YANTAI, China, Dec. 20, 2019 /PRNewswire/ -- Newater Technology,
Inc. (NASDAQ: NEWA) ("NEWA", "we", "our" or the "Company"), a
developer, service provider and manufacturer of membrane filtration
products and related hardware and engineered systems that are used
in the treatment, recycling and discharge of wastewater, today
announced its unaudited financial results for the half-year ended
June 30, 2019.
Six Months Ended June 30, 2019
Financial Highlights (all comparisons to the six months ended
June 30, 2018 unless noted)
- Revenues decreased by 67.05% from $26.48
million to $8.73 million,
which resulted from: 1) Greater salesforce and research and
development ("R&D") resource allocation into new target
markets, due to the company shifting its focus towards coal mine
wastewater and municipal wastewater projects; 2) in 2018, the
revenue was contributed by certain projects that did not continue
in 2019.
- Cost of revenues decreased by 64.91% from $12.83 million to $4.50
million due to the 67.05% decline of revenues.
- Gross profit decreased by 69.06% to $4.22 million compared to $13.65 million for the same period in 2018, while
the gross profit margin was 48.39%, compared to 51.54% for the same
period in 2018.
- Operation costs increased by 16.16% from $4.69 million to $5.45
million, and the percentage of operation costs compared to
revenue increased from 17.71% to 62.44%.
- Operating income declined from operating income of $8.96 million to operating loss of $1.23 million, due to the decrease in total
revenue and increase in R&D expenses.
"We are working towards meeting our operational goals for 2019,"
commented Mr. Yuebiao Li, the Company's Chairman and Chief
Executive Officer, "We remain committed to research and development
of DTRO technology as well as expanding the application of DTRO
technology in new markets such as zero-discharge treatment
technology on coal mine wastewater, we believe we will soon see new
revenue streams generating from those markets"
Operating Results for Six Months Ended June 30, 2019
Revenues
We derive our revenues from (1) sale of products such as reverse
osmosis and nano-filtration membrane equipment and wastewater
treatment equipment ("product revenues"); (2) sale of wastewater
treatment projects ("project revenues"); and (3) providing
wastewater treatment services to landfill leachates, briny
wastewater from industrial parks and coal mines ("service
revenues"). Revenues consist of the invoiced value for the sales,
net of value-added tax ("VAT"), business tax, applicable local
government levies, rebates, discounts and returns.
For the six months ended June 30,
2019, revenues decreased by $17.75
million, or 67.05%, to $8.73
million from $26.48 million
for the same period last year. This decrease was partially caused
by the decrease in the size of project sales. In addition, we began
to focus on coal mine wastewater treatment projects, which we
expect to begin in the near future, and may decrease our resource
that we allocated to existing markets.
Our project revenues decreased significantly for the six months
ended June 30, 2019. Our project
revenues are recognized when our performance obligation under the
terms of a contract with the customer are satisfied and control of
the products has been transferred to the customer, which normally
occurs (i) when customer-issued formal acceptance is obtained or
(ii) the Company has demonstrated the equipment meets the
agreed-upon criteria per the contract when formal acceptance is not
available.
Our service revenues are recognized as the performance
obligations are satisfied over time, because our customers
simultaneously receive and consume benefits as the services are
provided by us. Specifically, the revenues have been recognized
based on the volume of wastewater purified multiplied by negotiated
contract billing rates.
Cost of revenues
Cost of revenues consist primarily of (i) materials and
equipment costs, (ii) compensation and related overhead expenses
for personnel involved in the customization of our products,
delivery, installation and maintenance and services, (iii)
contractor costs, and (iv) depreciation of equipment used in
operations.
Cost of revenues decreased by $8.33
million, or 64.91%, to $4.50
million for the six months ended June
30, 2019 from $12.83 million
for the same period last year. As a percentage of revenues, cost of
revenues was 51.61% for the six months ended June 30, 2019, compared to 48.46% for the same
period last year. The decrease in cost of revenues is directly
linked to the 67.05% revenue decline.
Gross profit and gross margin
Gross profit decreased significantly by $9.42 million, or 69.06%, to $4.22 million for the six months ended
June 30, 2019 from $13.65 million for the same period last year. In
addition, gross margin decreased to 48.39% for the six months ended
June 30, 2019 from 51.54% for the
same period last year.
Selling, general and administrative expenses
Selling, general and administrative expenses ("SG&A")
increased by $0.76 million, or
16.16%, to $5.45 million for the six
months ended June 30, 2019 from
$4.69 million for the same period
last year. The significant increase was partially due to the
increase in travelling expense, professional expense, business and
entertainment expenses.
R&D expenses increased by 96.44% for the six months ended
June 30, 2019 due to increased
R&D investments into coal mine wastewater and municipal
wastewater. Research and development expenses accounted for 47.98%
of the selling, general and administrative expenses for the six
months ended June 30, 2019, compared
with 30.23% for the same period of 2018.
Operating income (loss) and operating margin
Income from operations declined by $10.18
million, or 113.68%, to a loss of $1.23 million for the six months ended
June 30, 2019 from income of
$8.96 million for the same period
last year. Operating margin was negative 14.04% for the six months
ended June 30, 2019, compared to
positive 33.82% for the same period last year.
The significant decrease in operating income and operating
margin mainly resulted from the significant decrease of revenues
and increase of expenses for the six months ended June 30, 2019.
Income Taxes
Provision for income taxes was $0.06
million for the six months ended June
30, 2019, a decrease of $1.39
million, or 95.99%, from $1.45
million for the same period of last year. We were entitled
to a preferential enterprise income tax ("EIT") rate of 15% in 2018
and 2019. The standard enterprise income tax rate in China is 25%.
Net Income (loss)
Net loss was $0.98 million for the
six months ended June 30, 2019,
compared to net income of 7.24 million for the same period last
year. Earnings per basic and diluted share was negative
$0.09, and positive $0.67 for the six months ended June 30, 2019 and 2018, respectively.
Financial Conditions
As of June 30, 2019, the Company
had cash of $2.68 million, compared
to $2.46 million at December 31, 2018. Total working capital was
$6.18 million as of June 30, 2019, compared to $9.28 million at the end of 2018.
Net cash used in operating activities was $1.10 million for the six months ended
June 30, 2019, compared to net cash
provided by operating activities of $4.86
million for the same period last year. Net cash used in
investing activities was $1.07
million for the six months ended June
30, 2019, compared to $6.74
million for the same period last year. Net cash provided by
financing activities was $0.93
million for the six months ended June
30, 2019, compared to $6.24
million for the same period of last year.
Recent Developments
On April 24, 2019, the Company
established a wholly-owned subsidiary, Newater Technology America,
Inc., in the United States.
On Dec 20, 2019, the Company
entered into a definitive contract granting the Company to act as
the Engineering, Procurement and Commissioning ("EPC") contractor
for a coal mine wastewater zero liquid discharge ("ZLD") project.
Total contract value is approximately $50
million. Detailed information of this contract will be
disclosed and filed with SEC promptly.
About Newater Technology, Inc.
Founded in 2012 and headquartered in Yantai, China, Newater specializes in the development,
manufacture and sale of DTRO (Disk Tube Reverse Osmosis) and DTNF
(Disk Tube Nano-Filtration) membranes for wastewater treatment,
recycling and discharge. Newater provides integrated technical
solutions in engineering support and installation, technical advice
and services, and other project-related solutions to turn
wastewater into valuable clean water. Newater also provides
wastewater treatment services, such as landfill leachate treatment
and purification services.
The Company's products can be used across a wide spectrum of
industries, including:
- Landfill
Leachate
|
- Industrial Park
Common Effluent
|
|
|
- Wastewater from
coal mines
|
- Briny
Wastewater
|
More information about the Company can be found at:
www.dtnewa.com.
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 expansion into the coal-mine wastewater treatment
industry and expected revenue from that market; 2) the continued
expansion of its research and development; and 3) its continued
growth 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 the water
filtration industry in China;
reputation and brand; the impact of competition and pricing;
government regulations; fluctuations in general economic and
business conditions in China 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.
For more information, please contact:
Company
|
|
|
|
Zhuo Zhang
CFO
|
|
Phone: +86 (535)
626-4177
|
|
Email:
CFO@dtnewa.com
|
|
NEWATER
TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
2,676,097
|
|
|
$
|
2,461,501
|
|
Restricted cash,
current
|
|
|
4,533,585
|
|
|
|
6,033,482
|
|
Accounts receivable,
net
|
|
|
11,908,361
|
|
|
|
10,064,847
|
|
Accounts receivable -
related parties
|
|
|
1,892,621
|
|
|
|
1,948,009
|
|
Notes
receivable
|
|
|
342,286
|
|
|
|
6,999
|
|
Inventories
|
|
|
16,531,915
|
|
|
|
13,762,959
|
|
Deposit - related
party
|
|
|
-
|
|
|
|
10,180
|
|
Deferred cost of
revenue
|
|
|
764,497
|
|
|
|
343,090
|
|
Advance to suppliers
and other current assets, net
|
|
|
6,637,979
|
|
|
|
4,904,290
|
|
Total current
assets
|
|
|
45,287,341
|
|
|
|
39,535,357
|
|
|
|
|
|
|
|
|
|
|
Retentions
receivable, non-current
|
|
|
345,399
|
|
|
|
344,856
|
|
Property, plant and
equipment, net
|
|
|
20,426,881
|
|
|
|
18,753,340
|
|
Land use rights,
net
|
|
|
2,059,603
|
|
|
|
2,078,240
|
|
Deferred tax
assets
|
|
|
768,508
|
|
|
|
604,064
|
|
Deposit on loan
agreement
|
|
|
932,184
|
|
|
|
436,275
|
|
Total
assets
|
|
$
|
69,819,916
|
|
|
$
|
61,752,132
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
7,333,887
|
|
|
$
|
5,353,538
|
|
Accounts payable -
related parties
|
|
|
5,289,285
|
|
|
|
3,389,148
|
|
Loans due within one
year
|
|
|
12,288,318
|
|
|
|
10,867,111
|
|
Advances from
customers
|
|
|
5,823,873
|
|
|
|
2,953,595
|
|
Advances from
customers - related parties
|
|
|
2,633,281
|
|
|
|
586,719
|
|
Income tax
payables
|
|
|
-
|
|
|
|
732,699
|
|
Accrued expenses and
other payables
|
|
|
5,014,989
|
|
|
|
6,375,800
|
|
Due to related
party
|
|
|
728,268
|
|
|
|
-
|
|
Total current
liabilities
|
|
|
39,111,901
|
|
|
|
30,258,610
|
|
|
|
|
|
|
|
|
|
|
Long-term loans, less
current portion and unamortized debt issuance costs
|
|
|
4,599,906
|
|
|
|
4,449,889
|
|
Total
liabilities
|
|
|
43,711,807
|
|
|
|
34,708,499
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
|
|
|
|
|
|
|
Common shares ($0.001
par value, 200,000,000 shares authorized,10,809,000 shares
issued and outstanding as of June 30, 2019 and December 31,
2018)
|
|
|
10,809
|
|
|
|
10,809
|
|
Additional paid-in
capital
|
|
|
15,059,181
|
|
|
|
15,059,181
|
|
Statutory
reserves
|
|
|
1,765,711
|
|
|
|
1,765,711
|
|
Retained
earnings
|
|
|
10,400,156
|
|
|
|
11,380,149
|
|
Accumulated other
comprehensive loss
|
|
|
(1,127,748)
|
|
|
|
(1,172,217)
|
|
Total shareholders' equity
|
|
|
26,108,109
|
|
|
|
27,043,633
|
|
Total liabilities
and shareholders' equity
|
|
$
|
69,819,916
|
|
|
$
|
61,752,132
|
|
NEWATER
TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
(Unaudited)
|
|
|
|
For the Six
Months
Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Net
revenues
|
|
$
|
4,349,931
|
|
|
$
|
20,414,822
|
|
Net revenues from
related parties
|
|
|
4,376,104
|
|
|
|
6,063,924
|
|
Total
revenues
|
|
|
8,726,035
|
|
|
|
26,478,746
|
|
Cost of
revenues
|
|
|
4,124,057
|
|
|
|
7,087,460
|
|
Cost of revenues from
related parties
|
|
|
379,014
|
|
|
|
5,744,533
|
|
Total
cost of revenues
|
|
|
4,503,071
|
|
|
|
12,831,993
|
|
Gross
profit
|
|
|
4,222,964
|
|
|
|
13,646,753
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
5,448,482
|
|
|
|
4,690,671
|
|
Total
operating expenses
|
|
|
5,448,482
|
|
|
|
4,690,671
|
|
Income (loss) from
operations
|
|
|
(1,225,518)
|
|
|
|
8,956,082
|
|
Interest
expense
|
|
|
497,800
|
|
|
|
194,663
|
|
Interest
income
|
|
|
(16,488)
|
|
|
|
(15,816)
|
|
Government
grants
|
|
|
(844,352)
|
|
|
|
-
|
|
Other
expenses
|
|
|
59,554
|
|
|
|
93,177
|
|
Total other expenses
(income)
|
|
|
(303,486)
|
|
|
|
272,024
|
|
Income (loss)
before income tax provisions
|
|
|
(922,032)
|
|
|
|
8,684,058
|
|
Income tax
provision
|
|
|
57,961
|
|
|
|
1,446,519
|
|
Net income
(loss)
|
|
|
(979,993)
|
|
|
|
7,237,539
|
|
Other
comprehensive income (loss)
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
44,469
|
|
|
|
(568,369)
|
|
Total
comprehensive income (loss)
|
|
$
|
(935,524)
|
|
|
$
|
6,669,170
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.09)
|
|
|
$
|
0.67
|
|
Diluted
|
|
$
|
(0.09)
|
|
|
$
|
0.67
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
|
10,809,000
|
|
|
|
10,809,000
|
|
Diluted
|
|
|
10,809,000
|
|
|
|
10,809,000
|
|
NEWATER
TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
For the Six
Months
Ended June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Cash flows from
operating activities
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(979,993)
|
|
|
$
|
7,237,539
|
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization expense
|
|
|
452,175
|
|
|
|
183,131
|
|
Deferred income
taxes
|
|
|
(165,462)
|
|
|
|
695,967
|
|
Amortization of debt
issuance costs
|
|
|
186,616
|
|
|
|
33,137
|
|
Loss on disposal of
property, plant and equipment
|
|
|
36,056
|
|
|
|
17,104
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable,
net
|
|
|
(1,849,692)
|
|
|
|
(7,351,322)
|
|
Accounts receivable -
related parties
|
|
|
59,155
|
|
|
|
-
|
|
Notes
receivable
|
|
|
(339,314)
|
|
|
|
(285,717)
|
|
Inventories
|
|
|
(3,628,348)
|
|
|
|
(5,905,343)
|
|
Deferred cost of
revenue
|
|
|
(425,936)
|
|
|
|
2,104,545
|
|
Advances to suppliers
and other current assets, net
|
|
|
(1,745,404)
|
|
|
|
(4,388,319)
|
|
Deposit - related
party
|
|
|
10,319
|
|
|
|
-
|
|
Accounts
payable
|
|
|
1,995,676
|
|
|
|
3,092,094
|
|
Accounts payable -
related parties
|
|
|
1,917,626
|
|
|
|
-
|
|
Notes
payable
|
|
|
-
|
|
|
|
(1,496,874)
|
|
Advances from
customers
|
|
|
2,900,143
|
|
|
|
12,655,491
|
|
Advances from
customers - related parties
|
|
|
2,070,275
|
|
|
|
-
|
|
Due to related
parties
|
|
|
737,039
|
|
|
|
-
|
|
Income tax
payables
|
|
|
(742,689)
|
|
|
|
(33,291)
|
|
Accrued expenses and
other payables
|
|
|
(1,587,558)
|
|
|
|
(1,696,777)
|
|
Net cash provided
by (used in) operating activities
|
|
|
(1,099,316)
|
|
|
|
4,861,365
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
|
|
(1,172,508)
|
|
|
|
(6,560,476)
|
|
Proceeds from disposal
of property, plant and equipment
|
|
|
106,625
|
|
|
|
19,600
|
|
Deposit on acquisition
of subsidiary
|
|
|
-
|
|
|
|
(200,000)
|
|
Net cash used in
investing activities
|
|
|
(1,065,883)
|
|
|
|
(6,740,876)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
Repayment to related
party
|
|
|
(4,606)
|
|
|
|
-
|
|
Deposit on loan
agreement
|
|
|
(503,939)
|
|
|
|
(471,209)
|
|
Proceeds from loans
due within one year
|
|
|
1,196,073
|
|
|
|
1,570,697
|
|
Repayment of loans due
within one year
|
|
|
(2,600,489)
|
|
|
|
(3,210,646)
|
|
Proceeds from
long-term loans
|
|
|
6,376,169
|
|
|
|
8,638,834
|
|
Payment of debt
issuance costs
|
|
|
(335,938)
|
|
|
|
(282,725)
|
|
Repayment of long-term
loans
|
|
|
(3,195,888)
|
|
|
|
-
|
|
Net cash provided
by financing activities
|
|
|
931,382
|
|
|
|
6,244,951
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign
exchange rate changes on cash, cash equivalents, and restricted
cash
|
|
|
(51,484)
|
|
|
|
(256,506)
|
|
|
|
|
|
|
|
|
|
|
Net change in
cash, cash equivalents, and restricted cash
|
|
|
(1,285,301)
|
|
|
|
4,108,934
|
|
Cash, cash
equivalents, and restricted cash, beginning of the
period
|
|
|
8,494,983
|
|
|
|
10,371,765
|
|
Cash, cash
equivalents, and restricted cash, end of the period
|
|
$
|
7,209,682
|
|
|
$
|
14,480,699
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash
flow information
|
|
|
|
|
|
|
|
|
Cash paid for
interest
|
|
$
|
538,764
|
|
|
$
|
288,382
|
|
Cash paid for income
taxes
|
|
$
|
966,113
|
|
|
$
|
783,843
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing
and financing activities:
|
|
|
|
|
|
|
|
|
Properties acquired
with loans
|
|
$
|
-
|
|
|
$
|
51,833
|
|
Liabilities assumed
in connection with purchase of property, equipment and
plant
|
|
$
|
216,064
|
|
|
$
|
-
|
|
Operating expenses
paid by related parties
|
|
$
|
4,606
|
|
|
$
|
-
|
|
Property, plant and
equipment transferred from inventories
|
|
$
|
847,956
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
cash, cash equivalents, and restricted cash to the consolidated
balance sheets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
2,676,097
|
|
|
$
|
8,755,374
|
|
Restricted
cash
|
|
|
4,533,585
|
|
|
|
5,725,325
|
|
Total cash, cash
equivalents and restricted cash
|
|
$
|
7,209,682
|
|
|
$
|
14,480,699
|
|
View original
content:http://www.prnewswire.com/news-releases/newater-technology-inc-announces-half-year-2019-unaudited-financial-results-300978661.html
SOURCE Newater Technology, Inc.