NEW YORK, March 18, 2020 /PRNewswire/ -- Recon Technology, Ltd. (Nasdaq: RCON) ("Recon" or the "Company"), today announced its financial results for the first six months of fiscal year 2020.

First Six Months of Fiscal 2019 Financial:

  • Total revenues for the six months ended December 31, 2019 decreased by 28.1% to $4.4 million (RMB30.4 million).
  • Total cost of revenues for the six months ended December 31, 2019 decreased by 31.8% to $2.6 million (RMB18.4 million).
  • Gross profit for the six months ended December 31, 2019 was $1.7 million (RMB12.0 million). Gross profit margin for the six months ended December 31, 2019 was 39.4%, an increase of 3.4 percentage points compared to the six months ended December 31, 2018.
  • Net loss attributable to Recon for the six months ended December 31, 2019 was $1.0 million (RMB6.7 million), or $0.22 (RMB1.51) per basic and diluted share, compared to RMB10.1 million, or RMB2.72 per basic and diluted share, for the six months ended December 31, 2018.

Management Commentary

Mr. Shenping Yin, co-founder and CEO of Recon stated, "Ever since the year 2019, our management has been focusing on cash management and operating risk control, expanding our business structure from traditional oilfield service to some other energy sectors with higher margin and opportunities. As a result, for the six months ended December 31, 2019, the cash position and overall operation results were improved, and the total loss was narrowed. Besides, as our oily sludge treatment production was temporarily postponed by late acceptance inspection, the revenue from oilfield environmental protection was not recognized. We expect the production will be enabled and revenue to be earned later this year."

Mr. Yin continued, "Due to the coronavirus disease 2019 outbreak, our business has slowed down in the short term. We believe the outbreak will affect our operation result from the beginning of calendar year 2020 to date and in the whole fiscal year 2020. However, we don't expect a significant impact on the Company's operation and financial results in the long run."

First Six Months Fiscal 2020 Financial Results:

Revenue

Total revenues for the six months ended December 31, 2019 decreased by RMB11.9 million ($1.7 million) or 28.1%, to RMB30.4 million ($4.4 million) compared to RMB42.3 million for the six months ended December 31, 2018 mainly due to the decreased revenue from all three segments during the six months ended December 31, 2019.

Revenue from automation product and software decreased by RMB6.4 million ($0.9 million), or 22.0%, to RMB22.6 million ($3.2 million) for the six months ended December 31, 2019 from RMB29.0 million for the six months ended December 31, 2018, as the Company selected to take those orders with higher margin to optimize the use of cash rather than accepting all orders.

Revenue from equipment and accessories decreased by RMB2.5 million ($0.4 million), or 24.3%, to RMB7.8 million ($1.1 million) for the six months ended December 31, 2019 from RMB10.3 million for the six months ended December 31, 2018 as a result of less furnaces sold to commercial and general industry markets.

Revenue from oilfield environmental protection projects decreased by RMB3.0 million ($0.4 million), or 99.1%, to RMB26,085 ($3,744) for the six months ended December 31, 2019 from RMB3.0 million for the six months ended December 31, 2018. As of December 31, 2019, the Company won contracts of over 1,708 tons of oily sludge treatment and collected the basic materials. As of December 31, 2019, the Company billed the customers RMB2.6 million ($0.4 million) in total and RMB0.7 million ($0.1 million) was received and recorded as advance from customer. The Company received RMB1.9 million ($0.3 million) in January 2020. Affected by late acceptance inspection of Gansu production project, the Company is still in the process of treating oil sludge collected, hence, revenue was not recognized during the six months ended December 31, 2019. The Company expects this revenue could be recognized and reflected in the financial data by end of fiscal year 2020.

Cost and Margin

Total cost of revenues decreased by RMB8.6 million ($1.2 million), or 31.8%, to RMB18.4 million ($2.6 million) for the six months ended December 31, 2019. The decrease was mainly caused by decrease in cost of revenue from all three segments during the six months ended December 31, 2019, which is in line with the decrease in revenue.

Gross profit decreased by RMB3.3 million ($0.5 million), or 21.5%, to RMB12.0 million ($1.7 million) for the six months ended December 31, 2019 from RMB15.2 million from the six months ended December 31, 2018. The gross profit as a percentage of revenue increased to 39.4% for the six months ended December 31, 2019 from 36.0% for the same period in 2018. While the gross profit margin of automation production and software remained relatively stable with a slight increase of 2.1%, gross profit margin of equipment and accessories increased by 11.4% due to higher margin equipment sales during the six months ended December 31, 2019 as the Company focused on higher margin business. However, since the Company didn't launch the large-scale treatment of oily sludge treatment, zero revenue was recognized and costs of pilot testing was recorded, resulting to a negative margin of oilfield environmental protection business. The Company believes this situation would change as the Company began the official treatment process in calendar year 2020.

Operating Expenses

Selling and distribution expenses decreased by RMB2.2 million ($0.3 million), or 45.8%, to RMB2.7 million ($0.4 million) for the six months ended December 31, 2019 from RMB4.9 million for the six months ended December 31, 2018. This decrease was primarily due to the decrease in traveling expenses as well as entertainment expenses as the Company tried to control the operating expenditures during the six months ended December 31, 2019.

General and administrative expenses decreased by RMB5.5 million ($0.8 million), or 29.3%, to RMB13.4 million ($1.9 million) for the six months ended December 31, 2019 from RMB18.9 million for the six months ended December 31, 2018. The decrease in general and administrative expenses was mainly due to the decrease in stock-based compensation expense during the six months ended December 31, 2019.

Provision for doubtful accounts was RMB25,537 ($3,665) for the six months ended December 31, 2019, compared to reversal of provision for doubtful accounts of RMB1.5 million for the six months ended December 31, 2018. The increase in provision for doubtful accounts was mainly resulted by additional provision made for long outstanding account receivables. Management will continue to monitor account receivables to maintain the provision at a lower risk level.

Research and development expenses increased from approximately RMB1.7 million for the six months ended December 31, 2018 to RMB2.9 million ($0.4 million) for the same period of 2019. This increase was primarily due to more research and development expense spent on design of new automation platform systems.

Net Loss

Loss from operations was RMB7.0 million ($1.0 million) for the six months ended December 31, 2019, compared to a loss of RMB8.7 million for the six months ended December 31, 2018. This RMB1.8 million ($0.3 million) decrease in loss from operations was primary due to a decrease in general and administrative expenses and selling and distribution expenses, partially offset by decrease in gross profit as discussed above.

Net loss was RMB7.0 million ($1.0 million) for the six months ended December 31, 2019, a decrease of RMB2.9 million ($0.4 million) from net loss of RMB9.9 million for the six months ended December 31, 2018. Net loss attributable to Recon for the six months ended December 31, 2018 was RMB10.1 million, or RMB2.72 per basic and diluted share, compared to RMB6.7 million ($1.0 million), or RMB1.51 ($0.22) per basic and diluted share for the six months ended December 31, 2019.

EBITDA

Adjusted EBITDA loss was RMB1.5 million ($0.2 million) for the six months ended December 31, 2019, compared to an adjusted EBITDA income of RMB0.9 million for the same period last year. Please see the section titled "Non-GAAP Financial Measures" below for a discussion of this metric, which the Company believes may be informative for investors but is not a GAAP financial measure.

Financial Condition

As of December 31, 2019, the Company had cash of RMB10.3 million ($1.5 million), compared to RMB4.5 million as of June 30, 2019. As of December 31, 2019, the Company had working capital of RMB51.4 million ($7.4 million) while as of June 30, 2019, the Company had working capital of RMB55.7 million.

Net cash provided by operating activities was RMB0.3 million ($0.04 million) for the six months ended December 31, 2019, compared to net cash used in operating activities of approximately RMB27.0 million for the six months ended December 31, 2018. Net cash provided by investing activities was RMB3.7 million ($0.5 million) for the six months ended December 31, 2019, compared to net cash used in investing activities RMB8.5 million for the six months ended December 31, 2018. Net cash provided by financing activities was RMB1.9 million ($0.3 million) for the six months ended December 31, 2019, compared to net cash provided by financing activities of RMB1.0 million for the six months ended December 31, 2018.

Exchange Rate

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 RMB6.9680 to $1.00, the approximate exchange rate prevailing on December 31, 2019.

About Recon Technology, Ltd.

Recon Technology, Ltd. (RCON) is China's first non-state-owned oil and gas field service company listed on NASDAQ. Recon supplies China's largest oil exploration companies with advanced automated technologies, efficient gathering and transportation equipment and reservoir stimulation measures for increasing petroleum extraction levels, reducing impurities and lowering production costs. Since 2017, the Company has expanded its business operations into other segments of the broader energy industry including electric power, coal chemicals, renewable energy and environmental protection in the energy and chemical industries. Through the years, Recon has taken leading positions on several market segments of the oil and gas field service industry. Recon also has developed stable long-term cooperation relationships with its major clients, and its products and service are well accepted by clients. For additional information please visit: www.recon.cn.

Safe Harbor Statement

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, the effect of novel coronavirus and other health matters on target markets, 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.

IR contact:
Dragon Gate Investment Partners LLC
Tel: +1(646)-801-2803
Email: RCON@dgipl.com

 

 

RECON TECHNOLOGY, LTD

CONDENSED BALANCE SHEETS

(UNAUDITED)




As of June 30



As of December 31



As of December 31




2019



2019



2019




RMB



RMB



U.S. Dollars


ASSETS













Current assets













Cash


¥

4,521,325



¥

10,325,219



$

1,481,806


Notes receivable



3,073,680




4,060,506




582,736


Trade accounts receivable, net



68,535,282




63,063,443




9,050,441


Trade accounts receivable- related party, net



3,409,912




3,409,912




489,368


Inventories, net



1,270,523




1,796,411




257,809


Other receivables, net



5,665,593




4,784,811




686,684


Loans to third parties



4,960,000




-




-


Purchase advances, net



1,343,576




187,174




26,862


Contract assets, net



4,633,940




14,604,897




2,095,996


Prepaid expenses



192,837




75,920




10,896


Prepaid expenses - related parties



217,600




-




-


Total current assets



97,824,268




102,308,293




14,682,598















Property and equipment, net



3,661,321




3,267,226




468,890


Construction in progress



21,524,994




23,143,654




3,321,421


Land use right, net



1,307,887




1,294,267




185,744


Investment in unconsolidated entity



31,078,971




31,220,259




4,480,521


Long-term other receivables, net



440,015




23,922




3,433


Prepayments for construction in progress



1,144,098




1,059,404




152,039


Right of use assets



-




532,491




76,420


Total Assets


¥

156,981,554



¥

162,849,516



$

23,371,066















LIABILITIES AND STOCKHOLDERS' EQUITY


























Current liabilities













Short-term bank loan


¥

2,500,000



¥

2,500,000



$

358,783


Trade accounts payable



14,089,293




14,688,353




2,107,972


Other payables



2,246,410




2,086,665




299,464


Other payable- related parties



2,290,873




4,081,028




585,682


Advance from customers



120,000




2,024,753




290,579


Accrued payroll and employees' welfare



1,384,529




2,885,935




414,170


Investment payable



6,400,000




6,400,000




918,485


Taxes payable



2,180,847




2,831,702




406,387


Short-term borrowings



1,081,096




-




-


Short-term borrowings - related parties



9,010,525




11,931,310




1,712,301


Long-term borrowings - related party - current portion



780,797




813,334




116,724


Operating lease liabilities - current



-




640,491




91,919


Total Current Liabilities



42,084,370




50,883,571




7,302,466















Long-term borrowings - related party



8,196,204




7,796,782




1,118,942


Total Liabilities



50,280,574




58,680,353




8,421,408















Commitments and Contingencies


























Equity













Common stock, ($ 0.0925 U.S. dollar par value,
20,000,000 shares authorized; 4,611,720 shares and
4,361,634 shares issued and outstanding as of
December 31, 2019 and June 30, 2019, respectively)*



2,712,773




2,876,228




412,777


Additional paid-in capital



250,624,798




254,552,363




36,531,641


Statutory reserve



4,148,929




4,509,040




647,107


Accumulated deficit



(164,780,885)




(171,842,193)




(24,661,634)


Accumulated other comprehensive gain



2,909,936




2,919,546




418,994


Total stockholders' equity



95,615,551




93,014,984




13,348,885


Non-controlling interests



11,085,429




11,154,179




1,600,773


Total equity



106,700,980




104,169,163




14,949,658


Total Liabilities and Equity


¥

156,981,554



¥

162,849,516



$

23,371,066



* Retrospectively restated for effect of stock split on December 27, 2019

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

RECON TECHNOLOGY, LTD

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)




For the six months ended
December 31,




2018



2019



2019




RMB



RMB



USD


Revenues













Revenues - third party


¥

41,954,746



¥

30,405,153



$

4,363,543


Revenues - related party



316,983




-




-


Revenues



42,271,729




30,405,153




4,363,543















Cost of revenues













Cost of revenues and related tax - third party



26,914,495




18,437,241




2,645,989


Cost of revenues and related tax - related party



120,142




-




-


Cost of revenues and related tax



27,034,637




18,437,241




2,645,989















Gross profit



15,237,092




11,967,912




1,717,554















Selling and distribution expenses



4,909,361




2,660,873




381,871


General and administrative expenses



18,903,138




13,366,413




1,918,258


Provision for (net recovery of) doubtful accounts



(1,494,707)




25,537




3,665


Research and development expenses



1,654,702




2,895,286




415,512


Operating expenses



23,972,494




18,948,109




2,719,306















Loss from operations



(8,735,402)




(6,980,197)




(1,001,752)















Other income (expenses)













Subsidy income



55,706




854,389




122,616


Interest income



32,109




85,745




12,306


Interest expense



(856,571)




(761,322)




(109,260)


Income (loss) from investment in unconsolidated entity



(844,369)




141,288




20,277


Foreign exchange transaction gain



17,651




209




30


Other income (expense)



387,439




(60,760)




(8,720)


Other income (expense), net



(1,208,035)




259,549




37,249


Loss before income tax



(9,943,437)




(6,720,648)




(964,503)


Income tax expenses



2,002




316,799




45,465


Net loss



(9,945,439)




(7,037,447)




(1,009,968)















Less: Net income (loss) attributable to non-controlling interests



138,804




(336,250)




(48,256)


Net loss attributable to Recon Technology, Ltd


¥

(10,084,243)



¥

(6,701,197)



$

(961,712)















Comprehensive loss













Net loss



(9,945,439)




(7,037,447)




(1,009,968)


Foreign currency translation adjustment



1,195,328




9,610




1,379


Comprehensive loss



(8,750,111)




(7,027,837)




(1,008,589)


Less: Comprehensive income (loss) attributable to non-
controlling interests



138,804




(336,250)




(48,256)


Comprehensive loss attributable to Recon Technology, Ltd


¥

(8,888,915)



¥

(6,691,587)



$

(960,333)















Loss per common share - basic and diluted


¥

(2.72)



¥

(1.51)



$

(0.22)


Weighted - average shares -basic and diluted*



3,711,083




4,449,980




4,449,980



* Retrospectively restated for effect of stock split on December 27, 2019

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 

RECON TECHNOLOGY, LTD

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)




For the six months ended December 31,




2018



2019



2019




RMB



RMB



U.S. Dollars


Cash flows from operating activities:













Net loss


¥

(9,945,439)



¥

(7,037,447)



$

(1,009,968)


Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:













Depreciation and amortization



515,457




411,592




59,069


Loss from disposal of equipment



-




3,189




458


Provision for (net recovery of) doubtful accounts



(1,494,707)




25,537




3,665


Provision for slow moving inventories



65,380




25,312




3,633


Amortization of right of use assets



-




718,000




103,043


Restricted shares issued for management and employees



9,539,917




4,057,093




582,247


Loss (income) from investment in unconsolidated entity



844,369




(141,288)




(20,277)


Restricted shares issued for services



516,194




33,927




4,869


Changes in operating assets and liabilities:













Notes receivable



217,436




(986,826)




(141,623)


Trade accounts receivable



(11,251,794)




5,412,201




776,723


Inventories



(150,754)




(551,200)




(79,105)


Other receivable



(6,468,866)




1,364,500




195,824


Purchase advance



(3,105,872)




1,108,902




159,142


Contract assets



(11,115,958)




(9,951,981)




(1,428,241)


Prepaid expense



(124,589)




116,917




16,779


Prepaid expense - related parties



-




217,600




31,228


Operating lease liabilities



-




(610,000)




(87,543)


Trade accounts payable



740,274




362,758




52,061


Other payables



(1,218,860)




(160,316)




(23,007)


Other payables-related parties



3,122




1,790,155




256,911


Advance from customers



4,462,975




1,904,753




273,357


Accrued payroll and employees' welfare



285,135




1,501,406




215,472


Taxes payable



645,328




650,855




93,406


Net cash (used in) provided by operating activities



(27,041,252)




265,639




38,123















Cash flows from investing activities:













Investment in unconsolidated entity



(3,815,080)




-




-


Purchases of property and equipment



(283,129)




(12,967)




(1,861)


Proceeds from disposal of equipment



-




900




129


Repayments from loans to third parties



-




4,960,000




711,826


Payments and prepayments for construction in progress



(4,411,620)




(1,297,663)




(186,232)


Net cash (used in) provided by investing activities



(8,509,829)




3,650,270




523,862















Cash flows from financing activities:













Proceeds from short-term borrowings



1,031,507




-




-


Repayments of short-term borrowings



-




(1,081,096)




(155,152)


Proceeds from short-term borrowings-related parties



5,000,000




13,115,000




1,882,176


Repayments of short-term borrowings-related parties



(5,000,000)




(10,195,000)




(1,463,118)


Repayments of long-term borrowings-related party



(334,513)




(365,530)




(52,458)


Refund of capital contribution by a non-controlling shareholder



(200,000)




-




-


Capital contribution by non-controlling shareholders



500,000




405,000




58,123


Net cash provided by financing activities



996,994




1,878,374




269,571















Effect of exchange rate fluctuation on cash



1,195,329




9,611




1,380















Net (decrease) increase in cash



(33,358,758)




5,803,894




832,936


Cash at beginning of period



45,340,578




4,521,325




648,870


Cash at end of period


¥

11,981,820



¥

10,325,219



$

1,481,806




























Supplemental cash flow information













Cash paid during the period for interest


¥

805,613



¥

718,201



$

103,071


Cash paid (received) during the period for taxes


¥

2,002



¥

(2,002)



$

(287)















Non-cash investing and financing activities













Issuance of common stock in exchange of shares of FGS, net of
issuance costs


¥

21,433,796



¥

-



$

-


Investment payable in exchange of interest of FGS


¥

6,400,000



¥

-



$

-


Right-of-use assets obtained in exchange for operating lease
obligations


¥

-



¥

1,228,963



$

176,372


Payable for construction in progress


¥

5,957,463



¥

236,302



$

33,912


Receivable for disposal of property and equipment


¥

-



¥

5,000



$

718


 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 

 

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SOURCE Recon Technology, Ltd.

Copyright 2020 PR Newswire

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