UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K/A

(Amendment No. 1)

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of report (date of earliest event reported): February 1, 2018

 

 

 

H/CELL ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada   000-55802   47-4823945

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

97 River Road, Flemington, NJ 08822

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (908) 837-9097

 

Copy of correspondence to:

 

James M. Turner, Esq.

Marc J. Ross, Esq.

Sichenzia Ross Ference Kesner LLP

1185 Avenue of the Americas, 37 th Floor

New York, New York 10036

Tel: (212) 930-9700     Fax: (212) 930-9725

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

     
 

 

EXPLANATORY NOTE

 

On February 5, 2018, H/Cell Energy Corporation, a Nevada corporation (“H/Cell Energy” or the “Company”), filed a Current Report on Form 8-K to report the completion of its acquisition of PVBJ Inc., a New Jersey corporation (“PVBJ”) , which was completed on February 1, 2018. This Current Report on Form 8-K/A is filed as an amendment to the Current Report on Form 8-K filed by H/Cell Energy on February 5, 2018 solely to include the financial information described in Item 9.01 below that was previously omitted in accordance with Item 9.01(a) and Item 9.01(b) of Form 8-K.

 

Item 9.01 Financial Statements and Exhibits.

 

(a) Financial statements of businesses acquired.

 

The audited consolidated financial statements of PVBJ Inc. as of December 31, 2017 and 2016, and for each of the two years in the period ended December 31, 2017, are filed as Exhibit 99.02 hereto and incorporated herein by reference.

 

(b) Pro forma financial information.

 

The unaudited pro forma condensed combined financial information with respect to the transaction described in Item 2.01 is filed as Exhibit 99.03 hereto and incorporated herein by reference.

 

(d) Exhibits.

 

10.01   Form of Stock Purchase Agreement, by and among H/Cell Energy Corporation, PVBJ Inc. and Benis Holdings LLC, dated February 1, 2018, filed as an exhibit to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 5, 2018 and incorporated herein by reference.
     
10.02   Form of Employment Agreement, by and between H/Cell Energy Corporation and Paul V. Benis, Jr., dated February 1, 2018, filed as an exhibit to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 5, 2018 and incorporated herein by reference.
     
99.01   Press Release, dated February 5, 2018, issued by H/Cell Energy Corporation, filed as an exhibit to the Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 5, 2018 and incorporated herein by reference.
     
99.02   Audited consolidated financial statements of PVBJ Inc. as of December 31, 2017 and 2016 and for each of the two fiscal years in the period ended December 31, 2017.
     
99.03   Unaudited pro forma condensed combined consolidated financial information of H/Cell Energy Corporation.

 

  2  
 

 

SIGNATURE

 

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  H/CELL ENERGY CORPORATION
     
Date: June 19, 2018 By: /s/ MATTHEW HIDALGO
    Matthew Hidalgo
    Chief Financial Officer

 

  3  
 

 

 

Exhibit 99.02

 

PVBJ Inc.

 

FINANCIAL STATEMENTS

 

December 31, 2017 and 2016

 

 
 

 

PVBJ Inc.

 

TABLE OF CONTENTS

 

  Page
Financial Statements  
   
Independent Auditor’s Report 1
   
Balance Sheets as of December 31, 2017 and 2016 2
   
Statements of Operations and Shareholder Deficit for the years ended December 31, 2017 and 2016 3
   
Statements of Cash Flows for the years ended December 31, 2017 and 2016 4
   
Notes to Financial Statements 5-9

 

 
 

 

Ind ependent Auditors’ Report

 

To the Shareholders of

PVBJ Inc.

 

We have audited the accompanying financial statements of PVBJ, Inc. which comprise the balance sheets as of December 31, 2017 and 2016, and the related statements of operations and shareholder deficit, and cash flows for the years then ended, and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is respons ible for the preparation and fair presentation of these financial statements in accordance with accounting principles gene rally accepted in the United States of America; this inclu des the design, imp le mentation, and maintenance of internal co ntrol rele vant to the pre paration and fair presentation of financi al stateme nts that are free from material misstatement whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on these financia l statements based on our audits. We condu cted our audi ts in accordance with a uditing standards generally accepted in the Unit ed States of America. Those sta ndards requ ire that we plan and perform the audit to obtain reaso nable assurance abo ut whethe r the financ ial statements are free from material miss tatement.

 

An audit in volves performing procedures to obtain audit e vidence about the amounts and disc los ures in the financial statemen ts. The procedures selected depend on the auditor’s judgment, inc lud ing the assessme nt of the ris ks of mater ia l miss tatement of the finan cial statements, whether due to fraud or error. In makin g those ris k assessmen ts, the auditor conside rs internal control relevant to the entity’s preparation and fair presentation of the financi al statements in order to design aud it procedures that are appropriate in the circum stances , but not for the purpose of expressing an opinion on the effectiveness of the entity’ s internal control. Accord ing ly, we express no such o pinion. An aud it also incl udes evaluatin g the appropriateness of accounting policies used and the reasonab leness of signi fica nt accounting estimates made by manageme nt, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have ob tained is s ufficie nt and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our op inio n, the financ ial s tatements re ferred to above present fairly, in all mate rial respects, the financial position of PVBJ Inc. as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then e nded in accordance with acco unting principles gene rally accepted in the United States of America.

 

/s/ Rosenberg Rich Baker Berman, P.A.

 

Somerset, New Jersey

June 15, 2018

 

1
 

 

PVBJ Inc.

 

BALANCE SHEETS

 

    Year Ended December 31,  
    2017     2016  
             
ASSETS                
Current assets:                
Cash and cash equivalents   $ 82,063     $ 53,244  
Accounts receivable, net
    226,707       267,792  
                 
Total current assets     308,770       321,036  
                 
Property and equipment, net of accumulated depreciation     280,969       314,019  
                 
Total assets   $ 589,739     $ 635,055  
                 
LIABILITIES AND SHAREHOLDER DEFICIT                
Current liabilities:                
Accounts payable and accrued expenses   $ 166,433     $ 159,416  
Current notes payable
    14,918       13,547  
Current capital lease payable     66,475       56,018  
                 
Total current liabilities     247,826       228,981  
                 
Line of credit     198,701       144,015  
Capital leases     199,961         224,749    
Notes payable     71,898       70,721  
                 
Total long term liabilities     470,560       439,485  
                 
Total liabilities   $ 718,386     $ 668,466  
                 
Shareholder deficit:                
Common stock, no par value, 100 shares authorized, 100 shares issued and outstanding     40,000       40,000  
Contributed capital     29,262       32,134  
Accumulated deficit     (197,909 )     (105,545 )
                 
Total shareholder deficit
    (128,647 )     (33,411 )
                 
Total liabilities and shareholder equity   $ 589,739     $ 635,055  

 

See accompanying notes to financial statements. 2  
 

 

PVBJ Inc.

 

STATEMENTS OF OPERATIONS AND SHAREHOLDER DEFICT

 

    Year Ended December 31,  
    2017     2016  
Sales   $ 2,181,086     $ 2,216,107  
Cost of sales     1,636,404       1,675,574  
                 
Gross profit     544,682       540,533  
                 
General and administrative expenses     594,983       514,872  
                 
Income (loss) before other income and expense     (50,301 )     25,661  
                 
Other expense:                
Loss on disposition of equipment     4,657       3,819  
Interest expense     37,407       39,223  
                 
Total other expense     42,064       43,042  
                 
Net loss     (92,365 )     (17,381 )
                 
Shareholder deficit, beginning of year     (33,411 )     (48,164 )
                 
Shareholder distributions     (2,871 )     (957 )
                 
Contributed capital     -       33,091  
                 
Shareholder deficit, end of year   $ (128,647 )   $ (33,411 )

 

See accompanying notes to financial statements. 3  
 

 

PVBJ Inc.

 

STATEMENTS OF CASH FLOWS

 

    Year Ended December 31,  
      2017       2016  
Cash flows from operating activities:                
Net loss   $ (92,365 )   $ (17,381 )
Adjustments to reconcile net loss to net cash provided by operating activities:                
Depreciation     94,700       94,641  
Loss on disposal of assets (Increase) decrease in:     4,657       3,819  
Accounts receivable     55,208       (54,188 )
Allowance for doubtful accounts     (14,123 )     14,123  
Prepaid expenses and other current assets     -       12,062  
Security deposits increase (decrease) in:     -       686  
Accounts payable and accrued expenses     7,017       (48,099 )
                 
Net cash provided by operating activities     55,094       5,663  
                 
Cash flows from investing activities:                
Proceeds from disposition of property and equipment     -     -  
                 
Net cash (used in) investing activities     -       -  
                 
Cash flows from financing activities:                
Proceeds from line of credit     55,863       -  
Payments on line of credit             (708 )
Repayment of notes payable     (7,941 )     (4,863 )
Repayment of capital leases     (71,326 )     (62,047 )
Proceeds from contributed capital     -       33,091  
Shareholder distribution     (2,871 )     (957 )
                 
Net cash provided by (used in) financing activities     26,275       (35,484 )
                 
Net increase (decrease) in cash and cash equivalents     28,819       (29,821 )
                 
Cash and cash equivalents, beginning of year     53,244       83,065  
                 
Cash and cash equivalents, end of year   $ 82,063     $ 53,244  
                 
Supplemental disclosure of cash flow information:                
Cash paid for interest   $ 37,407     $ 39,223  
Cash paid for taxes   $ 1,965     $ 2,907  

 

See accompanying notes to financial statements. 4  
 

 

PVBJ Inc.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2017 AND 2016 

 

NOTE 1 - NATURE OF OPERATIONS

 

Established in 2008, PVBJ, Inc. doing business as Temperature Service Company (the “Company”) a New Jersey S-Corporation is a regionally recognized company that specializes in HVAC and refrigeration for commercial and residential customers. The services offered include design, installation, repair, maintenance and emergency services for environmental systems. The Company has a highly trained technical team that is experienced in all aspects of environmental systems. The Company works directly with end users and through general contractors. The Company covers the Pennsylvania, New Jersey, Maryland and Delaware markets.

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates:

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Accounts Receivable:

 

Accounts receivable are recorded when invoices are issued and are presented in the balance sheet net of the allowance for doubtful accounts. The allowance for doubtful accounts is estimated based on the Company’s historical losses, the existing economic conditions in the construction industry, and the financial stability of its customers. Accounts are written off as uncollectible after collection efforts have failed. In addition, the Company does not generally charge interest on past-due accounts or require collateral. At December 31, 2017 there was no allowance doubtful accounts and at December 31, 2016 there was a $14,123 allowance for doubtful accounts.

 

Property and Equipment, and Depreciation :

 

Property and equipment are stated at cost. Depreciation is generally provided using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the remaining term of the lease or the estimated useful life of the improvement.

 

Repairs and maintenance that do not improve or extend the lives of the property and equipment are charged to expense as incurred.

 

Revenue Recognition:

 

Revenue is all from service or short term contracts and is recognized currently as the work is performed. Time and materials are accordingly charged to the customer at completion of the job.

 

The Company recognizes revenues when there is persuasive evidence of an arrangement, delivery has occurred or services are rendered, the sales price is determinable, and collectability is reasonably assured. Revenue is typically recorded once all performance obligations of PVBJ, Inc. have been satisfied. Sales are recorded net of discounts and returns, which historically have not been material.

 

Cash and Cash Equivalents:

 

Cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less. The Company has no cash equivalents for either years presented.

 

5
 

 

PVBJ Inc.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2017 AND 2016

 

Advertising Costs

 

Advertising costs are charged to expense during the period in which they are incurred. Advertising expense for the years ended December 31, 2017 and 2016 was approximately $1,738 and $1,248, respectively.

 

Fair Value of Financial Instruments:

 

The carrying value of the Company’s financial instruments, consisting principally of cash, receivables and accounts payable approximates fair value due to either the short-term maturity of the instruments or borrowings with similar interest rates or maturities.

 

Income Taxes:

 

PVBJ Inc. is a New Jersey S-Corporation with pass through tax benefit to the shareholder of PVBJ Inc. personal tax returns. Accordingly, no provision has been made for income taxes in the accompanying financial statements, since all items of income or loss are required to be reported on the income tax returns of the Shareholder, who are responsible for any taxes thereon.

 

Sales and Use Tax

 

The Company collects sales tax in various jurisdictions. Upon collection from customers, it records the amount as a payable to the related jurisdiction. On a periodic basis, it files a sales tax return with the jurisdictions and remits the amount indicated on the return.

 

NOTE 3 – SIGNIFICANT CONCENTRATIONS OF CREDIT RISK

 

Cash is maintained at an authorized deposit-taking institution incorporated in the United States and is insured by the U.S. Federal Deposit Insurance Corporation up to $250,000.

 

Credit risk for trade accounts is concentrated as well because substantially all of the balances are receivable from entities located within certain geographic regions. To reduce credit risk, the Company performs ongoing credit evaluations of its customers’ financial conditions, but does not generally require collateral. In addition, at December 31, 2017, 40% of the Company’s accounts receivable was from one customer, and, at December 31, 2016, 61% of the Company’s accounts receivable was due from three unrelated customers at 31%, 18% and 12%.

 

NOTE 4 – MAJOR CUSTOMERS

 

During the year ended December 31, 2017, there was one customer with a concentration of 40% of the Company’s revenue. During the year ended December 31, 2016, the Company earned 61% of it’s revenue from three customers at approximately 31%, 18% and 12%.

 

NOTE 5 – PROPERTY AND EQUIPMENT

 

At December 31, property and equipment are comprised of the following:

 

    2017     2016  
Furniture and fixtures (5 to 7 years)   $ 6,464     $ 6,464  
Auto and truck (5 to 7 years)     501,615       450,151  
      508,079       456,615  
Less: accumulated depreciation     (227,110 )     (142,596 )
    $ 280,969     $ 314,019  

 

Depreciation expense for the years ended December 31, 2017 and 2016 amounted to $94,700 and $94,159, respectively.

 

6
 

 

PVBJ Inc.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2017 AND 2016

 

NOTE 6 – COMMITMENTS

 

The Company entered into one operating lease for office space in Downingtown, PA expiring in December 2018. The future minimum payments on the lease for the next year and in the aggregate amount to the following:

 

2018   $ 16,200  
    $ 16,200  

 

Rent expense for the years ended December 31, 2017 and 2016 amounted to approximately $16,200 and $19,600, respectively, and is included in General and Administrative expenses on the related statements of operations.

 

During the year ended December 31, 2016, the Company leased equipment under three capital leases, which expire in June 2023. During the year ended December 31, 2017 the company entered into one more capital lease bringing the total to four. The obligations are payable in monthly installments ranging from approximately $615 to $2,630 with interest rates from 5.57% to 7.20% per annum. The leases are secured by the related equipment.

 

At December 31, capital leases are comprised of the following:

 

    2017     2016  
Auto and truck (5 to 7 years)     262,400       312,937  
Less: accumulated depreciation     (185,394 )     (111,911 )
    $ 77,006     $ 201,026  

 

At December 31, 2017, approximate payments to be made on these capital lease obligations are as follows:

 

2018   $ 78,207  
2019     78,207  
2020     78,207  
2021     44,680  
2022     7,510  
Thereafter     4,380  

 

Capital lease obligation     291,191  
Less amounts representing interest     24,755  
Current portion     66,475  
         
Net   $ 199,961  

 

For the years ended June 30, 2017 and 2016, interest expense on the capital leases was approximately $14,840 and $17,782, respectively. Amortization of the capital leases is included in depreciation expense on the income statement.

 

7
 

 

PVBJ Inc.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2017 AND 2016

 

NOTE 7 – NOTES PAYABLE

 

Notes payable consisted of the following:

 

    December 31, 2017     December 31, 2016  
Note payable with monthly payments of $716, including interest at 6.50% per annum through April 2021.   $ 25,576     $ 32,341  
Note payable with monthly payments of $792, including interest at 5.44% per annum through June 2023.   $ -     $ 51,920  
Note payable with monthly payments of $947 including interest at 6.14% per annum through August 2024.   $ 61,240     $ -  
Total   $ 86,816     $ 84,261  

 

Aggregate annual principal payments in the fiscal years subsequent to December 31 2017, are as follows:

 

Year ending December:   Amount  
2018   $ 14,918  
2019     15,887  
2020     16,919  
2021     12,064  
2022     9,926  
Thereafter     17,102  
    $ 86,816  

 

NOTE 8 - 401(k) PLANS

 

Substantially all of the Company’s employees may elect to defer a portion of their annual compensation in the Company-sponsored 401(k) tax-deferred savings plans. The Company makes matching contributions in these plans. The amount charged to expense for these plans was $19,276 and $9,979 for the years ended December 31, 2017 and 2016, respectively.

 

8
 

 

PVBJ Inc.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2017 AND 2016

 

NOTE 9 - SUBSEQUENT EVENTS

 

Date of Management’s Review:

 

The Company has evaluated subsequent events for the period from December 31, 2017, the date of these financial statements, through June 15, 2018 which represents the date these financial statements were available to be issued.

 

Sale of business:

 

On February 1, 2018, the shareholder of the Company entered into a Share Exchange Agreement with H/Cell Energy Corporation (“H/Cell”), whereby H/Cell acquired all outstanding shares of the Company in exchange for 444,445 shares in H/Cell stock with a fair value of $1,177,779 and $221,800 of earn-out liability.

 

9
 

 

 

 

On February 1, 2018 (the “Closing Date”), H/Cell Energy Corporation (“the Company”) entered into a share exchange agreement (the “Exchange Agreement”) by and among the Company, PVBJ Inc., (“PVBJ”), and Benis Holdings LLC, the sole shareholder of PVBJ.

 

Pursuant to the exchange agreement, the Company acquired PVBJ of Downingtown, Pennsylvania for 444,445 of the Company’s common stock with a fair value of $1,177,779 and $221,800 in earn-out liability (the “Acquisition Shares”).

 

The unaudited pro forma combined balance sheet as of December 31, 2017 giving effect to the exchange agreement as if they had occurred on the balance sheet date, and statements of operations for the year ended December 31, 2017 and include the historical statements of operations of the combined companies, giving effect to the exchange agreement as if it had occurred at the beginning of the period. This information is only a summary, and you should read it in conjunction with the Company’s historical financial statements and related notes and management’s discussion and analysis of financial condition and results of operations contained in the Company’s annual reports, quarterly reports and other information on file with the SEC. As a result, the combination of the Company and PVBJ pursuant to the Exchange Agreement will be accounted for using purchase method accounting.

 

The Company has prepared the unaudited pro forma combined financial statements based on available information, using assumptions that it believes are reasonable. These unaudited pro forma combined financial statements are being provided for informational purposes only. They do not purport to represent the Company’s actual financial position or results of operations had the exchange agreement occurred on the dates specified, nor do they project the Company’s results of operations or financial position for any future period or date.

 

The unaudited pro forma condensed combined statements of operations do not reflect any adjustments for non-recurring items or anticipated synergies resulting from the combination. Pro forma adjustments are based on certain assumptions and other information that are subject to change as additional information becomes available. Accordingly, the adjustments included in the Company’s financial statements published after the completion of the combination may vary from the adjustments included in these unaudited pro forma condensed combined financial statements below.

 

 
 

 

H/CELL ENERGY CORPORATION

 

UNAUDITED PRO FORMA BALANCE SHEET

AS OF DECEMBER 31, 2017

 

    H/Cell     PVBJ     Proforma
Adjustment
    Proforma
Combined
 
    December 31, 2017              
ASSETS                                
                                 
Current Assets                                
                                 
Cash and Cash Equivalents   $ 455,700     $ 82,063     $ -     $ 537,763  
Accounts Receivable, Net     808,050       226,707       -       1,034,757  
Prepaid Expenses     14,669       -       -       14,669  
Costs in Excess of Billings     51,531       -       -       51,531  
                                 
Total Current Assets     1,329,950       308,770       -       1,638,720  
                                 
Property and Equipment, Net of Accumulated Depreciation     102,573       280,969       -       383,542  
Security Deposits, and Other Non-Current Assets     8,416       -       -       8,416  
Goodwill     -       -       1,373,621 (2)     1,373,621  
Customer Lists     -       -       102,422 (4)     102,422  
Deferred Tax Asset     44,257       -       -       44,257  
                                 
TOTAL ASSETS   $ 1,485,196     $ 589,739     $ 1,476,043     $ 3,550,978  
                                 
LIABILITIES AND SHAREHOLDERS EQUITY                                
                                 
Current Liabilities                                
                                 
Accounts Payable and Accrued Expenses   $ 631,385     $ 166,433     $ -     $ 797,818  
Management Fees Payable - related party     31,257       -       -       31,257  
Billings in Excess of Costs     87,206       -       -       87,206  
Sales & Withholding Tax Payable     61,239       -       -       61,239  
Income Tax Payable     98,313       -       -       98,313  
Current Notes Payable     -       14,918       -       14,918  
Current Capital Lease Payable     -       66,475       -       66,475  
                                 
Total Current Liabilities     909,400       247,826       -       1,157,226  
                                 
Line of Credit     -       198,701       -       198,701  
Capital Leases     -       199,961       -       199,961  
Earn Out Liability     -       -       175,318 (3)     175,318  
Notes Payable     -       71,898       -       71,898  
                              -  
Total Long Term Liabilities     -       470,560       175,318       645,878  
                                 
Total Liabilites     909,400       718,386       175,318       1,803,104  
                                 
Commitments and Contingencies                                
                                 
Shareholders’ Equity                                
                                 
Common Stock     704       40,000       (39,956 )(1)     748  
Additonal Paid-in-Capital     1,335,656       29,262       1,142,772 (1)(2)     2,903,508  
Accumulated Deficit     (731,754 )     (197,909 )     197,909 (1)     (1,127,572 )
Accumulated Other Comprehensive Loss     (28,810 )     -       -       (28,810 )
Total Shareholder Equity (Deficit)     575,796       (128,647 )     1,300,725       1,747,874  
                                 
TOTAL LIABILITIES & SHAREHOLDERS EQUITY   $ 1,485,196     $ 589,739     $ 1,476,043     $ 3,550,978  

 

See Accompanying Notes to Financial Statements

 

 
 

 

H/CELL ENERGY CORPORATION

 

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2017

 

    H/Cell     PVBJ     Proforma Adjustment     Proforma Combined  
    December 31, 2017              
Revenue                                
Sales   $ 6,266,967     $ 2,181,086     $           -     $ 8,448,053  
Related Party     85,919       -       -       85,919  
                                 
Total Revenue     6,352,886       2,181,086       -       8,533,972  
                                 
Cost of Goods Sold                                
Direct Costs     4,241,421       1,636,404       -       5,877,825  
Related Party     87,649       -       -       87,649  
                                 
Total Cost of Goods Sold     4,329,070       1,636,404       -       5,965,474  
                                 
Gross Profit   $ 2,023,816     $ 544,682     $ -     $ 2,568,498  
                                 
Operating Expenses                                
Selling General and Administrative Expenses     1,776,859       594,983       -       2,371,842  
Management Fees - related party     184,004       -       -       184,004  
Total Operating Expenses     1,960,863       594,983       -       2,555,846  
                                 
Income (Loss) from operations   $ 62,953     $ (50,301 )   $ -     $ 12,652  
                                 
Income Tax     54,056       -       -       54,056  
                                 
Income (loss) before other income and expense     8,897       (50,301 )     -       (41,404 )
                                 
Other (Income) Expense Net                                
Gain on disposition of equipment     -       4,657       -       4,657  
Other Income     -       -       -       -  
Interest Expense     -       37,407       -       37,407  
Total Other (Income) Expense     -       42,064       -       42,064  
                                 
Net Income (Loss)   $ 8,897     $ (92,365 )   $ -     $ (83,468 )
              -       -       -  
Foreign currency translation adjustment     21,996               -       21,996  
                                 
Comprehensive Income (Loss)   $ 30,893     $ (92,365 )   $ -     $ (61,472 )

 

 
 

 

 
 

 

BASIS OF PRO FORMA PRESENTATION

 

The unaudited pro forma condensed combined balance sheet as of December 31, 2017 and the unaudited pro forma condensed statements of operations for the twelve months ended December 31, 2017, are based on the historical financial statements of H/Cell Energy Inc.. (the “Company”) and PVBJ Inc. (“PVBJ”) after giving effect to the Company’s acquisition that was consummated on February 1, 2018 and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined balance sheet and statement of operations for year ended December 31, 2017 are presented as if the acquisition of PVBJ had occurred on January 1, 2017 and were carried forward through each of the period presented.

 

The Company accounts for business combinations pursuant to Accounting Standards Codification ASC 805, Business Combinations. In accordance with ASC 805, the Company uses it best estimates and assumptions to accurately assign fair value to the assets acquired and the liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of the purchase consideration over the fair value of the assets acquired and the liabilities assumed.

 

The fair values assigned to PVBJ’s assets acquired and liabilities assumed are based on management’s estimates and assumptions. The estimated fair values of these assets acquired and liabilities assumed are considered preliminary and are based on the information that was available as of the date of acquisition. The Company believes that the information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but is waiting for additional information, primarily related to estimated values of current and non-current income taxes payable and deferred taxes, which are subject to change, pending the finalization of certain tax returns. The Company expects to finalize the valuation of the assets and liabilities as soon as practicable, but not later than one year from the acquisition date.

 

The unaudited pro forma condensed combined financial information is not intended to represent or be indicative of the Company’s consolidated results of operations or financial position that the Company would have reported had the PVBJ acquisition been completed as of the dates presented, and should not be taken as a representation of the Company’s future consolidated results of operation or financial position.

 

The unaudited pro forma condensed combined financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes of the Company included in the annual report on form 10K for the year ended December 31, 2017.

 

Accounting Periods Presented

 

For purposes of these unaudited pro forma condensed combined financial information, PVBJ Inc.’s historical financial statements for the year ended December 31, 2017 have been aligned to more closely conform to the Company’s financial information, as explained below. Certain pro forma adjustments were made to conform PVBJ’s accounting policies to the Company’s accounting policies as noted below.

 

Reclassifications

 

The Company reclassified certain accounts in the presentation of PVBJ’s historical financial statements in order to conform to the Company’s presentation.

 

2. ACQUISITION OF PVBJ INC.

 

On February 1, 2018, the Company acquired PVBJ pursuant to the terms of that certain share exchange agreement entered into between the Company and Paul Benis, the former owner of PVBJ.

 

Upon Closing, the Company acquired 100% of the outstanding securities of PVBJ in consideration pursuant to the exchange agreement, the Company acquired PVBJ of Downingtown, Pennsylvania for 444,445 shares of the Company’s common stock with a fair value $1,177,779 and $221,800 in earn-out liability.

 

 
 

 

A summary of consideration is as follows:

 

444,445 shares of the Company’s common stock     1,177,779  
Liabilities assumed     878,565  
Total purchase price   $ 2,056,343  

 

The following summarizes the current estimates of fair value of assets acquired and liabilities assumed:

 

Cash   $ 30,408  
Accounts Receivable     277,338  
Property and equipment     272,554  
Customer Lists     102,422  
Goodwill     1,373,621  
Assets acquired   $ 2,056,343  

 

The purchase price allocation for the above acquisitions is subject to further refinement as management completes its assessment of the valuation of certain assets and liabilities.

 

The Company accounts for acquisitions in accordance with the provisions of ASC 805-10. The Company assigns to all identifiable assets acquired, a portion of the cost of the acquired company equal to the estimated fair value of such assets at the date of acquisition. The Company records the excess of the cost of the acquired company over the sum of the amounts assigned to identifiable assets acquired as goodwill.

 

3. PRO FORMA ADJUSTMENTS

 

The following pro forma adjustments are included in the Company’s unaudited pro forma condensed combined financial information:

 

(1) To reflect 444,445 common shares issues as consideration in the share exchange agreement and eliminate PVBJ Inc.’s historical shareholder deficit.

 

(2) To record and align fair value of acquired assets and assumed liabilities and to record the preliminary estimate of goodwill for the Company’s acquisition of PVBJ Inc. The preliminary estimate of goodwill represents the excess of the purchase consideration over the estimated fair value of the assets acquired and the liabilities assumed.

 

(3) To record cash earn out liability associated with the purchase of PVBJ Inc.

 

(4) To record customer list intangible asset of PVBJ Inc.