ReTo Eco-Solutions Reports Fiscal Year 2022 Financial Results
BEIJING, May 1, 2023 /PRNewswire/ -- ReTo Eco-Solutions, Inc. (NASDAQ:RETO) ("ReTo," "Company," "we," "our" or "us"), a provider of technology solutions, operation services for intelligent ecological environments, roadside assistance services and software development services in China, today announced its audited financial results for the fiscal year ended December 31, 2022.
Financial Highlights for the Fiscal Year 2022
- Total revenue for the fiscal year 2022 increased by 80% to approximately $6.5 million, primarily due to higher machinery and equipment sales resulted from contracts for gravity separators and revenue from roadside assistance ("RSA") services and software development services, which were acquired in December 2021.
- Gross profit for the fiscal year 2022 increased by 109% to approximately $0.8 million. Gross profit margin was 12% for the fiscal year 2022, as compared to 11% for the prior year.
- Total net loss for the fiscal year 2022 was approximately $15.4 million, compared to approximately $22.1 million for the prior year.
Mr. Hengfang Li, ReTo's Chairman and Chief Executive Officer, said, "The total revenue in 2022 has increased compared to the previous year mainly due to the increase of income from sales of the Company's gravity separators and the newly added RSA services and software development services. As we move into post-epidemic era and adjust our business strategy and model, we will focus on the ecological and environmental protection business and plan to leverage our Internet of Things technology, ecological restoration technology and new ecological materials to empower our equipment business. Since the second half of 2022, we have launched a number of ecological and environmental protection projects, including large-scale Ecologic Oriented Development ("EOD") projects. We have started to work on a solid waste treatment and ecological governance EOD project for China-Mongolia Group and entered into a strategic cooperation agreement with the local government of Mengzi City, Yunnan Province for another ecological EOD project."
Financial Results for the Fiscal Years 2022 and 2021
Revenues
Our total revenues from continuing operations increased by approximately $2.9 million, or 80%, to approximately $6.5 million for the year ended December 31, 2022 from approximately $3.6 million for the year ended December 31, 2021. Among our total revenue, revenue from third-party customers increased by approximately $2.9 million, or 86%, from approximately $3.3 million for the year ended December 31, 2021 to approximately $6.2 million for the year ended December 31, 2022, while revenue from related-party customers increased by $23,091, or 8%, from $281,784 for the year ended December 31, 2021 to $304,875 for the year ended December 31, 2022. The significant increase in our total revenue was mainly due to higher machinery and equipment sales resulted from contracts for gravity separators and revenue from RSA services and software development services, which were acquired in December 2021.
Cost of Revenues
Our total cost of revenues increased by approximately $2.5 million, or 76%, to approximately $5.7 million for the year ended December 31, 2022 from approximately $3.2 million for the year ended December 31, 2021. Cost of revenues from third-party customers increased by approximately $2.2 million, or 71%, from approximately $3.0 million in the year ended December 31, 2021 to approximately $5.2 million in the year ended December 31, 2022, while cost of revenues from related-party customers increased by approximately $0.3 million, or 170%, from approximately $0.2 million in the year ended December 31, 2021 to approximately $0.5 million in the year ended December 31, 2022. The increase in our total cost of revenue was in line with the increase in revenue. The cost of revenues percentage decreased to 88% in the year ended December 31, 2022 from 89% in the year ended December 31, 2021.
Gross Profit (Loss)
Our gross profit increased by approximately $0.4 million, or 109%, to approximately $0.8 million for the year ended December 31, 2022 from approximately $0.4 million for the year ended December 31, 2021. Gross profit margin for our continuing operations was 12% for the year ended December 31, 2022, as compared to 11% for the year ended December 31, 2021.
Selling Expenses
For the year ended December 31, 2022, our selling expenses were approximately $3.8 million, representing a 357% increase from approximately $0.8 million in the year ended December 31, 2021. As a percentage of sales, our selling expenses were 58% and 23% for the years ended December 31, 2022 and 2021, respectively. The increase was mainly due to more marketing activities and shipping and handling fees associated with increased sales in the year ended December 31, 2022.
General and Administrative Expenses
For the year ended December 31, 2022, our general and administrative expenses were approximately $8.6 million, representing an increase of approximately $4.0 million compared to approximately $4.6 million in the year ended December 31, 2021. The increase in general and administrative expenses was mainly due to an increase of share-based compensation for services and consulting and professional fees of approximately $4.0 million. As a percentage of revenues, general and administrative expenses were 133% and 129% of our total revenues for the years ended December 31, 2022 and 2021, respectively.
Bad Debt Expenses
For the year ended December 31, 2022, our bad debt expenses were approximately $1.7 million, representing a decrease of approximately $0.5 million as compared to approximately $2.3 million in the year ended December 31, 2021. We incurred significant bad debt expenses on uncollectible accounts receivable and advance payments for the years ended December 31, 2022 and 2021. The impact of COVID-19 on our customers in 2022 was less severe than in 2021. As a percentage of revenues, bad debt expenses were 26% and 63% of our total revenues for the years ended December 31, 2022 and 2021, respectively.
Research and Development Expenses
Our research and development ("R&D") expenses were approximately $1.0 million and $0.3 million for the years ended December 31, 2022 and 2021, respectively. The increase in R&D expenses in the year ended December 31, 2022 was due to more R&D projects conducted by Beijing REIT Technology Development Co., Ltd., ReTo's wholly-owned subsidiary.
Change in Fair Value in Convertible Debt
During the years ended December 31, 2022 and 2021, change in fair value in convertible debt amounted to approximately $0.5 million and $1.9 million, respectively.
Net Loss
Our net loss from continuing operations amounted to approximately $15.4 million and $20.5 million for the years ended December 31, 2022 and 2021, respectively. Our net loss from discontinued operations amounted to nil and approximately $1.6 million for the years ended December 31, 2022 and 2021, respectively. Total net loss amounted to approximately $15.4 million and $22.1 million for the years ended December 31, 2022 and 2021, respectively.
Financial Position
As of December 31, 2022, the Company had cash of approximately $0.1 million and accounts receivable of approximately $2.2 million. As of December 31, 2022, the Company had a working capital deficit of approximately of $10.1 million. As of December 31, 2022, the Company had outstanding bank loans of approximately $1.3 million.
Additional information regarding the Company's results of operations for the fiscal year 2022 can be found in the Company's Annual Report on Form 20-F for the year ended December 31, 2022, which has been filed with the Securities and Exchange Commission on the date of this earnings release.
About ReTo Eco-Solutions, Inc.
Founded in 1999, ReTo, through its proprietary technologies, systems and solutions, is striving to bring clean water and fertile soil to communities worldwide. The Company, through its operating subsidiaries in China, is engaged in the manufacture and distribution of eco-friendly construction materials (aggregates, bricks, pavers and tiles), as well as equipment used for the production of these eco-friendly construction materials. In addition, the Company provides consultation, design, project implementation and construction of urban ecological protection projects and parts, engineering support, consulting, technical advice and service, and other project-related solutions for its manufacturing equipment and environmental protection projects. The Company also offers roadside assistance services and software development services utilizing Internet of Things technologies. 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. These statements are subject to uncertainties and risks including, but not limited to, the following: ReTo's goal and strategies; ReTo's future business development, financial condition and results of operations; expected changes in ReTo's revenues, costs or expenses; industry landscape of, and trends in, the construction industry; ReTo's expectations regarding demand for, and market acceptance of, its services; the impact of COVID-19 pandemic; general economic and business condition; 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 (the "SEC"). 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 SEC, 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.
Yue Hu
Beijing Phone: +86-010-64827328
ir@retoeco.com or 311@reit.cc
RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, | December 31, | |||||||
2022 | 2021 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 113,895 | $ | 457,495 | ||||
Accounts receivable, net | 2,150,450 | 441,703 | ||||||
Accounts receivable, net - related party | 83,736 | 93,589 | ||||||
Advances to suppliers, net | 453,894 | 281,600 | ||||||
Advances to suppliers, net - related party | 3,787,036 | 3,842,620 | ||||||
Inventories, net | 337,798 | 463,731 | ||||||
Prepayments and other current assets | 402,151 | 389,864 | ||||||
Due from related parties | 208,225 | - | ||||||
Receivable from disposition - current | - | 7,059,559 | ||||||
Total Current Assets | 7,537,185 | 13,030,161 | ||||||
Property, plant and equipment, net | 8,722,435 | 9,707,602 | ||||||
Intangible assets, net | 4,869,654 | 4,111,029 | ||||||
Long-term investment in equity investee | 2,503,944 | 2,758,228 | ||||||
Right-of-use assets | 424,999 | 278,269 | ||||||
Goodwill | - | 1,075,778 | ||||||
Total Assets | $ | 24,058,217 | $ | 30,961,067 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current Liabilities: | ||||||||
Short-term loans | $ | 1,319,490 | 2,353,500 | |||||
Convertible debt | 3,922,686 | 1,645,000 | ||||||
Advances from customers | 2,551,216 | 2,061,203 | ||||||
Due to a minority shareholder | 725,000 | - | ||||||
Deferred grants - current | 18,563 | 269,061 | ||||||
Accounts payable | 2,624,701 | 2,121,313 | ||||||
Accounts payable - related party | - | 10,199 | ||||||
Accrued and other liabilities | 2,717,432 | 3,103,056 | ||||||
Loans from third parties | 1,106,233 | 1,593,977 | ||||||
Taxes payable | 2,077,088 | 2,599,770 | ||||||
Due to related parties | - | 472,439 | ||||||
Operating lease liabilities, current | 277,036 | 155,857 | ||||||
Deferred tax liability | 325,593 | 370,856 | ||||||
Total Current Liabilities | 17,665,038 | 16,756,231 | ||||||
Loans from third parties-noncurrent | 1,160,000 | - | ||||||
Operating lease liabilities - noncurrent | 158,650 | 120,558 | ||||||
Total Liabilities | 18,983,688 | 16,876,789 | ||||||
Commitments and Contingencies | ||||||||
Shareholders' Equity: | ||||||||
Common Share, $0.001 par value, 200,000,000 shares authorized, 43,398,885 shares and 28,965,034 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 43,400 | 28,966 | ||||||
Additional paid-in capital | 53,331,093 | 46,776,170 | ||||||
Statutory reserve | 1,066,554 | 1,230,387 | ||||||
Accumulated deficit | (47,813,206 | ) | (33,347,984 | ) | ||||
Accumulated other comprehensive loss | (2,388,890 | ) | (1,135,386 | ) | ||||
Total Shareholders' Equity Attributable to ReTo Eco-Solutions Inc. | 4,238,951 | 13,552,153 | ||||||
Noncontrolling interest | 835,578 | 532,125 | ||||||
Total Shareholders' Equity | 5,074,529 | 14,084,278 | ||||||
Total Liabilities and Shareholders' Equity | $ | 24,058,217 | 30,961,067 | |||||
RETO ECO-SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31, | ||||||||||||
2022 | 2021 | 2020 | ||||||||||
Revenues | $ | 6,168,798 | $ | 3,318,294 | $ | 8,110,401 | ||||||
Revenues – related parties | 304,875 | 281,784 | 228,814 | |||||||||
Total Revenues | 6,473,673 | 3,600,078 | 8,339,215 | |||||||||
Cost of revenues | 5,195,159 | 3,039,296 | 6,193,505 | |||||||||
Cost of revenues – related parties | 471,849 | 175,053 | 148,034 | |||||||||
Total cost of revenues | 5,667,008 | 3,214,349 | 6,341,539 | |||||||||
Gross Profit | 806,665 | 385,729 | 1,997,676 | |||||||||
Operating Expenses: | ||||||||||||
Selling expenses | 3,774,666 | 826,242 | 1,085,602 | |||||||||
General and administrative expenses | 8,592,966 | 4,619,058 | 3,971,496 | |||||||||
Bad debt expenses | 1,710,839 | 2,250,334 | 909,931 | |||||||||
Impairment of long-lived assets | - | 4,344,133 | 2,267,485 | |||||||||
Impairment of goodwill | 1,018,870 | - | - | |||||||||
Research and development expenses | 960,598 | 346,951 | 334,904 | |||||||||
Total Operating Expenses | 16,057,939 | 12,386,718 | 8,569,418 | |||||||||
Loss from Operations | (15,251,274 | ) | (12,000,989 | ) | (6,571,742 | ) | ||||||
Other Income (Expenses): | ||||||||||||
Interest expense | (321,686 | ) | (103,340 | ) | (857,551 | ) | ||||||
Interest income | 3,234 | 1,898 | (64 | ) | ||||||||
Other income (expenses), net | 177,753 | (26,991 | ) | 480,054 | ||||||||
Loss from disposal of REIT Changjiang | - | (6,293,149 | ) | - | ||||||||
Gain from dissolution of subsidiaries | 508,345 | - | - | |||||||||
Gain from disposal of Gu'an REIT | - | - | 2,231,270 | |||||||||
Share of losses in equity method investments | (46,209 | ) | (142,673 | ) | - | |||||||
Change in fair value convertible debt | (467,383 | ) | (1,908,830 | ) | - | |||||||
Total Other Income (Expenses), net | (145,946 | ) | (8,473,085 | ) | 1,853,709 | |||||||
Loss before provision for income taxes | (15,397,220 | ) | (20,474,074 | ) | (4,718,033 | ) | ||||||
Income taxes provision (benefit) | (17,562 | ) | 3,469 | 569,974 | ||||||||
Net loss from continuing operations | (15,379,658 | ) | (20,477,543 | ) | (5,288,007 | ) | ||||||
Net loss from discontinued operations, net of taxes | - | (1,596,390 | ) | (7,612,601 | ) | |||||||
Net Loss | (15,379,658 | ) | (22,073,933 | ) | (12,900,608 | ) | ||||||
Less: net loss attributable to noncontrolling interest | (750,603 | ) | (969,107 | ) | (1,126,845 | ) | ||||||
Net loss attributable to ReTo Eco-Solutions, Inc. | $ | (14,629,055 | ) | $ | (21,104,826 | ) | $ | (11,773,763 | ) | |||
Comprehensive Loss: | ||||||||||||
Net Loss | $ | (15,379,658 | ) | (22,073,933 | ) | (12,900,608 | ) | |||||
Other Comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustments | (1,183,819 | ) | 493,769 | 1,923,316 | ||||||||
Comprehensive Loss | (16,563,477 | ) | (21,580,164 | ) | (10,977,292 | ) | ||||||
Less: comprehensive loss attributable to noncontrolling interest | (680,918 | ) | (938,771 | ) | (1,132,148 | ) | ||||||
Comprehensive loss attributable to ReTo Eco-Solutions, Inc. | $ | (15,882,559 | ) | $ | (20,641,393 | ) | $ | (9,845,144 | ) | |||
Net loss attributable to ReTo Eco-Solutions, Inc. | ||||||||||||
Continuing operations | (14,629,055 | ) | (19,508,436 | ) | (4,161,162 | ) | ||||||
Discontinued operations | - | (1,596,390 | ) | (7,612,601 | ) | |||||||
Total | $ | (14,629,055 | ) | $ | (21,104,826 | ) | $ | (11,773,763 | ) | |||
Basic and Diluted Loss Per Share Attributable to ReTo Eco-Solutions, Inc. | ||||||||||||
Continuing operations | (0.38 | ) | (0.75 | ) | (0.17 | ) | ||||||
Discontinued operations | - | (0.06 | ) | (0.32 | ) | |||||||
Total | $ | (0.38 | ) | $ | (0.81 | ) | $ | (0.49 | ) | |||
Weighted average number of shares | ||||||||||||
Basic and diluted | 38,800,974 | 26,160,750 | 24,124,884 | |||||||||
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SOURCE ReTo Eco-Solutions, Inc.