Recon Technology Reports Fiscal 2018 Third Quarter and First Nine Months Financial Results
Recon Technology Reports Fiscal 2018 Third Quarter and First Nine Months Financial Results
BEIJING, May 15, 2018 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON) ("Recon" or the "Company"), a China-based independent solutions integrator in the oilfield service and environmental protection, electric power and coal chemical industries, today announced its financial results for the third quarter and first nine months of fiscal year 2018, ended March 31, 2018.
Third Quarter Fiscal Year 2018 Financial Highlights (all comparable to the prior year period):
-- Total revenues for the third quarter of FY2018 increased by 181.2% to
¥16.6 million ($2.6 million).
-- Gross profit for the third quarter of FY2018 was ¥1.7 million ($0.3
million) compared to ¥1.08 million in FY2017.
-- Gross profit margin for the third quarter of FY2018 was 10.3%, which
decreased by 8.0 percentage points compared to the third quarter of
FY2017, largely due to a higher proportion of equipment sold at a lower
price during the test-run period.
-- Net loss attributable to Recon for the third quarter of FY2018 was
¥10.1 million ($1.6 million), or ¥0.70 ($0.11) per basic and diluted
share, compared to net loss attributable to Recon of ¥7.2 million, or
¥0.81 per basic and diluted share, for the same period of fiscal 2017.
-- Non-GAAP net loss attributable to common shareholders excluding certain
non-cash expenses was ¥5.1 million ($0.8 million), or ¥0.35 ($0.06)
per basic and diluted share, for the third quarter of FY2018, compared
to non-GAAP net income attributable to common shareholders of ¥2.3
million, ¥0.26 per basic and diluted share, for the same period of last
fiscal year.
First Nine Months of Fiscal Year 2018 Financial Highlights (all comparable to the prior year period):
-- Total revenues for the first nine months of FY2018 increased by 58.7% to
¥69.8 million ($11.1 million).
-- Gross profit for the first nine months of FY2018 was ¥7.8 million ($1.2
million). Gross profit margin for the first nine months of FY2018 was
11.1%, which decreased by 20.0 percentage points compared to the first
nine months of FY2017.
-- Net loss attributable to Recon for the first nine months of FY2018 was
¥27.1 million ($4.3 million), or ¥2.73 ($0.43) per basic and diluted
share, compared to ¥17.0 million, or ¥2.43 per basic and diluted
share, for the same period of last fiscal year.
-- Non-GAAP net loss attributable to common shareholders excluding certain
non-cash expenses was ¥10.5 million ($1.7 million), or ¥1.06 ($0.17)
per basic and diluted share, for the first nine months of FY2018,
compared to non-GAAP net loss attributable to common shareholders of
¥3.2 million, or ¥0.46 per basic and diluted share, for the same
period of last fiscal year.
Management Commentary
Mr. Shenping Yin, founder and CEO of Recon stated, "Our market expansion efforts proceeded quite well for the past quarter as we continued to extend our furnaces markets to the chemical industry and industrial automation products requirements to coal chemical industry, bringing us increased revenue. We expect this trend to remain stable and we remain confident of a 30% increase in revenue for the whole fiscal year 2018 as mentioned in our annual letter to shareholders. Furthermore, our construction of waste-water and waste oil sludge treatment facilities has also advanced as scheduled. We believe this will help improve our operations and profit in the coming year."
Recent Developments
On April 09, 2018, the Company announced procurement bidding results from Shenhua Group Corporation Limited ("Shenhua Group") through Shenhua Logistics Group Corporation Limited ("Shenhua Logistics"), during the first 3 months of FY2018, to provide specified equipment and maintenance services for contracts with amount above ¥6.8 million, or approximately $1.1 million. The Company expects bids of ¥20 million to be achieved for the whole year 2018. As of the date of this press release, ¥9.93 million ($1.58 million) has been secured. Shenhua Group is a state-owed enterprise, founded in October 1995 with the approval of the State Council, pursuant to PRC Corporate Laws. Shenhua Group is a diversified energy enterprise concentrating on coal production, sales, electricity and thermal generation, coal liquefaction, coal chemicals, and railway and port transportation.
On January 22, 2018, the Company and certain institutional investors entered into a securities purchase agreement in connection with an offering, pursuant to which the Company agreed to sell an aggregate of 3,592,500 ordinary shares. The purchase price was $1.66 per ordinary share. The aggregate proceeds, after deducting fees to the Placement Agent and other offering expenses of about $0.5 million, were approximately $5.5 million.
On December 15, 2017, the Company signed a subscription agreement with Future Gas Station (Beijing) Technology, Ltd ("FGS"). Pursuant to this agreement, Recon holds 8% equity interest of FGS. As of the date of this press release, Recon has invested ¥4.0 million in FGS.
On November 20, 2017, the Company entered into a securities purchase agreement with Yongquan Bi ("Mr. Bi"), pursuant to which Mr. Bi agreed to purchase an aggregate of 3 million unregistered restricted shares for $4.8 million, a per-share purchase price of $1.60. On January 19, 2018, the Company issued 3 million shares to Xinhaixin International Holdings Limited, Mr. Bi's wholly owned company.
Results of Operations
The following unaudited condensed consolidated results of operations which include the Company's wholly owned subsidiaries, their variable interest entities ("VIEs") and VIEs' subsidiaries. The VIEs are Nanjing Recon Technology Co. Ltd ("Nanjing Recon") and Beijing BHD Petroleum Technology Co, Ltd ("BHD"). BHD owns 100% of the equity interest of Huang Hua BHD Petroleum Equipment Manufacturing Co. LTD ("HH BHD"), 51% of the equity interest of Gansu BHD Environmental Technology Ltd ("Gansu BHD") and 55% of the equity interest of Qing Hai BHD New Energy Technology Co., Ltd. ("Qinghai BHD").
By this current report on Form 6-K, Recon has provided selected results for the third quarter and first nine months of fiscal year 2018, with details on its first nine months financial results in this report.
The translation has been made at the rate of $1.0: ¥6.28, the approximate exchange rate prevailing on March 31, 2018.
Selected Financial Highlights in RMB
(in 000s, except percentages, number of shares and per share data)
-----------------------------------------------------------------
3 months ended 3 months ended 9 months ended 9 months ended
March 31, 2017 March 31, 2018 March 31, 2017 March 31, 2018
-------------- -------------- -------------- --------------
Sales 5,898 16,586 44,013 69,832
Cost of Revenues 4,816 14,878 30,322 62,077
Gross Profit 1,082 1,708 13,691 7,755
Gross Profit Margin 18.3% 10.3% 31.1% 11.1%
Loss from Operations (6,971) (10,453) (16,265) (27,959)
Net Loss Attributable to Recon Technology, Ltd (7,187) (10,133) (16,999) (27,119)
Non-U.S. GAAP Net Loss attributable to common (2,295) (5,138) (3,220) (10,541)
shareholders
Basic and Weighted Average Number of Diluted 8,926,631 14,552,266 7,006,354 9,933,257
Common Shares Outstanding
Basic and Diluted Loss per Share (0.81) (0.70) (2.43) (2.73)
Non-U.S. GAAP adjusted loss per basic and diluted (0.26) (0.35) (0.46) (1.06)
share
3 MONTHS ENDED MARCH 31, 2018 UNAUDITED FINANCIAL RESULTS
Revenue
Total revenues for the three months ended March 31, 2018 increased by 181.2% to ¥16.6 million ($2.6 million) compared to ¥5.9 million for the same period of last year, largely due to increased sales of customized equipment and pressure vessels to new clients of chemical industry.
Cost and Margin
The Company's gross profit increased by 57.9% to ¥1.7 million ($0.3 million) for the three months ended March 31, 2018 from ¥1.1 million for the same period of last year. Gross profit margin decreased to 10.3% from 18.3% for the same period of last year. The significant decrease in gross margin was primarily due to increased sales of furnaces which usually generates lower gross margin. The management believes that our gross margin will increase after the construction and test-run stage of our new plants and equipment, when our equipment is expected to be sold at the normal price.
Net Loss
Loss from operations was ¥10.5 million ($1.7 million) during the three months ended March 31, 2018, compared to ¥7.0 million for the same period of last year. The increase in net loss is largely due to an increase in selling and distribution expenses and general and administrative expenses, partly offset by an increase in gross profit and a decrease in research and development expenses.
Net loss attributable to Recon for the three months ended March 31, 2018 was ¥10.1 million ($1.6 million), or ¥0.70 ($0.11) per basic and diluted share based on 14.6 million basic and diluted shares outstanding, compared to ¥7.2 million, or ¥0.81 per basic and diluted share based on 8.9 million basic and diluted shares outstanding for the same period of last year.
Non-U.S. GAAP Net Loss
Non-U.S. GAAP net loss attributable to common shareholders excluding certain non-cash expenses such as restricted shares issued for consulting services and non-cash stock compensation expense was ¥5.1 million ($0.8 million), or ¥0.35 ($0.06) per basic and diluted share, for the three months ended March 31, 2018, compared to adjusted net loss attributable to common shareholders of ¥2.3 million, ¥0.26 per basic and diluted share, for the same period of last year. Please see the note about non-GAAP measures and the reconciliation table at the end of this press release.
9 MONTHS ENDED MARCH 31, 2018 UNAUDITED FINANCIAL RESULTS
Revenue
For the Nine Months Ended
March 31,
---------
Percentage
2017 2018 Increase Change
---- ---- -------- ------
Hardware and software YEN 43,940,560 YEN 69,649,711 YEN 25,709,151 58.5%
Service 72,170 182,551 110,381 152.9%
------ ------- -------
Total revenues YEN 44,012,730 YEN 69,832,262 YEN 25,819,532 58.7%
=== ========== === ========== === ==========
Total revenues for the nine months ended March 31, 2018 were approximately ¥69.8 million ($11.1 million), representing an increase of approximately ¥25.8 million or 58.7% from ¥44.0 million for the nine months ended March 31, 2017. The overall increase in revenue was accomplished through Recon's expansion of new clients and development of new business. See below for more details:
For the Nine Months Ended
March 31,
---------
Increase / Percentage
2017 2018 (Decrease) Change
---- ---- --------- ------
Automation product and software YEN 18,901,400 YEN 15,915,595 YEN (2,985,805) (15.8)%
Equipment and accessories 22,301,456 53,302,419 31,000,963 139.0%
Waste water treatment products 2,737,704 431,697 (2,306,007) (84.2)%
Services 72,170 182,551 110,381 152.9%
------ ------- -------
Total revenues YEN 44,012,730 YEN 69,832,262 YEN 25,819,532 58.7%
=== ========== === ========== === ==========
(1) Revenue from automation product and software decreased by YEN3.0 million or 15.8% from the same period of last
year. Affected by less expenditure on surface projects of our clients for the last two years, requirements of
automation related projects maintained at a lower level and fluctuated. Revenue from this product line may
fluctuate from time to time. Management is confident on further development on this business because it
believes oil companies will continue to invest in automation products. In addition, during this period,
management also expanded new market of automation business to coal chemical industry.
(2) As shown above, the overall increase in revenue was primarily due to increased equipment business, including
furnaces and related accessories.
(3) Revenue from waste water treatment products decreased by YEN2.3 million or 84.2% as most of Recon's
wastewater treatment projects were not finished thus less revenue was recorded in the nine months ended
March 31, 2018 as compared to the same period of last year.
(4) Revenue from services for the nine months ended March 31, 2017 and 2018 consisted mainly of maintenance
services, which were provided upon request by customers. Revenue from services increased by YEN0.1 million or
152.9% from the same period of last year mainly because maintenance requests outpaced the purchase of new
equipment due to industry softness, and we believe the margin level is reasonable.
Cost and Margin
For the Nine Months Ended
March 31,
---------
Increase / Percentage
2017 2018 (Decrease) Change
---- ---- --------- ------
Total revenues YEN 44,012,730 YEN 69,832,262 YEN 25,819,532 58.7%
Cost of revenues 30,322,003 62,077,072 31,755,069 104.7%
---------- ---------- ----------
Gross profit YEN 13,690,727 YEN 7,755,190 YEN (5,935,537) (43.4)%
Margin % 31.1% 11.1% (20.0)% -
Cost of Revenues. Recon's cost of revenues increased from ¥30.3 million for the nine months ended March 31, 2017 to ¥62.1 million ($9.9 million) for the same period in 2018, representing an increase of ¥31.8 million ($5.1 million), or 104.7%. This increase was mainly caused by significant growth in revenue generated from equipment and accessories with lower gross profit margin.
Gross Profit. Recon's gross profit decreased to ¥7.8 million ($1.2 million) for the nine months ended March 31, 2018 from ¥13.7 million from the same period of last year. Recon's gross profit as a percentage of revenue decreased to 11.1% for the nine months ended March 31, 2018 from 31.1% from the same period of last year. This was mainly due to the increased equipment business with lower margin during this period, which led to the increase in cost of revenues in proportion to the increase in Recon's revenue.
Operating Expenses
For the Nine Months Ended
March 31,
---------
Increase / Percentage
2017 2018 (Decrease) Change
---- ---- --------- ------
Selling and distribution expenses YEN 3,311,070 YEN 4,283,601 YEN 972,531 29.4%
% of revenue 7.5% 6.1% (1.40)% -
General and administrative expenses 20,973,292 28,569,378 7,596,086 36.2%
% of revenue 47.7% 40.9% (6.80)% -
Provision for (reversal of) doubtful accounts (876,530) 504,498 1,381,028 (157.6)%
% of revenue (2.0)% 0.7% 2.70% -
Research and development expenses 6,547,582 2,356,406 (4,191,176) (64.0)%
% of revenue 14.9% 3.4% (11.50)% -
---- --- -------
Operating expenses YEN 29,955,414 YEN 35,713,883 YEN 5,758,469 19.2%
=== ========== === ========== === =========
Selling and Distribution Expenses. Selling and distribution expenses consist primarily of salaries and related expenditures of Recon's sales and marketing organization, sales commissions, costs of Recon's marketing programs including traveling expenses, advertising and trade shows, and rental expense, as well as shipping charges. Selling expenses increased by ¥1.0 million ($0.2 million) for the nine months ended March 31, 2018 from the same period of last year. This increase was primarily due to an increase in traveling expense and service and testing fees as we expanded our market to new basements of Changqing oilfield and new industries. Selling expenses were 6.1% of total revenues for the nine months ended March 31, 2018 and 7.5% of total revenues for the same period of last year.
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 36.2% or ¥7.6 million ($1.2 million), from ¥21.0 million in the nine months ended March 31, 2017 to ¥28.6 million ($4.5 million) for the same period of 2018. The increase in general and administrative expenses was mainly due to an increase in performance-based compensation, consulting fees, rent expenses and investor relationship expenses. General and administrative expenses accounted 40.9% of total revenues in the nine months ended March 31, 2018 and 47.7% of total revenues for the same period of last year. In December 2016, the Company's board approved the grants of restricted stock to management plan based on performance targets for the coming three fiscal years from FY2017 to FY2019. During the nine months ended March 31, 2018, because of the grant of certain restricted stock to management as the target for the FY2018 achieved, compensation expenses increased ¥2.5 million.
Provision for doubtful accounts. Provision for doubtful accounts is the estimated amount of bad debt that will arise as a result of lower collectability from accounts receivables, other receivables and purchase advances. We reversed provision for doubtful accounts of ¥0.9 million for the nine months ended March 31, 2017 and recorded a provision for doubtful accounts of ¥0.5 million ($0.1 million) for the same period in 2018. Management will continue to monitor accounts receivable to maintain the provision at a lower level.
Research and development ("R&D") expenses. Research and development expenses consist primarily of salaries and related expenditures for Recon's research and development projects. Research and development expenses decreased from ¥6.5 million for the nine months ended March 31, 2017 to ¥2.4 million ($0.4 million) for the same period of 2018. This decrease was primarily due to less research and development expense spent on design of chemical products used for waste water treatment and digital oilfield models and platform. The Company was focusing on the transformation of advanced R&D results into projects, which were undertaken by Gansu BHD and Qinghai BHD.
Net Loss
For the Nine Months Ended
March 31,
---------
Increase / Percentage
2017 2018 (Decrease) Change
---- ---- --------- ------
Loss from operations YEN (16,264,687) YEN (27,958,693) YEN (11,694,006) 71.9%
Other expense, net (185,591) (280,752) (95,161) 51.3%
-------- -------- -------
Loss before income taxes (16,450,278) (28,239,445) (11,789,167) 71.7%
Income tax expenses 264,344 11,018 (253,326) (95.8)%
------- ------ --------
Net loss (16,714,622) (28,250,463) (11,535,841) 69.0%
Less: Net income (loss) attributable to non-controlling 284,649 (1,131,067) (1,415,716) (497.4)%
interest
Net loss attributable to Recon Technology, Ltd YEN (16,999,271) YEN (27,119,396) YEN (10,120,125) 59.5%
=== =========== === =========== === ===========
Loss from operations. Loss from operations was ¥28.0 million ($4.5 million) for the nine months ended March 31, 2018, compared to a loss of ¥16.3 million for the same period of last year. This ¥11.7 million ($1.9 million) increase in loss from operations was primary due to a decrease in gross profit, as well as an increase in general and administrative expenses and partly offset by a decrease in research and development expenses as discussed above.
Basic and diluted loss per share. Basic and diluted loss per share attributable to common shareholders was ¥2.73, as compared to ¥2.43 for the nine months ended March 31, 2017.
Non-U.S. GAAP Net Loss
Non-U.S. GAAP net loss attributable to common shareholders excluding certain non-cash expenses (non-GAAP) such as restricted shares issued for consulting services and non-cash stock compensation expense was ¥10.5 million ($1.7 million), or ¥1.06 ($0.17) per diluted share, for the nine months ended March 31, 2018, compared to non-U.S. GAAP net loss attributable to common shareholders of ¥3.2 million, or ¥0.46 per basic and diluted share, for the same period of last 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 US$1.0: RMB6.28 at March 31, 2018
--------------------------------------------
3/31/2018 6/30/2017 Percentage
Change
------
Cash and cash equivalent 52,415,897 3,809,279 1,276.01%
Total Current Assets 120,424,984 68,387,075 76.09%
Total Assets 135,712,689 71,155,045 90.73%
Working Capital 93,554,270 38,941,318 140.24%
Total Current Liabilities 26,870,714 29,445,757 (8.75)%
Total Stockholders' Equity 88,687,587 33,244,445 166.77%
Total Liabilities and Stockholders' Equity 135,712,689 71,155,045 90.73%
Cash from Operating Activities. Net cash used in operating activities was ¥14.6 million ($2.3 million) for the nine months ended March 31, 2018. This represents an increase of ¥23.7 million ($3.8 million) compared to net cash provided by operating activities of ¥9.1 million for the nine months ended March 31, 2017. The increase in net cash used in operating activities for the nine months ended March 31, 2018 was primarily attributable to the net loss available to the Company of the amount of ¥28.3 million ($4.5 million), and reconciled by share based compensation of ¥5.1 million ($0.8 million), restricted shares issued for management of ¥8.0 million ($1.3 million) as well as restricted shares issued for services of ¥2.8 million ($0.5 million); and an increase in other receivables and purchase advances, partly offset by an decrease in trade accounts receivable.
Cash from Investing Activities. Net cash used in investing activities was ¥13.6 million ($2.2 million) for the nine months ended March 31, 2018, representing an increase in cash used in investing activities of ¥13.3 million ($2.1 million) compared to the same period in 2017. This increase was due to an increase in the Company's payments for a land use right of 50 years, payments for construction in progress and investment in unconsolidated entity.
Cash from Financing Activities. Net cash provided by financing activities amounted to ¥76.8 million ($12.2 million) for the nine months ended March 31, 2018, as compared to net cash used in financing activities of ¥6.2 million for the same period of last year. During the nine months ended March 31, 2018, we repaid ¥21.4 million ($3.4 million) in short-term borrowings to related parties and repaid ¥4.9 million ($0.8 million) in short-term borrowings to third-parties, and we received ¥20.2 million ($3.2 million) in short-term borrowings from related parties, received ¥4.6 million ($0.7 million) in short-term borrowings from one third-party and received ¥10.0 million ($1.6 million) in long-term borrowings from one related party. We also received ¥3.7 million ($0.6 million) capital contribution by non-controlling shareholders. Moreover, this increase in net cash provided by financing activities was due to net proceeds from issuance of common stock of ¥65.0 million ($10.3 million) for the nine months ended March 31, 2018.
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 unaudited condensed consolidated financial information presented in accordance with U.S. generally accepted accounting principles ("GAAP"), Recon uses the following non-GAAP financial measures: certain non-cash expenses such as restricted shares issued for consulting services and non-cash stock compensation expense, basic and diluted earnings (losses) per common share excludes non-cash expenses 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.
Recon Technology, Ltd. (NASDAQ: RCON) 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 (NYSE: SNP) 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, 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 relationship with its major clients, and its products and service are well accepted by clients. For additional information please visit: 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 ¥6.28 to $1.00, the noon buying rate as of March 31, 2018 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.
For more information, please contact:
In China:
Ms. Liu Jia
Chief Financial Officer
Recon Technology, Ltd.
Phone: +86 (10) 8494-5799
Email: info@recon.cn
In the United States:
Ms. Tina Xiao
President
Ascent Investor Relations LLC
Phone: +1-917-609-0333
Email: tina.xiao@ascent-ir.com
RECON TECHNOLOGY, LTD
CONDENSED BALANCE SHEETS
(UNAUDITED)
As of June 30, As of March 31 As of March 31
-------------- -------------- --------------
2017 2018 2018
---- ---- ----
ASSETS RMB RMB U.S. Dollars
--- --- ------------
Current assets
Cash and cash equivalent YEN 3,809,279 YEN 52,415,897 $8,345,583
Notes receivable 6,112,960 2,799,435 445,722
Trade accounts receivable, net 39,425,911 33,719,455 5,368,763
Inventories, net 2,627,974 5,157,202 821,122
Other receivables, net 4,106,510 8,331,295 1,326,497
Purchase advances, net 11,476,000 17,031,192 2,711,682
Prepaid expenses 828,441 970,508 154,523
------- ------- -------
Total current assets 68,387,075 120,424,984 19,173,892
Property and equipment, net 2,767,970 2,902,687 462,162
Construction in progress - 5,610,165 893,242
Land use right, net - 1,341,936 213,661
Investment in unconsolidated entity - 4,037,736 642,882
Prepayments for construction in progress - 1,395,181 222,139
--- --------- -------
Total Assets YEN 71,155,045 YEN 135,712,689 $21,607,978
=== ========== === =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank loan YEN - YEN 45,000 $7,165
Trade accounts payable 8,352,870 8,311,141 1,323,288
Other payables 3,351,900 3,481,726 554,355
Other payable- related parties 3,314,019 3,173,006 505,201
Deferred revenue 1,259,725 1,000,140 159,241
Accrued payroll and employees' welfare 2,014,514 438,124 69,757
Taxes payable 684,721 696,997 110,975
Short-term borrowings 300,000 - -
Short-term borrowings - related parties 10,168,008 9,019,086 1,436,006
Long-term borrowings - related party - current portion - 705,494 112,328
--- ------- -------
Total Current Liabilities 29,445,757 26,870,714 4,278,316
Long-term borrowings - related party - 9,120,612 1,452,171
--- --------- ---------
Total Liabilities 29,445,757 35,991,326 5,730,487
---------- ---------- ---------
Commitments and Contingencies
Equity
Common stock, ($ 0.0185 U.S. dollar par value, 100,000,000 shares 1,261,288 2,267,836 361,082
authorized; 18,280,349 shares and 9,902,914 shares issued and outstanding as
of March 31, 2018 and June 30, 2017, respectively)
Additional paid-in capital 123,436,043 204,974,986 32,635,821
Statutory reserve 4,148,929 4,148,929 660,586
Accumulated deficit (95,352,659) (122,472,055) (19,499,824)
Accumulated other comprehensive loss (249,156) (232,109) (36,956)
-------- -------- -------
Total stockholders' equity 33,244,445 88,687,587 14,120,709
Non-controlling interests 8,464,843 11,033,776 1,756,782
--------- ---------- ---------
Total equity 41,709,288 99,721,363 15,877,491
---------- ---------- ----------
Total Liabilities and Equity YEN 71,155,045 YEN 135,712,689 $21,607,978
=== ========== === =========== ===========
The accompanying notes are an integral part of these consolidated financial statements
RECON TECHNOLOGY, LTD
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
For the nine months ended For the three months ended
March 31, March 31,
--------- ---------
2017 2018 2018 2017 2018 2018
RMB RMB USD RMB RMB USD
--- --- --- --- --- ---
Revenues
Hardware and software YEN 43,940,560 YEN 69,649,711 $11,089,526 YEN 5,897,622 YEN 16,585,535 $2,640,725
Service 72,170 182,551 29,066 - - -
------ ------- ------ --- --- ---
Total revenues 44,012,730 69,832,262 11,118,592 5,897,622 16,585,535 2,640,725
---------- ---------- ---------- --------- ---------- ---------
Cost of revenues
Hardware and software 30,322,003 62,077,072 9,883,823 4,816,497 14,878,467 2,368,928
---------- ---------- --------- --------- ---------- ---------
Total cost of revenues 30,322,003 62,077,072 9,883,823 4,816,497 14,878,467 2,368,928
---------- ---------- --------- --------- ---------- ---------
Gross profit 13,690,727 7,755,190 1,234,769 1,081,125 1,707,068 271,797
---------- --------- --------- --------- --------- -------
Selling and distribution expenses 3,311,070 4,283,601 682,029 915,981 1,301,964 207,297
General and administrative expenses 20,973,292 28,569,378 4,548,775 5,728,585 9,897,237 1,575,824
Provision for (net recovery of) doubtful (876,530) 504,498 80,325 (185,566) 423,959 67,502
accounts
Research and development expenses 6,547,582 2,356,406 375,184 1,592,780 536,686 85,450
--------- --------- ------- --------- ------- ------
Operating expenses 29,955,414 35,713,883 5,686,313 8,051,780 12,159,846 1,936,073
---------- ---------- --------- --------- ---------- ---------
Loss from operations (16,264,687) (27,958,693) (4,451,544) (6,970,655) (10,452,778) (1,664,276)
----------- ----------- ---------- ---------- ----------- ----------
Other income (expenses)
Subsidy income 96,905 212,005 33,755 89,098 - -
Interest income 65,776 40,890 6,510 16,798 34,591 5,508
Interest expense (423,875) (551,458) (87,802) (138,013) (267,398) (42,575)
Income (loss) from foreign currency exchange 22,603 (6,799) (1,083) 19,588 (4,128) (657)
Other income (expense) 53,000 24,610 3,918 (10,524) 45,958 7,317
------ ------ ----- ------- ------ -----
Other expense, net (185,591) (280,752) (44,702) (23,053) (190,977) (30,407)
-------- -------- ------- ------- -------- -------
Loss before income tax (16,450,278) (28,239,445) (4,496,246) (6,993,708) (10,643,755) (1,694,683)
Income tax expenses 264,344 11,018 1,754 284,487 1,736 276
------- ------ ----- ------- ----- ---
Net loss (16,714,622) (28,250,463) (4,498,000) (7,278,195) (10,645,491) (1,694,959)
Less: Net income (loss) attributable to non- 284,649 (1,131,067) (180,087) (91,563) (512,905) (81,664)
controlling interests
Net loss attributable to Recon Technology, YEN (16,999,271) YEN (27,119,396) $(4,317,913) YEN (7,186,632) YEN (10,132,586) $(1,613,295)
Ltd
===
Comprehensive loss
Net loss (16,714,622) (28,250,463) (4,498,000) (7,278,195) (10,645,491) (1,694,959)
Foreign currency translation adjustment (108,008) 17,047 2,714 (33,856) (55,221) (8,792)
-------- ------ ----- ------- ------- ------
Comprehensive loss (16,822,630) (28,233,416) (4,495,286) (7,312,051) (10,700,712) (1,703,751)
Less: Comprehensive income (loss) attributable 284,649 (1,131,067) (180,087) (91,563) (512,905) (81,664)
to non-controlling interests
Comprehensive loss attributable to Recon YEN (17,107,279) YEN (27,102,349) $(4,315,199) YEN (7,220,488) YEN (10,187,807) $(1,622,087)
Technology, Ltd
===
Loss per common share - basic and diluted YEN (2.43) YEN (2.73) $(0.43) YEN (0.81) YEN (0.70) $(0.11)
=== ===== === ===== ====== === ===== === ===== ======
Weighted-average shares -basic and diluted 7,006,354 9,933,257 9,933,257 8,926,631 14,552,266 14,552,266
========= ========= ========= ========= ========== ==========
The accompanying notes are an integral part of these consolidated financial statements
RECON TECHNOLOGY, LTD
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine months ended March 31,
-----------------------------------
2017 2018 2018
---- ---- ----
RMB RMB U.S. Dollars
--- --- ------------
Cash flows from operating
activities:
Net loss YEN (16,714,622) YEN (28,250,463) $(4,498,000)
Adjustments to reconcile net
loss to net cash provided by
(used in)
operating activities:
Depreciation and amortization 636,072 850,217 135,370
Gain from disposal of equipment (35,919) (78,285) (12,464)
Provision for (net recovery of)
doubtful accounts (876,530) 504,498 80,325
Provision for slow moving
inventories - 88,214 14,045
Share based compensation 5,877,975 5,131,459 817,023
Restricted shares issued for
management 5,483,059 8,024,231 1,277,606
Restricted shares issued for
services 3,294,497 2,830,362 450,646
Changes in operating assets and
liabilities:
Notes receivable (2,241,179) 3,313,525 527,575
Trade accounts receivable, net 2,554,495 4,927,248 784,509
Inventories, net 3,314,798 (2,617,441) (416,745)
Other receivable, net 9,652,913 (4,055,057) (645,640)
Purchase advances, net (5,458,035) (5,368,312) (854,735)
Prepaid expense (62,074) (142,067) (22,620)
Trade accounts payable 3,485,149 (754,247) (120,090)
Other payables (842,523) 129,826 20,671
Other payables-related parties (230,324) (141,013) (22,452)
Deferred revenue 40,389 (259,585) (41,331)
Accrued payroll and employees'
welfare 1,306,318 341,603 54,389
Taxes payable (89,615) 935,921 149,016
------- ------- -------
Net cash provided by (used in)
operating activities 9,094,844 (14,589,366) (2,322,902)
--------- ----------- ----------
Cash flows from investing
activities:
Investment in unconsolidated
entity - (4,037,736) (642,882)
Purchases of property and
equipment (354,784) (983,966) (156,666)
Proceeds from disposal of
equipment 51,900 32,000 5,095
Payments for land use right - (1,361,969) (216,851)
Advance payments for
construction in progress - (1,395,181) (222,139)
Payments for construction in
progress - (5,837,842) (929,493)
--- ---------- --------
Net cash used in investing
activities (302,884) (13,584,694) (2,162,936)
-------- ----------- ----------
Proceeds from short-term bank
loans - 45,000 7,165
Proceeds from short-term
borrowings - 4,600,000 732,405
Repayments of short-term
borrowings (530,000) (4,900,000) (780,171)
Proceeds from short-term
borrowings-related parties 7,758,318 20,188,318 3,214,355
Repayments of short-term
borrowings-related parties (13,409,163) (21,369,678) (3,402,449)
Proceeds from long-term
borrowings-related party - 10,000,000 1,592,186
Repayments of long-term
borrowings-related party - (504,541) (80,332)
Proceeds from sale of common
stock, net of issuance costs - 65,004,531 10,349,928
Capital contribution by
noncontrolling shareholders - 3,700,000 589,109
--- --------- -------
Net cash provided by (used in)
financing activities (6,180,845) 76,763,630 12,222,196
---------- ---------- ----------
Effect of exchange rate
fluctuation on cash (94,125) 17,048 2,714
------- ------ -----
Net increase in cash 2,516,990 48,606,618 7,739,072
Cash at beginning of period 1,817,620 3,809,279 606,508
--------- --------- -------
Cash at end of period YEN 4,334,610 YEN 52,415,897 $8,345,580
=== ========= === ========== ==========
Supplemental cash flow
information
Cash paid during the
period for interest YEN 454,414 YEN 520,358 $82,851
=== ======= === ======= =======
Cash paid during the
period for taxes YEN 284,487 YEN 11,034 $1,757
=== ======= === ====== ======
Non-cash investing and
financing activities
Issuance of common
stock to prepay
professional services YEN 3,294,497 YEN 2,830,362 $450,646
Issuance of common
stock to settle
salary payable YEN - YEN 1,554,908 $247,570
Payable for
Construction in
Progress YEN - YEN 712,518 $113,446
Reconciliation of Non-GAAP Financial Measures
For the three months ended
March 31,
---------
2017 2018 2018
RMB RMB USD
--- --- ---
Reconciliation of Net loss attributable to common shareholders to Adjusted
Net loss attributable to common shareholders
Net loss attributable to common shareholders YEN (7,186,632) YEN (10,132,586) $(1,613,295)
Special items (A):
Restricted shares issued for services 2,530,110 892,495 142,102
Provision for (net recovery of) doubtful accounts (185,566) 423,959 67,502
Provision for slow moving inventories - 156,598 24,933
Stock compensation expense 1,805,834 1,580,774 251,689
Restricted shares issued for management 741,051 1,941,083 309,056
------- --------- -------
Adjusted net loss attributable to common shareholders YEN (2,295,203) YEN (5,137,677) $(818,013)
=== ========== === ========== =========
Reconciliation of U.S. GAAP Loss Per Share to Non U.S. GAAP Adjusted
Loss Per Share
U.S. GAAP loss per share
Basic and diluted YEN (0.81) YEN (0.70) $(0.11)
=== ===== === ===== ======
Impact of special items on earnings per share
Basic and diluted 0.55 0.35 0.05
==== ==== ====
Non U.S. GAAP adjusted loss per share
Basic and diluted YEN (0.26) YEN (0.35) $(0.06)
=== ===== === ===== ======
Weighted-average shares - basic and diluted 8,926,631 14,552,266 14,552,266
========= ========== ==========
For the nine months ended
March 31,
---------
2017 2018 2018
RMB RMB USD
--- --- ---
Reconciliation of Net loss attributable to common shareholders to Adjusted
Net loss attributable to common shareholders
Net loss attributable to common shareholders YEN (16,999,271) YEN (27,119,396) $(4,317,913)
Special items (A):
Restricted shares issued for services 3,294,497 2,830,362 450,646
Provision for (net recovery of) doubtful accounts (876,530) 504,498 80,325
Provision for slow moving inventories - 88,214 14,045
Stock compensation expense 5,877,975 5,131,459 817,023
Restricted shares issued for management 5,483,059 8,024,231 1,277,606
--------- --------- ---------
Adjusted net loss attributable to common shareholders YEN (3,220,270) YEN (10,540,632) $(1,678,268)
=== ========== === =========== ===========
Reconciliation of U.S. GAAP Loss Per Share to Non U.S. GAAP Adjusted
Loss Per Share
U.S. GAAP loss per share
Basic and diluted YEN (2.43) YEN (2.73) $(0.43)
=== ===== === ===== ======
Impact of special items on earnings per share
Basic and diluted 1.97 1.67 0.26
==== ==== ====
Non U.S. GAAP adjusted loss per share
Basic and diluted YEN (0.46) YEN (1.06) $(0.17)
=== ===== === ===== ======
Weighted-average shares - basic and diluted 7,006,354 9,933,257 9,933,257
========= ========= =========
(A): Please refer to Use of Non-GAAP Financial Measures for more explanation.
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SOURCE Recon Technology, Ltd.
