Recon Technology, Ltd. Reports Financial Results for the First Six Months of Fiscal Year 2020
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 YEN 4,521,325 YEN 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 YEN 156,981,554 YEN 162,849,516 $
23,371,066
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank loan YEN 2,500,000 YEN 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, 2,712,773 2,876,228 412,777
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)*
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 YEN 156,981,554 YEN 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 YEN 41,954,746 YEN 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 YEN (10,084,243) YEN (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- 138,804 (336,250) (48,256)
controlling interests
Comprehensive loss attributable to Recon Technology, Ltd YEN (8,888,915) YEN (6,691,587) $
(960,333)
Loss per common share - basic and diluted YEN (2.72) YEN (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 YEN (9,945,439) YEN (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 YEN 11,981,820 YEN 10,325,219 $
1,481,806
Supplemental cash flow information
Cash paid during the period for interest YEN 805,613 YEN 718,201 $
103,071
Cash paid (received) during the period for taxes YEN 2,002 YEN (2,002) $
(287)
Non-cash investing and financing activities
Issuance of common stock in exchange of shares of FGS, net of YEN 21,433,796 YEN
$
issuance costs
Investment payable in exchange of interest of FGS YEN 6,400,000 YEN
$
Right-of-use assets obtained in exchange for operating lease YEN YEN 1,228,963 $
176,372
obligations
Payable for construction in progress YEN 5,957,463 YEN 236,302 $
33,912
Receivable for disposal of property and equipment YEN YEN 5,000 $
718
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
View original content:http://www.prnewswire.com/news-releases/recon-technology-ltd-reports-financial-results-for-the-first-six-months-of-fiscal-year-2020-301025938.html
SOURCE Recon Technology, Ltd.
