ReTo Eco-Solutions Reports First Half of 2020 Financial Results

BEIJING,Dec. 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%,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,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,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,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,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,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.

RETO ECO-SOLUTIONS,INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30,

December31,

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

$

65,244

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

3,581

Operating Expenses:

Selling expenses

474,901

631,664

General and administrative expenses

1,788,625

1,377

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

$

(3,349)

$

(3,345)

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

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-

CommonShares

paid-in

Statutory

(Accumulated

Comprehensive

controlling

Total

Shares

Amount

Capital

Reserve

Deficit)

Income (Loss)

Interest

Equity

Balance at

December

31,2018

22,000

$

22,760

$

42,278,252

$

2,797

$

9,084,246

$

(3,105,185)

$

2,267,985

$

53,180,855

Net loss

-

-

-

-

(3,446)

-

(391,899)

(3,345)

Foreign

currency

translation

adjustment

-

-

-

-

-

232,966

(117,668)

115,298

Balance at

June 30,

2019

22,797

$

6,800

$

(2,872,219)

$

1,758,418

$

49,808

Balance at

December

31,2019

23,000

$

23,160

$

42,852

$

2,797

$

(5,368)

$

(3,438)

$

1,860

$

37,863

Net loss

-

-

-

-

(3,341)

-

(163,008)

(3,349)

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

24,000

$

24,135

$

43,127

$

2,439

$

(8,351)

$

(3,379)

$

1,062

$

34,033

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

$

(3,349)

$

(3,345)

Less: net loss from discontinued operations

-

(900,097)

Net loss from continuing operations

(3,349)

(2,248)

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

2,687,156

Gain from disposal of Gu'an REIT

(2,801)

-

Amortization of operating lease right-of-use assets

116,120

109,975

Changes in operating assets:

Accounts receivable

2,800

(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

1,195

174,185

Taxes payable

44,270

168,613

Operating lease liabilities

(143,306)

(103,462)

Net cash used in operating activities from continuing operations

(3,696)

(2,637,818)

Net cash provided by operating activities from discontinuing operations

-

3,134,281

Net cash provided by (used in) operating activities

(3,696)

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

2,332)

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

(1,383)

-

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

$

285,823,482

RECONCILIATION TO AMOUNTS ON CONSOLIDATED BALANCE SHEETS:

Cash

$

202,078

$

1,652,050

Restricted cash

83,005

171,432

Total cash and restricted cash

$

285,482

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

View original content:/news-releases/reto-eco-solutions-reports-first-half-of-2020-financial-results-301197194.html