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ReTo Eco-Solutions, Inc. Announces Second Half and Full Year 2017 Financial Results

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ReTo Eco-Solutions, Inc. (NASDAQ:RETO) ("ReTo" or the "Company"), a
manufacturer and distributor of eco-friendly construction materials as
well as equipment used for the production of these eco-friendly
construction materials, and consultation, design, project implementation
and construction of urban ecological environments including those for
the purpose of capturing, controlling and reusing rainwater, commonly
called "sponge cities", today announced its financial results for the
six and twelve months ended December 31, 2017.

Second Half 2017 Financial Highlights (all comparisons to prior
year unless noted)

      For the Six Months Ended December 31,
($ millions, except per share data) 2017     2016     % Change
Revenues $20.6 $18.9 8.6%
Gross profit $10.4 $7.8 34.0%
Gross margin 50.7% 41.1% 9.6 percentage points
Operating income $6.0 $4.1 47.9%
Operating margin 29.3% 21.5% 7.8 percentage points
Net income attributable to RETO $3.3 $1.8 85.3%
Diluted earnings per share $0.20     $0.10     86.7%
  • Revenues increased by 8.6% to $20.6 million primarily due to increases
    in sales for construction materials and technological consulting and
    other services and partially offset by decrease in sales of machinery
    and equipment.
  • Gross profit increased by 34.0% to $10.4 million while gross margin
    increased by 9.6 percentage points to 50.7%.
  • Operating income increased by 47.9% to $6.0 million and operating
    margin increased by 7.8 percentage points to 29.3%
  • Net income was $3.3 million, or $0.20 per basic and diluted share, for
    the second half of 2017, compared to $1.8 million, or $0.10 per basic
    and diluted share, for the same period of the prior year.

Full Year 2017 Financial Highlights

      For the Twelve Months Ended December 31,
($ millions, except per share data) 2017     2016     % Change
Revenues $35.6 $32.4 9.6%
Gross profit $18.0 $14.2 26.9%
Gross margin 50.5% 43.6% 6.9 percentage points
Operating income $10.3 $8.2 25.2%
Operating margin 28.8% 25.3% 3.6 percentage points
Net income attributable to RETO $6.0 $4.1 45.7%
Diluted earnings per share $0.35     $0.25     39.2%
  • Revenues increased by 9.6% to $35.6 million. The increase in revenues
    was across all four business segments.
  • Gross profit increased by 26.9% to $18.0 million while gross margin
    increased by 6.9 percentage points to 50.5%.
  • Operating income increased by 25.2% to $10.3 million and operating
    margin increased by 3.6 percentage points to 28.8%
  • Net income was $6.0 million, or $0.35 per basic and diluted share, for
    2017, compared to $4.1 million, or $0.25 per basic and diluted share,
    for 2016.

"We are very pleased to report strong financial results for the year of
2017 with revenues growing by 9.6% to $35.6 million and net income
attributable to ReTo increasing by 45.7% to $6.0 million, respectively,
both were record highs since our inception," said Mr. Hengfang Li,
Chairman and Chief Executive Officer of ReTo.

Mr. Li continued, "While 2017 was clearly a banner year for ReTo
highlighted by our successful IPO in November 2017, we expect the growth
momentum to continue in the near future as we continue to increase
market penetration of existing products, develop new products, and
expand our geographical outreach in both domestic and international
markets."

Second Half 2017 Unaudited Financial Results

Revenues

Total revenues increased by $1.6 million, or 8.6%, to $20.6 million for
the second half of 2017 from $18.9 million for the same period of the
prior year. The increase in total revenues was primarily due to
increased sales for construction materials and technological consulting
and other services and partially offset by decrease in sales for
machinery and equipment.

      For the Six Months Ended December 31,
2017     2016

Revenues
($'000)

   

Gross Profit
($'000)

   

Gross Margin
(%)

Revenues
($'000)

   

Gross Profit
($'000)

   

Gross Margin
(%)

Machinery and equipment $ 7,508 $ 3,801 50.6% $ 7,804 $ 5,198 66.6%
Construction materials 11,443 5,602 49.0% 10,582 2,373 22.4%
Municipal construction projects 250 90 36.0% - - -
Technological consulting and other services 1,360 928 68.2% 540 208 38.4%
Total $ 20,562     $ 10,421     50.7%     $ 18,927     $ 7,779     41.1%
 

The machinery and equipment we manufacture mostly consist of large-scale
automatic environmental protection equipment with hydraulic integration,
which can be used to produce various types of eco-friendly construction
materials and meet the needs of various ecological projects. Revenues
from the machinery and equipment segment decreased by $0.3 million, or
3.8%, to $7.5 million for the second half of 2017 from $7.8 million for
the same period of the prior year.

Construction materials are mostly eco-friendly made from mining waste
(iron tailings) and fly-ash and used for ground works, landscaping,
hydraulic engineering projects and wall projects. Revenues from
construction materials increased by $0.9 million, or 8.1%, to $11.4
million for the second half of 2017 from $10.6 million for the same
period of the prior year. The increase in revenues from construction
materials was related to increases in both sales volume and average
selling price.

Municipal construction includes such projects as sponge city projects,
sewage pipeline construction, public plaza construction, and
landscaping. Our environmental-friendly construction materials such as
brick and block may be used in these municipal construction projects as
required by local governments. Revenues from municipal construction
projects were $0.3 million related to one municipal construction project
for the second half of 2017. We did not book revenues from municipal
construction projects in the second half of 2016.

We started to provide environmental-protection related consulting
services to customers in the second half of 2016. Our subsidiaries
Beijing REIT and Dingxuan provided such services to customers by
assisting them in planning the environmental-protection projects,
providing market research and feasibility reports reviewing and
assisting customers to finalize the design, installation, testing and
inspection, as well as providing employee training services. Revenues
from technological consulting and other services increased by $0.8
million, or 151.7%, to $1.4 million for the second half of 2017 from
$0.5 million for the same period of the prior year.

Revenues from machinery and equipment, construction materials, municipal
construction projects and technological consulting and other services
accounted for 36.5%, 55.7%, 1.2%, and 6.6%, respectively, of total
revenues in the second half of 2017, compared to 41.2%, 55.9%, 0, and
2.9%, respectively, of total revenues in the same period of the prior
year.

Cost of goods sold

Total cost of goods sold decreased by $1.0 million, or 9.0%, to $10.1
million for the second half of 2017 from $11.1 million for the same
period of the prior year. The decrease in cost of goods sold was mainly
due to decrease in per unit costs related to our construction materials
business. As a percentage of revenues, total cost of goods sold was
49.3% in the second half of 2017, compared to 58.9% for the same period
of the prior year.

Costs of goods sold for machinery and equipment, construction materials,
municipal construction projects and technological consulting and other
services were $3.7 million, $5.8 million, $0.2 million, and $0.4
million, respectively, for the second half of 2017, compared to $2.6
million, $8.2 million, $0, and $0.3 million, respectively, for the same
period of the prior year.

Gross profit and gross margin

Overall gross profit increased by $2.6 million, or 34.0%, to $10.4
million for the second half of 2017 from $7.8 million for the same
period of the prior year. Gross profits for machinery and equipment,
construction materials, municipal construction projects and
technological consulting and other services were $3.8 million, $5.6
million, $0.1 million, and $0.9 million, respectively, for the second
half of 2017, compared to $5.2 million, $2.4 million, $0, and $0.2
million, respectively, for the same period of the prior year.

Overall gross margin was 50.7% for the second half of 2017, compared to
41.1% for the same period of the prior year. Gross margins for machinery
and equipment, construction materials, municipal construction projects
and technological consulting and other services were 50.6%, 49.0%,
36.0%, and 68.2%, respectively, for the second half of 2017, compared to
66.6%, 22.4%, $0, and 38.4%, respectively, for the same period of the
prior year.

Operating expenses

Selling expenses increased by $0.2 million, or 15.8%, to $1.2 million
for the second half of 2017 from $1.0 million for the same period of the
prior year. The increase in selling expenses was mainly due to higher
sales commission and increased marketing expenses in the second half of
2017. As a percentage of revenues, selling expenses were 5.8% for the
second half of 2017, compared to 5.5% for the same period of the prior
year.

General and administrative expenses increased by $0.5 million, or 21.1%,
to $2.9 million for the second half of 2017 from $2.4 million for the
same period of the prior year. The increase in general and
administrative expenses was mainly due to higher bad debt expense
incurred in the second half of 2017. As a percentage of revenues,
general and administrative expenses were 13.9% for the second half of
2017, compared to 12.5% for the same period of the prior year.

Research and development expenses increased by $32,321, or 10.3%, to
$0.35 million for the second half of 2017 from $0.31 million for the
same period of the prior year. As a percentage of revenues, research and
development expenses were 1.7% for the second half of 2017 and 2016.

Total operating expenses increased by $0.7 million, or 18.7%, to $4.4
million for the second half of 2017 from $3.7 million for the same
period of the prior year. As a percentage of revenues, operating
expenses were 21.4% for the second half of 2017, compared to 19.6% for
the same period of the prior year.

Operating income and operating margin

Income from operations increased by $1.9 million, or 47.9%, to $6.0
million for the second half of 2017 from $4.1 million for the same
period of the prior year. Operating margin was 29.3% for the second half
of 2017, compared to 21.5% for the same period of the prior year.

Other income (expenses)

Net other expenses were $0.3 million, including interest expense of $0.4
million and other income of $0.1 million, for the second half of 2017.
As a comparison, net other expenses were $1.0 million, including
interest expense of $0.7 million and other expenses of $0.3 million, for
the same period of the prior year. The decrease of interest expense was
due to less borrowings during the second half of 2017.

Income before income taxes

Income before income taxes increased by $2.7 million, or 89.4%, to $5.7
million for the second half of 2017 from $3.0 million for the same
period of the prior year. The increase was primarily attributable to
increased sales and gross margin and partially offset by the increased
operating expense as discussed above.

Provision for income taxes

Provision for income taxes was $1.9 million for the second half of 2017,
compared to $1.1 million for the same period of the prior year. The
effective tax rates were 33.5% and 36.9% for the second half of 2017 and
2016, respectively.

Net income and EPS

As a result, net income increased by $1.9 million, or 99.6%, to $3.8
million for the second half of 2017 from $1.9 million for the same
period of the prior year. After deducting for non-controlling interest,
net income attributable to RETO was $3.3 million, or $0.20 per basic and
diluted share, for the second half of 2017. This compared to $1.8
million, or $0.10 per basic and diluted share, for the same period of
the prior year.

Full Year 2017 Financial Results

Revenues

Total revenues increased by $3.1 million, or 9.6%, to $35.6 million for
2017 from $32.4 million for 2016. The increase in revenues was across
all four business segments.

      For the Twelve Months Ended December 31,
2017     2016
 

Revenues
($'000)

     

Gross Profit
($'000)

   

Gross Margin
(%)

 

Revenues
($'000)

     

Gross Profit
($'000)

   

Gross Margin
(%)

Machinery and equipment $ 14,485 $ 7,789 53.8% $ 13,167 $ 7,743 58.8%
Construction materials 19,456 9,156 47.1% 18,425 6,091 33.1%
Municipal construction projects 250 90 36.0% - - -
Technological consulting and other services 1,360 928 68.2% 833 318 38.2%
Total $ 35,551     $ 17,962     50.5%     $ 32,424     $ 14,152     43.6%
 

Revenues from the machinery and equipment segment increased by $1.3
million, or 10.0%, to $14.5 million for 2017 from $13.2 million for
2016. We sold 18 production lines and 33 large equipment sets to
customers during 2017, compared to 32 production lines and 20 large
equipment sets sold during 2016.

Revenues from construction materials increased by $1.0 million, or 5.6%,
to $19.5 million for 2017 from $18.4 million for 2016. The increase in
revenues from construction materials was related to increases in both
sales volume and average selling price. We sold approximately 5.0
million square meters of bricks and block during 2017 and 2016,
respectively.

Revenues from municipal construction projects was $0.3 million related
to one municipal construction project for 2017. The Company did not book
revenues from municipal construction projects in 2016.

Revenues from technological consulting and other services increased by
$0.5 million, or 63.2%, to $1.4 million for 2017 from $0.8 million for
2016.

Revenues from machinery and equipment, construction materials, municipal
construction projects and technological consulting and other services
accounted for 40.7%, 54.7%, 0.7%, and 3.8%, respectively, of total
revenues in 2017, compared to 40.6%, 56.8%, $0, and 2.6%, respectively,
of total revenues in 2016.

Cost of goods sold

Total cost of goods sold decreased by $0.7 million, or 3.7%, to $17.6
million for 2017 from $18.3 million for 2016. The decrease in cost of
goods sold was mainly due to decrease in per unit costs related to our
construction materials business. As a percentage of revenues, total cost
of goods sold was 49.5% in 2017, compared to 56.4% for the prior year.

Costs of goods sold for machinery and equipment, construction materials,
municipal construction projects and technological consulting and other
services were $6.7 million, $10.3 million, $0.1 million, and $0.4
million, respectively, in 2017, compared to $5.4 million, $12.3
million,$0, and $0.5 million, respectively, in 2016.

Gross profit and gross margin

Overall gross profit increased by $3.8 million, or 26.9%, to $18.0
million for 2017 from $14.2 million for 2016. Gross profits for
machinery and equipment, construction materials, municipal construction
projects and technological consulting and other services were $7.8
million, $9.2 million, $0.1 million, and $0.9 million, respectively, in
2017, compared to $7.7 million, $6.1 million, $0, and $0.3 million,
respectively, in 2016.

Overall gross margin was 50.5% for 2017, compared to 43.6% for the prior
year. Gross margins for machinery and equipment, construction materials,
municipal construction projects and technological consulting and other
services were 53.8%, 47.1%, 36.0%, and 68.2%, respectively, in 2017,
compared to 58.8%, 33.1%, 0, and 38.2%, respectively, in 2016.

Operating expenses

Selling expenses increased by $0.2 million, or 13.7%, to $1.8 million
for 2017 from $1.6 million for 2016. The increase in selling expenses
was mainly due to higher sales commissions and increased marketing
expenses in 2017. As a percentage of revenues, selling expenses were
5.1% for 2017, compared to 4.9% for the prior year.

General and administrative expenses increased by $1.4 million, or 36.9%,
to $5.3 million for 2017 from $3.9 million for 2016. The increase in
general and administrative expenses was mainly due to higher bad debt
expense incurred in 2017. As a percentage of revenues, general and
administrative expenses were 14.9% for 2017, compared to 12.0% for 2016.

Research and development expenses increased by $0.1 million, or 19.8%,
to $0.6 million for 2017 from $0.5 million for 2016. As a percentage of
revenues, research and development expenses were 1.7% for 2017, compared
to 1.6% for 2016.

Total operating expenses increased by $1.7 million, or 29.3%, to $7.7
million for 2017 from $6.0 million for 2016. As a percentage of
revenues, operating expenses were 21.7% for 2017, compared to 18.4% for
2016.

Operating income and operating margin

Income from operations increased by $2.1 million, or 25.2%, to $10.3
million for 2017 from $8.2 million for 2016. Operating margin was 28.8%
for 2017, compared to 25.3% for 2016.

Other income (expenses)

Net other expenses were $0.8 million, including interest expense of $1.0
million and other income of $0.2 million, for 2017. As a comparison, net
other expenses were $1.7 million, including interest expense of $1.5
million and other expenses of $0.3 million, for 2016. The decrease of
interest expense was due to less borrowings during 2017.

Income before income taxes

Income before income taxes increased by $3.0 million, or 45.7%, to $9.4
million for 2017 from $6.5 million for 2016. The increase was primarily
attributable to increased sales and gross margin and partially offset by
the increased operating expense as discussed above.

Provision for income taxes

Provision for income taxes was $2.8 million for 2017, compared to $2.0
million for 2016. The effective tax rates were 29.3% and 30.2% for 2017
and 2016, respectively.

Net income and EPS

As a result, net income increased by $2.1 million, or 47.6%, to $6.6
million for 2017 from $4.5 million for 2016. After deducting for
non-controlling interest, net income attributable to RETO was $6.0
million, or $0.35 per basic and diluted share, for 2017. This compared
to $4.1 million, or $0.25 per basic and diluted share, for 2016.

Financial Conditions

As of December 31, 2017, we had cash and cash equivalents of $10.9
million and restricted cash of $0, compared to $1.6 million and $0.2
million, respectively, at the end of 2016. Total loan balance was $15.0
million as of December 31, 2017, compared to $16.4 million at the end of
2016. Total working capital was $7.0 million as of December 31, 2017,
versus working capital deficit of $7.0 million at the end of 2016.

Net cash provided by operating activities was $2.5 million for 2017,
compared to $3.9 million for 2016. Net cash used in investing activities
was $7.4 million for 2017, compared to $9.3 million for 2016. During
2017, the Company paid $4.6 million on the construction in progress
projects to build a new factory facility and purchase of equipment for
the Company's subsidiary REIT Xinyi. Net cash provided by financing
activities was $14.2 million for 2017, compared to $6.7 million for 2016.

Recent Developments

In December 2017, we closed our initial public offering ("IPO") of
3,220,000 shares of common shares at a public offering price of $5.00
per share. The gross proceeds from the offering were approximately $16.1
million before deducting placement agent commissions and other offering
expenses, resulting in net proceeds of approximately $14.3 million. In
connection with the offering, the Company's common shares began trading
on the NASDAQ Capital Market beginning on November 29, 2017 under the
symbol "RETO".

About ReTo Eco-Solutions, Inc.

Founded in 1999 and headquartered in Beijing, ReTo is a manufacturer and
distributor of eco-friendly construction materials (aggregates, bricks,
pavers and tiles), made from mining waste (iron tailings) and fly-ash,
as well as equipment used for the production of these eco-friendly
construction materials. The Company also provides a full range of
eco-friendly project solutions, including consultation, design, project
implementation and construction, relating to all stages of sponge-city
projects for customers. The Company's clients are located or have been
located in mainland China, and internationally, including Canada, the
United States, Middle East, India, Maldives North Africa and Brazil.

Notice

Rounding amounts and percentages: Certain amounts and percentages
included in this press release have been rounded for ease of
presentation. Percentage figures included in this press release have not
in all cases been calculated on the basis of such rounded figures, but
on the basis of such amounts prior to rounding. For this reason, certain
percentage amounts in this press release may vary from those obtained by
performing the same calculations using the figures in the financial
statements. In addition, certain other amounts that appear in this press
release may not sum due to rounding.

Forward-Looking Statements

This press release contains forward-looking statements as defined by the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements include statements concerning plans, objectives, goals,
strategies, future events or performance, and underlying assumptions and
other statements that are other than statements of historical facts.
When the Company uses words such as "may," "will," "intend," "should,"
"believe," "expect," "anticipate," "project," "estimate" or similar
expressions that do not relate solely to historical matters, it is
making forward-looking statements. Specifically, the Company's
statements regarding: 1) the Company's continued growth and business
outlook; 2) the Company's ability to increase market penetration of
existing products; 3) the Company's ability to develop new products; and
4) the Company's ability to expand its geographical outreach in domestic
and international markets are forward-looking statements.
Forward-looking statements are not guarantees of future performance and
involve risks and uncertainties that may cause the actual results to
differ materially from the Company's expectations discussed in the
forward-looking statements. These statements are subject to
uncertainties and risks including, but not limited to, the following:
the Company's goals and strategies; the Company's future business
development; product and service demand and acceptance; changes in
technology; economic conditions; the growth of construction in China and
internationally; reputation and brand; the impact of competition and
pricing; government regulations; fluctuations in general economic and
business conditions in China and internationally and assumptions
underlying or related to any of the foregoing and other risks contained
in reports filed by the Company with the Securities and Exchange
Commission. For these reasons, among others, investors are cautioned not
to place undue reliance upon any forward-looking statements in this
press release. Additional factors are discussed in the Company's filings
with the U.S. Securities and Exchange Commission, which are available
for review at www.sec.gov.
The Company undertakes no obligation to publicly revise these
forward-looking statements to reflect events or circumstances that arise
after the date hereof.

         

RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 
December 31, December 31,
2017 2016

ASSETS

Current Assets:
Cash and cash equivalents $ 10,863,040 $ 1,594,594
Restricted cash - 230,400
Accounts receivable, net 18,503,286 15,207,029
Advances to suppliers, net 1,847,637 1,882,408
Inventories 1,611,836 1,308,526
Acquisition deposit - 565,000
Prepaid expenses and other current assets   774,665   356,498
Total Current Assets 33,600,464 21,144,455
 
Property, plant and equipment, net 39,833,280 34,160,330
Intangible assets, net 7,401,550 7,092,370
Other assets - 174,829
Deferred tax assets   296,535   89,015
Total Assets $ 81,131,829 $ 62,660,999
 

LIABILITIES AND EQUITY

 
Current Liabilities:
Short term bank loans, net $ 7,540,381 $ 5,734,666
Long term bank loans-current portion 4,460,524 4,391,260
Bank notes payable - 720,000
Advances from customers 7,078,609 7,924,658
Deferred revenue 520,872 507,200
Accounts payable 2,506,484 4,405,118
Accrued and other liabilities 716,960 915,307
Taxes payable 3,352,512 2,310,902
Due to related parties   375,697   1,199,620
Total Current Liabilities   26,552,039   28,108,731
 
Long term bank loans   2,951,040   6,249,600
Total Liabilities   29,503,079   34,358,331
 
Commitments and Contingencies
 
Equity:
Common Stock, $0.001 par value, 200,000,000 shares authorized,
22,760,000 and 18,640,000 shares issued and outstanding as of
December 31, 2017 and 2016*
22,760 18,640
Additional paid-in capital 42,278,252 23,741,828
Statutory reserve 1,989,475 1,033,524
Accumulated earnings 5,246,950 224,512
Accumulated other comprehensive loss   (216,414 )   (1,728,096 )
Total RETO Eco Solutions Inc. Stockholders' Equity   49,321,023   23,290,408
 
Noncontrolling interest   2,307,727   5,012,260
Total Equity   51,628,750   28,302,668
 
Total Liabilities and Equity $ 81,131,829 $ 62,660,999
 
     

RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 
For the Years ended

December 31,

2017     2016     2015
 
Revenues $ 35,551,016 $ 32,424,269 $ 17,384,373
Cost of goods sold   17,588,738   18,272,017   9,265,313
Gross Profit   17,962,278   14,152,252   8,119,060
 
Operating Expenses
Selling expenses 1,797,926 1,580,825 1,462,144
General and administrative expenses 5,308,079 3,878,709 2,607,846
Research and development expenses   603,445   503,688   458,246
Total Operating Expenses   7,709,450   5,963,222   4,528,236
 
Income from Operations   10,252,828   8,189,030   3,590,824
 
Other Expense:
Interest expense (1,012,960 ) (1,450,389 ) (1,032,329 )
Other income (expense)   166,997   (283,205 )   92,880
Total Other Expense, net   (845,963 )   (1,733,594 )   (939,449 )
 
Income Before Income Taxes 9,406,865 6,455,436 2,651,375
 
Provision for Income Taxes   2,760,080   1,952,356   295,760
 
Net Income 6,646,785 4,503,080 2,355,615
Less: net income attributable to noncontrolling interest   668,396   399,559   41,270
Net income attributable to ReTo Eco-Solutions, Inc. $ 5,978,389 $ 4,103,521 $ 2,314,345
 
Net Income $ 6,646,785 $ 4,503,080 $ 2,355,615
Other Comprehensive Income (loss):
Foreign currency translation income (loss)   2,109,103   (1,699,975 )   (905,144 )
Comprehensive Income 8,755,888 2,803,105 1,450,471
Less: comprehensive income (loss) attributable to noncontrolling
interest
  1,265,817   (26,394 )   (65,195 )
Comprehensive income attributable to ReTo Eco-Solutions, Inc. $ 7,490,071 $ 2,829,499 $ 1,515,666
 
Earnings per share
Basic and diluted $ 0.35 $ 0.25 $ 0.13
 
Weighted average number of shares
Basic and diluted *   19,130,137   18,043,836   17,840,000
 
     

RETO ECO-SOLUTIONS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
For the Years ended
December 31,
2017     2016     2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,646,785 $ 4,503,080 $ 2,355,615
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain from disposal of property and equipment - - (12,598 )
Deferred tax benefit (194,045 ) (44,685 ) (45,448 )
Depreciation and amortization 1,566,739 1,361,260 1,257,220
Bad debt provisions 876,924 1,101,698 311,331
Changes in operating assets:
Accounts receivable (3,174,381 ) (7,451,292 ) (5,353,931 )
Advances to suppliers 198,355 (1,761,639 ) 1,206,987
Inventories (207,182 ) 745,161 353,894
Other assets (320,500 ) 6,281 (15,751 )
Changes in operating liabilities:
Advances from customers (1,328,663 ) 3,028,340 (368,457 )
Deferred revenue (19,733 ) (20,067 ) (21,400 )
Accounts payable (2,113,907 ) 231,012 1,809,758
Billings in excess of costs and estimated earnings - (174,038 ) 65,924
Taxes payable 853,072 2,078,982 420,593
Accrued and other liabilities   (248,546 )   333,863   (105,410 )
Net cash provided by operating activities   2,534,918   3,937,956   1,858,327
 
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from property and equipment disposal - - 17,655
Addition of property, equipment and construction in progress (4,639,003 ) (9,372,067 ) (2,709,343 )
Purchase of intangible assets - (1,681,870 ) -
Deposit made for planned acquisition of minority interest - (565,000 ) -
Acquisition of minority interest (2,735,000 ) - -
Collection (payment) on project deposit   -   2,317,700   (2,471,700 )
Net cash used in investing activities   (7,374,003 )   (9,301,237 )   (5,163,388 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term bank loans 9,767,793 7,597,297 -
Deferred financing costs paid - (98,774 ) -
Proceeds from long-term bank loans - 752,500 5,617,500
Repayment of short-term bank loans (8,244,905 ) (6,772,500 ) (4,250,197 )
Repayment of long-term bank loans (3,799,654 ) (1,962,331 ) (3,624,960 )
Proceeds from (repayment of) bank notes, net (739,984 ) - 802,500
Proceeds received from stock issuance for reorganization - 4,457,500 -
Payments to original shareholders of Beijing REIT - (3,466,260 ) -
Proceeds from investor loan - 3,200,000 -
Gross proceeds from Initial Public Offering – stock issuance 16,100,000 - -
Direct costs disbursed from Initial Public Offering proceeds (1,829,806 ) - -
Proceeds from private placement sale of stock 3,600,000 - -
Proceeds from (repayment of) related party loans, net (854,401 ) 817,495 424,019
Capital contribution from noncontrolling shareholders - 2,218,617 2,912,760
Change in restricted cash, net   236,795   (90,300 )   (160,500 )
Net cash provided by financing activities   14,235,838   6,653,244   1,721,122
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS   (128,307 )   (227,996 )   85,022
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,268,446 1,061,967 (1,498,917 )
 
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR   1,594,594   532,627   2,031,544
 
CASH AND CASH EQUIVALENTS, END OF YEAR $ 10,863,040 $ 1,594,594 $ 532,627
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 997,948 $ 1,430,901 $ 1,237,325
Income tax paid $ 1,903,343 $ 719,479 $ 34,867
 
Non-Cash Financing Activities
Conversion of investor loan to equity $ - $ 3,200,000 $ 3,325,019
Withdrawal of capital by original minority shareholder in REIT
Changjiang
$ - $ - $ (3,325,019 )
 

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