Hebron Technology Co., Ltd. Reports Fiscal Year 2018 Financial Results

WENZHOU, China, May 15, 2019 /PRNewswire/ -- Hebron Technology Co., Ltd. ("Hebron" or the "Company") (Nasdaq: HEBT), a developer, manufacturer and installer of valves and pipe fittings for use in the pharmaceutical, biological, food and beverage, and other clean industries, today announced its financial results for the fiscal year ended December 31, 2018.

Fiscal Year 2018 Financial Highlights


                              
          
          Year ended December 31,              
        
           Changes



                               2018                                 2017                              ($)           (%)



                Revenue             $
        
              25,290,060          $
        
       29,200,445               (3,910,385)   (13)


                                                                                                                           %


     Installation                                    17,297,212                    23,748,141               (6,450,929)   (27)
      service                                                                                                              %


     Fluid equipment                                  7,992,848                     5,452,304                 2,540,544      47
      sales                                                                                                                %




                Gross profit                          7,577,952                    10,444,161               (2,866,209)   (27)


                                                                                                                           %


                (Loss) Income                       (5,329,410)                    3,877,317               (9,206,727)  (238)
                 from
                 operations
                                                                                                                           %


                Net income                          (5,144,715)                    7,136,387              (12,281,102)  (172)


                                                                                                                           %


                Basic and              $
         
              (0.33)             $
       
          0.49                    (0.82)  (167)
                 diluted EPS

                                                                                                                           %

    --  Total revenues decreased by 13.0% to $25.29 million for the twelve
        months ended December 31, 2018.
    --  Operating (loss) income decreased 237.5% to operation loss of $5.3
        million for the twelve months ended December 31, 2018 from operation
        income of $4.07 million for the same period of the prior fiscal year,
        primarily due to bad debt provision of $7.9 million for the twelve
        months ended December 31, 2018.
    --  Net loss was $5.14 million, for the twelve months ended December 31,
        2018, compared to net income of $7.14 million for the same period of the
        prior fiscal year.




                                  
      
     Years ended December 31,         Changes             Changes



                     2018                                  %       2017                %            ($)      (%)



     Installation          6,356,004                            37                9,470,074               40       (3,114,070)   (33)
      service
                                                                %                                       %                       %


     Fluid                 1,221,948                            15                  974,087               18
      equipment                                                                                                                 %
      sales                                                     %                                       %          247,861      25


                  30      36



                                                                                                                                %
     Gross profit          7,577,952                             %              10,444,161                %      (2,886,209)   (27)

Revenues

Total revenues decreased by 13.0% to $25.29 million for the twelve months ended December 31, 2018 mainly due to decreasing installation revenues. Revenue from installation service was $17.30 million for the year ended December 31, 2018, representing a 27% decrease from last year. Due to market competition, the Company had 6 major installation projects in fiscal 2018, comparing to 12 major installation projects in fiscal 2017 although the average individual contract amount increased from $2.0 million in fiscal 2017 to $2.6 million in fiscal 2018. Revenues from fluid equipment sales increased by 47% to $7.99 million for the twelve months ended December 31, 2018 due to increasing valve demands.

Cost of revenues and gross profit

Total cost of revenues decreased by $1.04 million to $17.71 million for the twelve months ended December 31, 2018, mainly due to decrease in the cost of installation service in fiscal 2018. For fiscal 2018, cost of installation service was $10.94 million representing a decrease of $3.3 million from 2017 due to lower installation service revenue, offset by an increase of $2.29 million in cost of fluid equipment sales.

Overall gross profit decreased by 27% or $2.89 million to $7.58 million for the twelve months ended December 31, 2018 from $10.44 million for the same period of the prior fiscal year. is the decrease was primarily due to gross profit from installation sales decreasing 33% in fiscal 2018 as compared to fiscal 2017.

Overall gross profit margin for fiscal 2018 was 30%, decreased from 36% in fiscal 2017. The gross profit margins for both of the Company's installation service and fluid equipment sales decreased by 3% from fiscal 2017.

Operating expenses

Total operating expenses increased by $6.3 million, or 96.6%, to $12.9 million for the twelve months ended December 31, 2018. The significant increase in operating expense was primarily due to $7.7 million increase in bad debt provision, which was offset by a decrease of $0.8 million in selling expense and a $0.4 million decrease in general and administrative expenses.

For fiscal 2018, the Company's general and administrative expenses were $3.30 million, representing an approximate decrease of $0.4 million compared to fiscal 2017. The decrease in general and administrative expenses was mainly due to the Company's lesser professional fees in fiscal 2018.

For fiscal 2018, the Company's research and development ("R&D") expenses were $0.36 million, representing a decrease of $0.15 million from fiscal 2017. The decrease in R&D expense was due to less R&D projects and devices in fiscal year 2018.

For fiscal 2018, the Company's selling expenses were $1.34 million, representing a 39% decrease from fiscal 2017. The decrease was mainly due to less revenue in fiscal 2018.

Operating (loss) income

Operating loss was $5.3 million for twelve months ended December 31, 2018, representing a decrease of 237% from operating income of $4.07 million in fiscal 2017, which was mainly due to less revenue and significant increase in operating expense during fiscal 2018.

Net income

Net loss was $5.14 million for the twelve months ended December 31, 2018, compared to net income of $7.14 million for fiscal 2017.

Financial Condition

As of December 31, 2018, the Company had cash and restricted cash balance of $3.07 million.

Net cash used in operating activities was approximately $0.73 million for the twelve months ended December 31, 2018, compared to net cash used in operating activities of $6.10 million for the same period of the prior fiscal year.

Net cash used in investing activities was approximately $0.12 million for fiscal 2018, compared to approximately $3.13 million for fiscal 2017.

Net cash provided by financing activities was approximately $0.73 million for fiscal 2018, compared to approximately $0.92 million for fiscal 2017.

About Hebron Technology Co., Ltd.

Established in January 2005 and headquartered in Wenzhou City, Zhejiang Province, China, Hebron Technology Co., Ltd. ("Hebron" or the "Company") engages in research, development, and manufacture of highly specialized valves and pipe fitting products for use in the pharmaceutical, biological, food and beverage, and other clean industries. The Company also offers its customers comprehensive pipeline design, installation, construction, and ongoing maintenance services as holistic solution services. For more information about the Company, please visit www.xibolun.com.

Forward-Looking Statements

This press release contains information about Hebron's view of its future expectations, plans and prospects that constitute forward-looking statements. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors including, but not limited to, risks and uncertainties associated with its ability to raise additional funding, its ability to maintain and grow its business, variability of operating results, its ability to maintain and enhance its brand, its development and introduction of new products and services, the successful integration of acquired companies, technologies and assets into its portfolio of products and services, marketing and other business development initiatives, competition in the industry, general government regulation, economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the requirements of its clients, and its ability to protect its intellectual property. Hebron encourages you to review other factors that may affect its future results in Hebron's registration statement and in its other filings with the Securities and Exchange Commission.

HEBRON TECHNOLOGY CO., LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


                                                 December 31,                       December 31,


                                                         2018                                2017



       
              
                ASSETS


                   CURRENT ASSETS:



     Cash                                                           $
         947,588                    $
        3,220,781



     Restricted Cash                                                     2,124,655                             55,322


      Contracts receivable, net                                          24,669,365                         16,904,972


      Accounts receivable, net                                            2,655,845                          1,419,305



     Notes receivable                                                       81,611                            689,171


      Retainage receivables, net                                          3,146,986                          2,564,404



     Inventories                                                           365,480                          1,582,501


      Prepayments and advances to
       suppliers, net                                                     3,568,003                         11,904,107


      Other receivables, net                                                767,681                            240,284


      Prepaid expenses and other
       current assets                                                        94,539



                   TOTAL CURRENT ASSETS                                  38,421,753                         38,580,847




      Property and equipment at cost,
       net of accumulated
       depreciation                                                      12,515,894                         14,588,262


      Land use right, net of
       accumulated amortization                                             969,339                          1,086,148



     Deposits for rent                                                      43,633                             46,101



     Equity investment                                                   3,054,090



     Deferred tax assets                                                 1,648,967                            247,324





                   TOTAL ASSETS                               $
     
           56,653,676               $
     
          54,548,682





                   LIABILITIES AND SHAREHOLDERS'
                                EQUITY


                   CURRENT LIABILITIES:



     Short-term loans                                             $
         1,698,058                      $
        457,940



     Notes Payable                                                       2,117,382                             55,322



     Accounts payable                                                    1,361,687                          1,276,784


      Accrued expenses and other
       current liabilities                                                2,112,472                          1,327,513


      Other loan payable -current                                           177,291                            179,182


      Advances from customers                                             3,131,338                          2,825,215



     Taxes payable                                                       9,085,746                          7,067,593



                   TOTAL CURRENT LIABILITIES                             19,683,974                         13,189,549




      Other loan payable - long-
       term                                                                 212,351                            411,683



     Long-term loans                                                                                         414,912





                   TOTAL LIABILITIES                                     19,896,325                         14,016,144





                   COMMITMENTS AND CONTINGENCIES




                   SHAREHOLDERS' EQUITY:



     Common stock


      Class A common stock, $0.001
       par value, 40,000,000 shares
       authorized, 8,491,177 and
       6,916,947 shares issued and
       outstanding as of December 31,
       2018 and 2017, respectively                                            8,491                              6,917


      Class B common stock, $0.001
       par value, 10,000,000 shares
       authorized, 7,778,400 shares
       issued and outstanding as of
       December 31, 2018 and 2017,
       respectively.                                                          7,778                              7,778


      Additional paid-in capital                                         13,361,447                         10,237,965



     Retained earnings                                                  24,732,776                         29,877,491


      Accumulated other comprehensive
       income (loss)                                                    (1,353,141)                           402,387



                   TOTAL SHAREHOLDERS' EQUITY                            36,757,351                         40,532,538





                   TOTAL LIABILITIES AND
                    SHAREHOLDERS' EQUITY                      $
     
           56,653,676               $
     
          54,548,682

HEBRON TECHNOLOGY CO., LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)


                                                             
          
             For the Years Ended December 31,



                                                 2018                                          2017                                   2016




     
                REVENUE



     Installation service                                 $
          17,297,212                                      $
          23,748,141          $
          24,299,062



     Fluid equipment sales                                         7,992,848                                               5,452,304                   2,798,774



                                                                   25,290,060                                              29,200,445                  27,097,836


                   COST OF REVENUE


      Cost of product and services                                 17,458,252                                              18,080,777                  16,192,810


      Business and sales related taxes                                253,856                                                 675,507                     443,448



                   GROSS PROFIT                                     7,577,952                                              10,444,161                  10,461,578





                   OPERATING EXPENSES




      General and administrative
       expenses                                                     3,298,188                                               3,683,594                     932,911



     Selling expenses                                              1,337,321                                               2,187,253                   1,742,147


       Bad debt expenses (recovery)                                 7,913,442                                                 187,715                   (227,873)


      Research and development
       expenses                                                       358,411                                                 508,282                      33,847



      Total operating expenses                                     12,907,362                                               6,566,844                   2,481,032



                   (LOSS) INCOME FROM OPERATIONS                  (5,329,410)                                              3,877,317                   7,980,546





                   OTHER INCOME (EXPENSE)



     Other income, net                                             (426,585)                                                377,174                       6,431



     Interest expense                                              (208,306)                                               (56,953)                   (49,625)


       Income from investment                                         168,534


      Total other (expense) income,
       net                                                          (466,357)                                                320,221                    (43,194)





                   (LOSS) INCOME BEFORE INCOME
                    TAXES                                         (5,795,767)                                              4,197,538                   7,937,352


                   (BENEFIT FROM) PROVISION FOR
                    INCOME TAXES                                    (651,052)                                            (2,938,849)                  2,002,467





                   NET (LOSS) INCOME                  $
     
            (5,144,715)                                  $
     
            7,136,387       $
     
            5,934,885




                   OTHER COMPREHENSIVE INCOME
                    (LOSS)




      Foreign currency translation
       (loss) income                                              (1,755,528)                                              2,249,081                 (1,401,124)





                   COMPREHENSIVE (LOSS) INCOME        $
     
            (6,900,243)                                  $
     
            9,385,468       $
     
            4,533,761





      Basic and diluted (loss)
       earnings per common share



     Basic                                                    $
          (0.33)                                         $
            0.49              $
            0.49




     Diluted                                                  $
          (0.33)                                         $
            0.49              $
            0.49





      Weighted average number of
       shares outstanding



     Basic                                                        15,760,633                                              14,695,347                  12,029,538




     Diluted                                                      15,760,633                                              14,695,347                  12,046,045

HEBRON TECHNOLOGY CO., LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


                     
     
               Class A             
           
        Class B                            Additional         Retained                             Accumulated
                                                                                               paid in                                                 Other
                                Common Stock                     Common Stock                                                                     Comprehensive



                         Shares              Amount                           Shares  Amount                      capital                Earnings                                             Income (Loss)          Total



     Balance at
      January 1,
      2016*                        4,221,600        $
       4,222                       7,778,400                              $
         7,778                                      $
          108,970               $
           16,806,219   $
             (445,570) $
            16,481,619


     Issuance Class
      A shares -IPO                2,695,347             2,695                                                                                                                   10,128,995                                                                   10,131,690


     Net income                                                                                                                                                                                                  5,934,885                                   5,934,885


     Foreign
      currency
      translation
      loss                                                                                                                                                                                                                           (1,401,124)          (1,401,124)



     Balance at
      December 31,
      2016                         6,916,947             6,917                       7,778,400                                     7,778                                           10,237,965                        22,741,104            (1,846,694)           31,147,070




     Net income                                                                                                                                                                                                  7,136,387                                   7,136,387


     Foreign
      currency
      translation
      income                                                                                                                                                                                                                           2,249,081             2,249,081



     Balance at
      December 31,
      2017                         6,916,947             6,917                       7,778,400                                     7,778                                           10,237,965                        29,877,491                402,387            40,532,538




     Net loss                                                                                                                                                                                                  (5,144,715)                                (5,144,715)


     Foreign
      currency
      translation
      loss                                                                                                                                                                                                                           (1,755,528)          (1,755,528)


     Issuance of
      class A common
      stock for
      consulting
      services                       131,452               131                                                                                                                      239,369                                                                      239,500


     Issuance of
      class A common
      stock for
      equity
      investment                   1,442,778             1,443                                                                                                                    2,884,113                                                                    2,885,556



     Balance at
      December 31,
      2018                         8,491,177        $
       8,491                       7,778,400                              $
         7,778                                   $
          13,361,447               $
           24,732,776 $
             (1,353,141) $
            36,757,351

* Retrospectively adjusted the reclassification of the Company's common stock (see Note 14)


HEBRON TECHNOLOGY CO., LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                       
          
            For the Years Ended December 31,



                                                           2018                                        2017                                      2016



                   CASH FLOWS FROM OPERATING ACTIVITIES:



     Net income (loss)                                            $
          (5,144,715)                                        $
          7,136,387               $
            5,934,885


      Adjustments to reconcile net income
       to net cash provided by (used in)
       operating activities:


      Depreciation and amortization                                          1,195,161                                                   939,995                           517,402


      Loss on disposition of property and
       equipment                                                               283,487                                                    12,179                           228,245


      Deferred tax expense (benefit)                                       (1,471,938)                                                   11,526                            56,968


      Bad debt expense (recovery)                                            7,913,442                                                   187,715                         (227,873)


                   Changes in operating assets and
                    liabilities:



     Contracts receivable                                                 (9,019,036)                                              (2,992,867)                      (5,893,527)



     Accounts receivable                                                  (1,383,452)                                                (950,850)                          922,611



     Notes receivable                                                         593,674                                                 (378,205)                         (85,107)



     Retainage receivables                                                  (748,903)                                                 (80,360)                        (548,357)


      Prepayment and advances to suppliers                                      93,149                                               (7,127,018)                      (2,861,600)



     Inventories                                                            1,177,956                                                   788,000                           427,878



     Other receivables                                                      (598,764)                                                (156,074)                          (1,535)



     Accounts payable                                                         146,546                                                    26,450                         (290,717)



     Notes Payable                                                          2,148,292                                                    53,272



     Advances from customers                                                  429,217                                                 (370,964)                          528,193



     Deferred revenue                                                                                                              (1,071,355)                            3,161



     Taxes payable                                                          2,770,253                                               (2,365,120)                        2,484,264


      Accrued expenses and other current
       liabilities                                                             890,551                                                   240,505                           382,410



                   NET CASH (USED IN) PROVIDED BY
                    OPERATING ACTIVITIES                                     (725,080)                                              (6,096,784)                        1,577,301





                   CASH FLOWS FROM INVESTING ACTIVITIES:


      Acquisitions of property and
       equipment                                                              (74,210)                                              (3,126,777)                          (7,667)


      Payments for intangible assets                                          (41,000)


      Payments for construction in progress                                                                                                                            (973,254)



                   NET CASH (USED IN) INVESTING
                    ACTIVITIES                                               (115,210)                                              (3,126,777)                        (980,921)





                   CASH FLOWS FROM FINANCING ACTIVITIES:


      Proceeds from short-term bank loans                                    1,995,763                                                   295,954                           301,019


      Repayment of short-term bank loans                                   (1,088,667)                                                                                 (795,443)


      Proceeds from long-term loans                                                                                                     173,873                           556,885


      Repayment of long-term loans                                                                                                     (47,353)


      Repayment/Proceeds from other loan                                     (176,427)                                                  582,205



     Repayment of other loan                                                                                                          (21,457)


      Repayment of (proceeds from) related
       parties                                                                                                                         (66,582)                           72,009


      Proceeds from issuance of shares in
       IPO                                                                                                                                                            10,131,690



                   NET CASH PROVIDED BY FINANCING
                    ACTIVITIES                                                 730,669                                                   916,640                        10,266,160





                   EFFECT OF EXCHANGE RATE CHANGE ON
                    CASH                                                      (94,239)                                                (292,869)                        (104,290)



                   NET (DECREASE) INCREASE IN CASH                           (203,860)                                              (8,599,790)                       10,758,250


                   CASH AND RESTRICTED CASH-beginning
                    of year                                                  3,276,103                                                11,875,893                         1,117,643





                   CASH AND RESTRICTED CASH-end of year         $
      
            3,072,243                                     $
     
            3,276,103          $
     
              11,875,893





                   SUPPLEMENTAL CASH FLOW DISCLOSURES:



     Cash paid for income taxes                                        $
          42,250                        
              $                            
     $




     Cash paid for interest                                            $
          91,917                                           $
           75,704                  $
            50,705





                   Non-cash financing activities


      Warrants issued to placement agent in
       connection with the Company's IPO                 
        $                                              
              $                                      $
            488,730



      Issuance of shares for consulting
       services                                                        $
          239,500                        
              $                            
     $



      Issuance of shares for equity
       investment                                                    $
          2,885,556                        
              $                            
     $

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SOURCE Hebron Technology Co., Ltd.