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.