Cleantech Solutions International Reports Third Quarter 2017 Results

By , in PR PR Economy on .

WUXI, China, Nov. 14, 2017 — Cleantech Solutions International, Inc. (“Cleantech Solutions” or “the Company”) (NASDAQ: CLNT) today announced its financial results for three months ended September 30, 2017.

“Cleantech Solutions had another active quarter, as we move forward with the development of our sharing economy platforms and related rental businesses,” said Mr. Parkson Yip, COO of Cleantech Solutions. “Our portable mobile phone charger rental business is off to a solid start. We began generating revenue during the quarter and now have more than 20,000 chargers available for rent in major convenience store outlets in Hong Kong and Macau.  We are preparing to expand this business into other retail outlets along with new regions, such as India and Singapore. 

“We are also excited about opportunities in the peer-to-peer courier market afforded by our recent acquisition of a 51% interest in Inspirit Studio.  Inter-city, last mile logistics is one of the latest sectors to be transformed by the sharing economy. We see strong potential for the Anyway app, which offers individuals and businesses a reliable network of on-demand couriers who will deliver packages within two hours throughout Hong Kong. We currently have over 2,000 couriers on the platform and aim to increase that to 12,000 over the next twelve months. We believe a true peer-to-peer, rental-based sharing economy will continue to disrupt traditional business and consumer markets over the next few years and are currently exploring additional merger and acquisition opportunities to position Cleantech Solutions for success in the future.”

Cleantech Solutions' CEO, Mr. Jianhu Wu added “While our legacy dyeing and finishing business in China is facing headwinds, I am pleased with our progress in executing our growth strategies. Collaborative consumption holds enormous promise, and I am optimistic that our new business units will quickly gain traction in the market.”          

Third Quarter 2017 Results

Revenue for the third quarter of 2017 declined by 33.4% to $2,629,000 compared to $3,946,000 for the same period in 2016.  Currently, the Company's primary source of revenue is from the dyeing and finishing business since the forged rolled rings and related products and petroleum and chemical equipment businesses are discontinued and its new business units are in an early stage of development. 

Gross loss for the third quarter of 2017 was $446,000, compared to gross profit of $494,000 for the same period in 2016.  Gross margin was negative 17.0% during the third quarter of 2017 compared to 12.5% for the same period in 2016. The decline in gross margin was primarily attributable to reduced scale of operations related to reduced revenues and higher raw material costs.

Operating expenses increased to $3,664,000 compared to $547,000 for the same period in 2016.  The increase was primarily due to a $2.4 million bad debt expense, and an increase in professional fees, including stock-based consulting fees, and payroll and related benefits. 

Loss from operations was $4,110,000, compared to a loss from operations of 53,000 for the same period in 2016.

Loss from continuing operations was $4,179,000, or $(2.10) per basic and diluted share, compared to a loss from continuing operations of $86,000, or $(0.07) per basic and diluted share for the same period in 2016.

Loss from discontinued operations (Refer to “Discontinued Operations” discussion below) was $71,000, or $(0.04) per basic and diluted share, for the third quarter of 2017.  This compares to a loss from discontinued operations of $273,000, or $(0.21) per basic and diluted share, for the third quarter of 2016.

Net loss for the third quarter of 2017 was $4,250,000, or $(2.14) per basic and diluted share, compared to net loss of $360,000, or $(0.28) per basic and diluted share, for the same period in 2016.   

Basic and diluted earnings per share were based on 1,988,794 and 1,297,111 weighted average shares outstanding, respectively, for the three months ended September 30, 2017, and 2016. All share and per share information has been adjusted to reflect a 1-for-4 reverse stock split effective March 20, 2017.

Financial Condition

As of September 30, 2017, Cleantech Solutions held cash and cash equivalents of $4,775,000 compared to $1,481,000 at December 31, 2016. Accounts receivable were $13,023,000 compared to $13,922,000 at December 31, 2016. Inventories were $4,033,000 compared to $2,394,000 at December 31, 2016. The Company had $2,029,000 and $376,000 in short-term bank loans and bank acceptance notes payable, respectively, at September 30, 2017, down from $2,160,000 and $547,000, respectively, at December 31, 2016. Working capital was $23,206,000 at September 30, 2017 compared to $21,539,000 at December 31, 2016. Stockholders' equity was $65,656,000 at September 30, 2017 compared to $65,312,000 at December 31, 2016. 

In the first nine months of 2017, the Company used $17,000 in operating cash flow, primarily due to the loss for the period and increases in inventory and advances to suppliers, which were offset by an increase in accounts payable and a decrease in prepaid and other current assets as a result of an increase in stock based compensation. The Company generated $2,029,000 in cash flow from investing activities, primarily related to a payment from the sale of Wuxi Fulland Wind Energy Equipment Co., Ltd. (“Fulland Wind”) in the second quarter of 2017. The Company generated $1,138,000 in cash flow from financing activities, primarily due to $860,000 in net proceeds from a private placement transaction in June 2017, which was partially offset by a reduction in short term debt.

Recent Events

On October 9, 2017, the Company entered into an agreement with an investor who purchased a note for $670,000, bearing two percent (2%) interest per annum. The note automatically converts into shares of common stock of the Company at a conversion price equal to $3.35 per share on January 8, 2018. The Company shall have the option, in its sole and absolute discretion, to repay the outstanding amount in full on or before the Conversion Date.

On October 27, 2017, the Company's wholly-owned subsidiary, EC Technology & Innovations Limited, acquired a 51% interest in Inspirit Studio, which develops and runs a sharing economy mobile platform called Anyway that allows people to provide courier delivery services during their commuting times. Total consideration was HK$3.0 million, which shall be satisfied by the allotment and issuance of 85,473 shares of the Company.

On October 12, 2017, the Company's wholly-owned subsidiary, Sharing Economy Investment Limited, entered into exclusive discussions regarding the potential acquisition of a 51% interest in 3D Discovery Co. Limited (“3D Discovery”), a digital marketing services provider which provides various solution such as 3D scanning and modeling, website and mobile app development, video production, graphic design, etc. to its clients. Apart from existing business, 3D Discovery is going to develop a mobile app which allows users to create an interactive virtual tour of a physical space by using a mobile phone camera.

Discontinued Operations

On December 30, 2016, the Company sold 100% of the stock of Fulland Wind to an unrelated party and discontinued the Company's forged rolled rings and related components business. Additionally, the Company's management decided to discontinue its petroleum and chemical equipment segment due to significant declines in revenues and the loss of its major customer. As such, the assets and liabilities of these two segments were classified on the unaudited condensed consolidated balance sheets as assets and liabilities of discontinued operations and the operating results were classified as discontinued operations in the unaudited condensed consolidated statements of operations for all periods presented.

About Cleantech Solutions International

Cleantech Solutions, through its affiliated companies, designs, manufactures and distributes a line of proprietary high and low temperature dyeing and finishing machinery to the textile industry.  The Company's latest business initiatives are focused on targeting the technology and global sharing economy markets, by developing online platforms and rental business partnerships that will drive the global development of sharing through economical rental business models.

Safe Harbor Statement

This release contains certain “forward-looking statements” relating to the business of the Company and its subsidiary and affiliated companies. These forward looking statements are often identified by the use of forward-looking terminology such as “believes,” “expects” or similar expressions. Such forward looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein referred to in this press release as anticipated, believed, estimated or expected. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website, including factors described in “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the year ended December 31, 2016 and in our Form 10-Q for the quarter ended September 30, 2017. All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward-looking statements.

Company Contacts:

Cleantech Solutions International, Inc.
Parkson Yip, Chief Operating Officer 
E-mail: [email protected]
+852-31060372 
Web: www.cleantechsolutionsinternational.com

Compass Investor Relations
Elaine Ketchmere, CFA
Email: [email protected] 
+1-310-528-3031
Web:  www.compassinvestorrelations.com

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE GAIN (LOSS)

(Unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

REVENUES

$           2,629,217

$           3,946,480

$       10,998,438

$       12,390,980

COST OF REVENUES

3,075,290

3,452,614

10,415,813

10,484,928

GROSS PROFIT (LOSS)

(446,073)

493,866

582,625

1,906,052

OPERATING EXPENSES:

Depreciation

276,940

112,472

814,654

388,326

Selling, general and administrative

3,279,792

322,426

4,147,652

1,189,460

Research and development

107,568

111,840

324,698

196,478

Total operating expenses

3,664,300

546,738

5,287,004

1,774,264

(LOSS) INCOME FROM OPERATIONS

(4,110,373)

(52,872)

(4,704,379)

131,788

OTHER INCOME (EXPENSE):

Interest income

3,205

5,460

10,925

20,272

Interest expense

(33,125)

(31,676)

(107,991)

(96,630)

Loss on equity method investment

(39,060)

(81,871)

Foreign currency transaction gain 

(1)

168

Other income

478

(2)

47,618

391

Total other expense, net

(68,502)

(26,219)

(131,319)

(75,799)

(LOSS) INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES

(4,178,875)

(79,091)

(4,835,698)

55,989

Income taxes provision

113

7,103

11,196

176,518

(LOSS) INCOME FROM CONTINUING OPERATIONS

(4,178,988)

(86,194)

(4,846,894)

(120,529)

LOSS FROM DISCONTINUED OPERATIONS, NET OF
INCOME TAXES

(71,339)

(273,342)

(71,339)

(1,763,282)

NET LOSS

$         (4,250,327)

$            (359,536)

$       (4,918,233)

$        (1,883,811)

COMPREHENSIVE LOSS:

Net loss

$         (4,250,327)

$            (359,536)

$       (4,918,233)

$        (1,883,811)

Other comprehensive gain (loss):

Unrealized foreign currency translation gain (loss)

1,224,249

(315,181)

2,807,841

(2,157,652)

Comprehensive loss

$         (3,026,078)

$            (674,717)

$       (2,110,392)

$        (4,041,463)

NET LOSS PER COMMON SHARE:

Continuing operations – Basic and diluted

$                  (2.10)

$                  (0.07)

$                (2.96)

$                 (0.10)

Discontinued operations – basic and diluted

(0.04)

(0.21)

(0.04)

(1.54)

Net loss per common share – basic and diluted

$                  (2.14)

$                  (0.28)

$                (3.00)

$                 (1.64)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic and diluted

1,988,794

1,297,111

1,635,223

1,148,390

CLEANTECH SOLUTIONS INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2017

December 31, 2016

(Unaudited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$                 4,774,697

$                 1,481,498

Restricted cash

229,499

551,047

Notes receivable

254,059

133,913

Accounts receivable, net of allowance for doubtful accounts 

13,023,448

13,922,371

Inventories, net of reserve for obsolete inventories

4,033,372

2,394,179

Advances to suppliers

2,560,713

1,116,525

Deferred tax assets 

403,389

386,381

Receivable from sa

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Maria Burns

Maria Burns

Maria is a Viral News Editor who graduated from the University Of California. She likes social media trends, being semi-healthy, Buffalo Wild Wings and vodka with lime. When she isn’t writing, Maria loves to travel. She last went to Thailand to play with elephants and is planning a trip to Bali.
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