12.5 %	17,636	24.2 %	-6.4 %
Selling and marketing	13,508	10.2 %	3,360	4.6 %	302.0 %
General and administrative	25,945	19.7 %	16,979	23.3 %	52.8 %
Total operating costs and expenses	$ 128,738	97.5 %	$ 85,068	116.9 %	51.3 %

Interest Expense

Interest expense totaled $45.8 million for the year ended December 31, 2016, of which $6.2 million of interest expense was incurred to related parties: Alliance Rich, Beiguo Auto, Beiguo Mall Xinji Branch, Hebei Kaiyuan, Hebei Ruituo Auto Trading Co., Ltd. (“Ruituo”), Hebei Xuyuan Investment Company and Shijiazhuang Xuheng Trade Company. It includes interest of $51,000 and $194,000 incurred for loans advanced from Shijiazhuang Xuheng Trade Company and Hebei Xuyuan Investment Company, respectively. It also included interest of $2.1 million, $3.1 million and $1,000 incurred for the internet-based financing from Beiguo Mall Xinji Branch, Ruituo, and Xinji Beiguo Mall, respectively. $168,000 of interest expense was incurred to Alliance Rich for amounts still outstanding from the acquisition of Heat Planet, and interest of $ 0.6 million for the CeraVest investors, related parties. The increase in interest expense during the year ended December 31, 2016 as compared to the prior year was primarily due to increased borrowings to support the growth of the internet-based businesses.

Interest expense totaled $30.9 million for the year ended December 31, 2015, of which $6.1 million of interest expense was incurred to related parties. Other interest expenses increased to $39.6 million during fiscal 2016 from $24.8 million during the prior period due primarily to interest paid to CeraVest investors.

Provision for credit losses

From December 31, 2015 to December 31, 2016, we increased the provision for credit losses from $10.0 million to $17.5 million. The increase was based on the growth of our new CeraPay and CeraVest businesses, as well as our management’s ongoing analysis of credit losses for the corresponding other financing receivables and loans, net due from our customers. The Company determines to collectively assess provision for credit losses based on homogeneous risk characteristics, and evaluates the allowance for receivables due from CeraPay and CeraVest customers respectively. The allowance for loan losses attributed to these loans is established via a process that estimates the probable losses inherent in the specific portfolio. This process includes migration analysis, a new and more objective estimate utilized by management starting in 2016 based on the build-up of historical data, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, which has led to an increase in provisions.

Product development expense

Product development expense totaled $9.4 million for the year ended December 31, 2016 as compared to $6.2 million for the prior year. The increase was primarily a result of an increase in the headcount of technical staff as compared to the prior year period.

Property and management cost

Property and management cost, which consists of depreciation of the Kai Yuan Finance Center and costs associated with operating the Shijiazhuang Hilton Hotel, totaled $16.5 million for the year ended December 31, 2016 as compared to $17.6 million for the prior year. The reduction was due to cost control measures at the Shijiazhuang Hilton Hotel.

Selling and marketing

Selling and marketing expenses for the year ended December 31, 2016 were $13.5 million, an increase of $10.1 million as compared to the same period of 2015. This was mainly due to selling and marketing costs incurred to promote the Company’s new internet-based businesses during 2016. These costs include but are not limited to sales commissions and salaries for sales staff.

General and administrative

General and administrative expenses for the year ended December 31, 2016 were $25.9 million, an increase of $8.9 million as compared to the same period of 2015. The increase was primarily due to costs associated with establishing and running the Company’s new internet-based businesses. These costs include but are not limited to salaries for administrative personnel and fees from third-party payment providers.

Income tax provision (benefit)

In the year ended December 31, 2016, the Company recorded an income tax expense of $1.3 million, as compared to an income tax benefit of $2.9 million in the year ended December 31, 2015. This occurred because the Company generated income from continuing operations before income taxes during the year 2016, while it generated a loss from continuing operations before income taxes during the year 2015.

Income (loss) from continuing operations

Income from continuing operations in the year ended December 31, 2016 was $2.0 million, as compared to a loss from continuing operations of $9.4 million in year ended December 31, 2015. The increase resulted from the ramping up of the Company’s new internet-based businesses.

Income from discontinued operations, net of taxes

Discontinued operations consist of the Company’s commercial vehicle sales, leasing and support business and insurance agency business (see Note 4 to the financial statements included herewith). Income from discontinued operations in the year ended December 31, 2016 was $0.2 million, as compared to $8.2 million in the year ended December 31, 2015. The decrease resulted from the winding down of the businesses classified as discontinued operations.

Net income (loss)

Net income in the year ended December 31, 2016 was $2.2 million, as compared to a net loss of $1.2 million in the year ended December 31, 2015. The increase was due to the growth of the Company’s internet-based business.

2015 Compared to 2014

Overview

The year 2015 was a year of transition for Fincera Inc. as it marked the first full-year of operations for our new internet-based business segment. During the year, we also began winding down our legacy commercial vehicle sales, leasing and support business and insurance agency business, which have been classified as discontinued operations. As a result of the ramp-up of our new internet-based businesses, which is reflected in the table below, our revenues increased substantially during the period. The Company classifies service charges and interest income as part of its internet-based segment, and measures segment performance as income from operations less provision for credit losses, interest expenses, interest expenses of related parties, and property and management cost. Prior period amounts have been adjusted to exclude discontinued operations (refer to Note 4 to the Consolidated Financial Statements for additional information).

(RMB in millions)	For the Year Ended
	December 31, 2015	December 31, 2014
	Amount	Amount	% Change
CeraPay Transaction Volume	9,699.2	105.4	9,102.3 %
CeraVest Loans Issued	2,625.9	122.2	2,048.9 %

Income

The table below sets forth certain line items from the Company’s Consolidated Statement of Income as a percentage of income:

(in thousands)	Year ended December 31, 2015		Year ended December 31, 2014
	Amount	% of Revenue	Amount	% of Revenue	Y-O-Y %CHANGE
	(Combined – Note 2)		(Combined – Note 2)
Service charges	$ 32,110	44.1 %	$ 301	1.5 %	10,565.8 %
Interest income	14,226	19.6 %	195	1.0 %	7,195.4 %
Other income	62	0.1 %	—	0.0 %	100.0 %
Property lease and management	26,375	36.2 %	19,527	97.5 %	35.1 %
Total income	$ 72,773	100.0 %	$ 20,023	100.0 %	263.4 %

Income for the year ended December 31, 2015 was $72.8 million, an increase of $52.8 million from $20.0 million in the prior year period, primarily as a result of the ramp-up of our new internet-based business segment, in particular our CeraVest and CeraPay products, which were launched in November 2014. Our property lease and management revenue also increased due to a higher percentage of available space being leased out and increased revenues from the Shijiazhuang Hilton Hotel.

Service charges, which represents CeraPay’s transaction fees and penalty and late fees, totaled $32.1 million in the year ended December 31, 2015, an increase of $31.8 million compared to the prior year. This was due to the significant increase in the volume of CeraPay transactions processed, in large part since CeraPay was only in operation for two months of fiscal 2014 as compared to all of fiscal 2015. During 2014, 105.4 million RMB (approximately $17.2 million) of transactions were processed through CeraPay, which commenced operations in November 2014. During 2015, 9.7 billion RMB (approximately $1.6 billion) of transactions were processed through CeraPay.

Interest income, which represents CeraVest origination fees, interest earned on CeraVest loans, and penalty and late fees for CeraVest, totaled $14.2 million in the year ended December 31, 2015, an increase of $14.0 million compared to the prior year. This was due to a significant increase in the volume of CeraVest loans facilitated by the Company and since CeraVest was only in operation for two months of fiscal 2014 as compared to all of fiscal 2015. By December 31, 2014, there were 122.2 million RMB (approximately $19.9 million) of CeraVest loans facilitated since the product launched in November 2014. During 2015 a total of 2.6 billion RMB (approximately $422.0 million) of CeraVest loans were facilitated by the Company.

Other income, which represents the insurance indemnity for the property of Kai Yuan Finance Center, totaled $0.1 million in the year ended December 31, 2015. There was no other income in the prior year period.

Property lease and management revenues, which represent the revenues of the property lease and management business and consist of revenue derived from the Kai Yuan Finance Center, which includes the Shijiazhuang Hilton Hotel and office leasing operations, totaled $26.4 million in the year ended December 31, 2015. This represents an increase of 35.1% compared to the prior year due to a higher percentage of available space in the Kai Yuan Finance Center being leased out to tenants in addition to higher revenues from the Shijiazhuang Hilton Hotel. During the year ended December 31, 2015, revenues of the Shijiazhuang Hilton Hotel were approximately $16.5 million, compared to $14.6 million during the prior year, representing an increase of 13.0%. At December 31, 2015, the occupancy rate of the Kai Yuan Finance Center was 93%, as compared to 72% at December 31, 2014. The property lease and management business commenced operations during the third quarter of 2013.

Operating Costs and Expenses

The table below sets forth the components of our operating costs and expenses as a percentage of income, for the periods indicated (in thousands):

(in thousands)	Year ended December 31, 2015		Year ended December 31, 2014
	Amount	% of Revenues	Amount	% of Revenues	Y-O-Y %CHANGE
	(Combined – Note 2)		(Combined – Note 2)
Interest expense	$ 24,806	34.1 %	$ 14,530	72.6 %	70.7 %
Interest expense, related parties	6,109	8.4 %	1,991	9.9 %	206.8 %
Provision for credit losses	10,021	13.8 %	209	1.0 %	4,694.7 %
Product development expense	6,157	8.5 %	3,321	16.6 %	85.4 %
Property and management cost	17,636	24.2 %	17,360	86.7 %	1.6 %
Selling and marketing	3,360	4.6 %	1,558	7.8 %	115.7 %
General and administrative	16,979	23.3 %	13,353	66.7 %	27.2 %
Litigation expense	—	0.0 %	4,350	21.7 %	-100.0 %
Total operating costs and expenses	$ 85,068	116.9 %	$ 56,672	283.0 %	50.1 %

Interest Expense

Interest expense totaled $30.9 million for the year ended December 31, 2015, of which $6.1 million of interest expense was incurred to related parties: Alliance Rich, Beiguo Auto, Hebei Kaiyuan, Hebei Ruituo Auto Trading Co., Ltd. (“Ruituo”), Hebei Xuyuan Investment Company, Shijiazhuang Xuheng Trade Company and Xinji Beiguo Mall. It includes interest of $301,000, $60,000 and $11,000 incurred for loans advanced from Hebei Kaiyuan, Shijiazhuang Xuheng Trade Company and Hebei Xuyuan Investment Company, respectively. It also included interest of $3.9 million, $67,000 and $1.6 million incurred for the internet-based financing from Ruituo, Beiguo Auto and Xinji Beiguo Mall, respectively. $168,000 of interest expense was incurred to Alliance Rich for amounts still outstanding from the acquisition of Heat Planet.

Interest expense totaled $16.5 million for the year ended December 31, 2014, of which $2.0 million of interest expense was incurred to related parties. Other interest expenses increased to $24.8 million during fiscal 2015 from $14.5 million during the prior period due primarily to interest paid to CeraVest investors. CeraVest was launched in November 2014.

Provision for credit losses

From December 31, 2014 to December 31, 2015, we increased the provision for credit losses from $0.2 million to $10.0 million. The increase was based on the growth of our new CeraPay and CeraVest businesses, as well as our management’s ongoing analysis of credit losses for the corresponding other financing receivables and loans, net due from our customers. The Company determines that both the other financing receivables and loans, net represent large groups of smaller-balance homogeneous loans to the CeraPay and CeraVest customers based on their similar general credit risk characteristics, and evaluates the allowance for receivables due from CeraPay and CeraVest customers respectively. When evaluating the credit losses, the Company normally bases it on its historical loss experience derived from the commercial vehicle sales, leasing and support business, which has a similar credit portfolio with the existing Internet-based borrowers, and also makes reference to the experience of other entities in the same business.

Product development expense

Product development expense totaled $6.2 million for the year ended December 31, 2015 as compared to $3.3 million for the prior year. The increase was primarily a result of an increase in the headcount of technical staff as compared to the prior year period.

Property and management cost

Property and management cost, which consists of depreciation of the Kai Yuan Finance Center and costs associated with operating the Shijiazhuang Hilton Hotel, totaled $17.6 million for the year ended December 31, 2015 as compared to $17.4 million for the prior year.

Selling and marketing

Selling and marketing expenses for the year ended December 31, 2015 were $3.4 million, an increase of $1.8 million as compared to the same period of 2014. This was mainly due to selling and marketing costs incurred to promote the Company’s new internet-based businesses during 2015. These costs include but are not limited to sales commissions and salaries for sales staff.

General and administrative

General and administrative expenses for the year ended December 31, 2015 were $17.0 million, an increase of $3.6 million as compared to the same period of 2014. The increase was primarily due to costs associated with establishing and running the Company’s new internet-based businesses. These costs include but are not limited to salaries for administrative personnel, registration fees and fees from third-party payment providers.

Litigation expense

There was no litigation expense during the year ended December 31, 2015. Litigation expense totaled $4.4 million for year ended December 31, 2014. This represented the amount the Company agreed to pay to settle the outstanding lawsuit with the SEC.

Income tax benefit

In the year ended December 31, 2015, the Company recorded an income tax benefit of $2.9 million, as compared to an income tax benefit of $7.3 million in the year ended December 31, 2014.

Loss from continuing operations

Loss from continuing operations in the year ended December 31, 2015 was $9.4 million, as compared to a loss from continuing operations of $29.3 million in year ended December 31, 2014. The decrease resulted from the ramping up of the Company’s new internet-based businesses.

Income from discontinued operations, net of taxes

Discontinued operations consist of the Company’s commercial vehicle sales, leasing and support business and insurance agency business (see Note 4 to the financial statements included herewith). Income from discontinued operations in the year ended December 31, 2015 was $8.2 million, as compared to $26.5 million in the year ended December 31, 2014. The decrease resulted from the winding down of the businesses classified as discontinued operations.

Net loss

Net loss in the year ended December 31, 2015 was $1.2 million, as compared to $2.9 million in the year ended December 31, 2014. The decrease resulted from the ramping up of the Company’s new internet-based businesses.

LIQUIDITY AND CAPITAL RESOURCES

Financing arrangements

The Company’s operations have been financed primarily through short-term funding provided by CeraVest investors, and short-term bank borrowings from financial institutions and related parties. The interest rates of such short-term borrowings during the periods have ranged from 4.35% to 9.00% per annum.

As of December 31, 2016, the Company’s outstanding borrowings from related parties amounted to $144,000, $4.3 million, $4.3 million, $12,000, $68.8 million, $64.0 million and $165.5 million from Mr. Li, Alliance Rich, Hebei Kaiyuan, Honest Best Int’l Ltd., Smart Success Investment Limited (“Smart Success”), Ruituo and Beiguo Mall Xinji Branch, respectively. Alliance Rich, Hebei Kaiyuan, Honest Best Int’l Ltd. and Smart Success are controlled by Mr. Li.

Each of these loans was entered into to satisfy the Company’s capital needs except for the amount due to Alliance Rich, which represented the consideration for the acquisition of Heat Planet, and a portion of the amount due to Smart Success, which represented the consideration for the acquisition of Eastern Eagle. The amount due to Alliance Rich was payable within six months of occupation of the Kai Yuan Finance Center by the Company, which occurred in April 2013, and delivery of the audited financial statements for the five months ended May 31, 2012 of Heat Planet, which were delivered in December 2012, and any unpaid amounts after such six months have begun to accrue interest at the one-year rate announced by the People’s Bank of China (4.35% as of December 31, 2016). The amount due to Smart Success for the acquisition of Eastern Eagle is payable by August 8, 2017. Any unpaid amounts thereafter will begin to accrue interest at the one-year rate announced by the People’s Bank of China. As of December 31, 2016 approximately $66.9 million is still owed to Smart Success for the acquisition of Eastern Eagle. Other amounts due to Smart Success are non-interest bearing, unsecured and due on demand by the lenders.

The amount due to Hebei Kaiyuan was non-interest bearing, unsecured and due on demand. In September 2011, Hebei Kaiyuan began charging interest at 8.00% per annum on amounts owed to it. The amount due to Mr. Li and Honest Best Int’l Ltd. were non-interest bearing, unsecured and due on demand by the lenders. The Company pays a financing charge of approximately 4.6% per annum on amounts due to Beiguo Mall Xinji Branch.

The amount due to Ruituo represented an unsecured and due on demand amount by Ruituo bearing interest at approximately 8.00% per annum based on the weighted average outstanding payable balances at month end, and an unsecured long-term loan bearing interest at 4.90% per annum based on the weighted average outstanding payable balances at month end. The Company entered into a long-term loan agreement with Ruituo during 2016. Ruituo provided a facility to the Company, amounting to $72.1 million (RMB 500 million), with a period from September 23, 2016 to September 23, 2019. As of December 31, 2016, about $32.9 million was provided by Ruituo to the Company.

As of December 31, 2016, the Company had short-term bank borrowings of $83.6 million, represented by loans from various Chinese banks, which have terms within one year. The Company had long-term borrowings of $95.7 million, represented by loans from two Chinese banks, which mature in October 2023 and in December 2028. The Company also had $8.9 million of long-term bank borrowings, current portion, which represents the current portion of long-term loans from two bank in the PRC. And the Company had a total of $14.4 million of unused bank facilities, which was granted by China Citic Bank, as of December 31, 2016.

After taking into consideration our financing arrangements and our existing cash resources, we believe we have adequate sources of liquidity to meet our short-term obligations and working capital requirements for at least the next 12 months following the filing of this annual report. However, the Company may elect to obtain addition funding to expand and grow its operations, which may include borrowings from financial institutions and/or the sale of equity.

Working Capital

As of December 31, 2016 and 2015, the Company had a working capital deficit of $81.6 million and working capital of $116.8 million, respectively.

During the year ended December 31, 2016, the Company increased its total short-term borrowings, which includes its short-term bank borrowings, current portion of long-term bank borrowings, other payables and accrued liabilities and borrowed funds from CeraVest investors, borrowing net funds amounting to $249.7 million. The Company had a net increase of financing payables, related parties of $122.1 million, during fiscal 2016. The net impact generated additional cash for operations.

The Company anticipates that it will have adequate sources of working capital in the next 12 months. However, the Company may elect to obtain addition funding to expand and grow its operations, which may include offering debt, borrowing from financial institutions and/or the sale of equity.

Financial Condition

The following table sets forth our major balance sheet accounts at December 31, 2016 and 2015 (in thousands):

	As of December 31,
	2016	2015
		(Combined – Note 2)
Assets:
Cash and cash equivalents	$ 104,123	$ 72,262
Other financing receivables, net	295,437	235,349
Loans, net	371,301	250,659
Assets of discontinued operations	21,834	119,845
Property, equipment and improvements, net	202,073	224,704
Liabilities:
Short-term bank borrowings	$ 83,610	$ 75,921
Long-term bank borrowings, current portion	8,938	14,784
Long-term bank borrowings	95,719	118,424
Other payables and accrued liabilities	61,202	48,210
Borrowed funds from CeraVest investor, related party	4,349	2,716
Borrowed funds from CeraVest investors	437,594	202,725
Financing payables, related parties	273,970	151,921
Long-term financing payables, related party	33,028	-
Liabilities of discontinued operations	4,471	53,032

Other financing receivables, net began in November 2014 as a result of the inception of the CeraPay payments business under which the Company provides SMBs with an electronic form of payment with features similar to a credit card. As the CeraPay usage and revenue increased during the period, the balance of other financing receivables, net increased accordingly.

Loans, net began in November 2014 as a result of the inception of the CeraVest P2P lending platform business under which the Company provides short-term loans to SMBs which are partially funded by investors through the platform. As the CeraVest business and the amount of loans provided to SMBs have grown, the balance of loans, net has increased accordingly.

Assets of discontinued operations represent the current and non-current assets of the commercial vehicle sales, leasing and support business and insurance agency business, while Liabilities of discontinued operations represent its current and non-current liabilities (see Note 4 to the Consolidated Financial Statements for additional information).

Property, equipment and improvements decreased to $202.1 million as of December 31, 2016, a decrease of $22.6 million, as compared with December 31, 2015. The decrease mainly relates to depreciation on property and equipment as well as a decline in the exchange rate between RMB and USD.

Short-term bank borrowings represent loans from various banks in the PRC. Short-term bank borrowings were used for working capital and capital expenditure purposes. The borrowings increased to $83.6 million as of December 31, 2016, from $75.9 million as of December 31, 2015, because the Company increased bank borrowings by $7.7 million during the year. The terms of the remaining outstanding bank borrowings range from 6 months to12 months and begin to expire in December 2017.

Long-term bank borrowings, current portion represents the current portion of long-term loans from two banks in the PRC. The loans were used for working capital and capital expenditure purposes. The current portions of the loans are due in December 2017.

Other payables and accrued liabilities consist of the default assurance (security deposits) received from the CeraVest borrowers, deposits from CeraVest investors, customer deposit from tenants, salaries payable, payables to CeraPay registered stores and other items. It increased to $61.2 million as of December 31, 2016 from $48.2 million as of December 31, 2015, which was mainly due to the CeraVest and CeraPay business.

Borrowed funds from CeraVest investors began in November 2014 as a result of the inception of the CeraVest P2P lending platform business. Since borrowed funds from CeraVest investors represent the amounts invested by and therefore owed to CeraVest investors, as the CeraVest business and the amount of investment received from investors has grown, the balance of borrowed funds from CeraVest investors has increased accordingly.

Financing payables, related parties are related to the financing arrangement for the purchase of commercial vehicles by CeraVest customers and borrowings from related parties of the Company. Financing payables, related parties increased from $151.9 million to $274.0 million as of December 31, 2016, an increase of $122.1 million, as compared with December 31, 2015. Such amounts were primarily related to the payables to our related parties: Mr. Li, Alliance Rich, Hebei Kaiyuan, Honest Best Int’l Ltd., Smart Success, Ruituo, Beiguo Auto, Xinji Beiguo Mall and Beiguo Mall Xinji Branch.

Long-term financing payables, related party represented the loans provided by Ruituo for working capital purposes. Long-term financing payables, related parties increased from nil to $33.0 million as of December 31, 2016, an increase of $33.0 million, as compared with December 31, 2015. The loan is due in September 2019.

Liabilities of discontinued operations represent the current and non-current liabilities of the commercial vehicle sales, leasing, and support business and insurance agency business (see Note 4 to the financial statements attached herewith).

The following table sets forth certain historical information with respect to the Company’s statements of cash flows (in thousands):

	Years Ended December 31,
	2016	2015	2014
Net cash provided by (used in) operating activities	$ 123,300	$ 365,863	$ (20,177 )
Net cash (used in) investing activities	(243,956 )	(495,928 )	(50,582 )
Net cash provided by financing activities	162,140	178,509	53,826
Effect of exchange rate change	(9,623 )	(4,294 )	(532 )

Net increase (decrease) in cash and cash equivalents	$ 31,861	$ 44,150	$ (17,465 )

Operating Activities . Net cash provided by operating activities for the year ended December 31, 2016 was $123.3 million, as compared to $365.9 million and $20.2 million of net cash used in operating activities for the years ended December 31, 2015 and December 31, 2014, respectively. The decrease in cash flows provided by operating activities during fiscal 2016 was attributable primarily to a decrease in cash provided by operating activities – discontinued operations due to decreased collections on outstanding commercial vehicle leases from the Company’s discontinued commercial vehicle sales servicing, leasing and support business.

In the year ended December 31, 2016, operating activities generated $123.3 million of cash. During 2016, the Company had net income of $2.2 million. In addition, the Company had depreciation and amortization of $9.0 million, an increase of provision for credit losses of $20.8 million, an increase of restricted cash of $6.2 million, an increase of $14.6 million of other payables and accrued liabilities, an increase of prepaid expense and other current assets of $2.1 million, a decrease in accounts receivable of $15.5 million, a decrease of short term net investment of $5.6 million, a decrease of inventory of $3.2 million and a decrease of long term net investment in sale-type leases of $60.1 million. The remaining balance arises from changes in deferred income taxes, income tax payable, and other items.

In the year ended December 31, 2015, operating activities generated $365.9 million of cash. During 2015, the Company had a net loss of $1.2 million. In addition, the Company had depreciation and amortization of $10.0 million, an increase of provision for credit losses of $19.4 million, a decrease of restricted cash of $0.8 million, an increase of $23.0 million of other payables and accrued liabilities, an decrease of prepaid expense and other current assets of $0.7 million, an increase of accounts receivable of $11.1 million, a decrease of other financing receivables from peer store, net of $16.5 million, a decrease of short term investment of $50.1 million, and a decrease of long term net investment in sales-type leases of $270,9 million. The remaining balance arises from changes in deferred income taxes, income tax payable, and other items.

In the year ended December 31, 2014, operating activities used $20.2 million of cash. During 2014, the Company had a net loss of $2.9 million. In addition, the Company had depreciation and amortization of $10.4 million, an increase of provision for credit losses of $13.6 million, a decrease of restricted cash of $0.3 million, an increase of $7.8 million of other payables and accrued liabilities, an increase of prepaid expense and other current assets of $0.9 million, an increase of accounts receivable of $13.1 million, an increase of other financing receivables form peer store, net of $13.0 million, an increase of short term net investment of $57.3 million and a decrease of long term net investment in sales-type leases of $43.0 million. The remaining balance arises from changes in deferred income taxes, income tax payable, and other items.

Investing Activities . Net cash used in investing activities was $244.0 million in the year ended December 31, 2016 and was mainly attributed to an increase from change in loans of $144.7 million, an increase from change in other financing receivables of $92.5 million, purchase of property, equipment and leasehold improvements of $7.9 million and proceeds from sales of property, equipment and leasehold improvements of $1.1 million. Net cash used in investing activities was $495.9 million in the year ended December 31, 2015 and was mainly attributed to an increase from change in loans of $244.0 million, an increase from change in other financing receivables of $239.7 million and purchase of property, equipment and leasehold improvements of $12.2 million. Net cash used in investing activities was $50.6 million in the year ended December 31, 2014 and was mainly attributed to an increase from change in loans of $20.0 million, an increase from other financing receivables of $16.7 million and purchase of property, equipment and leasehold improvements of $13.9 million.

Financing Activities . Net cash provided by financing activities was $162.1 million in the year ended December 31, 2016, and net cash provided by financing activities was $178.5 million and $53.8 million in the years ended December 31, 2015 and 2014, respectively. In the year ended December 31, 2016, the Company received net proceeds of $260.0 million from CeraVest investors, received proceeds of $871.8 million from its related parties, repaid $765.6 million to its related parties and had net repayments of bank borrowings of $46.6 million. The Company also had a capital distribution of $157.5 million.

In the year ended December 31, 2015, the Company received net proceeds of $213.9 million from CeraVest investors, received proceeds of $270.7 million from its related parties, repaid $260.2 million to its related parties and had net repayments of bank borrowings of $45.9 million.

In the year ended December 31, 2014, the Company received net proceeds of $0.1 million from CeraVest investors, received proceeds of $901.5 million from its related parties, repaid $943.8 million to its related parties and had net bank borrowings of $96.0 million.

Historically, most or all available cash is used to fund the loans, investment in direct financing and sales-type leases, other financing receivables, short-term net investment, inventory growth and for capital expenditures. To the extent the investment in loans, direct financing, sales-type leases, other financing receivables, short-term net investment, inventory growth, and capital expenditures exceed income from operations, the Company generally increases the bank borrowings under its financing facilities and from related parties and CeraVest investors.

The Company currently leases all of the properties where its branch offices are located. It expects to lease the majority of the properties where new branch offices are located.

At December 31, 2016, the Company had $110.3 million of cash on hand, with $107.9 million of cash held in Renminbi. On a short-term basis, the Company’s principal sources of liquidity include borrowed funds from CeraVest investors, income from operations, short-term borrowings from financial institutions including other payables, related parties and borrowings from related parties. On a longer-term basis, the Company expects its principal sources of liquidity to consist of borrowed funds from CeraVest investors, income from operations, borrowings from financial institutions, related parties and/or fixed interest term loans. Furthermore, the Company believes, if necessary, it could raise additional capital through the issuance of debt and equity securities. The Company expects to use cash primarily to increase its loans, net and other financing receivables in line with its revenue growth. We believe that we have adequate liquidity to satisfy our capital needs for the near term; however, we may need to raise additional capital to maintain our high rate of growth.

Fincera’s borrowings primarily consisted of: (i) Short-term bank borrowings; (ii) Long-term bank borrowings; (iii) Borrowed funds from CeraVest investors; (iv) Financing payables, related parties; and (v) Long-term financing payables, related parties.

Short-term bank borrowings. Short-term bank borrowings represented loans from various financial institutions that were used for working capital and capital expenditures purposes. The loans from various financial institutions bear interest at rates ranging from 4.35% to 5.22% as of December 31, 2016 and have terms of up to one year.

Long-term bank borrowings. Long-term bank borrowings represented loans from two financial institutions that were used for working capital and capital expenditures purposes. The loans bear interest at 4.99% as of December 31, 2016, have an original term of 14 years and are due in December 2028.

Borrowed funds from CeraVest investors. Borrowed funds from CeraVest investors represent amounts invested by and therefore owed to CeraVest investors through the CeraPay platform. The loans bear interest at up to 8.03% for the flexible term and 8.62% for fixed term to six months.

Financing payables, related parties. Financing payables from related parties was primarily related to 1) the received internet-based financings from Ruituo, a company controlled by Mr. Li’s brother; 2) the internet-based financings from Beiguo Mall Xinji Branch during 2016, companies affiliated with Mr. Li; 3) the amount due to Alliance Rich, a company controlled by Mr. Li, which represents a portion of the consideration paid in the acquisition of Heat Planet Holdings Limited (“Heat Planet”); 4) the amount due to Hebei Kaiyuan, a company controlled by Mr. Li; and 4) the amount due to Smart Success, a company controlled by Mr. Li, which represents a portion of the consideration paid in the acquisition of Eastern Eagle.

The amount due to Ruituo is unsecured and due on demand by Ruituo and bore interest at approximately 8.00% per annum, based on the weighted average outstanding payable balances at month end.

Mr. Li holds 20.92% of indirect beneficial ownership in Beiguo Mall Xinji Branch. The Company pays a financing charge of approximately 4.6% per annum to Beiguo Mall Xinji Branch for the funds obtained due to this financing arrangement. The financing arrangement is personally guaranteed by Mr. Li, who has a long term business relationship with Beiguo, on behalf of the Company. In addition, the payable balances of each loan are unsecured and due in 180 days.

The amount due to Alliance Rich was payable within six months of occupation of the Kai Yuan Center by the Company, which was completed in April 2013 and delivery of the audited financial statements for the five months ended May 31, 2012 of Heat Planet, which were delivered in December 2012. In October 2013, the unpaid amount began to accrue interest at the one-year rate announced by the People’s Bank of China (4.35% as of December 31, 2016). As of December 31, 2016 approximately $4.3 million is still owed to Alliance Rich for the acquisition of Heat Planet.

The amount due to Hebei Kaiyuan was initially non-interest bearing, unsecured and due on demand by the lender. In September 2011, Hebei Kaiyuan began charging interest at 8.00% per annum, and amounts owed continue to be unsecured and due on demand by the lender.

The amount due to Smart Success is payable by August 8, 2017. Any unpaid amounts thereafter will begin to accrue interest at the one-year rate announced by the People’s Bank of China. As of December 31, 2016 approximately $66.9 million is still owed to Smart Success for the acquisition of Eastern Eagle. Other amounts due to Smart Success are non-interest bearing, unsecured and due on demand by the lenders.

The Company expects to continue relying on the financing from the related parties and believes the related parties have sufficient capital to continue providing such financing to us in the foreseeable future.

Long-term Financing payable, related parties. Long-term financing payable from related parties represent the amount due to Ruituo, a company controlled by Mr. Li’s brother. The Company entered into a long-term loan agreement with Ruituo during 2016 for long-term capital needs. Ruituo provided a facility to the Company, amounting $72.1 million (RMB 500 million), with a period from September 23, 2016 to September 23, 2019. This long-term loan is unsecured and bears interest at 4.90% per annum based on the weighted average outstanding payable balances at month end.

The Company’s borrowings fluctuate based upon a number of factors, including (i) income, (ii) changes in: other financing receivables and loans, net and (iii) capital expenditures. Historically, income from operations, as well as borrowings on the revolving credit facilities have driven accounts and notes receivable growth, inventory growth and capital expenditures.

We believe that our available cash and cash equivalents and cash provided by operating activities, together with cash available from borrowings, will be adequate to meet presently anticipated cash needs for at least the next twelve months.

Cash and cash equivalents as of December 31, 2016 are mainly held by the Company’s subsidiaries and VIEs. These cash balances cannot be transferred to the Company by loan or advance according to existing PRC laws and regulations. However, these cash balances can be utilized by the Company for its normal operations pursuant to the Enterprise Agreements.

Regulations on Dividend Distribution

The principal laws and regulations in China governing distribution of dividends by foreign-invested companies include:

●

The Sino-foreign Equity Joint Venture Law (1979), as amended;

●

The Regulations for the Implementation of the Sino-foreign Equity Joint Venture Law (1983), as amended;

●

The Sino-foreign Cooperative Enterprise Law (1988), as amended;

●

The Detailed Rules for the Implementation of the Sino-foreign Cooperative Enterprise Law (1995), as amended;

●

The Foreign Investment Enterprise Law (1986), as amended; and

●

The Regulations of Implementation of the Foreign Investment Enterprise Law (1990), as amended.

Off-Balance Sheet Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any off-balance sheet derivative instruments. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Contractual Payment Obligations

The following is a summary of the Company’s contractual obligations for operations as of December 31, 2016 (in thousands):

	Payments due by period
	Total	Less than 1 Year	1 to 3 Years	3 to 5 Years	More than 5 Years
Operating leases	$ 475	$ 192	$ 283	$ —	$ —
Short-term bank borrowings	83,610	83,610	—	—	—
Long-term bank borrowings	104,657	8,938	22,921	27,389	45,409
Financing payables, related parties	273,970	273,970	—	—	—
Long-term financing payables, related party	33,028		33,028

Total	$ 495,740	$ 366,710	$ 56,232	$ 27,389	$ 45,409

The Company leases certain facilities under long-term, non-cancelable leases and month-to-month leases. These leases are accounted for as operating leases.

Recently Issued Accounting Standards

See Note 3 to the Consolidated Financial Statements included herewith.

Critical Accounting Policies and Estimates

See Note 3 to the Consolidated Financial Statements included herewith.

Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Fincera’s exposure to interest rate risk primarily relates to its outstanding debts and interest income generated by excess cash, which is mostly held in interest-bearing bank deposits. In addition, fixed rate securities such as the Company’s CeraVest loans may have their fair market value adversely impacted due to a rise in interest rates. As of December 31, 2016, Fincera’s total outstanding interest-bearing borrowings amounted to $937.2 million with interest rates ranging from 4.35% to 9.00% per annum. The interest rates on our outstanding debts are fixed, which limits our exposure to material risks due to changes in market interest rates, and we have not used any derivative financial instruments in our investment portfolio. However, we cannot provide assurance that we will not be exposed to material risks due to changes in market interest rate in the future. We may invest our cash in both fixed rate and floating rate interest earning instruments that carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.

Credit Risk

Fincera is exposed to credit risk from its cash and cash equivalents, accounts receivable, loans and other finance receivables. The credit risk on cash and cash equivalents is limited because the counterparties are recognized financial institutions. Accounts receivable, loans and other finance receivables are subjected to credit evaluations and evaluation analysis on the residual value of the relevant collateral, if any. An allowance would be made, if necessary, for estimated irrecoverable amounts by reference to past default experience and other credit risks, if any, and by reference to the current economic environment.

Foreign Currency Risk

Substantially all of Fincera’s revenues and expenditures are denominated in Renminbi. As a result, fluctuations in the exchange rate between the U.S. dollars and Renminbi will affect Fincera’s financial results in U.S. dollars terms without giving effect to any underlying change in Fincera’s business or results of operations. The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions and foreign exchange policies. The conversion of RMB into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The PRC government allowed the RMB to appreciate by more than 20% against the U.S. dollar between July 2005 and July 2008. Between July 2008 and June 2010, this appreciation halted and the exchange rate between the RMB and the U.S. dollar remained within a narrow band. Since June 2010, the RMB has fluctuated against the U.S. dollar, at times significantly and unpredictably, and in recent years the RMB has depreciated significantly against the U.S. dollar. Since October 1, 2016, the RMB has joined the International Monetary Fund (IMF)’s basket of currencies that make up the Special Drawing Right (SDR), along with the U.S. dollar, the Euro, the Japanese yen and the British pound. In the fourth quarter of 2016, the RMB has depreciated significantly in the backdrop of a surging U.S. dollar and persistent capital outflows of China. With the development of the foreign exchange market and progress towards interest rate liberalization and Renminbi internationalization, the PRC government may in the future announce further changes to the exchange rate system and there is no guarantee that the RMB will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. dollar in the future.

Net income for the year ended December 31, 2016 of RMB14.4 million is reported as $2.2 million based on the 2016 year-to-date average Renminbi to U.S. dollar exchange rate of 6.6344. Net income would decrease $0.1 million to $2.1 million based on the December 31, 2016 exchange rate of 6.9370 Renminbi per U.S. dollar. Net income would decrease $0.5 million to $1.7 million based on the pre-July 2005 exchange rate of 8.3000 Renminbi per U.S. dollar.

Net loss for the year ended December 31, 2015 of RMB7.6 million is reported as $1.2 million based on the 2015 year-to-date average Renminbi to U.S. dollar exchange rate of 6.2245. Net loss would decrease $0.1 million to $1.2 million based on the December 31, 2015 exchange rate of 6.4936 Renminbi per U.S. dollar. Net loss would decrease $0.3 million to $0.9 million based on the pre-July 2005 exchange rate of 8.3000 Renminbi per U.S. dollar.

Net loss for the year ended December 31, 2014 of RMB17.5 million is reported as $2.9 million based on the 2014 year-to-date average Renminbi to U.S. dollar exchange rate of 6.1443. Net loss would be reported as $2.9 million based on the December 31, 2014 exchange rate of 6.1190 Renminbi per U.S. dollar. However, net loss would decrease $0.8 million to $2.1 million based on the pre-July 2005 exchange rate of 8.3000 Renminbi per U.S. dollar.

Very limited hedging transactions are available in China to reduce Fincera’s exposure to exchange rate fluctuations. To date, Fincera has not entered into any hedging transactions in an effort to reduce its exposure to foreign currency exchange risk. While Fincera may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedging transactions may be limited and it may not be able to successfully hedge its exposure at all. In addition, Fincera’s currency exchange losses may be magnified by PRC exchange control regulations that restrict its ability to convert Renminbi into foreign currency.

Seasonality

Our first quarter (January through March) is expected to be slower for CeraVest and CeraPay than the other quarters. This is due to the Chinese New Year holiday, which occurs in January or February depending on the year, and generally has an adverse effect on business activity in the transportation sector. We expect this trend to continue in future periods. If conditions arise that impair transportation sector business activity during the second to fourth quarters, the adverse effect on our revenues and operating profit for the year could be disproportionately large.

Impact of Inflation

Inflation has not historically been a significant factor impacting the Company’s results.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management.

Fincera’s current directors, executive officers and key employees are as follows:

Name	Age	Position
Yong Hui Li	55	Chairman, Chief Executive Officer and Director
Lei Chen	50	Senior Vice President
Jason Chia-Lun Wang	41	Chief Financial Officer
Xing Wei	56	Chief Operating Officer
James Cheng-Jee Sha	67	Director
Diana Chia-Huei Liu	52	Director
Leon Ling Chen	53	Director
Spencer Ang Li	28	VP, Product and Director

Yong Hui Li has served as Fincera’s Chairman and Chief Executive Officer and as a member of Fincera’s Board of Directors since April 9, 2009. Mr. Li is the founder, Chairman and Chief Executive Officer of ACG and Hebei Kaiyuan Real Estate Development Co., Ltd. (“Hebei Kaiyuan”) which was previously the second largest shareholder of Shijiazhuang International Building, a construction company traded on the Shenzhen Stock Exchange under the ticker symbol CN: 000600. Mr. Li founded Hebei Kaiyuan in November 1998, and ACG in July 2007. Mr. Li has also served as the Chairman of Prime Acquisition Corp., a blank check company, since its inception in February 2011 until September 2013. From February 2001 to May 2006, Mr. Li helped oversee Hebei Kaiyuan’s development of the largest steel-framed construction project in Hebei Province, consisting of residential complexes, office towers and an upscale shopping mall, which covered over one million square feet. In 1994, Mr. Li founded Shijiazhuang Hi-tech Zone Kaiyuan Auto Trade Co., which was a pioneer in the commercial vehicle leasing business in Hebei Province. He graduated from Tianjin University in June 1985 with a bachelor degree in Optical Physics. Yong Hui Li is Spencer Ang Li’s father.

Lei Chen has served as Fincera’s Senior Vice President since April 9, 2009. Mr. Chen has served as a Senior Vice President in charge of the finance department and investor relations services for ACG since September 2008. From January 1996 to September 2008, Mr. Chen served as a Senior Vice President in charge of the finance department and investor relations services for Hebei Kaiyuan Auto Trading Co., Ltd., a company affiliated with Yong Hui Li. Mr. Chen received a Bachelor of Economics degree from Hebei Finance and Economics University, China.

Jason Chia-Lun Wang has served as Fincera’s Chief Financial Officer since July 2009. Mr. Wang has also served as an independent director of Prime Acquisition Corp., a blank check company, since its inception in February 2011 until September 2013. From December 2007 until joining Fincera, Mr. Wang served as Director of Research and Analytics at Private Equity Management Group Inc. where he was responsible for analysis of prospective investments, credit and cash flow analysis, and valuations. From July 2005 until December 2007, Mr. Wang worked at QUALCOMM Inc., a developer and innovator of advanced wireless technologies, products and services, where his responsibilities included all phases of venture capital investing, from target company identification to portfolio management. From July 2004 until July 2005, Mr. Wang was an investment banking associate at Relational Advisors LLC, where he specialized in mergers and acquisitions and debt and equity fundraising. From March 2000 until July 2002, Mr. Wang was the Director of Corporate Development and Planning at 24/7 Real Media Inc., a global digital marketing company. Prior to that, Mr. Wang was an investment banking analyst in the Global Mergers and Acquisitions Group at Chase Securities Inc. Mr. Wang received his MBA from the UCLA Anderson School of Management in June 2004 and bachelor degrees from both the Wharton School and the School of Engineering and Applied Science at the University of Pennsylvania in May 1998. Mr. Wang is a CPA licensed in Virginia.

Xing Wei has served as Fincera’s Chief Operating Officer since April 9, 2009. Mr. Wei has served as Chief Operating Officer of ACG since September 2008. From July 2001 to September 2008, Mr. Wei served as Chief Operating Officer for Hebei Kaiyuan, a company affiliated with Yong Hui Li. Mr. Wei received a Bachelor of Engineering degree from Hebei Building Engineering University and a Bachelor of Economics degree from Hebei University.

James Cheng-Jee Sha has served as a member of Fincera’s Board of Directors since its inception. Mr. Sha served as Chairman of Fincera’s Board of Directors and Chief Executive Officer from its inception to April 9, 2009. Mr. Sha founded and has been a partner of Spring Creek Investments since December 1999. Spring Creek Investments is a private investment firm specializing in principal investments and business consultations with internet and infrastructure companies. Mr. Sha also has served as the Chief Executive Officer of Optoplex Corporation, a communication networks company, since 2001. From September 2005 to February 2007, Mr. Sha served as Chief Executive Officer of AppStream, a software application virtualization company. From February 1999 to September 1999, Mr. Sha served as the Chief Executive Officer for Sina.com (NASDAQ: SINA), a global Chinese on-line media company and value added information service provider. From July 1996 to August 1998, Mr. Sha served as the Chief Executive Officer of Actra Business Systems, a joint venture between Netscape Communications Corporation and GE Information Services (GEIS), providing next-generation internet commerce application solutions for both business-to-consumer and business-to-business commerce markets. From August 1994 to August 1998, Mr. Sha served as Senior Vice President and General Manager of Netscape Communications Corporation, a computer services company until its merger with AOL. From May 1990 to August 1994, Mr. Sha was a Vice President at Oracle Corporation (NASDAQ:ORCL), a database management and development systems software company. From June 1986 to May 1990, Mr. Sha was a Vice President at Wyse Technology, Inc., a hardware, software and services computing company. Mr. Sha currently serves as a member of the audit committee and the Board of Directors of Tom.com (HK: 8282), a wireless internet company in the PRC providing value-added multimedia products and services. Mr. Sha also currently serves as a director of Armorize Corp. From 1998 to 2000, Mr. Sha also served on the board of Abovenet. Mr. Sha also serves as a trustee of the University of California at Berkeley Foundation and is a Board member of the Berkeley Chinese Alumni International Association. Mr. Sha graduated from National Taiwan University with a BS in Electrical Engineering, the University of California at Berkeley with an MS in EECS and from Santa Clara University with an MBA.

Diana Chia-Huei Liu has served as a member of Fincera’s Board of Directors since its inception. Ms. Liu served as President of Fincera from its inception to April 9, 2009. Ms. Liu has also served as the Chief Executive Officer and a director of Prime Acquisition Corp., a blank check company, since its inception in February 2011. Ms. Liu has served as the President and Managing Director of Cansbridge Capital, a private investment firm specializing in early stage investments along the west coast of North America (namely U.S. and Canada) and Asia, since August 1998. Prior to Cansbridge, Ms. Liu served as the Executive Vice-President at Polaris Securities Group (TW: 6011), an investment firm in Taiwan, where she founded and managed its North American operations from April 1994 to August 1998. From August 1991 to April 1994, Ms. Liu was an account portfolio manager in global private banking at the Royal Bank of Canada (NYSE:RY), a full-service banking firm. From October 1988 to August 1991, Ms. Liu served as the regional sales manager for the province of British Columbia, Canada, at CIBC Securities, a subsidiary of CIBC (NYSE:CM), a full- service banking firm, where she founded and managed the mutual funds promotion division. Ms. Liu has served since March 2006 as a member of the Executive Committee and the Chair of the Investment Committee at the Asia Pacific Foundation, a Canadian federal government created think tank and policy advisory board where she works closely with the co-CEOs on operational issues and investment of its endowment funds. In addition, she also currently serves as a director of the Vancouver Goh Ballet Society and BaySpec, Inc., a supplier of optical components. Ms. Liu graduated with a BA in economics from the University of British Columbia in Canada. Ms. Liu is the spouse of Mr. William Yu, Fincera’s prior Chief Financial Officer.

Leon Ling Chen has served as a member of Fincera’s Board of Directors since December 29, 2011. Mr. Chen is the Managing Director of Graham Vacuum and Heat Transfer Technology (Suzhou) Co., Ltd., the Chinese subsidiary of Graham Corporation (NYSE Amex: GHM), where he manages China operations, oversees financial control and accounting activities, and leads the expansion of sales and distribution networks within China. Mr. Chen joined Graham Vacuum and Heat Transfer Technology (Suzhou) Co., Ltd. in January of 2006, and also serves as a member of the board of directors of the company. Prior to his tenure at Graham, Mr. Chen was President and CEO of Bayspec Inc., a vertically integrated spectral sensing company. Mr. Chen received a BS in engineering from Tianjin University in China, and a BA in Economics from University of International Business & Economics in Beijing, China.

Spencer Ang Li has served as Fincera’s Vice President, Product since June 24, 2015, and has served as a member of Fincera’s Board of Directors since June 26, 2014. He oversaw the development and launch of all of Fincera’s internet platforms, including CeraPay, CeraVest, TruShip, AutoChekk and most recently PingPing. Prior to joining Fincera, from July 2011 to January 2014 Mr. Li was an Investment Banking Analyst at Cogent Partners in New York, an advisor for private equity secondary transactions. Mr. Li received a BS in Economics and BA in Psychology from Duke University in 2011. Spencer Ang Li is Yong Hui Li’s son.

The term of each director is until the next election of directors or their earlier resignation or removal. The terms of Yong Hui Li as Chief Executive Officer, Lei Chen as Senior Vice President, and Xing Wei as Chief Operating Officer are until May 9, 2018, unless terminated or extended pursuant to such person’s employment contract with Fincera. The term of Jason Wang as Chief Financial Officer is until March 1, 2019, unless terminated or extended pursuant to his employment contract with Fincera.

Pursuant to the share exchange agreement entered into on February 4, 2009 and amended on March 11, 2009, James Cheng-Jee Sha and Diana Chia-Huei Liu were nominated as members of Fincera’s Board of Directors by the SCAC Shareholders’ Representative (as defined in the share exchange agreement) and Yong Hui Li and Spencer Ang Li were nominated as members of Fincera’s Board of Directors by the Fincera Shareholders’ Representative (as defined in the share exchange agreement). Leon Ling Chen was nominated upon the mutual agreement of the SCAC Shareholders’ Representative and the Fincera Shareholders’ Representative, pursuant to the share exchange agreement.

The business address of each party described above is 27/F, Kai Yuan Finance Center, No. 5, East Main Street, Shijiazhuang, Hebei, People’s Republic of China.

B. Compensation

Compensation Committee Interlocks and Insider Participation

During the last fiscal year, no officer and employee of Fincera, and no former officer of Fincera participated in deliberations of Fincera’s Board of Directors concerning executive officer compensation.

Fincera Director Compensation

The company pays an annual cash retainer of $30,000 to Leon Chen, James Sha and Diana Liu, its independent directors.

Fincera’s Executive Officers and Employees

Executive Officers

The Company has entered into employment agreements with each of the executive officers, which were renewed on May 9, 2015 until May 9, 2018 (except in the case of Mr. Wang whose employment agreement was renewed on March 6, 2016);

●

Yong Hui Li does not receive compensation for serving as Chief Executive Officer, Jason Wang receives $220,000 per year as base salary for serving as Chief Financial Officer, Xing Wei receives $62,867 per year as base salary for serving as Chief Operating Officer, Lei Chen receives $34,128 per year as base salary for serving as Senior Vice President and as of July 1, 2015 Spencer Li receives $100,000 per year as base salary for serving as Vice President, Product. No executive officer is entitled to a bonus, unless otherwise approved by the board of directors;

●

the employment agreements may be terminated by the Company (i) upon termination of the executive “for cause”, which is defined as (A) the failure of the executive to properly carry out his duties after notice by the Company of the failure to do so and a reasonable opportunity for the executive to correct the same within a reasonable period specified by the Company; (B) any breach by the executive of one or more provisions of any written agreement with, or written policies of, the Company or his fiduciary duties to the Company likely to cause material harm to the Company and its related parties, at the Company’s reasonable discretion, or (C) any theft, fraud, dishonesty or serious misconduct by the executive involving his duties or the property, business, reputation or affairs of the Company and its related parties, (ii) due to the executive’s death, (iii) in the event the executive becomes eligible for the Company’s long-term disability benefits or if the executive is unable to carry out his responsibilities as a result of a physical or mental impairment for more than 90 consecutive days or for more than 120 days in any 12-month period, subject to applicable laws, and (iv) without cause upon one month written notice, in which case the executive will be entitled to 3 months’ base salary severance to the extent the executive is not otherwise employed during the severance period;

●

the employment agreements may be terminated by the respective executives: (i) for any reason or no reason at all upon 3 months’ advanced notice, or (ii) for “good reason” upon notice of the reason within 3 months of the event causing such reason and subject to a 20-day cure period for the Company. “Good reason” is defined as: a material reduction in the executive’s base salary, except for reductions that are comparable to reductions generally applicable to similarly situated executives of Fincera if (i) such reduction is effected by the Company without the consent of the executive and (ii) such event occurs within 3 months after a change in control. If the agreement is terminated by the executive for “good reason” then the executive is entitled to 1 month’s base salary severance to the extent the executive is not otherwise employed during the severance period;

●

each executive is subject to the non-compete, non-solicitation provisions of the agreement for a term of one year following termination of the employment agreement;

●

except for “prior inventions” (which is defined as all inventions, original works of authorship, developments, improvements, and trade secrets which were made by the executive prior to the executive’s employment with the Company), all inventions and other intellectual property created by the executive during the term of employment are the property of the Company, and the executive agrees to assist the Company to secure such intellectual property rights; and

●

the employment agreements include other customary terms and conditions, and are governed by the laws of Hong Kong.

Compensation for senior executives generally consists of four elements: a base salary, an annual performance bonus, equity and benefits.

In developing salary ranges, potential bonus payouts, equity awards and benefit plans, it is anticipated that the compensation committee of the Board of Directors will take into account: 1) competitive compensation among comparable companies and for similar positions in the market, 2) relevant ways to incentivize and reward senior management for improving shareholder value while building Fincera into a successful company, 3) individual performance, 4) how best to retain key executives, 5) the overall performance of Fincera and its various key component entities, 6) Fincera’s ability to pay and 7) other factors deemed to be relevant at the time.

Director and Executive Officer Compensation

The following table shows information concerning the annual compensation for services provided to Fincera by certain employees, including its Chief Executive Officer and its Chief Financial Officer.

Name andPrincipal Position	Year	Salary ($)	Bonus ($)	Option Awards ($)	Stock Awards ($)	All other Compensation($)	Total Compensation($)
Yong Hui Li, Chief Executive Officer	2016	—	—	—	—	—	—
Xing Wei, Chief Operating Officer	2016	62,867	—		—	—	62,867
Jason Wang, Chief Financial Officer	2016	220,000	20,000	—	—	—	240,000
Lei Chen, Senior Vice-President	2016	34,128	—	—	—	—	34,128
Spencer Li, VP Product	2016	100,000	—	—	—	—	100,000

Fincera Inc. 2009 Equity Incentive Plan

The Fincera Inc. 2009 Equity Incentive Plan, which we refer as the 2009 incentive plan, was approved and took effect on April 8, 2009 upon the approval by the shareholders of Fincera Inc.

Under the terms of the 2009 incentive plan, 1,675,000 Fincera ordinary shares are reserved for issuance in accordance with its terms (provided, however, that dividend equivalent rights are payable solely in cash and therefore do not reduce the number of shares that may be granted under the incentive plan and that stock appreciation rights only reduce the number of shares available for grant under the incentive plan by the number of shares actually received by the grantee in connection with the stock appreciation right, if any). All awards under the incentive plan are made by Fincera’s Board of Directors or its Compensation Committee.

The purpose of the incentive plan is to assist Fincera in attracting, retaining and providing incentives to its employees, directors and consultants, and the employees, directors and consultants of its related parties, whose past, present and/or potential future contributions to Fincera have been, are or will be important to the success of Fincera and to align the interests of such persons with Fincera’s shareholders. It is also designed to motivate employees and to significantly contribute toward growth and profitability, by providing incentives to the directors, employees and consultants of Fincera and its related parties who, by their position, ability and diligence are able to make important contributions to the growth and profitability of Fincera and its related parties. The various types of incentive awards that may be issued under the incentive plan will enable Fincera to respond to changes in compensation practices, tax laws, accounting regulations and the size and diversity of its business and the business of its related parties.

All directors, employees and consultants of Fincera and its related parties are eligible to be granted awards under the 2009 incentive plan. Fincera did not award equity incentives to its executive officers during 2016 under the 2009 incentive plan.

Fincera Inc. 2015 Omnibus Equity Incentive Plan

The Fincera Inc. 2015 Omnibus Equity Incentive Plan, which we refer to as the 2015 incentive plan, took effect on September 24, 2015 and superseded the 2009 incentive plan. It was approved by shareholders at the Company’s annual meeting of shareholders held on July 12, 2016.

Under the terms of the 2015 incentive plan, 1,023,712 Fincera ordinary shares are reserved for issuance in accordance with its terms (provided, however, that dividend equivalent rights are payable solely in cash and therefore do not reduce the number of shares that may be granted under the incentive plan and that stock appreciation rights only reduce the number of shares available for grant under the incentive plan by the number of shares actually received by the grantee in connection with the stock appreciation right, if any). All awards under the incentive plan are made by Fincera’s Board of Directors or its Compensation Committee.

All directors, employees and consultants of Fincera and its related parties are eligible to be granted awards under the 2015 incentive plan. Fincera did not award equity incentives to its executive officers during 2016 under the 2015 incentive plan.

Description of the 2015 Incentive Plan

A summary of the principal features of the 2015 incentive plan is provided below, but is qualified in its entirety by reference to the full text of the incentive plan, a copy of which was attached as Exhibit 4.31 to our Annual Report on Form 20-F filed on May 2, 2016.

Awards

The incentive plan provides for the grant of any type of arrangement to an employee, director or consultant of Fincera or its related parties, which involves or might involve the issuance of ordinary shares, cash, stock options or stock appreciation rights, or a similar right with a fixed or variable price related to the fair market value of the ordinary shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. Such awards include, without limitation, incentive stock options, non-qualified stock options, stock appreciation rights, sales or bonuses of restricted shares, restricted share units and dividend equivalent rights, or any two or more of such awards in combination, for an aggregate of not more than 1,023,712 of the ordinary shares, to directors, employees and consultants of Fincera or its related parties. If any award expires, is cancelled, or terminates unexercised or is forfeited, the number of ordinary shares subject thereto, if any, will again be available for grant under the incentive plan. The number of ordinary shares with respect to which stock options or stock appreciation rights may be granted to a grantee under the incentive plan in any calendar year cannot exceed 100,000. The number of restricted ordinary shares or restricted share units which may be granted to a grantee under the incentive plan in any calendar year cannot exceed 100,000.

As of December 31, 2016, there are approximately 2,248 employees, directors and consultants who are currently eligible to receive awards under the Incentive Plan. New directors, employees and consultants of Fincera or its related parties are eligible to participate in the incentive plan as well.

The below table lists the grants made under the incentive plans. The exercise prices represent the closing prices of the Ordinary Shares on the dates of grant. The total vesting period for each of these stock options is four years, with 25% vesting one year after the date of grant and the remaining 75% vesting ratably each month for three years thereafter. Each of these stock options has a term of 10 years.

Grant Date	Type of Instrument	Quantity	Exercise Price
September 3, 2009	Stock options	681,840	$ 9.50
December 3, 2009	Stock options	520,944	$ 25.65
May 19, 2010	Stock options	27,024	$ 23.80
August 19, 2010	Stock options	364,080	$ 27.19
March 23, 2011	Stock options	72,000	$ 36.38
September 24, 2015	Stock options	513,958	$ 28.00
December 28, 2015	Stock options	139,808	$ 28.00
April 29, 2016	Stock options	136,200	$ 27.10
September 27, 2016	Stock options	21,000	$ 27.20
November 27, 2016	Stock options	157,000	$ 27.20

On August 6, 2012, the Company’s board of directors determined to amend certain Share Option Award Agreements entered into pursuant to the incentive plan to reduce the exercise price per share thereunder to the current fair market value of the Company’s ordinary shares, which is $14.50 per share. The amendment affected 984,048 shares of stock options granted during the prior periods. The reduction in the exercise price of the stock options increased the fair value of share-based expense by $1,281,000 in the year ended December 31, 2012. The Company’s amendment also increased the unrecognized compensation expenses by $575,000 which will increase the general and administrative expenses and additional paid-in capital throughout the remaining vesting period of the respective stock options.

As of December 31, 2016, 30,786 of these stock options had been exercised, and Fincera had recorded aggregate compensation expense of $17,964,000 based on the estimated fair value of the stock options on their dates of grant. All of the exercised stock options utilized a net exercise method, and therefore, the Company did not receive any cash proceeds from their exercise. The per share fair value of the stock options granted under the incentive plan was initially estimated using the Black-Scholes option-pricing model with the following assumptions:

Date of Grant	September 3, 2009	December 3, 2009	May 19, 2010	August 19, 2010	March 23 ,2011

Dividend yield (1)	None	None	None	None	None
Risk-free interest rate (2)	2.95 %	2.87 %	2.82 %	2.06 %	2.73 %
Volatility (3)	47 %	42 %	43 %	46 %	60 %
Expected Life (in years) (4)	6.08	6.08	6.08	6.08	6.08

Date of Grant	September 24, 2015	December 28, 2015	April 29, 2016	September 27, 2016	November 27, 2016

Dividend yield (1)	None	None	None	None	None
Risk-free interest rate (2)	1.84 %	2.05 %	2.05 %	1.39 %	2.12 %
Volatility (3)	26 %	25 %	41 %	32 %	32 %
Expected Life (in years) (4)	6.08	6.08	6.08	6.08	6.08

(1)

The Company has no expectation of paying regular cash dividends on its common stock.

(2)

The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected term of the awards in effect at the time of grant.

(3)

The Company estimates the volatility of its ordinary shares at the date of grant based on its historical monthly price observations .

(4)

The expected life of stock options granted under the incentive plan is based on expected exercise patterns, which the Company believes are representative of future behavior.

The Company used the binomial model to estimate the fair value of the modified options to reflect the amendment of the exercise prices of 984,048 shares of stock options previously granted in August 2012, using the following assumptions:

Date of Grant	December 3, 2009	May 19, 2010	August 19, 2010	March 23, 2011

Dividend yield (1)	None	None	None	None
Risk-free interest rate (2)	1.08 %	1.17 %	1.23 %	1.30 %
Volatility (3)	40 %	40 %	40 %	40 %
Expected Life (in years) (4)	7.30	7.80	8.00	8.60

(1)

The Company has no expectation of paying regular cash dividends on its common stock.

(2)

The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected term of the awards in effect at the time of grant.

(3)

The Company estimates the volatility of its common stock at the date of grant based on the implied volatility of publicly traded options on the common stock of companies within the same industry.

(4)

The expected life of stock options granted under the incentive plan is based on expected exercise patterns, which the Company believes are representative of future behavior.

The following table summarizes the outstanding options granted under the incentive plans as at December 31, 2016, related weighted average fair value and life information:

	Options Outstanding					Options Exercisable
Range of Exercise Price Per Share		Number Outstanding at December 31, 2016		Weighted Average Fair Value	Weighted Average Remaining Life (Years)		Number Exercisable at December 31, 2016		Weighted Average Exercise Price

$9.50 to $28.00		2,327,692	$	6.14	5.17		1,672,003	$	13.85

Administration of the Incentive Plan

The incentive plan is administered by either Fincera’s Board of Directors or its compensation committee (referred to as the committee), if the Board of Directors delegates administration of the incentive plan. Among other things, the Board of Directors or, if the Board of Directors delegates its authority to the committee, the committee, has complete discretion, subject to the express limits of the incentive plan, to determine the employees, directors and consultants to be granted awards, the types of awards to be granted, the terms and conditions of awards granted, the number of Fincera ordinary shares subject to each award, if any, the exercise price under each option, the base price of each stock appreciation right, the term of each award, the vesting schedule and/or performance goals for each award that utilizes such a schedule or provides for performance goals, whether to accelerate vesting, the value of the ordinary shares, and any required withholdings. The Board of Directors or the committee may amend, modify or terminate any outstanding award, provided that the grantee’s written consent to such action is required if the action would adversely affect the grantee. The Board of Directors or the committee is also authorized to construe the award agreements and may prescribe rules relating to the incentive plan. The Board of Directors or committee may reduce the exercise price of options or reduce the base appreciation amount of any stock appreciation right without shareholder approval. Except as specified below, no award intended to qualify as performance-based compensation for purposes of Section 162(m) of the Code may have a per share exercise or purchase price, if any, of less than 100% of the fair market value of an Fincera ordinary share on the date of grant.

Special Terms Relating to Stock Options

The incentive plan provides for the grant of stock options, which may be either “incentive stock options” (ISOs), which are intended to meet the requirements for special U.S. federal income tax treatment under the Code, or “nonqualified stock options” (NQSOs). Stock options may be granted under the incentive plan on such terms and conditions as the Board of Directors or the committee, if any, may determine; however, the per ordinary share exercise price under a stock option granted under the incentive plan may not be less than 100% of the “fair market value” (as defined in the incentive plan) of an ordinary share on the date of grant of the stock option, and the term of an ISO may not exceed ten years (110% of such value and five years in the case of an ISO granted to an employee who owns (or is deemed to own) more than 10% of the total combined voting power of all classes of capital stock of Fincera or a parent or subsidiary of Fincera). ISOs may only be granted to employees. In addition, the aggregate fair market value of the ordinary shares underlying one or more ISOs (determined at the time of grant of the ISO or ISOs) which are exercisable for the first time by any one employee during any calendar year may not exceed $100,000. The Board of Directors or the committee, if any, may permit a cashless “net exercise” of stock options granted under the incentive plan. As of December 31, 2016, all the stock options granted are ISOs.

Additional Terms

Under the incentive plan, upon the consummation of a “corporate transaction” (as defined in the incentive plan), all outstanding awards under the incentive plan will terminate, except to the extent they are assumed in connection with the corporate transaction.

Stock options granted under the incentive plan as ISOs may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the grantee, only by the grantee. Other awards are transferable (i) by will and by the laws of descent and distribution and (ii) during the lifetime of the grantee: (a) to a “holding company” (as defined in the incentive plan) of such grantee, or (B) to the extent and in the manner authorized by the Board of Directors or the committee, if any. No ordinary shares will be delivered under the incentive plan to any grantee or other person until such grantee or other person has made arrangements acceptable to the Board of Directors or the committee, if any, for the satisfaction of any national, provincial or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of ordinary shares under the incentive plan.

Amendments

Fincera’s Board of Directors may at any time amend, alter, suspend or terminate the incentive plan; provided, that no amendment requiring shareholder approval will be effective unless such approval has been obtained, and provided further that no amendment of the incentive plan or its termination may be effected if it would adversely affect the rights of a grantee without the grantee’s consent.

Certain U.S. Federal Income Tax Consequences of the Incentive Plan

The following is a general summary of the U.S. federal income tax consequences under current tax law to Fincera, were it subject to U.S. federal income taxation on a net income basis, and to grantees under the incentive plan who are individual citizens or residents of the United States for U.S. federal income tax purposes (“U.S. grantees”), of ISOs, NQSOs, sales or bonuses of restricted shares, restricted share units, dividend equivalent rights and SARs granted pursuant to the incentive plan. It does not purport to cover all of the special rules that may apply, including special rules relating to limitations on the ability of Fincera to deduct certain compensation, special rules relating to deferred compensation, golden parachutes, grantees subject to Section 16(b) of the Exchange Act and the exercise of a stock option with previously-acquired ordinary shares. This summary assumes that U.S. grantees will hold their ordinary shares as capital assets within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”). This summary does not address the application of the passive foreign investment company rules of the Code to U.S. grantees, which are discussed generally in the section of this Annual Report on Form 20-F in the section captioned “Taxation – United States Federal Income Taxation – Tax Consequences to U.S. Holders – Passive Foreign Investment Company Rules”. In addition, this summary does not address the foreign, state or local income or other tax consequences, or any U.S. federal non-income tax consequences, inherent in the acquisition, ownership, vesting, exercise, termination or disposition of an award under the incentive plan or ordinary shares issued pursuant thereto. Grantees are urged to consult their own tax advisors concerning the tax consequences to them of an award under the incentive plan or ordinary shares issued pursuant thereto.

A U.S. grantee generally does not recognize taxable income upon the grant of an NQSO or an ISO. Upon the exercise of an NQSO, the U.S. grantee generally recognizes ordinary income in an amount equal to the excess, if any, of the fair market value of the ordinary shares acquired on the date of exercise over the exercise price thereunder, and Fincera would generally be entitled to a deduction for such amount at that time. If the U.S. grantee later sells ordinary shares acquired pursuant to the exercise of an NQSO, the grantee generally recognizes a long-term or a short term capital gain or loss, depending on the period for which the ordinary shares were held thereby. A long-term capital gain is generally subject to more favorable tax treatment than ordinary income or a short-term capital gain. The deductibility of capital losses is subject to certain limitations.

Upon the exercise of an ISO, the U.S. grantee generally does not recognize taxable income. If the U.S. grantee disposes of the ordinary shares acquired pursuant to the exercise of an ISO more than two years after the date of grant and more than one year after the transfer of the ordinary shares to the grantee, the grantee generally recognizes a long-term capital gain or loss, and Fincera would not be entitled to a deduction. However, if the grantee disposes of such ordinary shares prior to the end of the required holding period, all or a portion of the gain is treated as ordinary income, and Fincera would generally be entitled to deduct such amount.

In addition to the U.S. federal income tax consequences described above, the U.S. grantee may be subject to the alternative minimum tax (“AMT”), which is payable to the extent it exceeds the grantee’s regular income tax. For this purpose, upon the exercise of an ISO, the excess of the fair market value of the ordinary shares for which the ISO is exercised over the exercise price thereunder for such ordinary shares is a preference item for purposes of the AMT. In addition, the U.S. grantee’s basis in such ordinary shares is increased by such excess for purposes of computing the gain or loss on the disposition of the ordinary shares for AMT purposes. If a U.S. grantee is required to pay any AMT, the amount of such tax which is attributable to deferral preferences (including any ISO adjustment) generally may be allowed as a credit against the grantee’s regular income tax liability (and, in certain cases, may be refunded to the grantee) in subsequent years. To the extent the credit is not used, it may be carried forward.

A U.S. grantee who receives a bonus of restricted ordinary shares or who purchases restricted ordinary shares, which, in either case, are subject to a substantial risk of forfeiture and certain transfer restrictions, generally recognizes ordinary compensation income at the time the restrictions lapse in an amount equal to the excess, if any, of the fair market value of the ordinary shares at such time over any amount paid by the grantee for the ordinary shares. Alternatively, the U.S. grantee may elect to be taxed upon receipt of the restricted ordinary shares based on the value of the ordinary shares at the time of receipt. Fincera would generally be entitled to deduct such amount at the same time as ordinary compensation income is required to be included by the U.S. grantee and in the same amount. Dividends received with respect to such restricted ordinary shares are generally treated as compensation, unless the grantee elects to be taxed on the receipt (rather than the vesting) of the restricted ordinary shares.

A U.S. grantee generally does not recognize income upon the grant of an SAR. The U.S. grantee recognizes ordinary compensation income upon the exercise of the SAR equal to the increase in the value of the underlying shares, and Fincera would generally be entitled to a deduction for such amount.

A U.S. grantee generally does not recognize income in connection with a dividend equivalent right or restricted share unit until payments are received thereunder. At such time, the U.S. grantee recognizes ordinary compensation income equal to the amount of any cash payments and the fair market value of any ordinary shares received, and Fincera would generally be entitled to deduct such amount at such time.

Retirement Benefits

As of December 31, 2016, Fincera’s subsidiaries in the PRC have participated the government-mandated employee welfare and retirement benefit contribution and provided pension, retirement or similar benefits to its employees. The PRC regulations require our PRC subsidiaries to pay the local labor administration bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The local labor administration bureau, which manages various investment funds, will take care of employee retirement, medical and other fringe benefits. Our subsidiaries have no further commitments beyond this monthly contribution.

Fincera’s (excluding its subsidiaries) only employees are its executive officers for which it has entered into employment contracts with. Fincera does not accrue pension, retirement or similar benefits, except for a nominal amount of employer matching that may occur for U.S. based employees’ 401k plans.

C. Board Practices

Board Committees

Fincera’s Board of Directors has an audit committee, governance and nominating committee, and compensation committee, and has adopted a charter for each committee. Each committee consists of Leon Chen, James Sha and Diana Liu, each of whom is an independent director. James Sha has been designated an “Audit Committee Financial Expert” under SEC rules and the current listing standards of the NASDAQ Marketplace Rules. Our corporate governance practices are designed to be the same as those followed by U.S. domestic companies under the listing standards of NASDAQ.

Audit Committee

The audit committee, consisting of Messrs. Sha and Chen and Ms. Liu, oversees our financial reporting process on behalf of the board of directors. The committee’s responsibilities include the following functions:

●

appoint and replace the independent auditors to conduct the annual audit of our books and records;

●

review the proposed scope and results of the audit;

●

review and pre-approve the independent auditors ’ audit and non-audited services rendered;

●

approve the audit fees to be paid;

●

review accounting and financial controls with the independent auditors and our internal auditors and financial and accounting staff;

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review and approve related party transactions;

●

meeting separately and periodically with management and our internal auditor and independent auditors.

Our board of directors has determined that Mr. Sha, the Chair of the Audit Committee, is an “audit committee financial expert” as defined by the SEC’s rules and the current listing standards of the NASDAQ Market Place Rules.

Governance and Nominating Committee

The governance and nominating committee, consisting of Messrs. Sha and Chen and Ms. Liu, is responsible for identifying potential candidates to serve on our board and its committees. The committee’s responsibilities include the following functions:

●

developing the criteria and qualifications for membership on the board;

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recruiting, reviewing and nominating candidates for election to the board or to fill vacancies on the Board;

●

reviewing candidates for election to the board proposed by shareholders, and conducting appropriate inquiries into the background and qualifications of any such candidates;

●

establishing subcommittees for the purpose of evaluating special or unique matters;

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monitoring and making recommendations regarding board committee functions, contributions and composition; and

●

evaluating, on an annual basis, the governance and nominating committee’s performance.

The governance and nominating committee will consider director candidates recommended by shareholders. Shareholders who wish to recommend to the governance and nominating committee a candidate for election to the board should send their letters to Fincera Inc., 27/F, Kai Yuan Finance Center, No. 5, East Main Street, Shijiazhuang, Hebei, 050011, People’s Republic of China, Attention: Governance and Nominating Committee. The corporate secretary will promptly forward all such letters to the members of the governance and nominating committee. Shareholders must follow certain procedures to recommend to the governance and nominating committee candidates for election as directors. In general, in order to provide sufficient time to enable the governance and nominating committee to evaluate candidates recommended by shareholders in connection with selecting candidates for nomination in connection with Fincera’s annual meeting of shareholders, the corporate secretary must receive the shareholder’s recommendation no later than thirty (30) days after the end of Fincera’s fiscal year. For a list of information required to be submitted with a recommendation, please contact Fincera’s secretary at the address listed above.

Compensation Committee

The compensation committee, consisting of Messrs. Sha and Chen and Ms. Liu, is responsible for making recommendations to the board concerning salaries and incentive compensation for our officers and employees and administers our stock option plans. Its responsibilities include the following functions:

●

review Fincera’s corporate goals and objectives relevant to the executives ’ compensation at least annually; evaluate the executives’ performance in light of such goals and objectives; and, either as a compensation committee or, together with the other independent directors (as directed by the board), determine and approve the executives’ compensation level based on this evaluation. In determining the long-term incentive component of the executives’ compensation, the compensation committee will consider Fincera’s performance, the value of similar incentive awards to the executives at comparable companies, the awards given to the executives in past years and any relevant legal requirements and associated guidance of the applicable law;

●

at least annually review and make recommendations to the board with respect to non-executive officer and independent director compensation to assist the board in making the final determination as to non-executive officer and independent director compensation;

●

attempt to ensure that Fincera’s compensation program is effective in attracting and retaining key employees, reinforce business strategies and objectives for enhanced shareholder value, and administer the compensation program in a fair and equitable manner consistent with established policies and guidelines;

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administer Fincera’s incentive-compensation plans and equity-based plans, insofar as provided therein;

●

make recommendations to the board regarding approval, disapproval, modification, or termination of existing or proposed employee benefit plans;

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approve any stock option award or any other type of award as may be required for complying with any tax, securities, or other regulatory requirement, or otherwise determined to be appropriate or desirable by the compensation committee or board;

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approve the policy for authorizing claims for expenses from the executives;

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review and assess the adequacy of this charter annually; and

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review and approve the compensation disclosure and analysis prepared by Fincera’s management, as required to be included in Fincera’s annual report on Form 20-F, or equivalent, filed with the SEC.

Director Independence

Fincera’s Board of Directors has determined that Messrs. Sha and Chen and Ms. Liu qualify as independent directors under the rules of the NASDAQ Stock Market because they do not currently own a large percentage of Fincera’s capital stock, are not currently employed by Fincera, have not been actively involved in the management of Fincera and do not fall into any of the enumerated categories of people who cannot be considered independent in the NASDAQ Stock Market Rules.

D. Employees

On December 31, 2016, our subsidiaries had 2,248 employees.

Fincera has no contracts or collective bargaining agreements with labor unions and has never experienced work stoppages. Fincera considers its relations with its employees to be good.

E. Share Ownership

See Item 7 below.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

The following table sets forth, as of March 8, 2017, certain information regarding beneficial ownership of Fincera’s ordinary shares by each person who is known by Fincera to beneficially own more than 5% of Fincera’s ordinary shares. The table also identifies the stock ownership of each of Fincera’s directors, each of Fincera’s named executive officers, and all directors and officers as a group. Except as otherwise indicated, the shareholders listed in the table have sole voting and investment powers with respect to the shares indicated. Fincera’s major shareholders do not have different voting rights than any other holder of Fincera’s ordinary shares.

Ordinary shares which an individual or group has a right to acquire within 60 days pursuant to the exercise or conversion of options, warrants or other similar convertible or derivative securities are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.

Name and Address of Beneficial Owner(1)	Amount andNature of Beneficial Ownership		Approximate Percentage of Outstanding Ordinary Shares (2)
Honest Best Int’l Ltd. (3)	19,189,446		81.44 %
Yong Hui Li	19, 189,446	(4 )	81.44 %
James Cheng-Jee Sha	1,295,157	(5 )	5.50 %
Diana Chia-Huei Liu	251,161	(6 )	1.07 %
Xing Wei	332,642	(7 )	1.40 %
Leon Ling Chen	2,800		*
Lei Chen	168,054	(8 )	*
Jason Wang	131,100	(9 )	*
Spencer Ang Li	68,189		*

All directors and executive officers as a group (eight individuals)	21,438,549	(10 )	89.41 %

* Less than 1%

(1)

Unless indicated otherwise, the business address of each of the individuals is 27/F, Kai Yuan Finance Center, No. 5, East Main Street, Shijiazhuang, Hebei, People’s Republic of China.

(2)

Based on 23,563,786 ordinary shares of Fincera issued and outstanding as of March 8, 2017, except that ordinary shares which an individual or group has a right to acquire within 60 days pursuant to the exercise or conversion of options, warrants or other similar convertible or derivative securities are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.

(3)

Yong Hui Li is the sole shareholder of Honest Best Int’l Ltd. and has sole voting and dispositive power over such shares.

(4)

Consists of 19,189,446 shares of Fincera owned by Honest Best Int’l Ltd., whose sole shareholder is Mr. Yong Hui Li.

(5)

Consists of 995,157 shares owned by Sha Living Trust. Mr. Sha is a trustee of Sha Living Trust, and 300,000 ordinary shares owned by Irrevocable Trust of James CJ Sha and Wen-Hsing Sha. Mr. Sha’s spouse is a trustee of this trust.

(6)

Includes 9,798 ordinary shares of Fincera owned by William Tsu-Cheng Yu, Ms. Liu’s husband.

(7)

Includes 230,400 shares underlying fully vested and exercisable incentive stock options.

(8)

Consists of 23,944 ordinary shares and 115,200 shares underlying fully vested and exercisable incentive stock options owned by Lei Chen, and 28,910 ordinary shares of Fincera owned by Lei Chen’s spouse.

(9)

Includes 115,200 shares underlying fully vested and exercisable incentive stock options.

(10)

Includes 460,800 shares underlying fully vested and exercisable incentive stock options.

For a description of the Fincera Inc. 2009 Equity Incentive Plan and the Fincera Inc. 2015 Omnibus Equity Incentive Plan, please refer to Item 6B.

As of March 31, 2017 approximately 5.5% of the ordinary shares were held by residents of the United States and there were 2 shareholders of record in the United States, though we believe that the number of beneficial holders in the United States may be significantly greater.

B. Related Party Transactions

See Note 20 to the Consolidated Financial Statements provided herewith, which is hereby incorporated by reference.

C. Interests of experts and counsel.

Not required.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information.

Please see “Item 18. Financial Statements” for a list of the financial statements filed as part of this annual report.

B. Significant Changes

None.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Fincera’s ordinary shares have been quoted on the over the counter market under the symbol AUTCF since February 28, 2012. Our ordinary shares are currently quoted on the OTC QB market.

Prior to February 28, 2012, the ordinary shares had been quoted on the OTC Pink Market since October 4, 2011 under the symbol AUTC. Prior to October 4, 2011, the ordinary shares had been listed on the NASDAQ Stock Market since October 5, 2009 under the symbol AUTC. Prior to October 5, 2009, the ordinary shares had been quoted on the OTC QB since March 28, 2008. Fincera’s ordinary shares did not trade on any market or exchange prior to March 28, 2008.

The table below reflects the high and low bid prices for Fincera’s ordinary shares on the OTC QB Pink Sheets for the period from January 1, 2012 through February 28, 2012 and the high and low bid prices for Fincera’s ordinary shares on the over the counter market (we are currently on the OTC QB) for the period from February 28, 2012 through March 31, 2017.

	Ordinary Shares
	High	Low
Annual Highs and Lows
2012	$ 28.50	$ 11.50
2013	21.00	5.10
2014	20.00	8.00
2015	28.00	15.50
2016	31.00	18.00

Quarterly Highs and Lows

2015
First Quarter	$ 28.00	$ 15.50
Second Quarter	24.00	18.25
Third Quarter	28.00	20.00
Fourth Quarter	28.00	21.25
2016
First Quarter	$ 29.00	$ 18.00
Second Quarter	28.50	22.40
Third Quarter	31.00	25.20
Fourth Quarter	30.00	26.80
2017
First Quarter	$ 34.00	$ 29.50

Monthly Highs and Lows
October 2016	$ 27.50	$ 26.80
November 2016	27.20	26.80
December 2016	30.00	27.20
January 2017	32.00	29.50
February 2017	33.65	32.00
March 2017	$ 34.00	$ 33.20

Number of Holders . As of March 8, 2017, there were 8 holders of record of our outstanding ordinary shares, though we believe that the number of beneficial holders is significantly greater.

Dividends . On January 27, 2012, the Board of Directors declared a one-time special cash dividend in the amount of $0.25 per share. The total amount of cash distributed in the dividend was $5,885,000 and paid on February 15, 2012, to all ordinary shareholders of record as of the close of business on February 8, 2012.

We do not anticipate paying any other dividend in the foreseeable future. Any dividends paid will be solely at the discretion of our Board of Directors.

B. Plan of Distribution

Not required.

C. Markets

Fincera’s ordinary shares have been quoted on the over the counter market (currently on the OTC QB) under the symbol AUTCF since February 28, 2012. Our ordinary shares were quoted the OTC Pink Market under the symbol AUTC from October 4, 2011 to February 28, 2012, and prior to that our ordinary shares were listed on the NASDAQ Capital Market under the symbol AUTC.

In June 2015, we changed our name from AutoChina International Ltd. to Fincera Inc. to better suit our new internet-based business. However, FINRA did not allow our name change to be processed for trading purposes. Therefore, our shares are still quoted under the symbol AUTCF.

D. Selling Shareholders

Not required.

E. Dilution

Not required.

F. Expenses of the Issue

Not required.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not required.

B. Memorandum and Articles of Association

We incorporate by reference into this Annual Report the description of our second amended and restated memorandum and articles of association contained in the Company’s registration statement on Form F-1/A, Registration No. 333-159607, filed on November 23, 2009.

To the Company’s knowledge there are no limitations on the rights of non-resident or foreign shareholders to hold our securities or exercise voting rights.

C. Material Contracts

Other than in the ordinary course of business and other than those described under this item, in “Item 4. Information on the Company — A. History and Development of the Company” or elsewhere in this annual report, we have not entered into any material contract during the two years immediately preceding the date of this annual report.

D. Exchange Controls and Other Limitations Affecting Security Holders

Under Cayman Islands law, there are no exchange control restrictions in the Cayman Islands.

E. Taxation

The following summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our ordinary shares, sometimes referred to as our “securities,” is based upon laws and relevant interpretations thereof in effect as of the date of this Annual Report, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state, local and other tax laws. As used in this discussion, references to “we,” “our,” or “us” refer only to Fincera Inc., and references to “ACG” refer only to AutoChina Group Inc.

Cayman Islands Taxation

The Government of the Cayman Islands will not, under existing legislation, impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon us or our security holders. The Cayman Islands are not party to any double taxation treaties.

No Cayman Islands stamp duty will be payable by our security holders in respect of the issue or transfer of our securities. However, an instrument transferring title to a security, if brought into or executed in the Cayman Islands, would be subject to a nominal stamp duty.

PRC Taxation

The following is a summary of the material PRC tax consequences relating to the acquisition, ownership and disposition of our securities.

Our security holders should consult with their own tax advisers regarding the PRC tax consequences of the acquisition, ownership and disposition of our securities in their particular circumstances.

Resident Enterprise Tax Treatment

On March 16, 2007, the Fifth Session of the Tenth National People’s Congress passed the Enterprise Income Tax Law of the PRC (“EIT Law”), which became effective on January 1, 2008. Under the EIT Law, enterprises are classified as “resident enterprises” and “non-resident enterprises.” Pursuant to the EIT Law and its implementing rules, enterprises established outside China whose “de facto management bodies” are located in China are considered “resident enterprises” and subject to the uniform 25% enterprise income tax rate on worldwide income. According to the implementing rules of the EIT Law, “de facto management body” refers to a managing body that in practice exercises overall management control over the production and business, personnel, accounting and assets of an enterprise.

On April 22, 2009, the State Administration of Taxation ("SAT") issued the Notice on the Issues Regarding Recognition of Enterprises that are Domestically Controlled as PRC Resident Enterprises Based on the De Facto Management Body Criteria ("Circular Guo Shui Fa [2009] No. 82"), which was retroactively effective as of January 1, 2008. This notice provides that an overseas incorporated enterprise that is controlled domestically will be recognized as a “tax-resident enterprise” if it satisfies all of the following conditions: (i) the senior management responsible for daily production/business operations are primarily located in the PRC, and the location(s) where such senior management execute their responsibilities are primarily in the PRC; (ii) strategic financial and personnel decisions are made or approved by organizations or personnel located in the PRC; (iii) major properties, accounting ledgers, company seals and minutes of board meetings and stockholder meetings, etc., are maintained in the PRC; and (iv) 50% or more of the board members with voting rights or senior management habitually reside in the PRC.

Following Circular Guo Shui Fa [2009] No. 82, on July 27, 2011, the SAT issued the Announcement of Administrative Measures for Income Tax on Overseas Incorporated Enterprise that is Controlled Domestically (Trial Implementation), which specified that the determination of the PRC tax resident status for overseas incorporated enterprises can be made either by (i) applying for determination by tax authorities after a self-assessment by the enterprises or (ii) determination by tax authorities upon investigation and discovery by the tax authorities. In the latter case, if the PRC tax authorities determine that we, ACG, Fancy Think Limited or Eastern Eagle is a “resident enterprise” for PRC EIT purposes, a number of tax consequences could follow. First, we, ACG, Fancy Think Limited and/or Eastern Eagle could be subject to the EIT at a rate of 25% on our, ACG’s, Fancy Think Limited’s and/or Eastern Eagle’s worldwide taxable income, as well as PRC enterprise income tax reporting obligations. Second, the EIT Law provides that dividend income between “qualified resident enterprises” is exempt from income tax. As a result, if we, ACG, Fancy Think Limited and Eastern Eagle are treated as PRC “resident enterprises,” all dividends paid from Ganglian or Chuanglian to us (through Fancy Think Limited and ACG) or from Hebei Anyong Trading to us (through Eastern Eagle and ACG) would constitute dividend income between “qualified resident enterprises” and would therefore qualify for tax exemption.

As of the date this document is filed, there has not been a definitive determination as to the “resident enterprise” or “non-resident enterprise” status of us, ACG, Fancy Think Limited and/or Eastern Eagle. However, since it is not anticipated that we, ACG, Fancy Think Limited and/or Eastern Eagle would receive dividends or generate other income in the near future, we, ACG, Fancy Think Limited and Eastern Eagle are not expected to have any income that would be subject to the 25% enterprise income tax on worldwide income in the near future. We, ACG, Fancy Think Limited and Eastern Eagle will consult with the PRC tax authorities and make any necessary tax payment if we, ACG, Fancy Think Limited and/or Eastern Eagle (based on future clarifying guidance issued by the PRC), or the PRC tax authorities, determine that we, ACG, Fancy Think Limited or Eastern Eagle are a resident enterprise under the EIT Law, and if we, ACG, Fancy Think Limited or Eastern Eagle were to have income in the future.

Dividends from Chuanglian, Ganglian and Hebei Anyong Trading

The EIT Law and the implementing rules of the EIT Law provide that (A) EIT at a standard tax rate of 25% will normally be applicable to investors that are “non-resident enterprises” which (i) have establishments or premises of business inside the PRC, and (ii) the income in connection with their establishment or premises of business is sourced from the PRC or the income is earned outside the PRC but has effective connection with their establishments or places of business inside the PRC, and (B) PRC withholding tax at a standard tax rate of 10% will normally be applicable to dividends payable to investors that are “non-resident enterprises” which (i) do not have an establishment or place of business in the PRC or (ii) have an establishment or place of business in the PRC, but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC. If Fancy Think Limited and Eastern Eagle are not treated as a resident enterprise under the EIT Law, then dividends that Fancy Think Limited receives from Chuanglian and Ganglian and dividends that Eastern Eagle receives from Hebei Anyong Trading may be subject to PRC withholding tax at the tax rate of 10% (unless a lower withholding tax rate applies under the Tax Treaty or Tax Arrangement, as mentioned below).

As described above, the PRC tax authorities may determine the resident enterprise status of entities organized under the laws of foreign jurisdictions on a case-by-case basis. We, ACG, Fancy Think Limited and Eastern Eagle are holding companies and substantially all of our, ACG’s, Fancy Think Limited’s and Eastern Eagle’s income may be derived from dividends. Thus, if we, ACG, Fancy Think Limited and/or Eastern Eagle is considered as a “non-resident enterprise” under the EIT Law and the dividends paid to us, ACG, Fancy Think Limited and/or Eastern Eagle are considered PRC-sourced income, such dividends received may be subject to PRC withholding tax at the tax rate of 10% as described in the foregoing paragraph.

Tax treaty (or Tax Arrangement) between the PRC and the jurisdiction in which a non-PRC investor resides may reduce withholding tax rate on such dividend income, with respect to such non-PRC enterprise investor if certain conditions under tax treaty and domestic tax laws are fulfilled. For example, pursuant to the PRC-Hong Kong Tax Arrangement and PRC domestic tax laws, if the Hong Kong enterprise is the beneficial owner of such dividend income and is allowed to enjoy the treaty benefits regarding favorable withholding tax rate by PRC tax authority (basically, Hong Kong enterprise shall own more than 25% of the equity interest in a company in China and shall not be deemed to be a conduit by the PRC tax authorities), the 10% PRC withholding tax on the dividends the Hong Kong enterprise receives from such company in China can be reduced to 5%. We and ACG are Cayman Islands holding companies, and ACG has subsidiaries in Hong Kong (Fancy Think Limited and Heat Planet), which in turn owns a 100% equity interest in Chuanglian and Ganglian, while Eastern Eagle (Hong Kong) has a 100% equity interest in Hebei Anyong Trading.

As a result, if Fancy Think Limited and Eastern Eagle were treated as a PRC “non-resident enterprise” under the EIT Law, then dividends that Fancy Think Limited receives from Chuanglian and Ganglian or dividends that Eastern Eagle receives from Hebei Anyong Trading (assuming such dividends were considered sourced within the PRC) (i) may be subject to a lower 5% PRC withholding tax, if the PRC-Hong Kong Tax Arrangement were applicable, or (ii) if such Tax Arrangement does not apply (i.e., because the PRC tax authorities may deem Fancy Think Limited and/or Eastern Eagle to be a conduit not entitled to treaty benefits), may be subject to a 10% PRC withholding tax. Similarly, if we or ACG were treated as a PRC “non-resident enterprise” under the EIT Law, and Fancy Think Limited and /or Eastern Eagle were treated as a PRC “resident enterprise” under the EIT Law, then dividends that we or ACG receive from Fancy Think Limited and/or Eastern Eagle (assuming such dividends were considered sourced within the PRC) may be subject to a 10% PRC withholding tax. Any such taxes on dividends could materially reduce the net amount of dividends, if any, we could pay to our shareholders.

As of the date this document is filed, there has not been a definitive determination as to the “resident enterprise” or “non-resident enterprise” status of us, ACG, Fancy Think Limited or Eastern Eagle. As indicated above, however, Chuanglian, Ganglian and Hebei Anyong Trading are not expected to pay any dividends in the near future. We, ACG, Fancy Think Limited and Eastern Eagle will consult with the PRC tax authorities and make any necessary tax withholding if, in the future, Chuanglian, Ganglian and Hebei Anyong Trading were to pay any dividends and we, ACG, Fancy Think Limited or Eastern Eagle (based on future clarifying guidance issued by the PRC), or the PRC tax authorities, determine that either we, ACG, Fancy Think Limited or Eastern Eagle is a non-resident enterprise under the EIT Law.

Dividends that Non-PRC Resident Investors Receive From Us; Gain on the Sale or Transfer of Our Securities

If dividends payable to or gains recognized by our non-resident enterprise investors are treated as PRC-sourced income, then the dividends that non-resident enterprise investors receive from us and any such gain on the sale or transfer of our securities may be subject to PRC income tax under the PRC tax laws.

Under the EIT Law and the implementing rules of the EIT Law, PRC withholding tax at the standard rate of 10% is applicable to dividends payable to investors that are “non-resident enterprises,” which (i) do not have an establishment or place of business in the PRC or (ii) have an establishment or place of business in the PRC but the relevant income is not effectively connected with the establishment or place of business, to the extent that such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of our securities by such enterprise investors is also subject to 10% PRC income tax if such gain is regarded as PRC-sourced income.

The dividends paid by us to non-resident enterprise investors with respect to our ordinary shares, or gain non-resident enterprise investors may realize from the sale or transfer of our securities, may be treated as PRC-sourced income and, as a result, may be subject to PRC withholding tax at a rate of 10%. In such event, we may be required to withhold a 10% PRC tax on any dividends paid to non-resident enterprise investors. In addition, non-resident enterprise investors in our securities may be responsible for paying PRC withholding tax at a rate of 10% on any gain realized from the sale or transfer of our securities if such non-resident enterprise investors and the gain satisfy the requirements under the EIT Law and its implementing rules. However, under the EIT Law and its implementing rules, we would not have an obligation to withhold PRC income tax in respect of the gains that non-resident enterprise investors (including U.S. investors) may realize from the sale or transfer of our securities.

If we were to pay any dividends in the future, we would consult with the PRC tax authorities and if we (based on future clarifying guidance issued by the PRC), or the PRC tax authorities, determine that we must withhold PRC tax on any dividends payable by us under the EIT Law, we will make any necessary withholding tax on dividends payable to our non-resident enterprise investors. If non-resident enterprise investors as described under the EIT Law (including U.S. investors) realized any gain from the sale or transfer of our securities and if such gain were considered as PRC-sourced income, such non-resident enterprise investors would be responsible for paying 10% PRC withholding tax on the gain from the sale or transfer of our securities. As indicated above, under the EIT Law and its implementing rules, we would not have an obligation to withhold PRC income tax in respect of the gains that non-resident enterprise investors (including U.S. investors) may realize from the sale or transfer of our securities.

Moreover, the SAT introduced Circular Guoshuihan No. 698 (“Circular 698”) on December 15, 2009, according to which a non-resident enterprise transferring shares in a Foreign Enterprise (i.e. an offshore enterprise that directly or indirectly holds an equity interest in a PRC enterprise) are subject to PRC income tax on the gains from the transfer if the PRC tax authorities determine that the arrangement lacks a reasonable commercial purpose. The PRC tax authorities will re-characterize the indirect transfer as a direct transfer of the PRC enterprise, and therefore subject to PRC income taxes.

To date, the SAT has been monitoring all kinds of offshore indirect transfer, and on February 3, 2015, the SAT released the Announcement on Several Issues Concerning the Enterprise Income Tax on the Indirect Transfers of Properties by Non-resident Enterprises, as a Public Announcement ("Circular 7") to supersede most of the rules under Circular 698. Circular 7 introduces a new tax regime that is significantly different from that under Circular 698. Firstly, it expands the transactions covered under Circular 698 (i.e. offshore indirect equity transactions) into covering transactions involving the transfer of "China Taxable Properties", which includes (i) assets attributed to an establishment in China, (ii) immovable property in China, and (iii) shares in Chinese resident enterprises. Second, Circular 7 provides clearer criteria than Circular 698 on how to assess the reasonable commercial purposes and introduces "safe harbor" and "blacklisted" scenarios. Third, Circular 7 encourages the transaction parties of an indirect transfer that are neither within the Safe Harbor Scenario nor the Blacklisted Scenario to voluntarily file a report to the in-charge China tax authority for assessment of reasonable business purpose. If the parties of the indirect transfer fail to file such a report, but the indirect transfer is identified as short of reasonable business purpose, the China tax authority will be entitled to collect the EIT on the capital gain and also impose a heavy penalty and a late payment interest. Circular 7 brings challenges to both the foreign transferor and the transferee of the offshore indirect transfer as they have to make a self-assessment on whether the transaction should be subject to PRC taxes and to file or withhold the PRC taxes accordingly. Thus, it is advisable for the transaction parties to consult their PRC tax advisor regarding the PRC tax implications.

Penalties for Failure to Pay Applicable PRC Income Tax

Non-resident investors in us may be subject to the PRC income tax at a rate of 10% on any gain realized from the sale or transfer of our securities if such non-resident investors and the gain trigger the tax rules under the EIT Law and its implementing rules, as described above.

According to the EIT Law and its implementing rules, the PRC Tax Administration and Tax Collection Law and its implementing rules, tax criminal provisions under PRC Criminal Law, the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises and other applicable PRC laws or regulations (collectively the “Tax Related Laws”), where any gain derived by non-resident investors from the sale or transfer of our securities is subject to any income tax in the PRC, and such non-resident investors fail to file any tax return or pay tax in this regard pursuant to the Tax Related Laws, they may be subject to certain fines, penalties or punishments, including without limitation: (1) if a non-resident investor fails to file a tax return and present the relevant information in connection with tax payments, the competent tax authorities shall order it to do so within the prescribed time limit and may impose a fine up to RMB 2,000, and in serious cases, may impose a fine ranging from RMB 2,000 to RMB 10,000; (2) if a non-resident investor fails to file a tax return or fails to pay all or part of the amount of tax payable, the non-resident investor shall be required to pay the unpaid tax amount, late payment interests on unpaid tax amount (the daily interest rate is 0.05% of the unpaid tax amount, starting from the first day when the tax payment liability arose), and a fine ranging from 50% to 500% of the unpaid tax amount; (3) if a non-resident investor fails to file a tax return or pay the tax within the prescribed time limit according to the order by the PRC tax authorities, the PRC tax authorities may collect and check information about the income items of the non-resident investor in the PRC and other payers (the “Other Payers”) who will pay amounts to such non-resident investor, and send a “Notice of Tax Issues” to the Other Payers to collect the unpaid tax amount and impose late payment interests and fines on such non-resident investor from the amounts otherwise payable to such non-resident investor by the Other Payers; (4) if a non-resident investor fails to pay the tax payable within the prescribed time limit as ordered by the PRC tax authorities, a fine may be imposed on the non-resident investor ranging from 50% to 500% of the unpaid tax amount; and the PRC tax authorities may, upon approval by the director of the tax bureau (or sub-bureau) of, or higher than, the county level, take the following compulsory measures: (i) notify in writing the non-resident investor’s bank or other financial institution to withhold from the account thereof for payment of the amount of tax payable, and (ii) detain, seal off, or sell by auction or on the market the non-resident investor’s commodities, goods or other property in a value equivalent to the amount of tax payable; or (5) if the nonresident investor fails to pay all or part of the amount of tax payable late payment interests for outstanding tax payment, and cannot provide a guarantee to the tax authorities, the tax authorities may notify the entry-exit authorities to prevent the non-resident investor or its legal representative from leaving the territory of the PRC. In an extreme case, taxpayer might be subject to PRC tax criminal liability (for example, fixed-term imprisonment if tax evasion crime is constituted to deliberately evade PRC taxes by means stipulated under PRC Criminal Law).

United States Federal Income Taxation

General

The following is a summary of the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our ordinary shares. The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to a beneficial owner of our ordinary shares that is for U.S. federal income tax purposes:

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an individual citizen or resident of the United States;

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a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;

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an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or

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a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

If a beneficial owner of our ordinary shares is not described as a U.S. Holder and is not an entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes, such owner will be considered a “Non-U.S. Holder.” The U.S. federal income tax consequences applicable specifically to Non-U.S. Holders are described below under the heading “Tax Consequences to Non-U.S. Holders.”

This summary is based on the Internal Revenue Code of 1986, as amended, or the “Code,” its legislative history, Treasury regulations promulgated thereunder, published rulings and court decisions, all as currently in effect. These authorities are subject to change or differing interpretations, possibly on a retroactive basis.

This discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular holder based on such holder’s individual circumstances. In particular, this discussion considers only holders that own and hold our ordinary shares as capital assets within the meaning of Section 1221 of the Code and does not address the alternative minimum tax. In addition, this discussion does not address the U.S. federal income tax consequences to holders that are subject to special rules, including:

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financial institutions or financial services entities;

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broker-dealers;

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persons that are subject to the mark-to-market accounting rules under Section 475 of the Code;

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tax-exempt entities;

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governments or agencies or instrumentalities thereof;

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insurance companies;

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regulated investment companies;

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real estate investment trusts;

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certain expatriates or former long-term residents of the United States;

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persons that actually or constructively own 5% or more of our voting shares;

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persons that acquired our ordinary shares pursuant to the exercise of employee stock options, in connection with employee stock incentive plans or otherwise as compensation;

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persons that hold or held our securities as part of a straddle, constructive sale, hedging, conversion or other integrated transaction;

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persons whose functional currency is not the U.S. dollar;

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controlled foreign corporations; or

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passive foreign investment companies.

This discussion does not address any aspect of U.S. federal non-income tax laws, such as gift or estate tax laws, state, local or non-U.S. tax laws or, except as discussed herein, any tax reporting obligations applicable to a holder of our ordinary shares. Additionally, this discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold our ordinary shares through such entities. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our ordinary shares, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. This discussion also assumes that any distribution made (or deemed made) by us on our ordinary shares and any consideration received (or deemed received) by a holder in consideration for the sale or other disposition of such ordinary shares will be in U.S. dollars.

We have not sought, and will not seek, a ruling from the Internal Revenue Service, or the “IRS,” or an opinion of counsel as to any U.S. federal income tax consequence described herein. The IRS may disagree with the description herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements in this discussion.

BECAUSE OF THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO ANY PARTICULAR HOLDER OF OUR SECURITIES MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN, EACH HOLDER OF OUR SECURITIES IS URGED TO CONSULT WITH ITS TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR SECURITIES, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND APPLICABLE TAX TREATIES.

Tax Consequences to U.S. Holders

Taxation of Cash Distributions Paid on Ordinary Shares

Subject to the passive foreign investment company, or “PFIC,” rules discussed below, a U.S. Holder generally will be required to include in gross income as ordinary income the amount of any cash dividend paid on our ordinary shares. A cash distribution on our ordinary shares generally will be treated as a dividend for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Such dividend generally will not be eligible for the dividends-received deduction generally allowed to domestic corporations in respect of dividends received from other domestic corporations. The portion of such distribution, if any, in excess of such earnings and profits generally will constitute a return of capital that will be applied against and reduce the U.S. Holder’s adjusted tax basis in such ordinary shares (but not below zero). Any remaining excess will be treated as gain from the sale or other taxable disposition of such ordinary shares and will be treated as described under “—Taxation on the Disposition of Ordinary Shares” below.

With respect to non-corporate U.S. Holders, such dividends may be subject to U.S. federal income tax at the lower applicable long-term capital gains tax rate (see “—Taxation on the Disposition of Ordinary Shares” below) provided that (1) our ordinary shares are readily tradable on an established securities market in the United States or, in the event we are deemed to be a Chinese “resident enterprise” under the EIT Law, we are eligible for the benefits of the Agreement between the Government of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income, or the “U.S.-PRC Tax Treaty,” (2) we are not a PFIC, as discussed below, for either the taxable year in which the dividend was paid or the preceding taxable year, and (3) certain holding period requirements are met. Under published IRS authority, ordinary shares are considered for purposes of clause (1) above to be readily tradable on an established securities market in the United States only if they are listed on certain exchanges, which presently do not include the OTC QB. Because our ordinary shares are currently quoted only on the OTC QB and, in any event, we may be treated as a PFIC (as discussed below), any cash dividends paid on our ordinary shares currently may not qualify for the lower rate. U.S. Holders should consult their own tax advisors regarding the availability of the lower rate for any cash dividends paid with respect to our ordinary shares.

If a PRC income tax applies to cash dividends paid to a U.S. Holder on our ordinary shares, such tax may be treated as a foreign tax eligible for a deduction from such holder’s U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax liability (subject to applicable conditions and limitations). In addition, if such PRC tax applies to any such dividends, a U.S. Holder may be entitled to certain benefits under the U.S.-PRC Tax Treaty, if such holder is considered a resident of the United States for purposes of, and otherwise meets the requirements of, the U.S.-PRC Tax Treaty. U.S. Holders should consult their own tax advisors regarding the deduction or credit for any such PRC tax and their eligibility for the benefits of the U.S.-PRC Tax Treaty.

Taxation on the Disposition of Ordinary Shares

Upon a sale or other taxable disposition of our ordinary shares and subject to the PFIC rules discussed below, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in such ordinary shares.

The regular U.S. federal income tax rate on capital gains recognized by U.S. Holders generally is the same as the U.S. federal income tax rate on ordinary income, except that long-term capital gains recognized by non-corporate U.S. Holders are generally subject to U.S. federal income tax at a maximum regular rate of 20%. Capital gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s holding period for the ordinary shares exceeds one year. The deductibility of capital losses is subject to various limitations.

If a PRC income tax applies to any gain from the disposition of our ordinary shares by a U.S. Holder, such tax may be treated as a foreign tax eligible for a deduction from such holder’s U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax liability (subject to applicable conditions and limitations). In addition, if such PRC tax applies to any such gain, a U.S. Holder may be entitled to certain benefits under the U.S.-PRC Tax Treaty, if such holder is considered a resident of the United States for purposes of, and otherwise meets the requirements of, the U.S.-PRC Tax Treaty. U.S. Holders should consult their own tax advisors regarding the deduction or credit for any such PRC tax and their eligibility for the benefits of the U.S.-PRC Tax Treaty.

Additional Taxes

U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally will be subject to a 3.8% Medicare contribution tax on unearned income, including, without limitation, dividends on, and gains from the sale or other taxable disposition of, our ordinary shares, subject to certain limitations and exceptions. Under applicable regulations, in the absence of a special election, such unearned income generally would not include income inclusions under the qualified electing fund, or QEF, rules discussed below under “— Passive Foreign Investment Company Rules,” but would include distributions of earnings and profits from a QEF. U.S. Holders should consult their own tax advisors regarding the effect, if any, of such tax on their ownership and disposition of our ordinary shares.

Passive Foreign Investment Company Rules

A foreign (i.e., non-U.S.) corporation will be a PFIC if at least 75% of its gross income in a taxable year of the foreign corporation, including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income. Alternatively, a foreign corporation will be a PFIC if at least 50% of its assets in a taxable year of the foreign corporation, ordinarily determined based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than certain rents or royalties derived from the active conduct of a trade or business), and gains from the disposition of passive assets.

Based on the composition (and estimated values) of the assets and the nature of the income of us and our subsidiaries for our 2016 taxable year, we may be treated as a PFIC for our 2016 taxable year. However, since we have not performed a definitive analysis with respect to our PFIC status for our 2016 taxable year, there can be no assurance with respect to our status as a PFIC for such taxable year. There also could be no assurance with respect to our PFIC status for our current (2017) taxable year or any future taxable year. U.S. Holders are urged to consult their own tax advisors regarding the possible application of the PFIC rules.

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of our ordinary shares and the U.S. Holder did not make either a timely QEF election for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) our ordinary shares, a QEF election along with a purging election or a mark-to-market election, each as described below, such holder generally will be subject to special rules for regular U.S. federal income tax purposes with respect to:

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any gain recognized by the U.S. Holder on the sale or other disposition of our ordinary shares; and

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any “excess distribution” made to the U.S. Holder (generally, the excess of the amount of any distributions to such U.S. Holder during a taxable year of the U.S. Holder over 125% of the average annual distributions received by such U.S. Holder in respect of the ordinary shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the ordinary shares).

Under these rules,

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the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the ordinary shares;

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the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the period in the U.S. Holder’s holding period before the first day of our first taxable year in which we qualified as a PFIC, will be taxed as ordinary income;

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the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and

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the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder.

In general, if we are determined to be a PFIC, a U.S. Holder may avoid the PFIC tax consequences described above in respect to our ordinary shares by making a timely QEF election (or a QEF election along with a purging election). Pursuant to the QEF election, a U.S. Holder generally will be required to include in income its pro rata share of our net capital gains (as long-term capital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with which our taxable year ends if we are treated as a PFIC for that taxable year. A U.S. Holder may make a separate election to defer the payment of taxes on undistributed income inclusions under the QEF rules, but if deferred, any such taxes will be subject to an interest charge.

The QEF election is made on a shareholder-by-shareholder basis and, once made, can be revoked only with the consent of the IRS. A U.S. Holder generally makes a QEF election by attaching a completed IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund), including the information provided in a PFIC annual information statement, to a timely filed U.S. federal income tax return for the taxable year to which the election relates. Retroactive QEF elections generally may be made only by filing a protective statement with such return and if certain other conditions are met or with the consent of the IRS.

In order to comply with the requirements of a QEF election, a U.S. Holder must receive certain information from us. Upon request from a U.S. Holder, we will endeavor to provide to the U.S. Holder no later than 90 days after the request such information as the IRS may require, including a PFIC annual information statement, in order to enable the U.S. Holder to make and maintain a QEF election. However, there is no assurance that we will have timely knowledge of our status as a PFIC in the future or of the required information to be provided.

If a U.S. Holder has made a QEF election with respect to our ordinary shares, and the special tax and interest charge rules do not apply to such shares (because of a timely QEF election for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) such shares or a QEF election, along with a purge of the PFIC taint pursuant to a purging election), any gain recognized on the sale or other taxable disposition of our ordinary shares generally will be taxable as capital gain and no interest charge will be imposed. As discussed above, for regular U.S. federal income tax purposes, U.S. Holders of a QEF generally are currently taxed on their pro rata shares of the QEF’s earnings and profits, whether or not distributed. In such case, a subsequent distribution of such earnings and profits that were previously included in income generally should not be taxable as a dividend to such U.S. Holders. The adjusted tax basis of a U.S. Holder’s shares in a QEF will be increased by amounts that are included in income, and decreased by amounts distributed but not taxed as dividends, under the above rules. Similar basis adjustments apply to property if by reason of holding such property the U.S. Holder is treated under the applicable attribution rules as owning shares in a QEF.

Although a determination as to our PFIC status will be made annually, the initial determination that we are a PFIC will generally apply for subsequent years to a U.S. Holder who held our ordinary shares while we were a PFIC, whether or not we meet the test for PFIC status in those subsequent years. A U.S. Holder who makes the QEF election discussed above for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) our ordinary shares, however, will not be subject to the PFIC tax and interest charge rules discussed above in respect to such shares. In addition, such U.S. Holder will not be subject to the QEF inclusion regime with respect to such shares for any of our taxable years that end within or with a taxable year of the U.S. Holder and in which we are not a PFIC. On the other hand, if the QEF election is not effective for each of our taxable years in which we are a PFIC and during which the U.S. Holder holds (or is deemed to hold) our ordinary shares, the PFIC rules discussed above will continue to apply to such shares unless the holder files on a timely filed U.S. federal income tax return (including extensions) a QEF election and a purging election to recognize under the rules of Section 1291 of the Code any gain that the U.S. Holder would otherwise recognize if the U.S. Holder had sold our ordinary shares for their fair market value on the “qualification date.” The qualification date is the first day of our tax year in which we qualify as a QEF with respect to such U.S. Holder. The purging election can only be made if such U.S. Holder held our ordinary shares on the qualification date. The gain recognized by the purging election will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, the U.S. Holder will increase the adjusted tax basis in its ordinary shares by the amount of the gain recognized and will also have a new holding period in the ordinary shares for purposes of the PFIC rules.

Alternatively, if a U.S. Holder, at the close of its taxable year, owns shares in a PFIC that are treated as marketable stock, the U.S. Holder may make a mark-to-market election with respect to such shares for such taxable year. If the U.S. Holder makes a valid mark-to-market election for the first taxable year of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) our ordinary shares and for which we are determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above in respect to its ordinary shares as long as such shares continue to be treated as marketable stock. Instead, in general, the U.S. Holder will include as ordinary income for each year that we are treated as a PFIC the excess, if any, of the fair market value of its ordinary shares at the end of its taxable year over the adjusted basis in its ordinary shares. The U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its ordinary shares over the fair market value of its ordinary shares at the end of its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. Holder’s basis in its ordinary shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition of the ordinary shares in a taxable year in which we are treated as a PFIC generally will be treated as ordinary income. Special tax rules may apply if a U.S. Holder makes a mark-to-market election for a taxable year after the first taxable year in which the U.S. Holder holds (or is deemed to hold) our ordinary shares and for which we are determined to be a PFIC.

The mark-to-market election is available only for stock that is regularly traded on a national securities exchange that is registered with the Securities and Exchange Commission or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. The OTC QB currently is not considered to be a national securities exchange that would allow a U.S. Holder to make or maintain a mark-to-market election. Because our ordinary shares are currently quoted only on the OTC QB, such shares may not qualify as marketable stock for purposes of the election.

If we are a PFIC and, at any time, have a foreign subsidiary that is classified as a PFIC, a U.S. Holder of our ordinary shares generally would be deemed to own a portion of the shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution from, or dispose of all or part of our interest in, or the U.S. Holder were otherwise deemed to have disposed of an interest in, the lower-tier PFIC. Upon request, we will endeavor to cause any lower-tier PFIC to provide to a U.S. Holder no later than 90 days after the request the information that may be required to make or maintain a QEF election with respect to the lower- tier PFIC. However, there is no assurance that we will have timely knowledge of the status of any such lower-tier PFIC or will be able to cause the lower-tier PFIC to provide the required information. U.S. Holders are urged to consult their own tax advisors regarding the tax issues raised by lower-tier PFICs.

A U.S. Holder that owns (or is deemed to own) shares in a PFIC during any taxable year of the U.S. Holder may have to file an IRS Form 8621 (whether or not a QEF election or mark-to-market election is or has been made) with such U.S. Holder’s U.S. federal income tax return and provide such other information as may be required by the U.S. Treasury Department.

The rules dealing with PFICs and with the QEF and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly, U.S. Holders of our ordinary shares should consult their own tax advisors concerning the application of the PFIC rules to our ordinary shares under their particular circumstances.

Tax Consequences to Non-U.S. Holders

Cash dividends paid or deemed paid to a Non-U.S. Holder in respect to its ordinary shares generally will not be subject to U.S. federal income tax, unless the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States).

In addition, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other taxable disposition of our ordinary shares unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) or the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of sale or other disposition and certain other conditions are met (in which case, such gain from U.S. sources generally is subject to U.S. federal income tax at a 30% rate or a lower applicable tax treaty rate).

Dividends and gains that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) generally will be subject to regular U.S. federal income tax at the same regular U.S. federal income tax rates applicable to a comparable U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.

Backup Withholding and Information Reporting

In general, information reporting for U.S. federal income tax purposes should apply to distributions made on our ordinary shares within the United States to a U.S. Holder (other than an exempt recipient) and to the proceeds from sales and other dispositions of our securities by a U.S. Holder (other than an exempt recipient) to or through a U.S. office of a broker. Payments made (and sales and other dispositions effected at an office) outside the United States will be subject to information reporting in limited circumstances. In addition, certain information concerning a U.S. Holder’s adjusted tax basis in its ordinary shares and adjustments to that tax basis and whether any gain or loss with respect to such ordinary shares is long-term or short-term also may be required to be reported to the IRS, and certain holders may be required to file an IRS Form 8938 (Statement of Specified Foreign Financial Assets) to report their interest in our ordinary shares.

Moreover, backup withholding of U.S. federal income tax at a rate of 28% generally will apply to dividends paid on our ordinary shares to a U.S. Holder (other than an exempt recipient) and the proceeds from sales and other dispositions of our ordinary shares by a U.S. Holder (other than an exempt recipient), in each case who (a) fails to provide an accurate taxpayer identification number; (b) is notified by the IRS that backup withholding is required; or (c) in certain circumstances, fails to comply with applicable certification requirements.

A Non-U.S. Holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.

Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S. Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the availability of and procedures for obtaining an exemption from backup withholding in their particular circumstances.

F. Dividends and Paying Agents

Not required.

G. Statement by Experts

Not required.

H. Documents on Display

Documents concerning us that are referred to in this document may be inspected at our principal executive offices at 27/F, Kai Yuan Finance Center, No. 5, East Main Street, Shijiazhuang, Hebei, People’s Republic of China, Tel: +86 311 8382 7688, Fax: +86 311 8381 9636.

In addition, we will file annual reports and other information with the Securities and Exchange Commission. We will file annual reports on Form 20-F and submit other information under cover of Form 6-K. As a foreign private issuer, we are exempt from the proxy requirements of Section 14 of the Exchange Act and our officers, directors and principal shareholders will be exempt from the insider short-swing disclosure and profit recovery rules of Section 16 of the Exchange Act. Annual reports and other information we file with the Commission may be inspected at the public reference facilities maintained by the Commission at 100 F. Street, N.E., Washington, D.C. 20549, and copies of all or any part thereof may be obtained from such offices upon payment of the prescribed fees. You may call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms and you can request copies of the documents upon payment of a duplicating fee, by writing to the Commission. In addition, the Commission maintains a web site that contains reports and other information regarding registrants (including us) that file electronically with the Commission which can be accessed at http://www.sec.gov .

I. Subsidiary Information

Not required.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

For disclosures regarding market risk exposure, see “Item 5 - Operating and Financial Review and Prospects – Liquidity and Capital Resources – Quantitative and Qualitative Disclosures about Market Risk” above.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

None.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

There has been no default of any indebtedness nor is there any arrearage in the payment of dividends.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

As of March 31, 2017, there had been no changes to the instruments defining the rights of the holders of any class of registered securities, and the rights of holders of the registered securities had not been altered by the issuance or modification of any other class of securities.

There are no restrictions on working capital and no removal or substitution of assets securing any class of our registered securities.

ITEM 15. CONTROLS AND PROCEDURES

A. Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2016. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures as of December 31, 2016 were effective.

Disclosure controls and procedures are designed to enable us to record, process, summarize and report information required to be included in the reports that we file or submit under the Exchange Act within the time period required and also effective to ensure that information required to be disclosed in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officer, to allow timely decisions regarding required disclosure.

It should be noted that while our disclosure controls and procedures as of December 31, 2016 were designed at the reasonable assurance level, our management does not expect that our disclosure controls and procedures or internal financial controls will prevent all errors or fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

B. Management’s Annual Report on Internal Control Over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our board of directors to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our board of directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on this evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2016.

Our registered public accounting firm, Marcum Bernstein & Pinchuk LLP, which audited our financial statements included in this annual report on Form 20-F has issued an attestation report on management’s assessment of our internal control over financial reporting. Such attestation report is provided in full below.

C. Attestation Report of the Registered Public Accounting Firm

To the Audit Committee of the

Board of Directors and Stockholders of

Fincera Inc.

We have audited Fincera Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material aspects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of December 31, 2016 and 2015 and the related consolidated statements of income and comprehensive (loss) income, changes in stockholders’ equity, and cash flows for the years ended December 31, 2016, 2015 and 2014, and our report dated May 1, 2017 expressed an unqualified opinion on those consolidated financial statements.

/s/ Marcum Bernstein & Pinchuk llp

Marcum Bernstein & Pinchuk LLP

Guangzhou, China

May 1, 2017

D. Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the quarter ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The Company’s Board of Directors has determined that Mr. James Cheng-Jee Sha is an audit committee financial expert and “independent” as that term is defined in the NASDAQ listing standards.

ITEM 16B. CODE OF ETHICS

In May 2009, our board of directors adopted a code of ethics that applies to our directors, officers and employees as well as those of our subsidiaries. A copy of our code of ethics was attached as an exhibit to our Annual Report on Form 20-F filed on June 9, 2009. We also will provide a copy of our code of ethics to any person, without charge, upon request. Requests for copies of our code of ethics should be sent in writing to Fincera Inc., 27/F, Kai Yuan Finance Center, No. 5, East Main Street, Shijiazhuang, Hebei, People’s Republic of China, Tel: +86 311 8382 7688, Fax: +86 311 8381 9636.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table represents the approximate aggregate fees for services rendered by Marcum Bernstein & Pinchuk LLP for fiscal years ended December 31, 2016 and 2015:

	December 31, 2016	December 31, 2015

Audit Fees – Marcum Bernstein & Pinchuk LLP	$ 422,043	$ 481,853
Audit-Related Fees	─	─
Tax Fees	─	─
All Other Fees	─	─
Total Fees	$ 422,043	$ 481,853

Audit Fees

Marcum Bernstein & Pinchuk LLP audit fees for 2016 and 2015 consist of the audits of our financial statements for the years ended December 31, 2016, 2015 and 2014 and the reviews of our interim financial statements included in 6-K filings for 2016 and 2015.

Non Audit-Related Fees

There were no non audit-related fees incurred by the Company during 2015 or 2016.

Tax Fees

There were no fees billed by Marcum Bernstein & Pinchuk LLP for tax services rendered during fiscal years ended December 31, 2016 and 2015.

All Other Fees

There were no fees billed by Marcum Bernstein & Pinchuk LLP for other professional services rendered during fiscal years ended December 31, 2016 and 2015.

Pre-Approval of Services

Before we engage our external auditors to render audit or non-audit services, the engagement is pre-approved by our audit committee. Our audit committee reviews our external auditors’ engagements letters for audit and non-audit services. All of the services provided by our external auditors for the fiscal years 2016, 2015 and 2014 were pre-approved by the audit committee in this manner.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

None.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

The Company did not repurchase any of its shares in the years ended December 31, 2016 and 2015.

ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

There were no changes to the certifying accountant for the year ended December 31, 2016.

ITEM 16G. CORPORATE GOVERNANCE

Not applicable.

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

The financial statements are filed as part of this annual report beginning on page F-1.

ITEM 19. EXHIBITS

Exhibit No.		Description
1.1		Second Amended and Restated Memorandum and Articles of Association (1)
1.2		Amendment to Memorandum and Articles of Association (12)
2.1		Specimen Ordinary Share Certificate (2)
4.1		Share Exchange Agreement (3)
4.2		Form of Indemnification Agreement (4)
4.3		Form of Fincera Inc. 2009 Equity Incentive Plan (5)
4.4		Executive Employment Agreement between the Registrant and Yong Hui Li, dated May 9, 2015 (*)
4.5		Executive Employment Agreement between the Registrant and Xing Wei, dated May 9, 2015 (*)
4.6		Executive Employment Agreement between the Registrant and Lei Chen, dated May 9, 2015 (*)
4.7		Executive Employment Agreement between the Registrant and Jason Wang, dated March 6, 2016 (*)
4.8		Executive Employment Agreement between the Registrant and Spencer Ang Li, dated March 6, 2016 (*)
4.9		Business Operation Agreement (Xuhua Trading) between Hebei Yarui Trading Co., Ltd. and Hebei Chuanglian Trade Co., Ltd., dated December 23, 2016 (*)
4.10		Equity Pledge Agreement (Xuhua Trading) between Hebei Yarui Trading Co., Ltd. and Hebei Chuanglian Trade Co., Ltd., dated December 23, 2016 (*)
4.11		Option Agreement (Xuhua Trading) between Hebei Yarui Trading Co., Ltd. and Hebei Chuanglian Trade Co., Ltd., dated December 23, 2016 (*)
4.12		Services Agreement (Xuhua Trading) between Hebei Yarui Trading Co., Ltd. and Hebei Chuanglian Trade Co., Ltd., dated December 23, 2016 (*)
4.13		Voting Attorney Agreement (Xuhua Trading) between Hebei Yarui Trading Co., Ltd. and Hebei Chuanglian Trade Co., Ltd., dated December 23, 2016 (*)
4.14		Business Operation Agreement (Kaiyuan Auto Trade) between Hebei Shengrong Investment Co., Ltd. and Hebei Chuanglian Finance Leasing Co., Ltd.., dated January 31, 2013 (11)
4.15		Equity Pledge Agreement (Kaiyuan Auto Trade) between Hebei Shengrong Investment Co., Ltd. and Hebei Chuanglian Finance Leasing Co., Ltd., dated January 31, 2013 (11)
4.16		Option Agreement (Kaiyuan Auto Trade) between Hebei Shengrong Investment Co., Ltd. and Hebei Chuanglian Finance Leasing Co., Ltd., dated January 31, 2013 (11)
4.17		Services Agreement (Kaiyuan Auto Trade) between Hebei Shengrong Investment Co., Ltd. and Hebei Chuanglian Finance Leasing Co., Ltd., dated January 31, 2013 (11)
4.18		Voting Attorney Agreement (Kaiyuan Auto Trade) between Hebei Shengrong Investment Co., Ltd. and Hebei Chuanglian Finance Leasing Co., Ltd., dated January 31, 2013 (11)
4.19		Business Operation Agreement (Kaiyuan Logistics) between Hebei Shengrong Investment Co., Ltd. and Hebei Chuanglian Finance Leasing Co., Ltd.., dated January 31, 2013 (11)
4.20		Equity Pledge Agreement between Hebei Shengrong Investment Co., Ltd. and Hebei Chuanglian Finance Leasing Co., Ltd., dated January 31, 2013 (11)
4.21		Option Agreement (Kaiyuan Logistics) between Hebei Shengrong Investment Co., Ltd. and Hebei Chuanglian Finance Leasing Co., Ltd., dated January 31, 2013 (11)
4.22		Services Agreement (Kaiyuan Logistics) between Hebei Shengrong Investment Co., Ltd. and Hebei Chuanglian Finance Leasing Co., Ltd., dated January 31, 2013 (11)
4.23		Voting Attorney Agreement (Kaiyuan Logistics) between Hebei Shengrong Investment Co., Ltd. and Hebei Chuanglian Finance Leasing Co., Ltd., dated January 31, 2013 (11)
4.24		Summary of Lease Securitization Agreement, by and between Chuangjie Trading and Citic Trust Co., Ltd., dated October 28, 2010 (6)
4.25		Eastern Eagle International 100% Equity Transfer Agreement, dated August 8, 2016, by and among Smart Success Investment Limited, Fincera Inc. and Eastern Eagle International (14)
4.26		Form of Fincera Inc. 2015 Omnibus Equity Incentive Plan (13)
8.1		Subsidiaries of the Registrant (*)
11		Code of Ethics (9)
12.1		Certification of the Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended

12.2		Certification of the Chief Financial Officer (Principal Financial Officer) pursuant to Rule 13a-14(a) of the Securities Exchange Act, as amended
13		Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1		Consent of Marcum Bernstein & Pinchuk LLP, independent registered public accounting firm
101		Interactive Data File
*	Attached to this Annual Report on Form 20-F.

(1)

Incorporated by reference to Registration Statement on Form F-1, filed with the SEC on Form F-1 filed May 29, 2009.

(2)

Incorporated by reference to Fincera’s Registration Statement (File No. 333-147284), filed with the SEC on Form S-1 dated January 30, 2008.

(3)

Incorporated by reference to Annex C to Fincera’s Final Proxy Statement, filed as Exhibit 99.1 to Fincera’s Current Report on Form 6-K filed with the SEC on March 11, 2009.

(4)

Incorporated by reference to Schedule N to Annex C to Fincera’s Final Proxy Statement, filed as Exhibit 99.1 to Fincera’s Current Report on Form 6-K filed with the SEC on March 11, 2009.

(5)

Incorporated by reference to Annex E to Fincera’s Final Proxy Statement, filed as Exhibit 99.1 to Fincera’s Current Report on Form 6-K filed with the SEC on March 11, 2009.

(6)

Incorporated by reference to Fincera’s Amendment No. 1 to the Annual Report on Form 20-F/A, filed with the SEC on December 6, 2011.

(7)

Incorporated by reference to Fincera’s Annual Report on Form 20-F, filed with the SEC on November 30, 2011.

(8)

Incorporated by reference to Fincera’s Annual Report on Form 20-F, filed with the SEC on April 5, 2012.

(9)

Incorporated by reference to Fincera’s Annual Report, filed with the SEC on Form 20-F filed June 9, 2009.

(10)

Incorporated by reference to Fincera’s Annual Report on Form 20-F, filed with the SEC on April 30, 2013.

(11)

Incorporated by reference to Fincera’s Annual Report on Form 20-F, filed with the SEC on April 18, 2014.

(12)

Incorporated by reference to Fincera’s Annual Report on Form 20-F, filed with the SEC on April 30, 2015.

(13)

Incorporated by reference to Fincera’s Annual Report on Form 20-F, filed with the SEC on May 2, 2016.

(14)

Incorporated by reference to Fincera’s Current Report on Form 6-K filed with the SEC on August 15, 2016.

SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	FINCERA INC.

May 1, 2017	By:	/s/ Yong Hui Li
		Yong Hui Li
		Chief Executive Officer

May 1, 2017	By:	/s/ Jason Wang
		Jason Wang
		Chief Financial Officer

FINCERA INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

	Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
CONSOLIDATED BALANCE SHEETS	F-3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)	F-5
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY	F-7
CONSOLIDATED STATEMENTS OF CASH FLOWS	F-8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	F-10

F-1

Report of Independent Registered Public Accounting Firm

To the Audit Committee of the

Board of Directors and Stockholders of

Fincera Inc.

We have audited the accompanying consolidated balance sheets of Fincera Inc. and Subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the three years ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for the years ended December 31, 2016, 2015 and 2014 in conformity with accounting principles generally accepted in the United States of America.

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information listed in Note 22 to the financial statements is presented for purposes of complying with the Security and Exchange Commission’s rules and is not part of the basic financial statements. This additional information has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our report dated May 1, 2017 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ Marcum Bernstein & Pinchuk llp

Marcum Bernstein & Pinchuk llp

Guangzhou, China

May 1, 2017

F-2

FINCERA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands except share and per share data)

	December 31,
	2016	2015
		Combined – Note 2
ASSETS
Current assets
Cash and cash equivalents	$ 104,123	$ 72,262
Restricted cash	6,129	157
Other financing receivables, net	295,437	235,349
Loans, net	371,301	250,659
Prepaid expenses, related party	—	1,540
Prepaid expenses and other current assets	6,573	2,258
Current assets of discontinued operations	14,461	104,595
Total current assets	798,024	666,820

Property, equipment and leasehold improvements, net	202,073	224,704
Deferred income tax assets	23,527	17,649
Non-current assets of discontinued operations	7,373	15,250

Total assets	$ 1,030,997	$ 924,423

The accompanying notes are an integral part of these consolidated financial statements.

F-3

FINCERA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - Continued

(in thousands except share and per share data)

	December 31,
	2016	2015
		Combined – Note 2
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Short-term bank borrowings (including short-term bank borrowings of the consolidated VIEs without recourse to Fincera of $74,960 and $56,363 as of December 31, 2016 and 2015, respectively)	$ 83,610	$ 75,921
Long-term bank borrowings, current portion	8,938	14,784
Borrowed funds from CeraVest investor, related party (including borrowed funds from CeraVest investor, related party of the consolidated VIEs without recourse to Fincera of $134 and $2,716 as of December 31, 2016 and 2015, respectively)	4,349	2,716
Borrowed funds from CeraVest investors (including borrowed funds from CeraVest investors of the consolidated VIEs without recourse to Fincera of $228,278 and $202,725 as of December 31, 2016 and 2015, respectively)	437,594	202,725
Financing payables, related parties (including financing payables, related parties of the consolidated VIEs without recourse to Fincera of $200,721 and $58,620 as of December 31, 2016 and 2015, respectively)	273,970	151,921
Other payables and accrued liabilities (including other payables and accrued liabilities of the consolidated VIEs without recourse to Fincera of $29,061 and $14,334 as of December 31, 2016 and 2015, respectively)	61,202	48,210
Income tax payable (including income tax payable of the consolidated VIEs without recourse to Fincera of $3,741 and $2,562 as of December 31, 2016 and 2015, respectively)	5,476	3,317
Current liabilities of discontinued operations (including current liabilities of discontinued operations of the consolidated VIEs without recourse to Fincera of $806 and $9,868 as of December 31, 2016 and 2015, respectively)	4,471	50,445
Total current liabilities	879,610	550,039

Noncurrent liabilities
Long-term bank borrowings	95,719	118,424
Long-term financing payables, related party	33,028	—
Non-current liabilities of discontinued operations	—	2,587
Total liabilities	1,008,357	671,050

Commitment and Contingencies

Stockholders’ equity
Preferred shares, $0.001 par value authorized - 1,000,000 shares; issued – none	—	—
Ordinary shares - $0.001 par value authorized – 1,000,000,000 shares; issued and outstanding – 23,561,949 shares at December 31, 2016; issued and outstanding – 23,550,993 shares at December 31, 2015	24	24
Additional paid-in capital	136,802	359,960
Statutory reserves	25,074	27,014
Accumulated deficit	(146,173 )	(150,282 )
Accumulated other comprehensive income	6,913	16,657
Total stockholders’ equity	22,640	253,373

Total liabilities and stockholders’ equity	$ 1,030,997	$ 924,423

The accompanying notes are an integral part of these consolidated financial statements.

F-4

FINCERA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands except share and per share data)

	Years ended December 31,
	2016	2015	2014
		Combined – Note 2	Combined – Note 2
Income
Service charges	$ 71,642	$ 32,110	$ 301
Interest income	33,976	14,226	195
Other income	821	62	—
Property lease and management	25,589	26,375	19,527
Total income	132,028	72,773	20,023

Operating Costs and Expenses
Interest expense	39,606	24,806	14,530
Interest expense, related parties	6,231	6,109	1,991
Provision for credit losses	17,490	10,021	209
Product development expense	9,443	6,157	3,321
Property and management cost	16,515	17,636	17,360
Selling and marketing	13,508	3,360	1,558
General and administrative	25,945	16,979	13,353
Litigation expense	—	—	4,350
Total operating costs and expenses	128,738	85,068	56,672

Income (loss) from continuing operations before income taxes	3,290	(12,295 )	(36,649 )
Income tax provision (benefit)	1,286	(2,863 )	(7,309 )
Income (loss) from continuing operations	2,004	(9,432 )	(29,340 )

Income from discontinued operations, net of taxes	165	8,205	26,488
Net income (loss)	$ 2,169	$ (1,227 )	$ (2,852 )
Foreign currency translation adjustment	(9,744 )	(15,728 )	(1,293 )

Comprehensive loss	$ (7,575 )	$ (16,955 )	$ (4,145 )

F-5

FINCERA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS– Continued

(in thousands except share and per share data)

	Years ended December 31,
	2016	2015	2014
		Combined – Note 2	Combined – Note 2
Earnings (loss) per share

Basic
Continuing operations	$ 0.08	$ (0.40 )	$ (1.24 )
Discontinued operations	0.01	0.35	1.12
	$ 0.09	$ (0.05 )	$ (0.12 )

Diluted
Continuing operations	$ 0.08	$ (0.40 )	$ (1.24 )
Discontinued operations	0.01	0.35	1.12
	$ 0.09	$ (0.05 )	$ (0.12 )

Weighted average shares outstanding
Basic	23,556,828	23,550,145	23,549,112
Diluted	24,372,864	23,550,145	23,549,112

The accompanying notes are an integral part of these consolidated financial statements.

F-6

FINCERA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands except share data)

						Accumu-
						lated
						Other
			Additional		(Accumu-lated Deficit)	Compre-hensive	Total
	Ordinary Shares		Paid-in	Statutory	Retained	Income	Stockholders’
	Shares	Amount	Capital	Reserves	Earnings	(Loss)	Equity

Balance, December 31, 2013 (Combined – Note 2)	23,545,939	$ 24	$ 358,315	$ 22,947	$ (142,136 )	$ 33,678	$ 272,828
Other comprehensive income(loss):
Foreign currency translation adjustments	—	—	—	—	—	(1,293 )	(1,293 )
Stock-based compensation	—	—	1,253	—	—	—	1,253
Appropriations to statutory reserves	—	—	—	3,275	(3,275 )	—	—
Equity awards exercised	3,705	—	—	—	—	—	—
Net income for the year ended December 31, 2014	—	—	—	—	(2,852 )	—	(2,852 )
Balance, December 31, 2014 (Combined – Note 2)	23,549,644	$ 24	$ 359,568	$ 26,222	$ (148,263 )	$ 32,385	$ 269,936
Other comprehensive income(loss):
Foreign currency translation adjustments	—	—	—	—	—	(15,728 )	(15,728 )
Stock-based compensation	—	—	392	—	—	—	392
Appropriations to statutory reserves	—	—	—	792	(792 )	—	—
Equity awards exercised	1,349	—	—	—	—	—	—
Net income for the year ended December 31, 2015	—	—	—	—	(1,227 )	—	(1,227 )
Balance, December 31, 2015 (Combined – Note 2)	23,550,993	$ 24	$ 359,960	$ 27,014	$ (150,282 )	$ 16,657	$ 253,373
Other comprehensive income(loss):
Foreign currency translation adjustments	—	—	—	—	—	(9,744 )	(9,744 )
Stock-based compensation	—	—	1,266	—	—	—	1,266
Appropriations to statutory reserves	—	—	—	2,299	(2,299 )	—	—
Disposal of subsidiaries	—	—	—	(4,239 )	4,239	—	—
Equity awards exercised	10,956	—	—	—	—	—	—
Capital Distribution	—	—	(224,695 )	—	—	—	(224,695 )
Gain on disposal of entity under common control	—	—	271	—	—	—	271
Net income for the year ended December 31, 2016	—	—	—	—	2,169	—	2,169
Balance, December 31, 2016	23,561,949	$ 24	$ 136,802	$ 25,074	$ (146,173 )	$ 6,913	$ 22,640

The accompanying notes are an integral part of these consolidated financial statements.

F-7

FINCERA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	December 31,
	2016	2015	2014
		(Combined – Note 2)	(Combined – Note 2)
Cash flow from operating activities:

Net income (loss)	$ 2,169	$ (1,227 )	$ (2,852 )
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	8,952	9,992	10,378
Provision for credit losses	20,849	19,373	13,599
Deferred income taxes	(3,018 )	(8,515 )	(9,115 )
Stock-based compensation expenses	1,266	392	1,253
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Restricted cash	(6,243 )	808	251
Accounts receivable	15,536	(11,111 )	(13,062 )
Other financing receivables from peer store, net	—	16,513	(12,953 )
Short-term net investment in sales-type leases	5,587	50,052	(57,328 )
Long-term net investment in direct financing and sales-type leases	60,123	270,923	42,984
Inventories	3,244	143	746
Other payables and accrued liabilities	14,594	22,951	7,779
Prepaid expense and other current assets	(2,115 )	729	(934 )
Income tax payable	2,356	1,100	(1,070 )
Long-term payable	—	(6,260 )	147

Net cash provided by (used in) operating activities	123,300	365,863	(20,177 )

Cash flows from investing activities:
Change in loans	(144,698 )	(244,092 )	(20,004 )
Change in other financing receivables	(92,470 )	(239,673 )	(16,716 )
Purchase of property, equipment and leasehold improvements	(7,850 )	(12,163 )	(13,862 )
Proceeds from sales of property, equipment and leasehold improvements	1,062	—	—

Net cash used in investing activities	(243,956 )	(495,928 )	(50,582 )

F-8

FINCERA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

(in thousands)

	December 31,
	2016	2015	2014
		(Combined – Note 2)	(Combined – Note 2)
Cash flow from financing activities:

Changes in borrowed funds from CeraVest investors	259,950	213,868	87
Proceeds from financing payables, related parties	871,770	270,669	901,456
Repayment to financing payables, related parties	(765,544 )	(260,239 )	(943,814 )
Proceeds from bank borrowings	87,423	161,614	341,051
Repayment of bank borrowings	(133,945 )	(207,403 )	(244,954 )
Capital distribution	(157,514 )	—	—

Net cash provided by financing activities	162,140	178,509	53,826

Effect of exchange rate fluctuation on cash and cash equivalents	(9,623 )	(4,294 )	(532 )

Net increase (decrease) in cash and cash equivalents	31,861	44,150	(17,465 )

Cash and cash equivalents, beginning of the year	72,262	28,112	45,577

Cash and cash equivalents, end of the year	$ 104,123	$ 72,262	$ 28,112

FINCERA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued

(in thousands)

	December 31,
	2016	2015	2014
		(Combined – Note 2)	(Combined – Note 2)
Supplemental disclosure of cash flow information:
Interest paid	$ 40,303	$ 26,214	$ 10,674
Income taxes paid	$ 4,946	$ 1,075	$ —
Supplemental disclosure of non-cash financing activities:
Consideration payable to Smart Success	$ 67,181	$ —	$ —

The accompanying notes are an integral part of these consolidated financial statements.

F-9

FINCERA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2016, 2015 and 2014

(in thousands except share and per share data)

NOTE 1 – ORGANIZATION AND PRINCIPLE ACTIVITIES

Fincera Inc. (the “Company” or “Fincera”) is a holding company whose only business operations are conducted through its wholly owned subsidiary, AutoChina Group Inc. (“ACG”). ACG’s operations consist of 1) Internet-business and 2) Property lease and management business. Our internet-based segment is its own reportable segment. Within our property lease and management business are two additional reportable segments: hotel and office leasing. The Company is in the process of winding down its commercial vehicle sales, leasing and support business and insurance agency business. All the business is conducted in the People’s Republic of China (the “PRC” or “China”).

In October 2016, the Company acquired 100% equity interest of Eastern Eagle and its subsidiaries from Smart Success, an entity wholly-owned by the significant shareholder of the Company. The Company accounted for this transaction using the method similar to the pooling-of-interests method in accordance with ASC 805-50; accordingly, the assets and liabilities and operations of the Company and Eastern Eagle were combined at their historical carrying amounts, and all periods presented were adjusted as if the entities had always been combined when the combining entities were under common control (see Note 2). Intercompany balances and transactions between the combining entities prior to the acquisition are eliminated from the combined financial statements.

Internet-based business

From February 2012 to October 2014, the Company established a series of subsidiaries, including Chuang Jin World Investment Limited (“Chuang Jin World”) and Hebei Remittance Guarantee Limited (“Hebei Remittance”). Through its VIEs it also established Beijing One Auto Technology, Dian Fu Bao Investments Limited and Easy Technology Limited. All of these subsidiaries and subsidiaries of VIEs were established to facilitate the internet-based operations including a new peer-to-peer lending platform called CeraVest, an online payments platform for the transportation industry called CeraPay, and ecommerce platforms TruShip, AutoChekk and PingPing.

CeraVest, launched at the end of 2014, is a proprietary peer-to-peer (“P2P”) lending platform, through which the Company offers small and medium sized businesses (“SMBs”) short-term, 6-month financing at competitive interest rates. These loans are funded by CeraVest investors, who can invest in notes through the CeraVest platform simply by visiting the platform’s website ( www.qingyidai.com ), completing the registration process and selecting which notes to invest in. Due to regulatory restrictions under PRC law, the SMBs assign certain individuals to apply for the loans through the platform by signing a borrowing agreement and service agreement, which state that the ownership of the debt may be transferred to CeraVest investors at the Company’s option during the six-month loan period and that the interest is established at approximately 8.62% per annum. The loan is guaranteed by the SMBs and 8.0% of the principal balance of the loan is remitted to the Company as a loan deposit recorded as CeraVest security deposits under other payable and accrued liabilities (Note 10).

The debt is transferred, partly or in full, to CeraVest investor through a transfer agreement at a quoted rate of return of approximately 8.62% per annum and the lending period is also six months, which is called “CeraVest Fixed”.

In September 2015, the Company launched a flexible term investment product called “CeraVest Flex” in order to give investors more flexibility with respect to the term of their investment, as opposed to the fixed 6-month term of the regular CeraVest product. CeraVest Flex is designed to offer customers the flexibility to add to or withdraw from the investments. It transfers the underlying notes, which are CeraPay receivables, to investors through a transfer agreement at a quoted rate of return of approximately 8.03% per annum. The transferred notes have no specific lending period or maturity date. The investors, once they have purchased these notes, are free to add to or withdraw from their investment at any time. The rate of return is fixed regardless of the holding period. The Company adjusts the size of the underlying pool of CeraPay receivables according to the total amount of investment in CeraVest Flex. All of the foregoing is reflected in the applicable transfer agreement.

In late 2016 the Company also began packaging CeraVest Flex investments using CeraVest loans. The resulting investment product has the same terms as the original CeraVest Flex product.

No clauses in the transfer agreement require the Company to repurchase any default loans. However, the Company voluntarily commits to assist the investors to eliminate their investment risks, and preserve the principal and the stated interest.

CeraPay is our proprietary online payments platform that operates on our own closed-loop network. The platform’s website is www.dianfubao.com . Having features similar to a credit card, CeraPay is free for users to use as long as any outstanding balances are paid in full each month. The Company charges transaction fees to merchants in the network.

F-10

TruShip, launched in December 2015, is our online ecommerce platform run by Beijing One Auto Technology whereby trucking industry merchants, such as dealerships and leasing companies, can establish an online store-front and conveniently conduct sales transactions through CeraPay. The platform’s website is www.che001.com . The platform charges approximately 0.2% facilitation fees to the online registered stores for each successful transaction conducted with the customers.

Property lease and management business

We own the Kai Yuan Finance Center, which is a 54 story large-scale commercial building with hotel, office and ancillary facilities, erected on a land parcel with a site area of approximately 10,601 square meters in the central business district of Shijiazhuang, China. The office space in the building comprises a total gross floor area of approximately 62,972 square meters. Our corporate headquarters occupies floors 26 and 27 and we lease out the space that we do not occupy (approximately 56,092 square meters).

The Kai Yuan Finance Center also houses the Shijiazhuang Hilton Hotel (the “Hotel”). This full-service, premiere hotel property totals over 119,000 square meters and includes guest rooms, restaurants, conference facilities, fitness center, spa and an underground parking garage. The Company has entered into a management and franchise agreement with Hilton Worldwide Holdings Inc. to manage and operate the Hotel.

Discontinued Operations

The Company has discontinued its commercial vehicle sales, leasing and support business, which includes its insurance agency business. Accordingly, the activities of the Company’s commercial vehicle sales, leasing and support business and its insurance agency business have been segregated and reported as discontinued operations for all periods presented. Summarized financial data for the businesses classified as discontinued operations are provided in Note 4 – Discontinued Operations.

NOTE 2 - ACQUISITION OF SUBSIDIARY UNDER COMMON CONTROL AND ADJUSTMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

In October 2016, the Company acquired 100% of the equity interest of Eastern Eagle and its subsidiaries from Smart Success. The total transaction value, as adjusted to account for changes in the net asset carrying value determined for Eastern Eagle, was $409.3 million, consisting of cash of $111.5 million and assumed liabilities of $297.8 million. For all periods presented, the Company, Smart Success, and Eastern Eagle and its subsidiaries were all under the control of Mr. Li, this transaction was accounted for as a combination of commonly controlled entities and accounted for as if the acquisition had been consummated at the beginning of the earliest period presented, with no gain or loss being recognized. The acquired assets and liabilities of Eastern Eagle and its subsidiaries were recorded at carrying value. On the date of the acquisition, the cash consideration in excess of carrying value of net assets of Eastern Eagle’s subsidiary amounted to $230.0 million.

In accordance with ASC 805-50, the assets and liabilities and operations of the Company and Eastern Eagle were combined at their historical carrying amounts, and all periods presented were adjusted as if the entities had always been combined since January 1, 2014.

F-11

Selected combined balance sheet information as of December 31, 2015:

	Fincera	Eastern Eagle	Adjustments/Elimination	Combined

ASSETS
Cash and cash equivalents	$ 61,957	$ 10,305	$ -	$ 72,262
Prepaid expenses, related party	-	41,148	(39,608 )	1,540
Prepaid expenses and other current assets	1,520	738	-	2,258
Property, equipment and leasehold improvements, net	73,817	150,887	-	224,704
Deferred income tax assets	7,011	10,638	-	17,649
Total assets	$ 750,315	$ 213,716	$ (39,608 )	$ 924,423

LIABILITIES
Long-term bank borrowings, current portion	13,860	924	-	14,784
Financing payables, related parties	106,869	84,660	(39,608 )	151,921
Other payables and accrued liabilities	35,806	12,404	-	48,210
Long-term bank borrowings	-	118,424	-	118,424
Total liabilities	$ 494,246	$ 216,412	$ (39,608 )	$ 671,050

STOCKHOLDERS’ EQUITY
Ordinary shares	24	-	-	24
Additional paid-in capital	329,276	30,684	-	359,960
Statutory reserves	27,014	-	-	27,014
Accumulated losses	(115,229 )	(35,053 )	-	(150,282 )
Accumulated other comprehensive income	14,984	1,673	-	16,657
Total stockholders’ equity	256,069	(2,696 )	-	253,373
Total liabilities and stockholders’ equity	$ 750,315	$ 213,716	$ (39,608 )	$ 924,423

F-12

Selected combined statement of operations information for the year ended December 31, 2015:

	Fincera	Eastern Eagle	Adjustments/Elimination	Combined

Total income	$ 56,311	$ 18,634	$ (2,172 )	$ 72,773
Interest expense	16,694	8,112	-	24,806
Interest expense, related parties	7,006	71	(968 )	6,109
Property and management cost	2,063	15,573	-	17,636
Selling and marketing	2,400	960	-	3,360
General and administrative	11,620	6,563	(1,204 )	16,979
Income (loss) from continuing operations before income taxes	350	(12,645 )	-	(12,295 )
Income tax provision (benefit)	274	(3,137 )	-	(2,863 )
Income (loss) from continuing operations	76	(9,508 )	-	(9,432 )
Net income (loss)	$ 8,281	$ (9,508 )	$ -	$ (1,227 )

Earnings (loss) per share
Basic
Continuing operations	$ 0.003	$ (0.40 )	$ 0.00	$ (0.40 )
Discontinued operations	0.35	0.00	0.00	0.35
	$ 0.35	$ (0.40 )	$ 0.00	$ (0.05 )

Diluted
Continuing operations	$ 0.003	$ (0.40 )	$ 0.00	$ (0.40 )
Discontinued operations	0.34	0.00	0.01	0.35
	$ 0.34	$ (0.40 )	$ 0.01	$ (0.05 )

Selected combined statement of operations information for the year ended December 31, 2014:

	Fincera	Eastern Eagle	Adjustments/Elimination	Combined

Total income	$ 5,375	$ 15,597	$ (949 )	$ 20,023
Interest expense	7,292	7,238	-	14,530
Interest expense, related parties	1,409	582	-	1,991
Property and management cost	2,532	14,828	-	17,360
Selling and marketing	488	1,070	-	1,558
General and administrative	5,494	8,808	(949 )	13,353
Loss from continuing operations before income taxes	(19,720 )	(16,929 )	-	(36,649 )
Income tax benefit	(3,398 )	(3,911 )	-	(7,309 )
Loss from continuing operations	(16,322 )	(13,018 )	-	(29,340 )
Net income (loss)	$ 10,166	$ (13,018 )	$ -	$ (2,852 )

Earnings (loss) per share
Basic
Continuing operations	$ (0.69 )	$ (0.55 )	$ 0.00	$ (1.24 )
Discontinued operations	1.12	0.00	0.00	1.12
	$ 0.43	$ (0.55 )	$ 0.00	$ (0.12 )

Diluted
Continuing operations	$ (0.69 )	$ (0.55 )	$ 0.00	$ (1.24 )
Discontinued operations	1.12	0.00	0.00	1.12
	$ 0.43	$ (0.55 )	$ 0.00	$ (0.12 )

F-13

NOTE 3 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Statement Preparation and Presentation

The accompanying consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles in the United States (“U.S. GAAP”).

As mentioned in Note 1 and Note 4, the Company is winding down its commercial vehicle sales, leasing and support business and its insurance agency business and therefore has classified them as discontinued operations. Certain accounts in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2014, and balances in the consolidated balance sheets as of December 31, 2014, and related notes have been retrospectively adjusted to reflect the effect of the asset groups and discontinued operations. See Note 4 for details of discontinued operations. The results of discontinued operations have been reflected separately in the consolidated statement of operations as a single line item for all periods presented in accordance with U.S. GAAP.

The consolidated and combined financial statements for all periods presented are retrospectively adjusted to reflect the acquisition under common control of Eastern Eagle and its subsidiaries, which were under common control (see Note 2).

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company, its subsidiaries and VIEs. All significant inter- company balances and transactions have been eliminated in consolidation.

Reclassification

The Company has reclassified certain comparative balances in the consolidated balance sheet for December 31, 2015 and certain comparative amounts in the consolidated statements of income and comprehensive (loss) income for the years ended December 31, 2015 and 2014 to conform to the current year’s presentation. The principal reclassifications are related to 1) CeraVest origination fees and penalty and late fees being reclassified from Service income to Interest income; and 2) Penalty and late fees from office leasing being reclassified from Other income to Property lease and management; and 3) the separate presentation of Product development expense, which was previously included in General and Administrative and Selling and Marketing. The reclassification did not have an impact on the reported total assets, liabilities, stockholders’ equity and net income.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The most significant estimates and related assumptions include the assessment of the provision for credit losses, the assessment of the impairment of tangible long-lived assets, and the assessment of the valuation allowance on deferred tax assets. Actual results could differ from these estimates.

Currency Reporting

The Company uses U.S. dollars (“USD”) as its functional currency. The Company’s operations in China and Hong Kong use the local currencies - Renminbi (“RMB”) and Hong Kong dollars (“HKD”) as its functional currencies whereas amounts reported in the accompanying consolidated financial statements and disclosures are stated in U.S. dollars, the reporting currency of the Company, unless stated otherwise. As such, assets and liabilities have been translated into USD at the current rates listed by the People’s Bank of China on the consolidated balance sheet dates. Equity accounts are translated at historical rates, except for the change in retained earnings during the year which is the result of the income statement translation process. Revenue and expense accounts are translated using the weighted average exchange rate during the period. The cumulative translation adjustments are recorded in other comprehensive income (loss) in the consolidated statements of stockholders’ equity.

The following are the exchange rates used by the Company as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014.

	December 31, 2016	December 31, 2015	December 31, 2014
Exchange rates as of the balance sheet dates	6.9370:1 RMB to USD	6.4936:1 RMB to USD	-
	7.7551:1 HKD to USD	7.7510:1 HKD to USD	-
Average exchange rates for the years ended	6.6344:1 RMB to USD	6.2245:1 RMB to USD	6.1443:1 RMB to USD
	7.7615:1 HKD to USD	7.7521:1 HKD to USD	7.7556:1 HKD to USD

F-14

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations. As of December 31, 2016 and 2015, the majority of cash, including restricted cash, was in RMB on deposit in PRC financial institutions, which the management believes are of high credit quality. Cash remittance in or out of the PRC are subject to the PRC foreign exchange control regulations pursuant to which PRC government approval is required for the Company to receive funds from or distribute funds outside the PRC.

Restricted Cash

As of December 31, 2016 and 2015, the restricted cash was $6,129 and $157, respectively, which were uninvested cash balances in CeraVest customer accounts. These cash balances belong to the respective investors and therefore the Company does not have any control over those deposits.

Other financing Receivables, net

Other financing receivables, net represent current and overdue financing provided to registered customers on the CeraPay platform, usually with an original term of 30 days. Other financing receivables become overdue after an eight day grace period from the monthly due date.

Loans, net

Loans, net represents loans provided to small and medium sized businesses (“SMBs”) through the CeraVest platform with a six-month term and an interest rate of 8.62% per annum. It includes any amounts that are overdue. The SMBs are expected to repay the principal and interest to the Company in lump-sum at the maturity of the loan.

Borrowed funds from CeraVest investors

Borrowed funds from CeraVest investors represents 1) the funds provided by investors through the CeraVest platform for the purpose of funding CeraVest loans with a six-month term; and 2) the funds provided by investors through CeraVest Flex for the investment in the obligation rights generated by the Company on selected CeraPay and CeraVest users. These payables bear interest at a weighted average interest rate of 8.49% for fixed and 8.03% for flexible term per annum as of December 31, 2016, respectively.

Provision for Credit Losses

The allowance for credit losses, which includes the allowance for other financing receivables and loans, net represents management’s estimate of probable losses inherent in the Company’s internet-based business. The Company determines to collectively assess provision for credit losses based on homogeneous risk characteristics, combined with targeted analysis on certain large individual balances, and evaluates the allowance for receivables due from CeraPay and CeraVest customers respectively. The allowance for loan losses attributed to these loans is established via a process that estimates the probable losses inherent in the specific portfolio. This process includes migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio.

The Company performs periodic and systematic detailed reviews of its other financing receivables and loans, net, to identify credit risks and to assess the overall collectability of those portfolios, and may adjust its estimates on allowance of credit losses when new circumstances arise. As a result of such a review, effective on October 1, 2016 the Company changed its estimates relating to the collectability of the receivables arising from the CeraPay and CeraVest businesses (see Note 5).

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of other financing receivables and loans, net. Credit risk concentration with respect to other financing receivables and loans, net is reduced because a large number of diverse customers over a wide geographic area make up the Company’s customer base.

Product Development Expense

Our product development expense includes the costs associated with the engineering and technical headcount responsible for product development, as well as their associated costs. It includes labor and facilities-related costs for employees responsible for research and development of our existing and new products and services, as well as depreciation and equipment-related expenses.

F-15

Property, Equipment and Leasehold Improvements, net

Property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives. All depreciation is included in operating expenses on the accompanying consolidated statements of income and comprehensive (loss) income. Leasehold improvements are capitalized and amortized over the lesser of the life of the lease or the useful life of the related asset.

The estimated useful lives of property, equipment and leasehold improvements are as follows:

		Useful life
Buildings		40 years
Equipment		5 - 10 years
Furniture and fixtures		5 - 10 years
Company automobiles		3 - 5 years
Leasehold improvements		Shorter of the remaining lease terms and estimated useful lives

Except for the leasehold improvements, all other assets are deemed to have a residual value of 5%.

Expenditures for major additions or improvements that extend the useful lives of assets are capitalized. Minor replacements, maintenance and repairs that do not improve or extend the lives of such assets are expensed as incurred.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company assesses the recoverability of the long-lived assets by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition where the fair value is lower than the carrying value, measurement of an impairment loss is recognized in the consolidated statements of income and comprehensive income (loss) for the difference between the fair value, using the expected future discounted cash flows, and the carrying value of the assets. No impairment of long-lived assets was recognized for the periods presented.

Fair Value of Financial Instruments

Financial instruments consist primarily of cash and cash equivalents, restricted cash, other financing receivables, loans, short-term bank borrowings, borrowed funds from CeraVest investors, financing payables, related parties and long-term bank borrowings. The carrying amounts of the short-term financial instruments at December 31, 2016 and 2015 approximated their fair values because of their short maturities or existence of variable interest rates, which reflect current market rates. For long-term financial instruments, the carrying amount approximates its fair value since the interest rates applied to determine the carrying amount is close to the market interest rates for similar types of long-term instruments. When available, the Company measures the fair value of financial instruments based on quoted market prices in active markets, valuation techniques that use observable market-based inputs or unobservable inputs that are corroborated by market data. Pricing information that the Company obtains from third parties is internally validated for reasonableness prior to use in the consolidated financial statements. When observable market prices are not readily available, the Company generally estimates fair value using valuation techniques that rely on alternate market data or inputs that are generally less readily observable from objective sources and are estimated based on pertinent information available at the time of the applicable reporting periods. In certain cases, fair values are not subject to precise quantification or verification and may fluctuate as economic and market factors vary and the Company’s evaluation of those factors changes. Although the Company uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique. In these cases, a minor change in an assumption could result in a significant change in its estimate of fair value, thereby increasing or decreasing the amounts of the Company’s consolidated assets, liabilities, equity and net income or loss.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs are used to measure fair value:

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

F-16

As of December 31, 2016 and 2015, there were no assets or liabilities within the continued operations that were measured and reported at fair value on a recurring basis.

Comprehensive Income (Loss)

U.S. GAAP generally requires that recognized revenue, expenses, gains and losses be included in net income or loss. Although certain changes in assets and liabilities are reported as separate components of the equity section of the consolidated balance sheet, such items, along with net income, are components of comprehensive income or loss. The components of other comprehensive income or loss consist solely of foreign currency translation adjustments.

Commitments and Contingencies

In the normal course of business, the Company is subject to contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters. The Company recognizes a liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and the specific facts and circumstances of each matter.

Revenue Recognition

Service Charges

Service charges consist of various fees, including transaction, penalty and late fees for CeraPay. We charge merchants transaction fees for accepting CeraPay payments and those fees are recognized when collected. We charge CeraPay users with penalties and late fees if they become delinquent in repaying any outstanding monthly CeraPay balance. Those fees are recognized when their collectability is reasonably assured.

Interest Income

Interest income consists of the interest income generated from CeraVest loans and bank deposits. We recognize interest income on CeraVest loans based on the effective interest rate method over the term of the financing period. Interest income also includes CeraVest origination, penalty and late fees. The borrowers are charged with an origination fee upon the establishment of CeraVest loans which are initially recorded as an offsetting balance to Loans, net, pursuant to ASC 310, and amortized during the period of the respective loans. We charge borrowers with penalties and late fees if they become delinquent in repaying a CeraVest loan. Those fees are recognized when their collectability is reasonably assured.

Recognition of income is suspended and a receivable is placed on non-accrual status when management determines that collection of future income is not probable. Accrual is resumed, and previously suspended income is recognized, when the receivable becomes contractually current and/or collection doubts are removed. Cash receipts on impaired loans are recorded against the loan principle and then to any unrecognized income.

Other income

Other income mainly represented government subsidies for our internet-based business provided by Hebei Province. Government subsidies as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related benefit are recognized as other income. Approximately $0.8 million government subsidies were recognized as other income for the year ended December 31, 2016.

Property lease and management

Minimum contractual rental income related to office leases are recognized on a straight-line basis over the terms of the respective leases. Straight-line rental revenue commences when the customer assumes control of the leased premises. In accordance with the Company’s standard lease terms, rental payments are generally due on a monthly basis. Tenant recovery revenue includes payments from tenants as reimbursements for management fees and utilities, etc., which are recognized when the related expenses are incurred. Rental from office lease and tenant recovery revenue together were recorded as “Property lease and management.”

Revenues related to the Hotel are primarily related to rooms rentals, food and beverage sales, and are recognized on an accrual basis. For guest rooms, revenue is recognized when the rooms are occupied and the services are performed. Food and beverage revenues are recognized when the services are performed or products delivered to the customer. Deferred revenue consisting of deposits paid in advance is recognized as revenue when the services are performed for hotels and restaurants.

Advertising

The Company expenses advertising costs as incurred. Advertising expenses totaled approximately $414, $440 and $436 for the years ended December 31, 2016, 2015 and 2014, respectively, and are included in selling and marketing expense in the accompanying consolidated statements of operations.

F-17

Value added Tax and Business Tax

In the PRC, value added tax (the “VAT”) of 17% on invoice amount is collected in respect of the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Company; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the authorities.

Since May 2016, all entities that were originally subject to a business tax are subject to VAT only under the National VAT Reform Program launched by the People's Congress of PRC. For the tax rates applicable, those that were initially charged at 5% of business tax are now subject to a 6% VAT for a general VAT payer, or 3% for a small-scale VAT payer, for the Company’s PRC subsidiaries’ revenue from the internet-based business, rental income, hotel revenue, membership fee, interest from sales-type leases, management servicing fee, commission fee and revenues from tires, fuel and insurance financing services.

Income Taxes

Income taxes are accounted for using an asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in the applicable tax jurisdiction expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Realization of the deferred tax asset is dependent on generating sufficient taxable income in future years.

The Company recognizes interest on non-payment of income taxes under requirement by tax law and penalties associated with tax positions when a tax position does not meet the minimum statutory threshold to avoid payment of penalties. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances, where the underpayment of taxes is more than RMB 100,000. In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. The tax returns of the Company’s PRC VIEs and subsidiaries are subject to examination by the relevant tax authorities.

The Company’s Chinese subsidiaries are subject to taxation in the PRC. The PRC income tax returns are generally not subject to examination by the tax authorities for tax years before 2011. With a few exceptions, the tax years 2011 to 2016 remain open to examination by tax authorities in the PRC. The tax years 2013 to 2016 for US entities remain open to examination by tax authorities in the US.

Uncertainty tax position

The Company has elected to classify interest related to an uncertain tax position (if and when required) to interest expense, and classify penalties related to an uncertain tax position (if and when required) as part of income tax expense in the consolidated statements of comprehensive income. For the years ended December 31, 2016, 2015 and 2014, the Company did not have any significant interest and penalties associated with uncertain tax positions. As of December 31, 2016 and 2015, the Company did not have any significant unrecognized uncertain tax positions and the Company does not believe that its unrecognized tax benefits will change over the next twelve months.

Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief executive officer (“CODM”), in deciding how to allocate resources and assessing performance. All of the Company’s sales are generated in the PRC and substantially all of the Company’s assets are located in the PRC. The Company’s operations consist of three reporting and operating segments, the internet-based business, property lease and management business and hotel business.

F-18

Earnings (Loss) Per Share

The Company computes earnings (loss) per share (“EPS”) in accordance with generally accepted accounting principles. Companies with complex capital structures are to present basic and diluted EPS. Basic EPS is measured as the income (loss) available to ordinary shareholders divided by the weighted average ordinary shares outstanding for the period. For basic EPS, the weighted average number of shares outstanding for the period includes contingently issuable shares (i.e., shares issuable for little or no cash consideration upon the satisfaction of the conditions of a contingent stock agreement) as of the date that all necessary conditions have been met. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercised or converted into ordinary stock. Ordinary shares issuable upon the conversion of the convertible preferred shares are included in the computation of diluted earnings per share on an “if-converted” basis when the impact is dilutive. The dilutive effect of outstanding ordinary share warrants and options are reflected in the diluted earnings per share by application of the treasury stock method when the impact is dilutive. Potential ordinary shares that have an anti-dilutive effect are excluded from the calculation of diluted EPS.

Basic and diluted earnings per share for each of the periods presented are calculated as follows:

	Year ended December 31,
	2016	2015	2014
		(Combined – Note 2)	(Combined – Note 2)
Net income (loss)	$ 2,169	$ (1,227 )	$ (2,852 )
Weighted average number of common shares outstanding – Basic	23,556,828	23,550,145	23,549,112
Stock options	816,036	-	-
Weighted average number of common shares outstanding – Diluted	24,372,864	23,550,145	23,549,112
Earnings (loss) per share
Basic	$ 0.09	$ (0.05 )	$ (0.12 )
Diluted	$ 0.09	$ (0.05 )	$ (0.12 )

For the year ended December 31, 2016, 815,172 stock options were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the ordinary shares. Due to the loss from continued operations for the years ended December 31, 2015 and 2014, 2,159,042 and 1,514,056 stock options were excluded from the calculation of diluted net income (loss) per share, respectively, because the effect would be anti-dilutive.

Share-Based Payments

The Company records all share-based payments grants of employee stock options to employees in the financial statements based on their fair values on the grant date and amortizes to expense on a straight-line basis over the vesting period. The Company used the Black-Scholes option-pricing model to estimate the fair value of the options at the date of grant for both the 2009 incentive plan and the 2015 incentive plan. On August 6, 2012, the Company’s board of directors determined to amend certain Share Option Award Agreements entered into pursuant to the 2009 incentive plan to reduce the exercise price per share thereunder to the then current fair market value of the Company’s ordinary shares. The Company used the binomial model to estimate the fair value of repriced options as the Company has reassessed the exercise pattern and determined that the Binomial Pricing model was a better model for estimating the fair values of the repriced options. The Company recognizes expenses related to share-based payments as part of general and administrative expense.

Recently Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, which was subsequently modified in August 2015 by ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which defers the effective date by one year. The core principle of ASU No. 2014-09 is that companies should recognize revenue when the transfer of promised goods or services to customers occurs in an amount that reflects what the company expects to receive. It requires additional disclosures to describe the nature, amount, timing and uncertainty of revenue and cash flows from contracts with customers. In 2016, the FASB issued additional ASUs that clarify the implementation guidance on principal versus agent considerations (ASU 2016-08), on identifying performance obligations and licensing (ASU 2016-10), and on narrow-scope improvements and practical expedients (ASU 2016-12) as well as on the revenue recognition criteria and other technical corrections (ASU 2016-20).

F-19

The Company is currently assessing the impact that adopting these ASUs will have on its consolidated financial statements and disclosures. The Company has not yet selected a transition approach.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments in this Update require public business entities that are required to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using the exit price notion consistent with Topic 820, Fair Value Measurement. The amendments in this Update require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option. The amendments in this Update require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or in the accompanying notes to the financial statements. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application by public business entities to financial statements of fiscal years or interim periods that have not yet been issued or, by all other entities, that have not yet been made available for issuance of the following amendments in this Update are permitted as of the beginning of the fiscal year of adoption: an entity should present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk if the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. We are in the process of evaluating the impact of adoption of this guidance on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases. The new standard creates Topic 842, Leases, in the FASB Accounting Standards Codification (FASB ASC) and supersedes FASB ASC 840, Leases. ASU 2016-02 requires a lessee to recognize the assets and liabilities that arise from leases (operating and finance). However, for leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. For public business entities, the amendments in this update are effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. We are in the process of evaluating the impact of adoption of this guidance on our consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments require that all excess tax benefits and all tax deficiencies should be recognized as income tax expense or benefit in the income statement and that those benefits and deficiencies are discrete items in the reporting period in which they occur. Because excess tax benefits are no longer recognized in additional paid in capital, the assumed proceeds from applying the treasury stock method when computing earnings per share is amended to exclude the amount of excess tax benefits that would be recognized in additional paid-in capital. The amendments also require to no longer delay recognition of a tax benefit until the tax benefit is realized through a reduction to taxes payable. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financing Instruments-Credit Losses (Topic 326): Measure of Credit Losses on Financial Instruments. The amendments change the guidance on the impairment of financial instruments. The main objective of this Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. We are evaluating the impact of adopting ASU 2016-13 on our consolidated financial statements.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (230): Restricted Cash. The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2017, and interim periods within those annual periods. Earlier adoption is permitted. The amendments in this Update should be applied using a retrospective transition method to each period presented. We are evaluating the impact of adopting ASU 2016-18 on our consolidated financial statements.

Recently issued ASUs by the FASB, except for the ones mentioned above, are not expect to have significant impact on the Company’s consolidated results of operations or financial position.

F-20

NOTE 4 – DISCONTINUED OPERATIONS

For the fiscal year ended December 31, 2014, our businesses consisted of 1) commercial vehicle sales, leasing and support business, 2) property lease and management business, 3) insurance agency, and 4) internet-based business in the commercial vehicle industry. In August 2015 we began winding down the operations of our commercial vehicle sales, leasing and support business and insurance agency business (the “traditional business”), in the following steps:

Ceased to market and sign up new contracts for commercial vehicles sales, leasing and support business and insurance agency business;

Actively sold a number of the transportation companies, which constitute the sales network of the traditional businesses to achieve market penetration at a municipal and county level throughout China, to third parties.

Transferred the long-lived assets, mainly including the computers and furniture, from the traditional businesses to the internet-based business;

Dismissed or transferred the employees from the traditional businesses to the internet-based business.

On December 31, 2015 the Board of Directors approved that the Company shift its strategy to focusing on its internet-based business, which was initially launched near the end of 2014. Accordingly, the Company determines that the traditional businesses were ceased as of December 31, 2015, and should be reported as discontinued operations.

The Company will continue to service outstanding leases until they have all been collected. The due dates for the remaining leases run through July 2017 and the Company also expects to continue servicing and collecting on any payments that become overdue. This constitutes significant continuing involvement in the traditional businesses after their cessation.

The assets and liabilities of the traditional businesses were included in the captions “Assets of discontinued operations” and “Liabilities of discontinued operations”, in the accompanying balance sheets at December 31, 2016 and 2015 and consisted of the following:

	December 31,
	2016	2015
Assets classified as discontinued operations
Accounts receivable, net	$ 11,107	$ 27,688
Prepaid expenses and other current assets	482	3,100
Other financing receivables from peer store, net	─	─
Inventories	956	4,330
Current maturities of long-term net investment in direct financing and sales-type leases, net of provision for credit losses	1,916	63,774
Short-term net investment in sales-type leases	─	5,703
Total current assets	14,461	104,595
Long-term net investment in direct financing and sales-type leases, net of current maturities	─	3,064
Deferred income tax assets	7,373	12,186
Total non-current assets	7,373	15,250
Total assets	$ 21,834	$ 119,845

	December 31,
	2016	2015
Liabilities classified as discontinued operations
Income tax payable	─	111
Other payables and accrued liabilities	2,316	11,795
Long-term payables, current portion	392	─
Short-term bonds payable	─	36,738
Financing payables, related parties	1,763	1,801
Total current liabilities	4,471	50,445
Long-term payables	─	2,587
Total non-current liabilities	─	2,587
Total liabilities	$ 4,471	$ 53,032

F-21

The following are revenues and income from discontinued operations:

	Years ended December 31,
	2016	2015	2014

Revenues	$ 6,259	$ 154,268	$ 812,019

Income from discontinued operations	(3,894 )	10,100	35,429
Income tax provisions	(4,059 )	1,895	8,941
Income from discontinued operation, net of income tax	165	8,205	26,488

The following are selective cash flow information from discontinued operations:

	Years ended December 31,
	2016	2015	2014

Net cash provided by (used in) operating activities	$ 48,550	$ 332,630	$ (10,686 )

Net cash provided by (used in) investing activities	$ ─	$ ─	$ ─

Net cash provided by (used in) financing activities	$ ─	$ ─	$ ─

NOTE 5 – CHANGE IN BAD DEBT PROVISION ESTIMATES

Effective October 1, 2016, the Company changed its estimates relating to the collectability of the receivables arising from the CeraPay and CeraVest businesses. The provision for credit losses is established via a process that estimates the probable losses inherent in the portfolio. This process includes migration analysis, in which historical delinquency and credit loss experience is applied to the current aging of the portfolio, together with analyses that reflect the estimated consequence resulted from the legal action taken by the Company.

The effect of the change in estimates relating to the CeraPay and CeraVest bad debt provision policy was to decrease net income and (loss) earnings per share as follows (in thousands, except per share amounts):

	Year ended December 31, 2016
Decrease to net income	$ (8,770 )

Effect on net income per share:
Basic	$ (0.37 )
Diluted	$ (0.37 )

NOTE 6 – OTHER FINANCING RECEIVABLES, NET

The following lists the components of other financing receivables, net:

	December 31,	December 31,
	2016	2015
Other financing receivables	$ 316,247	$ 242,543
Less: Provision for credit losses	(20,810 )	(7,194 )

Other financing receivables, net	$ 295,437	$ 235,349

Other financing receivables represent outstanding receivables from CeraPay users, which are due and payable in full on a monthly basis. The users must pass through an application process and provide guarantees. These users are also encouraged to provide collateral such as a commercial vehicle, security deposit or real estate to obtain extended credit line.

F-22

Credit quality of other financing receivables

The carrying amount of the current and past due other financing receivables as of December 31, 2016 and 2015 were as follows:

December 31, 2016	Total Current (1)	31-90 days past due	> 90 days past due	Total carrying amount

Gross Other financing receivables	$ 258,980	$ 9,677	$ 47,590	$ 316,247
Less: Provision for credit losses	(2,503 )	(1,648 )	(16,659 )	(20,810 )
Other financing receivables, net	$ 256,477	$ 8,029	$ 30,931	$ 295,437

(1)

Loans less than 30 days past due are presented as current.

December 31, 2015	Total Current (1)	31-90 days past due	> 90 days past due	Total carrying amount

Gross Other financing receivables	$ 216,878	$ 7,550	$ 18,115	$ 242,543
Less: Provision for credit losses	(436 )	(948 )	(5,810 )	(7,194 )
Other financing receivables, net	$ 216,442	$ 6,602	$ 12,305	$ 235,349

(1)

Loans less than 30 days past due are presented as current.

Provision for credit losses charged in the consolidated statement of operations for the CeraPay business was approximately $14,718, $7,494 and $11 for the years ended December 31, 2016, 2015 and 2014, respectively.

NOTE 7 – LOANS, NET

The following lists the components of loans, net:

	December 31,	December 31,
	2016	2015
Loans	$ 379,370	$ 253,268
Less: Provision for credit losses	(5,094 )	(2,609 )
Less: Deferred loan origination fees	(2,975 )	─

Loans, net	$ 371,301	$ 250,659

Loans, net arise from loans made from the CeraVest P2P platform, for which the Company enters into a six-month lending agreement with SMBs with principal and interest payable in full at maturity by the SMBs. As of December 31, 2016 and 2015, the effective interest rate charged for CeraVest loans was approximately 8.62% per annum on both years.

Credit quality of loans, net

The carrying amounts of the current and past due loans as of December 31, 2016 were as follows:

December 31, 2016	Total Current (1)	31-90 days past due	> 90 days past due	Total carryingamount

Gross loans	$ 343,152	$ 7,963	$ 28,255	$ 379,370
Less: Provision for credit losses	(978 )	(675 )	(3,441 )	(5,094 )
Less: Deferred loan origination fees	(2,975 )	─	─	(2,975 )
Loans, net	$ 339,199	$ 7,288	$ 24,814	$ 371,301

(1)

Loans less than 30 days past due are presented as current.

F-23

The carrying amounts of the current and past due loans as of December 31, 2015 were as follows:

December 31, 2015	Total Current (1)	31-90 days past due	> 90 days past due	Total carryingamount

Gross loans	$ 250,319	$ 1,710	$ 1,239	$ 253,268
Less: Provision for credit losses	(2,468 )	(26 )	(115 )	(2,609 )
Less: Deferred loan origination fees	─	─	─	─
Loans, net	$ 247,851	$ 1,684	$ 1,124	$ 250,659

(1)

Loans less than 30 days past due are presented as current.

Provision for credit losses charged in the consolidated statements of operations for the CeraVest business was approximately $2,772, $2,527 and $198 for the years ended December 31, 2016, 2015 and 2014, respectively.

NOTE 8 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

A summary of prepaid expenses and other current assets is as follows:

	December 31,
	2016	2015
		(Combined – Note 2)
Short-term advances	773	197
Temporary advances to employees	363	80
Prepaid rent	556	288
Prepaid other taxes	1,151	314
Legal deposit	2,393	268
Hotel inventory and receivables	519	504
Other current assets	818	607
Total	$ 6,573	$ 2,258

NOTE 9 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET

Summaries of property, equipment and leasehold improvements are as follows:

	December 31,
	2016	2015
		(Combined – Note 2)
Buildings and leasehold improvements	$ 204,784	$ 219,607
Furniture and fixtures	9,672	12,776
Equipment	16,437	17,552
Company automobiles	1,386	1,827
Total	232,279	251,762

Less: accumulated depreciation and amortization	(30,206 )	(27,058 )
Property, equipment and leasehold improvements, net	$ 202,073	$ 224,704

Depreciation and amortization expense for the continuing operations was approximately $8,952, $9,992 and $10,378 for the years ended December 31, 2016, 2015 and 2014, respectively.

F-24

The following schedule provides an analysis of Fincera’s investment in property on operating leases and hotel business by major classes as of December 31, 2016 and December 31, 2015:

	December 31,	December 31,
	2016	2015
		(Combined – Note 2)
Buildings and leasehold improvements	$ 192,990	$ 205,300
Equipment	15,313	16,359
Total	208,303	221,659

Less: Accumulated depreciation and amortization	(20,884 )	(15,801 )
Total	$ 187,459	$ 205,858

NOTE 10 - OTHER PAYABLES AND ACCRUED LIABILITIES

Other payables and accrued liabilities consist of the followings:

	December 31,
	2016	2015
		(Combined – Note 2)
CeraVest security deposits	$ 38,439	$ 22,755
Temporary payments to merchants	4,072	3,042
Purchasing funds from CeraVest loan investors	5,846	─
Payables related to properties and others	3,313	10,899
Rental advance and customer deposits	2,076	2,425
Accrued expenses	1,437	2,692
Business and other tax payables	845	1,069
Salary payable	2,458	2,326
Interest payable for bank borrowings	174	253
Other current liabilities	2,542	2,749
Total	$ 61,202	$ 48,210

CeraVest security deposits represent security deposits received from CeraVest borrowers upon the funding of their respective loans. Purchasing funds from CeraVest loan investors represent uninvested funds deposited by investors. Other current liabilities mainly include the unpaid expenses reimbursement due to staff.

NOTE 11 - THIRD PARTY BORROWINGS

As of December 31, 2016, the Company had a total of $14.4 million of unused bank facilities, which was granted by China Citic Bank. As of December 31, 2015, the Company had a total of $33.9 million of unused bank facilities, of which $24.6 million was granted by China Citic Bank and $9.3 million by China Minsheng Bank.

Short-term bank borrowings

Summaries of short-term bank borrowings are as follows:

	Weighted-average interest rate			December 31,
	2016	2015	Maturities	2016	2015

Short-term bank loans	4.98 %	5.93 %	December 2017	$ 83,610	$ 75,921

Short-term bank loans represent loans from local banks that were used for working capital and capital expenditures purposes. The loans bore interest at rates in the range of 4.35% to 5.22% and 4.35% to 6.72% as of December 31, 2016 and 2015, respectively, are denominated in RMB and have terms maturing within one year. All of the loans due before the filing date of this annual report were repaid. The weighted average short-term bank loans for the years ended December 31, 2016 and 2015 was $79,680 and $121,647, respectively.

F-25

The legal representative of Shijie Kaiyuan Auto Trade Co., Ltd has provided the guarantee for the Company to secure two short-term bank borrowings from Agricultural Bank of China for a total amount of $23.1 million.

Long-term bank borrowings

Summaries of long-term bank borrowings are as follows:

	Weighted-average interest rate			December 31,
	2016	2015	Maturities	2016	2015
					(Combined – Note 2)
Long-term bank loans, current portion	4.98 %	6.79 %	December 2017	$ 8,938	$ 14,784
Long-term bank loans	4.99 %	6.34 %	December 2028	95,719	118,424
Total				$ 104,657	$ 133,208

The total carrying amount of property, equipment and leasehold improvements that have been pledged as collateral to secure financing from commercial banks is $178.0 million and $204.6 million as of December 31, 2016 and 2015 respectively.

NOTE 12 – BORROWED FUNDS FROM CERAVEST INVESTORS

A summary of the Company’s borrowed funds from CeraVest investors is as follows:

	Weighted-average interest rate
	December 31,	December 31,		December 31,	December 31,
	2016	2015	Maturities	2016	2015

Borrowed funds from CeraVest investors-CeraVest Fixed (inclusive of interest payable $3,236 and $1,965 as of December 31, 2016 and 2015, respectively)	8.49 %	8.33 %	January 2017 to June 2017	$ 101,645	$ 97,392

-CeraVest Flex ( inclusive of interest payable $3,100 and $511 as of December 31, 2016 and 2015, respectively)	8.03 %	8.03 %	—	335,949	105,333
Total				$ 437,594	$ 202,725

NOTE 13 - INCOME TAXES

Cayman Islands: Under the current tax laws of the Cayman Islands, the Company and its subsidiaries are not subject to tax on their income or capital gains.

Hong Kong: The Company’s subsidiary in Hong Kong did not have assessable profits that were derived from Hong Kong during the years ended December 31, 2016, 2015 and 2014. Therefore, no Hong Kong profit tax has been provided for in the periods presented.

China: The foreign invested enterprises and domestic companies are generally subject to enterprise income tax at a uniform rate of 25%.

F-26

Summaries of the income tax provision (benefit) attributable to continued operations in the consolidated statements of operations are as follows:

	Years Ended December 31,
	2016	2015 (Combined – Note 2)	2014 (Combined – Note 2)

Current	$ 6,454	$ 1,992	$ —
Deferred	(5,168 )	(4,855 )	(7,309 )
Total	$ 1,286	$ (2,863 )	$ (7,309 )

The tax effects of temporary differences of continuing operations representing deferred income tax assets / liabilities result principally from the following:

	December 31,
	2016	2015 (Combined – Note 2)

Deferred income tax assets:
Provision for credit losses	$ 6,476	$ 2,451
Accrued liabilities	4,373	2,785
Organization cost	-	298
Tax loss carried forward	12,678	12,115
	23,527	17,649
Valuation allowance	-	-
Deferred income tax assets, net	$ 23,527	$ 17,649

As of December 31, 2016 and 2015, deferred income tax assets are derived from accrued liabilities, provision for credit losses, organization cost and tax loss carried forward arising from the same tax jurisdictions in China. The management determines it is more likely than not that these deferred tax assets could be utilized in the future, so no valuation allowance was provided as of December 31, 2016 and 2015.

At December 31, 2016, the Company had $50,712 of tax loss carry forwards that expires through December 31, 2021.

The difference between the effective income tax rate and the expected statutory rate on income (loss) from operations was as follows:

	December 31,
	2016	2015 (Combined – Note 2)	2014 (Combined – Note 2)
Statutory EIT rate	25.0 %	25.0 %	25.0 %
Non-deductible expenses	2.6 %	(3.2 )%	(5.7 )%
Non-taxable income	- %	1.5 %	0.9 %
Tax-exempt entities	10.7 %	- %	- %
Different tax rates in other jurisdictions	0.8 %	- %	(0.3 )%
Effective tax rate	39.1 %	23.3 %	19.9 %

*Tax-exempt entities represent entities outside of China and Hong Kong for which the statutory tax rate is zero.

The Company adopted the guidance on accounting for uncertainties in income taxes, which prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Guidance was also provided on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures. Significant judgment is required in evaluating the Company’s uncertain tax positions and determining its provision for income taxes. The Company has elected to classify interest related to an uncertain tax position (if and when required) to interest expense, and classify penalties related to an uncertain tax position (if and when required) as part of income tax expense in the consolidated statements of comprehensive income. For the years ended December 31, 2016, 2015 and 2014, the Company did not have any significant interest and penalties associated with uncertain tax positions. As of December 31, 2016 and 2015, the Company did not have any significant unrecognized uncertain tax positions and the Company does not believe that its unrecognized tax benefits will change over the next twelve months.

F-27

PRC Withholding Tax on Dividends

The current PRC Enterprise Income Tax Law imposes a 10% withholding income tax for dividends distributed by foreign invested enterprises to their immediate holding companies outside the PRC. A lower withholding tax rate will be applied if there is a tax treaty arrangement between the PRC and the jurisdiction of the foreign holding company. Distributions to holding companies in Hong Kong that satisfy certain requirements specified by PRC tax authorities, for example, will be subject to a 5% withholding tax rate.

As of December 31, 2016 and 2015, the Company had not recorded any withholding tax on the retained earnings of its foreign invested enterprises in the PRC, since the Company intends to reinvest its earnings to further expand its business in mainland China, and its foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies.

NOTE 14 - STOCK-BASED COMPENSATION

On April 9, 2009, the Fincera Inc. 2009 Equity Incentive Plan (the “2009 Incentive Plan”) was approved by the shareholders of the Company. Under the terms of the 2009 Incentive Plan, 1,675,000 ordinary shares were reserved for issuance. All directors, employees and consultants of Fincera and its related parties are eligible to be granted awards under the 2009 Plan.

The total vesting period for the options is four years, with 25% of the options vesting one year after the date of grant and the remaining 75% vesting ratably each month for three years thereafter. The options have a total term of 10 years. The Company will issue new shares to the holders of stock options upon exercise of the options.

On September 24, 2015, the Fincera Inc. 2015 Omnibus Equity Incentive Plan (the “2015 Incentive Plan”) took effect. Under the terms of the 2015 Incentive Plan, 1,023,712 ordinary shares are reserved for issuance. All directors, employees and consultants of Fincera and its related parties are eligible to be granted awards under the 2015 Incentive Plan.

On September 24, 2015, December 28, 2015, April 29, 2016, September 27, 2016 and November 27, 2016 the Company granted 513,958, 139,808, 136,200, 21,000 and 157,000 stock options, respectively, under the terms of the 2015 Incentive Plan. The exercise price of each option is $28.00, $28.00, $27.10, $27.20 and $27.20, respectively, which represents the closing price of the Company’s ordinary shares on the date of grant. The total vesting period for the options is four years, with 25% of the options vesting one year after the date of grant and the remaining 75% vesting ratably each month for three years thereafter. The options have a total term of 10 years. The Company will issue new shares to the holders of stock options upon exercise of the options.

During the years ended December 31, 2016, 2015 and 2014, 144,014, 8,780 and 1,320 stock options have been forfeited, respectively, as a result of the resignation of the grantees. In connection with the grant of stock options to employees the Company recorded compensation expense charges in general and administrative expenses of $1,266, $392 and $1,253 for the years ended December 31, 2016, 2015 and 2014, respectively, based on the estimated fair value of the options on the date of grant. No stock-based compensation charges were recorded for non-employees for the years ended December 31, 2016, 2015 and 2014. The per share fair value of the stock options granted has been estimated using the Black-Scholes option-pricing model with the following assumptions:

Date of Grant	September 24, 2015	December 28, 2015	April 9, 2016	September 27, 2016	November 27, 2016

Dividend yield (1)	None	None	None	None	None
Risk-free interest rate (2)	1.84 %	2.05 %	2.05 %	1.39 %	2.12 %
Volatility (3)	26 %	25 %	41 %	32 %	32 %
Expected Life (in years) (4)	6.08	6.08	6.08	6.08	6.08

(1)

The Company has no expectation of paying regular cash dividends on its ordinary shares.

(2)

The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the expected term of the awards in effect at the time of grant.

(3)

The Company estimates the volatility of its ordinary shares at the date of grant based on its historical monthly price observations .

(4)

The expected life of stock options granted under the Incentive Plan is based on expected exercise patterns, which the Company believes are representative of future behavior.

F-28

The following table summarizes outstanding options as at December 31, 2016, related weighted average fair value and life information:

	Options Outstanding						Options Exercisable
Range of Exercise Price Per Share	Number Outstanding at December 31,2016		Weighted Average Fair Value		Weighted Average Remaining Life (Years)		Number Exercisable at December 31,2016		Weighted Average Exercise Price

$9.50 to $28.00		2,327,692	$	6.14		5.17		1,672,003	$	13.85

A summary of option activity under the employee share option plan as of December 31, 2016, 2015 and 2014, and changes during the three years then ended is presented as follows:

Options	Number of Shares	Weighted Average Exercise Price	Weighted Average Remaining Life (Years)	Aggregate Intrinsic Value

Outstanding at January 1, 2014	1,515,376	$ 12.37	6.05	$ 11,563
Forfeited	(1,320 )	$ 14.50
Outstanding at December 31, 2014	1,514,056	$ 12.37	5.05	$ 11,560
Granted	653,766	$ 28.00
Forfeited	(8,780 )	$ 28.00
Outstanding at December 31, 2015	2,159,042	$ 17.04	5.76	$ 21,779
Exercised	(1,536 )	$ 14.50
Granted	314,200	$ 27.16
Forfeited	(144,014 )	$ 27.83
Outstanding at December 31, 2016	2,327,692	$ 17.74	5.17	$ 28,548

A summary of unvested options under the employee share option plan as of December 31, 2016, and changes during the year then ended is presented as follows:

Options	Number of Shares	Weighted Average Fair Value

Unvested at January 1, 2016	644,986	$ 8.53
Granted	314,200	9.46
Vested	(159,483 )	8.25
Forfeited or exercised	(144,014 )	8.40
Unvested at December 31, 2016	655,689	$ 9.07
Expected to vest thereafter	655,689	$ 9.07

As of December 31, 2016, 1,672,003 of the share options are vested and exercisable and a total of $5,515 of compensation expense pertaining to options remains unrecognized. This amount will be recognized as compensation expense ratably over the remaining vesting period. The weighted average remaining vesting period of the options is 3.09 years.

NOTE 15 - DIVIDEND PAYMENT

Pursuant to the relevant accounting principles and financial regulations applicable to companies established in the PRC, a certain percentage of the after-tax net income is restricted and required to be allocated to a general statutory reserve until the balance of the fund has reached 50% of the registered capital of the applicable companies. The statutory reserve fund can be used to increase the registered capital and eliminate future losses of companies, but it cannot be distributed to shareholders except in the event of a solvent liquidation of the companies.

F-29

In addition, a substantial part of the Company’s businesses and assets are denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. These requirements imposed by the PRC government authorities may restrict the ability of the Company’s subsidiaries and VIEs to transfer its net assets to the Company through loans, advances or cash dividends, which consisted of paid-up capital, additional paid in capital and statutory reserves and amounted to approximately $161.9 million as of December 31, 2016, exceeding 25% of the Company’s consolidated net assets. Accordingly, condensed parent company financial statements have been prepared in accordance with Rule 5-04 and Rule 12-04 of SEC Regulation S-X, and set out in Note 22.

NOTE 16 – FUTURE MINIMUM RENTAL INCOME UNDER OPERATING LEASES

Fincera’s operations include the leasing of commercial property at the Kai Yuan Finance Center. The leases thereon expire at various dates through 2021. The following is a schedule of minimum future rents on non-cancelable operating leases at December 31, 2016:

Year Ending December 31,	Future Minimum Rentals
2017	$ 5,327
2018	2,612
2019	1,558
2020	1,230
2021	308
Total	$ 11,035

There are no contingent rentals as of December 31, 2016.

NOTE 17 – COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases certain facilities under long-term, non-cancelable leases and monthly leases. These leases are accounted for as operating leases. Rent expense for continuing operations amounted to $1,200, $669, nil for the years ended December 31, 2016, 2015 and 2014, respectively. Rent expense for discontinued operations amounted to $739, $1,935 and $2,998 for the years ended December 31, 2016, 2015 and 2014, respectively.

Future minimum payments for operations under long-term, non-cancelable leases as of December 31, 2016, are as follows:

Year Ending December 31,	Future Minimum Payments
2017	$ 192
2018	252
2019	31
Total	$ 475

Legal Proceedings

In the opinion of management, there are no material claims assessments or litigation pending against the Company.

NOTE 18 – PROFIT APPROPRIATION

The Company’s China-based subsidiaries and VIEs are required to make appropriations to certain non-distributable reserve funds.

In accordance with the Chinese Company Laws, some of the Company’s PRC subsidiaries and VIEs have to make appropriations from their after-tax-profit under the Generally Accepted Accounting Principles in the PRC (“PRC GAAP”) to non-distributable reserve funds, including a statutory surplus fund and a discretionary surplus fund. Each year, at least 10% of the after-tax-profit under PRC GAAP is required to be set aside as statutory surplus fund until such appropriations for the fund equal 50% of the paid-in capital of the applicable company. The appropriation for the discretionary surplus fund is at the Company’s discretion as determined by the Board of Directors of each company.

F-30

Upon certain regulatory approvals and subject to certain limitations, the general reserve fund and the statutory surplus fund can be used to offset prior year losses, if any, and can be converted into paid-in capital of the applicable company, but it cannot be distributed to shareholders except in the event of a solvent liquidation of the company.

For the years ended December 31, 2016, 2015 and 2014, appropriations for the general reserve funds and statutory surplus funds totaled $2,299, $792 and $3,275, respectively. The 2016 reserve refund is due to the refund of surplus reserves caused by the Company’s winding down of its commercial vehicle sales, leasing and support business.

NOTE 19 - SEGMENT REPORTING

The Company’s chief operating decision maker (“CODM”) has been identified as the CEO, who reviews the financial information of separate operating segments when making decisions about allocating resources and assessing performance of the Company. The Company measures segment income as income from operations less provision for credit losses, interest expenses, interest expenses of related parties, and property and management cost. The reportable segments are components of the Company, which offer different products or services and are separately managed, with separate financial information available that is separately evaluated regularly by the Company’s Chief Executive Officer in determining the performance of the business. Income tax expenses are not allocated to the segments.

The Company operated three segments: the internet-based business segment, the hotel segment and the office leasing segment.

Discontinued operations have been excluded from the segment information for periods presented.

Year ended December 31, 2016

	Internet-based Business	Hotel Business	Office Leasing	Corporate	Totals

Segment Revenues	$ 106,376	$ 16,596	$ 9,056	$ -	$ 132,028
Property and management cost	$ -	$ 14,466	$ 2,049	$ -	$ 16,515
Provision for credit losses	$ 17,490	$ -	$ -	$ -	$ 17,490
Interest expense-related parties	$ 5,700	$ 244	$ 287	$ -	6,231
Interest expense	$ 33,452	$ 6,082	$ 72	$ -	$ 39,606
Product development expense	$ 9,443	$ -	$ -	$ -	$ 9,443

Segment Income (loss) before taxes	$ 40,291	$ (4,196 )	$ 6,648	$ -	$ 42,743
General and administrative	$ -	$ -	$ -	$ 25,945	$ 25,945
Selling and marketing	$ -	$ -	$ -	$ 13,508	$ 13,508
Income (loss) from continuing operations before income taxes	$ 40,291	$ (4,196 )	$ 6,648	$ (39,453 )	$ 3,290

F-31

Year ended December 31, 2015

	Internet-based Business	Hotel Business	Office Leasing	Corporate	Totals

Segment Revenues	$ 46,585	$ 16,462	$ 9,726	$ -	$ 72,773
Property and management cost	$ -	$ 15,573	$ 2,063	$ -	$ 17,636
Provision for credit losses	$ 10,021	$ -	$ -	$ -	10,021
Interest expense-related parties	$ 6,038	$ 71	$ -	$ -	$ 6,109
Interest expense	$ 16,694	$ 8,112	$ -	$ -	$ 24,806
Product development expense	$ 6,157	$ -	$ -	$ -	$ 6,157

Segment Income (loss) before taxes	$ 7,675	$ (7,294 )	$ 7,663	$ -	$ 8,044
General and administrative	$ -	$ -	$ -	$ 16,979	$ 16,979
Selling and marketing	$ -	$ -	$ -	$ 3,360	$ 3,360
Income (loss) from continuing operations before income taxes	$ 7,675	$ (7,294 )	$ 7,663	$ (20,339 )	$ (12,295 )

Year ended December 31, 2014

	Internet-based Business	Hotel Business	Office Leasing	Corporate	Totals

Segment Revenues	$ 438	$ 14,648	$ 4,937	$ -	$ 20,023
Property and management cost	$ -	$ 14,828	$ 2,532	$ -	$ 17,360
Provision for credit losses	$ 209	$ -	$ -	$ -	$ 209
Interest expense-related parties	$ 1,281	$ 582	$ 128	$ -	$ 1,991
Interest expense	$ 7,292	$ 7,238	$ -	$ -	$ 14,530
Product development expense	$ 3,321	$ -	$ -	$ -	$ 3,321

Segment Income (loss) before taxes	$ (11,665 )	$ (8,000 )	$ 2,277	$ -	$ (17,388 )
General and administrative	$ -	$ -	$ -	$ 13,353	$ 13,353
Selling and marketing	$ -	$ -	$ -	$ 1,558	$ 1,558
Litigation expense	$ -	$ -	$ -	$ 4,350	$ 4,350
Income (loss) from continuing operations before income taxes	$ (11,665 )	$ (8,000 )	$ 2,277	$ (19,261 )	(36,649 )

F-32

The assets of the office leasing segment as of December 31, 2016 and December 31, 2015 amounted to $102.0 million and $87.4 million, respectively. The assets of the hotel business segment as of December 31, 2016 and December 31, 2015 amounted to $157.0 million and $174.1 million, respectively. The assets of the internet-based business segment as of December 31, 2016 and December 31, 2015 amounted to $750.1 million and $543.0 million, respectively. The remaining balances of assets as of December 31, 2016 and December 31, 2015 are $21.9 million and $119.9 million, respectively, which are related to the discontinued operations.

NOTE 20 - RELATED PARTY BALANCES AND TRANSACTIONS

Prepaid expenses, related party:

The outstanding amounts of prepaid expense, related party as of December 31, 2016 and 2015 were as follows:

		December 31,
	Notes	2016	2015
			(Combined – Note 2)
Shijiazhuang Kaiyuan Car Trade Co. Ltd.	(1 )	$ -	$ 1,540

Note:

(1)

Entity controlled by Mr. Li’s brother.

Financing payables, related parties

During the periods presented, the Company has borrowed from the Company’s Chairman and Chief Executive Officer, Mr. Li and companies affiliated with Mr. Li. Each of these loans was entered into to satisfy the Company’s short-term capital needs.

The amount due to Alliance Rich represents a portion of the consideration paid in the acquisition of Heat Planet Holdings Limited (“Heat Planet”). The amount was payable within six months of occupation of the Kai Yuan Center by the Company, which was completed in April 2013 and delivery of the audited financial statements for the five months ended May 31, 2012 of Heat Planet, which were delivered in December 2012. In October 2013, the unpaid amount began to accrue interest at the one-year rate announced by the People’s Bank of China (4.35% as of December 31, 2016). As of December 31, 2016 approximately $4.3 million is still owed to Alliance Rich for the acquisition of Heat Planet.

The amount due to Smart Success Investment Limited (“Smart Success”) represents a portion of the consideration paid in the acquisition of Eastern Eagle. The amount is payable by August 8, 2017. Any unpaid amounts thereafter will begin to accrue interest at the one-year rate announced by the People’s Bank of China. As of December 31, 2016 approximately $66.9 million is still owed to Smart Success for the acquisition of Eastern Eagle. Other amounts due to Smart Success are non-interest bearing, unsecured and due on demand by the lenders.

In September 2011, Hebei Kaiyuan began charging interest at 8.00% per annum, and amounts owed continue to be unsecured and due on demand by the lender.

The amount due to Mr. Li is non-interest bearing, unsecured and due on demand by the lender.

During the periods presented, the Company received internet-based financings from Ruituo, a company controlled by Mr. Li’s brother. The amount due to Ruituo is unsecured and due on demand by Ruituo and bore an interest at approximately 8.00% based on the weighted average outstanding payable balances at month end.

In 2015, the Company obtained internet-based financings from Beiguo Auto and Xinji Beiguo Mall, companies affiliated with Mr. Li. Mr. Li holds 20.92% of indirect beneficial ownership in both Beiguo Auto and Xinji Beiguo Mall. During 2016, the Company repaid the amounts due to Beiguo Auto and Xinji Beiguo Mall and began obtaining internet-based financings from Beiguo Mall Xinji Branch instead. Mr. Li holds 20.92% of indirect beneficial ownership in Beiguo Mall Xinji Branch. The Company pays a financing charge of approximately 4.6% per annum to Beiguo Mall Xinji Branch for the funds obtained due to this financing arrangement. The financing arrangement is personally guaranteed by Mr. Li and Hebei Kaiyuan, who has a long term business relationship with Beiguo, on behalf of the Company. In addition, the payable balances of each loan are unsecured and due in 180 days.

F-33

The outstanding financing payables, related parties as of December 31, 2016 and 2015 were as follows:

		December 31,
	Notes	2016	2015
			(Combined – Note 2)
Mr. Li		$ 144	$ 144
Alliance Rich	(1 )	4,257	4,091
Hebei Kaiyuan	(1 )	4,306	4,400
Honest Best Int’l Ltd.	(1 )	12	9
Smart Success	(1 )	68,836	6,608
Ruituo	(2 )	30,962	136,585
Beiguo Auto	(3 )	—	23
Xinji Beiguo Mall	(3 )	—	61
Beiguo Mall Xinji Branch	(3 )	165,453	—
Total		$ 273,970	$ 151,921

Notes:

	(1)	Entity controlled by Mr. Li.
	(2)	Entity controlled by Mr. Li’s brother.
	(3)	Entity in which Mr. Li is the indirect beneficial owner of approximately 20.92%.

Borrowed funds from CeraVest investor, related party:

A summary of the Company’s borrowed funds from CeraVest investor, related party is as follows:

		December 31,
	Note	2016	2015

Mr. Lei Chen	(1 )	$ 3,370	$ 2,716
Mr. Yong Qi Li	(2 )	437	—
Mr. Jin Yu Peng	(3 )	245	—
Mr. Xing Wei	(4 )	141	—
Mr. Chen Guang Bi	(5 )	87	—
Ms. Shu Ling Li	(6 )	51	—
Mr. Yong Hui Li	(7 )	13	—
Mr. Spencer Ang Li	(8 )	5	—
Total		$ 4,349	$ 2,716

During the periods presented, the above related parties have provided to the Company through the CeraVest platform for the purpose of funding CeraVest loans with a six-month term and are secured by the counterpart loans, net. These payables represent two types of investment, CeraVest Fixed and CeraVest Flex, amounting to the corresponding amounts shown in the table, with weighted average interest rate of 8.62% and 8.03%, and 8.62% and 8.03% per annum as of December 31, 2016 and December 31, 2015, respectively.

(1)

The senior vice president of the Company.

(2)

The brother of Mr. Li.

(3)

The General Manager of the Company’s Risk Control Department.

(4)

The Company’s COO.

(5)

The General Manager of the Company’s Henan Region.

(6)

The sister of Mr. Li

(7)

The Company’s Chairman and CEO.

(8)

The Company’s VP Product and Director.

Long-term financing payables, related party

The Company entered into a long-term loan agreement with Ruituo during 2016 for long-term capital needs. Ruituo provided a facility to the Company, amounting to $72.1 million (RMB 500 million), with a period from September 23, 2016 to September 23, 2019. This long-term loan is unsecured and bears interest at 4.90% per annum based on the weighted average outstanding payable balances at month end.

F-34

The outstanding long-term financing payable, related party as of December 31, 2016 and 2015 were as follows:

		December 31,
	Notes	2016	2015

Ruituo	(1 )	$ 33,028	$ -

Note:

(1) Entity controlled by Mr. Li’s brother.

Related Parties Transactions

During the periods presented, the details of the related party transactions were as follows:

	Notes		Years Ended December 31,
			2016	2015	2014
				(Combined – Note 2)	(Combined – Note 2)
Capital nature:
Alliance Rich	(1 )	(f)	168	168	939
Beiguo Auto	(5 )	(e)	—	182	—
Beiguo Auto	(5 )	(f)	—	67	—
Beiguo Mall Xinji Branch	(5 )	(e)	170,646	—	—
Beiguo Mall Xinji Branch	(5 )	(f)	2,063	—	—
Hebei Kaiyuan	(1 )	(c)	—	—	50,616
Hebei Xuyuan Investment Company	(7 )	(c)	9,390	3,109	22,113
Hebei Xuyuan Investment Company	(7 )	(f)	194	11	639
Honest Best Int’l Ltd.	(1 )	(c)	2	2	2
Kaiyuan Shengrong	(1 )	(a)	94,357	—	—
Mr. Rui Qi Li	(8 )	(a)	95,563	107,639	109,044
Mr. Li	(4 )	(a)	263,927	355,049	132,969
Mr. Xing Wei	(6 )	(a)	15,073	16,066	—
Ruituo	(3 )	(a)	—	24,098	48,826
Ruituo	(3 )	( c )	122,482	144,988	111,415
Ruituo	(3 )	(e)	554,898	55,115	7,927
Ruituo	(3 )	(f)	3,031	3,908	31
Shijiazhuang Xuheng Trade Company	(7 )	(c)	1,191	1,221	2,432
Shijiazhuang Xuheng Trade Company	(7 )	(f)	51	60	71
Smart Success Investment Limite d	(1 )	(c)	120	—	—
Xinji Beiguo Mall	(5 )	(e)	—	35,627	—
Xinji Beiguo Mall	(5 )	(f)	1	1,594	—


Operating nature:
Smart Success Investment Limite d	(1 )	(m)	111,512	—	—
Hebei Kaiyuan	(1 )	(f)	276	301	311
Shijiazhuang Kaiyuan Auto Trade	(3 )	(g)	19	117	198
Mr. Chen Guang Bi	(9 )	(n)	65	—	—
Mr. Chen Guang Bi	(9 )	(f)	5	—	—
Mr. Lei Chen	(10 )	(n)	6,840	—	—
Mr. Lei Chen	(10 )	(f)	391	—	—
Mr. Li	(4 )	(n)	46	—	—
Mr. Li	(4 )	(f)	1	—	—
Mr. Jin Yu Peng	(11 )	(n)	898	—	—
Mr. Jin Yu Peng	(11 )	(f)	23	—	—
Mr. Shu Ling Li	(12 )	(n)	106	—	—
Mr. Shu Ling Li	(12 )	(f)	4	—	—
Mr. Spencer Ang Li	(13 )	(n)	8	—	—
Mr. Xing Wei	(14 )	(n)	1,033	—	—
Mr. Xing Wei	(14 )	(f)	19	—	—
Mr. Yong Qi Li	(15 )	(n)	452	—	—
Mr. Yong Qi Li	(15 )	(f)	4	—	—
Yuanshi County Natural Gas Sales Company	(3 )	(h)	—	—	857
Yuanshi County Natural Gas Sales Company	(3 )	(l)	—	—	2,074
Yuanshi County Natural Gas Sales Company	(3 )	(i)	—	25	23
Yuanshi County Natural Gas Sales Company	(3 )	(j)	—	927	190
Yuanshi County Natural Gas Sales Company	(3 )	(k)	—	11	3

F-35

Notes :

(1)

Entity controlled by Mr. Li.

(2)

Entity in which Mr. Li’s brother holds 40% equity interest.

(3)

Entity controlled by Mr. Li’s brother.

(4)

The Chairman and Chief Executive Officer of Fincera.

(5)

Entity in which Mr. Li is the indirect beneficial owner of approximately 20.92%

(6)

The Chief Operating Officer of Fincera.

(7)

Entity in which Mr. Li holds 40% equity interest.

(8)

The General Manager of the Company’s Yunyu River Region.

(9)

The General Manager of the Company’s Henan Region.

(10)

The senior vice president of the Company.

(11)

The General Manager of the Company’s Risk Control Department.

(12)

The sister of Mr. Li

(13)

The Company’s VP Product and Director.

(14)

The Company’s COO.

(15)

The brother of Mr. Li.

Nature of transaction :

(a)

Bank loan guarantee provided to the bank by the related parties.

(b)

Bank loan guarantee provided by the Company to the affiliate.

(c)

Loan provided to the Company during the year.

(d)

Receivables of the Company pledged to guarantee the bank loans borne by the affiliate.

(e)

Internet-based financing provided to the Company during the year.

(f)

Interest incurred by the Company during the year.

(g)

Construction fees.

(h)

CeraVest loans and security deposits.

(i)

CeraVest interest revenue.

(j)

CeraPay funds used.

(k)

CeraPay revenue.

(l)

Sale of automobiles by the Company, including VAT, during the year.

(m)

Acquisition transaction.

(n)

CeraVest investment.

F-36

NOTE 21 – VARIABLE INTEREST ENTITIES

On November 26, 2008, through the Company’s wholly owned subsidiary, Chuanglian, the Company executed a series of contractual arrangements with the Auto Kaiyuan Companies (refers to Kaiyuan Logistics, Kaiyuan Auto Trade Co., Ltd., and Hebei Xuhua Trading Co., Ltd.) and their shareholder, as the Enterprise Agreements. Pursuant to the Enterprise Agreements, the Company had exclusive rights to obtain the economic benefits and assume the business risks of the Auto Kaiyuan Companies from their shareholder, and generally had control of the Auto Kaiyuan Companies. The Auto Kaiyuan Companies were considered VIEs and the Company was the primary beneficiary. The Company’s relationships with the Auto Kaiyuan Companies and their shareholder were governed by the Enterprise Agreements between Chuanglian and each of the Auto Kaiyuan Companies, which were the operating companies (the “Operating Companies”) of the Company in the PRC.

In January 2013, the Company has further amended the Enterprise Agreements with Kaiyuan Auto Trade and Kaiyuan Logistics and their shareholder, Hebei Kaiyuan. Under the amendment, Hebei Kaiyuan transferred its entire equity interests held in Kaiyuan Auto Trade (2%) and Kaiyuan Logistics (100%) to its parent company, Hebei Shengrong Investment. Thereafter, Hebei Shengrong Investment became the shareholder of these two VIEs. The rights and obligations of the Company and the VIEs in the Enterprise Agreements remain unchanged.

In December 2016, Hebei Kaiyuan was replaced by Hebei Yarui Trading. The related Enterprise Agreements involving Hebei Kaiyuan were replaced by identical agreements involving Hebei Yarui Trading instead. This occurred because Hebei Kaiyuan had split into two companies due to business reasons. One of the split companies, Hebei Yarui Trading, replaced Hebei Kaiyuan in our VIE structure.

Details of the Enterprise Agreements are as follows:

Assignment of Voting Rights

The shareholder of the Auto Kaiyuan Companies irrevocably agreed to assign all of its voting rights to the Company for all business resolutions. As a result, the Company has direct control of the Board of Directors and has authority to appoint the majority of the Board of Directors which makes it the primary controlling shareholder of the Auto Kaiyuan Companies.

Management and Operating Agreement

The Company is engaged to exclusively manage and operate the sales and service of the Operating Companies held by the Auto Kaiyuan Companies, including the development of sales and marketing strategy, management of customer services, daily operations, financial management, employment issues and all other related operating and consulting services. Furthermore, the Auto Kaiyuan Companies agree that without the prior consent of the Company, the Auto Kaiyuan Companies will not engage in any transactions that could materially affect their respective assets, liabilities, rights or operations, including, without limitation, incurrence or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any encumbrance on any of their assets or intellectual property rights in favor of a third party or transfer of any agreements relating to their business operation to any third party. The management and operating agreement was entered on November 26, 2008 and amended on December 14, 2009 , has a term of 10 years and will be extended for another 10 years automatically unless the Company files a written notice at least 3 months prior to the expiration of this agreement.

Equity Interest Transfer Agreement

The shareholder of the Auto Kaiyuan Companies agreed to transfer all of its assets to the Company and the Company has an exclusive, irrevocable and unconditional right to purchase, or cause the Company’s designated party to purchase, from such shareholder, at the Company’s sole discretion, part or all of the shareholders’ equity interests in the Auto Kaiyuan Companies when and, to the extent that, applicable PRC Laws permit the Company to own part or all of such equity interests in the Auto Kaiyuan Companies. According to the Exclusive Equity Interest Transfer Agreement, the purchase price to be paid by the Company to the shareholder of the Auto Kaiyuan Companies will be the minimum amount of consideration permitted by applicable PRC Law at the time when such share transfer occurs.

Equity Pledge Agreement

Pursuant to the Equity Pledge Agreement, the Auto Kaiyuan Companies and their shareholder agreed to pledge all of its equity interest and operating profits to guarantee the performance of the Auto Kaiyuan Companies in the obligation under the Equity Interest Transfer Agreement. In the event of the breach of any conditions of the Equity Interest Transfer Agreement, the Company is entitled to enforce its pledge rights over the equity interests of the Auto Kaiyuan Companies for any losses suffered from the breach.

F-37

The FASB issued guidance requiring companies to provide enhanced disclosures about an enterprise’s involvement in a VIE. This guidance also requires an enterprise to qualitatively assess the determination of the primary beneficiary of a VIE. As part of its qualitative assessment the Company has evaluated the following:

●

The sufficiency of Fincera’s equity investments at risk to permit the Operating Companies to finance their activities without additional subordinated financial support;

●

That as a group, the holders of the equity investments at risk have:

●

The power through voting rights or similar rights to direct activities that most significantly impact the Operating Companies’ economic performance,

●

The obligation to absorb the expected losses of the Operating Companies and such obligations are not protected directly or indirectly, and

●

The right to receive the expected residual return of the Operating Companies and such rights are not capped; and

●

The voting rights of the investors are not proportional to either their obligations to absorb the expected losses of the Operating Companies, their rights to receive the expected returns of the Operating Companies, or both, and that substantially all of the Operating Companies activities do not involve or are not conducted on behalf of an investor that has disproportionately few voting rights.

Since the management contract generally represents a significant service arrangement for the Operating Companies and the associated management fees represent a significant amount of the entity’s cash flow as compared to the overall cash flow of the Operating Companies (generally 50% or more including incentives), the Management Companies’ have what is considered a variable interest in the Operating Companies. This variable interest thereby qualifies Fincera’s Operating Companies as VIEs.

If an investment is determined to be a VIE, the Company then performs an analysis to determine if the Company is the primary beneficiary of the VIE. U.S. GAAP requires a VIE to be consolidated by its primary beneficiary. The primary beneficiary is the party that has a controlling financial interest in an entity. In order for a party to have a controlling financial interest in an entity it must have:

●

The power to direct the activities of a VIE that most significantly impact the entity’s economic performance (“power criterion”), and

●

The obligation to absorb losses of an entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE (“losses/benefits criterion”).

As part of its qualitative assessment, Fincera has concluded that it maintains the power criterion since the Company directs the activities that impact the underlying economics of the Operating Company. One example of such an activity is that Fincera’s Officers, which is composed of senior employees across Fincera’s departments, is responsible for monitoring performance and allocating resources and capital to the Operating Companies. Further, since Fincera maintains a priority earnings position in the Operating Companies and has the ability and obligation to absorb the losses of the Operating Companies, Fincera also meets the losses/benefits criterion.

These contractual arrangements may not be as effective in providing the Company with control over the VIEs as direct ownership. Due to its VIE structure, the Company has to rely on contractual rights to effect control and management of the VIEs, which exposes it to the risk of potential breach of contract by the shareholders of the VIEs for a number of reasons. For example, their interests as shareholders of the VIEs and the interests of the Company may conflict and the Company may fail to resolve such conflicts; the shareholders may believe that breaching the contracts will lead to greater economic benefit for them; or the shareholders may otherwise act in bad faith. If any of the foregoing were to happen, the Company may have to rely on legal or arbitral proceedings to enforce its contractual rights, including specific performance or injunctive relief, and claiming damages. Such arbitral and legal proceedings may cost substantial financial and other resources, and result in a disruption of its business, and the Company cannot assure that the outcome will be in its favor. Apart from the above risks, there are no significant judgments or assumptions regarding enforceability of the contracts.

F-38

In addition, as all of these contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit the Company’s ability to enforce these contractual arrangements. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event the Company is unable to enforce these contractual arrangements, it may not be able to exert effective control over the VIEs, and its ability to conduct its business may be materially and adversely affected.

None of the assets of the VIEs can be used only to settle obligations of the consolidated VIEs. Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the consolidated VIEs.

The following financial statement amounts and balances of the VIEs were included in the accompanying consolidated financial statements as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014:

	December 31,
	2016	2015

Total assets	$ 421,952	$ 636,526
Total liabilities	$ 537,701	$ 347,188

	Years Ended December 31,
	2016	2015	2014

Income	$ 72,387	$ 34,845	$ 274
Net income from discontinued operation	11,492	816	162
Net loss from continued operation	(3,537 )	(156 )	(8,629 )

NOTE 22 - CONDENSED PARENT COMPANY FINANCIAL INFORMATION OF FINCERA INC.

The Company records its investments in its subsidiaries under the equity method of accounting. Such investments are presented on the separate condensed balance sheets of the Company as “Long-term investments in subsidiaries”.

The subsidiaries did not pay any dividends to the Company for the periods presented. Certain information and footnote disclosures generally included in financial statements prepared in accordance with U.S. GAAP have been condensed and omitted. The footnote disclosures represent supplemental information relating to the operations of the Company, as such, these statements should be read in conjunction with the notes to the consolidated financial statements of the Company.

As of December 31, 2016 and 2015, there were no material contingencies, significant capital and other commitments, provisions for long-term obligations, or guarantees of the Company, except as separately disclosed in the Company’s Consolidated Financial Statements, if any.

F-39

Condensed Balance Sheets

	December 31,
	2016	2015

Assets
Cash and cash equivalents	$ 671	$ 135
Prepaid expenses and other current assets	23	16
Investment in subsidiaries, continued operations	46,787	115,752
Investment in subsidiaries, discontinued operations	17,362	66,813
Due from subsidiaries	25,290	71,276
Total assets	$ 90,133	$ 253,992

Liabilities
Other payables and accrued liabilities	583	619
Due to Smart Success	66,910	—
Total liabilities	$ 67,493	$ 619

Stockholders’ equity
Ordinary shares - $0.001 par value authorized – 1,000,000,000 shares; issued and outstanding – 23,561,949 shares at December 31, 2016, respectively; and $0.001 par value authorized – 1,000,000,000 shares; issued and outstanding – 23,550,993 shares at December 31, 2015, respectively	24	24
Additional paid-in capital	136,802	359,960
Accumulated losses	(121,099 )	(123,268 )
Accumulated other comprehensive income	6,913	16,657
Total stockholders’ equity	22,640	253,373

Total liabilities and stockholders’ equity	$ 90,133	$ 253,992

Condensed Statements of Income

	Years ended December 31,
	2016	2015	2014

Equity in profit (loss) of subsidiaries and VIEs, continued	$ 4,074	$ (8,582 )	$ (23,176 )
Equity in profit of subsidiaries and VIEs, discontinued	165	8,205	26,488
Total equity in profit of subsidiaries	4,239	(377 )	3,312

General and administrative expenses	2,070	850	1,814
Litigation expense	-	-	4,350
Total operating expenses	2,070	850	6,164

Income from operations	2,169	(1,227 )	(2,852 )
Net income (loss)	$ 2,169	$ (1,227 )	$ (2,852 )

Condensed Statements of Cash flows

	Years ended December 31,
	2016	2015	2014

Net cash and cash equivalents (used in) operating activities	$ (839 )	$ (481 )	$ (4,811 )
Net cash and cash equivalents provided by investing activities	1,375	498	4,833
Net cash and cash equivalents used in financing activities	-	-	-
Cash and cash equivalents, beginning of the year	135	118	96
Cash and cash equivalents, end of the year	$ 671	$ 135	$ 118

NOTE 23 – SUBSEQUENT EVENT

The Company has evaluated subsequent events through the date of issuance of these consolidated financial statements and has not identified events with material financial impact on the Company’s consolidated financial statements.

F-40

Exhibit 4.4

Exhibit 4.5

Exhibit 4.6

AutoChina International Limited

Executive Employment Agreement

This EXECUTIVE EMPLOYMENT AGREEMENT (the " Agreement "), entered into as of May 9, 2015, by and between AutoChina International Limited, a company organized under the laws of the Cayman Islands (the " Company ") and Lei Chen (the " Executive ") (collectively, the " Parties ").

RECITALS

A. The Company desires to employ the Executive as its Senior Vice President and to assure itself of the services of the Executive for the Period of Employment (as defined below).

B. The Executive desires to be employed by the Company as its Senior Vice President for the Period of Employment and upon the terms and conditions of this Agreement.

AGREEMENT

ACCORDINGLY, the Parties agree as follows:

1. Term of Employment. The Company shall employ the Executive to render services to the Company in the position and with the duties and responsibilities described in Section 2 for a period of three (3) years starting from the date of this Agreement (the " Period of Employment "), unless the Period of Employment is terminated sooner in accordance with Sections 4 or 5 below or extended upon mutual agreement of the Parties.

2. Position, Duties, Responsibilities.

2.1 Position . The Executive shall render services to the Company in the position of Senior Vice President and shall perform all services appropriate to that position as well as such other services as may reasonably be assigned by the Company, including serving as the Senior Vice President of Hebei Chuanglian Finance Leasing Co., Ltd. (河北创联融资租赁有限公司), an indirectly wholly-owned subsidiary of the Company established in the People's Republic of China (the " PRC ") (" Chuanglian ") and any other direct or indirect subsidiary of the Company. The Executive's principal place of employment shall be at any location decided by the board of directors of the Company. The Executive shall devote his best efforts and full-time attention to the performance of his duties. The Executive shall report to the board of directors of the Company.

2.2 Other Activities . Except upon the prior written consent of the board of directors of the Company, the Executive shall not (i) accept any other employment (except for academic employment, position in industrial or professional associations, non-executive director of other companies which do not compete with the Company's business provided that such other companies purchase director liability insurance), (ii) engage, invest or assist, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that is or may be in conflict with, or that might place the Executive in a conflicting position to that of the Company or (iii) act as the legal representative or an executive officer of another company (excluding any affiliates of the Company) within or outside the PRC.

2.3 Execution of Chuanglian Employment Agreement . The Executive shall upon request of the Company execute an employment agreement with Chuanglian or any other direct or indirect subsidiary of the Company (in each case, a " Subsidiary Employment Agreement ") in accordance with PRC laws and regulations, in the form substantially identical to this Agreement except for adjustments or alterations required to comply with the relevant laws and regulations of the PRC.

3. Compensation and Holiday. In consideration of the services to be rendered under this Agreement, the Executive shall be entitled to the following:

3.1 Base Salary . The Company and the Executive shall agree to a " Base Salary, " subject to adjustment in accordance with Section 3.2 below. The Base Salary shall be paid in accordance with the Company's regularly established payroll practices.

3.2 Salary Adjustment . The Executive's Base Salary will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be adjusted in the sole discretion of the Company.

3.3 Benefits . The Executive shall be eligible to participate in the benefits made generally available by the Company to similarly-situated executives, in accordance with the benefit plans established by the Company (including the Company’s Equity Incentive Plan), and as may be amended from time to time in the Company's sole discretion.

3.4 Bonus . The Executive shall not be entitled to any bonus unless otherwise approved by the board of directors of the Company in its sole discretion.

3.5 Holidays . The Executive shall be entitled, in addition to applicable statutory public holidays, to take (14) working days as paid holiday in each full calendar year. If the Executive's employment commences or terminates part way through a calendar year, his entitlement to holidays will be assessed on a pro-rata basis in accordance with the Company's holiday policy, as it may change from time to time.

3.6 Insurance . The Company shall purchase life insurance and medical insurance for the Executive pursuant to applicable standards.

3.7 Others . The salary and welfare provided respectively in the Subsidiary Employment Agreements and this Agreement shall not be cumulative. If there is any discrepancy between the above provisions in Article 3 herein and the salary and other welfare provided in the Subsidiary Employment Agreements, the Executive shall, in addition to the salary and welfare provided in the Subsidiary Employment Agreements, be entitled to the additional amount of the salary and welfare (if any) provided in this Agreement only to the extent it exceeds those provided in the Subsidiary Employment Agreements.

4. Termination By Company.

4.1 Termination for Cause . For purposes of this Agreement, " For Cause " shall mean the occurrence of any of the following, subject only to any statutory requirement of any applicable law: (i) the failure of the Executive to properly carry out his duties after notice by the Company of the failure to do so and a reasonable opportunity for the Executive to correct the same within a reasonable period specified by the Company; (ii) any breach by the Executive of one or more provisions of any written agreement with, or written policies of, the Company or his fiduciary duties to the Company likely to cause material harm to the Company and its affiliates, at the Company's reasonable discretion, or (iii) any theft, fraud, dishonesty or serious misconduct by the Executive involving his duties or the property, business, reputation or affairs of the Company and its affiliates. The Company may terminate the Executive's employment For Cause at any time, without any advance notice or payment in lieu of notice. The Company shall pay to the Executive all compensation prescribed under Section 3 hereof to which the Executive is entitled up through the date of termination, subject to any other rights or remedies of the Company under law, and thereafter all obligations of the Company under this Agreement shall cease.

4.2 By Death . The Executive's employment shall terminate automatically upon the Executive's death. The Company shall pay to the Executive's beneficiaries or estate, as appropriate, any compensation then due and owing under Section 3 hereof to which the Executive is entitled up through the date of termination, subject to any other rights or remedies of the Company under law, and thereafter all obligations of the Company under this Agreement shall cease. Nothing in this section shall affect any entitlement of the Executive's heirs or devisees to the benefits of any life insurance plan or other applicable benefits, if any. If the Executive dies during the course of or in connection with the performance of his duty, subject to applicable laws, the Company shall pay to the Executive's beneficiaries or estate, as appropriate, a special compensation not exceeding the annual Base Salary as provided in Article 3.1 above, as decided by the board of directors of the Company.

4.3 By Disability . If the Executive becomes eligible for the Company's long-term disability benefits or if, in the sole opinion of the Company, the Executive is unable to carry out the responsibilities and functions of the position held by the Executive by reason of any physical or mental impairment for more than ninety (90) consecutive days or more than one hundred twenty (120) days in any twelve-month period, then, to the extent permitted by law, the Company may terminate the Executive's employment. The Company shall pay to the Executive all compensation prescribed under Section 3 hereof to which the Executive is entitled up through the date of termination, and thereafter all obligations of the Company under this Agreement shall cease. Nothing in this section shall affect the Executive's rights under any disability plan in which the Executive is a participant, if any.

4.4 Other Termination by Company . In addition to Sections 4.1 through 4.3, the Company may at any time terminate the employment of the Executive without cause by giving one (1) month written notice to the Executive, in which case the Executive will be eligible to receive an amount equal to three (3) months of the then-current Base Salary of the Executive payable in the form of salary continuation. Such severance shall be reduced by any remuneration paid to the Executive because of the Executive's employment or self-employment during the severance period, and the Executive shall promptly report all such remuneration to the Company in writing. The Executive's eligibility for severance is conditioned on the Executive having first signed a Termination Certificate in the form attached as Exhibit A . The Executive shall not be entitled to any severance payments if the Executive's employment is terminated For Cause, by death or by disability (as provided above) or if the Executive's employment is terminated by the Executive for any reason other than Good Reason, as defined below.

5. Termination By Executive.

5.1 Termination by Executive other than for Good Reason . The Executive may terminate employment with the Company at any time for any reason or no reason at all, upon three (3) months' advance written notice. During such notice period the Executive shall continue to diligently perform all of the Executive's duties hereunder. The Company shall have the option, in its sole discretion, to make the Executive's termination effective at any time prior to the end of such notice period as long as the Company pays the Executive all compensation under Section 3 hereof to which the Executive is entitled up through the last day of the three (3) months' notice period. Thereafter all obligations of the Company shall cease. Unless the Executive terminates his employment for Good Reason, as provided in Section 5.2, no severance or other separation benefits shall be paid to the Executive.

5.2 Termination for Good Reason After Change in Control . The Executive's termination shall be for Good Reason (as defined below) if the Executive provides written notice to the Company of the Good Reason within three (3) months of the event constituting Good Reason and provides the Company with a period of twenty (20) days to cure the Good Reason and the Company fails to cure the Good Reason within that period. For purposes of this Agreement, " Good Reason " shall mean a material reduction in the Executive's Base Salary, except for reductions that are comparable to reductions generally applicable to similarly situated executives of the Company if (i) such reduction is effected by the Company without the consent of the Executive and (ii) such event occurs within three (3) months after a Change in Control (as hereinafter defined). For purposes of this Agreement, a " Change in Control " of the Company shall be deemed to have occurred when: (i) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the shareholders of the Company immediately prior thereto holding fifty percent (50%) or more of the outstanding voting securities of the Company or the surviving entity immediately after such merger or consolidation; or (ii) the shareholders of the Company approve either a plan of liquidation or dissolution of the Company or an agreement for the sale, lease, exchange or other transfer or disposition by the Company of fifty-percent (50%) or more of the Company's assets. If the Executive terminates his employment for Good Reason, the Executive will be eligible to receive an amount equal to one (1) month of the Executive's then-current Base Salary payable in the form of salary continuation. Thereafter all obligations of the Company or its successor under this Agreement shall cease. Any severance shall be reduced by any remuneration paid to the Executive because of the Executive's employment or self-employment during the severance period, and the Executive shall promptly report all such remuneration to the Company or its successor in writing. The Executive's eligibility for severance is conditioned on the Executive having first signed a Termination Certificate in the form attached as Exhibit A .

6. Termination Obligations.

The Executive agrees that on or before termination of employment, he will promptly return to the Company all documents and materials of any nature pertaining to his work with the Company, including all originals and copies of all or any part of any Proprietary Information or Inventions (as defined below) along with any and all equipment and other tangible and intangible property of the Company. The Executive agrees not to retain any documents or materials or copies thereof containing any Proprietary Information or Inventions.

The Executive further agrees that: (i) all representations, warranties, and obligations under Articles 6, 7, 8, 10, 11, 12, 14.1, 14.2 and 14.3 contained in this Agreement shall survive the termination of the Period of Employment; (ii) the Executive's representations, warranties and obligations under Articles 6, 7, 8, 10, 11, 12, 14.1, 14.2 and 14.3 shall also survive the expiration of this Agreement; and (iii) following any termination of the Period of Employment, the Executive shall fully cooperate with the Company in all matters relating to his continuing obligations under this Agreement, including but not limited to the winding up of pending work on behalf of the Company, the orderly transfer of work to the other employees of the Company, and the defense of any action brought by any third party against the Company that relates in any way to the Executive's acts or omissions while employed by the Company. The Executive also agrees to sign and deliver the Termination Certificate attached hereto as Exhibit A prior to his termination of employment with the Company.

7. Post-Termination Activity.

7.1 No Use of Proprietary Information . The Executive acknowledges that the pursuit of the activities forbidden by this subsection would necessarily involve the use or disclosure of Proprietary Information in breach of this Agreement, but that proof of such a breach would be extremely difficult. To forestall such disclosure, use, and breach, and in consideration of the employment under this Agreement, the Executive also agrees that while employed by the Company, and for a period of one (1) year after termination of the Executive's employment, the Executive shall not, directly or indirectly:

(i) divert or attempt to divert from the Company or any Affiliate (" Affiliate " shall mean any person or entity that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with such entity). For the purposes of this definition " control " means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract or otherwise, and includes (x) ownership directly or indirectly of 50% or more of the shares in issue or other equity interests of such person, (y) possession directly or indirectly of 50% or more of the voting power of such person or (z) the power directly or indirectly to appoint a majority of the members of the board of directors or similar governing body of such person, and the terms " controlling " and " controlled " have meanings correlative to the foregoing) any business of any kind in which it is engaged, including, without limitation, soliciting business from or performing services for, any persons, company or other entity which at any time during the Executive's employment by the Company is a client, supplier, or customer of the Company or prospective client, supplier, or customer of the Company if such business or services are of the same general character as those engaged in or performed by the Company;

(ii) solicit or otherwise induce any person to terminate his employment or consulting relationship with the Company or any Affiliate; and

(iii) engage, invest or assist in any business activity that directly or indirectly competes with any business plan of the Company or any Affiliate.

In addition, because the Executive acknowledges the difficulty of establishing when any intellectual property, invention, or proprietary information is first conceived or developed by the Executive, or whether it results from access to Proprietary Information or the Company equipment, supplies, facilities, or data, the Executive agrees that any intellectual property, invention, or proprietary information shall be reported to the Company and, unless proven otherwise to the reasonable satisfaction of the Company, shall be presumed to be an Invention for the purpose of this Agreement and shall be subject to all terms and conditions hereof, if reduced to practice by the Executive or with the aid of the Executive within one (1) year after termination of the Period of Employment.

7.2 No Competition . Notwithstanding Section 7.1 above, while employed by the Company and for a period equal to the greater of one (1) year after the termination of the Executive's employment with the Company for any reason whatsoever, the Executive shall not, directly or indirectly, as an executive, employer, employee, consultant, agent, principal, partner, manager, stockholder, officer, director, or in any other individual or representative capacity, engage or participate in any business within the PRC and/or Hong Kong that is competitive with the business of the Company or any Affiliate. Notwithstanding the foregoing, the Executive may own less than one percent (1%) of any class of stock or security of any corporation listed on an internationally recognized securities exchange which competes with the Company.

7.3 Enforceability . The covenants of this Article 7 are several and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. If any provision of this Article 7 relating to the time period or geographic area of the restrictive covenants shall be declared by a court of competent jurisdiction to exceed the maximum time period or geographic area, as applicable, that such court deems reasonable and enforceable, then this Agreement shall automatically be considered to have been amended and revised to reflect the maximum time period or geographic area that such court deems enforceable.

7.4 Independent Covenants . All of the covenants in this Article 7 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Executive against the Company or any of its Affiliates, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants.

8. Proprietary Information.

The Executive agrees during his employment with the Company and within three (3) years thereafter, to hold in strictest confidence and trust, and not to use or disclose to any person, firm or corporation any Proprietary Information without the prior written consent of the Company, except as necessary in carrying out his duties as an employee of the Company for the benefit of the Company. " Proprietary Information " means any information of a proprietary, confidential or secret nature that may be disclosed to the Executive that relates to the business of the Company or of any parent, subsidiary, Affiliate, customer or supplier of the Company or any other party with whom the Company agrees to hold information of such party in confidence (" Relevant Parties "). Such Proprietary Information includes, but is not limited to, Inventions (as defined below), research, product plans, products, services, business strategies, personnel information, customer lists, customers, markets, technical information, forecasts, marketing, finances or other business information of the Company and its Affiliates. This information shall remain confidential whether it was disclosed to the Executive either directly or indirectly in writing, orally or by drawings or observation. The Executive understands that Proprietary Information does not include any of the foregoing items which has become publicly known and made generally available through no wrongful act of the Executive or others who were under confidentiality obligations as to the items involved.

9. Former Employer Information.

The Executive agrees that he will not, during his employment with the Company, improperly use or disclose any proprietary information or trade secrets, or bring onto the premises of the Company any unpublished document or proprietary information belonging to any former or concurrent employer or other person or entity (excluding Chuanglian and any other direct or indirect subsidiary of the Company).

10. Third Party Information.

The Executive recognizes that the Company has received and in the future will receive confidential or proprietary information from third parties. The Executive agrees to hold all such confidential or proprietary information in the strictest confidence and trust, and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out his work for the Company consistent with the Company's agreement with such third party.

11. No Conflict.

The Executive represents and warrants that the Executive's execution of this Agreement, his employment with the Company, and the performance of his proposed duties under this Agreement shall not violate any obligations he may have to any former employer or other party, including any obligations with respect to proprietary or confidential information or intellectual property rights of such party.

12. Inventions.

12.1 Inventions Retained and Licensed . The Executive has attached, as Exhibit C , a list describing all inventions, original works of authorship, developments, improvements, and trade secrets which were made by the Executive prior to the Executive's employment with the Company (" Prior Inventions "), which belong to the Executive, and which relate to the Company's actual and/or proposed business, products or research and development. If, in the course of his employment with the Company, the Executive incorporates into a Company product, process or machine a Prior Invention owned by the Executive or in which the Executive has an interest, the Company is hereby granted and shall have a non-exclusive, royalty-free, irrevocable, perpetual, worldwide license to make, have made, modify, use and sell such Prior Invention as part of or in connection with such product, process or machine.

12.2 Assignment of Inventions . The Executive agrees that he will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and hereby irrevocably assign to the Company, or its designee, all the Executive's right, title, and interest in and to any and all inventions, original works of authorship, developments, concepts, improvements, designs, drawings, discoveries, ideas, formulas, processes, compositions of matter, software, databases, mask works, computer programs (including all source codes) and related documentation, algorithms, engineering and reverse engineering, technology, hardware configuration information, logos, trade names, trademarks, patents, patent applications, copyrights, trade secrets or know-how, which the Executive may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice (" Inventions "), while the Executive is employed by the Company. The Executive further acknowledges that all original works of authorship which are made by the Executive (solely or jointly with others) within the scope of and during his employment with the Company and which are protectible by copyright are " works made for hire ," as that term is defined in the United States Copyright Act and that the Company will be considered the author and owner of such works. The Executive understands and agrees that the decision whether or not to commercialize or market any Invention developed by the Executive solely or jointly with others is within the Company's sole discretion and for the Company's sole benefit and that no royalty will be due to the Executive as a result of the Company's efforts to commercialize or market any such Invention.

12.3 Waiver of Moral Rights . To the utmost extent legally permitted, the Executive also hereby forever waives and agrees never to assert any and all Moral Rights (as defined below) he may have in or with respect to any Invention, even after termination of his work on behalf of the Company. " Moral Rights " mean any rights to claim authorship of an Invention to object to or prevent the modification of any Invention, or to withdraw from circulation or control the publication or distribution of any Invention, and any similar right, existing under judicial or statutory law of any country in the world, or under any treaty, regardless of whether or not such right is denominated or generally referred to as a " moral right ."

12.4 Maintenance of Records . The Executive agrees to keep and maintain adequate and current written records of all Inventions made by the Executive (solely or jointly with others) during the Executive's employment with the Company. The records will be in the form of notes, sketches, drawings, and any other format that may be specified by the Company. The records will be provided to, and remain the sole property of, the Company at all times.

12.5 Patent and Copyright Registrations . The Executive agrees to assist the Company, or its designee, at the Company's expense, in every proper way, to secure the Company's rights in the Inventions and any copyrights, patents, mask work rights, trade secret rights or other intellectual property rights relating thereto in any and all countries. The Executive will disclose to the Company all pertinent information and data which the Company deems necessary for the execution of all applications, specifications, oaths, assignments and execute all instruments necessary to apply for and obtain such rights and in order to assign and convey to the Company, its successors, assigns, and nominees, the sole and exclusive right, title and interest in and to such Inventions, and any copyrights, patents, mask work rights, or other intellectual property rights relating thereto. The Executive further agrees that the Executive's obligation to execute or cause to be executed, when it is in the Executive power to do so, any such instrument or papers shall continue after the termination of this Agreement. If the Company is unable, because of the Executive's mental or physical incapacity or for any other reason, to secure his signature to apply for or to pursue any application for any patents or copyright registrations covering the Inventions assigned to the Company as above, then the Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agent and attorney in fact, to act for and in the Executive's behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters, patent or copyright registrations thereon with the same legal force and effect as if executed by the Executive.

13. Alternative Dispute Resolution.

The Company and Executive mutually agree that any controversy or claim arising out of or relating to this Agreement or the breach thereof, or any other dispute between the parties, shall be submitted to mediation before a mutually agreeable mediator, which cost is to be borne equally by the parties hereto. In the event the Parties fail to agree on a mediator, or mediation is unsuccessful in resolving the claim or controversy within one (1) month after the commencement of mediation, such claim or controversy shall be resolved by arbitration in Hong Kong under the auspices of the Hong Kong International Arbitration Centre.

14. Miscellaneous.

14.1 Continuing Obligations . The obligations in this Agreement will continue in the event that the Executive is hired, renders services to or for the benefit of or is otherwise retained at any time by any present or future Affiliates of the Company. Any reference to the Company in this Agreement will include such Affiliates. Upon the expiration or termination for any reason whatsoever of this Agreement, the Executive shall forthwith resign from any employment of office with an Affiliate of the Company unless the board of directors of the Company requests otherwise.

14.2 Notification . The Executive hereby authorizes the Company to notify his actual or future employers of the terms of this Agreement and his responsibilities hereunder.

14.3 Name and Likeness Rights . The Executive hereby authorizes the Company to use, reuse, and to grant others the right to use and reuse, his name, photograph, likeness (including caricature), voice, and biographical information, and any reproduction or simulation thereof, in any media now known or hereafter developed (including but not limited to film, video and digital or other electronic media), both during and after his employment, for whatever purposes the Company deems necessary.

14.4 Injunctive Relief . The Executive understands that in the event of a breach or threatened breach of this Agreement by him, the Company may suffer irreparable harm and will therefore be entitled to injunctive relief to enforce this Agreement.

14.5 Legal Fees . In any dispute arising under or in connection with this Agreement, the prevailing party shall be entitled to recover reasonable attorney's fees.

14.6 Entire Agreement . This Agreement, including the exhibits attached hereto, is intended to be the final, complete, and exclusive statement regarding their subject matter, except for other agreements specifically referenced herein. Unless otherwise specifically provided for herein, this Agreement supersedes all other prior and contemporaneous agreements and statements pertaining to this subject matter, and may not be contradicted by evidence of any prior or contemporaneous statements or agreements. To the extent that the practices, policies, or procedures of the Company, now or in the future, apply to the Executive and are inconsistent with the terms of this Agreement, the provisions of this Agreement shall control.

14.7 Amendments, Renewals and Waivers . This Agreement may not be modified, amended, renewed or terminated except by an instrument in writing, signed by the Executive and by a duly authorized representative of the Company other than the Executive. No failure to exercise and no delay in exercising any right, remedy, or power under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, or power under this Agreement preclude any other or further exercise thereof, or the exercise of any other right, remedy, or power provided herein or by law or in equity.

14.8 Assignment; Successors and Assigns . The Executive agrees that he will not assign, sell, transfer, delegate or otherwise dispose of, whether voluntarily or involuntarily, or by operation of law, any rights or obligations under this Agreement, nor shall the Executive's rights be subject to encumbrance or the claims of creditors. Any purported assignment, transfer, or delegation shall be null and void. Nothing in this Agreement shall prevent the consolidation of the Company with, or its merger into, any other corporation, or the sale by the Company of all or substantially all of its properties or assets, or the assignment by the Company of this Agreement and the performance of its obligations hereunder to any successor in interest. In the event of a change in ownership or control of the Company, the terms of this Agreement will remain in effect and shall be binding upon any successor in interest. Notwithstanding and subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors, and permitted assigns, and shall not benefit any person or entity other than those enumerated above.

14.9 Notices . All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made as of the date delivered or mailed if delivered personally or by nationally recognized courier or mailed by registered mail (postage prepaid, return receipt requested) or by telecopy to the parties at the following addresses (or at such other address for a party as shall be specified by like notice, except that notices of changes of address shall be effective upon receipt):

To: Company

Contact Address: AutoChina International Limited

27F Kaiyuan Center

Attention: Senior Vice President

To: Executive

Contact Address: AutoChina International Limited

27F Kaiyuan Center

No.5 East Main Street, Shijiazhuang City

Hebei Province 050011, People’s Republic of China

Attention: Lei Chen

14.10 [Reserved.]

14.11 Waiver of Immunity . To the extent that any Party (including its assignees of any such rights or obligations hereunder) may be entitled, in any jurisdiction, to claim for itself (or himself or herself) or its revenues or assets or properties, immunity from service of process, suit, the jurisdiction of any court, an interlocutory order or injunction or the enforcement of the same against its property in such court, attachment prior to judgment, attachment in aid of execution of an arbitral award or judgment (interlocutory or final) or any other legal process, and to the extent that, in any such jurisdiction there may be attributed such immunity (whether claimed or not), such Party hereby irrevocably waive such immunity .

14.12 Severability; Enforcement . If any provision of this Agreement, or its application to any person, place, or circumstance, is held by an arbitrator or a court of competent jurisdiction to be invalid, unenforceable, or void, such provision shall be enforced (by blue-penciling or otherwise) to the maximum extent permissible under applicable law, and the remainder of this Agreement and such provision as applied to other persons, places, and circumstances shall remain in full force and effect.

14.13 Governing Law . This Agreement shall in all respects be construed and enforced in accordance with and governed by the laws of Hong Kong.

14.14 Interpretation . This Agreement shall be construed as a whole, according to its fair meaning, and not in favor of or against any party. Sections and section headings contained in this Agreement are for reference purposes only, and shall not affect in any manner the meaning or interpretation of this Agreement. Whenever the context requires, references to the singular shall include the plural and the plural the singular. References to one gender include both genders.

14.15 Obligations Survive Termination of Employment . The Executive agrees that any and all of the Executive's obligations under this Agreement capable of execution after the termination of the Executive employment, including but not limited to those contained in exhibits attached hereto, shall survive the termination of employment and the termination of this Agreement.

14.16 Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement, but all of which together shall constitute one and the same instrument.

EXECUTIVE ACKNOWLEDGEMENT. The Executive acknowledges (i) that he has consulted with or has had the opportunity to consult with independent counsel of his own choice concerning this Agreement and has been advised to do so by the Company, and (ii) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment. The Executive hereby agrees that his obligations set forth in Sections 7, 8, and 9 hereof and the definitions of Proprietary Information and Inventions contained therein shall be equally applicable to Proprietary Information and Inventions relating to any work performed by the Executive for the Company prior to the execution of this Agreement.

The parties have duly executed this Agreement as of the date first written above.

EXECUTIVE:

Name:

COMPANY:

AUTOCHINA INTERNATIONAL LIMITED

By:

Name: James Sha

Title: Director

EXHIBIT A

TERMINATION CERTIFICATE

This is to certify that I have returned all personal property of AutoChina International Limited (the " Company ") and the Relevant Parties, including, without limitation, all books, manuals, records, models, drawings, reports, notes, contracts, lists, blueprints, and other documents and materials, electronic data recorded or retrieved by any means, Proprietary Information, and equipment furnished to or prepared by me in the course of or incident to my employment with the Company, and that I did not make or distribute any copies of the foregoing.

I further certify that I have reviewed the Executive Employment Agreement (the " Agreement ") signed by me and that I have complied with and will continue to comply with all of its terms, including, without limitation, (i) the reporting of any Inventions or any improvement, rights, or claims related to the foregoing, conceived or developed by me and covered by the Agreement; (ii) the preservation as confidential of all Proprietary Information pertaining to the Company and the Relevant Parties; (iii) not participating in any business competitive with the business of the Company; (iv) not acting as the legal representative or an executive officer of any other company within and outside the People’s Republic of China, and (v) the reporting of any remuneration paid to me due to any employment or self-employment during the severance period, if any. This certificate in no way limits my responsibilities or the Company's rights under the Agreement.

On termination of my employment with the Company, I will be employed by [name of new employer] in the [division name] division and I will be working in connection with the following projects:

[generally describe the projects]

Date:

Print Executive's Name

Executive's Signature

EXHIBIT C

LIST OF PRIOR INVENTIONS

AND ORIGINAL WORKS OF AUTHORSHIP

Title Date Identifying Number or Brief Description

____________

No inventions or improvements

____________

Additional Sheets Attached

Signature of Executive:

Printed Name of Executive:

Date:

Exhibit 4.7

Exhibit 4.8

Exhibit 4.9

BUSINESS OPERATION AGREEMENT

This Agreement is made on the 23rd day of December, 2016, at Shijiazhuang, People’s Republic of China (the “PRC”) by and among the following parties:

Hebei Chuanglian Finance Leasing Co., Ltd. ( “ Party A ”)

Registered Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Legal representative: Geng Juncai

Hebei Yarui Trading Co., Ltd. (“ Party B ”)

Registered Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Legal representative: Li Mingxia

WHEREAS:

1.	Party A, a wholly foreign owned enterprise organized and existing under the laws of PRC. (For the purpose of this Agreement, excluded Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan hereinafter the “PRC”)

2.	Party B, a limited liability company registered and existing under the laws of PRC.

Party A and Party B have agreed that, under the law of the PRC, Party B shall assign the equity interests of Hebei Xuhua Trading Co., Ltd (hereinafter the “Company”) hold by itself to Party A or any third party designated by Party A unconditionally. So the ordinary course of business will materially impact the interest of Party A after the acquisition of equity interest of Party B.

NOW THEREFORE , through mutual consultations, the Parties have reached the following agreement:

1. OBLIGATION

For the purpose of guarantee the Agreements and obligations, Party B hereby acknowledges and agrees that, other than with prior written consent of Party A or the third party designated by Party A, Party B will not undertake or urge the Company to undertake any transactions which may material impact the assets, obligations, rights or business of the company, including but not limited:

1.1

It will not undertake any business beyond the ordinary scope of business;

1.2

It will not lend any loan to third party or assume any indebtedness from any third party;

1.3

It will not change or remove any directors or senior management team.

1.4

It will not sell or acquire any assets or rights exceed RMB 100,000 in value to any third party, include but not limited to any intellectual properties;

1.5

It will not provide any of its assets or intellectual properties to be used as securities or provide any other encumbrance thereon;

1.6

It will not modify the articles of association and bylaws of the Company or alter the scope of business of the Company;

1.7

It will not alter the operation procedure or substantially modifying the internal system;

1.8

It will not transfer the rights and obligations hereunder to any third party.

1.9 Party A has the right to inspect the business status of Company at any time and ask Party B for assistance, including but not limited to provide the documents which Party A believes is necessary and to answer the questions raised by Party A. In the event that the conduct(s) of Party B or the Company lead the Party A reasonably believes that it had violated the obligation provided in the Section 1 under this Agreement, Party A is entitled to require Party B to withdraw such conduct(s), and Party B shall cause the Company to withdraw such conduct(s) (if possible).

2. BUSINESS OPERATION AND PERSONNEL ARRANGEMENT

2.1

Party B agrees to cause the Company to accept and enforce rigidly the advices in connection with the appointment and dismissal of employees, the daily business operation of the Company and the financing management systems of the Company.

2.2

Party B hereby agrees that, it will cause the Company to appoint the persons designated by Party A to assume the position of director in accordance with the procedure provided by laws, regulations and articles of association, and cause such directors to elect the chairman of the board according to the instruction by Party A. Party B shall appoint the personnel designated by Party A as the Company’s general manager, financial controller and other officers

2.3

The aforesaid director or officers designated by Party A shall loss all the position in the Company in the event of dismissal (voluntarily or involuntarily) or resignation from Party A. Party B shall cause the Company to appoint other person designated by Party A to assume such position under this circumstance.

2.4

For the purpose of said Section 2.3, Party B will urge the Company to take any and all necessary steps to accomplish the appointment and dismissal procedure under the applicable law, regulations and articles of association of the Company and provisions specified in this Agreement.

2.5

Simultaneously with the execution of this Agreement, party B agrees to execute the Power of Attorney (“POA”), appointing Party A’s authorized representatives as his/her attorney with the power to vote at any meetings or in any other circumstance, Party B further agrees to execute and deliver a new POA to the effect of withdrawing the authorization with respect to the representative of the Attorney in the POA and nominate the new representative as the attorney on request of Party A.

3. MISCELLANEOUS

3.1

In the event of expiration or termination of any one of the agreements between the Parties, Party A is entitled to determine whether to terminate all other agreements between the Parties.

3.2

Party B agrees, it will pay or transfer unconditionally to Party A any or all bonus, dividends or any other revenues or benefits (no matter the form) which it obtained from the Company as the shareholder. The taxes and expenses regard with the transfer (if any) shall be assumed according to the applicable laws.

4. BREACH OF CONTRACT

	4.1	Unless otherwise specified hereunder, in the event that Party B fails to perform this Agreement fully and completely or terminate its performance temporarily, and fails to correct his non-performance within 30 days after the acceptance of Party A’s notice, it will be deemed as the breach of contract.

	4.2	Any expenses (including but not limited to attorney fees, litigation fees, arbitration fees and travel and lodging fees), responsibilities or damages (including but not limited to reasonable loss of profit) undertaken by Party A arising in connection with the non-performance of Party B hall be indemnified by Party B.

5. ENTIRE AGREEMENT AND AMENDMENT

5.1

This Agreement and any other contract mentioned or included expressly by the Agreement constitute the entire the subject matter between the Parties hereto, and supersedes all prior agreements, contracts, understandings and communications.

5.2

No amendment, supplementary or modification of this Agreement shall occur except in writing. The amend agreement and supplementary agreement that have been signed by the Parties shall have the same validity as this Agreement.

6. GOVERNING LAW

The execution, effectiveness, performance, construction and settlement of dispute of this Agreement shall be governed by the laws of the PRC.

7. SETTLEMENT OF DISPUTE

7.1

In the event of any dispute with respect to or in connection with the construction and performance of the provisions of this Agreement, the Parties shall first negotiate in good faith to resolve the dispute. In the event the Parties fail to reach an agreement on the resolution of such a dispute, any Party may submit the relevant dispute to China International Economic and Trade Arbitration Commission in Shijiazhuang for binding arbitration. The languages used during arbitration shall be Chinese. The arbitration shall be final and binding on both Parties.

7.2

The Parties shall in good faith in all other respects continue their implementation of this Agreement except issues in dispute between the Parties.

8. NOTICES

All notices and other communications given or made pursuant hereto shall be in writing and deliverer to the address as specified below by personally delivery, registered mail pre-paid post, courier or facsimile transmission.

Party A: Hebei Chuanglian Finance Leasing Co., Ltd.

Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Facsimile: 0311-83819636

Telephone: 0311-83827688

Attention: Geng Juncai

Party B: Hebei Hebei Yarui Trading Co., Ltd.

Address: 5 East Main Street, 27 th Floor

Facsimile: 0311-83819636

Telephone: 0311-83827688

Attention: Li Mingxia

9. EFFECTIVENESS, TERMIN ATION AND MISCELLANEOUS

9.1

This Agreement shall expire in 10 years following the date first above written unless terminated earlier in accordance with the provisions specified in this Agreement. The term of this Agreement will be automatically extended for another ten-year period upon expiry, unless Party A filed a 3 months’ prior written notice before the expiration of the Agreement.

9.2

This Agreement shall not be terminated by Party B during the term but Party A can terminate this Agreement at any time without cause, by giving 30 day's prior written notice to Party B.

9.3

If any term or provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any applicable laws and regulations, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

9.4

No delay or omission by any Party in exercising the right, power or privilege hereunder shall be deemed as a waiver of such right, power or privilege. The single or partial exercise of any right, power or privilege shall not preclude any exercise of any other right, power or privilege.

IN WITNESS WHEREOF , the parties have duly executed this Agreement as of the date first written above.

[SIGNATURE PAGE]

Party A: Hebei Chuanglian Finance Leasing Co., Ltd. （ seal ）

Authorized Representative （ signature ） :

Party B: Hebei Yarui Trading Co., Ltd. （ seal ）

Authorized Representative （ signature ） :

Exhibit 4.10

EQUITY PLEDGE AGREEMENT

This equity pledge agreement (this “Agreement”) is made on the 23rd day of December, 2016, at Shijiazhuang, the People’s Republic of China (the “PRC”) by and among the following parties:

(1) Hebei Chuanglian Finance Leasing Co., Ltd. ( “ Pledgee ”)

Registered Number: 91130000673204841J

Registered Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Legal representative: Geng Juncai

(2) Hebei Yarui Trading Co., Ltd. (“ Pledgor ”)

Registration Number: 9113010MA07X0GPXX

Registered Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Legal representative: Li Mingxia

WHEREAS:

1. Pledgor, a limited liability company registered and existing under the laws of PRC, hold the equity interests of Hebei Xuhua Trading Co., Ltd (hereinafter “Xuhua Trading”) 【 within the jurisdiction of china 】 , and holds 100% of the equity of Xuhua Trading, the amount of capital contributed being 470 million RMB.

2. Pledgee, a wholly foreign owned enterprise organized and existing under the laws of the PRC.

3. Pledgee and Pledgor both agree, Pledgor shall assign and transfer the equity interests of Xuhua Trading to Pledgee unconditionally and perform the obligations (hereinafter “Security Obligation” )of Option Agreement(hereinafter “Transaction Agreement ” )which signed by Pledgor and Pledgee good and completely after the Pledgee have authorized.

4. The Pledgor agrees to pledge all of his equity interest in Xuhua Trading to Pledgee as collateral for securing his obligations.

NOW THEREFORE , through mutual consents, the Parties have reached the following agreements:

1. DEFINITIONS

Unless otherwise provided, the definitions below shall have the following meanings throughout this Agreement:

1.1 PLEDGES: means all the right and beneficial interest set forth at the Clause 2 of this Agreement.

1.2 EQUITY INTEREST: means any and all the equity interests of Xuhua Trading held by Pledgor legally and the rights and interests in connection with the equity interests in the meantime and in the future.

1.3 EVENT OF DEFAULT: means any event set forth at the Clause 8 herein.

1.4 NOTICES OF THE EVENT OF DEFAULT: means the notices delivered by the Pledgee for the purpose of declare the event of default pursuant to this Agreement.

2. THE PLEDGED INTERESTS

2.1 Pledgor hereby pledge all its equity interests in Xuhua Trading to secure performance of all obligations, penalties, damages, costs of exercising the pledged interests and any indebtedness to Pledgee pursuant to the terms of the Transaction Agreement.

2.2 The Pledge Interests hereunder means the rights and interests owned by Pledgee and take the right to request first priority repayment which Pledgor pledge its equity interest to Pledgee as collateral for securing his obligation.

2.3 Unless the Pledgee otherwise consent in writing after the execution of this Agreement, the pledge under this Agreement shall be valid until the obligations have been fully discharged and have been permitted by Pledgee in writing.

3. NATRUE OF PLEDGE

3.1 The pledge under this Agreement shall not be affected by any other pledge or security interest in accordance with security obligation, and not affect the effectiveness of any other pledge or security interest.

3.2 The right of Pledgor and Pledgee hereunder shall not be affected or waived at any circumstance set forth below:

3.2.1 Any extension, waiver, relief or termination of the obligations of any Party with the consent of Pledgee.

3.2.2 Any amendment, mortification or supplementary of the Transaction Agreement.

3.2.3 Any disposal, change or termination in connection with any other pledge or guaranty on the secured obligation;

3.2.4 Any agreement made by Pledgee and any other parties which may affect the Pledged Interests;

3.2.5 Any delay, performance, breach or mistake in connection with exercising of rights by Pledgee under this Agreement.

3.2.6 Any acknowledgement of illegality, invalidity or unenforceability of any transaction or its performance, or

3.2.7 Any other event which may affect any Pledgor’s obligation under this Agreement.

4 ． EFFECTIVENESS

4.1 This Agreement becomes effective upon the entry of such pledge into the shareholder’s register of Administration Bureau of Industry and Commerce.

4.2 During the term of pledge, provide the Pledgor fail to performance of its security obligation, the Pledgee entitle the right to exercise the rights subject to this Agreement.

5. THE POSSESSION OF CERTIFICATE

5.1 The Pledgor shall put the certificate of capital (original) on Xuhua Trading under the safekeeping of the Pledgee during the pledge term provided by this Agreement. The Pledgor shall deliver the certificate (original) and the appropriate evidence which can prove the pledge has been entered into the Register of Shareholders to Pledgee within one (1) week.

5.2 Without prior written consent of Pledgee, Pledgor shall not declare or distribute any income (if any, including but not limitation, dividend and profit), such income shall be deemed as collateral for securing their obligations. Pledgor shall transfer such income generated by the said equity interests to a bank account designated in writing by Pledgee.

6. REPRESENTATIONS AND WARRANTIES

Pledgor hereby represents and warrants to the Pledgee set forth as below, and acknowledges that the execution and enforcement hereof by Pledgee is depended upon the represents and warrants herein:

6.1 Xuhua Trading are enterprises established and existing under the laws of the PRC.

6.2 Xuhua Trading have had any and all necessary approval, authorization and permission from government, and have accomplished all the registration and filing.

6.3 The Pledgor has the capacity for civil right and capacity for civil conduct for execute and perform this Agreement.

6.4 The execution and performance of this Agreement by Pledgor shall not conflict with the Article of Association of the Xuhua Trading or any other relevant documents. The Pledgor has obtained any and all necessary approvals and authorizations for the execution and performance of this Agreement.

6.5 The execution and performance of this Agreement will not violate any laws or regulations of the PRC, or violate any conditions of licenses, authorities, notices or any other governmental documents necessary, or conflict with or result in a breach or violation of any contracts or agreements to which Pledgor is a party.

6.6 The Pledgor has paid up the registered capital according to the equity in connection with Xuhua Trading under the PRC laws and obtained the capital verification report issued by qualified certified public accounting firm.

6.7 The Pledgor has full right, title and interest in the Pledged Interests and free of lien or other security interest other than the pledges created by this Agreement.

6.8 The Pledgor or Xuhua Trading have not conducted any acts or actions which may material adverse affect the assets, business of Xuhua Trading or the obligations of the Pledgor until the date of execution.

6.9 The Pledgor have not pledged, assigned or otherwise transferred to any third party any of their interest in the pledged Interests during the term.

6.10 The Pledgor have not pledged, mortgaged or created any other priority right in Xuhua Trading’s assets except that the encumbrances have already disclosed.

6.11 All the documents delivered from Pledgor to Pledgee are true, completed, and accurate and contain no material misrepresentation or error.

6.12 No further intervention other than the applicable law in the event that the Pledgee exercises its rights according to the terms and conditions under this Agreement at any time.

6.13 The Pledgee is entitled to acquire all right, title and interest to any of the pledged interests or beneficial interests according to the terms and conditions in this Agreement and under the PRC laws.

6.14 On the date of this Agreement entered, there is no civil or criminal legal proceeding and arbitration is current or pending against Pledgor’s entry into this Agreement or performance of their obligations hereunder.

6.15 No outstanding taxes, expenses due or unconsummated legal proceedings, procedures which should have consummated as of the date of execution.

6.16 All or any provisions hereunder represent the real intention of parties, and each party will legally bound by this Agreement.

7. CONVENANTS

7.1 During the terms of this Agreement, Pledgor hereby covenants to Pledgee as follows:

7.1.1 It will not transfer the Pledged Interests or cause or allow the Pledged Interests to be used as security for any other obligation that may affect Pledgee’s right or beneficial without the prior written consent of Pledgee except that the Pledgee require the Pledgor to assign or transfer the equity interest.

7.1.2 Without the Pledgee’s written consent, during the term from the signature of this Agreement to the termination of the pledge hereunder, the Pledgor or Xuhua Trading shall not take any action involve in any event which will material adversely affects the asset and business of Xuhua Trading or the responsibility of the Pledgor.

7.1.3 Without the Pledgee’s written consent, during the term from the execution of this Agreement to the termination of the pledge hereunder, the Pledgor warranty that Xuhua Trading shall not pledge, mortgage or create any other restrictive right in all or any of their asset.

7.1.4 It will comply with and enforce any and all applicable laws, rules and regulations and deliver all the notices, instructions or advices within five(5) days to Pledgee in the event that he received such notices, instructions and advices from the authorized government entity, and conduct acts under the reasonable instructions of Pledgee.

7.1.5 It shall promptly notify Pledgee of any event that may materially affect Pledgee’s rights to any portion of the Pledged Interests or any of Pledgor’s guarantees or obligations hereunder and follow the instructions of Pledgee.

7.1.6 Comply with the representations and warranties aforesaid at Clause 6 and keep it effective.

7.2 The Pledgor agrees, the Pledgee is entitled to exercise the rights according to the terms and conditions of this Agreement, and free from the intervention and encumbrance from the Pledgor, its successor, assignor or any other person.

7.3 The Pledgor hereby covenants to Pledgee, he will enter into and cause any other person who affects the Pledged Interests to enter into any certificate, deed which required by Pledgee in good faith, and/or conduct and cause any other person who affects the Pledged Interests to conduct actions which required by Pledgee. And it will enter into all the alter documents in connection with the equity interest certificate with the Pledgee or any other person designated by it, and provides all the necessary documents according to the Pledged Interests to Pledgee during the reasonable term.

7.4 Pledgor shall comply with and perform all the guarantees, covenants, agreements, represents and conditions. If it is failed to perform or performed in full, it shall reimburse all the relevant losses and damages to Pledgee.

8. EVENT OF DEFAULT

8.1 Each of the followings shall be deemed an Event of Default:

8.1.1 Pledgor, its successors and agents fails to perform any security obligation;

8.1.2 Any representation or warranty made by the Pledgor in Clause 6 herein contains a material misrepresentation or error;

8.1.3 Any Pledgor breaches any of the warranties in Clause 6 or covenants made in Clause 7 herein;

8.1.4 Any Pledgor breaches any clauses under this Agreement;

8.1.5 Any Pledgor transfers the Pledged Interest without the prior written consent of Pledgee, except as provided in Clause 7.1.1 herein;

8.1.6 Loans, encumbrances, indemnities, promises or any other remedies arising in connection with breach which demands that Pledgor immediately perform all the obligations including payment of all outstanding payments due leads the Pledgee believe that the Pledgor’s ability to perform his or her obligations under this Agreement has been adversely affected.

8.1.7 Pledgor cannot satisfy its indebtedness or any other debt;

8.1.8 The promulgation of any applicable laws or regulations renders this Agreement illegal or makes the Pledgor’s performance under this Agreement impossible.

8.1.9 Any approval, license, permit or authorization of government agencies that makes this Agreement enforceable, legal and effective is withdrawn, terminated, invalidated or substantively changed.

8.1.10 A adversely change occurring in the financial conditions of Pledgor leads Pledgee to believe the Pledgor’s ability to perform his or her obligations under this Agreement has been adversely affected.

8.1.11 The discontinuance, termination, forced closure or liquidation of the Pledgor or Xuhua Trading.

8.1.12 Any other event precludes Pledgee to exercise its pledge right under the applicable laws.

8.2 Pledgor shall immediately notify Pledgee in writing upon the incident of any Event of Default or any event which with lapse of time and/or notice will constitute an Event of Default.

8.3 Unless the Event of Default specified in Clause 8.1 aforesaid has been resolved satisfaction, Pledgee may deliver a written notice of default to Pledgor, which demands that Pledgor immediately perform all the obligations or enforces or disposes of the Pledged Interest in accordance with the Clause 9 under this Agreement.

9. ENFORCEMENT OF PLEDGES

9.1 Prior to the Pledgor’s security obligation has been discharged, Pledgor shall not transfer its equity interest without prior written consent of Pledgee.

9.2 An Enforcement Notice shall be delivered to Pledgor before Pledgee exercise its Pledge right under this Agreement.

9.3 Subject to Clause 8.3, from and including delivery of the Default Notice under this Agreement, Pledgee shall become entitle to exercise the right of Pledged Interest at its sole discretion.

9.4 Pledgee is entitled to enforce the pledges of first order in priority by dispose of the pledge interests hereunder legally.

9.5 The Pledgor shall not hinder and shall take necessary assistance for the enforcement of pledges by Pledgee.

10. ASSIGNMENTS

10.1 Without Prior written consent by Pledgee, the Pledgor shall not assign or transfer all or any of its rights or obligation under this Agreement.

10.2 This Agreement shall have binding force on Pledgor and its successors and assigns, and this Agreement is in full force and effect for the Pledgee and its successors and assigns.

10.3 Pledgee may transfer or assign the security obligation to any third party designated by it. In that event, the assignee shall have the same rights and obligations as the Pledgee under this Agreement. The Pledgor shall execute relevant agreements or documents in connection with the assignment upon received the request of Pledgee.

10.4 The Parties shall execute a new pledge equity agreement provide the verification of the Pledgee which caused by assignment.

11. BREACH OF AGREEMENT

11.1 Any breach of provisions under this Agreement, or Pledgor fails to perform the obligation of security in time, or the breach of contract pursuant to the sub-clause 8.1 shall deem as breach of agreement by Pledgor. Pledge may notify the Pledgor in writing to ask for correction and take actions to eliminate the consequence and indemnify Pledgee for its breach pursuant to specifications under this Agreement.

11.2 In the event of breach by Pledgor, the Pledgee may terminate the performance of obligations hereunder temporarily by deliver a written notice to Pledgor in consideration that the performance is impossible or unfair until the Pledgor take the actions to eliminate the consequence and indemnify the costs arising in connection with the breach.

11.3 Pursuant to this clause, Pledgee is entitle the right to claim Pledgor to be compensated for all losses, including the direct economic losses, any reasonably foreseeable indirect economic losses and related costs arising there from, including but not limited to legal fees, litigation costs , arbitration fees and travel expenses.

12. TERMINATION

This Agreement shall be terminated upon the performance of the obligation of security by Pledgor is completed, then Pledgee shall cancel or terminate this Agreement as soon and reasonable as practicable. The Pledgor shall not terminate this Agreement in any reason by any way without the consent of the Pledgee.

13. COMMISSION AND OTHER FEES

13.1 Any and all costs and actual expenses incurred in connection with this Agreement, including, without limitation, any legal fees, disbursements, stamp duties or any other taxes and fees are undertaken by the Pledgor. The Pledgor shall compensate the Pledgee for costs and expenses which was undertaken by the Pledgee pursuant to the applicable laws.

13.2 Pledgor shall undertake any and all costs and expenses (including, without limitation, taxes, commission charges, administration fees, legal fees, fees of attorney and any insurance fees) in the event that Pledgor fail to pay any or all of taxes, expenses or for any other reason that cause Pledgee have such claim.

14. GOVERNING LAW AND SETTLEMENT OF DISPUTES

14.1 The execution, effectiveness, performance, construction and settlement of disputes shall be governed by the laws of the PRC.

14.2 In the event of any dispute with respect to or in connection with the construction and performance of the provisions of this Agreement, the Parties shall first negotiate in good faith to resolve the dispute. In the event the Parties fail to reach an agreement on the resolution of such a dispute, any Party may submit the relevant dispute to China International Economic and Trade Arbitration Commission in Shijiazhuang for binding arbitration. The languages used during arbitration shall be Chinese. The arbitration shall be final and binding by both Parties.

14.3 The Parties shall in good faith in all other respects continue their implementation of this Agreement except issues in dispute between the Parties.

15. NOTICES

All the notices or other communications given or made pursuant hereto shall be sent in writing in Chinese and delivered to the address as specified below by personally delivery, registered mail pre-paid post, courier or facsimile transmission.

Pledgee: Hebei Chuanglian Finance Leasing Co., Ltd.

Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Facsimile: 0311-83819636

Telephone: 0311-83827688

Attention: Geng Juncai

Pledgor: Hebei Yarui Trading Co., Ltd.

Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Facsimile: 0311-83819639

Telephone: 0311-83827688

Attention: Li Mingxia

16. SCHEDULES AND ANNEXES

All schedules are an integral part of this Agreement.

17. WAIVER

No delay or omission by Pledgee in exercising the right, remedy, power or privilege by this Agreement shall be deemed as a waiver of such right, remedy, power or privilege. The single or partial exercise of any right, remedy, power or privilege shall not preclude any exercise of any other right, remedy, power or privilege. The right, remedy, power or privilege under this Agreement is cumulative and are not exclusive of any right, remedy, power or privilege provided by laws.

18. MISCELLANEOUS

18.1 No amendment, supplementary or modification of this Agreement shall occur except in writing. The amendment agreement and supplementary agreement that have been signed and sealed by the Parties shall have the same validity as this Agreement.

18.2 In the event that any provision of this Agreement is determined to be invalid or unenforceable in any respect in accordance with the applicable laws, the validity or enforceability of the remaining provisions of this Agreement shall not be affected.

18.3 This Agreement is signed in quadruplicate originals, with each of equally binding force.

[REMAINEDROF PAGE INTENIONALLY LEFT BLANK]

[SIGNATURE PAGE]

PLEDGEE: Hebei Chuanglian Finance Leasing Co., Ltd. （ SEAL ）

AUTHORIZED PERSON: （ SIGNATURE ） :

PLEDGOR: Hebei Kaiyuan Yarui Trading Co., Ltd. （ SEAL ）

AUTHORIZED PERSON: （ SIGNATURE ） :

Exhibit 4.11

OPTION AGREEMENT

This Option Agreement (hereinafter “Agreement”) is made on the 23rd day of December, 2016,at Shijiazhuang, the People’s Republic of China (the “PRC”) by and among the following parties:

Hebei Chuanglian Finance Leasing Co., Ltd. ( “ Party A ”)

Registered Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Legal representative: Geng Juncai

Hebei Kaiyuan Yarui Trading Co., Ltd. (“ Party B ”)

Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Legal representative: Li Mingxia

WHEREAS:

Party A, a wholly foreign owned enterprise organized and existing under the laws of PRC.

2. Party B, a limited liability company registered and existing under the laws of PRC, hold the equity interests of Hebei Xuhua Trading Co., Ltd (hereinafter “Xuhua Trading”) 【 within the jurisdiction of china 】 , and holds 100% of the equity of Xuhua Trading, the amount of capital contributed being 470 million RMB.

1. THE OPTIONS GRANTED

1.1 GRANT

Grantor agrees to voluntarily, unconditionally, irrevocably and exclusively grant Party A the option under the PRC laws and the terms and conditions provide in this Agreement, the Party A or any third party designated by Party A is entitled to purchase all or part of the share at the lower of the lowest price permitted by the PRC laws at the time of exercise of Option and the audited net asset value of Xuhua Trading.

1.2 TERMS

This Agreement shall be valid from the date of execution until (i) the Accomplished Date defined in Clause 2.5 as below or (ii) the obligations hereunder have been performed, which is later. Party B shall not terminate this Agreement early in any reason.

2. EXERCISE OF OPTION AND CLOSING

2.1 TIME OF EXERCISE

The Grantor agrees, Party A may exercise any or all option under this Agreement at any time of the expiration unless otherwise specified by the PRC laws.

The Grantor agrees, Party A have no limitation in the number of exercise unless have acquired all the equity interests of 4S Stores.

The Grantor agrees, Party A may designate a third Party as its representative to exercise any or all portion of the options subject to notify the Grantor prior in writing.

2.2 THE USE OF FUND

Grantors hereby agree to provide all the interests in connection with the exercise of Option by Party A or any third party designated by Party A to Xuhua Trading in an appropriate manner.

2.3 ASSIGNMENT

Grantors agree that the Party A may assign or transfer all or any of the Option under this Agreement to any third party. Any such third party shall be deemed as one Party of this Agreement and have all of Party A’s rights and obligations.

2.4 NOTICES OF EXECISE THE OPTION

In the event that Party A wishes to exercise the Option, it shall send to the Grant a written notice not later than 10 business days from the Notice Date for the closing of such purchase (an “Option Closing Date” as defined below). The Notice shall specify the terms as below:

The date as of the consummation of the approval of the equity transfers (if required by law) and applies for registration in the AIC formally. (hereinafter “Option Closing Date”)

The name of the shareholder after the closing date;

The amount of equity interest purchased from the Grantor;

Payment method;

Power of Attorney (if authorized the third party to exercise the rights) .

Both Parties agree that, Party A shall designate the third party and on the name of the third party to exercise the options and register the equity interests. Grantor agrees that he will sign the Share Transfer Agreements prepared by Party A or the third party designated by Party A within 5 business days after the acceptance of the Notice for Exercise provide Party A or the third party designated by Party A on demand.

2.5 CLOSING

2.5.1 Grantor shall urge Xuhua Trading to accomplish the approval of assignment by the authorized governmental institutions hereunder under the applicable law of PRC (if any).

2.5.2 Grantor shall cause Xuhua Trading to accomplish the register procedure promptly in the AIC under the applicable laws of the PRC.

2.5.3 Party A or the third party designated by Party A shall pay the Grantors with the price provided in the Clause 1.1 at the closing day.

2.5.4 Grantors shall render Xuhua Trading necessary and timely assistance according to the applicable laws of the PRC to consummate the approval procedures (if required by law) in authorized government entity and to consummate the equity transfer procedure in the AIC. Such date is the date of consummation of the Option. (hereinafter “Accomplished Date”)

2.6 ACCOMPLISHED DATE

Party A or the designated third party shall become the legal owner of the equity interests after the consummated date pursuant to the Articles of Association and applicable laws of the PRC.

3. REPRESENTATIONS AND WARRANTIES

Except as disclosed, Grantor hereby represents and warrants as below:

3.1.1 Grantor has full and complete right and authority to execute and perform this Agreement;

3.1.2 Grantor have performed the contributing obligation of shareholders in Xuhua Trading and owned the lawful and complete title of the shares under the applicable law of the PRC and the Articles of Association and bylaws of Xuhua Trading.

3.1.3 The performance of this Agreement or obligation hereunder have no violation of the binding laws, regulations and other agreements, and have no necessary approval or authority required by the competent governmental entity.

3.1.4 There are no pending and threatened litigations, arbitrations or any other judicial or administrative proceedings which will materially impact the performance of this Agreement.

3.1.5 No pledge, indebtedness or any other encumbrances on the equity interest of Xuhua Trading, and no assignment, donate, pledge or any other manner to dispose of the equity interest to any third party;

3.1.6 These equity interests of Xuhua Trading hold by Grantor are free from any pledge, indebtedness or any other encumbrances of the third party.

3.1.7 The Option granted to Party A or the persons designated by Party A must be exclusive, Grantor shall not grant any other party the option or any similar right in any manner;

3.1.8 Xuhua Trading is a limited liability company created and existing under the applicable laws of the PRC, and have obtained all necessary approvals, authorities and licenses for the operation of business now and in the future. Xuhua Trading does not have any known or expected incident that may lead such approvals, authorities and licenses to be cancelled, removed or suspended

3.1.9 Grantor shall strive to urge the adoption of resolutions which approve Grantor to assign the equity interests to Party A or the third party designated by Party A during the term of exercise of option under the terms and conditions hereof by the shareholders’ meeting of Xuhua Trading. Grantor also shall strive to cause any shareholders of Xuhua Trading other than Grantor (if any) to agree the waiver of the right of first refusal in connection with the equity interests all or any which are attempted to assign.

3.1 CONVENANTS

3.2.1 During the terms of this Agreement, Grantor covenants to Party A or the third party designated by Party A, it will carry out all the necessary procedures which made the Party A or the third party designated by Party A the shareholder of Xuhua Trading. The procedures included, without limitation, rendering Party A or the third party designated by Party A assistance to obtain necessary approvals from governmental entities and institutions, delivering Share Transfer Agreement to the related Administration for Industry and Commence (“AIC”) for the purpose of the amendments or modifications of the Articles of Association and bylaws, shareholders’ register or any other things concerned.

3.2.2 During the terms of this Agreement, he will not put the equity interests hold by Grantor under the circumstance of pledge, indebtedness or encumbrance for any third party, and he will not assign, donate, pledge or dispose of the equity interests hold by Grantor in any other manner to the third party.

3.2.3 During the terms of this Agreement, the equity interests hold by Grantor will not under the circumstance of pledge, indebtedness or encumbrance for the third party.

3.2.4 During the terms of this Agreement, the option granted by Grantor to Party A shall be exclusive; Grantor shall not grant any other party the option or any other right similar right.

4. TAXES AND FEES

Subject to applicable laws, the taxes and fees shall be paid by Parties respectively in the course of carrying out this Agreement.

5. BREACH OF AGREEMENT

5.1 Any breach of the representations and warrants under this Agreement by any Party, given the written notices the other Party have the right to require the breaching Party to correct its conducts of breach or non-performance, and take good, promptly and effectively action to eliminate the consequences in connection with the breach and non-performance aforesaid, and cover the damages .

5.2 The breaching Party shall be liable for any cost, liability or loss (include but not limited to the interests and attorney fees arising from the breach) provide that the breach of this Agreement by any Party. The aggregate amount of indemnification shall be equivalent to the loss incurred by the default; said remedies include the profits for performance which could reasonably have foreseen at the time of the conclusion of the Agreement.

5.3 In the event of breach by Party B, Party A or the third party designated by Party A may terminate the performance of obligations hereunder temporarily by deliver a written notice to Party B in consideration that the performance is impossible or unfair until the Party B take the actions to eliminate the consequence and indemnify the costs arising in connection with the breach.

5.4 Parties shall be liable respectively for the damages to the extent that incurred by themselves provide the breach of this Agreement by both Parties.

6. GOVERNING LAW AND SETTLEMENT OF DISPUTES

6.1 GOVERNING LAW

The application, include, without limitation, execution, effectiveness, performance, construction of this Agreement shall be governed by the laws of the PRC.

6.2 AMICABLE NEGOTIATION

In the event any dispute with respect to or in connection with the construction and performance of this Agreement, the Parties shall first negotiate in good faith or mediate through a third party to resolve the dispute. In the event the Parties fail to resolve the dispute through the methods above-mentioned within 30 days after the any Party’s request for resolution of the dispute, any Party shall submit the relevant dispute to arbitration.

6.3 ARBITRATION

The dispute with respect to this Agreement shall submit to China International Economic and Trade Arbitration Commission in Shijiazhuang for binding arbitration. The languages used during arbitration shall be Chinese. The arbitration shall be final and binding on Parties.

7. CONFIDENTIALITY

7.1 CONFIDENTIAL INFORMATION

This Agreement and schedules hereto is strictly confidential. No Party shall disclose any information of this Agreement to any third party without the prior written consent of both Parties. This term shall survive the termination of this Agreement.

7.2 EXCEPTION

The disclosure in accordance with the laws, adjudications, arbitral awards and the decisions of governmental entity shall not be deemed as the non-compliance of the clause 7.1.

8. MISCELLANEOUS

8.1 ENTIRE AGREEMENT

This Agreement constitutes the entire the subject matter between the Parties hereto, and supersedes all prior discussions, negotiations and agreements. This Agreement shall be altered by mutual consent in writing between Parties, the schedules and exhibits referred to herein are incorporated in this Agreement and constitute an integral part of this Agreement.

8.2 AMENDMENTS AND SUPPLEMENTARY

No amendment, supplementary or modification of this Agreement shall occur except in writing. The amend agreement and supplementary agreement that have been signed and sealed by the Parties shall have the same validity as this Agreement.

8.3 SEVERABILITY

In the event that any provision of this Agreement is determined to be invalid or unenforceable in any respect in accordance with the applicable laws, the validity or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect.

8.4 WAIVER

8.5 NOTICE

All the notices sent by parties for the rights and obligations performance given under this Agreement shall be sent in writing and delivered to the address as specified below by the way of personally delivery, registered mail, prepaid post, courier or facsimile transmission.

Party A: Hebei Chuanglian Finance Leasing Co., Ltd.

Address: 5 East Main Street, 27th Floor, Shijiazhuang

Facsimile: 0311-83819636

Telephone: 0311-83827688

Attention: Geng Juncai

Party B: Hebei Yarui Trading Co., Ltd.

Address: 5 East Main Street, 27th Floor, Shijiazhuang

Facsimile: 0311-85068813

Telephone: 0311-85068830

Attention: Li Mingxia

Notices shall be deemed to have been received:

Upon confirmed transmission if sent by fax, provide the fax sent later than 17:00 or sent not in business day, upon the next successive business day;

Upon signature date if delivered by hand (include courier)

Upon 15 days after the date of confirmation of the return receipt if delivered by registered mail.

8.5.1 BINDING

This Agreement is binding for both Parties.

8.6 LANGUAGE

This Agreement signed in quadruplicate originals, with each of equally binding force.

8.7 DAY AND BUSINESS DAY

References to “day” mean the calendar day, “business day” means the date from Monday to Friday.

8.8 HEADINGS

The headings in this Agreement are for convenience only and shall not affect the construction of the Agreement.

8.9 UNSPECIFIED EVENT

The event which is not specified in this Agreement shall be negotiated by both Parties under the law of the PRC.

[SIGNATURE PAGE]

Party A: Hebei Chuanglian Finance Leasing Co., Ltd. （ seal ）

Authorized Representative （ signature ） :

Party B: Hebei Yarui Trading Co., Ltd. （ seal ）

Authorized Representative （ signature ） :

Exhibit 4.12

SERVICES AGREEMENT

This Agreement is made on the 23rd day of December, 2016, at Shijiazhuang, the People’s Republic of China (the “PRC”) by and among the following parties:

Hebei Chuanglian Finance Leasing Co., Ltd. ( “ Party A ”)

Registered Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Legal representative: Geng Juncai

Hebei Kaiyuan Yarui Trading Co., Ltd. (“ Party B ”)

Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Legal representative: Li Mingxia

WHEREAS:

1. Party A, a wholly foreign owned enterprise organized and existing under the laws of PRC. (For the purpose of this Agreement, excluded Hong Kong, Macau and Taiwan, hereinafter “PRC”)

3. Party A agrees to provide the services in relation to management of the 4S Stores to Party B; Party B agrees to accept the services hereunder.

NOW THEREFORE , through mutual consultations, the Parties have reached the following agreement:

1. MANAGEMENT SERVICES: EXCLUSIVE RIGHTS AND BENEFITS

1.1 Party A agrees to under the conditions herein provide relevant management services to Party B during the term of this Agreement. (the content of the services set forth in schedule 1.)

1.2 Party B hereby agrees to accept the manage services provided by Party A, and further agrees, he will not accept the manage services aforesaid from any third party without the prior written consent of Party A during the term of this Agreement.

1.3 Party A shall be entitle to possess the monopolistic and exclusive rights and benefits of any rights, title, beneficial interests and intelligence property (including but not limited to copyright, patent right, know-how, commercial secret and any other similar right) in accordance with the performance of this Agreement regardless of the resource of the intelligence property.

1.4 Party B covenants to give Party A or its Affiliates the right of first refusal under the comparable circumstance provides he desire to cooperate with any other enterprise in any business.

2. OBLIGATIONS

2.1 OBLIGATIONS OF PARTY A

Party A agrees to provide the management services to Party B pursuant to this Agreement timely during the term of this Agreement.

2.2 OBLIGATIONS OF PARTY B

2.2.1 Party B agrees to pay the management services charges (hereinafter “Services Charges”) timely by the way specified in schedule 2.

2.2.2 Party B shall accept and employ the management services provided by Party A in an appropriate and reasonable way.

2.2.3 Party B shall notify Party A in no delay provides the occurrence of events which will affect the ordinary operation of Party B.

2.2.4 Party B hereby authorizes Party A or any person designated by Party A the right to enter the offices or any other business premises of Party B in the reasonable time.

2.2.5 Party B shall not, and shall urge any third party not take actions that will affect adversely the know-how or intelligence property which is provided by Party A under this Agreement.

2.2.6 Party B shall be liable for the obtainment of all the relevant approvals and permissions acquired from the government (if need) in favor of the performance of Party A.

3. REPRESENTATIONS AND WARRANTIES

3.1 Party A hereby represents and warrants as follows:

3.1.1 Party A is a lawful company registered and existing under the laws of the PRC.

3.1.2 Party A has the authority to execute and perform this Agreement without further approval of any other person or governmental entity, no violation of any applicable laws or binding agreements.

3.1.3 In the event of execution this Agreement constitutes a lawful, valid, binding and enforceable obligation to Party A.

3.2 Party B hereby represents and warrants as follows:

3.2.1 Party B is a lawful company registered and existing under the laws of the PRC

3.2.2 Party B has the authority to execute and perform this Agreement without further approval of any other person or governmental entity, no violation of any applicable laws or binding agreements.

3.2.3 In the event of execution this Agreement constitutes a lawful, valid, binding and enforceable obligation to Party B.

4. CONFIDENTIALITY

4.1 Party B agrees that it will hold all of the confidential data and information (hereinafter “Confidential Information”) in strict confidence, Party B shall not, either during or after the term of this Agreement, disclose, sell or assign to any third party any information without the prior written consent of Party A. In the event of termination, Party B shall, on Party A’s request, return or delete any and all copies of files, data or software which be used as carrier of the confidential information. Disclosure of any Confidential Information by any staff member, agent or consulter hired by Party B shall constitute a disclosure and Party B shall be liable for a breach of this Agreement.

4.2 Said restrictions shall not apply to any Confidential Information which:

4.2.1 Is publicity known at the time of disclosure;

4.2.2 Becomes publicity known, after such disclosure, otherwise than through a breach of this undertaking by Party B;

4.2.3 Can be proved by Party B that it takes it in a proper way , and not take it from Party A , its affiliates or stockholders directly or indirectly;

4.2.4 Is required to be disclosed to government authorities or stock exchanges in accordance with applicable law, stock exchange regulations; or Party B may provide such information to its legal consultant or financial consultant, due to ordinary course of business. However, Party B has to ensure that such legal consultant or financial consultant will follow this Clause on the Confidential Information.

4.3 This term shall survive the termination of this Agreement.

5. BREACH OF CONTRACT

5.1 The violation of any provisions of this Agreement, or fail to perform the obligations under this Agreement promptly by Party B shall be deemed as breach of contract. In that case Party A may notify Party B in writing, and require Party B to redeem its responsibilities, minimize the impact of the breach and be liable for any claims for damages pursuant to the applicable laws and specifications under this Agreement.

5.2 In the event of non-performance by Party B, subject to his reasonable and objective judgment, Party A shall notify Party B in writing to terminate its performance hereunder temporarily in consideration of impossible or unfair for its performance, until Party B cancel the non-performance, take necessary steps to cure the negative consequence and indemnified the damages according to applicable laws and specifications under this Agreement.

5.3 Party B shall protect, defend, indemnify and hold harmless Party A from and against any and all losses, damages, liabilities, fees and expenses arising from any and all litigation, claim or other request that incurs by reason of or in connection with the management services required by Party B.

5.4 Party B shall be liable for the direct loss, foreseeable indirect loss and the relevant fees, including without limitation attorneys’ fees, litigation fees and travel and lodging fees.

6. EFFECTIVENESS AND TERM

6.1 This Agreement shall expire in 10 years following the date first above written unless terminated earlier in accordance with the provisions specified in this Agreement or any other relevant agreement signed by Parties.

6.2 The term of this Agreement may be extended for successive ten-year periods without prior written notice of the Party A at the expiration of the Agreement.

7. TERMINATION

7.1 This Agreement will terminate at the expiration unless renewed pursuant to the relevant provision hereunder.

7.2 This Agreement shall not be terminated by Party B during the term, but Party A can terminate this Agreement at any time without cause, by giving 30 day’s prior written notice to Party B. In the event that this Agreement is early terminated by Party A as a result of Party B’s conduct or cause, the Party B shall indemnify any and all losses incurred by Party A and pay the charges in connected with the services rendered.

7.3 Notwithstanding termination, the rights and obligations under the Clause 4 and Clause 5 shall continue in force.

8. SETTLEMENT OF DISPUTE

8.1 In the event of any dispute with respect to or in connection with the construction and performance of the provisions of this Agreement, the Parties shall first negotiate in good faith to resolve the dispute. In the event the Parties fail to reach an agreement on the resolution of such a dispute, any Party may submit the relevant dispute to China International Economic and Trade Arbitration Commission in Shijiazhuang for binding arbitration. The languages used during arbitration shall be Chinese. The arbitration shall be final and binding on Parties.

8.2 The Parties shall in good faith in all other respects continue their implementation of this Agreement except issues in dispute by Parties.

9. FORCE MAJEURE

9.1 The term “Force Majeure” means any event or circumstance which is beyond a Party’s reasonable control and such Party could not reasonably have avoid or overcome, including but not limitation, government, acts of God, fire, explosion, hurricane, flood, earthquake, tide, bolt or war. However, the inadequacy of capital, credit or finance shall not be deemed as the event or circumstance beyond reasonable control. Upon occurrence of any Force Majeure event, the Party affected shall promptly notify the other Parties and tell him the necessary steps of implement.

9.2 If any Party is prevented by said Force Majeure event from performing its obligations specified in this Agreement, he will exempt from responsibility for performance to the extent delay or prevention. The Party that encounters and event of Force Majeure must take appropriate actions to reduce to the minimum the influence of this event and use its best efforts to recover the performance.

10. NOTICES

All notices and other communications given or made pursuant hereto shall be in writing in Chinese and deliverer to the address as specified below by personally delivery, registered mail pre-paid post, courier or facsimile transmission.

Party A: Hebei Chuanglian Finance Leasing Co., Ltd.

Address: 5 East Main Street, 27th Floor, Shijiazhuang

Facsimile: 0311-83819636

Telephone: 0311-83827688

Attention: Geng Juncai

Party B: Hebei Yarui Trading Co., Ltd.

Address: 5 East Main Street, 27th Floor, Shijiazhuang

Facsimile: 0311-83819636

Telephone: 0311-83827688

Attention: Li Mingxia

11. ASSIGNMENT

The rights and obligations hereunder shall not be assigned by Party B to any other party without Party A’s written consent. Party A has the right to assign the rights and obligations hereunder to any third party subject to deliver a notice to Party B.

12. SEVERABILITY

If any term or provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of law, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect.

13. AMENDMENT AND SUPPLEMENTARY

No amendment, supplementary or modification of this Agreement shall occur except in writing. The amendment agreement and supplementary agreement that have been signed and sealed by the Parties shall be seemed as a integrate part of this Agreement and have the same validity as this Agreement.

14. WAIVER

Subject to otherwise specified herein, no delay or omission by any Party in exercising the right, power or privilege hereunder shall be deemed as a waiver of such right, power or privilege. The single or partial exercise of any right, power or privilege shall not preclude any exercise of any other right, power or privilege.

15. GOVERNING LAW

The application, including without limitation, execution, effectiveness, performance, construction of this Agreement shall be governed by the laws of the PRC.

16. COUNTERPARTS

This Agreement signed in quadruplicate originals, with each of equally binding force.

IN WITNESS WHEREOF , the parties have duly executed this Agreement as of the date first written above.

[SIGNATURE PAGE]

Party A: Hebei Chuanglian Finance Leasing Co., Ltd. （ seal ）

Authorized Representative （ signature ） :

Party B: Hebei Yarui Trading Co., Ltd. （ seal ）

Authorized Representative （ signature ） :

SCHEDULE

1. THE CONTENT OF SERVICE

2. THE CALCULATION AND PAYMENT OF SERVICE FEES

SCHEDULE 1

THE CONTENT OF SERVICE

Service Species		Service Content
Marketing Innovation and Management Standardization		1. Establishment of 4S sale mode 2. Constitute sale price strategy 3. Market analysis 4. Demand analysis 5. Subdivision of sale market 6. Organize sale procedure 7. Constitute sale and marketing strategy 8. E-business and network marketing 9. Sales promotion and advertise 10. Sales force construction and management 11. Standardization of sale management 12. PDI standardization 13. Standardize credit service 14. Standardize car insurance service 15. Standardize car purchase procedure 16. Construct better sale service 17. Manage sale manager

Accessory Management		1. Standardize accessory management system 2. Standardize purchase management system 3. Standardize accessory transportation management 4. Standardize accessory supply management 5. Constitute accessory pricing strategy 6. Standardize warehouse management 7. Sale innovation 8. Guarantee compensation management

After-sale Service Innovation and Management		1. Customer relationship management 2. Service strategy of 4S store 3. Construct customer management system 4. Standardize after-sale service management system 5. Maintenance service management 6. Formulate maintenance price 7. Supervise and manage maintenance quality 8. Safety maintenance management system

		9. Construct maintenance professional and integrity ethics 10. Contract management of after-sale service 11. Complaint handling 12. After-sale service for special costumer 13. Job responsibility of staff 14. Costumer reception skill 15. Image construction of maintenance station 16. Managerial art of costumer manager 17. Admin Office management

Information Feedback Innovation and Management		1. Quality information feedback 2. Demand information feedback 3. Competitive information feedback 4. Sale information feedback 5. Construct and perfect the feedback platform 6. Information feedback management 7. Promote car sale by information feedback

Used-car Transaction Innovation and Management		1. Innovation for used-car management 2. Used-car inspection management 3. Standardize used-car assessment management 4. Used-car transaction standardization

Human Resource management and salesman training		1. Job arrangement and analysis 2. Human Resource Planning 3. Staff performance management 4. Staff payment management 5. Sale skill training 6. Costumer car purchase analysis 7. Actual sale training for staff

Other Matters		1. Implement International Quality Certificate System 2. Standardize finance management system

SCHEDULE 2

THE CALCULATION AND PAYMENT OF SERVICE FEES

In consideration of Party A’s performance, Party B shall pay Party A service fee that equal to_____% to _____% of the sales income on yearly basis. The specific ratio (the scope from _____% to_____%) is based on the performance of Party A, and calculates in yearly. The fees in connection with other management and consultant service required by Party B, would be negotiated by both parties. In consideration of the future development of Party B, both parties agree that Party B shall retain the cash and cash equivalent equal no less than RMB, _____ (hereinafter “The Lowest Cashflow”). In each year, if Party B cannot satisfy The Lowest Cashflow after the payment of the services fee to Party A, Party B shall pay Party A the service fees up to The Lowest Cashflow, the payment of the remaining unpaid portion shall be deferred to the next year together with the service fee of the next year. In the event Party B still cannot satisfy the requirement, Party A is entitled to reduce the current year’s service fees to at least RMB .

Exhibit 4.13

VOTING AGREEMENT

This Voting Attorney Agreement (hereinafter “Agreement”) is made on the 23rd day of December, 2016, at Shijiazhuang, the People’s Republic of China (the “PRC”) by and among the following parties:

Hebei Chuanglian Finance Leasing Co., Ltd. ( “ Party A ”)

Registered Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Legal representative: Geng Juncai

Hebei Yarui Trading Co., Ltd. (“ Party B ”)

Registered Address: 5 East Main Street, 27 th Floor, Shijiazhuang

Legal representative: Li Mingxia

(Party A hereinafter “WFOE”, Party B, hereinafter “Grantor”. WFOE and Grantor are hereinafter referred to as, individually, a “Party”, and collectively, the “Parties”.)

WHEREAS:

1. Party A, a wholly foreign owned enterprise organized and existing under the laws of the PRC within the jurisdiction of the PRC; (for the purpose of this Agreement, excluded Hong Kong , Macau and Taiwan, hereinafter “PRC”).

2. Party B, a limited liability company registered and existing under the laws of PRC; with registered capital of 20 million RMB. Hold the ownership 【 within the jurisdiction of china 】 of Hebei Xuhua Trading Co., Ltd (hereinafter “Domestic Company”)

3. Grantor desires to grant a power of attorney to the WFOE (via the person designated by it) to vote for its entire shares of Domestic Company’s voting stock in the shareholder meeting.

NOW THEREFORE , the Parties have reached the following agreements:

1 ． VOTING RIGHT

1.1 Grantor has irrevocably agreed to grant any and all voting right to the WFOE to vote for its entire shares of Domestic Company’s voting stock in the shareholder meeting under the PRC law and the Domestic Company’s constitutional documents (“Voting Right”) during the term of this Agreement. The Voting Right mentioned above include, without limitation ,the rights set forth as below:

1.1.1 Determining the Domestic Company’s operational policies and investment plans;

1.1.2 Electing and replacing directors of the Domestic Company, and deciding their remunerations;

1.1.3 Electing and replacing members of the board of supervisors of the Domestic Company, and deciding their remunerations;

1.1.4 Reviewing and approving any and all reports provided by the board of directors of the Domestic Company;

1.1.5 Reviewing and approving any and all reports provided by the board of supervisors of the Domestic Company;

1.1.6 Reviewing and approving annual financial budget plans and final accounting plans of the Domestic Company;

1.1.7 Reviewing and approving profit distribution plans and plans to cover company losses of the Domestic Company;

1.1.8 Adopting resolutions regarding increase or decrease of registered capital by the Domestic Company;

1.1.9 Adopting resolutions on the issue of bonds by the Domestic Company;

1.1.10 Adopting resolutions on merger, division, restructure, termination and liquidation of the Domestic Company;

1.1.11 Determining the alteration of the business scope of the Domestic Company;

1.1.12 Amending the articles of association and bylaws of the corporation of the Domestic Company;

1.1.13 Determining the material alteration of the content and nature of business of the Domestic Company;

1.1.14 Determining the dividend and other contribution policies of the Domestic Company;

1.1.15 Determining to enter into loan arrangements with any third party for borrowings or incur any indebtedness from any third party under the name of the Domestic Company;

1.1.16 Determining to sell, transfer or dispose otherwise any assets or rights including but not limited to intellectual property of the Domestic Company to any third party;

1.1.17 Determining to create any encumbrance on the assets of the Domestic Company (tangible or intangible), irrespective of the purpose of this encumbrance;

1.1.18 Determining to assign any contract or agreement which the Domestic Company is one of the Parties to any third party;

1.1.19 Determining to offer any loans by the Domestic Company to any third party; and

1.1.20 Determining any other event which may impact materially to any rights, obligations, assets or business of the Domestic Company.

1.2 The WFOE shall appoint one (1) nature person to exercise the voting rights specified in this Agreement. Concurrently with appointing the natural person, the WFOE shall notify the Grantor, and the Grantor shall deliver a Power of Attorney (“POA”) as set forth in Schedule 1. The Grantor shall not revoke the POA other than required by the WFOE with a written notice. The Grantor shall execute and deliver a new POA to the effect of withdrawing the authorization with respect to the representative of the Attorney in the POA and designating the new representative as the attorney.

1.3 Grantor covenants that, it will not execute any loan contract with an value exceeding RMB1,000,000 without the prior written consent of the WFOE. (whether Domestic Company is lender or borrower)

1.4 The WFOE hereby agrees that it will accept the power of attorney granted by Grantor pursuant to Section 1.1, and will exercise the voting right on its behalf in accordance with the terms and conditions of this Agreement.

1.5 Grantor hereby appoints the WFOE irrevocably as its attorney in fact to exercise all the rights of signature and seal in any and all corporation documents as the shareholders of the Domestic Company.

2. EXERCISE VOTING RIGHT

2.1 The Grantor shall execute any relevant shareholder’s resolution of the Domestic Company or any other similar documents on the request of the WFOE in connection with any event which authorized the WFOE to approve by exercising the voting right.

2.2 Grantor hereby acknowledges that, the WFOE has the right to grant any right hereunder to any third Party as representative without the consent of Grantor subject to notify this event to Grantor immediately.

2.3 The WFOE shall notify to the Grantor for the exercising of voting right at any appropriate time, and shall report the Grantor the consequence on exercising of voting rights at the time the Agreement is terminated.

2.4 The WFOE may assign or transfer any or all of its voting rights to any third Party without the consent of Grantor subject to delivering a written notice to the Grantor for the assignment.

3. TERM OF PROXY

3.1 The term of proxy hereunder shall be counted from the date of effectiveness of this Agreement to (i) the date of accomplishment of assignment( the definition set forth as below) or (ii) the date of the termination of the Domestic Company (the earlier shall prevail). “The Date of Accomplishment of Assignment” means the date when the Domestic Company accomplished the registration of alter and the WFOE or the person designated by the WFOE becomes the legal owner of the equity interests of the Domestic Company.

3.2 Subject to mutual agreement and expressly made in written, both Parties of this Agreement may modify the expiration of the proxy.

4. COMISSION OF ATTORNEY

4.1 The WFOE hereby agrees that the Grantor have no obligation to pay the WFOE for its service to act for proxy.

5. REPRESENTATIONS AND WARRANTIES

5.1 The Parties hereby represents and warrants to each other as follows:

5.1.1 The Party has full power, and qualification to enter into this Agreement;

5.1.2 The Party have the competence to perform its obligations hereunder; and

5.1.3 The performance of obligations hereunder will not conflict with or violate any law, statute, rule, regulation and order applicable to such party.

5.2 In the event of execution, this Agreement constitutes a legal, valid and binding obligation of each Party, enforceable against it in accordance with its terms.

6. REMEDIES

6.1 In the event that Grantor make any breach of the provisions hereunder directly or indirectly or not carry out any obligation hereunder promptly and good shall be deemed as breach of contract, given the written notices the WFOE have the right to require the Grantor to correct its conducts of breach or non-performance, and take good, promptly and effectively action to eliminate the consequences in connection with the breach and non-performance aforesaid, and cover the damages of the WFOE.

6.2 Subject to the reasonable, objective judgment of the WFOE, in the event that the breach of contract will make the performance of the WFOE impossible or unfair, the WFOE may notify the Grantor in writing to pause the performance temporarily until the Grantor ceased his breach and took prompt, good measures to eliminate the consequences and give indemnity to the WFOE for its damages.

6.3 Subject to otherwise expressly specified herein, the payable damages caused by the breach of contract for Grantor shall includes the indirect losses, any anticipatable consequential damages and any other costs and expenses in connection with the non-performance, including without limitation the attorney fees, litigation fees, arbitration fees, finance expenses and traveling expenses.

7. EFFECTIVENESS, MODIFICATION AND TERMINATION

7.1 This Agreement shall be effective from the signature date of this Agreement and terminate on and before the expiration of the duration of attorney hereunder.

7.2 Prior to the expiration of this Agreement, the Grantor will relief its obligations bound by this Agreement, upon the completion of transferring its entire equity interests of the Domestic Company to the WFOE or any third party designated by the WFOE.

7.3 Grantor hereby irrevocably and permanently waives his power of termination.

7.4 No amendment, supplementary or modification of this Agreement shall occur except in written consent by both Parties. The amend agreement and supplementary agreement (if any) that have been signed and sealed by the Parties shall constitute an integrate part hereof and have the same validity as this Agreement.

7.5 Grantor agrees, the WFOE have the right to terminate this Agreement with ten (10) days prior written notices, without given any cause, and shall not be liable for any remedies. However, the Grantor shall not terminate this Agreement prior to expiry in any reason without the prior written approval.

7.6 Any earlier termination hereof shall not affect any of rights and obligations undertaken by any Party before the date of termination under this Agreement.

8. GOVERNING LAW AND SETTLEMENT OF DISPUTES

8.1 The execution, effectiveness, performance, construction and settlement of disputes shall be governed by the laws of the PRC without regard to conflict of laws principles.

8.2 In the event of any dispute with respect to or in connection with the construction and performance of the provisions of this Agreement, the Parties shall first negotiate in good faith to resolve the dispute. In the event the Parties fail to resolve the dispute through the methods above-mentioned within sixty(60) days or longer term otherwise specified by Parties after the any Party’s notice in writing for resolution of the dispute, any Party may submit the relevant dispute to China International Economic and Trade Arbitration Commission in Shijiazhuang for binding arbitration. The languages used during arbitration shall be Chinese. The arbitration shall be final and binding on Parties.

9. MISCELLANEOUS

9.1 The headings in this Agreement are for convenience only and shall not affect the construction of the Agreement.

9.2 If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of law or any other reason, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto will negotiate in good faith to modify this Agreement.

9.3 The breach of any or all provisions under this Agreement shall not affect the rights and obligations hereunder or in connection with any other relevant agreements as well as the performance hereof or thereof.

9.4 No delay or omission by any Party in exercising the right, power or privilege hereunder shall be deemed as a waiver of such right, power or privilege. The single or partial exercise of any right, power or privilege shall not preclude any exercise of any other right, power or privilege.

9.5 This Agreement constitutes the entire agreement of the parties and supersedes all prior agreements and undertakings, both written and oral, between the parties with respect to the subject matter hereof.

9.6 This Agreement is binding on each party's successors and permitted assignees.

9.7 This Agreement signed in quadruplicate originals, with each of equally binding force.

IN WITNESS WHEREOF , the parties have duly executed this Agreement as of the date first written above.

[SIGNATURE PAGE]

Party A: Hebei Chuanglian Finance Leasing Co., Ltd. （ seal ）

Authorized representative （ signature ） :

Party B: Hebei Yarui Trading Co., Ltd. （ seal ）

Authorized representative （ signature ） :

SCHEDULE 1

POWER OF ATTORNEY

Party A ： Hebei Yarui Trading Co., Ltd.

Party B ： Hebei Chuanglian Finance Leasing Co., Ltd.

This POWER OF ATTORNEY ( hereinafter “POA”) is made on the 23rd day of December, 2016, at Shijiazhuang, the People’s Republic of China.

Party A, hereby irrevocably and to the fullest extent permitted by law Geng Juncai as its proxy, with full power of substitution, to the full extent of Party A’s rights with respect to his or her entire equity interest in Hebei Xuhua Trading Co., Ltd.

This POA shall be irrevocably revoked in the event that Party B dismiss and replace the representative with written notice. Party A shall withdraw the authorization immediately and give another POA to the representative designated by Party B.

This attorney appointed by this POA is empowered, and may exercise this POA, to vote all of the Equity Interest in accordance with the prior written instruction of Attorney at any time until the termination of the Agreement, at any meetings or in any other circumstances upon which the vote or other action of the holders of the Equity Interest is sought.

This POA shall be effective for a period of ten (10) year from the signature date of this POA subject to the Voting Proxy Agreement executed between Party A and Party B be terminated in any reason during this term.

[SIGNATURE PAGE]

Party A: Hebei Yarui Trading Co., Ltd. （ seal ）

Authorized Representative （ signature ） :

Party B: Hebei Chuanglian Finance Leasing Co., Ltd. （ seal ）

Authorized Representative （ signature ） :

Exhibit 8.1

LIST OF SUBSIDIARIES

COMMERCIAL VEHICLE SALES AND FINANCING BUSINESS

1. Hebei Shijie Kaiyuan Logistics Co., Ltd. 河北世捷开元物流有限公司 (“Kaiyuan Logistics”)

2. Hebei Chuanglian Finance Leasing Co., Ltd. 河北创联融资租赁有限公司 (“Chuanglian”)

3. Ganglian Finance Leasing Co., Ltd. 港联融资租赁有限公司 (“Ganglian Finance Leasing”)

INTERNET-BASED BUSINESS

1. Hebei Remittance Guarantee Co., Ltd. 河北汇通非融资性担保有限公司 (“Hebei Remittance”)

2. Chuang Jin World Investment Co., Ltd. 创金天地投资有限公司 (“Chuang Jin World”)

3. Beijing One Auto Technology Co., Ltd. 北京壹号车科技有限公司 (“Beijing One Auto Technology”)

4. Dian Fu Bao Investment Co., Ltd. 垫富宝投资有限公司 (“Dian Fu Bao Investment”)

5. Easy Technology Co., Ltd. 轻易科技有限公司 (“Easy Technology Limited”)

6. Shenzhen Kaiyuan Financial Services Co., Ltd. 深圳世捷开元金融服务有限公司 (“Shenzhen Kaiyuan Financial Services”)

7. Shenzhen Kaiyuan Inclusive Financial Services Co., Ltd. 深圳开元普惠金融服务有限公司 (“Shenzhen Kaiyuan Inclusive Financial Services”)

8. Shijie Kaiyuan Auto Trade Co., Ltd. 河北世捷开元汽车贸易有限公司 (“Kaiyuan Auto Trade”)

9. Hebei Xuhua Trading Co., Ltd. 河北旭华贸易有限公司 (“Hebei Xuhua Trading”)

PROPERTY LEASE AND MANAGEMENT BUSINESS

1. Hebei Ruiliang Trading Co., Ltd. 河北瑞良商贸有限公司 (“Hebei Ruiliang Trading”)

2. Hebei Ruiliang Property Services Co., Ltd. 轻易科技有限公司 (“Hebei Ruiliang Property Services”)

3. Hebei Anyong Trading Co., Ltd河北安勇贸易有限公司 (“Hebei Anyong Trading”)

4. Hebei Ruijie Hotel Management Co., Ltd河北瑞捷酒店管理有限公司 (“Hebei Ruijie Hotel Management”)

INVESTMENT HOLDING COMPANIES

1. Fancy Think Limited (“Fancy Think”)

2. AutoChina Group Inc. (“ACG”)

3. Heat Planet Holdings Limited (“Heat Planet”)

4. Eastern Eagle International Ltd.(“Eastern Eagle”)

5. Hebei Xuwei Trading Co., Ltd. 河北旭威贸易有限公司 (“Hebei Xuwei Trading”)

Exhibit 12.1

Certification

Pursuant to Rule 13a-14(a) of the Exchange Act

I, Yong Hui Li, certify that:

I have reviewed this annual report on Form 20-F of Fincera Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: May 1, 2017

	By:	/s/ Yong Hui Li
		Yong Hui Li
		Chief Executive Officer and Chairman
		(Principal Executive Officer)

Exhibit 12.2

Certification

Pursuant to Rule 13a-14(a) of the Exchange Act

I, Jason Wang, certify that:

I have reviewed this annual report on Form 20-F of Fincera Inc.;

(a)

(b)

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: May 1, 2017

	By:	/s/ Jason Wang
		Jason Wang
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Exhibit 13

Certification

Pursuant to 18 U.S.C. Section 1350

Pursuant to U.S.C. Section 1350 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Fincera Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Annual Report of the Company on Form 20-F for the year ended December 31, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.

This certification is not deemed filed pursuant to the Securities Exchange Act of 1934, as amended, and does not constitute a part of the Annual Report of the Company on Form 20-F for the period ending December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof.

Date: May 1, 2017

	By:	/s/ Yong Hui Li
		Yong Hui Li
		Chief Executive Officer and Chairman
		(Principal Executive Officer)

Date: May 1, 2017

	By:	/s/ Jason Wang
		Jason Wang
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Exhibit 15.1

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM'S CONSENT

We consent to the incorporation by reference in the Registration Statement of Fincera Inc. on Form S-8 (File No. 333-170786) of our report dated May 1, 2017, with respect to our audits of the consolidated financial statements of Fincera Inc. and Subsidiaries as of December 31, 2016 and 2015 and for the years ended December 31, 2016, 2015 and 2014 and our report dated May 1, 2017 with respect to our audit of the effectiveness of internal control over financial reporting of Fincera Inc. and Subsidiaries as of December 31, 2016, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013, which reports are included in this Annual Report on Form 20-F of Fincera Inc. for the year ended December 31, 2016.

/s/ Marcum Bernstein & Pinchuk LLP

Marcum Bernstein & Pinchuk LLP

Guangzhou, China

May 1, 2017