BEIJING, Feb. 13, 2017 /PRNewswire/ -- Recon
Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a
leading independent oilfield services provider operating primarily
in China, today reported
its financial results for the second quarter and
first six months of fiscal year 2017, which ended December 31,
2016.
Second Quarter FY2017 Financial Highlights (all comparable to
the prior year period):
- Total revenues for the second quarter of FY2017 increased 5.1%
to RMB 30.3
million (USD 4.36 million)
- Gross profit for the second quarter of FY2017 was RMB 13.3
million (USD 1.9 million)
- Gross profit margin improved by 23.9 to 43.9%, largely due to continued
revenues generated by higher margin projects stemming from its
automation maintaining projects and investments in developing its
oilfield waste water treatment services
- Net loss attributable to Recon for the second quarter of FY2017
was RMB4.4 million ($626,667), or RMB
(0.70) ($0.10) per
basic and diluted share, compared
to RMB2.5 million, or RMB 0.45 per basic and diluted share, for the same period
of last fiscal year
- Non-GAAP net income attributable to ordinary shareholders
excluding certain non-cash expenses was RMB3.3 million ($469,391), RMB0.53($0.08)
per basic share, or RMB 0.48 ($0.07) per diluted share, for the
second quarter of FY2017, compared to non-GAAP net loss
attributable to common shareholders of RMB708,267, or RMB0.13 per basic
and diluted share, for the same period last fiscal year
First Fiscal Six Months ended December
31, 2016 Financial Highlights (all comparable to the prior
year period):
- Total revenues for the first six months of FY2017 increased
17.5% to RMB 38.1
million (USD 5.49 million)
- Gross profit for the first six months of FY2017 was RMB
14.4 million (USD 2.1
million)
- Gross profit margin improved by 18.8 to 37.8%, largely due to continued
revenues generated by higher margin projects stemming from its
automation projects and investments in developing its oilfield
waste water treatment services
- Net loss attributable to Recon for the first six months of
FY2017 was RMB 9.8 million (USD
1.4 million), or RMB 1.62 ($0.23) per basic
and diluted share, compared to RMB 11.4 million,
or RMB 2.07 per basic and
diluted share, for the same period of last fiscal year
- Non-GAAP net loss attributable to ordinary shareholders
excluding certain non-cash expenses was RMB
234,103 ($33,710), or
RMB 0.04 ($0.01) per basic and diluted share, for the first six
months of FY2017, compared to non-GAAP net loss attributable to
common shareholders of RMB 8.2
million, or RMB 1.49 per
basic and diluted share, for the
same period last fiscal year
- RMB 6.59 per share ($0.95) in shareholders' equity per share
Management Commentary
Mr. Shenping Yin, Chairman and CEO of Recon stated, "We
reported an excellent operating quarter that reflected strong
operations in the oil and gas sector and continued development
towards becoming a true global energy service provider. The second
quarter was highlighted by the delivery of our furnace equipment to
Changqing oilfield, and we are seeing a trend of more capital
spending by larger oil and gas producers in China. Our strong financial condition has
benefitted the Company through this prolonged period of lower oil
and gas pricing, as Recon continued to upgrade its service offering
to a greater degree than that of its lesser capitalized peers. We
were pleased to generate cash from operations during the period
while still steadily increasing our R&D expenditures to broaden
our reach to other potential markets, and reported improved
profitability excluding certain non-cash items. We recently
announced the approval by ABB as a vendor, which allows Recon to
bid as a service provider for larger automation projects and is a
reflection of our commitment to the exploration and development of
new business opportunities outside our traditional oilfield
sector."
Results of Operations
The following consolidated results of operations include the
results of operations of the Company's wholly owned subsidiaries
and its variable interest entities ("VIEs"), Nanjing Recon
Technology Co. Ltd ("Nanjing Recon") and Beijing BHD Petroleum
Technology Co, Ltd ("BHD").
On November 25, 2016, the Company
began reporting under Rule 3b-4 of the Securities Exchange Act of
1934 as a foreign private issuer, including the filing of annual
reports on Form 20-F and current reports on Form 6-K. Recon has
provided selected fiscal 2017 second quarter results, with greater
detail on its first half financial results in this report.
Selected Financial
Highlights in RMB
(in 000s, except
number of shares and per share data)
Conversion USD 1.0 =
RMB 6.94 at December 31, 2016
|
|
3 months ended
December 31, 2015
|
|
3 months ended
December 31, 2016
|
|
6 months ended
December 31, 2015
|
|
6 months ended
December 31, 2016
|
Sales
|
28,842
|
|
30,313
|
|
32,436
|
|
38,115
|
Cost of
Revenues
|
23,080
|
|
16,996
|
|
26,272
|
|
23,706
|
Gross
Profit
|
5,762
|
|
13,317
|
|
6,164
|
|
14,409
|
Gross Profit
Margin
|
20.0%
|
|
43.9%
|
|
19.0%
|
|
37.8%
|
|
|
|
|
|
|
|
|
Loss from
Operations
|
(3,275)
|
|
(3,810)
|
|
(11,956)
|
|
(9,294)
|
|
|
|
|
|
|
|
|
Net Loss Attributable
to Recon
Technology, Ltd
|
(2,519)
|
|
(4,352)
|
|
(11,368)
|
|
(9,813)
|
Non U.S. GAAP Net
Income (Loss)
attributable to ordinary shareholders
|
(708)
|
|
3,260
|
|
(8,228)
|
|
(234)
|
Weighted Average
Number of Basic
and Diluted
Ordinary Shares Outstanding
|
5,569,102
|
|
6,176,444
|
|
5,503,932
|
|
6,067,089
|
Basic and Diluted
EPS
|
(0.45)
|
|
(0.70)
|
|
(2.07)
|
|
(1.62)
|
Non U.S. GAAP
adjusted earnings
(loss) per share
|
|
|
|
|
|
|
|
Basic
|
(0.13)
|
|
0.53
|
|
(1.49)
|
|
(0.04)
|
Diluted
|
(0.13)
|
|
0.48
|
|
(1.49)
|
|
(0.04)
|
3 MONTHS ENDED DECEMBER 31,
2016 UNAUDITED FINANCIAL RESULTS
Revenue
Total revenues for the three months ended December 31, 2016 increased 5.1% to RMB 30.3 million (USD 4.4
million) compared to RMB 28.8
million, largely due to increased sales of equipment due to
more furnaces provided to the Company's new client, Changqing
Oilfield, a major subsidiary of PetroChina and the largest
producing oilfield of China.
Cost and Margin
The Company's gross profit increased 131.1% to RMB 13.3 million (or USD
1.9 million) for the three months ended December 31, 2016 from RMB
5.8 million in the prior year period. Gross profit margin
improved to 43.9% from 20.0% in the prior year period. The
significant increase in gross margin was largely due to higher
margin automation projects and waste water treatment business
during this period, which traditionally report a higher margin than
the Company's oil and gas service business.
Net Loss
Loss from operations was RMB 3.8
million (USD 548,641) during
the three months ended December 31,
2016, compared to RMB 3.3
million in the prior year period. The increase was largely
due to higher general and administrative expenses due to higher
share based compensation during the period, offset but higher total
revenues and gross profit.
Net loss attributable to Recon Technology for the fiscal 2017
second quarter was RMB 4.4 million
(USD 626,667), or RMB 0.70 (USD 0.10)
per basic and diluted share based
on 6.2 million diluted shares outstanding, compared to RMB 2.5 million, or RMB
0.45 per basic and diluted
share based on 5.6 million diluted shares outstanding in the prior
year period.
Non U.S. GAAP Net Income
- Non U.S. GAAP net income attributable to ordinary shareholders
excluding certain non-cash expenses such as restricted shares
issued for consulting services and non-cash stock compensation
expense was RMB3.3 million
($469,391), or RMB0.53 ($0.08)
per basic share or RMB0.48 ($0.07)
per diluted share, for the second quarter of FY2017,
compared to adjusted net loss attributable to common shareholders
of RMB708,267, or RMB0.13 per basic
and diluted share, for the same period last fiscal year.
Please see the note about non-GAAP measures and the reconciliation
table at the end of this press release.
FIRST FISCAL 6
MONTHS ENDED DECEMBER 31, 2016 UNAUDITED FINANCIAL
RESULTS
|
|
Revenue
|
|
For the
Six Months
Ended
|
|
December
31,
|
|
|
|
|
|
Increase
|
|
Percentage
|
|
2015
|
|
2016
|
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware and
software- non-related parties
|
RMB
|
31,338,132
|
|
RMB
|
35,305,234
|
|
RMB
|
3,967,102
|
|
|
12.7%
|
|
Service
|
|
1,098,258
|
|
|
2,809,874
|
|
|
1,711,616
|
|
|
155.8%
|
|
Total
revenues
|
RMB
|
32,436,390
|
|
RMB
|
38,115,108
|
|
RMB
|
5,678,718
|
|
|
17.5%
|
Our total revenues for the first fiscal six months ended
December 31, 2016 were approximately
RMB 38.1 million (USD 5.5 million), an increase of approximately
RMB 5.7 million or 17.5% from
RMB 32.4 million for the first fiscal
six months ended December 31, 2015.
The overall increase in revenue was accomplished through our
expansion of new clients and development of new business. See below
for more detail:
|
For the Six Months
Ended
|
|
December
31,
|
|
|
|
|
Increase
/
|
|
Percentage
|
|
2015
|
|
2016
|
|
(Decrease)
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Automation product
and software
|
RMB
|
23,677,914
|
|
RMB
|
17,964,392
|
|
RMB
|
(5,713,522)
|
|
(24.1)%
|
|
Equipment and
accessories
|
|
7,660,218
|
|
|
17,340,842
|
|
|
9,680,624
|
|
126.4%
|
|
Waste water treatment
products
|
|
-
|
|
|
2,737,704
|
|
|
2,737,704
|
|
100.0%
|
|
Other
services
|
|
1,098,258
|
|
|
72,170
|
|
|
(1,026,088)
|
|
(93.4)%
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue -
Hardware and software-
non-related parties
|
RMB
|
32,436,390
|
|
RMB
|
38,115,108
|
|
RMB
|
5,678,718
|
|
17.5%
|
(1) As shown above, the overall increase in revenue was
primarily affected by the increased sales of equipment, primarily
more furnaces provided to our new client, Changqing Oilfield, a
major subsidiary of PetroChina and the largest producing oilfield
of China.
(2) The Company invested in R&D of new products used for
oilfield waste water treatment beginning in 2016, and the outcome
was gradually reflected its operating results. For the first fiscal
six months ended December 31, 2016,
this new business continued to contribute revenue and margin to our
operation. Management expects to obtain more business in the coming
months due to our technical advantage and long-term cooperation
with oilfield companies.
(3) Revenue from other services decreased by RMB 1.0 million or 93.4% mainly because we
provided furnace maintenance services as required by clients in
2015 while there was no such requirement during the same period of
2016.
Cost and Margin
|
For the Six
Months Ended
|
|
December
31,
|
|
|
|
|
|
Increase
/
|
|
Percentage
|
|
2015
|
|
2016
|
|
(Decrease)
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
RMB
|
32,436,390
|
|
RMB
|
38,115,108
|
|
RMB
|
5,678,718
|
|
17.5%
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
26,272,046
|
|
|
23,705,506
|
|
|
(2,566,540)
|
|
(9.8)%
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
RMB
|
6,164,344
|
|
RMB
|
14,409,602
|
|
RMB
|
8,245,258
|
|
133.8%
|
|
|
|
|
|
|
|
|
|
|
|
Margin %
|
|
19.0%
|
|
|
37.8%
|
|
|
18.8%
|
|
-
|
Cost of Revenues. Our cost of revenues decreased from
approximately RMB 26.3 million in the
first fiscal six months ended December 31,
2015 to approximately RMB 23.7 million (USD 3.4 million) for the same period in 2016, a
decrease of approximately RMB 2.6
million (USD 0.4 million), or
9.8%. This decrease was mainly caused by less revenue generated
from automation products and software which has higher cost of
revenue.
Gross Profit. Our gross profit increased to approximately
RMB 14.4 million (USD 2.1 million) for the first fiscal six months
ended December 31, 2016 from
approximately RMB 6.2 million for the
same period in 2015. Our gross profit as a percentage of revenue
increased to 37.8% for the six months ended December 31, 2016 from 19.0% for the same period
in 2015. This was mainly due to higher margin automation projects
and waste water treatment business during this period.
Operating Expenses
|
For the
Six Months
Ended
|
|
|
December
31,
|
|
|
|
|
Increase
/
|
Percentage
|
|
2015
|
2016
|
(Decrease)
|
Change
|
Selling and
distribution expenses
|
RMB
|
2,624,348
|
|
RMB
|
4,195,089
|
|
RMB
|
1,570,741
|
|
59.9
|
%
|
% of
revenue
|
|
8.1
|
%
|
|
11.0
|
%
|
|
2.9
|
%
|
-
|
|
General and
administrative expenses
|
|
8,813,445
|
|
|
15,244,707
|
|
|
6,431,262
|
|
73.0
|
%
|
% of
revenue
|
|
27.2
|
%
|
|
40.0
|
%
|
|
12.8
|
%
|
-
|
|
Provision for
(reversal of) doubtful
accounts
|
|
2,153,337
|
|
|
(690,964)
|
|
|
(2,844,301)
|
|
(132.1)
|
%
|
% of
revenue
|
|
6.6
|
%
|
|
(1.8)
|
%
|
|
(8.5)
|
%
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development expenses
|
|
4,529,036
|
|
|
4,954,802
|
|
|
425,766
|
|
9.4
|
%
|
% of
revenue
|
|
14.0
|
%
|
|
13.0
|
%
|
|
(1.0)
|
%
|
-
|
|
Operating
expenses
|
RMB
|
18,120,166
|
|
RMB
|
23,703,634
|
|
RMB
|
5,583,468
|
|
30.8
|
%
|
Selling and Distribution Expenses. Selling and distribution
expenses consist primarily of salaries and related expenditures of
our sales and marketing organization, sales commissions, costs of
our marketing programs including traveling charges, advertising and
trade shows, and an allocation of our facilities, depreciation
expenses and rental expense, as well as shipping charges. Selling
expenses increased approximately RMB 1.6
million (USD 0.2 million) for
the first fiscal six months ended December
31, 2016 compared to the same period in 2015. This increase
was primarily due to an increase in onsite projects service
expenses as a results of projects increase. Selling expenses were
8.1% of total revenues for the six months ended December 31, 2015 and 11% of total revenues in
the same period of 2016.
General and Administrative Expenses. General and administrative
expenses consist primarily of costs in human resources, facilities
costs, depreciation expenses, professional advisor fees, audit
fees, stock based compensation expense and other miscellaneous
expenses incurred in connection with general operations. General
and administrative expenses increased by 73.0% or RMB 6.4 million (USD
1.0 million), from approximately ¥8.8 million in the
first fiscal six months ended December 31,
2015 to approximately RMB 15.2
million (USD 2.2 million) in the
same period of 2016. The increase in general and administrative
expenses was mainly due to an increase in salaries and share-based
compensation. General and administrative expenses were 40.0% of
total revenues in the first fiscal six months ended December 31, 2016 and 27.2% of total
revenues in the same period of 2015.
Provision for doubtful accounts. Provision for doubtful accounts
is the estimated amount of bad debt that will arise from accounts
receivables, other receivables and purchase advances. We recorded a
provision for doubtful accounts of RMB 2.2
million for the first fiscal six months ended December 31, 2015 and reversed provision for
doubtful accounts of RMB 0.7 million
($99.5 thousand) for the same period
in 2016. The decrease in provision of doubtful accounts was mainly
resulted by the management's effort to collect the long outstanding
receivables.
Research and development ("R&D") expenses. Research and
development expenses consist primarily of salaries and related
expenditures for our research and development projects. Research
and development expenses increased from approximately RMB 4.5 million for first fiscal six months ended
December 31, 2015 to approximately
RMB 5.0 million (USD 0.7 million) for the same period of 2016.
This increase was primarily due to more research and development
expense spent on design of chemical products used for waste water
treatment and digital oilfield models and platform.
Net Loss
|
For the First
Fiscal Six Months Ended
|
|
December
31,
|
|
|
|
|
|
Increase
/
|
|
Percentage
|
|
2015
|
|
2016
|
|
(Decrease)
|
|
Change
|
Loss from
operations
|
RMB
|
(11,955,822)
|
|
RMB
|
(9,294,032)
|
|
RMB
|
2,661,790
|
|
(22.3)%
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other
expense
|
|
(280,133)
|
|
|
(162,538)
|
|
|
117,595
|
|
(42.0)%
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
|
(12,235,955)
|
|
|
(9,456,570)
|
|
|
2,779,385
|
|
(22.7)%
|
|
|
|
|
|
|
|
|
|
|
|
Benefit for income
taxes
|
|
(868,173)
|
|
|
(20,143)
|
|
|
848,030
|
|
(97.7)%
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
(11,367,782)
|
|
|
(9,436,427)
|
|
|
1,931,355
|
|
(17.0)%
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income
attributable to
non-controlling interest
|
|
-
|
|
|
376,212
|
|
|
376,212
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to Recon
Technology, Ltd
|
RMB
|
(11,367,782)
|
|
RMB
|
(9,812,639)
|
|
RMB
|
1,555,143
|
|
(13.7)%
|
Loss from operations. Loss from operations was approximately
RMB 9.3 million (USD 1.3 million) for the first fiscal six months
ended December 31, 2016, compared to
a loss of RMB 12.0 million for the
same period of 2015. This decrease in loss from operations was
primary due to an increase in gross profit, and a decrease in
provision for doubtful accounts as discussed above.
Interest and other expense. Interest and other expense was
approximately RMB 0.2 million
(USD 23.4 thousand) for the first
fiscal six months ended December 31,
2016, compared to interest and other expense of RMB 0.3 million for the same period of 2015. The
RMB 0.1 million (USD 17.0 thousand) decrease in interest and other
expense was primarily due to the decreased interest expense of
RMB 0.2 million.
Net loss. As a result of the factors described above, net loss
was approximately RMB 9.4 million
(USD 1.3 million) for the first
fiscal six months ended December 31,
2016, a decrease of approximately RMB
1.9 million (USD 0.3 million)
from net loss of RMB 11.4 million for
the same period of 2015.
Basic and diluted loss per share. Basic and diluted loss per
share attributable to common shareholders was RMB 1.62, as compared to RMB 2.07, in the first fiscal six months of
2016.
Non U.S. GAAP Net Loss
Non U.S. GAAP net loss attributable to ordinary shareholders
excluding certain non-cash expenses (non-GAAP) such as restricted
shares issued for consulting services and non-cash stock
compensation expense was RMB 234,103
($33,710), or RMB 0.04 ($0.01)
per basic and diluted share, for
the first six months of FY2017, compared to non U.S. GAAP net loss
attributable to common shareholders of RMB
8.2 million, or RMB 1.49 per
basic and diluted share, for the
same period last fiscal year. Please see the note about
non-GAAP measures and the reconciliation table at the end of this
press release.
LIQUIDITY AND CAPITAL RESOURCES
Selected Balance
Sheet Highlights in RMB
|
Conversion USD 1.0 =
RMB 6.94 at December 31, 2016
|
|
12/31/2016
|
|
6/30/2016
|
Percentage
Change
|
|
|
|
|
|
Cash and Cash
Equivalents
|
5,057,928
|
|
1,817,620
|
178.3%
|
Total Current
Assets
|
83,838,720
|
|
74,322,220
|
12.8%
|
Total
Assets
|
86,537,875
|
|
79,450,314
|
8.9%
|
Working
Capital
|
46,968,598
|
|
44,471,702
|
5.6%
|
Total Liabilities (No
Long Term Debt)
|
36,870,122
|
|
29,850,518
|
23.5%
|
Shareholders'
Equity
|
41,068,044
|
|
41,376,299
|
(0.7)%
|
Total Liabilities and
Shareholders' Equity
|
86,537,875
|
|
79,450,314
|
8.9%
|
Cash and working capital. As of December
31, 2016, the Company's cash RMB 5.1
million, as compared to RMB 1.82
million as of June 30, 2016.
The net working capital was RMB 47
million as of December 31,
2016, compared to net working capital of RMB 44.5 million as of June 30, 2016. Current assets totaled
RMB 83.8 million and current
liabilities totaled RMB 36.9
million.
Cash from Operating Activities. Net cash provided by operating
activities was approximately RMB 6.0
million ($0.9 million) for the
six months ended December 31, 2016.
This was an increase of approximately RMB
5.0 million ($0.7 million)
compared to net cash provided by operating activities of
approximately RMB 1.0 million for the
six months ended December 31, 2015.
The increase in net cash used in operating activities for the six
months ended December 31, 2016 was
primarily attributable to the net loss available to the Company in
the amount of RMB 9.4 million
($1.4 million), share based
compensation of RMB 8.8 million
($1.3 million) and restricted shares
issued for services of RMB 0.8
million ($0.1 million) as
reconciled, and collections of other receivable, an increase in
trade accounts payable and a decrease in inventory.
Cash from Investing Activities. Net cash used in investing
activities was approximately RMB 0.2
million ($23.9 thousand) for
the six months ended December 31,
2016, which was an increase in cash provided by investing
activities of approximately RMB 0.3
million compared to the same period in 2015. The increase is
due to a decrease in the Company's purchase of additional property
and equipment and an increase in proceeds from disposal of
equipment.
Cash from Financing Activities. Net cash used in financing
activities amounted to RMB 2.5
million ($0.4 million) for the
six months ended December 31, 2016,
as compared to net cash used in financing activities of
$9.9 million for the same period in
2015. During the six months ended December
31, 2016, we repaid RMB 9.7
million ($1.4 million) in
short-term borrowings to two related parties and repaid
RMB 0.5million ($76.3 thousand) in short-term borrowings to one
third-party, and we received RMB 7.8
million ($1.1 million) from
two related parties.
STATEMENT REGARDING UNAUDITED FINANCIAL INFORMATION
The unaudited financial information set forth above is subject
to adjustments that may be identified when audit work is performed
on the Company's year-end financial statements, which could result
in significant differences from this unaudited financial
information.
Use of Non-GAAP Financial Measures
To supplement Recon's consolidated financial information
presented in accordance with U.S. generally accepted accounting
principles ("GAAP"), Recon uses the following non-GAAP financial
measures: net income (loss) adjusted for certain non-cash expenses
(Special item (A)) such as restricted shares
issued for consulting services and non-cash stock compensation
expense, and basic and diluted earnings (losses) per common share
excluding non-cash expenses (Special
item (A)) such as restricted shares issued for
consulting services and non-cash stock compensation expense.
The presentation of these non-GAAP financial measures is not
intended to be considered in isolation or as a substitute for the
financial information prepared and presented in accordance with
GAAP. Recon believes these non-GAAP financial measures provide
meaningful supplemental information about its performance by
excluding non-cash items, which may not be indicative of its
operating performance.
About Recon Technology, Ltd. (NASDAQ: RCON)
Recon Technology, Ltd. is China's first listed non-state owned oil and
gas field service company on NASDAQ. Recon supplies China's largest oil exploration companies,
Sinopec and CNPC, with advanced automated technologies, efficient
gathering and transportation equipment and reservoir stimulation
measure for increasing petroleum extraction levels, reducing
impurities and lowering production costs. Through the years, RCON
has taken leading positions on several segmented markets of the oil
and gas filed service industry. RCON also has developed stable
long-term cooperation relationship with its major clients, and its
products and service are also well accepted by clients. For
additional information please visit us at www.recon.cn.
Currency Conversion
The translation of RMB amounts into U.S. dollars are included
solely for the convenience of readers and have been made at the
rate of RMB 6.94 to USD 1.00, the
noon buying rate as of December 31,
2016 as set forth in the H.10 statistical release of the
Federal Reserve Board. Prior period numbers have been recast into
the new reporting currency.
Safe Harbor
This news release contains forward-looking statements as defined
by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance, and
underlying assumptions and other statements that are other than
statements of historical facts. These statements are subject to
uncertainties and risks including, but not limited to, product and
service demand and acceptance, changes in technology, economic
conditions, the impact of competition and pricing, government
regulation, and other risks contained in reports filed by the
company with the Securities and Exchange Commission. All such
forward-looking statements, whether written or oral, and whether
made by or on behalf of the company, are expressly qualified by the
cautionary statements and any other cautionary statements which may
accompany the forward-looking statements. In addition, the company
disclaims any obligation to update any forward-looking statements
to reflect events or circumstances after the date hereof.
Company Contact
Liu Jia
Recon Technology, Ltd.
+86 (10) 84945799
info@recon.cn
Investor Relations
The Equity Group Inc.
In China
Katherine Yao, Senior Associate
+86-10-6587-6435
kyao@equityny.com
In U.S.
Adam Prior, Senior Vice
President
+1 (212) 836-9606
aprior@equityny.com
RECON TECHNOLOGY,
LTD
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(UNAUDITED)
|
|
|
|
|
|
|
|
As of June
30,
|
|
As of December
31,
|
|
As of December
31,
|
|
2016
|
|
2016
|
|
2016
|
ASSETS
|
RMB
|
|
RMB
|
|
U.S.
Dollars
|
Current
assets
|
|
|
|
|
|
|
Cash
|
1,817,620
|
|
5,057,928
|
|
$
|
728,307
|
Notes
receivable
|
4,660,177
|
|
5,168,417
|
|
|
744,217
|
Trade accounts
receivable, net
|
38,097,626
|
|
55,101,422
|
|
|
7,934,233
|
Inventories,
net
|
6,313,070
|
|
2,984,626
|
|
|
429,766
|
Other receivables,
net
|
22,000,112
|
|
11,958,434
|
|
|
1,721,934
|
Purchase advances,
net
|
1,323,305
|
|
3,513,976
|
|
|
505,989
|
Prepaid
expenses
|
110,310
|
|
53,917
|
|
|
7,763
|
Total current
assets
|
74,322,220
|
|
83,838,720
|
|
|
12,072,209
|
|
|
|
|
|
|
|
Property and
equipment, net
|
2,907,762
|
|
2,699,155
|
|
|
388,660
|
Long-term trade
accounts receivable, net
|
2,220,332
|
|
-
|
|
|
-
|
Total
Assets
|
79,450,314
|
|
86,537,875
|
|
$
|
12,460,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Trade accounts
payable
|
7,540,430
|
|
14,440,512
|
|
$
|
2,079,336
|
Other
payables
|
2,972,192
|
|
3,055,569
|
|
|
439,981
|
Other payable-
related parties
|
3,680,244
|
|
3,763,825
|
|
|
541,965
|
Deferred
revenue
|
406,681
|
|
405,370
|
|
|
58,371
|
Advances from
customers
|
200,600
|
|
195,600
|
|
|
28,165
|
Accrued payroll and
employees' welfare
|
381,109
|
|
1,102,375
|
|
|
158,735
|
Accrued
expenses
|
261,348
|
|
14,155
|
|
|
2,035
|
Taxes
payable
|
755,880
|
|
2,691,350
|
|
|
387,536
|
Short-term
borrowings
|
530,000
|
|
-
|
|
|
-
|
Short-term borrowings
- related parties
|
12,941,848
|
|
11,021,180
|
|
|
1,586,976
|
Deferred tax
liability
|
180,186
|
|
180,186
|
|
|
25,946
|
Total current
liabilities
|
29,850,518
|
|
36,870,122
|
|
|
5,309,046
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
Common stock, $
0.0185 U.S. dollar par value, 100,000,000
shares authorized; 6,230,792 and 5,804,005 shares issued
and outstanding as of December 31, 2016 and June 30,
2016, respectively
|
741,467
|
|
794,194
|
|
|
114,359
|
Additional paid-in
capital
|
100,612,455
|
|
110,138,264
|
|
|
15,859,167
|
Statutory
reserve
|
4,148,929
|
|
4,148,929
|
|
|
597,418
|
Accumulated
deficit
|
(63,907,512)
|
|
(73,720,151)
|
|
|
(10,615,204)
|
Accumulated other
comprehensive loss
|
(219,040)
|
|
(293,192)
|
|
|
(42,217)
|
Total
shareholders' equity
|
41,376,299
|
|
41,068,044
|
|
|
5,913,523
|
Non-controlling
interest
|
8,223,497
|
|
8,599,709
|
|
|
1,238,300
|
Total
equity
|
49,599,796
|
|
49,667,753
|
|
|
7,151,823
|
Total Liabilities
and Equity
|
79,450,314
|
|
86,537,875
|
|
$
|
12,460,869
|
RECON TECHNOLOGY,
LTD
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
LOSS
|
(UNAUDITED)
|
|
|
For the six months
ended
|
|
For the three
months ended
|
|
December
31,
|
|
December
31,
|
|
2015
|
|
2016
|
|
2016
|
|
2015
|
|
2016
|
|
2016
|
|
RMB
|
|
RMB
|
|
USD
|
|
RMB
|
|
RMB
|
|
USD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware and
software
|
31,338,132
|
|
35,305,234
|
|
$
|
5,083,715
|
|
27,857,380
|
|
27,503,131
|
|
$
|
3,960,265
|
Service
|
1,098,258
|
|
2,809,874
|
|
|
404,603
|
|
985,050
|
|
2,809,874
|
|
|
404,603
|
Total
revenues
|
32,436,390
|
|
38,115,108
|
|
|
5,488,318
|
|
28,842,430
|
|
30,313,005
|
|
|
4,364,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hardware and
software
|
25,595,076
|
|
21,673,434
|
|
|
3,120,829
|
|
22,402,781
|
|
14,963,656
|
|
|
2,154,665
|
Service
|
676,970
|
|
2,032,072
|
|
|
292,605
|
|
676,970
|
|
2,032,072
|
|
|
292,605
|
Total cost of
revenues
|
26,272,046
|
|
23,705,506
|
|
|
3,413,434
|
|
23,079,751
|
|
16,995,728
|
|
|
2,447,270
|
Gross
profit
|
6,164,344
|
|
14,409,602
|
|
|
2,074,884
|
|
5,762,679
|
|
13,317,277
|
|
|
1,917,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
distribution expenses
|
2,624,348
|
|
4,195,089
|
|
|
604,064
|
|
1,511,678
|
|
3,144,948
|
|
|
452,851
|
General and
administrative expenses
|
8,813,445
|
|
15,244,707
|
|
|
2,195,135
|
|
4,746,226
|
|
10,345,379
|
|
|
1,489,665
|
Provision for
(reversal of) doubtful accounts
|
2,153,337
|
|
(690,964)
|
|
|
(99,494)
|
|
43,411
|
|
(698,990)
|
|
|
(100,650)
|
Research and
development expenses
|
4,529,036
|
|
4,954,802
|
|
|
713,458
|
|
2,736,039
|
|
4,336,128
|
|
|
624,373
|
Operating
expenses
|
18,120,166
|
|
23,703,634
|
|
|
3,413,163
|
|
9,037,354
|
|
17,127,465
|
|
|
2,466,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidy
income
|
124,720
|
|
7,807
|
|
|
1,124
|
|
75,720
|
|
-
|
|
|
-
|
Interest
income
|
104,719
|
|
48,978
|
|
|
7,053
|
|
49,209
|
|
21,084
|
|
|
3,036
|
Interest
expense
|
(474,200)
|
|
(285,862)
|
|
|
(41,162)
|
|
(196,376)
|
|
(153,372)
|
|
|
(22,085)
|
Income (loss) from
foreign currency exchange
|
(202)
|
|
3,015
|
|
|
434
|
|
736
|
|
2,627
|
|
|
378
|
Other income
(expense)
|
(35,170)
|
|
63,524
|
|
|
9,147
|
|
(25,506)
|
|
(35,994)
|
|
|
(5,183)
|
Other income
(expense)
|
(280,133)
|
|
(162,538)
|
|
|
(23,404)
|
|
(96,217)
|
|
(165,655)
|
|
|
(23,854)
|
Loss before income
tax
|
(12,235,955)
|
|
(9,456,570)
|
|
|
(1,361,683)
|
|
(3,370,892)
|
|
(3,975,843)
|
|
|
(572,495)
|
Benefit for income
tax
|
(868,173)
|
|
(20,143)
|
|
|
(2,900)
|
|
(851,716)
|
|
-
|
|
|
-
|
Net
loss
|
(11,367,782)
|
|
(9,436,427)
|
|
|
(1,358,783)
|
|
(2,519,176)
|
|
(3,975,843)
|
|
|
(572,495)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income
attributable to non-controlling interest
|
-
|
|
376,212
|
|
|
54,172
|
|
-
|
|
376,212
|
|
|
54,172
|
Net loss
attributable to Recon Technology, Ltd
|
(11,367,782)
|
|
(9,812,639)
|
|
$
|
(1,412,955)
|
|
(2,519,176)
|
|
(4,352,055)
|
|
$
|
(626,667)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(11,367,782)
|
|
(9,436,427)
|
|
|
(1,358,783)
|
|
(2,519,176)
|
|
(3,975,843)
|
|
|
(572,495)
|
Foreign currency
translation adjustment
|
122,790
|
|
(74,152)
|
|
|
(10,677)
|
|
(1,428)
|
|
(66,550)
|
|
|
(9,583)
|
Comprehensive
loss
|
(11,244,992)
|
|
(9,510,579)
|
|
|
(1,369,460)
|
|
(2,520,604)
|
|
(4,042,393)
|
|
|
(582,078)
|
Less: Comprehensive
income attributable to non-controlling interest
|
13,643
|
|
376,212
|
|
|
54,172
|
|
(2,977)
|
|
376,212
|
|
|
54,172
|
Comprehensive loss
attributable to Recon Technology, Ltd
|
(11,258,635)
|
|
(9,886,791)
|
|
$
|
(1,423,632)
|
|
(2,517,627)
|
|
(4,418,605)
|
|
$
|
(636,250)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common
share - basic and diluted
|
(2.07)
|
|
(1.62)
|
|
$
|
(0.23)
|
|
(0.45)
|
|
(0.73)
|
|
$
|
(0.11)
|
Weighted - average
shares -basic and diluted
|
5,503,932
|
|
6,067,089
|
|
|
6,067,089
|
|
5,569,102
|
|
5,957,733
|
|
|
5,957,733
|
Reconciliation of
Non-GAAP Financial Measures
|
|
|
For the three
months ended
|
|
December
31,
|
|
2015
|
|
2016
|
|
2016
|
|
RMB
|
|
RMB
|
|
USD
|
Reconciliation of
Net loss attributable to ordinary shareholders
|
|
|
|
|
|
|
|
|
to Adjusted Net
loss attributable to ordinary shareholders
|
|
|
|
|
|
|
|
|
Net loss attributable to
ordinary shareholders
|
|
(2,519,176)
|
|
|
(4,352,055)
|
|
$
|
(626,667)
|
Special items
(A):
|
|
|
|
|
|
|
|
|
Restricted shares issued for
services
|
|
363,886
|
|
|
764,387
|
|
|
110,067
|
Stock compensation
expense
|
|
1,447,023
|
|
|
6,847,479
|
|
|
985,991
|
Adjusted net income
(loss) attributable to ordinary shareholders
|
|
(708,267)
|
|
|
3,259,811
|
|
$
|
469,391
|
|
|
|
|
|
|
|
|
|
Reconciliation of
U.S. GAAP Earnings (Loss) Per Share
|
|
|
|
|
|
|
|
|
to Non U.S. GAAP
Adjusted Earnings (Loss) Per Share
|
|
|
|
|
|
|
|
|
U.S. GAAP loss per
share
|
|
|
|
|
|
|
|
|
Basic
|
|
(0.45)
|
|
|
(0.70)
|
|
$
|
(0.10)
|
Diluted
|
|
(0.15)
|
|
|
(0.64)
|
|
$
|
(0.09)
|
Impact of
special items(A) on earnings per share
|
|
|
|
|
|
|
|
|
Basic
|
|
(0.32)
|
|
|
(1.23)
|
|
$
|
(0.18)
|
Diluted
|
|
(0.32)
|
|
|
(1.12)
|
|
$
|
(0.16)
|
Non U.S. GAAP
adjusted earnings (loss) per share
|
|
|
|
|
|
|
|
|
Basic
|
|
(0.13)
|
|
|
0.53
|
|
$
|
0.08
|
Diluted
|
|
(0.13)
|
|
|
0.48
|
|
$
|
0.07
|
Weighted - average
shares - basic diluted
|
|
5,569,102
|
|
|
6,176,444
|
|
|
6,176,444
|
Weighted - average
shares - basic diluted
|
|
5,569,102
|
|
|
6,766,481
|
|
|
6,766,481
|
|
|
|
|
|
|
|
|
|
|
For the six months
ended
|
|
December
31,
|
|
2015
|
|
2016
|
|
2016
|
|
RMB
|
|
RMB
|
|
USD
|
Reconciliation of
Net Loss attributable to ordinary shareholders
|
|
|
|
|
|
|
|
|
to Adjusted Net
Loss attributable to ordinary shareholders
|
|
|
|
|
|
|
|
|
Net loss attributable to
ordinary shareholders
|
|
(11,367,782)
|
|
|
(9,812,639)
|
|
$
|
(1,412,955)
|
Special items
(A):
|
|
|
|
|
|
|
|
|
Restricted shares issued for
services
|
|
566,361
|
|
|
764,387
|
|
|
110,067
|
Stock compensation
expense
|
|
2,573,575
|
|
|
8,814,149
|
|
|
1,269,178
|
Adjusted net loss
attributable to ordinary shareholders
|
|
(8,227,846)
|
|
|
(234,103)
|
|
$
|
(33,710)
|
|
|
|
|
|
|
|
|
|
Reconciliation of
U.S. GAAP Earnings (Loss) Per Share
|
|
|
|
|
|
|
|
|
to Non U.S. GAAP
Adjusted Earnings (Loss) Per Share
|
|
|
|
|
|
|
|
|
U.S. GAAP loss per
share
|
|
(2.07)
|
|
|
(1.62)
|
|
$
|
(0.23)
|
Impact of
special items(A) on earnings per share
|
|
0.58
|
|
|
1.58
|
|
$
|
0.22
|
Non U.S. GAAP
adjusted loss per share
|
|
(1.49)
|
|
|
(0.04)
|
|
$
|
(0.01)
|
Weighted - average
shares - basic and diluted
|
|
5,503,932
|
|
|
6,067,089
|
|
|
6,067,089
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/recon-technology-reports-fiscal-2017-second-quarter-and-first-six-months-financial-results-300406117.html
SOURCE Recon Technology, Ltd.