Newater Technology, Inc. Announces Year 2019 Audited Financial Results

NEWATER TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 
2019

December 31, 
2018

ASSETS

Current assets

Cash and cash equivalents

$

9,944,765

$

2,461,501

Restricted cash, current

4,021,177

6,033,482

Accounts receivable, net

11,293,625

10,064,847

Accounts receivable - related parties, net

2,392,087

1,948,009

Notes receivable

360,505

6,999

Inventories

13,715,369

13,762,959

Deposit - related party

-

10,180

Deferred cost of revenue

221,737

343,090

Advances to suppliers and other current assets, net

4,699,755

4,904,290

Total current assets

46,649,020

39,535,357

Retentions receivable, non-current

734,140

344,856

Property, plant and equipment, net

24,611,862

18,753,340

Land use right, net

2,008,096

2,078,240

Operating lease right-of-use assets, net

141,016

-

Deferred tax assets

-

604,064

Deposit on loan agreement

918,643

436,275

Long-term investments

2,997,419

-

Total assets

$

78,060,196

$

61,752,132

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable and bank acceptance notes to vendors

$

8,099,529

$

5,353,538

Accounts payable - related parties

5,225,004

3,389,148

Loans due within one year

11,809,449

10,867,111

Advances from customers

5,522,913

2,953,595

Advances from customers - related parties

7,254,968

586,719

Income tax payables

322,419

732,699

Accrued expenses and other payables

6,971,505

6,375,800

Operating lease liabilities, current

56,852

-

Deferred income

43,061

-

Total current liabilities

45,305,700

30,258,610

Deferred Income, non-current

43,061

-

Deferred tax liabilities

288,687

-

Operating lease liabilities, non-current

68,420

-

Long term loans, less current portion and unamortized debt issuance costs

1,377,217

4,449,889

Total non-current liabilities

1,777,385

4,449,889

Total liabilities

47,083,085

34,708,499

Shareholders' equity

Common shares ($0.001 par value, 200,000,000 shares authorized,10,809,000 shares issued and outstanding as of December 31, 2019 and December 31, 2018)

10,809

10,809

Additional paid-in capital

26,303,348

15,059,181

Statutory reserves

2,267,219

1,765,711

Retained earnings

3,946,021

11,380,149

Accumulated other comprehensive loss

(1,550,286)

(1,172,217)

Total shareholders' equity

30,977,111

27,043,633

Total liabilities and shareholders' equity

$

78,060,196

$

61,752,132

NEWATER TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

For the Years ended December 31,

2019

2018

2017

Net revenues

$

23,716,978

$

25,973,963

$

16,192,503

Net revenues from related parties

13,857,014

21,066,741

9,146,994

        Total revenues

37,573,992

47,040,704

25,339,497

Cost of revenues

20,233,998

20,474,072

17,199,866

Cost of revenues from related parties

1,450,627

5,669,252

-

        Total cost of revenues

21,684,625

26,143,324

17,199,866

        Gross profit

15,889,367

20,897,380

8,139,631

Operating expenses:

Selling, general and administrative

10,148,039

12,025,924

5,452,349

        Total operating expenses

10,148,039

12,025,924

5,452,349

Income from operations

5,741,328

8,871,456

2,687,282

Interest expense

1,087,051

658,290

242,707

Interest income

(38,328)

(26,632)

(112,592)

Government grants

(946,164)

(627,748)

(513,538)

Investment loss

17,023

-

-

Other expenses (income)

(153,546)

(1,162)

3,956

        Total other expenses (income)

(33,964)

2,748

(379,467)

Income before income taxes provisions

5,775,292

8,868,708

3,066,749

Income tax provisions

1,463,745

1,657,279

475,818

Net income

$

4,311,547

$

7,211,429

$

2,590,931

Other comprehensive income (loss)

Foreign currency translation adjustment

(378,069)

(1,159,084)

535,810

Total comprehensive income

$

3,933,478

$

6,052,345

$

3,126,741

Earnings per common share

Basic

$

0.40

$

0.67

$

0.26

Diluted

$

0.40

$

0.67

$

0.26

Weighted average common shares outstanding

Basic

10,809,000

10,809,000

9,864,479

Diluted

10,809,000

10,809,000

9,864,479

NEWATER TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

Number of Shares

Common Shares

Additional Paid-in Capital

Retained Earnings

Statutory Reserves

Accumulated Other Comprehensive Loss

Total Shareholder's Equity

Balance, January 1, 2017

9,199,000

$

9,199

$

7,949,466

$

2,960,698

$

382,802

$

(548,943)

$

10,753,222

Net income

2,590,931

2,590,931

Statutory reserves

(322,896)

322,896

-

Issuance of common shares for cash

1,610,000

1,610

7,109,715

7,111,325

Foreign currency translation adjustment

535,810

535,810

Balance, December 31, 2017

10,809,000

$

10,809

$

15,059,181

$

5,228,733

$

705,698

$

(13,133)

$

20,991,288

Net income

7,211,429

7,211,429

Statutory reserves

(1,060,013)

1,060,013

-

Foreign currency translation adjustment

(1,159,084)

(1,159,084)

Balance, December 31, 2018

10,809,000

$

10,809

$

15,059,181

$

11,380,149

$

1,765,711

$

(1,172,217)

$

27,043,633

Net loss

4,311,547

4,311,547

Statutory reserves

(501,508)

501,508

-

Capital increase from retained earnings

11,244,167

(11,244,167)

Foreign currency translation adjustment

(378,069)

(378,069)

Balance, December 31, 2019

10,809,000

$

10,809

$

26,303,348

$

3,946,021

$

2,267,219

$

$

30,977,111

NEWATER TECHNOLOGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31,

2019

2018

2017

Cash flows from operating activities

Net income

$

4,311,547

$

7,211,429

$

2,590,931

Adjustments to reconcile net income to net cash used in operating activities:

Loss from equity method investment

17,023

-

-

Depreciation and amortization expense

1,549,296

558,327

233,493

Deferred income taxes

892,548

(118,199)

(312,997)

Bad debt expense

1,243,709

280,228

229,707

Amortization of debt issuance costs

324,221

103,772

-

Noncash lease expense

41,935

-

-

Loss on disposal of property, plant and equipment

1,367

13,256

-

Changes in assets and liabilities:

Accounts receivable, net

(1,509,728)

(5,327,278)

(5,076,425)

Accounts receivable - related parties, net

(1,103,104)

(1,427,078)

2,821,621

Notes receivable

(356,648)

(7,276)

70,000

Inventories

(2,923,465)

(5,762,750)

(4,923,400)

Deferred cost of revenue

117,910

383,382

(657,875)

Deferred cost of revenue - related party

-

1,765,856

(1,795,222)

Advances to suppliers and other current assets, net

(311,090)

(2,108,928)

(412,955)

Due from related parties

-

-

703

Retentions receivable, non-current

(397,157)

(358,505)

-

Deposit - related party

10,134

(10,583)

-

Other non-current assets

-

-

4,719

Accounts payable and bank acceptance notes to vendors

2,839,752

996,619

2,577,192

Accounts payable - related parties

1,896,054

3,269,238

248,695

Deferred income

43,433

-

(26,639)

Advances from customers

2,630,143

2,420,363

(220,483)

Advances from customers - related parties

6,733,465

(125,099)

719,550

Due to related parties

-

-

5,102

Deferred income, non-current

43,433

-

-

Operating lease liabilities

(76,752)

-

-

Income tax payables

(404,231)

267,988

144,944

Accrued expenses and other payables

(2,322,199)

(4,481,539)

589,638

Net cash provided by (used in) operating activities

13,291,596

(2,456,777)

(3,189,701)

Cash flows from investing activities

Cash paid for equity investments

(3,015,119)

-

-

Purchase of property, plant and equipment

(2,316,967)

(5,511,732)

(1,482,360)

Proceeds from disposal of property, plant and equipment

427,261

22,072

-

Advances to third party

-

-

(1,236,490)

Repayments from third party

-

-

1,236,490

Repayments from related parties

-

-

2,960

Deposit on acquisition of subsidiary

-

(200,000)

-

Net cash used in investing activities

(4,904,825)

(5,689,660)

(1,479,400)

Cash flows from financing activities

Proceeds from issuances of common shares

-

-

7,111,325

Repayment to related parties

-

(9,703)

(739,973)

Deposit on loan agreement

(503,939)

(473,698)

-

Proceeds from loans due within one year

7,454,711

11,493,557

8,805,683

Repayment of loans due within one year

(8,046,350)

(11,952,224)

(3,283,830)

Proceeds from long-term loans

6,376,169

8,631,493

-

Payment of debt issuance costs

(335,938)

(284,219)

-

Repayment of long-term loans

(7,736,415)

(730,595)

-

Net cash provided by (used in) financing activities

(2,791,762)

6,674,611

11,893,205

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash

(124,050)

(404,956)

222,973

Net change in cash, cash equivalents and restricted cash

5,470,959

(1,876,782)

7,447,077

Cash, cash equivalents and restricted cash, beginning of the year

8,494,983

10,371,765

2,924,688

Cash, cash equivalents and restricted cash, end of the year

$

13,965,942

$

8,494,983

$

10,371,765

Supplemental cash flow information

Cash paid for interest

$

608,431

$

689,867

$

244,753

Cash paid for income taxes

$

977,755

$

1,507,489

$

656,602

Non-cash investing and financing activities:

Properties acquired with loans

$

-

$

52,161

$

206,000

Liabilities assumed in connection with purchase of property, plant and equipment

$

2,980,582

$

2,636,770

$

7,445,478

Operating expenses paid by related parties

$

-

$

9,703

$

-

Property, plant and equipment transferred from inventories

$

2,791,339

$

1,566,314

$

-

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets

Cash and cash equivalents

$

9,944,765

$

2,461,501

$

3,118,080

Restricted cash

4,021,177

6,033,482

7,253,685

Total cash, cash equivalents and restricted cash

$

13,965,942

$

8,494,983

$

10,371,765