Euro Tech(CLWT) - 2020 Q4 - Annual Report

Financial Performance - Total revenues for 2020 were $13,357,000, a decrease of 23.5% from $17,399,000 in 2019[15] - Gross profit for 2020 was $3,685,000, down 16.6% from $4,417,000 in 2019[15] - Operating loss for 2020 was $1,701,000, compared to a loss of $440,000 in 2019, indicating a significant decline in operational performance[15] - Net income for 2020 was $402,000, a recovery from a net loss of $210,000 in 2019[15] - The company reported a comprehensive income of $371,000 in 2020, compared to a comprehensive loss of $218,000 in 2019, indicating a positive shift in overall financial health[15] - The company reported a net cash used in operating activities of $2,035,000 in 2020, compared to $266,000 in 2019[182] - The company’s revenue for Fiscal 2020 was approximately $13.36 million, a decrease of 23.3% from $17.40 million in Fiscal 2019[90] - Gross profit for Fiscal 2020 decreased by approximately $732,000 or 16.6% to approximately $3.69 million, with a gross profit margin of 27.6%[91] - The company's net income for Fiscal 2020 was approximately $402,000, compared to a net loss of $210,000 in Fiscal 2019[90] - The company paid dividends totaling $1,299,000 in 2020, down from $1,443,000 in 2019, reflecting a strategy to conserve cash amid losses[183]. Assets and Liabilities - Cash and cash equivalents decreased to $3,519,000 in 2020 from $5,991,000 in 2019, reflecting a liquidity challenge[14] - Total assets decreased to $20,095,000 in 2020 from $22,213,000 in 2019, indicating a reduction in the company's asset base[14] - Total current assets decreased to $10,448,000 in 2020, down 12.9% from $12,010,000 in 2019[179] - Total liabilities decreased to $5,632,000 in 2020, a reduction of 18.1% from $6,876,000 in 2019[179] - Total shareholders' equity attributable to Euro Tech Holdings Company Limited was $13,935,000 as of December 31, 2020, down from $14,459,000 in 2019[179] - As of December 31, 2020, the total shareholders' equity was $14,463,000, a decrease from $15,337,000 in 2019, reflecting a net loss of $146,000 for the year[183]. Market and Economic Conditions - The company anticipates continued challenges in the PRC market due to economic instability and regulatory changes, which may impact future performance[20] - The PRC government's measures to control economic growth have contributed to a slowdown, with China's GDP growth rate at 2.3% in 2020, potentially impacting domestic commerce significantly[23] - Average inflation rates in the PRC increased by 2.0%, 1.6%, 2.1%, 2.9%, and 2.5% from 2016 to 2020, which may adversely affect business revenues and overhead costs[23] - The PRC legal system presents uncertainties that could limit legal protections for foreign investments and expand government power, affecting business operations[24] - The PRC government imposes currency controls, affecting the convertibility of RMB into foreign currencies and potentially restricting access to foreign currencies for capital expenses[28] Operational Challenges - The company has reduced staff and consolidated offices in an effort to stem the decline in revenue, although these efforts have not yet been successful[34] - The company faces risks related to fluctuations in commodity prices, raw materials, and labor costs, which may affect its operating results[35] - The company is subject to various litigations that could adversely affect its financial statements and may incur significant expenses in defending these lawsuits[35] - The company has limited long-term arrangements with major vendors, increasing the risk of operational disruptions if relationships are terminated[42] - The company has been unable to find a suitable market for its energy meters, despite substantial development efforts[71] Shareholder and Governance Issues - The weighted average ordinary shares outstanding increased to 3,092,859 in 2020 from 2,301,993 in 2019, reflecting potential dilution for existing shareholders[15] - Major shareholder T.C. Leung owns 2,659,810 shares, representing 51.6% of the Company's Ordinary Shares[138] - The total number of Ordinary Shares outstanding as of March 31, 2021, was 5,154,759[138] - The Company is classified as a "controlled company," exempting it from certain NASDAQ corporate governance criteria, which may limit shareholder protections[55] - The Company’s Memorandum and Articles of Association can be amended by the Board of Directors without shareholder approval, potentially affecting control changes[142] Research and Development - The Company incurred research and development costs of approximately $493,000 in Fiscal 2020 for BWTS compliance with IMO revised G8 requirements[65] - The Company plans to spend up to an additional $100,000 in research and development costs during Fiscal 2021 for BWTS and related projects[67] - R&D costs for the year ended December 31, 2020, amounted to approximately $497,000, a significant increase from $184,000 in 2018[200] Regulatory and Compliance - The company is subject to various laws regulating advertising, and violations could result in fines and harm to its brand[46] - The Group's financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and assumptions affecting reported amounts[108] - The company intends to comply with changes to NASDAQ corporate governance rules as they become effective[164] Currency and Foreign Exchange Risks - The company is exposed to foreign currency risks, with sales primarily in HK dollars and RMB, while expenses are also denominated in multiple currencies including U.S. dollars and Euros[154] - The company does not currently hedge its foreign exchange positions, which could adversely affect its financial condition if foreign currencies appreciate against the U.S. dollar[154]