EX-99.2 3 ea131795ex99-2_retoeco.htm PRESS RELEASE

Exhibit 99.2

 

ReTo Eco-Solutions Reports First Half of 2020 Financial Results

 

BEIJING, DECEMBER 22, 2020 – ReTo Eco-Solutions, Inc. (NASDAQ: RETO) (“ReTo” or the “Company”), a provider of technology solutions for the improvement of ecological environments, today announced its financial results for the six months ended June 30, 2020. ReTo is a manufacturer and distributor of eco-friendly construction materials as well as equipment used for the production of eco-friendly construction materials. ReTo also engages in consultation, design, project implementation, and construction of urban ecological projects, including those for the purpose of capturing, controlling, and reusing rainwater, commonly called “sponge cities.”

 

Mr. Hengfang Li, Chairman and Chief Executive Officer of ReTo, commented, “As was the case for most companies, COVID-19 had a significant negative impact on our business throughout 2020. Unfortunately, projects we were anticipating to contribute to revenue never materialized due to forced closures. As a result of COVID-19 related business and government closures, logistic complications, delays and higher costs, and the cancellation or delay in the delivery of products and services to customers, our financial results for the first six months of 2020 were negative when compared to the first six months of 2019.”

  

Net revenue for the six months ended June 30, 2020 was $3.14 million compared to $14.13 million for the same period of last year. The decrease was primarily due to the materially adverse impact of COVID-19 on the economy, ReTo’s operations, its customers, and its supply chain. Revenue from machinery and equipment, construction materials, and municipal construction projects accounted for 43.6%, 52.0%, and 4.4%, respectively, of total revenue for the six months ended June 30, 2020, compared to 48.0%, 51.5%, and 0.5%, respectively, for the same period of last year.

 

Cost of revenue was $2.88 million for the six months ended June 30, 2020 compared to $10.70 million for the same period of last year, which reflected the decrease in revenue over the same period. Gross profit was $0.26 million for the six months ended June 30, 2020 compared to $3.44 million for the same period of last year. Gross margin was 8.2% for the six months ended June 30, 2020 compared to 24.3% for the same period of last year. Net loss attributable to ReTo was $3.7 million, or $0.16 per basic and diluted share, as compared to a net loss of $3.0 million, or $0.13 per basic and diluted share in the year-ago period. The six-month period ended June 30, 2020 included a $2.19 million one-time gain from the disposal of a subsidiary.

 

As of June 30, 2020, the Company had balance of cash and cash equivalents of approximately $0.2 million, with an accounts receivable balance of approximately $6.7 million, of which approximately $1.3 million was subsequently collected after June 30, 2020, with the remaining balance expected to be substantially collected before June 30, 2021. The Company is working to improve its liquidity and capital sources mainly through cash flow from its operations, renewal of bank borrowings, borrowing from related parties, and potential equity financings, but it cannot guarantee the timing or a positive outcome leading to a substantial doubt about the Company’s ability to continue as a going concern for the next 12 months based on its unaudited condensed consolidated financial statements.

 

Mr. Hengfang Li continued, “We believe we have solid long-term business fundamentals based on the growing demand for eco-friendly solutions. Our focus is on reducing operating expenses and overhead wherever possible as we align our cost structure with the current business level. We have seen an improvement in the operating environment in the second half of 2020 and expect a continued improvement in 2021. We are excited about our long-term fundamentals and believe we will emerge from 2020 in a stronger position as we are now offering customers additional features and customized configurations on our machinery and equipment products. We will continue to devote our efforts to manufacturing equipment used for production of eco-friendly construction materials.

 

In addition, with more stringent environmental regulations being enforced in China, many companies have to replace older equipment with more environmentally friendly equipment. We believe our products can provide an ideal solution for these companies and will work to capitalize on this potential growth opportunity. In line with our development strategy, we have started several ecological restoration projects in cooperation with local governments and state-owned companies. We believe these projects will contribute our business growth in 2021.”

 

 

 

 

Recent Developments

 

On July 13, 2020, ReTo transferred its 55% equity interests in Yunnan Litu Technology Development Co., Ltd. (“Yunnan Litu”) to third parties for a nominal price given the inactivity of Yunnan Litu’s business operations since its inception and ReTo’s ongoing focus on its own organic business growth.

 

On September 7, 2020, Beijing REIT Technology Development Co., Ltd. (“Beijing REIT”) entered into a share transfer agreement with the original shareholder of Shexian Ruibo Environmental Science and Technology Co., Ltd. (“Shexian Ruibo”) for the acquisition of 41.67% of the equity interests in Shexian Ruibo for a total consideration of $3.6 million (RMB 25 million), including a cash payment of $2.7 million (RMB 18.5 million) and non-cash contribution of six patents valued at $0.9 million (RMB 6.5 million). Beijing REIT made the cash payment of $2.7 million (RMB 18.5 million) on October 20, 2020 and the six patents had been transferred to Shexian Ruibo prior to September 15, 2020.

 

About ReTo Eco-Solutions, Inc. (NASDAQ: RETO)

 

Founded in 1999, ReTo (NASDAQ: RETO), through its proprietary technologies, systems and solutions, is striving to bring clean water and fertile soil to communities worldwide. The Company offers a full range of products and services, ranging from the production of environmentally-friendly construction materials, environmental protection equipment, and manufacturing equipment used to produce environmentally-friendly construction materials, to project consulting, design, and installation for the improvement of ecological environments, such as ecological soil restoration through solid waste treatment. For more information, please visit: http://en.retoeco.com

 

Forward-Looking Statements

 

This press release contains forward-looking statements. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. When the Company uses words such as “may,” “will,” “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate,” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Specifically, the Company’s statements regarding: 1) the ability of additional features and customized configurations on its machinery and equipment products to attract new customers; 2) the ability of the growth of its business to resume in the near future; and 3) the further spread of COVID-19 or the occurrence of another wave of cases and the impact it may have on the Company’s operations are forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following: the Company’s goals and strategies; the Company’s future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the construction industry in China; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the Securities and Exchange Commission. For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the U.S. Securities and Exchange Commission, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

 

For more information, please contact:

 

ReTo Eco-Solutions, Inc.

Giorgio Zhao

Beijing Phone: +86-010-64827328

ir@retoeco.com or 310@reit.cc

 

Global IR Partners
David Pasquale

New York Phone: +1-914-337-8801

RETO@globalirpartners.com 

 

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RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30,   December 31, 
   2020   2019 
ASSETS  (Unaudited)     
Current Assets:        
Cash and cash equivalents  $202,078   $897,281 
Restricted cash   83,005    84,237 
Accounts receivable, net – third parties   6,590,699    11,252,002 
Accounts receivable, net – related party   96,661    469,474 
Advances to suppliers, net – third parties   3,793,935    2,449,629 
Advances to suppliers, net – related parties   3,043,191    - 
Inventories, net   2,704,139    888,203 
Prepayments and other current assets   2,951,906    435,273 
Prepayment for construction of properties   3,608,250    3,661,800 
Current assets held for sale associated with discontinued operation of Gu’an REIT   -    5,326,348 
Total Current Assets   23,073,864    25,464,247 
           
Property, plant, and equipment, net   35,910,908    37,457,643 
Intangible assets, net   5,982,569    6,145,179 
Long-term investment in equity investee   -    28,720 
Right-of-use assets   603,535    505,630 
Non-current assets held for sale associated with discontinued operation of Gu’an REIT   -    1,193,825 
Total Assets  $65,570,876   $70,795,244 
           
LIABILITIES AND EQUITY          
           
Current Liabilities:          
Short term loans  $6,042,188   $8,309,098 
Long term bank loans - current portion   2,369,643    1,436,000 
Advances from customers   4,510,113    3,087,315 
Deferred revenue   460,661    471,375 
Accounts payable   1,645,417    1,151,570 
Accounts payable - related party   416,534    1,485,049 
Accrued and other liabilities   4,165,919    2,487,616 
Taxes payable   1,824,407    1,806,777 
Due to related parties   2,887,208    405,222 
Operating lease liabilities, current   305,452    177,903 
Advance payment from the buyer associated with discontinued operation of Gu’an REIT   -    1,392,920 
Current liabilities held for sale associated with discontinued operation of Gu’an REIT   -    3,004,924 
Total Current Liabilities   24,672,542    25,215,769 
           
Long-term bank loans   6,226,000    7,323,600 
Operating lease liabilities – noncurrent   278,301    301,012 
Total Liabilities   31,131,843    32,840,381 
           
Commitments and Contingencies          
           
Shareholders’ Equity:          
Common shares, $0.001 par value, 200,000,000 shares authorized, 24,135,000 shares and 23,160,000 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively   24,135    23,160 
Additional paid-in capital   43,709,127    42,725,852 
Statutory reserve   2,067,439    2,632,797 
Accumulated deficit   (8,893,351)   (5,718,368)
Accumulated other comprehensive loss   (3,937,379)   (3,527,438)
Total RETO Eco-Solutions, Inc. Shareholders’ Equity   32,969,971    36,136,003 
           
Non-controlling interest   1,469,062    1,818,860 
Total Equity   34,439,033    37,954,863 
           
Total Liabilities and Equity  $65,570,876   $70,795,244 

 

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RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

 

   For the Six Months Ended
June 30, 		 
   2020   2019 
         
Revenue  $3,142,102   $14,125,892 
Cost of revenue – third-party customers   2,884,298    10,689,311 
Gross Profit   257,804    3,436,581 
           
Operating Expenses:          
Selling expenses   474,901    631,664 
General and administrative expenses   1,788,625    1,709,377 
Bad debt expenses   2,792,800    2,686,782 
Research and development expenses   180,339    234,741 
Total Operating Expenses   5,236,665    5,262,564 
           
Loss from Operations   (4,978,861)   (1,825,983)
           
Other Income (expenses):          
Interest expense   (876,660)   (632,830)
Interest income   2,715    1,722 
Other income (expenses), net   (111,729)   126,765 
Total Other expenses, net   (985,674)   (504,343)
           
Loss before provision for income taxes   (5,964,535)   (2,330,326)
Provision for income taxes   131,615    171,922 
Net loss from continuing operations   (6,096,150)   (2,502,248)
Net loss from discontinued operations   -    (900,097)
Gain from disposal of Gu’an REIT   2,192,801    - 
Net Loss   (3,903,349)   (3,402,345)
           
Less: net loss attributable to non-controlling interest   (163,008)   (391,899)
Net loss attributable to ReTo Eco-Solutions, Inc.  $(3,740,341)  $(3,010,446)
           
Net Loss  $(3,903,349)  $(3,402,345)
Other comprehensive (loss) income:          
Foreign currency translation adjustment:   (596,731)   115,298 
Comprehensive Loss   (4,500,080)   (3,287,047)
Less: comprehensive loss attributable to noncontrolling interest   (349,798)   (509,567)
Comprehensive loss attributable to ReTo Eco-Solutions, Inc.  $(4,150,282)  $(2,777,480)
           
Loss per share          
Basic and diluted  $(0.16)  $(0.13)
           
Weighted average number of shares          
Basic and diluted   23,622,148    22,760,000 

 

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RETO ECO-SOLUTIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(UNAUDITED)

 

       Additional       Retained Earnings   Accumulated Other   Non-     
   Common Shares   paid-in   Statutory   (Accumulated   Comprehensive   controlling   Total 
   Shares   Amount   Capital   Reserve   Deficit)   Income (Loss)   Interest   Equity 
                                 
Balance at December 31, 2018   22,760,000   $22,760   $42,278,252   $2,632,797   $9,084,246   $(3,105,185)  $2,267,985   $53,180,855 
Net loss   -    -    -    -    (3,010,446)   -    (391,899)   (3,402,345)
Foreign currency translation adjustment   -    -    -    -    -    232,966    (117,668)   115,298 
Balance at June 30, 2019   22,760,000   $22,760   $42,278,252   $2,632,797   $6,073,800   $(2,872,219)  $1,758,418   $49,893,808 
                                         
Balance at December 31, 2019   23,160,000   $23,160   $42,725,852   $2,632,797   $(5,718,368)  $(3,527,438)  $1,818,860   $37,954,863 
Net loss   -    -    -    -    (3,740,341)   -    (163,008)   (3,903,349)
Change in statutory reserve related to disposal of Gu’an REIT   -    -    -    (565,358)   565,358    -    -    - 
Foreign currency translation adjustment   -    -    -    -    -    (409,941)   (186,790)   (596,731)
Issuance of common shares on January 1, 2020   685,000    685    650,065    -    -    -    -    650,750 
Issuance of common shares on February 3, 2020   290,000    290    333,210    -    -    -    -    333,500 
Balance at June 30, 2020   24,135,000   $24,135   $43,709,127   $2,067,439   $(8,893,351)  $(3,937,379)  $1,469,062   $34,439,033 

 

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RETO ECO-SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

   For the six months ended
June 30,		 
   2020   2019 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net loss  $(3,903,349)  $(3,402,345)
Less: net loss from discontinued operations   -    (900,097)
Net loss from continuing operations   (3,903,349)   (2,502,248)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:          
Loss from disposal of property and equipment   10,458    - 
Depreciation and amortization   1,127,480    826,670 
Amortization of stock-based compensation for services   456,063    - 
Change in bad debt allowances   2,792,800    2,687,156 
Gain from disposal of Gu’an REIT   (2,192,801)   - 
Amortization of operating lease right-of-use assets   116,120    109,975 
Changes in operating assets:          
Accounts receivable   2,125,800    (4,987,255)
Accounts receivable - related party   220,998    - 
Advances to suppliers   (1,628,556)   (9,003)
Advances to suppliers - related parties   (3,069,487)   - 
Inventories   (1,837,972)   (2,063,087)
Prepayments and other current assets   (479,015)   (32,915)
Billings in excess of costs and estimated earnings   -    (91,735)
Changes in operating liabilities:   -    - 
Advances from customers   1,475,209    1,577,496 
Deferred revenue   (3,839)   - 
Accounts payable   513,213    1,607,792 
Accounts payable - related party   (1,051,977)     
Accrued and other liabilities   1,718,195    174,185 
Taxes payable   44,270    168,613 
Operating lease liabilities   (143,306)   (103,462)
Net cash used in operating activities from continuing operations   (3,709,696)   (2,637,818)
Net cash provided by operating activities from discontinuing operations   -    3,134,281 
Net cash provided by (used in) operating activities   (3,709,696)   496,463 
           
CASH FLOWS FROM INVESTING ACTIVITIES          
           
Addition of property, equipment and construction in progress   (91,946)   (508,236)
Proceeds from disposal of long-term investment   28,440    - 
Proceeds from disposal of Gu’an REIT   2,768,703    - 
Term deposits   -    (141,096)
Net cash provided by (used in) investing activities from continuing operations   2,705,197    (649,332)
Net cash used in investing activities from discontinued operations   -    - 
Net cash provided by (used in) investing activities   2,705,197    (649,332)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Proceeds from short-term loans   5,801,760    6,619,731 
Proceeds from long-term bank loans   -    737,069 
Repayment of short-term bank loans   (7,957,772)   (6,633,621)
Repayment of long-term bank loans   (36,035)   (147,414)
Proceeds from related party loans   3,677,761    202,329 
Repayment to related party loans   (1,180,383)   - 
Net cash provided by financing activities from continuing operations   305,331    778,094 
Net cash used in financing activities from discontinuing operations   -    (324,280)
Net cash provided by financing activities   305,331    453,814 
           
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND RESTRICTED CASH   2,733    (32,181)
           
NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH   (696,435)   268,764 
           
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD   981,518    1,563,166 
           
CASH AND RESTRICTED CASH, END OF PERIOD  $285,083   $1,831,930 
Less: cash and cash equivalents, restricted cash from discontinued operation, end of period   -    (8,448)
Cash and and cash equivalents, restricted cash from continuing operations, end of period  $285,083   $1,823,482 
           
RECONCILIATION TO AMOUNTS ON CONSOLIDATED BALANCE SHEETS:          
Cash  $202,078   $1,652,050 
Restricted cash   83,005    171,432 
Total cash and restricted cash  $285,083   $1,823,482 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:          
Interest paid  $572,201   $711,255 
Income tax paid  $-   $75,387 
           
Non-Cash Investing Activities          
Right-of-use Assets obtained in exchange for operating lease obligations  $221,940   $731,517 

 

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