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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

 

FORM 6-K

______________

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of June 2018

 

CLPS INCORPORATION

(Translation of registrant’s name into English)

 

c/o 2nd Floor, Building 18, Shanghai Pudong Software

Park, 498 Guoshoujing Road, Pudong, Shanghai,

201203, People’s Republic of China

(Address of Principal Executive Office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒                    Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Yes ☐                    No ☒

 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 001-38505.

 

 

 

 

 

 

EXPLANATORY NOTE

 

This Report of Foreign Private Issuer on Form 6-K filed by CLPS Incorporation (together with our subsidiaries, unless the context indicates otherwise, “we,” “us,” “our,” or the “Company”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or the Company’s future financial performance. The Company has attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions, uncertainties and other factors may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. The information in this Report on Form 6-K is not intended to project future performance of the Company. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company does not guarantee future results, levels of activity, performance or achievements. The Company expectations are as of the date this Form 6-K is filed, and the Company does not intend to update any of the forward-looking statements after the date this Report on Form 6-K is filed to confirm these statements to actual results, unless required by law.

 

  Page
     
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2018 and June 30, 2017 2
Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the  three months ended March 31, 2018 and 2017, and for the nine months ended  March 31, 2018 and 2017 3

 

 1 

 

 

CLPS INCORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

   As of March 31,
2018		  

As of June 30,
2017

 
ASSETS        
Current assets        
Cash and cash equivalents  $2,900,656   $4,814,568 
Accounts receivable, net   14,832,141    6,644,774 
Prepayments, deposits and other assets, net   1,219,124    578,391 
Prepaid income tax   151,276    169,557 
Amount due from related parties   87,098    118,006 
Total Current Assets   19,190,295    12,325,296 
           
Property and equipment, net   371,524    273,347 
Intangible assets, net   288,291    305,464 
Goodwill   210,838    195,080 
Prepayments, deposits and other assets, net   125,928    123,783 
Equity investment   95,654    - 
Deferred tax assets   382,745    298,953 
Total Assets  $20,665,275   $13,521,923 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current liabilities          
Accounts payable and other current liabilities  $696,481   $239,165 
Short-term bank loans   2,694,258    - 
Taxes payable   830,869    640,864 
Deferred revenue   131,950    110,631 
Customer deposits   759,341    97,740 
Salaries and benefits payable   6,863,249    5,392,434 
Amounts due to related parties   986,421    1,729,791 
Total Current Liabilities   12,962,569    8,210,625 
           
Commitments and Contingencies          
           
Shareholders’ Equity          
Common share, $0.0001 par value; 100,000,000 shares authorized; 11,290,000 shares issued and outstanding as of March 31, 2018 and June 30, 2017 *   1,129    1,129 
Additional paid-in capital   7,120,943    7,120,943 
Statuary reserves   908,847    680,671 
Accumulated deficit   (1,042,994)   (2,521,285)
Accumulated other comprehensive loss   (22,820)   (447,270)
           
Total CLPS Incorporation’s Shareholders’ Equity   6,965,105    4,834,188 
           
Non-controlling Interests   737,601    477,110 
           
Total Shareholders’ Equity   7,702,706    5,311,298 
           
Total Liabilities and Shareholders’ Equity  $20,665,275   $13,521,923 

 

* The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance.

  

 2 

 

 

CLPS INCORPORATION

UNAUDITED CONDENSED CONSOLIDATED statements of INCOME AND COMPREHENSIVE INCOME

 

   For the three months ended
March 31,		   For the nine months ended
March 31,		 
   2018   2017   2018     2017   
                 
Revenues  $12,883,298   $7,867,460   $35,083,293   $22,191,398 
Less: Cost of revenues   (8,919,509)   (4,961,120)   (22,261,487)   (13,445,017)
Gross profit   3,963,789    2,906,340    12,821,806    8,746,381 
                     
Operating expenses:                    
Selling and marketing   471,064    426,093    1,603,995    708,711 
Research and development   2,251,332    1,226,360    5,814,320    3,233,126 
General and administrative   1,079,234    975,907    4,143,466    4,008,496 
Total operating expenses   3,801,630    2,628,360    11,561,781    7,950,333 
Income from operations   162,159    277,980    1,260,025    796,048 
Subsidies and other income   293,076    7,952    659,874    462,961 
Other expense   (30,515)   (301)   (43,728)   (2,447)
                     
Income before income tax   424,720    285,631    1,876,171    1,256,562 
Provision (benefit) for income taxes   (170,480)   40,535    (44,420)   (13,507)
Net income   595,200    245,096    1,920,591    1,270,069 
Less: Net income attributable to non-controlling interests   220,062    5,671    214,124    5,196 
Net income attributable to CLPS Incorporation’s shareholders  $375,138   $239,425   $1,706,467   $1,264,873 
                     
Other comprehensive income (loss)                    
Foreign currency translation gain (loss)  $239,523   $62,128   $470,747   $(171,697)
Less: foreign currency translation gain (loss) attributable to Non-controlling interests   25,524    3,611    46,297    (3,438)
Other comprehensive income (loss) attributable to CLPS Incorporation’s shareholders  $213,999   $58,517   $424,450   $(168,259)
                     
Comprehensive income                    
CLPS Incorporation shareholders  $589,137   $297,942   $2,130,917   $1,096,614 
Non-controlling interest   245,586    9,282    260,421    1,758 
   $834,723   $307,224   $2,391,338   $1,098,372 
                     
Basic and diluted earnings per common share *  $0.03   $0.02   $0.15   $0.11 
Weighted average number of share outstanding – basic and diluted   11,290,000    11,290,000    11,290,000    11,290,000 

 

* The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance.

 

 3 

 

 

Third Quarter 2018 Highlights (all comparisons to prior year unless noted)

 

  

Three months ended March 31, 2018

(Unaudited)

  

Three months ended, March 31, 2017

(Unaudited)

         
   Amount   As % 
of
Sales		   Amount   As % 
of
Sales		   Amount
Increase
(Decrease)		   Percentage
Increase
(Decrease)		 
                         
Revenues  $12,883,298    100.0%  $7,867,460    100.0%  $5,015,838    63.8%
Cost of revenues   (8,919,509)   69.2%   (4,961,120)   63.1%   (3,958,389)   79.8%
Gross profit   3,963,789    30.8%   2,906,340    36.9%   1,057,449    36.4%
Operating expenses                              
Selling and marketing   471,064    3.7%   426,093    5.4%   44,971    10.6%
Research and development expense   2,251,332    17.5%   1,226,360    15.6%   1,024,972    83.6%
General and administrative expenses   1,079,234    8.4%   975,907    12.4%   103,327    10.6%
Total operating expenses   3,801,630    29.5%   2,628,360    33.4%   1,173,270    44.6%
Income from operations   162,159    1.3%   277,980    3.5%   (115,821)   (41.7%)
                               
Subsidies and other income   293,076    2.3%   7,952    0.1%   285,124    3,585.6%
Other expenses   (30,515)   0.2%   (301)   0.0%   30,214    10,037.9%
Income before income taxes   424,720    3.3%   285,631    3.6%   139,089    48.7%
Provision (benefit) for income taxes   (170,480)   1.3%   40,535    0.5%   (211,015)   (520.6%)
Net income  $595,200    4.6%  $245,096    3.1%  $350,104    142.8%

 

●     Revenues increased by approximately $5.0 million, or 63.8%, to approximately $12.9 million for the three months ended March 31, 2018 from approximately $7.9 million for the three months ended March 31, 2017.

 

●     Net income was approximately $0.6 million for the three months ended March 31, 2018, an increase of $0.4 million from $0.2 million for the three months ended March 31, 2017. For the three months ended March 31, 2018, net income was up because of the subsidies and other income as well as the tax benefit derived from the net operating loss carried forwards.

 

 4 

 

 

Third Quarter of 2018 Financial Results

 

Revenue

 

For the three months ended March 31, 2018, revenues increased by approximately $5.0 million, or 63.8%, to approximately $12.9 million from $7.9 million for the three months ended March 31, 2017. The overall growth in our revenues reflected an increase in revenues from both of our IT consulting services and customized IT solution services.

 

   For the three months ended March 31, 
  

2018

(Unaudited)

  

2017

(Unaudited)

         
   Revenue   % of total
Revenue		   Revenue   % of total
Revenue		   Variance  

Variance

%

 
                         
IT consulting services  $12,207,404    94.8%  $7,232,105    91.9%  $4,975,299    68.8%
Customized IT solution services   645,957    5.0%   587,655    7.5%   58,302    9.9%
Other   29,937    0.2%   47,700    0.6%   (17,763)   (37.2%)
Total  $12,883,298    100.0%  $7,867,460    100.0%  $5,015,838    63.8%

 

For the three months ended March 31, 2018, revenue derived from our IT consulting services increased by 68.8% to $12.2 million from $7.2 million for the three months ended March 31, 2017, primarily reflecting the increasing demands for our IT consulting service from banks and other financial institutions. For the three months ended March 31, 2018 and 2017, 47.2% and 49.5% of our IT consulting service revenues were from international banks, respectively. For the three months ended March 31, 2018, we strengthened our expertise in the financial industry to leverage our existing industry knowledge and grew our customer base of local Chinese financial institutions.

 

For the three months ended March 31, 2018, revenues derived from our customized IT solution services increased by 9.9% to $0.65 million from $0.59 million for the period of 2017. Historically, IT consulting services have contributed the substantial majority of our net revenues. In recent years, we started to develop customized IT solution service to small and medium enterprises (“SME”) in China. With the growing demand for our financial IT solution innovations and e-banking technology, our financial IT solutions service provides SMEs affordable integrated technologies that are reshaping our customers’ business and operating models. We plan to expand our financial IT solution service in China, which is driven by the increased adoption of big data, platform engineering for cloud solutions and an expanded range of services, such as artificial intelligence.

 

Cost of Revenue

 

Our cost of revenues mainly consists of compensation and benefit expenses for our IT professionals, travel expenses and material costs. Our cost of revenues increased by $4.0 million or 79.8% to approximately $8.9 million for the three months ended March 31, 2018 from approximately $5.0 million for the three months ended March 31, 2017, primarily as a result of increased headcount, expanded office facilities and an increase in depreciation and amortization expenses to enable and match the growth of our business. As a percentage of revenues, our cost of revenues was 69.2% and 63.1% for the three months ended March 31, 2018 and 2017, respectively. Our total number of employees grew from 1,243 employees as of March 31, 2017 to 1,618 employees as of March 31, 2018.

 

Gross Profit and Gross Margin

 

Our gross profit increased $1.1 million, or 36.4%, to approximately $4.0 million for the three months ended March 31, 2018 from approximately $2.9 million for the three months ended March 31, 2017. Customized IT solution services contribute favorably to our client retention and understanding of our clients’ businesses, and provide opportunities to cross-sell our other services. Gross margin for the three months ended March 31, 2018 decreased because gross margin of the new projects was lower.

 

 5 

 

 

Selling and marketing expenses

 

Selling and marketing expenses primarily consisted of salary and compensation expenses relating to selling and marketing activities, and also included entertainment, travel and transportation, and other expenses relating to our marketing activities.

 

Selling and marketing expenses increased by $44,971 or 10.6% from $0.4 million for the three months ended March 31, 2017 to $0.5 million for the three months ended March 31, 2018. The increase was primarily attributable to our expansion of the pre-sales and marketing teams in Shanghai and Dalian in China to support our operations. Accordingly, as a percentage of sales, our selling expenses were 3.7% of revenues for the three months ended March 31, 2018 as compared to 5.4% for the three months ended March 31, 2017. While we expect our selling and marketing expenses to increase as we continue our business expansion, we expect these expenses to remain relatively steady as a percentage of our net revenues to support our business growth in the near future.

 

Research and development (“R&D”) expenses

 

R&D expenses primarily consisted of compensation and benefit expenses relating to our research and development personnel as well as office overhead and other expenses relating to our R&D activities. Our R&D expenses increased by $1.0 million from $1.2 million for the three months ended March 31, 2017 to $2.3 million for the three months ended March 31, 2018, representing 17.5% and 15.6% of our total revenues for the three months ended March 31, 2018 and 2017, respectively. The increased R&D expense for the three months ended March 31, 2018 is attributable to the launch of several research projects related to cloud computing and mobile internet applications in fiscal 2018. We expect to increase our investment in research and development to enhance our industry knowledge, improve our competitiveness and enable us to identify attractive market opportunities for new and enhanced services and solutions.

 

General and administrative expenses

 

General and administrative expenses primarily consisted of compensation and benefit expenses relating to our finance, legal, human resources and executive office personnel, and included rental expenses, depreciation and amortization expense, office overhead, professional service fees and travel and transportation costs.

 

General and administrative expenses increased by $0.1 million or 10.6% from approximately $1.0 million for the three months ended March 31, 2017 to approximately $1.1 million for the three months ended March 31, 2018. As a percentage of revenues, general and administrative expenses were 8.4% and 12.4% of our revenue for the three months ended March 31, 2018 and 2017, respectively.

 

Subsidies and other income

 

Subsidies and other income primarily included government subsidies which represented amounts granted by local government authorities as a general incentive for us to promote development of the local technology industry. The Company records government subsidies and other income upon receipt and when there is no further performance obligation. Total government subsidies amounted to $0.3 million and $7,952 for the three months ended March 31, 2018 and 2017, respectively. The increase in government subsidies for the three months ended March 31, 2018 was because the local governments were in the process of amending the existing subsidy policy and deferred the approvals for government subsidies that are applicable to us. While we expect the continued support of local governments to promote the technology industry, we only record government subsidies and other income when received due to uncertainties.

 

Income before income taxes

 

Our income before income taxes was approximately $0.4 million for the three months ended March 31, 2018, an increase of 48.7% compared with the three months ended March 31, 2017.

 

Provision (benefit) for income taxes

 

Our income tax benefit was $0.2 million for the three months ended March 31, 2018, compared to $40,535 income tax expense for the three months ended March 31, 2017. The increase of $0.2 million in deferred tax benefit was mainly because we recognized deferred tax assets as a result of the net operating losses carry forward for some of our subsidiaries.

 

Net Income

 

Our net income was approximately $0.6 million for the three months ended March 31, 2018, an increase of $0.4 million from $0.2 million for the three months ended March 31, 2017. The increase in net income was caused by the increase tax benefit of $0.2 million and the subsidies and other income for the three months ended March 31, 2018 as compared to the period of 2017 as mentioned above.

 

 6 

 

 

Other comprehensive income

 

Foreign currency translation adjustments amounted to a gain of $0.2 million and $0.1 million for the three months ended March 31, 2018 and 2017, respectively. The balance sheet amounts with the exception of equity as of March 31, 2018 were translated at 6.2726 RMB to 1.00 USD as compared to 6.8832 RMB to 1.00USD as of March 31, 2017. The equity accounts were stated at their historical rate. The average translation rates applied to the income statements accounts for the three months ended March 31, 2018 and 2017 were 6.3535 RMB to 1.00 USD and 6.8853 RMB to 1.00 USD, respectively. The change in the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying change in our business or results of operation.

 

Nine Months Ended March 31, 2018 Financial Results

 

  

Nine months ended March 31, 2018

(Unaudited)

   Nine months ended March 31, 2017 (Unaudited)         
   Amount   As % 
of
Sales		   Amount   As % 
of
Sales		   Amount
Increase
(Decrease)		   Percentage
Increase
(Decrease)		 
                         
Revenues  $35,083,293    100.0%  $22,191,398    100.0%  $12,891,895    58.1%
Cost of revenues   (22,261,487)   63.5%   (13,445,017)   60.6%   (8,816,470)   65.6%
Gross profit   12,821,806    36.5%   8,746, 381        39.4%   4,075,425    46.6%
Operating expenses                              
Selling and marketing   1,603,995    4.6%   708,711    3.2%   895,284    126.3%
Research and development expense   5,814,320    16.6%   3,233,126    14.6%   2,581,194    79.8%
General and administrative expenses   4,143,466    11.8%   4,008,496    18.1%   134,970    3.4%
Total operating expenses   11,561,781    33.0%   7,950,333    35.8%   3,611,448    45.4%
Income from operations   1,260,025    3.6%   796,048    3.6%   463,977    58.3%
                               
Subsidies and other income   659,874    1.9%   462,961    2.1%   196,913    42.5%
Other expenses   (43,728)   0.1%   (2,447)   0.0%   41,281    1,687.0%
Income before income taxes   1,876,171    5.3%   1,256,562    5.7%   619,609    49.3%
Benefit for income taxes   (44,420)   0.1%   (13,507)   0.1%   30,913    228.9%
Net income  $1,920,591    5.5%  $1,270,069    5.7%  $650,522    51.2%

 

●     Revenues increased by approximately $12.9 million, or 58.1%, to approximately $35.1 million for the nine months ended March 31, 2018 from approximately $22.2 million for the three months ended March 31, 2017.

 

●     Net income was approximately $1.9 million for the nine months ended March 31, 2018, an increase of $0.6 million from $1.3 million for the nine months ended March 31, 2017. The increase in net income was in line with expansion of our business and increased revenues.

 

 7 

 

 

Revenue

 

Our total revenues increased by approximately $12.9 million, or 58.1%, to approximately $35.1 million for the nine months ended March 31, 2018 from approximately $22.2 million for the nine months ended March 31, 2017. The overall growth in our revenues reflected an increase in revenues from our IT consulting services.

 

   For the Nine months ended March 31, 
  

2018

(Unaudited)

  

2017

(Unaudited)

         
   Revenue   % of total
Revenue		   Revenue   % of total
Revenue		   Variance  

Variance

%

 
                         
IT consulting services  $33,840,013    96.5%  $20,514,946    92.4%  $13,325,067    65.0%
Customized IT solution services   1,170,177    3.3%   1,348,254    6.1%   (178,077)   (13.2%)
Other   73,103    0.2%   328,198    1.5%   (255,095)   (77.7%)
Total  $35,083,293    100.0%  $22,191,398    100.0%  $12,891,895    58.1%

 

For the nine months ended March 31, 2018, revenue derived from our IT consulting services increased by 65.0% to $33.8 million from $20.5 million for the nine months ended March 31, 2017, primarily reflecting the increasing demands for our IT consulting services from banks and other financial institutions. For the nine months ended March 31, 2018 and 2017, 46.4% and 54.0% of our IT consulting service revenue were from international banks, respectively. For the nine months ended March 31, 2018, we strengthened our expertise in the financial industry to leverage our existing industry knowledge and grew our customer base of local Chinese financial institutions.

 

Cost of Revenue

 

Our cost of revenues mainly consists of compensation and benefit expenses for our IT professionals, travel expenses and material costs. Our cost of revenues increased by $8.8 million or 65.6% to approximately $22.3 million for the nine months ended March 31, 2018 from approximately $13.4 million for the nine months ended March 31, 2017, primarily as a result of increased headcount, expanded office facilities and increase of depreciation and amortization expenses to enable and match the growth of our business. As a percentage of revenues, our cost of revenues was 63.5% and 60.6% for the nine months ended March 31, 2018 and 2017, respectively. Our total number of employees grew from 1,243 employees as of March 31, 2017 to 1,618 employees as of March 31, 2018.

 

Gross Profit and Gross Margin

 

Our gross profit increased by $4.1 million, or 46.6%, to approximately $12.8 million for the nine months ended March 31, 2018 from approximately $8.7 million for the nine months ended March 31, 2017. Customized IT solution services contribute favorably to our client retention and understanding of our clients’ businesses, and provide opportunities to cross-sell our other services. Gross margin for the nine months ended March 31, 2018 decreased compared to the period of 2017 because gross margin of the new projects was lower.

 

Selling and marketing expenses

 

Selling and marketing expenses primarily consisted of compensation and benefit expenses relating to our selling and marketing activities, and also included entertainment, travel and transportation, and other expenses relating to our marketing activities.

 

Selling and marketing expenses increased by $0.9 million or 126.3% from $0.7 million for the nine months ended March 31, 2017 to $1.6 million for the nine months ended March 31, 2018. The increase was primarily attributable to our expansion of the pre-sales and marketing teams in Shanghai and Dalian in China to support our operations. Accordingly, as a percentage of sales, our selling expenses were 4.6% of revenues for the nine months ended March 31, 2018 as compared to 3.2% for the nine months ended March 31, 2017. While we expect our selling and marketing expenses to increase as we continue our business expansion, we expect these expenses to remain relatively steady as a percentage of our net revenues to support our business growth in the near future.

 

Research and development (“R&D”) expenses

 

R&D expenses primarily consisted of compensation and benefit expenses relating to our research and development personnel as well as office overhead and other expenses relating to our R&D activities. Our R&D expenses increased by $2.6 million from $3.2 million for the nine months ended March 31, 2017 to $5.8 million for the nine months ended March 31, 2018, representing 16.6% and 14.6% of our total revenues for the period of 2018 and 2017, respectively. The increased R&D expense for the nine months ended March 31, 2018 was attributable to the research projects on office automation system and big data platform for decision-making, and projects related to cloud computing and mobile internet applications. We expect to increase our investment in research and development to enhance our industry knowledge, improve our competitiveness and enable us to identify attractive market opportunities for new and enhanced services and solutions.

 

 8 

 

 

General and administrative expenses

 

General and administrative expenses primarily consisted of salary and compensation benefit expenses relating to our finance, legal, human resources and executive office personnel, and included rental expenses, depreciation and amortization expenses, office overhead, professional service fees and travel and transportation costs.

 

General and administrative expenses increased by $0.1 million or 3.4% from approximately $4.0 million for the nine months ended March 31, 2017 to approximately $4.1 million for the nine months ended March 31, 2018. As a percentage of revenues, general and administrative expenses were 11.8% and 18.1% of our revenue for the nine months ended March 31, 2018 and 2017, respectively.

 

Subsidies and other income

 

Subsidies and other income primarily included government subsidies which represented amounts granted by local government authorities as a general incentive for us to promote development of the local technology industry. The Company records government subsidies and other income upon receipt and when there is no further performance obligation. Total government subsidies amounted to $0.7 million and $0.5 million for the nine months ended March 31, 2018 and 2017, respectively. While we expect the continued support of local government to promote the technology industry, we only record government subsidies and other income when received due to uncertainties.

 

Income before income taxes

 

Our income before income taxes was approximately $1.9 million for the nine months ended March 31, 2018, an increase of 49.3% compared with the period 2017.

 

Provision (benefit) for income taxes

 

Our income tax benefit was $44,420 for the nine months ended March 31, 2018, compared to $13,507 income tax benefit for the nine months ended March 31, 2017. The increase of $30,913 in deferred tax benefit was mainly because we recognized deferred tax assets as a result of the net operating losses carry forward for some of our subsidiaries.

 

Net Income

 

Our net income was approximately $1.9 million for the nine months ended March 31, 2018, an increase of $0.6 million with $1.3 million for the nine months ended March 31, 2017. For the nine months ended March 31, 2018, the increase in net income was in line with increased revenues, gross profit and operating expenses as compared to the period of 2017 as mentioned above. Subsidies and other income also contributed to the increase of net income.

 

Other comprehensive income

 

Foreign currency translation adjustments amounted to a gain of $0.5 million for the nine months ended March 31, 2018 and a loss of $0.2 million for the nine months ended March 31, 2017, respectively. The balance sheet amounts with the exception of equity as of March 31, 2018 were translated at 6.2726 RMB to 1.00 USD as compared to 6.8832 RMB to 1.00 USD as of March 31, 2017. The equity accounts were stated at their historical rate. The average translation rates applied to the income statements accounts for the periods ended March 31, 2018 and 2017 were 6.5453 RMB to 1.00 USD and 6.7915 RMB to 1.00 USD, respectively. The change in the value of the RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying change in our business or results of operation.

 

Liquidity and Capital Resources

 

As of March 31, 2018, we had cash and cash equivalents of approximately $2.9 million and working capital of approximately $6.2 million. Our current assets were approximately $19.2 million, and our current liabilities were approximately $13.0 million. Total shareholders’ equity as of March 31, 2018 was approximately $7.7 million. We believe that we will have sufficient working capital to operate our business for the next 12 months.

 

On May 29, 2018, CLPS completed its initial public offering, or IPO, of 2,000,000 common shares, $0.0001 par value per share. The common shares were sold at an offering price of $5.25 per share, generating gross proceeds of approximately $10.5 million; net proceeds from the IPO were approximately $9.3 million.

 

The registration statement relating to this IPO also covered the underwriters’ common stock purchase warrants and the common shares issuable upon the exercise thereof in the total amount of 83,162 common shares. Each five-year warrant entitles the warrant holder to purchase the Company’s shares at the exercise price of $6.30 per share and is not be exercisable for a period of 180 days from May 23, 2018.

 

On June 8, 2018, the Company closed on the exercise in full of the over-allotment option to purchase an additional 300,000 common shares of the Company by The Benchmark Company, LLC, the representative of the underwriters in connection with and the book running manager of the Company’s IPO, at the IPO price of $5.25 per share. As a result, the Company has raised gross proceeds of approximately $1.58 million, in addition to the IPO gross proceeds of approximately $10.5 million, or combined gross proceeds in this IPO of approximately $12.08 million, before underwriting discounts and commissions and offering expenses.

 

 9 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

  CLPS INCORPORATION
     
  By: /s/ Raymond Ming Hui Lin
   

Raymond Ming Hui Lin

Chief Executive Officer

   

 

Date: June 27, 2018

 

 10 

 

 

EXHIBIT INDEX

 

Exhibit No.  Description
    
99.1  Press Release, dated June 27, 2018.

 

 

11

 

Exhibit 99.1

 

CLPS Incorporation Reports Financial Results for the Third Quarter of 2018

 

Shanghai, China, June 27, 2018 (GLOBE NEWSWIRE) -- CLPS Incorporation (the “Company”, “CLPS”, or Nasdaq: CLPS), a leading information technology (“IT”) consulting and solutions service provider focusing on the banking, insurance and financial sectors in China and globally, today announced its financial results for the third fiscal quarter ended March 31, 2018.

 

Mr. Raymond Lin, Chief Executive Officer of CLPS Incorporation, commented, “We are proud to report our financial results for the third quarter of 2018. Our revenue reached $12.88 million and our net income was $0.6 million for the third quarter, a year-over-year increase of 63.8% and 142.8%, respectively.”

 

Mr. Lin continued, “As we reflect on the financial results of the fiscal quarter before our successful initial public offering in May 2018, we are pleased with the notable revenue increase in both our IT consulting and customized solution services. We believe that we are positioned for success in the coming fiscal quarters given our solid strategic foundation, stable margins and growth in revenue and net income, and the additional boost that the net proceeds from our initial public offering offer us, as we consider new opportunities and expand existing business lines.”

 

Third Quarter of 2018 Financial Highlights

 

   For the Three Months Ended March 31 
(USD millions, except per share data)  2018   2017   Change 
Revenue   12.88    7.87    63.8%
IT consulting services   12.21    7.23    68.8%
Customized IT solution services   0.65    0.59    9.9%
Other   0.03    0.05    -37.2%
Gross Profit   3.96    2.91    36.4%
Gross Margin   30.8%   36.9%   -6.1 pts 
Operating Profits   0.16    0.28    -41.7%
Operating Margin   1.3%   3.5%   -2.2 pts 
Net Income Attributable to CLPS Incorporation   0.38    0.24    56.7%
EPS   0.03    0.02    50.0%

 

●Revenues increased by 63.8% to $12.88 million for the three months ended March 31, 2018, from $7.87 million for the same period of last year, mainly due to an increase in revenues from both IT consulting services and customized IT solution services.

 

●Gross profit increased by 36.4% to $3.96 million for the three months ended March 31, 2018, from $2.91 million for the same period of last year. Gross margin decreased to 30.8% from 36.9% for the same period of last year.

 

●Net income attributable to CLPS Incorporation increased by 56.7% to $0.38 million for the three months ended March 31, 2018.

 

●Basic and diluted earnings per share were $0.03 for the three months ended March 31, 2018, compared with $0.02 for the same period of last year.

 

 

 

 

Third Quarter of 2018 Financial Results

 

Revenues

 

For the three months ended March 31, 2018, revenue increased by $5.01 million, or 63.8%, to $12.88 million from $7.87 million for the same period of last year. The increase in revenue was mainly due to an increase in revenues from both of IT consulting services and customized IT solution services.

 

Revenue from IT consulting services increased by $4.98 million, or 68.8%, to $12.21 million and accounted for 94.8% of total revenue for the three months ended March 31, 2018 from $7.23 million, or 91.9% of total revenues, for the same period of last year. The increase was primarily due to the increasing demand for IT consulting service from banks and other financial institutions. For the three months ended March 31, 2018 and 2017, 47.2% and 49.5% of IT consulting service revenue were from international banks, respectively.

 

Revenue from customized IT solution services increased by $0.06 million, or 9.9%, to $0.65 for the three months ended March 31, 2018 from $0.59 million for the same period of last year. Revenue from other services decreased by $0.02 million, or 37.2%, to $0.03 for the three months ended March 31, 2018 from $0.05 million for the same period of last year. Historically, IT consulting services have contributed the substantial majority of our net revenues.

 

Gross Profit and Gross Margin

 

Gross profit increased by $1.05 million, or 36.4%, to $3.96 million for the three months ended March 31, 2018 from $2.91 million for the same period of last year. Gross margin decreased to 30.8% for the three months ended March 31, 2018, from 36.9% for the same period of last year. The decrease in gross margin was primarily due to the lower gross margin of the new projects.

 

Operating Expenses

 

Selling and marketing expenses increased by $0.04 million, or 10.6% to $0.47 million for the three months ended March 31, 2018 from $0.43 million for the same period of last year. The increase was primarily due to the expansion of the pre-sales and marketing teams in Shanghai and Dalian in China to support operations.

 

Research and development expenses increased by $1.02 million, or 83.6%, to $2.25 million for the three months ended March 31, 2018 from $1.23 million for the same period of last year. The increase was attributable to the launch of several research projects related to cloud computing and mobile internet applications in fiscal 2018.

 

General and administrative expenses increased by $0.10 million, or 10.6%, to $1.08 million for the three months ended March 31, 2018 from $0.98 million for the same period of last year. The increase was primarily due to growth of staff in support sectors.

 

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Operating Income

 

Operating income decreased by $0.12 million, or 41.7%, to $0.16 million for the three months ended March 31, 2018 from $0.28 million for the same period of last year. Operating margin was 1.3% for the three months ended March 31, 2018, compared to 3.5% for the same period of last year.

 

Other Income and Expenses

 

Subsidies and other income increased to $0.29 million for the three months ended March 31, 2018 from $7,952 for the same period of last year. The increase was mainly due to the fact that local governments were in the process of amending the existing subsidy policy and deferred the approvals for government subsidies that were applicable to the Company.

 

Provision (Benefit) for Income Taxes

 

Income tax benefit was $0.17 million for the three months ended March 31, 2018, compared to income tax expense of $0.04 million for the same period of last year, mainly due to the Company recognized deferred tax assets as a result of the net operating losses carry forward for some of the Company’s subsidiaries.

 

Net Income and EPS

 

Net income increased by $0.35 million, or 142.8%, to $0.60 million for the three months ended March 31, 2018 from $0.25 million for the same period of last year, mainly due to the subsidies and other income as well as tax benefit derived from the net operating loss carried forwards. After the deduction of non-controlling interests, net income attributable to shareholders for the three months ended March 31, 2018 was $0.38 million, or $0.03 per basic and diluted share. This compared to net income attributable to shareholders of $0.24 million, or $0.02 per basic and diluted share for the three months ended March 31, 2017.

 

Nine Months Ended March 31, 2018 Financial Results

 

   For the Nine Months Ended March 31 
(USD millions, except per share data)  2018   2017   Change 
Revenue   35.08    22.19    58.1%
IT consulting services   33.84    20.51    65.0%
Customized IT solution services   1.17    1.35    -13.2%
Other   0.07    0.33    -77.7%
Gross Profit   12.82    8.75    46.6%
Gross Margin   36.5%   39.4%   -2.9 pts 
Operating Profits   1.26    0.80    58.3%
Operating Margin   3.6%   3.6%   0.0 pts 
Net Income Attributable to CLPS Incorporation   1.71    1.26    34.9%
EPS   0.15    0.11    36.4%

 

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Revenues

 

For the nine months ended March 31, 2018, revenue increased by $12.89 million, or 58.1%, to $35.08 million from $22.19 million for the same period of last year. The increase in revenue was mainly due to an increase in revenue from IT consulting services.

 

Revenue from IT consulting services increased by $13.33 million, or 65.0%, to $33.84 million and accounted for 96.5% of total revenue for the nine months ended March 31, 2018 from $20.51 million, or 92.4% of total revenue, for the same period of last year. The increase was primarily due to the increasing demands for IT consulting service from banks and other financial institutions. For the nine months ended March 31, 2018 and 2017, 46.4% and 54.0% of IT consulting service revenue were from international banks, respectively.

 

Revenue from customized IT solution service decreased by $0.18 million, or 13.2%, to $1.17 for the nine months ended March 31, 2018 from $1.35 million for the same period of last year. Revenue from other service decreased by $0.26 million, or 77.7%, to $0.07 for the nine months ended March 31, 2018 from $0.33 million for the same period of last year. For the nine months ended March 31, 2018, we strengthened our expertise in the financial industry to leverage our existing industry knowledge and grew our customer base of local Chinese financial institutions.

 

Gross Profit and Gross Margin

 

Gross profit increased by $4.07 million, or 46.6%, to $12.82 million for the nine months ended March 31, 2018 from $8.75 million for the same period of last year. Gross margin decreased to 36.5% for the nine months ended March 31, 2018, compared to 39.4% for the same period of last year. The decrease in gross margin was primarily due to the lower gross margin of the new projects.

 

Operating Expenses

 

Selling and marketing expenses increased by $0.89 million, or 126.3% to $1.60 million for the nine months ended March 31, 2018 from $0.71 million for the same period of last year. The increase was primarily due to the expansion of the pre-sales and marketing teams in Shanghai and Dalian in China to support operations.

 

Research and development expenses increased by $2.58 million, or 79.8%, to $5.81 million for the nine months ended March 31, 2018 from $3.23 million for the same period of last year. The increase was attributable to the research projects on office automation system and big data platform for decision-making, and projects related to cloud computing and mobile internet applications.

 

General and administrative expenses increased by $0.13 million, or 3.4%, to $4.14 million for the nine months ended March 31, 2018 from $4.01 million for the same period of last year. The increase was primarily due to growth of staff in support sectors..

 

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Operating Income

 

Operating income increased by $0.46 million, or 58.3%, to $1.26 million for the nine months ended March 31, 2018 from $0.80 million for the same period of last year. Operating margin was 3.6% for the nine months ended March 31, 2018, compared to 3.6% for the same period of last year.

 

Other Income and Expenses

 

Subsidies and other income increased to $0.66 million for the nine months ended March 31, 2018, from $0.46 million for the same period of last year.

 

Provision (Benefit) for Income Taxes

 

Income tax benefit increased by $0.03 million to $0.04 million for the nine months ended March 31, 2018 from $0.01 million for the same period of last year, mainly due to the Company recognized deferred tax assets as a result of the net operating losses carry forward for some of the Company’s subsidiaries.

 

Net Income and EPS

 

Net income increased by $0.65 million, or 51.2%, to $1.92 million for the nine months ended March 31, 2018 from $1.27 million for the same period of last year, mainly due to the expansion of business and increased revenues. After the deduction of non-controlling interests, net income attributable to shareholders for the nine months ended March 31, 2018 was $1.71 million, or $0.15 per basic and diluted share. This compared to net income attributable to shareholders of $1.26 million, or $0.11 per basic and diluted share for the nine months ended March 31, 2017.

 

Financial Condition

 

As of March 31, 2018, the Company had cash and cash equivalents of $2.90 million, compared with $4.81 million as of June 30, 2017.

 

About CLPS Incorporation

 

Headquartered in Shanghai, China, CLPS Incorporation (the "Company") (Nasdaq: CLPS) is a global leading information technology (“IT”), consulting and solutions service provider focusing on the banking, insurance and financial sectors. The Company serves as an IT solutions provider to a growing network of clients in the global financial industry, including large financial institutions in the US, Europe, Australia and Hong Kong and their PRC-based IT centers. The Company maintains eleven delivery and/or research & development centers to serve different customers in various geographic locations. Mainland China centers are located in Shanghai, Beijing, Dalian, Tianjin, Chengdu, Guangzhou and Shenzhen. The remaining four global centers are located in Hong Kong, Taiwan, Singapore and Australia. For further information regarding the Company, please visit: http://ir.clpsglobal.com/.

 

 5 

 

 

Forward-Looking Statements

 

This announcement contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact in this announcement are forward-looking statements, including, among others. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations and projections about future events and financial trends that the Company believes may affect its financial condition, results of operations, business strategy and financial needs, including, without limitation, the Company’s ability to achieve projected revenue growth, market and client expansion as intended, among other factors. Investors can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. The Company undertakes no obligation to update forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results.

 

For more information, please contact Investor Relations at:

 

In China:

 

CLPS Incorporation

 

Tian van Acken

Phone: +86-158-0198-4357

Chief Financial Officer
Email: ir@clpsglobal.com

 

In the United States:

 

Ascent Investor Relations LLC

 

Nicolas Palar

Phone: +1-646-932-7202

Email: npalar@ascent-ir.com

 

Tina Xiao

Phone: +1-917-609-0333

Email: tina.xiao@ascent-ir.com

 

 6 

 

 

CLPS INCORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

   As of March 31,
2018		   As of June 30,
2017		 
ASSETS        
Current assets        
Cash and cash equivalents  $2,900,656   $4,814,568 
Accounts receivable, net   14,832,141    6,644,774 
Prepayments, deposits and other assets, net   1,219,124    578,391 
Prepaid income tax   151,276    169,557 
Amount due from related parties   87,098    118,006 
Total Current Assets   19,190,295    12,325,296 
           
Property and equipment, net   371,524    273,347 
Intangible assets, net   288,291    305,464 
Goodwill   210,838    195,080 
Prepayments, deposits and other assets, net   125,928    123,783 
Equity investment   95,654    - 
Deferred tax assets   382,745    298,953 
Total Assets  $20,665,275   $13,521,923 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current liabilities          
Accounts payable and other current liabilities  $696,481   $239,165 
Short-term bank loans   2,694,258    - 
Taxes payable   830,869    640,864 
Deferred revenue   131,950    110,631 
Customer deposits   759,341    97,740 
Salaries and benefits payable   6,863,249    5,392,434 
Amounts due to related parties   986,421    1,729,791 
Total Current Liabilities   12,962,569    8,210,625 
           
Commitments and Contingencies          
           
Shareholders’ Equity          
Common share, $0.0001 par value; 100,000,000 shares authorized; 11,290,000 shares issued and outstanding as of March 31, 2018 and June 30, 2017 *   1,129    1,129 
Additional paid-in capital   7,120,943    7,120,943 
Statuary reserves   908,847    680,671 
Accumulated deficit   (1,042,994)   (2,521,285)
Accumulated other comprehensive loss   (22,820)   (447,270)
           
Total CLPS Incorporation’s Shareholders’ Equity   6,965,105    4,834,188 
           
Non-controlling Interests   737,601    477,110 
           
Total Shareholders’ Equity   7,702,706    5,311,298 
           
Total Liabilities and Shareholders’ Equity  $20,665,275   $13,521,923 

 

* The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance.

  

 7 

 

 

CLPS INCORPORATION

UNAUDITED CONDENSED CONSOLIDATED statements of INCOME AND COMPREHENSIVE INCOME

 

   For the three months ended
March 31,		   For the nine months ended
March 31,		 
   2018   2017   2018     2017   
                 
Revenues  $12,883,298   $7,867,460   $35,083,293   $22,191,398 
Less: Cost of revenues   (8,919,509)   (4,961,120)   (22,261,487)   (13,445,017)
Gross profit   3,963,789    2,906,340    12,821,806    8,746,381 
                     
Operating expenses:                    
Selling and marketing   471,064    426,093    1,603,995    708,711 
Research and development   2,251,332    1,226,360    5,814,320    3,233,126 
General and administrative   1,079,234    975,907    4,143,466    4,008,496 
Total operating expenses   3,801,630    2,628,360    11,561,781    7,950,333 
Income from operations   162,159    277,980    1,260,025    796,048 
Subsidies and other income   293,076    7,952    659,874    462,961 
Other expense   (30,515)   (301)   (43,728)   (2,447)
                     
Income before income tax   424,720    285,631    1,876,171    1,256,562 
Provision (benefit) for income taxes   (170,480)   40,535    (44,420)   (13,507)
Net income   595,200    245,096    1,920,591    1,270,069 
Less: Net income attributable to non-controlling interests   220,062    5,671    214,124    5,196 
Net income attributable to CLPS Incorporation’s shareholders  $375,138   $239,425   $1,706,467   $1,264,873 
                     
Other comprehensive income (loss)                    
Foreign currency translation gain (loss)  $239,523   $62,128   $470,747   $(171,697)
Less: foreign currency translation gain (loss) attributable to Non-controlling interests   25,524    3,611    46,297    (3,438)
Other comprehensive income (loss) attributable to CLPS Incorporation’s shareholders  $213,999   $58,517   $424,450   $(168,259)
                     
Comprehensive income                    
CLPS Incorporation shareholders  $589,137   $297,942   $2,130,917   $1,096,614 
Non-controlling interest   245,586    9,282    260,421    1,758 
   $834,723   $307,224   $2,391,338   $1,098,372 
                     
Basic and diluted earnings per common share *  $0.03   $0.02   $0.15   $0.11 
Weighted average number of share outstanding – basic and diluted   11,290,000    11,290,000    11,290,000    11,290,000 

 

* The shares and per share data are presented on a retroactive basis to reflect the nominal share issuance.

 

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