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

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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 service

17,297,212

23,748,141

(6,450,929)

(27)

%

Fluid equipment sales

7,992,848

5,452,304

2,540,544

47

%

Gross profit

7,577,952

10,444,161

(2,866,209)

(27)

%

(Loss) Income from operations

(5,329,410)

3,877,317

(9,206,727)

(238)

%

Net income

(5,144,715)

7,136,387

(12,281,102)

(172)

%

Basic and diluted EPS

$

(0.33)

$

0.49

(0.82)

(167)

%

  • 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 service

6,356,004

37

%

9,470,074

40

%

(3,114,070)

(33)

%

Fluid equipment sales

1,221,948

15

%

974,087

18

%

247,861

25

%

Gross profit

7,577,952

30

%

10,444,161

36

%

(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

Common Stock

Class B

Common Stock

Additional
paid in

Retained

Accumulated
Other
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.

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