SEII Sharing Economy International Inc (CE)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549  

 

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FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934 

 

Date of report (Date of earliest event reported): November 10, 2015

 

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CLEANTECH SOLUTIONS INTERNATIONAL, INC.

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(Exact name of registrant as specified in Charter)

 

Nevada		001-34591		90-0648920
(State or other jurisdiction of incorporation or organization)		(Commission File No.)		(IRS Employee Identification No.)

 

No. 9 Yanyu Middle Road

Qianzhou Village, Huishan District, Wuxi City

Jiangsu Province, People’s Republic of China

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(Address of Principal Executive Offices)

  

(86) 51083397559

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 (Registrant’s Telephone number)

 

Copies to:

Asher S. Levitsky PC

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas; Suite 1100

New York, New York 10105

Phone: (212) 370-1300

Fax: (646) 895-7182

E-mail: alevitsky@egsllp.com

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02 Results of Operations and Financial Condition.

 

On November 13, 2015, the Company issued a press release announcing its financial results for the quarter and nine months ended September 30, 2015. A copy of the Company’s November 13, 2015press release is included as Exhibit 99.1.

 

In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set forth by specific reference in such a filing.

 

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On November 10, 2015, Mr. Tianxiang Zhou resigned as a director of the Company.  Mr. Zhou’s resignation did not result from a disagreement with the Company on any matter relating to the Company’s operations, policies or practices.  Mr. Zhou was a member of the compensation and corporate governance/ nominating committee of the board of directors..

 

Item 9.01 Financial Statements and Exhibits.

 

(d) Exhibits.

 

99.1

Press release issued on November 13, 2015 relating to its financial results for the quarter and nine months ended September 30, 2015.

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: November 16, 2015	Cleantech Solutions International, Inc.
By:	/s/ Adam Wasserman
	Adam Wasserman
	Chief Financial Officer

 

 

 Exhibit 99.1

 

For Immediate Release

 

Cleantech Solutions International Reports Third Quarter 2015 Results

 

· Revenues were $12.0 million with net income of $0.9 million, or $0.23 per basic and diluted share

 

 

Wuxi, Jiangsu Province, China – November 13, 2015 – Cleantech Solutions International, Inc. (“Cleantech Solutions” or “the Company”) (NASDAQ: CLNT), a manufacturer of metal components and assemblies used in various clean technology and manufacturing industries and textile dyeing and finishing machines, and, since the first quarter of 2015, the petroleum and chemical industries, today announced its financial results for the three and nine months ended September 30, 2015.

 

“In the third quarter of 2015, challenging economic conditions, falling steel prices and limited availability of credit in China presented numerous challenges for our business. Our forged rolled rings and related products segment in particular experienced a significant reduction in sales and operated at a loss during the quarter. In our dyeing equipment segment, we experienced softer demand for our low-emission airflow dyeing machines as many of our customers already upgraded to newer models last year and much of our remaining customer base does not have the ability to make significant capital expenditures at this time. We continue to deliver parts and equipment under our contract with a large state-owned enterprise for a major chemical project in Xinjiang, which helped offset the decreases in revenue from our other two segments,” said Mr. Jianhua Wu, Chairman and CEO of Cleantech Solutions. “Despite these difficult conditions, we remained profitable and our financial condition is strong.”

  

Third Quarter 2015 Results

 

Revenue for the third quarter of 2015 decreased by 40.6% to $12.0 million, compared to $20.2 million for the same period of 2014.

 

The Company experienced lower sales of forged rolled rings and related components to customers in the wind power and other industries and to dyeing and finishing equipment customers compared to the comparable quarter last year. These decreases were partially offset by sales of equipment to customers in the petroleum and chemical industries.

 

• Revenue from the sale of forged rolled rings and related products to the wind power and other industries fell by 83.2% to $1.4 million, compared with $8.4 million for the comparable period of the prior year. Economic conditions in China, overall capital expenditures, and the availability of credit are adversely affecting customer demand.

 

• Revenue from the dyeing and finishing equipment segment decreased by 29.2% to $8.4 million, compared to $11.8 million for the third quarter of 2014. In order to reduce business risk, the Company postponed shipments of low-emission airflow dyeing machines to certain customers who were behind in payments. In addition, the Company experienced softer demand for its low-emission airflow dyeing machines in 2015, as many of its customers had upgraded to new models in 2014 and did not require additional equipment in 2015. Finally, the Company believes that orders for new low-emission airflow dyeing machines have slowed down in 2015 because much of the remaining potential customer base does not have the ability to make the significant capital expenditures necessary to upgrade equipment.

• The Company generated $2.3 million in revenues from sales of equipment to customers in the petroleum and chemical industries during the third quarter, particularly from a large state-owned enterprise, which accounted for all of the petroleum and chemical segment revenue for the third quarter of 2015. This new business segment began shipping orders in the first quarter of 2015.

Gross profit for the third quarter of 2015 decreased by 57.2% to $2.0 million, compared to $4.7 million for the same period in 2014. Gross margin was 16.6% during the third quarter of 2015 compared to 23.1% for the same period a year ago. The decline in gross margin for the third quarter of 2015 was primarily attributable to (i) the reduced scale of operations resulting from lower revenues, including the allocation of fixed costs mainly consisting of depreciation, to cost of revenues in the forged rolled rings and related products segment combined with a slight increase in labor costs, as a result of which cost of revenue from this segment were greater than revenues, resulting in a negative gross profit from the segment, and (ii) the contribution of revenue from the sale of equipment to customers in the petroleum and chemical industries, which currently has a low gross margin because the Company is a new entrant to this market and is offering lower prices to attract customers. These decreases were partially offset by a slight increase in gross margin from the dyeing and finishing equipment segment associated with a larger proportion of higher margin models in the product mix.

 

Operating expenses decreased 28.0% to $0.7 million, compared to $1.0 million in the comparable period last year. The decrease was primarily due to lower selling, general and administrative expenses, partially offset by an increase in depreciation expenses related to new office equipment, furniture and other improvements which the Company started depreciating in 2014.

 

Operating income was $1.3 million, compared to operating income of $3.7 million in the same period of 2014. Operating margin was 10.6% compared to 18.1% in the same period of 2014.

 

EBITDA, a non-GAAP measurement, which adds interest expense, income tax, depreciation and amortization to net income, was $3.3 million, compared to $5.9 million in the third quarter of 2014. The calculation of EBITDA is shown in a table following the financial statements.

 

Net income for the third quarter of 2015 was $0.9 million, or $0.23 per basic and diluted share, compared to net income of $2.7 million, or $0.70 per basic and diluted share, in the third quarter of 2014.

 

 

Nine Month Results

 

For the nine months ended September 30, 2015, revenue was $42.9 million compared to $55.4 million in the first nine months of 2014. Gross profit was $7.8 million, down from $13.0 million in the first nine months of 2014. Gross margin was 18.1%, compared to 23.5% in the first nine months of 2014. Operating income was $4.8 million compared to $10.0 million in the first nine months of 2014. EBITDA, a non-GAAP measurement, was $11.1 million, compared to $16.4 million in the first nine months of 2014. Net income was $3.4 million, compared to $7.3 million in the first nine months of 2014. Net income per basic and diluted share was $0.86 compared to $1.99 in the first nine months of 2014.

  

Financial Condition

 

As of September 30, 2015, Cleantech Solutions held cash and cash equivalents of $18.7 million compared to $7.8 million at December 31, 2014. Accounts receivable were $17.2 million compared to $20.3 million at December 31, 2014. Inventories were $3.9 million compared to $4.2 million at December 31, 2014. Total current assets were $41.7 million as of September 30, 2015. The Company had $3.1 million in short-term bank loans payable at September 30, 2015, relatively unchanged from December 31, 2014. Stockholders’ equity was $97.6 million at September 30, 2015. In the first nine months of 2015, the Company generated $11.3 million in cash flow from operations.

  

Business Outlook

 

“With China’s industrial sector facing lower fixed asset investment and slower production, we expect the next few quarters to remain challenging. In the coming months, our primary focus will be on our core dyeing and equipment operations and executing the orders we have on hand in the petroleum and chemical segment. We remain confident in the long-term growth opportunities in China, particularly in the area of clean energy, and we are exploring opportunities to expand into new lines of business,” Mr. Wu concluded.

  

Use of Non-GAAP Financial Measures

The Company has included in this press release certain non-GAAP financial measures. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of the Company and when planning and forecasting future periods. Readers are cautioned not to view non-GAAP financial measures on a stand-alone basis or as a substitute for GAAP measures, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP measures with non-GAAP measures also included herein.

About Cleantech Solutions International

Cleantech Solutions is a manufacturer of metal components and assemblies, primarily used in clean technology and other industries and dyeing and finishing equipment for the textile industry and forged rolled rings and related products, and a supplier of fabricated products and machining services to a range of clean technology customers, and a supplier of products for the petroleum and chemical industries. The Company's website is www.cleantechsolutionsinternational.com. Any information on the Company's website or any other website is not a part of this press release.

 

Safe Harbor Statement

 

This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary and affiliated companies. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein and in the conference call referred to in this press release as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website, including factors described in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for the year ended December 31, 2014 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-Q for the quarter ended September 30, 2015. All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward-looking statements.

 

Company Contacts:

Cleantech Solutions International, Inc.

Adam Wasserman, CFO

E-mail: adamw@cleantechsolutionsinternational.com

Web: www.cleantechsolutionsinternational.com

 

Compass Investor Relations

Elaine Ketchmere, CFA

Email: eketchmere@compass-ir.com

+1-310-528-3031

Web: www.compassinvestorrelations.com

 

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE (LOSS)/INCOME

 

		For the Three Months Ended								For the Nine Months Ended
		September 30,								Spetember 30,
		2015				2014				2015				2014
REVENUES		$	12,025,433			$	20,246,555			$	42,862,498			$	55,409,844
COST OF REVENUES			10,023,347				15,570,370				35,094,790				42,375,936
GROSS PROFIT			2,002,086				4,676,185				7,767,708				13,033,908
OPERATING EXPENSES:
Depreciation			160,564				148,371				672,656				376,640
Selling, general and administrative			537,601				825,379				2,206,587				2,590,445
Research and development			23,935				29,328				81,195				87,447
Total Operating Expenses			722,100				1,003,078				2,960,438				3,054,532
INCOME FROM OPERATIONS			1,279,986				3,673,107				4,807,270				9,979,376
OTHER INCOME (EXPENSE):
Interest income			11,633				4,141				30,150				13,286
Interest expense			(61,131	)			(60,487	)			(175,102	)			(178,313	)
Grant income			–				2,735				–				34,821
Foreign currency transaction (loss)/gain			–				(2	)			(11	)			1,268
Other income			–				33,799				–				67,665
Total Other Income (Expense), net			(49,498	)			(19,814	)			(144,963	)			(61,273	)
INCOME BEFORE INCOME TAXES			1,230,488				3,653,293				4,662,307				9,918,103
INCOME TAXES			326,357				953,552				1,289,172				2,604,100
NET INCOME		$	904,131			$	2,699,741			$	3,373,135			$	7,314,003
COMPREHENSIVE INCOME:
NET INCOME		$	904,131			$	2,699,741			$	3,373,135			$	7,314,003
OTHER COMPREHENSIVE (LOSS) INCOME:
Unrealized foreign currency translation (loss)/gain			(4,217,933	)			29,648				(3,415,632	)			(645,827	)
COMPREHENSIVE (LOSS) INCOME		$	(3,313,802	)		$	2,729,389			$	(42,497	)		$	6,668,176
NET INCOME PER COMMON SHARE:
Basic		$	0.23			$	0.70			$	0.86			$	1.99
Diluted		$	0.23			$	0.70			$	0.86			$	1.99
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic			3,943,725				3,859,986				3,939,486				3,666,543
Diluted			3,943,725				3,859,986				3,939,486				3,666,543

  

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		September 30, 2015				December 31, 2014
ASSETS		(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents		$	18,672,230			$	7,835,791
Restricted cash			582,329				488,719
Notes receivable			248,670				114,034
Accounts receivable, net of allowance for doubtful accounts			17,158,938				20,316,037
Inventories, net of reserve for obsolete inventories			3,854,729				4,241,022
Advances to suppliers			629,605				565,581
Deferred tax assets			363,012				375,744
Prepaid expenses and other			172,104				153,260
Total Current Assets			41,681,617				34,090,188
PROPERTY AND EQUIPMENT, net			61,302,025				69,628,597
OTHER ASSETS:
Equipment held for sale			408,222				422,540
Land use rights, net			3,478,202				3,672,420
Total Assets		$	106,870,066			$	107,813,745
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term bank loans		$	3,147,723			$	3,095,219
Bank acceptance notes payable			582,329				488,719
Accounts payable			4,012,473				4,322,275
Accrued expenses			556,354				1,059,579
Advances from customers			837,408				495,461
VAT and service taxes payable			169,913				500,569
Income taxes payable			–				531,120
Total Current Liabilities			9,306,200				10,492,942
Total Liabilities			9,306,200				10,492,942
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock ($0.001 par value; 10,000,000 shares authorized; 0 share issued and
outstanding at September 30, 2015 and December 31, 2014)			–				–
Common stock ($0.001 par value; 50,000,000 shares authorized; 3,943,986 and 3,859,986
shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively)			3,944				3,860
Additional paid-in capital			33,803,333				33,517,857
Retained earnings			53,120,069				50,039,267
Statutory reserve			3,586,532				3,294,199
Accumulated other comprehensive income - foreign currency translation adjustment			7,049,988				10,465,620
Total Stockholders' Equity			97,563,866				97,320,803
Total Liabilities and Stockholders' Equity		$	106,870,066			$	107,813,745

  

 

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
		For the Nine Months Ended September 30,
		2015				2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	3,373,135			$	7,314,003
Adjustments to reconcile net income from operations to net cash
provided by operating activities:
Depreciation			6,166,899				6,245,723
Amortization of land use rights			71,966				72,141
Amortization of prepaid expense			–				13,774
Stock-based compensation			285,560				271,661
Changes in operating assets and liabilities:
Notes receivable			(142,843	)			461,461
Accounts receivable			2,546,105				729,430
Inventories			250,193				(2,959,168	)
Prepaid value-added taxes on purchases			–				256,691
Prepaid and other current assets			21,114				(11,280	)
Advances to suppliers			(85,798	)			113,219
Accounts payable			(168,462	)			(314,445	)
Accrued expenses			(487,275	)			(215,395	)
VAT and service taxes payable			(323,532	)			388
Income taxes payable			(574,783	)			(967,226	)
Advances from customers			369,986				(1,216,756	)
NET CASH PROVIDED BY OPERATING ACTIVITIES			11,302,265				9,794,221
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment			(12,573	)			(10,822,897	)
NET CASH USED IN INVESTING ACTIVITIES			(12,573	)			(10,822,897	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank loans			4,545,012				3,091,592
Repayments of bank loans			(4,382,690	)			(3,091,592	)
(Increase) Decrease in restricted cash			(113,625	)			244,073
Increase (decrease) in bank acceptance notes payable			113,625				(244,073	)
Net proceeds from sale of common stock			–				1,623,691
NET CASH PROVIDED BY FINANCING ACTIVITIES			162,322				1,623,691
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS			(615,575	)			(2,582	)
NET INCREASE IN CASH AND CASH EQUIVALENTS			10,836,439				592,433
CASH AND CASH EQUIVALENTS - beginning of period			7,835,791				1,114,873
CASH AND CASH EQUIVALENTS - end of period		$	18,672,230			$	1,707,306
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest		$	175,102			$	178,313
Income taxes		$	1,863,955			$	3,571,325
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired on credit as payable		$	–			$	321,064
Common stock issued for future service		$	–			$	90,554

 

Reconciliation of Net Income to EBITDA

(Amounts expressed in US$) 

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2015				2014				2015				2014
Net income		$	904,131			$	2,699,741			$	3,373,135			$	7,314,003
Add: income tax			326,357				953,552				1,289,172				2,604,100
Add: interest expense			61,131				60,487				175,102				178,313
Add: depreciation and amortization			2,045,999				2,184,933				6,238,865				6,317,864
Adjusted EBITDA		$	3,337,618			$	5,898,713			$	11,076,274			$	16,414,280

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