EURO TECH HOLDINGS COMPANY LIMITED
|
(Exact
name of Registrant as specified in its charter)
|
|
(Translation
of Registrant’s name into English)
|
British Virgin Islands
|
(Jurisdiction
of incorporation or organization)
|
Unit D, 18/F., Gee Chang Hong Centre, 65 Wong Chuk Hang Road, Hong
Kong
|
(Address
of principal executive offices)
|
T.C. Leung
FAX: 852-28734887
Unit D, 18/F., Gee Chang Hong Centre
65 Wong Chuk Hang Road
Hong Kong
|
(Name,
Telephone, Email and/or Facsimile number and Address of Company
Contact Person)
|
Title of each class
|
|
Trading Symbol
|
|
Name of each exchange on which registered
|
Ordinary
Shares, no par value
|
|
CLWT
|
|
NASDAQ
Capital Market
|
None.
|
(Title
of Class)
|
None.
|
(Title
of Class)
|
Large
accelerated filer ☐
|
Accelerated
filer ☐
|
Non-accelerated
filer ☑
|
Emerging
Growth Company ☐
|
U.S.
GAAP ☑
|
International
Financial Reporting Standards as issued by the International
Accounting Standards Board ☐
|
Other
☐
|
|
|
|
|
|
|
INTRODUCTION
|
4
|
|
FORWARD LOOKING STATEMENTS
|
4
|
|
GLOSSARY
|
5
|
|
|
|
|
|
PART I
|
|
|
|
|
ITEM 1.
|
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|
6
|
ITEM 2.
|
OFFER STATISTICS AND EXPECTED TIMETABLE
|
6
|
ITEM 3.
|
KEY INFORMATION
|
6
|
ITEM 4.
|
INFORMATION ON THE COMPANY
|
25
|
ITEM 4A.
|
UNRESOLVED STAFF COMMENTS
|
35
|
ITEM 5.
|
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
35
|
ITEM 6.
|
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
45
|
ITEM 7.
|
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
52
|
ITEM 8.
|
FINANCIAL INFORMATION
|
53
|
|
|
|
ITEM 9.
|
THE OFFER AND LISTING
|
53
|
ITEM 10.
|
ADDITIONAL INFORMATION
|
54
|
ITEM 11.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
61
|
ITEM 12.
|
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
61
|
|
|
|
|
PART II
|
|
|
|
|
ITEM 13.
|
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
62
|
ITEM 14.
|
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITYHOLDERS AND USE OF
PROCEEDS
|
62
|
ITEM 15.
|
CONTROLS AND PROCEDURES
|
62
|
ITEM 16.
|
[RESERVED]
|
63
|
ITEM 16A.
|
AUDIT COMMITTEE FINANCIAL EXPERT
|
63
|
ITEM 16B.
|
CODE OF ETHICS
|
63
|
ITEM 16C.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
64
|
ITEM 16D.
|
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEE
|
64
|
ITEM 16E.
|
PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATED
PURCHASERS
|
64
|
ITEM 16F.
|
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
|
64
|
ITEM 16G.
|
CORPORATE GOVERNANCE
|
64
|
ITEM 16H.
|
MINE SAFETY DISCLOSURE
|
64
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|
|
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PART III
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|
|
|
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ITEM 17.
|
FINANCIAL STATEMENTS
|
65
|
ITEM 18.
|
FINANCIAL STATEMENTS
|
65
|
ITEM 19.
|
EXHIBITS
|
66
|
Ambient
Air:
|
|
Atmospheric
air (outdoor as opposed to indoor air).
|
|
|
|
Anaerobic:
|
|
Treating
waste water biologically in the absence of air.
|
|
|
|
Atomic
Spectrometer:
|
|
An
analytical instrument used to measure the presence of an element in
a substance by testing a sample which is aspirated into a flame and
atomized. The amount of light absorbed or emitted is measured. The
amount of energy absorbed or emitted is proportional to the
concentration of the element in the sample.
|
|
|
|
Coalescer:
|
|
A
process that coalesces smaller oil particles to form larger oil
particles that can readily float to a tank’s
surface.
|
|
|
|
Colorimeter:
|
|
An
analytical instrument that measures substance concentration by
color intensity when the substance reacts to a chemical
reagent.
|
|
|
|
Human
Machine Interface Software:
|
|
A type
of software to interface (or coordinate) the interaction between
machine or equipment and a human being.
|
|
|
|
Lamella:
|
|
Synthetic
media installed in a clarifier tank to assist in particle
flocculation (coming together in a “floc” or
“flakes”).
|
|
|
|
Mass
Spectrometer:
|
|
An
analytical instrument that separates and identifies chemical
constituents according to their mass-to-charge ratios and is used
to identify organic compounds.
|
|
|
|
Membrane
Biological Reactor (MBR):
|
|
A
suspended-growth bioreactor combined with a membrane liquid/solids
separation unit. The “MBR” uses an advanced membrane
technology that treats biological wastes to a quality level which
in many industries is sufficient for reuse or low-cost disposal to
sewers.
|
|
|
|
Multi-Channel
Digital Recorder:
|
|
A
device that measures and records more than one input of a digitized
signal (signal in the form of pulses).
|
|
|
|
pH
Controller:
|
|
A
process instrument that measures and controls the acidity or
alkalinity of a fluid.
|
|
|
|
Reagent:
|
|
A
chemical substance used to cause a chemical reaction and detect
another substance.
|
|
|
|
Sequential
Batch Reactor (SBR):
|
|
A
waste-water treatment process that combines aeration and settling
in one reactor tank thus saving on space. Used for the treatment of
industrial waste-water as well as municipal sewage. The SBR is a
batch process that is ideal for waste-waters of changing
characteristics.
|
|
2020
|
2019
|
2018
|
2017
|
2016
|
|
US$
|
US$
|
US$
|
US$
|
US$
|
Balance
Sheet Data:
|
|
|
|
|
|
Cash and cash
equivalents
|
3,519
|
5,991
|
5,267
|
3,380
|
3,751
|
Working
capital(1)
|
4,915
|
5,350
|
6,013
|
2,986
|
3,101
|
Total
assets
|
20,095
|
22,213
|
23,065
|
23,737
|
23,104
|
Short-term
debt(2)
|
361
|
565
|
0
|
97
|
720
|
Net
assets
|
14,463
|
15,337
|
15,545
|
17,107
|
16,618
|
Capital
stock
|
123
|
123
|
123
|
123
|
123
|
|
2020
|
2019
|
2018
|
2017
|
2016
|
|
US$
|
US$
|
US$
|
US$
|
US$
|
Statement
of Operations and Comprehensive Income / (Loss) Data:
|
|
|
|
|
|
Revenues
|
13,357
|
17,399
|
20,104
|
17,350
|
22,478
|
Cost of
revenues
|
(9,672)
|
(12,982)
|
(16,405)
|
(12,937)
|
(17,527)
|
Gross
profit
|
3,685
|
4,417
|
3,699
|
4,413
|
4,951
|
Finance
costs
|
(12)
|
(4)
|
(7)
|
(11)
|
(19)
|
Selling and
administrative expenses
|
(5,374)
|
(4,853)
|
(4,751)
|
(4,976)
|
(5,602)
|
Operating
loss
|
(1,701)
|
(440)
|
(1,059)
|
(574)
|
(670)
|
Interest
income
|
28
|
83
|
35
|
24
|
18
|
Other income /
(losses), net
|
307
|
52
|
58
|
(14)
|
5
|
Gain / (loss) on
disposal of property, plant and equipment
|
1,429
|
(5)
|
3
|
-
|
7
|
Net gain on deemed
disposal of affiliate
|
-
|
-
|
-
|
128
|
24
|
Equity in income /
(loss) of affiliates
|
435
|
137
|
(932)
|
831
|
1,002
|
Net gain on
disposal of affiliate
|
-
|
-
|
1,522
|
-
|
-
|
Net income / (loss)
before income taxes
|
498
|
(173)
|
(373)
|
395
|
386
|
|
|
|
|
|
|
Income taxes
(expense) / credit
|
(96)
|
(37)
|
312
|
(28)
|
(228)
|
|
|
|
|
|
|
Net income /
(loss)
|
402
|
(210)
|
(61)
|
367
|
158
|
|
|
|
|
|
|
Net loss
attributable to non-controlling interests
|
367
|
64
|
149
|
106
|
73
|
Net income / (loss)
attributable to Euro Tech Holdings Company Limited’s
shareholders
|
769
|
(146)
|
88
|
473
|
231
|
|
|
|
|
|
|
Other comprehensive
income / (loss)
|
|
|
|
|
|
Net income /
(loss)
|
402
|
(210)
|
(61)
|
367
|
158
|
Foreign exchange
translation adjustments
|
(31)
|
(8)
|
(58)
|
122
|
4
|
|
|
|
|
|
|
Comprehensive
income / (loss)
|
371
|
(218)
|
(119)
|
489
|
162
|
Comprehensive loss
attributable to non-controlling interests
|
350
|
78
|
182
|
45
|
127
|
|
|
|
|
|
|
Comprehensive
income /(loss) attributable to the Company
|
721
|
(140)
|
63
|
534
|
289
|
|
|
|
|
|
|
Net income / (loss)
per ordinary share attributable to Euro Tech Holdings Company
Limited’s shareholders
|
|
|
|
|
|
-Basic
|
0.25
|
(0.06)
|
0.04
|
0.23
|
0.11
|
-Diluted
|
0.25
|
(0.06)
|
0.04
|
0.23
|
0.11
|
|
|
|
|
|
|
Weighted average
ordinary shares outstanding
|
|
|
|
|
|
-Basic
|
3,092,859
|
2,301,993
|
2,061,909
|
2,061,909
|
2,061,909
|
-Diluted
|
3,092,859
|
2,301,993
|
2,061,909
|
2,061,909
|
2,061,909
|
Customer
Name
|
Year Ended December
31,2020
|
Year Ended December
31,2019
|
Year Ended December
31,2018
|
Customer
A
|
-%
|
19%
|
15%
|
Customer
B
|
-%
|
10%
|
—%
|
Name of
entity
|
|
Ownership
interest held by the Group
|
|
Place of
incorporation
and principal
place of operation
|
|
Principal
activities
|
|
|
|
|
|
|
|
Subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro
Tech (Far East) Limited
|
|
100%
|
|
Hong
Kong
|
|
Marketing
and trading of water and waste water related process control,
analytical and testing instruments, disinfection equipment,
supplies and related automation systems
|
|
|
|
|
|
|
|
Euro
Tech Trading (Shanghai) Limited
|
|
100%
|
|
PRC
|
|
Marketing
and trading of water and waste water related process control,
analytical and testing instruments, disinfection equipment,
supplies and related automation systems
|
|
|
|
|
|
|
|
Shanghai Euro Tech
Limited
|
|
100%
|
|
PRC
|
|
Manufacturing
of analytical and testing equipment
|
|
|
|
|
|
|
|
Shanghai Euro Tech
Environmental Engineering Company Limited
|
|
100%
|
|
PRC
|
|
Undertaking
water and waste-water treatment engineering projects
|
|
|
|
|
|
|
|
Yixing
Pact Environmental Technology Co., Ltd
|
|
58%
|
|
PRC
|
|
Design,
manufacturing and operation of water and waste water treatment
machinery and equipment
|
|
|
|
|
|
|
|
Pact
Asia Pacific Limited
|
|
58%
|
|
British
Virgin Islands
|
|
Selling
of environmental protection equipment, undertaking environment
protection projects and providing relevant technology advice,
training and services
|
|
|
|
|
|
|
|
Affiliate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhejiang Tianlan
Environmental Protection Technology Co. Ltd.
|
|
19.4%
|
|
PRC
|
|
Design,
general contract, equipment manufacturing, installation, testing
and operation management of the treatment of waste gases
emitted
|
|
|
|
|
|
|
|
|
US$’000
|
|
|
Operating lease
cost
|
257
|
Short-term lease
cost
|
64
|
Total lease
cost
|
321
|
|
Operating
leases
|
|
US$’000
|
Year ending
December 31,
|
|
2021
|
144
|
2022
|
102
|
Total lease
payments
|
246
|
Less: imputed
interest
|
(34)
|
Total
|
212
|
Fiscal
Year
|
PRC
|
Hong
Kong
|
|
|
|
2018
|
40%
|
56%
|
2019
|
40%
|
58%
|
2020
|
38%
|
60%
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
Revenue
|
$13,357
|
100%
|
$17,399
|
100%
|
$20,104
|
100%
|
$17,350
|
100%
|
$22,478
|
100%
|
Cost of
revenue
|
$9,672
|
72.4%
|
$12,982
|
74.6%
|
$16,405
|
81.6%
|
$12,937
|
74.6%
|
$17,527
|
78.0%
|
Gross
profit
|
3,685
|
27.6%
|
$4,417
|
25.4%
|
$3,699
|
18.4%
|
$4,413
|
25.4%
|
$4,951
|
22.0%
|
Selling and
administrative expenses
|
$5,374
|
40.2%
|
$4,853
|
27.9%
|
$4,751
|
23.6%
|
$4,976
|
28.7%
|
$5,602
|
24.9%
|
Income / (loss)
before income taxes, equity in income / (loss) of affiliates and
non-controlling interests
|
$63
|
0.5%
|
$(310)
|
-1.8%
|
$(963)
|
-4.8%
|
$(564)
|
-3.3%
|
$(640)
|
-2.8%
|
Income taxes
(expense) / credit
|
$(96)
|
-0.7%
|
$(37)
|
-0.2%
|
$312
|
1.6%
|
$(28)
|
-0.2%
|
$(228)
|
-1.0%
|
Equity in income /
(loss) of affiliates
|
$435
|
3.3%
|
$137
|
0.8%
|
$(932)
|
-4.6%
|
$831
|
4.8%
|
$1,002
|
4.5%
|
Net gain on
disposal of affiliate
|
$-
|
-
|
$-
|
-
|
$1,522
|
7.6%
|
-
|
-
|
-
|
-
|
Net income /
(loss)
|
$402
|
3.0%
|
$(210)
|
-1.2%
|
$(61)
|
-0.3%
|
$367
|
2.1%
|
$158
|
0.7%
|
Net loss
attributable to non-controlling interests
|
$367
|
2.7%
|
$64
|
0.4%
|
$149
|
0.7%
|
$106
|
0.6%
|
$73
|
0.3%
|
Net income / (loss)
attributable to Euro Tech Holding Company Limited's
shareholders
|
$769
|
5.7%
|
$(146)
|
-0.8%
|
$88
|
0.4%
|
$473
|
2.7%
|
$231
|
1.0%
|
|
|
Payment due by December
31,
(in US$
thousands)
|
|||
|
Total
|
2021
|
2022
|
2023
|
2024
and after
|
Operating lease
commitments
|
212
|
118
|
94
|
-
|
-
|
Total
|
212
|
118
|
94
|
-
|
-
|
Name
|
|
Age
|
|
Position
|
T.C.
Leung
|
|
77
|
|
Chairman
of the Board of Directors and Chief Executive Officer
|
|
|
|
|
|
Jerry
Wong
|
|
62
|
|
Director
and Chief Financial Officer
|
|
|
|
|
|
Alex
Sham
|
|
57
|
|
Director
|
|
|
|
|
|
Y.K.
Liang
|
|
91
|
|
Director
|
|
|
|
|
|
Fu Ming
Chen
|
|
72
|
|
Director
|
|
|
|
|
|
Janet
Cheang
|
|
65
|
|
Director
|
|
|
|
|
|
David
YL Leung
|
|
47
|
|
Director
|
|
Year ended December
31,
|
|||||
|
2020
|
2019
|
2018
|
|||
|
Number of Options
|
Weighted average exercise price
|
Number of Options
|
Weighted average exercise price
|
Number of Options
|
Weighted average exercise price
|
|
|
|
|
|
|
|
Outstanding,
beginning of year
|
51,000
|
2.60
|
-
|
-
|
-
|
-
|
Granted
|
-
|
-
|
51,000
|
2.60
|
-
|
-
|
|
|
|
|
|
|
|
Outstanding, end of
year
|
51,000
|
2.60
|
51,000
|
2.60
|
-
|
-
|
|
|
|
|
|
|
|
Exercisable, end of
year
|
-
|
-
|
-
|
-
|
-
|
-
|
|
2020
|
2019
|
2018
|
Marketing and
sales
|
13
|
15
|
15
|
Administrative
|
18
|
20
|
22
|
Technical
|
14
|
15
|
17
|
Total full time
employees
|
45
|
50
|
54
|
|
2020
|
2019
|
2018
|
Administrative
|
8
|
8
|
8
|
Technical
|
24
|
28
|
27
|
Total full time
employees
|
32
|
36
|
35
|
|
Amount and Nature of Beneficial Ownership(4)
|
Approximate Percentage Of Ordinary Shares Owned
|
T.C. Leung
(1)
|
2,659,810
|
51.6%
|
|
|
|
Alex
Sham(1)
|
134,302
|
2.6%
|
|
|
|
Jerry
Wong(1)
|
87,162
|
1.7%
|
|
|
|
Y.K.
Liang(1)
|
—
|
—
|
|
|
|
Fu Ming
Chen(1)
|
—
|
—
|
|
|
|
Janet
Cheang(1)
|
—
|
—
|
|
|
|
David YL
Leung
|
—
|
—
|
|
|
|
All Executive
Officers And Directors of the Company as a group (7
persons)
|
2,881,274
|
55.9%
|
(1)
|
The
address for the Company’s officers and directors is c/o Euro
Tech (Far East) Ltd., Unit D, 18/F., Gee Chang Hong Centre, 65 Wong
Chuk Hang Road, Hong Kong.
|
Item
8A.1
|
See
– Item 18.
|
|
|
Item
8A.2
|
See
– Item 18.
|
|
|
Item
8A.3
|
See
– Report of Independent Registered Public Accounting Firm,
page F-2.
|
|
|
Item
8A.4
|
We have
complied with this requirement.
|
|
|
Item
8A.5
|
Not
applicable.
|
|
|
Item
8A.6
|
Not
applicable.
|
|
|
Item
8A.7
|
Legal
Proceedings. See – Item 4B. Business
Overview-Litigation.
|
|
|
Item
8A.8
|
Dividend
Policy.
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
|
|
|
|
Income / (loss)
before income taxes
|
498
|
(173)
|
(373)
|
|
|
|
|
Computed tax using
respective companies’ statutory tax rates
|
133
|
69
|
254
|
Change in valuation
allowances
|
48
|
30
|
(68)
|
Under /
(over-provision) for income taxes in prior years
|
-
|
(5)
|
131
|
Non-deductible
expenses
|
(277)
|
(131)
|
(5)
|
|
|
|
|
Income taxes
(expense) / credit at effective tax rate
|
(96)
|
(37)
|
312
|
|
For the Year Ended
December 31
|
|
|
2020
|
2019
|
|
US$
|
US$
|
Audit fees
(1)
|
160,000
|
185,000
|
Audit-related
fees(2)
|
—
|
—
|
Tax
fees(3)
|
—
|
—
|
All other
fees
|
—
|
—
|
(1)
|
“Audit
fees” means the aggregate fees billed in each of the fiscal
years listed for professional services rendered by our principal
auditor for the audit of our annual financial
statements.
|
(2)
|
“Audit-related
fees” means the aggregate fees billed in each of the fiscal
years listed for assurance and related services by our principal
auditor that are reasonably related to the performance of the audit
or review of our financial statements and are not reported under
“Audit fees.” Services comprising the fees disclosed
under the category of “Audit-related fees” involve
principally the performance of certain agreed upon procedures for
the years ended December 31, 2020 and 2019,
respectively.
|
(3)
|
“Tax
fees” means the aggregated fees billed in each of the years
listed for professional services rendered by our principal auditor
for tax compliance, tax advice and tax planning.
|
Euro Tech Holdings Company Limited
|
|
Reports of Independent Registered Public Accounting
Firm
|
|
Consolidated Balance Sheets as of December 31, 2020 and
2019
|
|
Consolidated Statements of Operations and Comprehensive Income /
(Loss) for the years ended December 31, 2020, 2019 and
2018
|
|
Consolidated Statements of Cash Flows for the years ended December
31, 2020, 2019 and 2018
|
|
Consolidated Statements of Shareholders’ Equity for the years
ended December 31, 2020, 2019 and 2018
|
|
Notes to the Consolidated Financial Statements
|
|
|
|
Zhejiang Tianlan Environmental Protection Technology Company
Limited
|
|
Reports of Independent Registered Public Accounting
Firm
|
|
Consolidated Balance Sheets as of December 31, 2020 and
2019
|
|
Consolidated Statements of Operations for the years ended December
31, 2020, 2019 and 2018
|
|
Consolidated Statements of Cash Flows for the years ended December
31, 2020, 2019 and 2018
|
|
Consolidated Statements of Shareholders’ Equity for the years
ended December 31, 2020, 2019 and 2018
|
|
Notes to the Consolidated Financial Statements
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
Amended
and Restated Memorandum and Articles of Association
(1)
|
|
|
|
|
|
Amendments
to Exhibit 3.1 ( 2)
|
|
|
|
|
|
Registrant’s
Audit Committee Charter (3)
|
|
|
|
|
|
Euro
Tech Holdings Company Limited 2019 Stock Option and Incentive Plan
(4)
|
|
|
|
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 *
|
|
|
|
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 *
|
|
|
|
|
|
Certification
of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 *
|
|
|
|
|
|
Certification
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 *
|
|
|
|
|
|
List of
Subsidiaries *
|
|
|
|
|
101
..INS*
|
|
XBRL
Instance Document
|
|
|
|
101
..SCH*
|
|
XBRL
Taxonomy Extension Schema Document
|
|
|
|
101
..CAL*
|
|
XBRL
Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101
..DBF*
|
|
XBRL
Taxonomy Extension Definition Linkbase Document
|
|
|
|
101
..LAB*
|
|
XBRL
Taxonomy Extension Label Linkbase Document
|
|
|
|
101
..PRE*
|
|
XBRL
Taxonomy Extension Presentation Linkbase Document
|
|
EURO TECH HOLDINGS COMPANY LIMITED
|
|
|
|
(REGISTRANT)
|
|
|
|
|
|
|
May 13,
2021
|
By:
|
/s/
T.C. Leung
|
|
|
|
T.C.
Leung
|
|
|
|
Chief
Executive Officer and Chairman of the Board of
Directors
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
Page
|
Reports
of Independent Registered Public Accounting Firm
|
F-2 to
F-3
|
Consolidated
Balance Sheets as of December 31, 2020 and 2019
|
F-4
|
Consolidated
Statements of Operations and Comprehensive Income / (Loss) for the
years ended December 31, 2020, 2019 and 2018
|
F-5 to
F-6
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2020,
2019 and 2018
|
F-7
|
Consolidated
Statements of Shareholders’ Equity for the years ended
December 31, 2020, 2019 and 2018
|
F-8
|
Notes
to the Consolidated Financial Statements
|
F-9 to
F-43
|
|
December
31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
3,519
|
5,991
|
Restricted
cash
|
1,672
|
658
|
Accounts
receivable, net
|
3,199
|
3,586
|
Prepayments and
other current assets
|
1,514
|
748
|
Contract
assets
|
202
|
441
|
Inventories
|
342
|
586
|
|
|
|
Total current
assets
|
10,448
|
12,010
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
259
|
700
|
Investments in
affiliates
|
8,084
|
7,720
|
Goodwill
|
1,071
|
1,071
|
Deferred tax
assets
|
-
|
87
|
Operating lease
right-of-use assets
|
233
|
406
|
Long-term
investment
|
-
|
148
|
Restricted
cash
|
-
|
71
|
|
|
|
Total non-current
assets
|
9,647
|
10,203
|
|
|
|
Total
assets
|
20,095
|
22,213
|
|
|
|
|
|
|
Liabilities
and shareholders’ equity
|
|
|
Current
liabilities:
|
|
|
Bank
borrowings
|
361
|
565
|
Accounts
payable
|
2,394
|
3,914
|
Contract
liabilities
|
1,063
|
869
|
Other payables and
accrued expenses
|
1,593
|
1,142
|
Current portion of
long-term operating lease obligations
|
118
|
170
|
Income tax
payable
|
4
|
-
|
|
|
|
Total current
liabilities
|
5,533
|
6,660
|
|
|
|
Deferred tax
liabilities
|
5
|
-
|
Long-term operating
lease obligations, net of current
maturities
|
94
|
216
|
|
|
|
Total non-current
liabilities
|
99
|
216
|
Total
liabilities
|
5,632
|
6,876
|
|
|
|
Commitments and
contingencies (Note 21)
|
|
|
|
|
|
Shareholders’
equity:
|
|
|
Ordinary share,
20,000,000 shares authorized as of
December 31, 2020 and 2019, respectively
3,260,559 no par value shares
issued as of December 31, 2020 and 2019,
respectively
|
123
|
123
|
Additional paid-in
capital
|
9,615
|
9,561
|
Treasury stock,
167,700 shares at cost as of December 31, 2020 and 2019,
respectively
|
(786)
|
(786)
|
PRC statutory
reserves
|
316
|
316
|
Accumulated other
comprehensive income
|
851
|
899
|
Retained
earnings
|
3,816
|
4,346
|
|
|
|
Total
shareholders’ equity attributable to Euro Tech Holdings
Company Limited
|
13,935
|
14,459
|
Non-controlling
interests
|
528
|
878
|
|
|
|
Total
shareholders’ equity
|
14,463
|
15,337
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
20,095
|
22,213
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
Revenues
|
|
|
|
Trading and
manufacturing
|
9,476
|
11,877
|
13,770
|
Engineering
|
3,881
|
5,522
|
6,334
|
|
|
|
|
Total
revenues
|
13,357
|
17,399
|
20,104
|
|
|
|
|
Cost
of revenues
|
|
|
|
Trading and
manufacturing
|
(7,048)
|
(9,285)
|
(11,136)
|
Engineering
|
(2,624)
|
(3,697)
|
(5,269)
|
|
|
|
|
Total cost of
revenues
|
(9,672)
|
(12,982)
|
(16,405)
|
|
|
|
|
Gross
profit
|
3,685
|
4,417
|
3,699
|
|
|
|
|
Finance
costs
|
(12)
|
(4)
|
(7)
|
Selling and
administrative expenses
|
(5,374)
|
(4,853)
|
(4,751)
|
|
|
|
|
Operating
loss
|
(1,701)
|
(440)
|
(1,059)
|
Interest
income
|
28
|
83
|
35
|
Other income /
(losses), net
|
307
|
52
|
58
|
Gain / (loss) on
disposal of property, plant and equipment
|
1,429
|
(5)
|
3
|
Equity in income /
(loss) of affiliates
|
435
|
137
|
(932)
|
Net gain on
disposal of affiliate
|
-
|
-
|
1,522
|
|
|
|
|
Net
income / (loss) before income taxes
|
498
|
(173)
|
(373)
|
|
|
|
|
Income taxes
(expense) / credit
|
(96)
|
(37)
|
312
|
|
|
|
|
Net
income / (loss)
|
402
|
(210)
|
(61)
|
|
|
|
|
Net loss
attributable to non-controlling interests
|
367
|
64
|
149
|
|
|
|
|
Net income / (loss)
attributable to Euro Tech Holdings Company Limited’s
shareholders
|
769
|
(146)
|
88
|
|
|
|
|
Other
comprehensive income / (loss)
|
|
|
|
Net
income / (loss)
|
402
|
(210)
|
(61)
|
Foreign
exchange translation
adjustments
|
(31)
|
(8)
|
(58)
|
|
|
|
|
Comprehensive
income / (loss)
|
371
|
(218)
|
(119)
|
Comprehensive loss
attributable to non-controlling interests
|
350
|
78
|
182
|
|
|
|
|
Comprehensive
income / (loss) attributable to the Company
|
721
|
(140)
|
63
|
|
Year ended
December 31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
Net
income / (loss) per ordinary share attributable to Euro Tech
Holdings Company Limited’s shareholders
|
|
|
|
-
Basic
|
$US0.25
|
$US(0.06)
|
$US0.04
|
|
|
|
|
-
Diluted
|
$US0.25
|
$US(0.06)
|
$US0.04
|
|
|
|
|
Weighted
average number of ordinary shares outstanding
|
|
|
|
-
Basic
|
3,092,859
|
2,301,993
|
2,061,909
|
|
|
|
|
-
Diluted
|
3,092,859
|
2,301,993
|
2,061,909
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
Cash
flows from operating activities:
|
|
|
|
Net income /
(loss)
|
769
|
(146)
|
88
|
Adjustments to
reconcile net income / (loss) to net cash (used in) / provided by
operating activities:
|
|
|
|
Depreciation
|
49
|
69
|
60
|
(Gain) / loss on
disposal of property, plant and equipment
|
(1,429)
|
5
|
(3)
|
Stock-based
compensation expense
|
54
|
10
|
-
|
Net gain on
disposal of affiliate
|
-
|
-
|
(1,522)
|
Non-controlling
interests in (loss) of subsidiaries
|
(367)
|
(64)
|
(149)
|
Equity in (profit)
/ loss of affiliates
|
(435)
|
(137)
|
932
|
Deferred tax
expenses
|
92
|
37
|
34
|
Changes in
non-current assets and liabilities:
|
|
|
|
Long-term operating
lease liabilities
|
(122)
|
216
|
-
|
Operating lease
right-of-use assets
|
173
|
(406)
|
-
|
Decrease /
(increase) in current assets:
|
|
|
|
Accounts
receivable, net
|
387
|
1,503
|
(1,281)
|
Prepayments and
other current assets
|
(766)
|
(201)
|
119
|
Contract
assets
|
239
|
458
|
(705)
|
Inventories
|
244
|
(185)
|
95
|
Increase /
(decrease) in current liabilities:
|
|
|
|
Accounts
payable
|
(1,520)
|
(986)
|
1,220
|
Other payables and
accrued expenses
|
451
|
(108)
|
249
|
Contract
liabilities
|
194
|
(501)
|
(350)
|
Income tax
payable
|
4
|
-
|
-
|
Current portion of
long-term operating lease obligations
|
(52)
|
170
|
-
|
Taxes
payable
|
-
|
-
|
(132)
|
|
|
|
|
Net cash used in
operating activities
|
(2,035)
|
(266)
|
(1,345)
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
Purchase of
property, plant and equipment
|
(11)
|
(21)
|
(85)
|
Proceeds from sale
of property, plant and equipment
|
1,835
|
-
|
3
|
Dividend received
from affiliates
|
71
|
-
|
276
|
Proceeds from sale
of affiliate
|
-
|
-
|
4,889
|
Proceeds from sale
of long-term investment
|
148
|
-
|
-
|
Purchase of
long-term investment
|
-
|
(148)
|
-
|
|
|
|
|
Net cash provided
by / (used in) investing activities
|
2,043
|
(169)
|
5,083
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
Dividend
paid
|
(1,299)
|
-
|
(1,443)
|
Proceeds from bank
borrowings
|
804
|
565
|
1,412
|
Repayments to bank
borrowings
|
(1,008)
|
-
|
(1,509)
|
|
|
|
|
Net cash (used in)
/ provided by financing activities
|
(1,503)
|
565
|
(1,540)
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(34)
|
(7)
|
(53)
|
|
|
|
|
|
|
|
|
Net (decrease) /
increase in cash and cash equivalents and restricted
cash
|
(1,529)
|
123
|
2,145
|
|
|
|
|
Cash, cash
equivalents and restricted cash at beginning of year
|
6,720
|
6,597
|
4,452
|
|
|
|
|
Cash, cash
equivalents and restricted cash at end of year
|
5,191
|
6,720
|
6,597
|
|
|
|
|
|
|
|
|
Cash
breakdown
|
|
|
|
Cash and cash
equivalents
|
3,519
|
5,991
|
5,267
|
Restricted
cash
|
1,672
|
729
|
1,330
|
|
|
|
|
|
5,191
|
6,720
|
6,597
|
|
US$’000
|
US$’000
|
US$’000
|
Supplemental
disclosure of consolidated cash flow information:
|
|
|
|
Cash paid during
the period for income taxes
|
-
|
-
|
-
|
Cash paid during
the period for interest
|
12
|
4
|
7
|
Operating leases
(disclosed in accompanying Note 3)
|
|
|
|
|
|
|
|
Non-cash
items:
|
|
|
|
Right-of-use assets
obtained in exchange for new operating lease
obligations
|
-
|
460
|
-
|
|
EURO TECH HOLDINGS
COMPANY LIMITED’S SHARHOLDERS
|
|
|
||||||
|
Number
of
ordinary
share
|
Ordinary
share
|
Additional
paid-in
capital
|
Treasury
stock
|
Accumulated
other
com-
prehensive
income
|
PRC statutory
reserves
|
Retained
earnings
|
Non-controlling
interests
|
Total
|
|
|
US$’000
|
US$’000
|
US$’000
|
US$’000
|
US$’000
|
US$’000
|
US$’000
|
US$’000
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2017
|
2,229,609
|
123
|
9,551
|
(786)
|
918
|
352
|
5,811
|
1,138
|
17,107
|
Net income /
(loss)
|
-
|
-
|
-
|
-
|
-
|
-
|
88
|
(149)
|
(61)
|
Foreign currency
translation adjustments
|
-
|
-
|
-
|
-
|
(25)
|
-
|
-
|
(33)
|
(58)
|
Appropriation of
reserves
|
-
|
-
|
-
|
-
|
-
|
(36)
|
36
|
-
|
-
|
Dividend
paid
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,443)
|
-
|
(1,443)
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2018
|
2,229,609
|
123
|
9,551
|
(786)
|
893
|
316
|
4,492
|
956
|
15,545
|
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(146)
|
(64)
|
(210)
|
Foreign currency
translation adjustments
|
-
|
-
|
-
|
-
|
6
|
-
|
-
|
(14)
|
(8)
|
Bonus shares
issued
|
1,030,950
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Stock-based
compensation expense
|
-
|
-
|
10
|
-
|
-
|
-
|
-
|
-
|
10
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2019
|
3,260,559
|
123
|
9,561
|
(786)
|
899
|
316
|
4,346
|
878
|
15,337
|
Net income /
(loss)
|
-
|
-
|
-
|
-
|
-
|
-
|
769
|
(367)
|
402
|
Foreign currency
translation adjustments
|
-
|
-
|
-
|
-
|
(48)
|
-
|
-
|
17
|
(31)
|
Dividend
paid
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,299)
|
-
|
(1,299)
|
Stock-based
compensation expense
|
-
|
-
|
54
|
-
|
-
|
-
|
-
|
-
|
54
|
|
|
|
|
|
|
|
|
|
|
Balance at December
31, 2020
|
3,260,559
|
123
|
9,615
|
(786)
|
851
|
316
|
3,816
|
528
|
14,463
|
Name of
entity
|
Ownership interest
held by the Group
|
Place of
incorporation and principal place of operation
|
Principal
activities
|
|
|
2020
|
2019
|
|
|
|
|
|
|
|
Euro Tech (Far
East) Limited
|
100%
|
100%
|
Hong
Kong
|
Marketing and
trading of water and waste water related process control,
analytical and testing instruments, disinfection equipment,
supplies and related automation systems
|
|
|
|
|
|
Euro Tech (China)
Limited
|
-^
|
100%
|
Hong
Kong
|
Inactive
|
|
|
|
|
|
Euro Tech Trading
(Shanghai) Limited
|
100%
|
100%
|
The
PRC
|
Marketing and
trading of water and waste water related process control,
analytical and testing instruments, disinfection equipment,
supplies and related automation systems
|
|
|
|
|
|
Shanghai Euro Tech
Limited
|
100%
|
100%
|
The
PRC
|
Manufacturing of
analytical and testing equipment
|
|
|
|
|
|
Shanghai Euro Tech
Environmental Engineering Company Limited
|
100%
|
100%
|
The
PRC
|
Inactive
|
Name of
entity
|
Ownership interest
held by the Group
|
Place of
incorporation and principal place of operation
|
Principal
activities
|
|
|
2020
|
2019
|
|
|
|
|
|
|
|
Yixing Pact
Environmental Technology Co., Ltd.
|
58%
|
58%
|
The
PRC
|
Design,
manufacturing and operation of water and waste water treatment
machinery and equipment
|
|
|
|
|
|
Pact Asia Pacific
Limited
|
58%
|
58%
|
The British Virgin
Islands
|
Selling of
environmental protection equipment, undertaking environment
protection projects and providing relevant technology advice,
training and services
|
|
|
|
|
|
Affiliate:
|
|
|
|
|
|
|
|
|
|
Zhejiang Tianlan
Environmental Protection Technology Co. Ltd. (“Blue
Sky”)
|
19.4%*
|
19.4%*
|
The
PRC
|
Design, general
contract, equipment manufacturing, installation, testing and
operation management of the treatment of waste gases
emitted
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Engineering
segment
|
11,581
|
8,611
|
Office
premises
|
47
to 51 years
|
Leasehold
improvements
|
over terms of the
leases or the useful lives whichever is less
|
Furniture, fixtures
and office equipment
|
3
to 5 years
|
Motor
vehicles
|
4
years
|
Testing
equipment
|
3
years
|
|
Years ended
December 31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
||
Operating lease
cost
|
257
|
193
|
Short-term lease
cost
|
64
|
153
|
|
|
|
Total lease
cost
|
321
|
346
|
|
Years ended
December 31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Cash paid for
amounts included in the measurement of lease
liabilities:
|
|
|
|
|
|
Operating cash
flows from operating leases
|
195
|
346
|
|
|
|
Right-of-use assets
obtained in exchange for lease obligations (noncash):
|
|
|
Operating
leases
|
-
|
460
|
|
December
31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Operating
leases
|
|
|
Operating lease
right-of-use assets
|
233
|
406
|
|
|
|
Current portion of
long-term operating lease obligations
|
118
|
170
|
Long-term operating
lease obligations, net of current
maturities
|
94
|
216
|
|
|
|
Total operating
lease liabilities
|
212
|
386
|
|
|
|
|
|
|
Weighted average
remaining lease term
|
|
|
Operating
leases
|
16 months
|
27 months
|
|
|
|
Weighted average
discount rate
|
|
|
Operating
leases
|
5%
|
5%
|
|
|
|
|
Operating
leases
|
|
US$’000
|
|
|
Year ending
December 31,
|
|
2021
|
144
|
2022
|
102
|
|
|
Total lease
payments
|
246
|
Less: imputed
interest
|
(34)
|
Total
|
212
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Contract
receivables
|
3,229
|
3,622
|
Less: allowance for
doubtful accounts
|
(30)
|
(36)
|
|
|
|
|
3,199
|
3,586
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Balance at
beginning of period
|
36
|
112
|
Less : reversal in
allowances
|
(6)
|
(76)
|
|
|
|
Balance at end of
period
|
30
|
36
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Current
|
2,014
|
1,495
|
|
|
|
Past
due
|
|
|
1-30
days
|
85
|
41
|
31-60
days
|
202
|
1,343
|
61-90
days
|
41
|
99
|
Greater than or
equal to 91 days
|
857
|
608
|
|
|
|
|
1,185
|
2,091
|
|
|
|
|
3,199
|
3,586
|
|
December
31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Deposits
paid
|
838
|
344
|
Prepayments
|
168
|
151
|
Other
receivables
|
250
|
251
|
Other tax
recoverable
|
258
|
2
|
|
|
|
|
1,514
|
748
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Unbilled
revenue
|
202
|
441
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Deferred
revenue
|
1,063
|
869
|
|
December
31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Contract
assets
|
202
|
441
|
Contract
liabilities
|
(1,063)
|
(869)
|
|
|
|
Net contract
liabilities
|
(861)
|
(428)
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Cost and estimated
earnings on uncompleted contracts
|
1,904
|
5,150
|
Less: billings to
date
|
(2,765)
|
(5,578)
|
|
|
|
|
(861)
|
(428)
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Unbilled
revenue
|
202
|
441
|
Deferred
revenue
|
(1,063)
|
(869)
|
|
|
|
|
(861)
|
(428)
|
|
December
31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Raw
materials
|
63
|
85
|
Work in
progress
|
20
|
29
|
Finished
goods
|
259
|
472
|
|
|
|
|
342
|
586
|
|
December
31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Office
premises*
|
673
|
1,866
|
Leasehold
improvements
|
157
|
155
|
Furniture, fixtures
and office equipment
|
557
|
511
|
Motor
vehicles
|
175
|
173
|
Testing
equipment
|
37
|
37
|
|
|
|
|
1,599
|
2,742
|
|
|
|
Less: Accumulated
depreciation
|
(1,340)
|
(2,042)
|
|
|
|
|
259
|
700
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
|
|
|
|
Depreciation
charge
|
49
|
69
|
60
|
|
December
31,
|
|
|
2020
|
2019
|
Balance
Sheet:
|
US$’000
|
US$’000
|
|
|
|
Current
assets
|
44,918
|
41,614
|
|
|
|
Non-current
assets
|
15,258
|
15,666
|
|
|
|
Total
assets
|
60,176
|
57,280
|
|
|
|
Total
liabilities
|
(30,889)
|
(31,108)
|
|
|
|
Total
shareholders’ equity
|
29,287
|
26,172
|
|
Year ended December
31,
|
|
|
2020
|
2019
|
Operating
results:
|
US$’000
|
US$’000
|
|
|
|
Net
sales
|
43,933
|
40,348
|
|
|
|
|
|
|
Operating
income
|
2,214
|
677
|
|
|
|
|
|
|
Net
income
|
1,946
|
704
|
|
December
31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Dividend
payables
|
84
|
80
|
Deposits received
from customers
|
-
|
31
|
Rental deposit
received
|
4
|
12
|
Accruals for operating
expenses
|
1,500
|
941
|
Other tax
payables
|
5
|
78
|
|
|
|
|
1,593
|
1,142
|
|
2020
|
2019
|
|
|
|
Shares
issued
|
3,260,559
|
3,260,559
|
Less: shares under
treasury stock
|
(167,700)
|
(167,700)
|
|
|
|
|
3,092,859
|
3,092,859
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
|
|
|
|
Exchange gain / (loss),
net
|
101
|
(30)
|
7
|
Rental
income
|
59
|
82
|
51
|
Government
subsidies – Employment Support Scheme *
|
147
|
-
|
-
|
|
|
|
|
|
307
|
52
|
58
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
Current taxes
(expense) / credit
|
|
|
|
Hong Kong profits
tax and the PRC EIT
|
(4)
|
-
|
346
|
|
|
|
|
Income tax
(expense) / credit
|
(4)
|
-
|
346
|
|
|
|
|
Deferred tax
expenses
|
|
|
|
Hong Kong and the
PRC
|
(92)
|
(37)
|
(34)
|
|
|
|
|
Total deferred tax
expense
|
(92)
|
(37)
|
(34)
|
|
|
|
|
Total (expense) /
credit
|
(96)
|
(37)
|
312
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
|
|
|
|
Income / (loss)
before income taxes
|
498
|
173
|
(373)
|
|
|
|
|
Computed tax using
respective companies’ statutory tax rates
|
133
|
69
|
254
|
Change in valuation
allowances
|
48
|
30
|
68
|
Under /
(over-provision) for income taxes in prior
years
|
-
|
(5)
|
131
|
Non-deductible
expenses
|
(277)
|
(131)
|
(5)
|
|
|
|
|
Income taxes (expense) / credit at
effective tax rate
|
(96)
|
(37)
|
312
|
|
December
31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Tax
losses
|
901
|
858
|
Temporary
differences
|
(5)
|
(19)
|
Less: Valuation
allowances
|
(901)
|
(752)
|
|
|
|
Net deferred tax
(liabilities) / assets
|
(5)
|
87
|
|
December
31,
|
||
|
2020
|
2019
|
2018
|
|
Number of
shares
|
||
|
|
|
|
|
|
|
|
Weighted average
number of ordinary shares for the purposes of basic and diluted net
income per share
|
3,092,859
|
2,301,993
|
2,061,909
|
|
Year ended December
31,
|
|||||
|
2020
|
2019
|
2018
|
|||
|
Number
of
options
|
Weighted
average
exercise
price
|
Number
of
options
|
Weighted
average
exercise
price
|
Number
of
options
|
Weighted
average
exercise
price
|
|
|
US$
|
|
US$
|
|
US$
|
|
|
|
|
|
|
|
Outstanding,
beginning of year
|
51,000
|
2.60
|
-
|
-
|
-
|
-
|
Granted
|
-
|
-
|
51,000
|
2.60
|
-
|
-
|
|
|
|
|
|
|
|
Outstanding, end of
year
|
51,000
|
2.60
|
51,000
|
2.60
|
-
|
-
|
|
|
|
|
|
|
|
Exercisable, end of
year
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
Revenue
|
|
|
|
Trading and
manufacturing
|
9,476
|
11,877
|
13,770
|
Engineering
|
3,881
|
5,522
|
6,334
|
|
|
|
|
|
13,357
|
17,399
|
20,104
|
Operating
loss
|
|
|
|
Trading and
manufacturing
|
(488)
|
(102)
|
(119)
|
Engineering
|
(1,027)
|
(158)
|
(821)
|
Unallocated
corporate expenses
|
(186)
|
(180)
|
(119)
|
|
|
|
|
|
(1,701)
|
(440)
|
(1,059)
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
Depreciation:
|
|
|
|
Trading and
manufacturing
|
39
|
54
|
43
|
Engineering
|
10
|
15
|
17
|
|
|
|
|
|
49
|
69
|
60
|
|
|
|
|
Capital
expenditures, gross
|
|
|
|
Trading and
manufacturing
|
2
|
17
|
79
|
Engineering
|
9
|
4
|
6
|
|
|
|
|
|
11
|
21
|
85
|
|
December
31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
Assets
|
|
|
Trading and
manufacturing
|
7,877
|
9,843
|
Engineering
|
12,218
|
12,370
|
|
|
|
|
20,095
|
22,213
|
Liabilities
|
|
|
Trading and
manufacturing
|
2,645
|
4,319
|
Engineering
|
2,987
|
2,557
|
|
|
|
|
5,632
|
6,876
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
Revenue
-
|
|
|
|
The
PRC
|
5,072
|
6,886
|
8,026
|
Hong
Kong
|
8,024
|
10,169
|
11,169
|
Others
|
261
|
344
|
909
|
|
|
|
|
|
13,357
|
17,399
|
20,104
|
|
December
31,
|
|
|
2020
|
2019
|
|
US$’000
|
US$’000
|
|
|
|
Hong
Kong
|
47
|
478
|
The
PRC
|
212
|
222
|
|
|
|
|
259
|
700
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
|
|
|
Supplier
A
|
30%
|
53%
|
55%
|
Supplier
B
|
12%
|
-
|
-
|
Supplier
C
|
10%
|
7%
|
8%
|
Supplier
D
|
9%
|
6%
|
7%
|
Supplier
E
|
6%
|
6%
|
7%
|
Supplier
F
|
5%
|
-
|
-
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
|
|
|
Customer
A
|
9%
|
19%
|
15%
|
Customer
B
|
8%
|
-
|
-
|
Customer
C
|
6%
|
10%
|
-
|
Customer
D
|
-
|
5%
|
-
|
Customer
E
|
-
|
-
|
7%
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
US$’000
|
US$’000
|
US$’000
|
Revenue
|
|
|
|
Trading and
manufacturing (revenue recognized
at point in time)
|
9,476
|
11,877
|
13,770
|
Engineering
(revenue recognized over
time)
|
3,881
|
5,522
|
6,334
|
|
13,357
|
17,399
|
20,104
|
|
Page
|
Reports of
Independent Registered Public Accounting Firm
|
F-45 to
F-46
|
Consolidated
Balance Sheets as of December 31, 2020 and 2019
|
F-47
|
Consolidated
Statements of Operations for the years ended December 31, 2020,
2019 and 2018
|
F-48
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2020,
2019 and 2018
|
F-49
|
Consolidated
Statements of Shareholders’ Equity for the years ended
December 31, 2020, 2019 and 2018
|
F-50
|
Notes to the
Consolidated Financial Statements
|
F-51 to
F-72
|
|
December
31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
Assets
|
|
|
Current
assets:
|
|
|
Cash
|
50,969
|
11,614
|
Accounts
receivable, net
|
118,621
|
138,778
|
Prepayments and
other current assets
|
28,387
|
52,859
|
Contract assets,
net
|
94,494
|
80,961
|
Inventories
|
2,389
|
5,755
|
Short-term
investments
|
-
|
800
|
|
|
|
Total current
assets
|
294,860
|
290,767
|
|
|
|
Property, plant and
equipment, net
|
79,257
|
87,781
|
Intangible assets,
net
|
2,120
|
927
|
Land use right,
net
|
5,147
|
5,291
|
Deferred tax
assets
|
13,639
|
13,970
|
Long-term
investments
|
-
|
1,492
|
|
|
|
Total non-current
assets
|
100,163
|
109,461
|
|
|
|
Total
assets
|
395,023
|
400,228
|
|
|
|
Liabilities
and shareholders’ equity
|
|
|
Current
liabilities:
|
|
|
Bank
borrowings
|
20,029
|
26,841
|
Accounts
payable
|
97,795
|
89,372
|
Other payables and
accrued expenses
|
17,747
|
7,583
|
Contract
liabilities
|
47,135
|
55,898
|
Other taxes
payable
|
15,169
|
9,531
|
Current portion of
long-term finance lease obligations
|
-
|
25,785
|
|
|
|
Total current
liabilities
|
197,875
|
215,010
|
|
|
|
Deferred government
grant
|
4,894
|
2,349
|
|
|
|
Total non-current
liabilities
|
4,894
|
2,349
|
|
|
|
Total
liabilities
|
202,769
|
217,359
|
|
|
|
Commitments and
contingencies (Note 21)
|
|
|
|
|
|
Shareholders’
equity:
|
|
|
Share
capital
82,572,000
no par value shares authorised, issued and outstanding, as of
December 31, 2020 and 2019, respectively
|
82,572
|
82,572
|
Capital
reserve
|
35,761
|
35,510
|
PRC statutory
reserve
|
15,670
|
14,421
|
Retained
earnings
|
55,248
|
46,423
|
|
|
|
Total
shareholders’ equity attributable to Zhejiang Tianlan
Environmental Protection Technology Company Limited
|
189,251
|
178,926
|
Non-controlling
interests
|
3,003
|
3,943
|
|
|
|
Total
shareholders’ equity
|
192,254
|
182,869
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
395,023
|
400,228
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
RMB’000
|
RMB’000
|
RMB’000
|
|
|
|
|
Revenues
|
304,710
|
277,581
|
330,244
|
|
|
|
|
Cost
of revenues
|
(261,478)
|
(227,632)
|
(274,062)
|
|
|
|
|
Gross
profit
|
43,232
|
49,949
|
56,182
|
|
|
|
|
Selling and
administrative expenses
|
(60,393)
|
(43,739)
|
(48,546)
|
|
|
|
|
Operating (loss) /
income
|
(17,161)
|
6,210
|
7,636
|
|
|
|
|
Interest
income
|
30
|
50
|
53
|
Interest
expense
|
(1,676)
|
(2,258)
|
(2,998)
|
Other
income
|
39,646
|
6,276
|
8,561
|
Other
losses
|
(5,481)
|
(5,624)
|
(47,446)
|
|
|
|
|
Net
income / (loss) before income tax
|
15,358
|
4,654
|
(34,194)
|
|
|
|
|
Income tax
(expense) / credit
|
(1,858)
|
(296)
|
7,967
|
|
|
|
|
Net
income / (loss)
|
13,500
|
4,358
|
(26,227)
|
Net loss / (income)
attributable to non-controlling interests
|
2,032
|
484
|
(419)
|
Net income / (loss)
attributable to Zhejiang Tianlan Environmental Protection
Technology Company Limited’s shareholders
|
15,532
|
4,842
|
(26,646)
|
|
|
|
|
Net income / (loss)
per ordinary share attributable to Zhejiang Tianlan Environmental
Protection Technology Company Limited’s
shareholders
|
RMB
0.19
|
RMB
0.06
|
(RMB
0.32)
|
|
|
|
|
Weighted average
ordinary shares outstanding
|
82,572,000
|
82,572,000
|
82,572,000
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
RMB’000
|
RMB’000
|
RMB’000
|
Cash
flows from operating activities:
|
|
|
|
Net
income/(loss)
|
13,500
|
4,358
|
(26,227)
|
Adjustments to
reconcile net income/(loss) to net cash provided by operating
activities:
|
|
|
|
Amortization of
intangible assets
|
142
|
152
|
152
|
Amortization of
land use right
|
159
|
149
|
149
|
Bad debts written
off
|
-
|
5,383
|
13,946
|
Depreciation
|
6,359
|
6,556
|
11,755
|
Gain on disposal of
property, plant and equipment
|
-
|
(39)
|
-
|
Impairment loss on
contract assets
|
1,399
|
-
|
-
|
Impairment loss on
long-term investments
|
1,340
|
-
|
-
|
Impairment loss on
property, plant and equipment
|
2,742
|
-
|
33,500
|
Increase in
allowance for doubtful accounts
|
-
|
2,437
|
-
|
Investment
loss
|
-
|
241
|
-
|
Proceeds from
deferred government grant
|
-
|
2,349
|
-
|
Property, plant and
equipment written off
|
-
|
14
|
6
|
Reversal of
allowance for doubtful accounts
|
(6,463)
|
-
|
-
|
Change in
non-current assets and liabilities:
|
|
|
|
Deferred government
grant
|
2,545
|
-
|
-
|
Deferred tax
assets
|
331
|
268
|
(7,969)
|
Decrease /
(increase) in current assets:
|
|
|
|
Accounts
receivable, net
|
26,620
|
11,432
|
12,987
|
Prepayments and
other current assets
|
24,472
|
(6,369)
|
1,403
|
Contract assets,
net
|
(14,932)
|
20,033
|
18,262
|
Inventories
|
3,366
|
6,208
|
3,154
|
Short-term
investments
|
800
|
-
|
-
|
Increase/(decrease)
in current liabilities:
|
|
|
|
Accounts
payable
|
8,423
|
(17,272)
|
(20,785)
|
Other payables and
accrued expenses
|
10,164
|
(8,795)
|
(3,295)
|
Contract
liabilities
|
(8,763)
|
14,852
|
(11,731)
|
Other taxes
payable
|
5,638
|
(1,577)
|
22
|
Current portion of
long-term finance lease obligations
|
(11,263)
|
-
|
-
|
Tax
paid
|
(9,223)
|
(4,299)
|
(8,796)
|
|
|
|
|
Net cash provided
by operating activities
|
57,356
|
36,081
|
16,533
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
Proceeds from
investment
|
295
|
-
|
-
|
Proceeds from sale
of long-term investments
|
-
|
-
|
133
|
Proceeds from sale
of partial shareholding in a subsidiary
|
137
|
510
|
-
|
Proceeds from sale
of property, plant and equipment
|
-
|
50
|
121
|
Proceeds from sale
of subsidiaries
|
-
|
-
|
7,717
|
Purchase of
intangible assets
|
(1,350)
|
-
|
(8)
|
Purchase of
long-term investments
|
-
|
-
|
(111)
|
Purchase of
property, plant and equipment
|
(577)
|
(1,584)
|
(913)
|
Purchase of
short-term investments
|
-
|
(800)
|
-
|
Purchase of
subsidiary
|
(5,100)
|
-
|
-
|
|
|
|
|
Net cash (used
in)/provided by investing activities
|
(6,595)
|
(1,824)
|
6,939
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
Repayments of bank
borrowings
|
(36,800)
|
(63,000)
|
(53,000)
|
Payment of
principal obligations under long-term finance lease
|
-
|
(29,668)
|
(28,615)
|
Proceeds from bank
borrowings
|
30,000
|
44,841
|
65,000
|
Proceeds from
issuance of shares
|
-
|
-
|
2,450
|
Dividend paid to
shareholders and interest paid
|
(4,606)
|
-
|
(9,908)
|
|
|
|
|
Net cash used in
financing activities
|
(11,406)
|
(47,827)
|
(24,073)
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
39,355
|
(13,570)
|
(601)
|
|
|
|
|
Cash and cash
equivalents at beginning of year
|
11,614
|
25,184
|
25,785
|
|
|
|
|
Cash and cash
equivalents at end of year
|
50,969
|
11,614
|
25,184
|
|
|
|
|
|
RMB’000
|
RMB’000
|
RMB’000
|
Supplemental
disclosure of consolidated cash flow information:
|
|
|
|
|
|
|
|
Cash paid during
the period for income tax
|
-
|
5,237
|
8,796
|
Cash paid during
the period for interest
|
1,716
|
2,258
|
2,924
|
Finance leases
(disclosed in accompanying Note 3)
|
|
|
|
|
ZHEJIANG TIANLAN ENVIRONMENTAL PROTECTION
TECHNOLOGY COMPANY LIMITED’S
SHAREHOLDERS
|
|
|
|||
|
Share
capital
|
Capital
reserve
|
PRC statutory
reserve
|
Retained
earnings
|
Non-controlling
interests
|
Total
|
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
RMB’000
|
|
|
|
|
|
|
|
Balance
at
December 31,
2017
|
82,572
|
32,480
|
14,122
|
79,646
|
2,494
|
211,314
|
Net income /
(loss)
|
-
|
-
|
-
|
(26,646)
|
419
|
(26,227)
|
Dividend
paid
|
-
|
-
|
-
|
(9,908)
|
-
|
(9,908)
|
Capitalization of
gain on disposal of subsidiaries to the shareholders
|
-
|
1,874
|
-
|
-
|
(1,501)
|
373
|
Appropriation of
reserves
|
-
|
1,212
|
(219)
|
(993)
|
-
|
-
|
Issuance of
share
|
-
|
-
|
-
|
-
|
2,450
|
2,450
|
Balance
at
December 31,
2018
|
82,572
|
35,566
|
13,903
|
42,099
|
3,862
|
178,002
|
Net income /
(loss)
|
-
|
-
|
-
|
4,842
|
(484)
|
4,358
|
Appropriation of
reserves
|
-
|
-
|
518
|
(518)
|
-
|
-
|
Others
|
-
|
(56)
|
-
|
-
|
565
|
509
|
Balance
at
December 31,
2019
|
82,572
|
35,510
|
14,421
|
46,423
|
3,943
|
182,869
|
Net income /
(loss)
|
-
|
-
|
-
|
15,532
|
(2,032)
|
13,500
|
Dividend
paid
|
-
|
-
|
-
|
(2,890)
|
-
|
(2,890)
|
Others
|
-
|
251
|
(436)
|
(3,968)
|
(269)
|
(4,422)
|
Appropriation of
reserves
|
-
|
-
|
1,685
|
(1,685)
|
-
|
-
|
Consolidation of
companies under common control
|
-
|
3,600
|
-
|
1,836
|
2,122
|
7,558
|
Ordinary shares
injected by shareholders
|
-
|
-
|
-
|
-
|
(761)
|
(761)
|
Utilization of
reserve
|
-
|
(3,600)
|
-
|
-
|
-
|
(3,600)
|
Balance
at
December 31,
2020
|
82,572
|
35,761
|
15,670
|
55,248
|
3,003
|
192,254
|
Name of
entity
|
Ownership interest
held by the Group
|
Place of
incorporation and principal place of operation
|
Principal
activities
|
|
|
2020
|
2019
|
|
|
|
|
|
|
|
Zhejiang Tianlan
Environmental Protection Engineering Company Limited
|
100%*
|
-
|
PRC
|
Design, general
contract, installation and operating management of environmental
protection projects
|
Hangzhou Tianlan
Environmental Protection Equipment Company Limited
|
51%
|
51%
|
PRC
|
Manufacturing and
installation services of environmental protection
equipment
|
Hangzhou Tianlan
Pure Environmental Protection Technology Company
Limited
|
38.25%
|
40.8%
|
PRC
|
Manufacturing of
environmental protection equipment
|
Hangzhou Tiancan
Environmental Technology Company Limited
|
80%
|
100%
|
PRC
|
Manufacturing of
environmental protection equipment
|
Land use
right
|
Over terms of the
leases
|
Buildings and
leasehold improvements
|
11 to 50 years,
with 5% residual value
|
Furniture, fixtures
and office equipment
|
5 years, with 5%
residual value
|
Motor
vehicles
|
5 years, with 5%
residual value
|
Plant and
machineries
|
5 to 10 years, with
5% residual value
|
|
Years ended
December 31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Finance lease
cost:
|
|
|
Amortization of
right-of-use assets
|
5,837
|
4,347
|
Interest on lease
liabilities included under cost of revenue and selling and
administrative expenses
|
1,244
|
2,214
|
Total finance lease
cost
|
7,081
|
6,561
|
|
Years ended
December 31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Cash paid for
amounts included in the measurement of lease
liabilities:
|
|
|
|
|
|
Finance cash flows
from finance leases
|
11,263
|
29,668
|
Right-of-use assets
obtained in exchange for lease obligations (noncash):
|
|
|
Finance
leases
|
-
|
-
|
|
December
31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Finance
leases
|
|
|
Property, plant and
equipment, at cost
|
-
|
121,208
|
Accumulated
depreciation and impairment losses
|
-
|
(71,508)
|
|
|
|
Property, plant and
equipment, net
|
-
|
49,700
|
|
|
|
Current maturities
of long-term debt
|
-
|
25,785
|
Total finance lease
liabilities
|
-
|
25,785
|
|
|
|
Weighted average
remaining lease term
|
|
|
Finance
leases
|
-
|
1 year
|
|
|
|
Weighted average
discount rate
|
|
|
Finance
leases
|
5.9%
|
5.9%
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Contract
receivables
|
160,803
|
165,262
|
Less: allowance for
doubtful accounts
|
(42,182)
|
(26,484)
|
|
|
|
|
118,621
|
138,778
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Balance at
beginning of period
|
26,484
|
24,047
|
Add: provision for
allowances
|
22,161
|
2,437
|
Less: Reversal of
provision for allowances
|
(6,463)
|
-
|
|
|
|
Balance at end of
period
|
42,182
|
26,484
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Within 1
year
|
76,590
|
96,456
|
1 year - 2
years
|
31,389
|
30,252
|
2 years - 3
years
|
6,128
|
6,260
|
3 years - 4
years
|
3,678
|
5,179
|
4 years - 5
years
|
836
|
631
|
|
|
|
|
118,621
|
138,778
|
|
December
31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Prepayments
|
16,632
|
19,962
|
Deposits paid for bidding projects and temporary
payments
|
10,448
|
13,988
|
Deposits for
finance leases
|
-
|
17,512
|
Other current
assets
|
1,307
|
1,397
|
|
|
|
|
28,387
|
52,859
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Unbilled
revenue
|
94,494
|
80,961
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Deferred
revenue
|
47,135
|
55,898
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Contract
assets
|
94,494
|
80,961
|
Contract
liabilities
|
(47,135)
|
(55,898)
|
|
|
|
Net contract
assets
|
47,359
|
25,063
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Costs and estimated
earnings on uncompleted contracts
|
406,064
|
433,195
|
Less: billings to
date
|
(358,705)
|
(408,132)
|
|
|
|
|
47,359
|
25,063
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Gross contract
assets
|
102,144
|
80,961
|
Less: allowance for
doubtful accounts
|
(7,650)
|
-
|
|
|
|
|
94,494
|
80,961
|
|
December
31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Raw
materials
|
341
|
5,742
|
Finished
goods
|
2,048
|
13
|
|
|
|
|
2,389
|
5,755
|
|
December
31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
|
|
|
Building and
leasehold improvements
|
167,874
|
167,874
|
Furniture, fixtures
and office equipment
|
3,658
|
3,543
|
Motor
vehicles
|
4,808
|
4,808
|
Plant and
machineries
|
9,399
|
8,937
|
|
|
|
Total
|
185,739
|
185,162
|
|
|
|
Less: Accumulated
depreciation and amortization
|
(70,241)
|
(63,881)
|
Accumulated
impairment losses
|
(36,241)
|
(33,500)
|
|
|
|
Total
|
(106,482)
|
(97,381)
|
|
|
|
Net
|
79,257
|
87,781
|
|
|
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
RMB’000
|
RMB’000
|
RMB’000
|
|
|
|
|
Depreciation
charge
|
6,359
|
6,556
|
11,755
|
|
December
31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Amortizable
intangible assets
|
|
|
|
|
|
Gross carrying
amount
|
|
|
Patents
|
3,750
|
2,400
|
Others
|
165
|
165
|
|
|
|
|
3,915
|
2,565
|
|
|
|
Less: Accumulated
amortization
|
(1,795)
|
(1,638)
|
|
|
|
Net carrying
amount
|
2,120
|
927
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
RMB’000
|
RMB’000
|
RMB’000
|
|
|
|
|
Amortization
expense
|
142
|
152
|
152
|
|
Future
amortization expense
|
|
RMB’000
|
|
|
2021
|
142
|
2022
|
142
|
2023
|
142
|
2024
|
142
|
2025
|
142
|
Thereafter
|
1,410
|
|
|
Total
|
2,120
|
|
Future amortization
expense
|
|
RMB’000
|
|
|
2020
|
152
|
2021
|
152
|
2022
|
152
|
2023
|
152
|
2024
|
152
|
Thereafter
|
167
|
|
|
Total
|
927
|
|
December
31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
Gross carrying
amount
|
|
|
|
|
|
Land use
right
|
7,361
|
7,361
|
Less: Accumulated
amortization
|
(2,214)
|
(2,070)
|
|
|
|
Net carrying
amount
|
5,147
|
5,291
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
RMB’000
|
RMB’000
|
RMB’000
|
|
|
|
|
Amortization
expense
|
159
|
149
|
149
|
|
Future amortization
expense
|
|
RMB’000
|
|
|
2021
|
159
|
2022
|
159
|
2023
|
159
|
2024
|
159
|
2025
|
159
|
Thereafter
|
4,352
|
|
|
Total
|
5,147
|
|
Future amortization
expense
|
|
RMB’000
|
|
|
2020
|
149
|
2021
|
149
|
2022
|
149
|
2023
|
149
|
2024
|
149
|
Thereafter
|
4,546
|
|
|
Total
|
5,291
|
|
December
31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Bank loans borrowed
by the Company (note i)
|
10,014
|
21,834
|
Bank loans borrowed
by subsidiaries of the Company (note ii)
|
10,015
|
5,007
|
|
20,029
|
26,841
|
|
December
31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Accrued
expenses
|
7,629
|
5,312
|
Output VAT
|
6,529
|
-
|
Deposits received and temporary receipts
|
3,589
|
2,271
|
|
|
|
|
17,747
|
7,583
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
RMB’000
|
RMB’000
|
RMB’000
|
|
|
|
|
Compensation
income
|
22,548
|
-
|
-
|
Gain on disposal of
property, plant and equipment
|
-
|
39
|
-
|
Investment
income
|
266
|
-
|
1,661
|
Amounts
waived by payees |
4,535
|
280
|
1,363
|
Reversal of
allowance for doubtful accounts
|
6,463
|
-
|
-
|
Subsidy income from
PRC government
|
5,834
|
5,957
|
5,537
|
|
|
|
|
|
39,646
|
6,276
|
8,561
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
RMB’000
|
RMB’000
|
RMB’000
|
|
|
|
|
Bad debts written
off
|
-
|
5,383
|
13,946
|
Impairment loss on
contract assets
|
1,399
|
-
|
-
|
Impairment loss on
long-term investments
|
1,340
|
-
|
-
|
Impairment loss on
property, plant and equipment
|
2,742
|
-
|
33,500
|
Investment
loss
|
-
|
241
|
-
|
|
|
|
|
|
5,481
|
5,624
|
47,446
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
RMB’000
|
RMB’000
|
RMB’000
|
|
|
|
|
|
|
|
|
Current tax
expense
|
|
|
|
PRC
EIT
|
757
|
28
|
2
|
|
|
|
|
Income tax
expense
|
757
|
28
|
2
|
|
|
|
|
|
|
|
|
Deferred tax
expense/(credit)
|
1,101
|
268
|
(7,969)
|
|
|
|
|
Total deferred tax
expense/(credit)
|
1,101
|
268
|
(7,969)
|
|
|
|
|
Total
expense/(credit)
|
1,858
|
296
|
(7,967)
|
|
Year ended December
31,
|
||
|
2020
|
2019
|
2018
|
|
RMB’000
|
RMB’000
|
RMB’000
|
|
|
|
|
Income/(loss)
before income tax
|
15,358
|
4,654
|
(34,194)
|
Computed tax using
respective companies’ statutory tax rates
|
2,304
|
642
|
(4,987)
|
(Over)-provision
for income tax in prior years
|
(48)
|
-
|
-
|
Temporary
differences
|
182
|
202
|
(272)
|
Tax effect of
revenue not subject to tax
|
-
|
-
|
(3,024)
|
Tax effect of
expenses not deductible for tax purposes
|
2,306
|
693
|
316
|
Tax effect of
special deduction for research and development costs
|
(3,001)
|
(2,103)
|
-
|
Others
|
115
|
862
|
-
|
Income taxes
expense/(credit) at effective tax rate
|
1,858
|
296
|
(7,967)
|
|
December
31,
|
|
|
2020
|
2019
|
|
RMB’000
|
RMB’000
|
|
|
|
Allowance for
doubtful accounts
|
6,184
|
7,464
|
Deferred government
grant
|
750
|
-
|
Impairment losses
on assets
|
6,705
|
5,025
|
Tax
losses
|
-
|
1,481
|
|
|
|
Total deferred tax
assets
|
13,639
|
13,970
|
|
EURO
TECH HOLDINGS COMPANY
|
|
|
|
|
|
|
May 13, 2021 |
By:
|
/s/ T.C.
Leung
|
|
|
|
T.C. Leung |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
EURO
TECH HOLDINGS COMPANY
|
|
|
|
|
|
|
May 13, 2021
|
By:
|
/s/
Jerry
Wong
|
|
|
|
Jerry Wong |
|
|
|
Chief Financial
Officer
(Principal
Financial & Accounting Officer)
|
|
|
EURO
TECH HOLDINGS COMPANY
|
|
|
|
|
|
|
May 13, 2021
|
By:
|
/s/ T.C.
Leung
|
|
|
|
T.C.
Leung
|
|
|
|
Chief
Executive Officer
(Principal
Executive Officer)
|
|
|
EURO
TECH HOLDINGS COMPANY
|
|
|
|
|
|
|
May 13, 2021
|
By:
|
/s/
Jerry
Wong
|
|
|
|
Jerry Wong |
|
|
|
Chief Financial
Officer
(Principal
Financial & Accounting Officer)
|
|
Document and Entity Information |
12 Months Ended |
---|---|
Dec. 31, 2020
shares
| |
Cover [Abstract] | |
Entity Registrant Name | EURO TECH HOLDINGS CO LTD |
Entity Central Index Key | 0001026662 |
Document Type | 20-F |
Document Period End Date | Dec. 31, 2020 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Is Entity a Well-known Seasoned Issuer? | No |
Is Entity a Voluntary Filer? | No |
Is Entity's Reporting Status Current? | Yes |
Entity Filer Category | Non-accelerated Filer |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Interactive Data Current | Yes |
Entity Incorporation, State or Country Code | D8 |
Entity File Number | 000-22113 |
Document Annual Report | true |
Document Transition Report | false |
Document Shell Company Report | false |
Entity Common Stock, Shares Outstanding | 3,092,859 |
Document Fiscal Period Focus | FY |
Document Fiscal Year Focus | 2020 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Shareholders equity: | ||
Common stock, authorized | 20,000,000 | 20,000,000 |
Common stock, issued | 3,260,559 | 3,260,559 |
Common stock, outstanding | 3,260,559 | 3,092,859 |
Common stock, no par value | $ 0.00 | $ 0.00 |
Treasury stock, shares | 167,700 | 167,700 |
ZHEJIANG TIANLAN | ||
Shareholders equity: | ||
Common stock, authorized | 82,572,000 | 82,572,000 |
Common stock, issued | 82,572,000 | 82,572,000 |
Common stock, outstanding | 82,572,000 | 82,572,000 |
ZHEJIANG TIANLAN CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ¥ in Thousands, $ in Thousands |
USD ($) |
Ordinary Share
USD ($)
|
Retained Earnings
USD ($)
|
Non-controlling Interests
USD ($)
|
ZHEJIANG TIANLAN
CNY (¥)
|
ZHEJIANG TIANLAN
Ordinary Share
CNY (¥)
|
ZHEJIANG TIANLAN
Capital Reserve
CNY (¥)
|
ZHEJIANG TIANLAN
PRC Statutory Reserves
CNY (¥)
|
ZHEJIANG TIANLAN
Retained Earnings
CNY (¥)
|
ZHEJIANG TIANLAN
Non-controlling Interests
CNY (¥)
|
---|---|---|---|---|---|---|---|---|---|---|
Beginning balance, amount at Dec. 31, 2017 | ¥ 211,314 | ¥ 82,572 | ¥ 32,480 | ¥ 14,122 | ¥ 79,646 | ¥ 2,494 | ||||
Net income / (loss) | $ (61) | $ 88 | $ (149) | (26,227) | (26,646) | 419 | ||||
Dividend paid | (9,908) | (9,908) | ||||||||
Capitalization of gain on disposal of subsidiaries to the shareholders | 373 | 1,874 | (1,501) | |||||||
Appropriation of reserves | 0 | 36 | 0 | 1,212 | (219) | (993) | ||||
Issue share capital | 2,450 | 2,450 | ||||||||
Ending balance, amount at Dec. 31, 2018 | 178,002 | 82,572 | 35,566 | 13,903 | 42,099 | 3,862 | ||||
Net income / (loss) | (210) | (146) | (64) | 4,358 | 4,842 | (484) | ||||
Appropriation of reserves | 0 | 518 | (518) | |||||||
Others | 509 | (56) | 565 | |||||||
Ending balance, amount at Dec. 31, 2019 | 182,869 | 82,572 | 35,510 | 14,421 | 46,423 | 3,943 | ||||
Net income / (loss) | $ 402 | $ 769 | $ (367) | 13,500 | 15,532 | (2,032) | ||||
Dividend paid | (2,890) | (2,890) | ||||||||
Appropriation of reserves | 0 | 1,685 | (1,685) | |||||||
Others | (4,422) | 251 | (436) | (3,968) | (269) | |||||
Consolidation of companies under common control | 7,558 | 3,600 | 1,836 | 2,122 | ||||||
Ordinary shares injected by shareholders | (761) | (761) | ||||||||
Utilization of reserve | (3,600) | (3,600) | ||||||||
Ending balance, amount at Dec. 31, 2020 | ¥ 192,254 | ¥ 82,572 | ¥ 35,761 | ¥ 15,670 | ¥ 55,248 | ¥ 3,003 |
Organization and business |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and business | Euro Tech Holdings Company Limited (the “Company”) was incorporated in the British Virgin Islands on September 30, 1996.
Euro Tech (Far East) Limited (“Far East”) is the principal operating subsidiary of the Company. It is principally engaged in the marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems in Hong Kong and in the People’s Republic of China (the “PRC”).
The Group’s principal subsidiaries at December 31, 2020 and 2019 are set out below.
* This company was deregistered on April 3, 2020.
* The Group’s interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation on both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process and exercise significant influence.
The outbreak of COVID-19 worldwide and the various public health measures put in place in many countries to prevent the spread of COVID-19 have disrupted the overall business of the Group at different levels of time and regions in 2020. After the Chinese new year in February 2020, the Group’s domestic businesses were affected by the lock-down of various cities implemented in PRC, resulting in forced suspension of some local operations until the gradual resumption of work beginning from late March to early April 2020. Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Group’s consolidated financial position, results of its operations, the specific impact is not readily determinable as of the date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ZHEJIANG TIANLAN | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and business | Zhejiang Tianlan Environmental Protection Technology Company Limited (the “Company”) was incorporated in Hangzhou City, Zhejiang Province, the People's Republic of China (“PRC”) on May 18, 2000. The Company is a limited liability company limited by shares with an operating period up to long term.
The Company provides a comprehensive service for design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted from various boilers and industrial furnaces of power plants, steel works and chemical plants since 2000.
The Company has listed its shares on the New Third Board in the PRC since November 17, 2015 and suspended trading from August 15, 2017 and resumed trading on February 2, 2018 and suspended trading from November 24, 2020 and resumed trading on January 6, 2021.
The Group’s principal subsidiaries at December 31, 2020 are set out below.
* This company was acquired in August 2020.
The outbreak of COVID-19 worldwide and the various public health measures put in place in many countries to prevent the spread of COVID-19 have disrupted the overall business of the Group at different levels of time and regions in 2020. After the Chinese new year in February 2020, the Group’s domestic businesses were affected by the lock-down of various cities implemented in PRC, resulting in the forced suspension of some local operations until the gradual resumption of work beginning from late March to early April 2020. Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Group’s consolidated financial position, results of its operations, the specific impact is not readily determinable as of the date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
|
Summary of significant accounting policies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of significant accounting policies |
The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The accompanying consolidated financial statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated.
Subsidiaries are all entities over which the Group has control; has the power to appoint or remove the majority of the members of the board of directors; has the right to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
We account for our interest in an investment using the equity method of accounting per Accounting Standards Codification (“ASC”) No. 323, “Investments - Equity Method and Joint Ventures” if we are not the primary beneficiary of a VIE or do not have a controlling interest. The investment is recorded at cost and the carrying amount is adjusted periodically to recognize our proportionate share of income or loss, additional contributions made and dividends and capital distributions received. We record the effect of any impairment or other than temporary decrease in the value of the investment.
In the event a partially owned equity affiliate were to incur a loss and our cumulative proportionate share of the loss exceeded the carrying amount of the equity method investment, application of the equity method would be suspended and our proportionate share of further losses would not be recognized unless we committed to provide further financial support to the affiliate. We would resume application of the equity method once the affiliate became profitable and our proportionate share of the affiliate’s earnings equals our cumulative proportionate share of losses that were not recognized during the period the application of the equity method was suspended.
Our revenue is derived from long-term contracts for customers in our engineering segment, as well as short-term contracts for customers in our trading and manufacturing segment. Accounting treatment for these contracts in accordance with Accounting Standards Update (“ASU”) 2014-09 (Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customer), is as follows:
Performance obligations satisfied over time (Engineering services)
Recognition of performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Engineering service projects typically span between several days to over 5 years. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. Some contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle (engineering).
Revenues are recognized as our obligations are satisfied over time, by reference to the progress towards complete satisfaction of that performance obligation.
If the Group expects the reference to progress certificates issued by the customers, with additional adjustments where necessary, depicts the Group’s performance in transferring control of goods or services promised to customers for individual projects, the Group satisfies the performance obligation over time and therefore, recognises revenue over time in accordance with the output method for measuring progress. Under output method, revenue recognition is based on the stage of completion of the contracts, provided that the stage of contract completion and the gross billing value of contracting work can be measured reliably. The stage of completion of a contract is established by reference to the construction works certified by customers.
Remaining performance obligations (“RPOs”)
RPOs represent the amount of revenues we expect to recognize in the future from our contract commitments on projects and are hereafter referred to as “Backlog”. Backlog includes the entire expected revenue values for subsidiary we consolidate. Backlog may not be indicative of future operating results, and projects included in Backlog may be canceled, modified or otherwise altered by customers.
The Group had the following backlog:
Unrecognized contract revenue which is expected to be recognized in next 12 months is approximately US$11,581,000.
Variable consideration
Contract modifications through change orders, claims and incentives are routine in the performance of the Group’s contracts to account for changes in the contract specifications or requirements. In most instances, contract modifications are not distinct from the existing contract due to the significant integration service provided in the contract and are accounted for as a modification of the existing contract and performance obligation. Either the Group or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Change orders that are unapproved as to both price and scope are evaluated as claims. The Group considers claims to be amounts in excess of approved contract prices that the Group seeks to collect from its customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.
The Group estimates variable consideration for a performance obligation at the most likely amount to which the Group expects to be entitled (or the most likely amount the Group expects to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which the Group will be entitled (or will be incurred in the case of liquidated damages). The Group includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Group’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Group.
The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in the Group’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.
Performance obligations satisfied at a point-in-time (Trading and manufacturing)
Revenue for our trading and manufacturing contracts is recognized at a point in time. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been delivered to the point of receipt by customer.
Rental income
Rental income from operating leases is recognized in consolidated statements of operations and comprehensive income / (loss) on a straight-line basis over the term of the relevant lease.
Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately US$497,000, US$35,000 and US$184,000 for the years ended December 31, 2020, 2019 and 2018 respectively and were included in “Selling and Administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss).
Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately US$7,000, US$13,000 and US$16,000 for the years ended December 31, 2020, 2019 and 2018 respectively and were included in “Selling and Administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss).
The Group follows the liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Group also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized.
The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Group does not believe it has any uncertain tax positions through the periods ended December 31, 2020, 2019 and 2018 respectively which would have a material impact on the Group’s consolidated financial statements.
The Group files tax returns in Hong Kong and the PRC. The tax returns for 2020, 2019 and 2018 are subject to examination by Hong Kong and PRC taxing authorities, commencing with the first year filed.
Cash and cash equivalents consist of cash on hand, and bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal. There were no cash equivalents as of December 31, 2020 and 2019.
Restricted cash represents cash deposits retained with banks in the PRC for issuance of performance guarantees to the customers and cash deposited by the Group into separate accounts and designated as collateral for standby letters of credit in the same amount in accordance with contractual agreements.
The Group does not charge interest to its customers and carries its customer receivables at their face amounts, less an allowance for doubtful accounts. As is common practice in the industry, the Group classifies all accounts receivable as current assets.
The Group grants trade credit, on a non-collateralized basis, to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Group analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.
For revenue recognized associated with its contracts with customers over time, for which the Group has an enforceable right to receive compensation. Many of our contracts contain specific provisions that determine when the Group can bill for its work performed under these contracts.
Any revenue earned on a contract that has not yet been billed to the customer is recorded as a contract asset on the Group’s consolidated balance sheets.
The Group’s consolidated balance sheets present contract liabilities that contain deferred revenue that represent any costs incurred on contracts in process for which revenue has not yet been recognized.
Inventories are measured using the first-in, first-out method and are stated at the lower of cost or net realizable value. Cost of finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity. Allowance is made for obsolete, slow moving or defective items, where appropriate.
Property, plant and equipment is carried at cost. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in consolidated income from operations. The cost of maintenance and repairs is charged to expense as incurred. Property, plant and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property, plant and equipment exceeds its fair value, an impairment charge would be recorded in the consolidated statement of operations.
Depreciation of property, plant and equipment are computed using the straight-line method over the assets’ estimated useful lives as follows:
The Group has elected to apply the measurement alternative to equity securities without readily determinable fair values. As such, the Group’s non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the investee.
In the ordinary course of business, the Group enters into a variety of operating lease arrangements.
Operating right-of-use leases.
Operating right-of-use leases are included in operating lease right-of-use assets, current portion of long-term operating lease obligations and long-term operating lease obligations, net of current maturities on the Group’s consolidated balance sheets, as appropriate. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Group’s leases do not provide an implicit rate to calculate present value, the Group determines this rate by estimating the Group’s incremental borrowing rate, utilizing the borrowing rates associated with the Group’s various debt instruments. The operating lease right-of-use asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
Goodwill is not amortized. The Group performs either a qualitative or quantitative assessment to review goodwill for impairment on an annual basis. This assessment is performed at the beginning of the fourth quarter, or when circumstances change, such as a significant adverse change in the business climate or the decision to sell a business, both of which would indicate that impairment may have occurred.
A qualitative assessment considers financial, industry, segment and macroeconomic factors, if the qualitative assessment indicates a potential for impairment, a quantitative assessment is performed to determine if impairment exists. The quantitative assessment begins with a comparison of the fair value of the reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss would be recognized in an amount equal to that excess, limited to the total amount of the goodwill allocated to the reporting unit. If the carrying value of goodwill exceeds its implied fair value, an impairment charge would be recorded in the statement of operations.
As a result of the annual qualitative review process in 2020 and 2019, the Group determined it was not necessary to perform a quantitative assessment.
The assets and liabilities of the Group’s subsidiaries denominated in currencies other than U.S. dollars are translated into U.S. dollars using the applicable exchange rates at the consolidated balance sheet date. For consolidated statements of operations and comprehensive income/(loss)’ items, amounts denominated in currencies other than U.S. dollars were translated into U.S. dollars using the average exchange rate during the period. Equity accounts were translated at their historical exchange rates. Net gains and losses resulting from translation of foreign currency on consolidated financial statements are included in the consolidated statements of stockholders’ equity as accumulated other comprehensive income. Foreign currency transaction gains and losses are reflected in the consolidated statements of operations and comprehensive income/(loss).
We account for comprehensive income in accordance with ASC No. 220, “Comprehensive Income”, which specifies the computation, presentation and disclosure requirements for comprehensive income / (loss). Comprehensive income / (loss) consists of net income / (loss) and foreign currency translation adjustments, primarily from fluctuations in foreign currency exchange rates of our foreign subsidiaries with a functional currency other than the U.S. dollar.
On November 22, 2011, the Company filed Amended and Restated Memorandum and Articles of Association with the Registry of Corporate Affairs of the BVI Financial Services Commission that on November 29, 2011 became effective as of the filing date to amend the Company’s ordinary shares of US$0.01 par value capital stock to no par value capital stock. Treasury stock is accounted for using the cost method. When treasury stock is reissued, the value is computed and recorded using a weighted-average basis.
On October 8, 2019, the Company issued bonus shares at the rate of one ordinary share for every two ordinary shares held, creating 1,030,950 new shares of common stock.
The Group computes net income per ordinary share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to Euro Tech Holdings Company Limited are computed by dividing net income attributable to Euro Tech Holdings Company Limited by the weighted average number of ordinary shares outstanding during the period. The Group reports both basic earnings per share, which is based on the weighted average number of ordinary shares outstanding, and diluted earnings per share, which is based on the weighted average number of ordinary shares outstanding and all dilutive potential ordinary shares outstanding.
Outstanding stock options are the only dilutive potential shares of the Company.
The Group determines compensation expense for stock-based awards based on the estimated fair values at the grant date and recognizes the related compensation expense over the vesting period. The Group uses the straight-line amortization method to recognize compensation expense related to stock-based awards that have only service conditions. This method recognizes stock compensation expense on a straight-line basis over the requisite service period for the entire award.
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Group require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from engineering contracts over time, the valuation of goodwill, and contract assets and contract liabilities. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.
Related parties are affiliates of the Group; entities for which investments are accounted for by the equity method by the Group; trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; principal owners of the Group; its management; members of the immediate families of principal owners of the Group and its management; and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Another party also is a related party if it can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The Group reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Group’s reportable segments. The Group categorises its operations into two business segments: Trading and manufacturing, and Engineering.
Financial instruments that potentially subject the Group to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable, net. The Group maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions.
The Group is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Group’s top customers accounting for more than 5% of the Group’s revenue generated approximately 23%, 34%, and 22% of consolidated revenues for the years ended December 31, 2020, 2019 and 2018, respectively. For the years ended December 31, 2020, 2019 and 2018, two customers (Customer A: 9%; Customer B: 8%), two customers (Customer A: 19%; Customer B: 10%) and one customer (Customer A: 15%) accounted for more than 10.0% of annual revenues, respectively.
The Group grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, general contractors, owners and managers of industrial properties and government departments.
Consequently, the Group is subject to potential credit risk related to changes in business and economic factors. At December 31, 2020, three (2019: one) of the Group’s customers individually exceeded 10.0% of accounts receivable, net. The Group believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.
Interest relating to loans repaid is expensed in the period the repayment occurs.
The suppliers of the Group offer a standard one-year warranty to end customers of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis.
Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues.
The Group is required to make appropriation to reserve funds, comprising the statutory reserve fund and statutory staff welfare fund, based on after-tax net income determined with generally accepted accounting principles of the PRC (“PRC GAAP”).
Appropriations to the statutory reserve fund is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve fund is equal to 50% of the entities’ registered capital.
The Group uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
As of December 31, 2020 and 2019, the Group determined that the carrying values of cash and cash equivalents, restricted cash, accounts receivable, net, prepayments and other current assets, contract assets, bank borrowings, accounts payable, contract liabilities and other payables and accrued expenses and income tax payable approximate their fair values because of the short-term nature of these instruments.
Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Group considers the applicability and impact of all ASUs. The Group, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Group or may have minimal impact on its consolidated financial statements.
Recently adopted accounting pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial instruments, including trade receivables and off-balance sheet credit exposures. Under this guidance, an entity is required to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. This ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill, through the elimination of Step 2 from the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The Group adopted this ASU on a prospective basis in January 2020 and there was no effect on the Group’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The Group adopted this ASU in January 2020 and there was no effect on the consolidated financial statements or disclosures.
Recently issued accounting pronouncements not yet adopted
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, the Group must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The adoption of this standard is not expected to have a material impact on the Group’s consolidated financial statements or disclosures.
In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),” an amendment clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivative instruments. The guidance is effective for fiscal years beginning after December 15, 2020. ASU 2020-01 will become effective for the Group in fiscal 2022. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” this ASU affects a wide variety of Topics in the Codification. They apply to all reporting entities within the scope of the affected accounting guidance. More specifically, this ASU, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose because the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure Section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). Those amendments are not expected to change current practice. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early application of the amendments is permitted for and varies based on the entity. The amendments should be applied retrospectively and at the beginning of the period that includes the adoption date. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.
Certain reclassifications have been made to prior year amounts to conform with the current year presentation.
For entities that are consolidated, but not 100% owned, a portion of the income or loss and equity is allocated to owners other than the Group. The aggregate of the income or loss and corresponding equity that is not owned by the Group is included within non-controlling interests in the consolidated financial statements.
Non-controlling interests is presented as a separate component of equity in the consolidated balance sheets. Net income includes the net income attributable to the holders of non-controlling interests in the consolidated statements of operations and comprehensive income / (loss). Profits and losses are allocated to non-controlling interests in proportion to their relative ownership interests regardless of their basis.
Long-lived assets such as property, plant and equipment with finite lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment for the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Group recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets.
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Summary of significant accounting policies |
The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The accompanying consolidated financial statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated.
Subsidiaries are all entities over which the Group has control; has the power to appoint or remove the majority of the members of the board of directors; has the right to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
Our revenue is derived from long-term contracts for customers, as well as short-term contracts for customers. Accounting treatment for these contracts in accordance with Accounting Standards Update (“ASU”) 2014-09 (Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers), is as follows:
Performance obligations satisfied over time (Design, installiation and operation management services)
Recognition of performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Engineering projects typically span between 12 to 36 months. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Some contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle (design, installation and operation management services).
Revenues are recognized as our obligations are satisfied over time, using the ratio of project costs incurred to estimated total costs for each contract because of the continuous transfer of control to the customer as all of the work is performed at the customer’s site and, therefore, the customer controls the asset as it is being installed. This continuous transfer of control to the customer is further supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay the Group for costs incurred plus a reasonable profit and take control of any work in process. This cost-to-cost measure is used because management considers it to be the best available measure of progress on these contracts. Contract costs include all direct material, labor, subcontract and other costs.
Items excluded from cost-to-cost
Pre-contract costs are generally not material and are charged to expense as incurred, but in certain cases pre-contract recognition may be deferred if specific probability criteria are met.
Variable consideration
Contract modifications through change orders, claims and incentives are routine in the performance of the Group’s contracts to account for changes in the contract specifications or requirements. In most instances, contract modifications are not distinct from the existing contract due to the significant integration of services provided in the contract and are accounted for as a modification of the existing contract and performance obligation. Either the Group or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Change orders that are unapproved as to both price and scope are evaluated as claims. The Group considers claims to be amounts in excess of approved contract prices that the Group seeks to collect from its customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.
The Group estimates variable consideration for a performance obligation at the most likely amount to which the Group expects to be entitled (or the most likely amount the Group expects to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which the Group will be entitled (or will incur in the case of liquidated damages). The Group includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Group’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Group.
The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in the Group’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.
Performance obligations satisfied at a point-in-time (Sales of equipment)
Revenue for our sales contracts is recognized at a point in time. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been delivered to the point of receipt by customer.
Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately RMB28,589,000, RMB19,018,000 and RMB14,363,000 for the years ended December 31, 2020, 2019 and 2018 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations.
The Group follows the liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Group also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized.
The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Group does not believe it has any uncertain tax positions through the periods ended December 31, 2020, 2019 and 2018 respectively which would have a material impact on the Group’s consolidated financial statements.
The Group files tax returns in the PRC. The tax returns for 2020, 2019 and 2018 are subject to examination by the PRC taxing authorities,commencing with the first year filed.
Cash and cash equivalents consist of bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal and uninsured. There were no cash equivalents as of December 31, 2020 and 2019.
The Group does not charge interest to its customers and carries its customer receivables at their face amounts, less an allowance for doubtful accounts. As is common practice in the industry, the Group classifies all accounts receivable as current assets.
The Group grants trade credit, on a non-collateralized basis, to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Group analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.
For performance obligations satisfied over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g. weekly or monthly) or upon achievement of contractual milestones. Typically, the Group’s bills for advances or deposits from its customers before revenue are recognized, resulting in contract liabilities. However, the Group occasionally bills subsequent to revenue recognition, resulting in contract assets.
Inventories are measured using the weighted average method and are stated at the lower of cost or net realizable value. Cost of finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity.
Property, plant and equipment is carried at cost. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in consolidated income from operations. The cost of maintenance and repairs is charged to expense as incurred. Property, plant and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property, plant and equipment exceeds its fair value, an impairment charge would be recorded in the consolidated statement of operations.
Land in the PRC is owned by the PRC government. The government in the PRC, according to PRC Law, may sell the right to use the land for a specific period of time. Thus, all of the Group’s land purchases in the PRC are considered to be leasehold land and are classified as land use right.
Depreciation of property, plant and equipment and amortization of land use right are computed using the straight-line method over the assets’ estimated useful lives as follows:
The Group is currently amortizing its acquired intangible assets, consisted of patents and others, with finite-lived over periods generally ranging between three to twenty years.
Our finite-lived intangible assets are amortized over their estimated remaining useful economic lives. When events or changes in circumstances indicate that finite-lived intangible assets may be impaired, an evaluation is performed. If the asset or asset group fails the recoverability test, we perform a fair value measurement to determine and record an impairment charge. No impairment loss of intangible assets for the years ended December 31, 2020, 2019 and 2018 respectively.
Government grant income consists of receipt of funds to subsidize the investment cost of technical development in China. No present or future obligation arises from the receipt of such amount.
Government grants are recognized in the consolidated balance sheet initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognized as income in the consolidated statement of operations on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognized in the consolidated statement of operations over the useful life of the asset by way of reduced depreciation expenses.
The Group adopted ASU No. 2016-02, Leases (Topic 842). The Group leases certain equipment under finance leases. The economic substance of the leases is a financing transaction for acquisition of the equipment. Accordingly, the right-of-use assets for these leases are included on the Group’s consolidated balance sheets in property, plant and equipment, net of accumulated depreciation, amortization and impairment losses, with a corresponding amount recorded in current portion of long-term finance lease obligations. The finance lease assets are amortized over the life of the lease or, if shorter, the life of the leased asset, on a straight-line basis and included in depreciation expense. The financing component associated with finance lease obligations is included in interest expense. Generally, for the Group’s finance leases an implicit rate to calculate present value is provided in the lease agreement, however if a rate in not provided the Group determines this rate by estimating the Group’s incremental borrowing rate, utilizing the borrowing rates associated with the Group’s various debt instruments.
The Group determines if an arrangement is a lease at inception. Lease liabilities are the Group’s obligation to make lease payments arising from a lease and are measured on a discounted basis.
Paid in capital refers to the registered capital paid up by the shareholders of the Company.
At December 31, 2020, there were 82,572,000 shares (2019: 82,572,000 shares) issued.
The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Group require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from contracts over time, contract assets and contract liabilities. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.
Entities are considered to be related to the Group if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Group. Related parties also include principal owners of the Group, its management, members of the immediate families of principal owners of the Group and its management and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
The Group computes net income per ordinary share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited are computed by dividing net income attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited by the weighted average number of ordinary shares outstanding during the period.
The suppliers of the Group offer a standard one-year warranty to end customer of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis.
Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues.
Interest relating to loans repaid is expensed in the period the repayment occurs.
Financial instruments that potentially subject the Group to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable, net. The Group maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions.
The Group is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Group’s top five customers accounted for approximately 39%, 40%, and 31% of consolidated revenues for the years ended December 31, 2020, 2019 and 2018, respectively. For the years ended December 31, 2020, 2019 and 2018, one customer accounted for 16%, 17% and 14% of annual revenues, respectively.
The Group grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, general contractors, owners and managers of industrial properties.
Consequently, the Group is subject to potential credit risk related to changes in business and economic factors. At December 31, 2020 and 2019, none of the Group’s customers individually exceeded 10.0% of accounts receivable. The Group believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.
The Group is required to make appropriation to reserve, comprising the PRC statutory reserve, based on after-tax net income determined with generally accepted accounting principles of the PRC (“PRC GAAP”).
Appropriations to the PRC statutory reserve are required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital.
The Group uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
As of December 31, 2020 and 2019, the Group determined that the carrying values of cash and cash equivalents, accounts receivable, net, prepayments and other current assets, contract assets, bank borrowings, accounts payable, other payables and accrued expenses and contract liabilities approximate their fair values because of the short-term nature of these instruments.
The Group has elected to apply the measurement alternative to equity securities without readily determinable fair values. As such, the Group’s non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the investee.
Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Group considers the applicability and impact of all ASUs. The Group, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Group or may have minimal impact on its consolidated financial statements.
Recently adopted accounting pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial instruments, including trade receivables and off-balance sheet credit exposures. Under this guidance, an entity is required to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. This ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The Group adopted this ASU in January 2020 and there was no effect on the consolidated financial statements or disclosures.
Recently issued accounting pronouncements not yet adopted
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, the Group must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The adoption of this standard is not expected to have a material impact on the Group’s consolidated financial statements or disclosures.
Recently issued accounting pronouncements not yet adopted
In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),” an amendment clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivative instruments. The guidance is effective for fiscal years beginning after December 15, 2020. ASU 2020-01 will become effective for the Group in fiscal 2022. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” this ASU affects a wide variety of Topics in the Codification. They apply to all reporting entities within the scope of the affected accounting guidance. More specifically, this ASU, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose because the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure Section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). Those amendments are not expected to change current practice. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early application of the amendments is permitted for and varies based on the entity. The amendments should be applied retrospectively and at the beginning of the period that includes the adoption date. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.
For entities that are consolidated, but not 100% owned, a portion of the income or loss and equity is allocated to owners other than the Group. The aggregate of the income or loss and corresponding equity that is not owned by the Group is included within non-controlling interests in the consolidated financial statements.
Non-controlling interests is presented as a separate component of equity in the consolidated balance sheets. Net income includes the net income attributable to the holders of non-controlling interests in the consolidated statements of operations and comprehensive income /(loss). Profits and losses are allocated to non-controlling interests in proportion to their relative ownership interests regardless of their basis.
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Lease obligations |
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Lease obligations | The Group has operating leases primarily for office space. The Group’s leases have remaining lease terms of several months to two years.
The components of lease expense are as follows:
Supplemental consolidated cash flow information related to leases is as follows:
Supplemental consolidated balance sheet information related to leases is as follows:
Maturities of lease liabilities are as follows:
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ZHEJIANG TIANLAN | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease obligations | The Group has finance leases primarily for equipment.
The components of lease expense are as follows:
Supplemental consolidated cash flow information related to leases is as follows:
Supplemental consolidated balance sheet information related to leases is as follows:
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Accounts receivable, net |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounts receivable, net | Accounts receivable, net consisted of the following at December 31:
The roll-forward of activity in the allowance for doubtful accounts was as follows for the years ended December 31:
The following is an aging analysis of accounts receivable, net at December 31:
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ZHEJIANG TIANLAN | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable, net | Accounts receivable, net consisted of the following at December 31:
The roll-forward of activity in the allowance for doubtful accounts was as follows for the years ended December 31:
The following is an aging analysis of accounts receivable, net at December 31:
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Prepayments and other current assets |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Prepayments and other current assets | Prepayment and other current assets mainly represent deposits for purchases and services, rental and utilities deposits, and prepaid expenses.
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ZHEJIANG TIANLAN | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepayments and other current assets | Prepayments and other current assets mainly represent deposits paid for bidding projects, purchases, services and finance leases and prepaid expenses.
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Contract assets and liabilities |
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Contract assets and liabilities | Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the timing of costs incurred on work performed does not coincide with the billing terms.
The Group’s consolidated balance sheets present contract assets which contains earned unbilled revenue associated with contract work that has been completed but not paid by customers, that are generally due once the job is completed and approved.
Contract assets consisted of the following at December 31:
The Group’s consolidated balance sheets present contract liabilities which contains deferred revenue (previously identified as billings in excess of costs and estimated earnings on uncompleted contracts).
Contract liabilities consisted of the following at December 31:
The following table provides information about contract assets and contract liabilities from contracts with customers:
The difference between the opening and closing balances of the Group’s contract assets and contract liabilities primarily results from the timing of the Group’s billings in relation to its performance of work. The amounts of revenue recognized in the period that were included in the opening contract liability balances were US$1,214,000 and US$1,225,000 for the years ended December 31, 2020 and 2019, respectively. The revenue consists primarily of work performed on previous billings to customers.
The net liabilities position for contracts in process consisted of the following at December 31:
The net liabilities position for contracts in process is included within the contract asset and contract liability in the accompanying consolidated balance sheets as follows at December 31:
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ZHEJIANG TIANLAN | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract assets and liabilities | Contracts with customers usually stipulate the timing of payment, which is defined by the terms found within the various contracts under which work was performed during the period. Therefore, contract assets and liabilities are created when the timing of costs incurred on work performed does not coincide with the billing terms.
The Group’s consolidated balance sheets present contract assets which contains unbilled revenue associated with contract work that has been completed but not paid by customers, that are generally due once the job is completed and approved.
Contract assets consisted of the following at December 31:
The Group’s consolidated balance sheets present contract liabilities which contain deferred revenue (previously identified as billings in excess of costs and estimated earnings on uncompleted contracts).
Contract liabilities consisted of the following at December 31:
The following table provides information about contract assets and contract liabilities from contracts with customers at December 31:
The difference between the opening and closing balances of the Group’s contract assets and contract liabilities primarily results from the timing of the Group’s billings in relation to its performance of work.
The net asset position for contracts in process consisted of the following at December 31:
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Inventories |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Inventories |
Management continuously reviews obsolete and slow moving inventories and assesses the inventory valuation to determine if the write-down of inventories is deemed appropriate. For the years ended December 31, 2020, and 2019, write-down of inventories amounted to US$13,000 and US$35,000, respectively, which were charged to cost of revenue in consolidated statements of operations and comprehensive income / (loss).
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Inventories |
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Short-term and long-term investments |
12 Months Ended |
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Dec. 31, 2020 | |
ZHEJIANG TIANLAN | |
Short-term and long-term investments | The Group's short-term investments consist of wealth management products and long-term investments consist of minority ownership interests in Nil (2019: one) limited liability company, generally from private equity arrangements. These investments are carried under the equity method of accounting, with changes in the carrying value reported as realized gains or losses in the consolidated financial statements.
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Property, plant and equipment, net |
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Property, plant and equipment |
* Far East earns rental income from a property in Beijing, PRC for which it does not hold the title. Far East is investigating various ways in which to obtain the title but has not formulated a specific plan as of the date of issuance of this consolidated financial statements. The net book value of the property at December 31, 2020 is approximately US$92,000 (2019: US$96,000).
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Property, plant and equipment |
At December 31, 2020, the net book value of property, plant and equipment pledged as security for the Company’s bank loans and third party loans amounted to approximately RMB34,403,000 (2019: RMB84,598,000).
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Investments in affiliates |
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Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in affiliates | Investments in affiliates are accounted for using the equity method of accounting.
Far East is holding 19.4% (2019: 19.4%) equity interests in Blue Sky, a company incorporated in the PRC, with total cost of investment US$5,540,000. Blue Sky provides a comprehensive service for design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted from various boilers and industrial furnaces of power plants, steel works and chemical plants since 2000.
Blue Sky has listed its shares on the New Third Board in the PRC since November 17, 2015 and suspended trading from August 15, 2017 and resumed trading on February 2, 2018 and suspended trading from November 24, 2020 and resumed trading on January 6, 2021.
The Group’s interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation on both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process and exercise significant influence.
A summary of the financial information of the affiliate, Blue Sky, is set forth below:
Far East previously held 20% equity interests in Zhejiang Jia Huan Electronic Co. Ltd. (“Jia Huan”), a company incorporated in the PRC, with total cost of investment US$2,486,000. Jia Huan provides a comprehensive service for environmental protection business since 1969 and is based in Jin Hua, Zhejiang. On March 5, 2018, Far East entered into an Equity Transfer Agreement to sell this 20% equity stake of Jia Huan for a purchase price of RMB31,312,500 to Ms. Jin Lijuan, the wife of the holder of the remaining 80% equity stake of Jia Huan. In accordance with the terms of the Agreement, all approvals and registrations with the relevant governmental authorities were obtained, the closing of the transaction has been completed, and the Purchaser paid the Purchase Price to the Company, in full in May 2018. The Company made gain of US$1,522,000 on this disposal.
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Intangible assets, net |
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Intangible assets, net |
At December 31, 2020, estimated future intangible assets amortization expense for the each of the next five years and thereafter was as follows:
At December 31, 2019, estimated future intangible assets amortization expense for the each of the next five years and thereafter was as follows:
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Land use right, net |
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Land use right, net |
At December 31, 2020, the land use right pledged as security for the Company’s bank loans and third party’s loans amounted to approximately RMB4,463,000 (2019: RMB5,291,000).
As of December 31, 2020, estimated future land use right amortization expense for the each of the next five years and thereafter was as follows:
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Bank borrowings |
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Bank borrowings |
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Other payables and accrued expenses |
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Other payables and accrued expenses | Other payables and accrued expenses mainly represent deposits received from customers and accruals for operating expenses.
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Ordinary share |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ordinary share | During the years ended December 31, 2018 and 2020, there was no movement with the Company’s issued ordinary shares and outstanding shares.
On October 8, 2019, the Company issued bonus shares at the rate of one ordinary share for every two ordinary shares held, creating 1,030,950 new shares of common stock.
Number of outstanding shares at year end of:
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Goodwill |
12 Months Ended |
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Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Reporting units - The Group’s reporting units consist of its trading and manufacturing and engineering segments. Goodwill is not amortized, but instead is reviewed for impairment at least annually during the fourth quarter of each year at the reporting level, absent any interim indicators of impairment or other factors requiring an assessment.
Annual impairment assessment - For our 2020 annual impairment test we performed a qualitative assessment, using information as of October 1. Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. We determined there were no factors indicating the need to perform a quantitative goodwill impairment test and concluded that it is more likely than not the fair value of our reporting units is greater than their carrying value and thus there was no impairment to goodwill.
In addition to our annual review, we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value of a reporting unit may be greater than fair value. Factors that could trigger an interim impairment review include, but are not limited to, significant adverse changes in the business climate which may be indicated by a decline in our market capitalization or decline in operating results. No impairments were recorded to our goodwill during the years ended December 31, 2020, 2019 and 2018. No material events or changes occurred between the testing date and year end to trigger a subsequent impairment review.
At December 31, 2020 and 2019, we had goodwill for our engineering segment with a carrying amount of $1,071,000 and $1,071,000, respectively.
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PRC statutory reserves |
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Dec. 31, 2020 | |||||||
Prc Statutory Reserves | |||||||
PRC statutory reserves | Under the relevant PRC laws and regulations, the PRC subsidiaries are required to appropriate a certain percentage of their respective net income to two statutory funds i.e. the statutory reserve fund and the statutory staff welfare fund. The PRC subsidiaries can also appropriate certain amount of its net income to the enterprise expansion fund.
Pursuant to applicable PRC laws and regulations, the PRC subsidiaries are required to allocate at least 10% of its net income to the statutory reserve fund until such fund reaches 50% of its registered capital. The statutory reserve fund can be utilised upon the approval by the relevant authorities, to offset accumulated losses or to increase its registered capital, provided that such fund be maintained at a minimum of 25% of its registered capital.
Under the PRC laws and regulations, the PRC subsidiaries are restricted in their ability to transfer certain of its net assets in the form of dividend payments, loans or advances. The amounts restricted include paid-in capital and statutory reserves, as determined pursuant to PRC generally accepted accounting principles, totaling US$3,174,000 as at December 31, 2020 (2019: US$3,174,000 and 2018: US$3,174,000).
Pursuant to applicable PRC laws and regulations, the PRC subsidiaries are required to allocate a certain amount of its net income to the statutory staff welfare fund determined by it. The statutory staff welfare fund can only be used to provide staff welfare facilities and other collective benefits to its employees. This fund is non-distributable other than upon liquidation of the PRC subsidiaries.
The enterprise expansion fund shall only be used to make up losses, expand the PRC subsidiaries’ production operations, or increase the capital of the subsidiaries. The enterprise expansion fund can be utilised upon approval by relevant authorities, to convert into registered capital and issue bonus capital to existing investors, provided that such fund be maintained at a minimum of 25% of its registered capital.
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Other taxes payable |
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Dec. 31, 2020 | |
ZHEJIANG TIANLAN | |
Other taxes payable | Other taxes payable mainly comprise Valued-Added Tax (“VAT”). The Group is subject to output VAT levied at the rate of 3% to 13 % (2019: 9% to 13%) of the revenue from sales of equipment. The input VAT paid on purchases of materials and other direct inputs can be used to offset the output VAT levied on operating revenue to determine the net VAT payable or recoverable.
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Capital reserve |
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Dec. 31, 2020 | |
ZHEJIANG TIANLAN | |
Capital reserve | Capital reserve represents capital contributions from shareholders in excess of the paid-in capital amount and capitalization of gain on disposal of subsidiaries to the shareholders in previous years .
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Other income / (losses), net |
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* The amount represents salaries and wage subsidies granted under Anti-Epidemic Fund by the Government of the Hong Kong Special Administrative Region for the use of paying wages of employees from June to November 2020.
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Other income / (losses), net | Other income
Other losses
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Income taxes |
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Income taxes | No income tax arose in the United States of America by the Group for the years ended December 31, 2020, 2019 and 2018.
The Company and Pact Asia Pacific Limited are exempt from taxation in the British Virgin Islands (“BVI”).
Far East and Euro Tech (China) Limited provided for Hong Kong profits tax at a rate of 8.25% on assessable profits up to US$256,000; and 16.5% on any part of assessable profits over US$256,000 in year 2020 (2019 and 2018: 16.5%) on the basis of their income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for profits tax purposes.
Euro Tech Trading (Shanghai) Limited (“ETTS”), a subsidiary of Far East, provides for PRC Enterprise Income Tax (“EIT”) at a rate of 25% (2019 and 2018: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2020, ETTS had an assessable loss carried forward of US$604,778 as agreed by the local tax authority to offset its profit for the forth coming years (2019: US$518,328 and 2018: US$801,751). Such loss will expire in 5 years.
Shanghai Euro Tech Limited (“SET”), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2019 and 2018: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2020, SET had an assessable loss carried forward of US$658,733 as agreed by the local tax authority to offset its profit for the forth coming years (2019: US$444,192 and 2018: US$317,098). Such loss will expire in 5 years.
Shanghai Euro Tech Environmental Engineering Company Limited (“SETEE”), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2019 and 2018: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2020, SETEE had an assessable loss carried forward of US$34,032 as agreed by the local tax authority to offset its profit for the forth coming years (2019: US$380,591 and 2018: US$854,388). Such loss will expire in 5 years.
Yixing Pact Environmental Technology Co. Ltd. (“Yixing”), a subsidiary of Far East, provides for PRC Enterprise Income Tax at a rate of 25% (2019 and 2018: 25%), after offsetting losses brought forward, if any, on the basis of its income for financial reporting purposes, adjusting for income and expense items which are not assessable or deductible for PRC Enterprise Income Tax purposes. As of December 31, 2020, Yixing had an assessable loss carried forward of US$2,304,828 as agreed by the local tax authority to offset its profit for the forth coming years (2019: US$1,664,275 and 2018: US$1,228,223). Such loss will expire in 5 years.
Under the New Enterprise Income Tax Law and the implementation rules, profits of the PRC subsidiaries earned on or after January 1, 2008 and distributed by the PRC subsidiaries to foreign holding company are subject to a withholding tax at a rate of 10% unless reduced by tax treaty. Aggregate undistributed earnings of Far East’s subsidiaries located in the PRC that are available for distribution to Far East of approximately US$0.6 million at December 31, 2020 (2019: US$0.6 million and 2018: US$0.6 million) are intended to be reinvested, and accordingly, no deferred taxation has been made for the PRC dividend withholding taxes that would be payable upon the distribution of those amounts to Far East. Distributions made out of pre January 1, 2008 retained earnings will not be subject to the withholding tax.
The Company and its subsidiaries are based in Hong Kong and PRC and file Hong Kong profits tax return and PRC EIT return, respectively. The components of the (provision) / credit for income taxes expense / (credit) were as follows:
The items comprising the difference between income taxes computed at the Hong Kong profits tax and PRC EIT statutory tax rates in effect for 2020, 2019 and 2018 and our effective tax rates were as follows:
The components of deferred tax (liabilities) / assets are as follows:
Uncertain tax positions
As a result of the Group’s analysis, management has determined that the Group does not have any material uncertain tax positions.
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Income taxes | According to relevant PRC tax laws and regulations, entities incorporated in the PRC are subject to Enterprise Income Tax (“EIT”) at a statutory rate of 25% or reduced national EIT rates of 15% for certain High and New Technology Enterprises (“HNTE”) on PRC taxable income. Zhejiang Tianlan Environmental Protection Technology Company Limited and Hangzhou Tianlan Environmental Protection Equipment Company Limited are classified as HNTE which enjoy a preferential tax rate of 15%.
During the years ended December 31, 2020 and 2019, the PRC tax laws and regulations have launched a tax reduction scheme for small enterprises, Hangzhou Tianlan Pure Environmental Protection Technology Company Limited, Hangzhou Tiancan Environmental Technology Company Limited, Zhejiang Tianlan Environmental Engineering and Design Company Limited and Zhejiang Tianlan Environmental Protection Engineering Company Limited are entitled to enjoy this tax benefit. As such, they are subjects to Enterprise Income Tax rate of 20% only.
The Company and its subsidiaries are based in the PRC and file an EIT return. The components of the provision for income tax expense/(credit) were as follows:
The items comprising the difference between income tax computed at the EIT statutory rates in effect for 2020, 2019 and 2018 and our effective tax rates were as follows:
The components of deferred tax assets are as follows:
Uncertain tax positions
As a result of the Group’s analysis, management has determined that the Group does not have any material uncertain tax positions.
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Net income per ordinary share |
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Dec. 31, 2020 | |||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||
Net income per ordinary share | The calculation of the basic and diluted net income per ordinary share is based on the following data:
The common stock equivalents are anti-dilutive because of the loss for the year.
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Stock options |
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Stock options | 2019 Stock Option and Incentive Plan
In April 2019, the Board of Directors approved the adoption of the 2019 Stock Option and Incentive Plan (the “Plan”). The Plan was also subsequently approved under a resolution of the Company's shareholders. The Plan provides for the granting of up to 300,000 Ordinary Shares (the “Share Limit”), in the form of options to Officers, Directors and Key Employees who perform services which contribute to the successful performance of the Company and its subsidiaries. In addition, the Plan provides that, on the first day of each fiscal year commencing on January 1, 2020, the Share Limit shall automatically be increased by that number of shares equal to 5% of the number of Ordinary Shares outstanding as of such date.
The Board of Directors or a committee (the “Committee”) appointed by the Board of Directors administers the Plan.
Appropriate adjustment in the maximum number of Ordinary Shares issuable pursuant to this Plan, the maximum number of Ordinary Shares with respect to which options may be granted within any 12-month period to any participant during the duration of this Plan, the number of shares subject to options granted under this Plan, and the exercise price with respect to options, shall be made to give effect to any increase or decrease in the number of issued Ordinary Shares resulting from a subdivision or consolidation of shares whether through reorganization, recapitalization, division of shares, reverse share split, spin-off, split-off, spin-out, or other distribution of assets to shareholders, issue of bonus shares or combination of shares, assumption and conversion of outstanding options due to an acquisition by the Company of the shares, stock or assets of any other company or corporation, other increase or decrease in the number of such shares outstanding effected, without receipt of consideration by the Company, or any other occurrence for which the Committee determines an adjustment is appropriate.
The purchase price per share of the Ordinary Shares to be paid upon the exercise of the option must be at least 100% of the fair market value of an Ordinary Shares on the date on which the option was granted. Under the Plan, if the Ordinary Shares are principally traded on a national securities exchange or the Nasdaq Global Market or Capital Market at the time of grant, the Company is required to use, at fair market value, the average of the closing prices of the Ordinary Shares for the ten consecutive trading days immediately before the date of grant. If the Ordinary Shares are traded on a national securities exchange or the Nasdaq Stock Global Market or Capital Market, but no closing prices are reported for such ten-day period, or if the Ordinary Shares are principally traded in the over-the-counter market, the Company is required to use, as fair market value, the average of the mean between the bid and asked prices reported for the Company’s Ordinary Shares at the close of trading during such ten-day period before the date of grant. If the Ordinary Shares are traded neither on a national securities exchange, one of the Nasdaq’s Markets nor in the over-the-counter market or if bid and asked prices are otherwise not available, the fair market value of the Ordinary Shares on the date of grant will be determined in good faith by the Committee or the Board of Directors, as the case may be.
The Board of Directors or the Committee, as the case may be, determines, at the time of grant, when each option granted under the Plan will become exercisable. Notwithstanding the foregoing, all options held by a key employee of the Company or its subsidiaries become immediately exercisable, whether or not exercisable at the time, upon the death or disability, and shall be exercisable within twelve (12) months after the date of death or disability, but in no event later than the expiration date of such Options.
No option is to be exercisable more than ten years from the date the option is granted.
Payment of Exercise Price for Options. Under the Plans, payment for shares purchased upon exercise of an option may be made by any of the following methods, subject to certain requirements: (i) in cash, (ii) in Ordinary Shares which have been held by the participant for not less than six months prior to the exercise of the option, valued at its Fair Market Value (as defined) on the date of exercise, (iii) in cash by a broker-dealer to whom the holder of the option has submitted an exercise notice consisting of a fully endorsed option, or (iv) by such other medium of payment as the Board or the Committee, as applicable, in its sole discretion, shall authorize, or by any combination of (i), (ii), or (iii), at the sole discretion of the Board or the Committee, as applicable, or in any manner provided in the option agreement, except by directing the Company to withhold Ordinary Shares otherwise issuable upon the exercise of the Option in payment of the exercise price.
Transfer of Options. Under the Plans, an option may not be sold, assigned or otherwise transferred except to:
These assignments are only permitted if the assigning option holder does not receive any compensation in connection with the assignment and the assignment is expressly approved by the Board or Committee, as the case may be.
The Company indemnifies the members of any Committee and its delegates and the Chief Executive Officer against (a) the reasonable expenses (as such expenses are incurred), including attorneys’ fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding (or in connection with any appeal therein), to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any option granted under the Plan; and (b) all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member or delegatee, as applicable, is liable for gross negligence or gross misconduct in the performance of his or her duties; provided that within 60 days after institution of any such action, suit or proceeding a Committee member or delegatee shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same.
The Board may terminate, suspend, or amend the Plan at any time without the authorization of shareholders to the extent allowed by law or the rules of any market on which the Company’s shares are then listed or quoted.
During the year ended December 31, 2019, the Company granted such options to its officers, directors and employees, which allow them to purchase up to 51,000 ordinary shares. The exercise price of all options granted is US$2.60 per share. The stock options granted are exercisable on January 1, 2022 and terminate on April 18, 2029.
The Company estimate the fair value of the options granted under the Binomial pricing model at US$2.324 per share.
Changes in outstanding options under various plans mentioned above were as follows:
As of December 31, 2020, 2019 and 2018, there was no unrecognized stock-based compensation expense related to unvested stock options. The compensation expense for the year is US$54,157 (2019: US$10,358; 2018: US$ Nil).
The Group applies the provisions of ASC No. 718-10, which requires to recognise expense related to the fair value of stock-based compensation awards, including employee stock options.
The Binomial option-pricing model is used to estimate the fair value of the options granted. This requires the input of subjective assumptions, including the expected volatility of stock price, expected option term, expected risk-free rate over the expected option term and expected dividend yield rate over the expected option term. Because changes in subjective input assumptions can materially affect the fair value estimate, in directors’ opinion, the existing model may not necessarily provide a realisable measure of the fair value of the stock options. Expected volatility is based on historical volatility in the 180 days prior to the issue of the options. Expected option term and dividend yield rate are based on historical trends. Expected risk-free rate is based on US Treasury securities with similar maturities as the expected terms of the options at the date of grant.
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Pension plan |
12 Months Ended |
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Dec. 31, 2020 | |
Pension plan | Prior to December 1, 2000, Far East had only one defined contribution pension plan for all its Hong Kong employees. Under this plan, all employees were entitled to pension benefits equal to their own contributions plus 50% to 100% of individual fund account balances contributed by Far East, depending on their years of service with Far East. Far East was required to make specific contributions at approximately 10% of the basic salaries of the employees to an independent fund management company.
With the introduction of the Mandatory Provident Fund Scheme (“MPF scheme”), a defined contribution scheme managed by an independent trustee on December 1, 2000, Far East and its employees who joined Far East subsequently make monthly contributions to the scheme at 5% of the employee’s cash income as defined under the Mandatory Provident Fund Schemes Ordinance. Under the MPF scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employees' relevant income, subject to a cap of monthly relevant income of HK$30,000. Contributions to the plan vest immediately.
During the years ended December 31, 2020, 2019 and 2018, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately US$104,000, US$332,000 and US$278,000 respectively.
As stipulated by the rules and regulations in the PRC, the PRC’s subsidiaries contributes to state-sponsored retirement plans for its employees in Mainland China. PRC’s subsidiaries’ contribution approximately 16% of the basic salaries of its employees, and have no further obligations for the actual payment of pension or post-retirement benefits beyond the annual contributions. The state-sponsored retirement plans are responsible for the entire pension obligations payable to retired employees.
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ZHEJIANG TIANLAN | |
Pension plan | As stipulated by the rules and regulations in the PRC, the Group contributes to state-sponsored retirement plans for its employees in Mainland China. The Group contributes approximately 12% to 14% of the basic salaries of its employees, and has no further obligations for the actual payment of pension or post-retirement benefits beyond the annual contributions. The state-sponsored retirement plans are responsible for the entire pension obligations payable to retired employees.
During the years ended December 31, 2020, 2019 and 2018, the aggregate contributions of the Group to the aforementioned pension plans and retirement benefit schemes were approximately RMB5,645,000, RMB5,449,000 and RMB4,692,000 respectively.
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Risk factors |
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Dec. 31, 2020 | |||||
Risk factors | Financial risk factors
The Group’s activities expose it to a variety of financial risks: credit risk and foreign exchange rate risk.
The Group has no significant concentration of credit risk, cash in banks in Hong Kong and PRC is insured with limit of approximately US$64,000 and US$72,000, respectively per bank per each depositor. Uninsured cash in banks and restricted cash balances in Hong Kong and PRC are of approximately US$4,594,000 (2019: US$6,468,000). Cash transactions are limited to high credit quality banks.
The Group operates in Hong Kong, the PRC and trades with both local and overseas customers and suppliers, and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to purchases in Hong Kong dollars, Renminbi and Euros. Foreign exchange risk arises from committed and unmatched future commercial transactions, such as confirmed import purchase orders and sales orders, recognized assets and liabilities, and net investment in the PRC operations.
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ZHEJIANG TIANLAN | |||||
Risk factors | Financial risk factors
The Group’s activities expose it mainly to credit risk.
Credit risk
The Group has no significant concentration of credit risk, cash in banks in PRC is insured with limit of approximately RMB500,000, per bank per each depositor. Uninsured cash in banks and restricted cash balances in PRC are of approximately RMB44,494,000 (2019: RMB7,258,000). Cash transactions are limited to high credit quality banks.
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Related party transactions |
12 Months Ended |
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Dec. 31, 2020 | |
Related party transactions | Other than compensation to directors and stock options available to the directors and disposal of long-term investment to associate Blue Sky for a total consideration of approximately US$148,000 with nil gain or loss on disposal during the year ended December 31, 2020, there were no transactions with other related parties in the years 2020, 2019 and 2018.
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ZHEJIANG TIANLAN | |
Related party transactions | There were sales of certain shareholding in a subsidiary to a shareholder of the Company with gross sale proceeds of RMB510,000 in 2019, purchase of a subsidiary from shareholders of the Company with total consideration of approximately RMB4,590,000 (2019: RMB Nil), engineering service income from an investment of approximately RMB5,779,000 (2019: RMB Nil) and remuneration to key management personnel of approximately RMB1,400,000 (2019: RMB 1,473,000).
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Commitments and contingencies |
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Commitments and contingencies |
As at December 31, 2020 and 2019, the Group had various banking facilities available for overdraft and import and export credits from which the Group can draw up to approximately US$897,000 and US$897,000 respectively, of which approximately US$596,000 and US$778,000 were utilised for issuance of bank guarantees as security for the performance of various contracts with customers and import loans. The various banking facilities are secured by a bank deposit of approximately US$897,000 and various blanket counter indemnities and counter indemnities. The weighted average interest rate for import loans as at December 31, 2020 was 4.9% per annum (December 31, 2019: 4.9% per annum). For the years ended December 31, 2020 and 2019, the average dollar amount of the bank borrowings was approximately US$457,000 and US$92,000 respectively and average interest rates were approximately 4.9% and 4.9% per annum respectively for the years ended December 31, 2020 and 2019.
The Group granted the non-controlling interest of Yixing Pact Environmental Technology Co., Ltd. and Pact Asia Pacific Limited a put option, which is effective from 2009, requiring the Group to acquire part or all remaining shares of these two companies at a purchase price per share calculated by 5.2 times of their average net income for the three prior fiscal years divided by total number of shares outstanding at the time of exercise of such option. Such put option did not have an expiry date.
The Group carries insurance policies to cover various risks, primarily general liability, automobile liability, workers’ compensation and employee medical expenses under which we are liable to reimburse the insurance company for a portion of each claim paid.
To manage the risk of changes in material prices and subcontracting costs used in tendering bids for engineering contracts, most of the time, the Group obtains firm quotations from suppliers and subcontractors before submitting a bid. These quotations do not include any quantity guarantees. As soon as the Group is advised that its bid is successful, the Group enters into firm contracts with most of its materials suppliers and sub-contractors, thereby mitigating the risk of future price variations affecting the contract costs.
The Group is now and may in the future be involved as a party to various legal proceedings that are incidental to the ordinary course of business. Management, after consultation with legal counsel, does not believe that the outcome of these actions will have a material impact on the consolidated financial statements of the Group. There are no significant unresolved legal issues as of December 31, 2020 and 2019.
The Group accounts for loss contingencies in accordance with ASC Topic 450 and other related guidelines. As of December 31, 2020 and 2019, the Group’s management is of the opinion that there are no commitments and contingencies to account for.
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ZHEJIANG TIANLAN | |||||||||||||
Commitments and contingencies | (i) Insurance
The Group carries insurance policies to cover various risks, primarily general liability, automobile liability, workers’ compensation and employee medical expenses under which we are liable to reimburse the insurance company for a portion of each claim paid.
(ii) Purchase commitments
To manage the risk of changes in material prices and subcontracting costs used in tendering bids for contracts, most of the time, the Group obtains firm quotations from suppliers and subcontractors before submitting a bid. These quotations do not include any quantity guarantees. As soon as the Group is advised that its bid is successful, the Group enters into firm contracts with most of its materials suppliers and sub-contractors, thereby mitigating the risk of future price variations affecting the contract costs.
(iii) Litigation
The Group is now and may in the future be involved as a party to various legal proceedings that are incidental to the ordinary course of business. Management, after consultation with legal counsel, does not believe that the outcome of these actions will have a material impact on the consolidated financial statements of the Group. There are no significant unresolved legal issues as of December 31, 2020 and 2019.
(v) Contingencies
The Group accounts for loss contingencies in accordance with ASC Topic 450 and other related guidelines. As of December 31, 2020 and 2019, the Group’s management is of the opinion that there are no commitments and contingencies to account for.
(vi) Operating leases
The Group has no operating leases expense during the year ended December 31, 2020 (2019 and 2018: RMB Nil). At December 31, 2020, the Group has no future minimum lease payments under non-cancellable operating leases.
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Segment information |
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Segment information |
Operating income represents total revenues less operating expenses, excluding other expense, interest and income taxes. The identifiable assets by segment are those used in each segment’s operations. Intersegment transactions are not significant and have been eliminated to arrive at consolidated totals.
Geographical analysis of long-lived assets is as follows:
Details of individual suppliers accounting for more than 5% of the Group’s purchases are as follows:
Details of individual customers accounting for more than 5% of the Group’s revenue are as follows:
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Disaggregated revenue from contracts |
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Disaggregated revenue from contracts |
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Subsequent events |
12 Months Ended |
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Dec. 31, 2020 | |
Subsequent events | On February 11, 2021, the Company announced that the Company’s board of directors authorized the issuance of bonus shares (the “Bonus Shares”), which are issuable on March 2, 2021 to shareholders of record as of February 23, 2021 (the “Record Date”). Shareholders of record on the Record Date will receive two (2) ordinary shares for every three (3) ordinary shares held. All issuances resulting in a fractional share will be rounded down to the next whole share. |
ZHEJIANG TIANLAN | |
Subsequent events | On April 24, 2021, the director of the Company proposed a cash dividend of an aggregate of approximately RMB13,212,000, which dividend was paid to all holders of record subject to approval in shareholders’ annual general meeting.
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Summary of significant accounting policies (Policies) |
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Basis of presentation | The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). |
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Basis of consolidation | The accompanying consolidated financial statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated. |
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Subsidiaries | Subsidiaries are all entities over which the Group has control; has the power to appoint or remove the majority of the members of the board of directors; has the right to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
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Investments in affiliates | We account for our interest in an investment using the equity method of accounting per Accounting Standards Codification (“ASC”) No. 323, “Investments - Equity Method and Joint Ventures” if we are not the primary beneficiary of a VIE or do not have a controlling interest. The investment is recorded at cost and the carrying amount is adjusted periodically to recognize our proportionate share of income or loss, additional contributions made and dividends and capital distributions received. We record the effect of any impairment or other than temporary decrease in the value of the investment.
In the event a partially owned equity affiliate were to incur a loss and our cumulative proportionate share of the loss exceeded the carrying amount of the equity method investment, application of the equity method would be suspended and our proportionate share of further losses would not be recognized unless we committed to provide further financial support to the affiliate. We would resume application of the equity method once the affiliate became profitable and our proportionate share of the affiliate’s earnings equals our cumulative proportionate share of losses that were not recognized during the period the application of the equity method was suspended.
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Revenue recognition | Our revenue is derived from long-term contracts for customers in our engineering segment, as well as short-term contracts for customers in our trading and manufacturing segment. Accounting treatment for these contracts in accordance with Accounting Standards Update (“ASU”) 2014-09 (Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customer), is as follows:
Performance obligations satisfied over time (Engineering services)
Recognition of performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Engineering service projects typically span between several days to over 5 years. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. Some contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle (engineering).
Revenues are recognized as our obligations are satisfied over time, by reference to the progress towards complete satisfaction of that performance obligation.
If the Group expects the reference to progress certificates issued by the customers, with additional adjustments where necessary, depicts the Group’s performance in transferring control of goods or services promised to customers for individual projects, the Group satisfies the performance obligation over time and therefore, recognises revenue over time in accordance with the output method for measuring progress. Under output method, revenue recognition is based on the stage of completion of the contracts, provided that the stage of contract completion and the gross billing value of contracting work can be measured reliably. The stage of completion of a contract is established by reference to the construction works certified by customers.
Remaining performance obligations (“RPOs”)
RPOs represent the amount of revenues we expect to recognize in the future from our contract commitments on projects and are hereafter referred to as “Backlog”. Backlog includes the entire expected revenue values for subsidiary we consolidate. Backlog may not be indicative of future operating results, and projects included in Backlog may be canceled, modified or otherwise altered by customers.
The Group had the following backlog:
Unrecognized contract revenue which is expected to be recognized in next 12 months is approximately US$11,581,000.
Variable consideration
Contract modifications through change orders, claims and incentives are routine in the performance of the Group’s contracts to account for changes in the contract specifications or requirements. In most instances, contract modifications are not distinct from the existing contract due to the significant integration service provided in the contract and are accounted for as a modification of the existing contract and performance obligation. Either the Group or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Change orders that are unapproved as to both price and scope are evaluated as claims. The Group considers claims to be amounts in excess of approved contract prices that the Group seeks to collect from its customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.
The Group estimates variable consideration for a performance obligation at the most likely amount to which the Group expects to be entitled (or the most likely amount the Group expects to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which the Group will be entitled (or will be incurred in the case of liquidated damages). The Group includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Group’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Group.
The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in the Group’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.
Performance obligations satisfied at a point-in-time (Trading and manufacturing)
Revenue for our trading and manufacturing contracts is recognized at a point in time. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been delivered to the point of receipt by customer.
Rental income
Rental income from operating leases is recognized in consolidated statements of operations and comprehensive income / (loss) on a straight-line basis over the term of the relevant lease.
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Research and development costs | Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately US$497,000, US$35,000 and US$184,000 for the years ended December 31, 2020, 2019 and 2018 respectively and were included in “Selling and Administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss).
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Advertising and promotional expenses | Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately US$7,000, US$13,000 and US$16,000 for the years ended December 31, 2020, 2019 and 2018 respectively and were included in “Selling and Administrative expenses” in the Group’s consolidated statements of operations and comprehensive income / (loss).
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Income taxes | The Group follows the liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Group also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized.
The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Group does not believe it has any uncertain tax positions through the periods ended December 31, 2020, 2019 and 2018 respectively which would have a material impact on the Group’s consolidated financial statements.
The Group files tax returns in Hong Kong and the PRC. The tax returns for 2020, 2019 and 2018 are subject to examination by Hong Kong and PRC taxing authorities, commencing with the first year filed.
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Cash and cash equivalents | Cash and cash equivalents consist of cash on hand, and bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal. There were no cash equivalents as of December 31, 2020 and 2019.
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Restricted cash | Restricted cash represents cash deposits retained with banks in the PRC for issuance of performance guarantees to the customers and cash deposited by the Group into separate accounts and designated as collateral for standby letters of credit in the same amount in accordance with contractual agreements.
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Accounts receivable and allowance for doubtful accounts | The Group does not charge interest to its customers and carries its customer receivables at their face amounts, less an allowance for doubtful accounts. As is common practice in the industry, the Group classifies all accounts receivable as current assets.
The Group grants trade credit, on a non-collateralized basis, to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Group analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.
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Classification of contract assets and liabilities | For revenue recognized associated with its contracts with customers over time, for which the Group has an enforceable right to receive compensation. Many of our contracts contain specific provisions that determine when the Group can bill for its work performed under these contracts.
Any revenue earned on a contract that has not yet been billed to the customer is recorded as a contract asset on the Group’s consolidated balance sheets.
The Group’s consolidated balance sheets present contract liabilities that contain deferred revenue that represent any costs incurred on contracts in process for which revenue has not yet been recognized.
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Inventories | Inventories are measured using the first-in, first-out method and are stated at the lower of cost or net realizable value. Cost of finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity. Allowance is made for obsolete, slow moving or defective items, where appropriate.
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Property, plant and equipment and land use right, net | Property, plant and equipment is carried at cost. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in consolidated income from operations. The cost of maintenance and repairs is charged to expense as incurred. Property, plant and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property, plant and equipment exceeds its fair value, an impairment charge would be recorded in the consolidated statement of operations.
Depreciation of property, plant and equipment are computed using the straight-line method over the assets’ estimated useful lives as follows:
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Long-term investment | The Group has elected to apply the measurement alternative to equity securities without readily determinable fair values. As such, the Group’s non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the investee.
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Lease arrangements | In the ordinary course of business, the Group enters into a variety of operating lease arrangements.
Operating right-of-use leases.
Operating right-of-use leases are included in operating lease right-of-use assets, current portion of long-term operating lease obligations and long-term operating lease obligations, net of current maturities on the Group’s consolidated balance sheets, as appropriate. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Group’s leases do not provide an implicit rate to calculate present value, the Group determines this rate by estimating the Group’s incremental borrowing rate, utilizing the borrowing rates associated with the Group’s various debt instruments. The operating lease right-of-use asset also includes any lease payments made and initial direct costs incurred and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
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Goodwill | Goodwill is not amortized. The Group performs either a qualitative or quantitative assessment to review goodwill for impairment on an annual basis. This assessment is performed at the beginning of the fourth quarter, or when circumstances change, such as a significant adverse change in the business climate or the decision to sell a business, both of which would indicate that impairment may have occurred.
A qualitative assessment considers financial, industry, segment and macroeconomic factors, if the qualitative assessment indicates a potential for impairment, a quantitative assessment is performed to determine if impairment exists. The quantitative assessment begins with a comparison of the fair value of the reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss would be recognized in an amount equal to that excess, limited to the total amount of the goodwill allocated to the reporting unit. If the carrying value of goodwill exceeds its implied fair value, an impairment charge would be recorded in the statement of operations.
As a result of the annual qualitative review process in 2020 and 2019, the Group determined it was not necessary to perform a quantitative assessment.
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Foreign currency translation | The assets and liabilities of the Group’s subsidiaries denominated in currencies other than U.S. dollars are translated into U.S. dollars using the applicable exchange rates at the consolidated balance sheet date. For consolidated statements of operations and comprehensive income/(loss)’ items, amounts denominated in currencies other than U.S. dollars were translated into U.S. dollars using the average exchange rate during the period. Equity accounts were translated at their historical exchange rates. Net gains and losses resulting from translation of foreign currency on consolidated financial statements are included in the consolidated statements of stockholders’ equity as accumulated other comprehensive income. Foreign currency transaction gains and losses are reflected in the consolidated statements of operations and comprehensive income/(loss).
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Comprehensive income / (loss) | We account for comprehensive income in accordance with ASC No. 220, “Comprehensive Income”, which specifies the computation, presentation and disclosure requirements for comprehensive income / (loss). Comprehensive income / (loss) consists of net income / (loss) and foreign currency translation adjustments, primarily from fluctuations in foreign currency exchange rates of our foreign subsidiaries with a functional currency other than the U.S. dollar.
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Ordinary share | On November 22, 2011, the Company filed Amended and Restated Memorandum and Articles of Association with the Registry of Corporate Affairs of the BVI Financial Services Commission that on November 29, 2011 became effective as of the filing date to amend the Company’s ordinary shares of US$0.01 par value capital stock to no par value capital stock. Treasury stock is accounted for using the cost method. When treasury stock is reissued, the value is computed and recorded using a weighted-average basis.
On October 8, 2019, the Company issued bonus shares at the rate of one ordinary share for every two ordinary shares held, creating 1,030,950 new shares of common stock.
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Net income per ordinary share | The Group computes net income per ordinary share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to Euro Tech Holdings Company Limited are computed by dividing net income attributable to Euro Tech Holdings Company Limited by the weighted average number of ordinary shares outstanding during the period. The Group reports both basic earnings per share, which is based on the weighted average number of ordinary shares outstanding, and diluted earnings per share, which is based on the weighted average number of ordinary shares outstanding and all dilutive potential ordinary shares outstanding.
Outstanding stock options are the only dilutive potential shares of the Company.
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Stock-based compensation | The Group determines compensation expense for stock-based awards based on the estimated fair values at the grant date and recognizes the related compensation expense over the vesting period. The Group uses the straight-line amortization method to recognize compensation expense related to stock-based awards that have only service conditions. This method recognizes stock compensation expense on a straight-line basis over the requisite service period for the entire award.
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Use of estimates | The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Group require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from engineering contracts over time, the valuation of goodwill, and contract assets and contract liabilities. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.
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Related parties | Related parties are affiliates of the Group; entities for which investments are accounted for by the equity method by the Group; trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; principal owners of the Group; its management; members of the immediate families of principal owners of the Group and its management; and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Another party also is a related party if it can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
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Segment information | The Group reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Group’s reportable segments. The Group categorises its operations into two business segments: Trading and manufacturing, and Engineering.
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Concentrations | Financial instruments that potentially subject the Group to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable, net. The Group maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions.
The Group is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Group’s top customers accounting for more than 5% of the Group’s revenue generated approximately 23%, 34%, and 22% of consolidated revenues for the years ended December 31, 2020, 2019 and 2018, respectively. For the years ended December 31, 2020, 2019 and 2018, two customers (Customer A: 9%; Customer B: 8%), two customers (Customer A: 19%; Customer B: 10%) and one customer (Customer A: 15%) accounted for more than 10.0% of annual revenues, respectively.
The Group grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, general contractors, owners and managers of industrial properties and government departments.
Consequently, the Group is subject to potential credit risk related to changes in business and economic factors. At December 31, 2020, three (2019: one) of the Group’s customers individually exceeded 10.0% of accounts receivable, net. The Group believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.
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Finance costs | Interest relating to loans repaid is expensed in the period the repayment occurs.
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Warranties | The suppliers of the Group offer a standard one-year warranty to end customers of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis.
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Shipping and handling costs | Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues.
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Statutory reserves | The Group is required to make appropriation to reserve funds, comprising the statutory reserve fund and statutory staff welfare fund, based on after-tax net income determined with generally accepted accounting principles of the PRC (“PRC GAAP”).
Appropriations to the statutory reserve fund is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve fund is equal to 50% of the entities’ registered capital.
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Fair value measurements | The Group uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
As of December 31, 2020 and 2019, the Group determined that the carrying values of cash and cash equivalents, restricted cash, accounts receivable, net, prepayments and other current assets, contract assets, bank borrowings, accounts payable, contract liabilities and other payables and accrued expenses and income tax payable approximate their fair values because of the short-term nature of these instruments.
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Recent accounting pronouncements | Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Group considers the applicability and impact of all ASUs. The Group, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Group or may have minimal impact on its consolidated financial statements.
Recently adopted accounting pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial instruments, including trade receivables and off-balance sheet credit exposures. Under this guidance, an entity is required to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. This ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill, through the elimination of Step 2 from the goodwill impairment test. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The Group adopted this ASU on a prospective basis in January 2020 and there was no effect on the Group’s consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The Group adopted this ASU in January 2020 and there was no effect on the consolidated financial statements or disclosures.
Recently issued accounting pronouncements not yet adopted
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, the Group must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The adoption of this standard is not expected to have a material impact on the Group’s consolidated financial statements or disclosures.
In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),” an amendment clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivative instruments. The guidance is effective for fiscal years beginning after December 15, 2020. ASU 2020-01 will become effective for the Group in fiscal 2022. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” this ASU affects a wide variety of Topics in the Codification. They apply to all reporting entities within the scope of the affected accounting guidance. More specifically, this ASU, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose because the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure Section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). Those amendments are not expected to change current practice. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early application of the amendments is permitted for and varies based on the entity. The amendments should be applied retrospectively and at the beginning of the period that includes the adoption date. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.
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Reclassification | Certain reclassifications have been made to prior year amounts to conform with the current year presentation.
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Non-controlling interests | For entities that are consolidated, but not 100% owned, a portion of the income or loss and equity is allocated to owners other than the Group. The aggregate of the income or loss and corresponding equity that is not owned by the Group is included within non-controlling interests in the consolidated financial statements.
Non-controlling interests is presented as a separate component of equity in the consolidated balance sheets. Net income includes the net income attributable to the holders of non-controlling interests in the consolidated statements of operations and comprehensive income / (loss). Profits and losses are allocated to non-controlling interests in proportion to their relative ownership interests regardless of their basis.
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Impairment of long lived assets | Long-lived assets such as property, plant and equipment with finite lives are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be fully recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment for the long-lived assets by comparing the carrying value of the assets to an estimate of future undiscounted cash flows expected to be generated from the use of the assets and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the assets, the Group recognizes an impairment loss based on the excess of the carrying value of the assets over the fair value of the assets.
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ZHEJIANG TIANLAN | |||||||||||||||||||||||||||||||||||||
Basis of presentation | The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
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Basis of consolidation | The accompanying consolidated financial statements include the results of operations of the Company and its subsidiaries. Significant intercompany transactions and balances have been eliminated.
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Subsidiaries | Subsidiaries are all entities over which the Group has control; has the power to appoint or remove the majority of the members of the board of directors; has the right to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee under a statute or agreement among the shareholders or equity holders.
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Revenue recognition | Our revenue is derived from long-term contracts for customers, as well as short-term contracts for customers. Accounting treatment for these contracts in accordance with Accounting Standards Update (“ASU”) 2014-09 (Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers), is as follows:
Performance obligations satisfied over time (Design, installiation and operation management services)
Recognition of performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Engineering projects typically span between 12 to 36 months. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Some contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the project life cycle (design, installation and operation management services).
Revenues are recognized as our obligations are satisfied over time, using the ratio of project costs incurred to estimated total costs for each contract because of the continuous transfer of control to the customer as all of the work is performed at the customer’s site and, therefore, the customer controls the asset as it is being installed. This continuous transfer of control to the customer is further supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay the Group for costs incurred plus a reasonable profit and take control of any work in process. This cost-to-cost measure is used because management considers it to be the best available measure of progress on these contracts. Contract costs include all direct material, labor, subcontract and other costs.
Items excluded from cost-to-cost
Pre-contract costs are generally not material and are charged to expense as incurred, but in certain cases pre-contract recognition may be deferred if specific probability criteria are met.
Variable consideration
Contract modifications through change orders, claims and incentives are routine in the performance of the Group’s contracts to account for changes in the contract specifications or requirements. In most instances, contract modifications are not distinct from the existing contract due to the significant integration of services provided in the contract and are accounted for as a modification of the existing contract and performance obligation. Either the Group or its customers may initiate change orders, which may include changes in specifications or designs, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Change orders that are unapproved as to both price and scope are evaluated as claims. The Group considers claims to be amounts in excess of approved contract prices that the Group seeks to collect from its customers or others for customer-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.
The Group estimates variable consideration for a performance obligation at the most likely amount to which the Group expects to be entitled (or the most likely amount the Group expects to incur in the case of liquidated damages), utilizing estimation methods that best predict the amount of consideration to which the Group will be entitled (or will incur in the case of liquidated damages). The Group includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Group’s estimates of variable consideration and determination of whether to include estimated amounts in transaction price are based largely on an assessment of its anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Group.
The effect of variable consideration on the transaction price of a performance obligation is recognized as an adjustment to revenue on a cumulative catch-up basis. To the extent unapproved change orders and claims reflected in transaction price (or excluded from transaction price in the case of liquidated damages) are not resolved in the Group’s favor, or to the extent incentives reflected in transaction price are not earned, there could be reductions in, or reversals of, previously recognized revenue.
Performance obligations satisfied at a point-in-time (Sales of equipment)
Revenue for our sales contracts is recognized at a point in time. Sales are recognized when control of the products has transferred, being when the products are delivered to the customer. Delivery occurs when the products have been delivered to the point of receipt by customer.
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Research and development costs | Research and development costs (“R&D” costs) are expensed as incurred. The R&D costs amounted to approximately RMB28,589,000, RMB19,018,000 and RMB14,363,000 for the years ended December 31, 2020, 2019 and 2018 respectively and were included in “Selling and administrative expenses” in the Group’s consolidated statements of operations.
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Advertising and promotional expenses | Advertising and promotional expenses (“A&P” expenses) are expensed as incurred. The A&P expenses amounted to approximately RMB Nil, RMB Nil and RMB Nil for the years ended December 31, 2020, 2019 and 2018 respectively.
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Income taxes | The Group follows the liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recorded for future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the underlying assets or liabilities are recovered or settled. The Group also evaluates whether the recorded deferred tax assets and valuation allowances can be realized and, when necessary, reduces the amounts to what is expected to be realized.
The accounting guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Group does not believe it has any uncertain tax positions through the periods ended December 31, 2020, 2019 and 2018 respectively which would have a material impact on the Group’s consolidated financial statements.
The Group files tax returns in the PRC. The tax returns for 2020, 2019 and 2018 are subject to examination by the PRC taxing authorities,commencing with the first year filed.
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Cash and cash equivalents | Cash and cash equivalents consist of bank deposits with original maturities of three months or less, all of which are unrestricted as to withdrawal and uninsured. There were no cash equivalents as of December 31, 2020 and 2019.
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Accounts receivable and allowance for doubtful accounts | The Group does not charge interest to its customers and carries its customer receivables at their face amounts, less an allowance for doubtful accounts. As is common practice in the industry, the Group classifies all accounts receivable as current assets.
The Group grants trade credit, on a non-collateralized basis, to its customers and is subject to potential credit risk related to changes in business and overall economic activity. The Group analyzes specific accounts receivable balances, historical bad debts, customer credit-worthiness, current economic trends and changes in customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In the event that a customer balance is deemed to be uncollectible, the account balance is written-off against the allowance for doubtful accounts.
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Classification of contract assets and liabilities | For performance obligations satisfied over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g. weekly or monthly) or upon achievement of contractual milestones. Typically, the Group’s bills for advances or deposits from its customers before revenue are recognized, resulting in contract liabilities. However, the Group occasionally bills subsequent to revenue recognition, resulting in contract assets.
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Inventories | Inventories are measured using the weighted average method and are stated at the lower of cost or net realizable value. Cost of finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity.
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Property, plant and equipment and land use right, net | Property, plant and equipment is carried at cost. Major modifications or refurbishments which extend the useful life of the assets are capitalized and depreciated over the adjusted remaining useful life of the assets. Upon retirement or disposition of property, plant and equipment, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized in consolidated income from operations. The cost of maintenance and repairs is charged to expense as incurred. Property, plant and equipment is reviewed for impairment and tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of property, plant and equipment exceeds its fair value, an impairment charge would be recorded in the consolidated statement of operations.
Land in the PRC is owned by the PRC government. The government in the PRC, according to PRC Law, may sell the right to use the land for a specific period of time. Thus, all of the Group’s land purchases in the PRC are considered to be leasehold land and are classified as land use right.
Depreciation of property, plant and equipment and amortization of land use right are computed using the straight-line method over the assets’ estimated useful lives as follows:
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Intangible assets, net | The Group is currently amortizing its acquired intangible assets, consisted of patents and others, with finite-lived over periods generally ranging between three to twenty years.
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Evaluating impairment of intangible assets | Our finite-lived intangible assets are amortized over their estimated remaining useful economic lives. When events or changes in circumstances indicate that finite-lived intangible assets may be impaired, an evaluation is performed. If the asset or asset group fails the recoverability test, we perform a fair value measurement to determine and record an impairment charge. No impairment loss of intangible assets for the years ended December 31, 2020, 2019 and 2018 respectively.
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Government grant income | Government grant income consists of receipt of funds to subsidize the investment cost of technical development in China. No present or future obligation arises from the receipt of such amount.
Government grants are recognized in the consolidated balance sheet initially when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognized as income in the consolidated statement of operations on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognized in the consolidated statement of operations over the useful life of the asset by way of reduced depreciation expenses.
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Lease arrangements | The Group adopted ASU No. 2016-02, Leases (Topic 842). The Group leases certain equipment under finance leases. The economic substance of the leases is a financing transaction for acquisition of the equipment. Accordingly, the right-of-use assets for these leases are included on the Group’s consolidated balance sheets in property, plant and equipment, net of accumulated depreciation, amortization and impairment losses, with a corresponding amount recorded in current portion of long-term finance lease obligations. The finance lease assets are amortized over the life of the lease or, if shorter, the life of the leased asset, on a straight-line basis and included in depreciation expense. The financing component associated with finance lease obligations is included in interest expense. Generally, for the Group’s finance leases an implicit rate to calculate present value is provided in the lease agreement, however if a rate in not provided the Group determines this rate by estimating the Group’s incremental borrowing rate, utilizing the borrowing rates associated with the Group’s various debt instruments.
The Group determines if an arrangement is a lease at inception. Lease liabilities are the Group’s obligation to make lease payments arising from a lease and are measured on a discounted basis.
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Share capital | Paid in capital refers to the registered capital paid up by the shareholders of the Company.
At December 31, 2020, there were 82,572,000 shares (2019: 82,572,000 shares) issued.
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Net income per ordinary share | The Group computes net income per ordinary share using the treasury stock method. Under the treasury stock method, basic earnings per share attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited are computed by dividing net income attributable to Zhejiang Tianlan Environmental Protection Technology Company Limited by the weighted average number of ordinary shares outstanding during the period.
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Use of estimates | The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain accounting estimates of the Group require a higher degree of judgment than others in their application. These include the recognition of revenue and earnings from contracts over time, contract assets and contract liabilities. Management continually evaluates all of its estimates and judgments based on available information and experience; however, actual results could differ from these estimates.
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Related parties | Entities are considered to be related to the Group if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Group. Related parties also include principal owners of the Group, its management, members of the immediate families of principal owners of the Group and its management and other parties with which the Group may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
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Concentrations | Financial instruments that potentially subject the Group to a concentration of credit risk consist principally of cash and cash equivalents and accounts receivable, net. The Group maintains substantially all of its cash and cash equivalent balances with large financial institutions which are believed to be high quality institutions.
The Group is subject to a concentration of risk because it derives a significant portion of its revenues from a few customers. The Group’s top five customers accounted for approximately 39%, 40%, and 31% of consolidated revenues for the years ended December 31, 2020, 2019 and 2018, respectively. For the years ended December 31, 2020, 2019 and 2018, one customer accounted for 16%, 17% and 14% of annual revenues, respectively.
The Group grants trade credit under contractual payment terms, generally without collateral, to its customers, which include high credit quality electric utilities, general contractors, owners and managers of industrial properties.
Consequently, the Group is subject to potential credit risk related to changes in business and economic factors. At December 31, 2020 and 2019, none of the Group’s customers individually exceeded 10.0% of accounts receivable. The Group believes the terms and conditions in its contracts, billing and collection policies are adequate to minimize the potential credit risk.
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Finance costs | Interest relating to loans repaid is expensed in the period the repayment occurs.
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Warranties | The suppliers of the Group offer a standard one-year warranty to end customer of the Group. The Group only provides labour service to repair or replace parts. The Group does not maintain a general warranty reserve because historically labour costs for such repair or replacement have been de minimis.
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Shipping and handling costs | Amounts billed to customers related to shipping and handling are classified as revenues, and the Group’s shipping and handling costs are included in cost of revenues.
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Statutory reserves | The Group is required to make appropriation to reserve, comprising the PRC statutory reserve, based on after-tax net income determined with generally accepted accounting principles of the PRC (“PRC GAAP”).
Appropriations to the PRC statutory reserve are required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entities’ registered capital.
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Fair value measurements | The Group uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs used in measuring fair value based upon their degree of availability in external active markets. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
As of December 31, 2020 and 2019, the Group determined that the carrying values of cash and cash equivalents, accounts receivable, net, prepayments and other current assets, contract assets, bank borrowings, accounts payable, other payables and accrued expenses and contract liabilities approximate their fair values because of the short-term nature of these instruments.
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Short-term and long-term investments | The Group has elected to apply the measurement alternative to equity securities without readily determinable fair values. As such, the Group’s non-marketable equity securities are measured at cost, less any impairment, and are adjusted for changes in fair value resulting from observable transactions for identical or similar investments of the investee.
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Recent accounting pronouncements | Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s ASC. The Group considers the applicability and impact of all ASUs. The Group, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Group or may have minimal impact on its consolidated financial statements.
Recently adopted accounting pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial instruments, including trade receivables and off-balance sheet credit exposures. Under this guidance, an entity is required to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. This ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for Level 1, Level 2 and Level 3 instruments in the fair value hierarchy. The Group adopted this ASU in January 2020 and there was no effect on the consolidated financial statements or disclosures.
Recently issued accounting pronouncements not yet adopted
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistent application among reporting entities. The guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years, with early adoption permitted. Upon adoption, the Group must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The adoption of this standard is not expected to have a material impact on the Group’s consolidated financial statements or disclosures.
Recently issued accounting pronouncements not yet adopted
In January 2020, the FASB issued ASU 2020-01, “Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815),” an amendment clarifying the interaction between accounting standards related to equity securities, equity method investments, and certain derivative instruments. The guidance is effective for fiscal years beginning after December 15, 2020. ASU 2020-01 will become effective for the Group in fiscal 2022. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.
In October 2020, the FASB issued ASU 2020-10, “Codification Improvements,” this ASU affects a wide variety of Topics in the Codification. They apply to all reporting entities within the scope of the affected accounting guidance. More specifically, this ASU, among other things, contains amendments that improve the consistency of the Codification by including all disclosure guidance in the appropriate Disclosure Section (Section 50). Many of the amendments arose because the FASB provided an option to give certain information either on the face of the financial statements or in the notes to financial statements and that option only was included in the Other Presentation Matters Section (Section 45) of the Codification. The option to disclose information in the notes to financial statements should have been codified in the Disclosure Section as well as the Other Presentation Matters Section (or other Section of the Codification in which the option to disclose in the notes to financial statements appears). Those amendments are not expected to change current practice. The amendments are effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early application of the amendments is permitted for and varies based on the entity. The amendments should be applied retrospectively and at the beginning of the period that includes the adoption date. The Group is currently evaluating the impact of the new guidance on its consolidated financial statements.
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Non-controlling interests | For entities that are consolidated, but not 100% owned, a portion of the income or loss and equity is allocated to owners other than the Group. The aggregate of the income or loss and corresponding equity that is not owned by the Group is included within non-controlling interests in the consolidated financial statements.
Non-controlling interests is presented as a separate component of equity in the consolidated balance sheets. Net income includes the net income attributable to the holders of non-controlling interests in the consolidated statements of operations and comprehensive income /(loss). Profits and losses are allocated to non-controlling interests in proportion to their relative ownership interests regardless of their basis.
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Organization and business (Tables) |
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Schedule of significant subsidiaries |
* This company was deregistered on April 3, 2020.
* The Group’s interest in Blue Sky has been counted for as an affiliate using the equity method as the Group has representation on both the Board and Executive Committee of Blue Sky, and the ability to participate in the decision-making process and exercise significant influence.
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Schedule of significant subsidiaries |
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Summary of significant accounting policies (Tables) |
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Property, plant and equipment |
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Engineering segment backlog |
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Property, plant and equipment |
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Lease obligations (Tables) |
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Lease expense |
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Supplemental information related to operating leases | Supplemental consolidated cash flow information related to leases is as follows:
Supplemental consolidated balance sheet information related to leases is as follows:
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Future minimum lease payments required under operating leases |
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Lease expense |
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Supplemental information related to finance leases | Supplemental consolidated cash flow information related to leases is as follows:
Supplemental consolidated balance sheet information related to leases is as follows:
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Accounts receivable, net (Tables) |
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Accounts receivable, net |
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Allowance for doubtful accounts activity |
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Age analysis of past due account receivables |
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ZHEJIANG TIANLAN | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts receivable, net |
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Allowance for doubtful accounts activity |
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Age analysis of past due account receivables |
|
Prepayments and other current assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepayment and other current assets |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ZHEJIANG TIANLAN | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prepayment and other current assets |
|
Contract assets and liabilities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract assets and liabilities | Contract assets consisted of the following at December 31:
Contract liabilities consisted of the following at December 31:
The following table provides information about contract assets and contract liabilities from contracts with customers:
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Net (liability) / asset position for contracts in process | The net liabilities position for contracts in process consisted of the following at December 31:
The net liabilities position for contracts in process is included within the contract asset and contract liability in the accompanying consolidated balance sheets as follows at December 31:
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ZHEJIANG TIANLAN | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract assets and liabilities | Contract assets consisted of the following at December 31:
Contract liabilities consisted of the following at December 31:
The following table provides information about contract assets and contract liabilities from contracts with customers at December 31:
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Net (liability) / asset position for contracts in process |
|
Inventories (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
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ZHEJIANG TIANLAN | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
|
Property, plant and equipment, net (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment |
* Far East earns rental income from a property in Beijing, PRC for which it does not hold the title. Far East is investigating various ways in which to obtain the title but has not formulated a specific plan as of the date of issuance of this consolidated financial statements. The net book value of the property at December 31, 2020 is approximately US$92,000 (2019: US$96,000).
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Depreciation charge |
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ZHEJIANG TIANLAN | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment |
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Depreciation charge |
|
Investments in affiliates (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in affiliates |
|
Intangible assets, net (Tables) - ZHEJIANG TIANLAN |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets, net |
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Amortization expense | At December 31, 2020, estimated future intangible assets amortization expense for the each of the next five years and thereafter was as follows:
At December 31, 2019, estimated future intangible assets amortization expense for the each of the next five years and thereafter was as follows:
|
Land use right, net (Tables) - ZHEJIANG TIANLAN |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of land use right |
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Amortization expense |
As of December 31, 2020, estimated future land use right amortization expense for the each of the next five years and thereafter was as follows:
|
Bank borrowings (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ZHEJIANG TIANLAN | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bank borrowings |
|
Other payables and accrued expenses (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other payables and accrued expenses |
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ZHEJIANG TIANLAN | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other payables and accrued expenses |
|
Ordinary share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares outstanding |
|
Other income / (losses), net (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other income / (losses), net |
* The amount represents salaries and wage subsidies granted under Anti-Epidemic Fund by the Government of the Hong Kong Special Administrative Region for the use of paying wages of employees from June to November 2020.
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ZHEJIANG TIANLAN | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other income / (losses), net | Other income
Other losses
|
Income taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of income tax (expense) / credit |
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Reconciling items from income tax |
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Components of deferred tax assets |
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ZHEJIANG TIANLAN | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of income tax (expense) / credit |
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Reconciling items from income tax |
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Components of deferred tax assets |
|
Net income per ordinary share (Tables) |
12 Months Ended | ||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||
Basic and diluted number of shares |
|
Stock options (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement, Noncash Expense [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock option activity |
|
Segment information (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment information |
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Geographical analysis of revenue and assets |
Geographical analysis of long-lived assets is as follows:
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Major suppliers and customers |
Details of individual suppliers accounting for more than 5% of the Group’s purchases are as follows:
Details of individual customers accounting for more than 5% of the Group’s revenue are as follows:
|
Disaggregated revenue from contracts (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregated revenue from contracts |
|
Organization and business (Details) |
12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
||||||||
Euro Tech (Far East) Limited | |||||||||
Percentage of equity ownership | 100.00% | 100.00% | |||||||
Place of incorporation | Hong Kong | Hong Kong | |||||||
Principal activities | Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems | Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems | |||||||
Euro Tech (China) Limited | |||||||||
Percentage of equity ownership | [1] | 0.00% | 100.00% | ||||||
Place of incorporation | Hong Kong | Hong Kong | |||||||
Principal activities | Inactive | Inactive | |||||||
Euro Tech Trading (Shanghai) Limited | |||||||||
Percentage of equity ownership | 100.00% | 100.00% | |||||||
Place of incorporation | The PRC | The PRC | |||||||
Principal activities | Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems | Marketing and trading of water and waste water related process control, analytical and testing instruments, disinfection equipment, supplies and related automation systems | |||||||
Shanghai Euro Tech Limited | |||||||||
Percentage of equity ownership | 100.00% | 100.00% | |||||||
Place of incorporation | The PRC | The PRC | |||||||
Principal activities | Manufacturing of analytical and testing equipment | Manufacturing of analytical and testing equipment | |||||||
Shanghai Euro Tech Environmental Engineering Company Limited | |||||||||
Percentage of equity ownership | 100.00% | 100.00% | |||||||
Place of incorporation | The PRC | The PRC | |||||||
Principal activities | Inactive | Inactive | |||||||
Yixing Pact Environmental Technology Co., Ltd | |||||||||
Percentage of equity ownership | 58.00% | 58.00% | |||||||
Place of incorporation | The PRC | The PRC | |||||||
Principal activities | Design, manufacturing and operation of water and waste water treatment machinery and equipment | Design, manufacturing and operation of water and waste water treatment machinery and equipment | |||||||
Pact Asia Pacific Limited | |||||||||
Percentage of equity ownership | 58.00% | 58.00% | |||||||
Place of incorporation | The British Virgin Islands | The British Virgin Islands | |||||||
Principal activities | Selling of environmental protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services | Selling of environmental protection equipment, undertaking environment protection projects and providing relevant technology advice, training and services | |||||||
Zhejiang Tianlan Environmental Protection Technology Co. Ltd. | |||||||||
Percentage of equity ownership | [2] | 19.40% | 19.40% | ||||||
Place of incorporation | The PRC | The PRC | |||||||
Principal activities | Design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted | Design, general contract, equipment manufacturing, installation, testing and operation management of the treatment of waste gases emitted | |||||||
Zhejiang Tianlan Environmental Protection Engineering Company Limited | ZHEJIANG TIANLAN | |||||||||
Percentage of equity ownership | 100.00% | [3] | 0.00% | ||||||
Place of incorporation | PRC | PRC | |||||||
Principal activities | Design, general contract, installation and operating management of environmental protection projects | Design, general contract, installation and operating management of environmental protection projects | |||||||
Hangzhou Tianlan Environmental Protection Equipment Company Limited | ZHEJIANG TIANLAN | |||||||||
Percentage of equity ownership | 51.00% | 51.00% | |||||||
Place of incorporation | PRC | PRC | |||||||
Principal activities | Manufacturing and installation services of environmental protection equipment | Manufacturing and installation services of environmental protection equipment | |||||||
Hangzhou Tianlan Pure Environmental Protection Technology Company Limited | ZHEJIANG TIANLAN | |||||||||
Percentage of equity ownership | 38.25% | 40.80% | |||||||
Place of incorporation | PRC | PRC | |||||||
Principal activities | Manufacturing of environmental protection equipment | Manufacturing of environmental protection equipment | |||||||
Hangzhou Tiancan Environmental Technology Company Limited | ZHEJIANG TIANLAN | |||||||||
Percentage of equity ownership | 80.00% | 100.00% | |||||||
Place of incorporation | PRC | PRC | |||||||
Principal activities | Manufacturing of environmental protection equipment | Manufacturing of environmental protection equipment | |||||||
|
Summary of significant accounting policies (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Accounting Policies [Abstract] | ||
Engineering segment backlog | $ 11,581 | $ 8,611 |
Summary of significant accounting policies (Details 1) |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Office Premises | |
Useful lives | 47 to 51 years |
Leasehold Improvements | |
Useful lives | over terms of the leases or the useful lives whichever is less |
Furniture, Fixtures and Office Equipment | |
Useful lives | 3 to 5 years |
Furniture, Fixtures and Office Equipment | ZHEJIANG TIANLAN | |
Useful lives | 5 years, with 5% residual value |
Motor Vehicles | |
Useful lives | 4 years |
Motor Vehicles | ZHEJIANG TIANLAN | |
Useful lives | 5 years, with 5% residual value |
Testing Equipment | |
Useful lives | 3 years |
Land Use Right | ZHEJIANG TIANLAN | |
Useful lives | Over terms of the leases |
Buildings and Leasehold Improvements | ZHEJIANG TIANLAN | |
Useful lives | 11 to 50 years, with 5% residual value |
Plant and Machineries | ZHEJIANG TIANLAN | |
Useful lives | 5 to 10 years, with 5% residual value |
Summary of significant accounting policies (Details Narrative) ¥ in Thousands, $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2020
USD ($)
shares
|
Dec. 31, 2020
CNY (¥)
shares
|
Dec. 31, 2019
USD ($)
shares
|
Dec. 31, 2019
CNY (¥)
shares
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2018
CNY (¥)
|
|
Research and development costs | $ | $ 497 | $ 35 | $ 184 | |||
Advertising and promotional expenses | $ | $ 7 | $ 13 | $ 16 | |||
Shares issued | shares | 3,260,559 | 3,260,559 | 3,260,559 | 3,260,559 | ||
ZHEJIANG TIANLAN | ||||||
Research and development costs | ¥ | ¥ 28,589 | ¥ 19,018 | ¥ 14,363 | |||
Advertising and promotional expenses | ¥ | ¥ 0 | ¥ 0 | ¥ 0 | |||
Shares issued | shares | 82,572,000 | 82,572,000 | 82,572,000 | 82,572,000 |
Lease obligations (Details) ¥ in Thousands, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
|
Operating lease cost | $ | $ 257 | $ 193 | ||
Short-term lease cost | $ | 64 | 153 | ||
Total lease cost | $ | $ 321 | $ 346 | ||
ZHEJIANG TIANLAN | ||||
Amortization of right-of-use assets | ¥ | ¥ 5,837 | ¥ 4,347 | ||
Interest on lease liabilities included under cost of revenue and selling and administrative expenses | ¥ | 1,244 | 2,214 | ||
Total lease cost | ¥ | ¥ 7,081 | ¥ 6,561 |
Lease obligations (Details 1) ¥ in Thousands, $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
Dec. 31, 2018
USD ($)
|
|
Operating cash flows from operating leases | $ | $ 195 | $ 346 | |||
Right-of-use asset obtained in exchange for new operating lease obligations | $ | $ 0 | $ 460 | $ 0 | ||
ZHEJIANG TIANLAN | |||||
Finance cash flows from finance leases | ¥ | ¥ 11,263 | ¥ 29,668 | |||
Right-of-use assets obtained in exchange for lease obligations (noncash): finance leases | ¥ | ¥ 0 | ¥ 0 |
Lease obligations (Details 2) ¥ in Thousands, $ in Thousands |
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
---|---|---|---|---|
Operating lease right-of-use assets | $ | $ 233 | $ 406 | ||
Current portion of long-term operating lease obligations | $ | 118 | 170 | ||
Long-term operating lease obligations, net of current maturities | $ | 94 | 216 | ||
Total operating lease liabilities | $ | $ 212 | $ 386 | ||
ZHEJIANG TIANLAN | ||||
Property, plant and equipment, at cost | ¥ 0 | ¥ 121,208 | ||
Accumulated depreciation and impairment losses | 0 | (71,508) | ||
Property, plant and equipment, net | 0 | 49,700 | ||
Current maturities of long-term debt | 0 | 25,785 | ||
Total finance lease liabilities | ¥ 0 | ¥ 25,785 |
Lease obligations (Details 3) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Weighted-average remaining lease term - operating leases | 16 months | 27 months |
Weighted-average discount rate - operating leases | 5.00% | 5.00% |
ZHEJIANG TIANLAN | ||
Weighted-average remaining lease term - finance leases | 0 years | 1 year |
Weighted-average discount rate - finance leases | 5.90% | 5.90% |
Lease obligations (Details 4) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Leases [Abstract] | ||
2021 | $ 144 | |
2022 | 102 | |
Total lease payments | 246 | |
Less: imputed interest | (34) | |
Total | $ 212 | $ 386 |
Accounts receivable, net (Details) ¥ in Thousands, $ in Thousands |
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2018
CNY (¥)
|
---|---|---|---|---|---|---|
Contract receivables | $ | $ 3,229 | $ 3,622 | ||||
Less: allowance for doubtful accounts | $ | (30) | (36) | $ (112) | |||
Accounts receivable, net | $ | $ 3,199 | $ 3,586 | ||||
ZHEJIANG TIANLAN | ||||||
Contract receivables | ¥ | ¥ 160,803 | ¥ 165,262 | ||||
Less: allowance for doubtful accounts | ¥ | (42,182) | (26,484) | ¥ (24,047) | |||
Accounts receivable, net | ¥ | ¥ 118,621 | ¥ 138,778 |
Accounts receivable, net (Details 1) ¥ in Thousands, $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
|
Allowance for doubtful accounts, beginning | $ | $ 36 | $ 112 | ||
Less: reversal of provision for doubtful accounts | $ | (6) | (76) | ||
Allowance for doubtful accounts, ending | $ | $ 30 | $ 36 | ||
ZHEJIANG TIANLAN | ||||
Allowance for doubtful accounts, beginning | ¥ 26,484 | ¥ 24,047 | ||
Add: provision for allowances | 22,161 | 2,437 | ||
Less: reversal of provision for doubtful accounts | (6,463) | 0 | ||
Allowance for doubtful accounts, ending | ¥ 42,182 | ¥ 26,484 |
Accounts receivable, net (Details 2) ¥ in Thousands, $ in Thousands |
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
---|---|---|---|---|
Accounts receivable | $ 3,199 | $ 3,586 | ||
ZHEJIANG TIANLAN | ||||
Accounts receivable | ¥ | ¥ 118,621 | ¥ 138,778 | ||
Current | ||||
Accounts receivable | 2,014 | 1,495 | ||
1 - 30 Days Past Due | ||||
Accounts receivable | 85 | 41 | ||
31 - 60 Days Past Due | ||||
Accounts receivable | 202 | 1,343 | ||
61 - 90 Days Past Due | ||||
Accounts receivable | 41 | 99 | ||
Greater Than or Equal to 91 Days | ||||
Accounts receivable | 857 | 608 | ||
Past Due | ||||
Accounts receivable | $ 1,185 | $ 2,091 | ||
Within 1 Year | ZHEJIANG TIANLAN | ||||
Accounts receivable | ¥ | 76,590 | 96,456 | ||
1 year - 2 Years | ZHEJIANG TIANLAN | ||||
Accounts receivable | ¥ | 31,389 | 30,252 | ||
2 Years - 3 Years | ZHEJIANG TIANLAN | ||||
Accounts receivable | ¥ | 6,128 | 6,260 | ||
3 Years - 4 Years | ZHEJIANG TIANLAN | ||||
Accounts receivable | ¥ | 3,678 | 5,179 | ||
4 Years - 5 Years | ZHEJIANG TIANLAN | ||||
Accounts receivable | ¥ | ¥ 836 | ¥ 631 |
Prepayments and other current assets (Details) ¥ in Thousands, $ in Thousands |
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
---|---|---|---|---|
Deposits paid | $ | $ 838 | $ 344 | ||
Prepayments | $ | 168 | 151 | ||
Other receivables | $ | 250 | 251 | ||
Other tax recoverable | $ | 258 | 2 | ||
Prepayments and other current assets | $ | $ 1,514 | $ 748 | ||
ZHEJIANG TIANLAN | ||||
Prepayments | ¥ | ¥ 16,632 | ¥ 19,962 | ||
Other receivables | ¥ | 10,448 | 13,988 | ||
Deposits for finance leases | ¥ | 0 | 17,512 | ||
Other current assets | ¥ | 1,307 | 1,397 | ||
Prepayments and other current assets | ¥ | ¥ 28,387 | ¥ 52,859 |
Contract assets and liabilities (Details) ¥ in Thousands, $ in Thousands |
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
---|---|---|---|---|
Contract assets: unbilled revenue | $ | $ 202 | $ 441 | ||
Contract liabilities: deferred revenue | $ | (1,063) | (869) | ||
Net contract (liabilities) / assets | $ | $ (861) | $ (428) | ||
ZHEJIANG TIANLAN | ||||
Contract assets: unbilled revenue | ¥ | ¥ 94,494 | ¥ 80,961 | ||
Contract liabilities: deferred revenue | ¥ | (47,135) | (55,898) | ||
Net contract (liabilities) / assets | ¥ | ¥ 47,359 | ¥ 25,063 |
Contract assets and liabilities (Details 1) ¥ in Thousands, $ in Thousands |
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
---|---|---|---|---|
Costs and estimated earnings on uncompleted contracts | $ 1,904 | $ 5,150 | ||
Less: billings to date | (2,765) | (5,578) | ||
Costs and estimated earnings on uncompleted contracts in excess of billings | (861) | (428) | ||
Unbilled revenue | 202 | 441 | ||
Deferred revenue | $ (1,063) | $ (869) | ||
ZHEJIANG TIANLAN | ||||
Costs and estimated earnings on uncompleted contracts | ¥ | ¥ 406,064 | ¥ 433,195 | ||
Less: billings to date | ¥ | (358,705) | (408,132) | ||
Costs and estimated earnings on uncompleted contracts in excess of billings | ¥ | ¥ 47,359 | ¥ 25,063 |
Inventories (Details) ¥ in Thousands, $ in Thousands |
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
---|---|---|---|---|
Raw materials | $ 63 | $ 85 | ||
Work in progress | 20 | 29 | ||
Finished goods | 259 | 472 | ||
Inventory, net | $ 342 | $ 586 | ||
ZHEJIANG TIANLAN | ||||
Raw materials | ¥ | ¥ 341 | ¥ 5,742 | ||
Finished goods | ¥ | 2,048 | 13 | ||
Inventory, net | ¥ | ¥ 2,389 | ¥ 5,755 |
Inventories (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Inventory Disclosure [Abstract] | ||
Write-down of inventories | $ 13 | $ 35 |
Property, plant and equipment, net (Details) ¥ in Thousands, $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
CNY (¥)
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
|
Office premises | $ | $ 673 | $ 1,866 | ||||
Leasehold improvements | $ | 157 | 155 | ||||
Furniture, fixtures and office equipment | $ | 557 | 511 | ||||
Motor vehicles | $ | 175 | 173 | ||||
Testing equipment | $ | 37 | 37 | ||||
Property, plant and equipment, gross | $ | 1,599 | 2,742 | ||||
Less: accumulated depreciation and amortization | $ | (1,340) | (2,042) | ||||
Net | $ | $ 259 | $ 700 | ||||
ZHEJIANG TIANLAN | ||||||
Building and leasehold improvements | ¥ | ¥ 167,874 | ¥ 167,874 | ||||
Furniture, fixtures and office equipment | ¥ | 3,658 | 3,543 | ||||
Motor vehicles | ¥ | 4,808 | 4,808 | ||||
Plant and machineries | ¥ | 9,399 | 8,937 | ||||
Property, plant and equipment, gross | ¥ | 185,739 | 185,162 | ||||
Less: accumulated depreciation and amortization | ¥ | (70,241) | (63,881) | ||||
Less: accumulated impairment losses | ¥ | ¥ (36,241) | ¥ (33,500) | ||||
Net | ¥ | ¥ 79,257 | ¥ 87,781 |
Property, plant and equipment, net (Details 1) ¥ in Thousands, $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2018
CNY (¥)
|
|
Depreciation charge | $ | $ 49 | $ 69 | $ 60 | |||
ZHEJIANG TIANLAN | ||||||
Depreciation charge | ¥ | ¥ 6,359 | ¥ 6,556 | ¥ 11,755 |
Investments in affiliates (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Balance Sheet: | |||
Current assets | $ 10,448 | $ 12,010 | |
Non-current assets | 9,647 | 10,203 | |
Total assets | 20,095 | 22,213 | |
Total liabilities | (5,632) | (6,876) | |
Total shareholders' equity | 13,935 | 14,459 | |
Operating results: | |||
Operating income | (1,701) | (440) | $ (1,059) |
Net income | 769 | (146) | $ 88 |
Blue Sky | |||
Balance Sheet: | |||
Current assets | 44,918 | 41,614 | |
Non-current assets | 15,258 | 15,666 | |
Total assets | 60,176 | 57,280 | |
Total liabilities | (30,889) | (31,108) | |
Total shareholders' equity | 29,287 | 26,172 | |
Operating results: | |||
Net sales | 43,933 | 40,348 | |
Operating income | 2,214 | 677 | |
Net income | $ 1,946 | $ 704 |
Intangible assets, net (Details) - ZHEJIANG TIANLAN - CNY (¥) ¥ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Patents | ¥ 3,750 | ¥ 2,400 |
Others | 165 | 165 |
Intangible assets, gross | 3,915 | 2,565 |
Less: accumulated amortization | (1,795) | (1,638) |
Intangible assets, net | ¥ 2,120 | ¥ 927 |
Intangible assets, net (Details 1) - ZHEJIANG TIANLAN ¥ in Thousands, $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
CNY (¥)
|
Dec. 31, 2018
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
|
Amortization expense | ¥ 142 | ¥ 152 | ¥ 152 | ||
Year 1 | 142 | $ 152 | |||
Year 2 | 142 | 152 | |||
Year 3 | 142 | 152 | |||
Year 4 | 142 | 152 | |||
Year 5 | 142 | 152 | |||
Thereafter | 1,410 | $ 167 | |||
Total | ¥ 2,120 | ¥ 927 |
Land use right, net (Details) - ZHEJIANG TIANLAN - CNY (¥) ¥ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Land use right, gross | ¥ 7,361 | ¥ 7,361 |
Less: accumulated amortization | (2,214) | (2,070) |
Land use right, net | ¥ 5,147 | ¥ 5,291 |
Land use right, net (Details 1) - ZHEJIANG TIANLAN - CNY (¥) ¥ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Amortization expense | ¥ 159 | ¥ 149 | ¥ 149 |
2021 | 159 | ||
2022 | 159 | ||
2023 | 159 | ||
2024 | 159 | ||
2025 | 159 | ||
Thereafter | 4,352 | ||
Total | ¥ 5,147 |
Bank borrowings (Details) - ZHEJIANG TIANLAN - CNY (¥) ¥ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
||||
---|---|---|---|---|---|---|
Bank loan | ¥ 20,029 | ¥ 26,841 | ||||
Bank Loan Borrowed by the Company | ||||||
Bank loan | [1] | 10,014 | 21,834 | |||
Bank Loan Borrowed by Subsidiaries of the Company | ||||||
Bank loan | [2] | ¥ 10,015 | ¥ 5,007 | |||
|
Other payables and accrued expenses (Details) ¥ in Thousands, $ in Thousands |
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
---|---|---|---|---|
Dividend payables | $ 84 | $ 80 | ||
Deposit received from customers | 0 | 31 | ||
Rental deposit received | 4 | 12 | ||
Accruals for operating expenses | 1,500 | 941 | ||
Other tax payables | 5 | 78 | ||
Other payables and accrued expenses | $ 1,593 | $ 1,142 | ||
ZHEJIANG TIANLAN | ||||
Accrued expenses | ¥ | ¥ 7,629 | ¥ 5,312 | ||
Other current liabilities | ¥ | 6,529 | 0 | ||
Other payables | ¥ | 3,589 | 2,271 | ||
Other payables and accrued expenses | ¥ | ¥ 17,747 | ¥ 7,583 |
Ordinary share (Details) - shares |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Equity [Abstract] | ||
Shares outstanding | 3,260,559 | 3,260,559 |
Less: shares under treasury stock | (167,700) | (167,700) |
Total | 3,260,559 | 3,092,859 |
Other income / (losses), net (Details) ¥ in Thousands, $ in Thousands |
12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2018
CNY (¥)
|
||||
Exchange gain / (loss), net | $ | $ 101 | $ (30) | $ 7 | ||||||
Rental income | $ | 59 | 82 | 51 | ||||||
Government subsidies - Employment Support Scheme | $ | 147 | [1] | 0 | 0 | |||||
Other income, net | $ | 307 | 52 | 58 | ||||||
Impairment loss on property, plant and equipment | $ | $ 54 | $ 10 | $ 0 | ||||||
ZHEJIANG TIANLAN | |||||||||
Compensation income | ¥ 22,548 | ¥ 0 | ¥ 0 | ||||||
Gain on disposal of property, plant and equipment | 0 | 39 | 0 | ||||||
Investment income | 266 | 0 | 1,661 | ||||||
Others | 4,535 | 280 | 1,363 | ||||||
Reversal of allowance for doubtful accounts | 6,463 | 0 | 0 | ||||||
Subsidy income | 5,834 | 5,957 | 5,537 | ||||||
Other income, net | 39,646 | 6,276 | 8,561 | ||||||
Bad debts written off | 0 | 5,383 | 13,946 | ||||||
Impairment loss on contract assets | 1,399 | 0 | 0 | ||||||
Impairment loss on long-term investments | 1,340 | 0 | 0 | ||||||
Impairment loss on property, plant and equipment | 2,742 | 0 | 33,500 | ||||||
Investment loss | 0 | 241 | 0 | ||||||
Other losses, net | ¥ 5,481 | ¥ 5,624 | ¥ 47,446 | ||||||
|
Income taxes (Details) ¥ in Thousands, $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2018
CNY (¥)
|
|
The provision / (credit) for income taxes consist of: | ||||||
Current taxes (expense) / credit: Hong Kong profits tax and the PRC EIT | $ | $ (4) | $ 0 | $ 346 | |||
Income tax (expense) / credit | $ | (4) | 0 | 346 | |||
Deferred tax expenses: Hong Kong and the PRC | $ | (92) | (37) | (34) | |||
Total deferred tax expense / (credit) | $ | (92) | (37) | (34) | |||
Total (expense) / credit | $ | $ (96) | $ (37) | $ 312 | |||
ZHEJIANG TIANLAN | ||||||
The provision / (credit) for income taxes consist of: | ||||||
Current PRC EIT | ¥ | ¥ 757 | ¥ 28 | ¥ 2 | |||
Income tax (expense) / credit | ¥ | 757 | 28 | 2 | |||
Deferred tax expense / (credit) | ¥ | 1,101 | 268 | (7,969) | |||
Total deferred tax expense / (credit) | ¥ | 1,101 | 268 | (7,969) | |||
Total (expense) / credit | ¥ | ¥ (1,858) | ¥ (296) | ¥ 7,967 |
Income taxes (Details 2) ¥ in Thousands, $ in Thousands |
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
---|---|---|---|---|
Tax losses | $ | $ 901 | $ 858 | ||
Temporary differences | $ | (5) | (19) | ||
Less: valuation allowances | $ | (901) | (752) | ||
Net deferred tax assets | $ | $ (5) | $ 87 | ||
ZHEJIANG TIANLAN | ||||
Allowance for doubtful debts | ¥ 6,184 | ¥ 7,464 | ||
Deferred government grant | 750 | 0 | ||
Impairment losses on assets | 6,705 | 5,025 | ||
Tax losses | 0 | 1,481 | ||
Net deferred tax assets | ¥ 13,639 | ¥ 13,970 |
Net income per ordinary share (Details) - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Earnings Per Share [Abstract] | |||
Weighted average number of ordinary shares for the purposes of basic and diluted net income per share | 3,092,859 | 2,301,993 | 2,061,909 |
Stock options (Details) - Stock Options - $ / shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Number of options | |||
Outstanding, beginning of year | 51,000 | 0 | 0 |
Granted | 0 | 51,000 | 0 |
Outstanding, end of year | 51,000 | 51,000 | 0 |
Exercisable, end of year | 0 | 0 | 0 |
Weighted average exercise price | |||
Outstanding, beginning of year | $ 2.60 | $ 0.00 | $ 0.00 |
Granted | .00 | 2.60 | 0.00 |
Outstanding, end of year | 2.60 | 2.60 | 0.00 |
Exercisable, end of year | $ .00 | $ 0.00 | $ 0.00 |
Pension plan (Details Narrative) ¥ in Thousands, $ in Thousands |
12 Months Ended | |||||
---|---|---|---|---|---|---|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2018
CNY (¥)
|
|
Aggregate contributions to pension plans and retirement benefit schemes | $ | $ 104 | $ 332 | $ 278 | |||
ZHEJIANG TIANLAN | ||||||
Aggregate contributions to pension plans and retirement benefit schemes | ¥ | ¥ 5,645 | ¥ 5,449 | ¥ 4,692 |
Commitments and contingencies (Details Narrative) ¥ in Thousands, $ in Thousands |
12 Months Ended | ||||
---|---|---|---|---|---|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
CNY (¥)
|
Dec. 31, 2018
CNY (¥)
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2019
USD ($)
|
|
Banking facilities available for overdraft and import and export credits | $ | $ 897 | $ 897 | |||
Weighted average interest rate | 4.90% | 4.90% | |||
ZHEJIANG TIANLAN | |||||
Operating leases expense | ¥ | ¥ 0 | ¥ 0 | ¥ 0 |
Segment information (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Revenue | $ 13,357 | $ 17,399 | $ 20,104 |
Operating loss | (1,701) | (440) | (1,059) |
Depreciation | 49 | 69 | 60 |
Capital expenditures, gross | 11 | 21 | 85 |
Assets | 20,095 | 22,213 | |
Liabilities | 5,632 | 6,876 | |
Trading and Manufacturing | |||
Revenue | 9,476 | 11,877 | 13,770 |
Operating loss | (488) | (102) | (119) |
Depreciation | 39 | 54 | 43 |
Capital expenditures, gross | 2 | 17 | 79 |
Assets | 7,877 | 9,843 | |
Liabilities | 2,645 | 4,319 | |
Engineering | |||
Revenue | 3,881 | 5,522 | 6,334 |
Operating loss | (1,027) | (158) | (821) |
Depreciation | 10 | 15 | 17 |
Capital expenditures, gross | 9 | 4 | 6 |
Assets | 12,218 | 12,370 | |
Liabilities | 2,987 | 2,557 | |
Unallocated Corporate Expenses | |||
Revenue | 0 | ||
Operating loss | (186) | $ (180) | $ (119) |
Depreciation | 0 | ||
Capital expenditures, gross | $ 0 |
Segment information (Details 1) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Revenue | $ 13,357 | $ 17,399 | $ 20,104 |
Geographical analysis of long-lived assets | 259 | 700 | 754 |
The PRC | |||
Revenue | 5,072 | 6,886 | 8,026 |
Geographical analysis of long-lived assets | 212 | 222 | 250 |
Hong Kong | |||
Revenue | 8,024 | 10,169 | 11,169 |
Geographical analysis of long-lived assets | 47 | 478 | 504 |
Others | |||
Revenue | 261 | 344 | 909 |
Geographical analysis of long-lived assets | $ 0 | $ 0 | $ 0 |
Segment information (Details 2) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Supplier A | |||
Supplier accounting for more than 5% of Group's purchases | 30% | 53% | 55% |
Supplier B | |||
Supplier accounting for more than 5% of Group's purchases | 12% | 0% | 0% |
Supplier C | |||
Supplier accounting for more than 5% of Group's purchases | 10% | 7% | 8% |
Supplier D | |||
Supplier accounting for more than 5% of Group's purchases | 9% | 6% | 7% |
Supplier E | |||
Supplier accounting for more than 5% of Group's purchases | 6% | 6% | 7% |
Supplier F | |||
Supplier accounting for more than 5% of Group's purchases | 5% | 0% | 0% |
Segment information (Details 3) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Customer A | |||
Customers accounting for more than 5% of the Group's revenue | 9% | 19% | 15% |
Customer B | |||
Customers accounting for more than 5% of the Group's revenue | 8% | 0% | 0% |
Customer C | |||
Customers accounting for more than 5% of the Group's revenue | 6% | 10% | 0% |
Customer D | |||
Customers accounting for more than 5% of the Group's revenue | 0% | 5% | 0% |
Customer E | |||
Customers accounting for more than 5% of the Group's revenue | 0% | 0% | 7% |
Disaggregated revenue from contracts (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Disaggregation of Revenue [Abstract] | |||
Trading and manufacturing (revenue recognized at point in time) | $ 9,476 | $ 11,877 | $ 13,770 |
Engineering (revenue recognized over time) | 3,881 | 5,522 | 6,334 |
Total revenues | $ 13,357 | $ 17,399 | $ 20,104 |
Label | Element | Value |
---|---|---|
Restricted Cash | us-gaap_RestrictedCash | $ 729,000 |
Restricted Cash | us-gaap_RestrictedCash | 1,330,000 |
Restricted Cash | us-gaap_RestrictedCash | $ 1,672,000 |
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