Recon Technology, Ltd Reports Financial Results for Fiscal Year 2020
BEIJING, Oct. 9, 2020 /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 fiscal year 2020.
Fiscal 2020 Financial Highlights:
-- Total cost of revenues for fiscal year 2020 decreased by 36.4% to $6.5
million (RMB46.2 million).
-- Gross profit for fiscal year 2020 was $2.8 million (RMB19.6 million).
Gross profit margin for fiscal year 2020 was 29.8%, an increase of 0.6
percentage points compared to fiscal year 2019.
-- Net loss attributable to Recon for fiscal year 2020 was $2.7 million
(RMB19.2 million), or $0. 59 (RMB4.16) per basic and diluted share,
compared to $3.5 million (RMB24.0 million), or $0.92 (RMB6.49) per basic
and diluted share for the fiscal year 2019.
Management Commentary
Mr. Shenping Yin, co-founder and CEO of Recon, stated, "The COVID-19 pandemic had a significant impact on our operation of the second-half of fiscal 2020, resulted in a delay in project performance timeline and thus delayed recognition of revenue. Nevertheless, we are pleased with our ability to handle such challenge and we believe our delayed projects will be completed methodically as social and overall conditions in China resume. We're also very proud that our clients remained stable and we believe our strategy to establish long term cooperation with clients valuing our essential automation solution and value-added services will help us reposition our business by bringing more resources through companies that want to adopt effective online and industrial automotive solutions and Internet-of-Things in China."
"We believe Recon has been prepared for larger projects in automation and environmental protection segments. We never stop improving our business structure and focusing on opportunities that can leverage our knowledge and experience in energy industry. We believe all our current efforts will drive our long-term net profit growth targets," concluded Mr. Yin.
Fiscal 2020 Financial Results:
Revenue
Total revenues were approximately RMB65.8 million ($9.3 million), representing a decrease of 35.8% compared to fiscal year 2019.
Automation products and software. Revenues from automation products and software decreased to approximately RMB51.4 million ($7.3 million), representing a decrease of 19.1% from fiscal year 2019. The decrease was primarily due to the postponed acceptance of several projects and less expenditures budgeted by Shenhua Group and decreased orders from Xinjiang East Hope New Energy Co., Ltd.
Equipment and accessories. Revenue from equipment and accessories decreased to approximately RMB14.2 million ($2.0 million), representing a decrease of 40.6% from fiscal year 2019, mainly due to less demand of the Company's products by oilfield companies as a result of low oil price.
Oilfield environmental protection. Revenue from oilfield environmental protection decreased by 99.2% to almost nil for this period, mainly affected by late acceptance inspection of the Company's Gansu production project, thus orders were not fulfilled and revenue was not recognized during the fiscal year 2020.
Cost and Margin
Total cost of revenues decreased by 36.4% to approximately RMB46.2 million ($6.5 million), mainly due to the decreased cost in line with revenue.
Gross profit decreased to approximately RMB19.6 million ($2.8 million), representing a decrease of 34.4% from fiscal year 2019. Gross margin was maintained at a same level of 29.8%, compared to a 29.2% of last year. Specifically, gross margin for automation and equipment segments were all improved during fiscal year 2020. The Company expects that the gross margin for oilfield environmental protection segment will be back to a 40% level when the treatment process is completed and revenue is recognized.
Operating Expenses
Total operating expenses decreased to approximately RMB39.8 million ($5.6 million), representing a decrease of 26.5%.
Selling and distribution expenses. Selling and distribution expenses were approximately RMB4.4 million ($0.6 million), representing a 51.3% decrease from fiscal year 2019. This decrease was mainly caused by less traveling expenses and entertainment expenses as the Company tried to control its operating expenditure, as well as the restriction on travelling and outdoor activities imposed by PRC government due to the COVID-19 during the fiscal year 2020.
General and Administrative Expenses. General and administrative expenses was approximately RMB26.1 million ($3.7 million), representing a 36.7% decrease from fiscal year 2019. The decrease was mainly due to the decrease in stock-based compensation expense.
Research and development expenses. Research and development expenses were approximately RMB7.0 million ($1.0 million), representing an increase of 7.6% from fiscal year 2019. This increase was primarily due to more expenses spent on design of new automation platform systems.
Net Loss
Loss from operations was RMB20.2 million ($2.9 million), representing a decrease of 22.0% from fiscal year 2019, which was a loss of RMB25.8 million.
Basic and diluted EPS. Basic and diluted net loss per share were RMB4.16 ($0.59), compared to RMB6.49 ($0.92) in fiscal year 2019.
Financial Condition
As of June 30,2020, the Company had cash of RMB30.3 million ($4.3 million), compared to RMB4.5 million as of June 30, 2019. As of June 30, 2020, the Company had working capital of RMB64.1 million ($9.1 million), while as of June 30, 2019, the Company had working capital of RMB55.7 million. The increase was mainly contributed to securities offerings during May and June of 2020.
Net cash used in operating activities was RMB5.2 million ($0.7 million) for fiscal year 2020, compared to net cash used in operating activities of approximately RMB32.2 million for fiscal year 2019. Net cash used in investing activities was RMB2.1 million ($0.3 million) for fiscal year 2020, compared to RMB13.5 million for fiscal year 2019. Net cash provided by financing activities was RMB33.2 million ($4.7 million) for fiscal year 2020, compared to net cash provided by financing activities of RMB3.5 million for fiscal year 2019.
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 RMB7.06973 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:
In China:
Ms. Liu Jia
Recon Technology, Ltd.
Phone: +86 (10) 8494-5799
Email: info@recon.cn
RECON TECHNOLOGY, LTD
CONSOLIDATED BALANCE SHEETS
As of June 30 As of June 30 As of June 30
2019 2020 2020
ASSETS RMB RMB U.S. Dollars
---
Current assets
Cash YEN 4,521,325 YEN 30,336,504 $
4,291,042
Notes receivable 3,073,680 4,180,885 591,378
Trade accounts receivable, net 68,535,282 48,244,015 6,824,026
Trade accounts receivable- related
party, net 3,409,912 3,068,920 434,093
Inventories, net 1,270,523 1,985,723 280,877
Other receivables, net 5,665,593 6,350,802 898,309
Loans to third parties 4,960,000 3,200,377 452,687
Purchase advances, net 1,343,576 178,767 25,286
Contract assets, net 4,633,940 31,537,586 4,460,933
Prepaid expenses 192,837 198,294 28,048
Prepaid expenses -related parties 217,600
Total current assets 97,824,268 129,281,873 18,286,679
Property and equipment, net 3,661,321 29,756,879 4,209,055
Construction in progress 21,524,994
Land use right, net 1,307,887 1,280,648 181,145
Investment in unconsolidated entity 31,078,971 31,541,850 4,461,536
Long-term other receivables, net 440,015 3,640 515
Prepayments for construction in progress 1,144,098
Operating lease right-of-use assets
(including YENNil and YEN803,503 2,549,914 360,681
($113,654) from a related party as of
June 30, 2019 and 2020, respectively)
Total Assets YEN 156,981,554 YEN 194,414,804 $
27,499,611
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Short-term bank loans YEN 2,500,000 YEN 9,520,000 $
1,346,586
Trade accounts payable 14,089,293 23,034,347 3,258,163
Other payables 2,246,410 2,609,486 369,107
Other payable- related parties 2,290,873 4,498,318 636,279
Contract Liabilities 120,000 3,486,033 493,093
Accrued payroll and employees' welfare 1,384,529 1,917,635 271,246
Investment payable 6,400,000 6,400,000 905,268
Taxes payable 2,180,847 1,108,288 156,765
Short-term borrowings 1,081,096 200,000 28,290
Short-term borrowings - related
parties 9,010,525 10,230,746 1,447,120
Long-term borrowings - related party -
current portion 780,797 847,346 119,856
Operating lease liabilities -current
(including YENNil and YEN450,728 1,328,976 187,981
($63,755) from a related party as of
June 30, 2019 and 2020, respectively)
Total Current Liabilities 42,084,370 65,181,175 9,219,754
Operating lease liabilities - non-
current (including YENNil and
YEN352,775 1,210,088 171,165
($49,899) from a related party as of
June 30, 2019 and 2020, respectively)
Long-term borrowings - related party 8,196,204 7,379,253 1,043,782
Total Liabilities 50,280,574 73,770,516 10,434,701
Commitments and Contingencies
Equity
Common stock, ($ 0.0925 U.S. dollar par
value, 20,000,000 shares 2,712,773 4,577,233 647,441
authorized; 4,361,634 shares and
7,202,832 shares issued and outstanding
as of June 30, 2019 and June 30, 2020,
respectively) *
Additional paid-in capital 250,624,798 282,505,455 39,959,870
Statutory reserve 4,148,929 4,148,929 586,858
Accumulated deficit (164,780,885) (184,027,586) (26,030,358)
Accumulated other comprehensive gain 2,909,936 2,825,731 399,694
Total stockholders' equity 95,615,551 110,029,762 15,563,505
Non-controlling interests 11,085,429 10,614,526 1,501,405
Total equity 106,700,980 120,644,288 17,064,910
Total Liabilities and Equity YEN 156,981,554 YEN 194,414,804 $
27,499,611
RECON TECHNOLOGY, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the years ended June 30,
2018 2019 2020 2020
RMB RMB RMB USD
Revenues
Revenues - third party YEN 84,135,037 YEN 98,657,433 YEN 65,760,651 $
9,301,722
Revenues - related party 577,009 3,726,894
Revenues 84,712,046 102,384,327 65,760,651 9,301,722
Cost of revenues
Cost of revenues -third party 80,097,834 70,316,198 46,154,255 6,528,433
Cost of revenues -related party 464,027 2,202,765
Cost of revenues 80,561,861 72,518,963 46,154,255 6,528,433
Gross profit 4,150,185 29,865,364 19,606,396 2,773,289
Selling and distribution expenses 8,013,353 9,076,266 4,417,413 624,835
General and administrative expenses 34,687,317 41,288,351 26,120,099 3,694,644
Provision for (net recovery of)
doubtful accounts (841,242) 610,776 2,203,531 311,685
Research and development expenses 3,215,653 3,133,545 7,042,385 996,132
Operating expenses 45,075,081 54,108,938 39,783,428 5,627,296
Loss from operations (40,924,896) (24,243,574) (20,177,032) (2,854,007)
Other income (expenses)
Subsidy income 371,650 1,149,016 1,210,318 171,197
Interest income 68,028 40,391 54,746 7,744
Interest expense (897,521) (1,589,045) (1,451,890) (205,367)
Income (loss) from investment in
unconsolidated entity (959,905) 462,879 65,473
Impairment loss of investment in
unconsolidated entity (4,037,736)
Foreign exchange transaction gain
(loss) (4,068) 56,603 (17,720) (2,506)
Other income 65,539 162,585 78,417 11,092
Other income (expense), net (4,434,108) (1,140,355) 336,750 47,633
Loss before income tax (45,359,004) (25,383,929) (19,840,282) (2,806,374)
Income tax expenses 16,230 398,477 282,322 39,934
Net loss (45,375,234) (25,782,406) (20,122,604) (2,846,308)
Less: Net loss attributable to non-
controlling interests (1,302,913) (426,501) (875,903) (123,895)
Net loss attributable to Recon
Technology, Ltd YEN (44,072,321) YEN (25,355,905) YEN (19,246,701) $
(2,722,413)
Comprehensive loss
Net loss (45,375,234) (25,782,406) (20,122,604) (2,846,308)
Foreign currency translation
adjustment 1,765,249 1,393,843 (84,205) (11,911)
Comprehensive loss (43,609,985) (24,388,563) (20,206,809) (2,858,219)
Less: Comprehensive loss
attributable to non-controlling (1,302,913) (426,501) (875,903) (123,895)
interests
Comprehensive loss attributable to
Recon Technology, YEN (42,307,072) YEN (23,962,062) YEN (19,330,906) $
(2,734,324)
Ltd
Loss per common share -basic and
diluted YEN (19.19) YEN (6.49) YEN (4.16) $
(0.59)
Weighted -average shares -basic
and diluted 2,296,693 3,908,833 4,624,615 4,624,615
RECON TECHNOLOGY, LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended
2018 2019 2020 2020
RMB RMB RMB U.S. Dollars
Cash flows from operating
activities:
Net loss YEN (45,375,234) YEN (25,782,406) YEN (20,122,604) $
(2,846,308)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 1,119,049 1,124,011 1,609,700 227,689
Gain from disposal of equipment (78,285) (89,156) (12,611)
Provision for (net recovery of)
doubtful accounts (841,242) 610,776 2,203,531 311,685
Provision for slow moving
inventories 65,245 65,380 56,817 8,037
Amortization of right of use
assets 1,408,551 199,237
Reversal of interests expense (81,096) (11,471)
Restricted shares issued for
management and employees 15,462,124 21,288,204 7,944,835 1,123,782
Loss (income) from investment
in unconsolidated entity 959,905 (462,879) (65,473)
Impairment loss of investment
in unconsolidated entity 4,037,736
Restricted shares issued for
services 3,050,896 845,781 33,927 4,799
Changes in operating assets and
liabilities:
Notes receivable 2,116,998 922,282 (1,107,205) (156,612)
Trade accounts receivable 11,972,175 (40,461,376) 18,428,088 2,606,619
Trade accounts receivable-
related party (3,409,912)
Inventories (5,012,984) (1,197,529) (1,124,935) (159,120)
Other receivable (1,717,096) (928,882) (206,146) (29,159)
Purchase advance (296,903) 5,784,669 1,210,309 171,196
Contract assets (127,325) 7,554,745 (26,938,013) (3,810,332)
Prepaid expense 318,759 316,845 (5,457) (772)
Prepaid expense -related
parties (217,600) 217,600 30,779
Operating lease liabilities (1,419,402) (200,772)
Trade accounts payable (2,706,304) (400,034) 8,205,660 1,160,675
Other payables (179,507) (861,620) (23,600) (3,338)
Other payables-related parties (102,563) (920,584) 2,207,445 312,239
Deferred revenue (1,174,585)
Advance from customers 27,756 (37,856) 3,366,033 476,119
Accrued payroll and employees'
welfare 140,828 784,095 533,109 75,407
Accrued expenses 9,425 1,333
Taxes payable (269,358) 1,748,934 (1,085,213) (153,501)
Net cash used in operating
activities (19,569,820) (32,212,172) (5,230,676) (739,873)
Cash flows from investing
activities:
Investment in unconsolidated
entity (4,037,736) (4,205,080)
Purchases of property and
equipment (1,503,410) (1,735,956) (85,974) (12,161)
Proceeds from disposal of
equipment 32,000 900 127
Payments for land use right (1,361,969)
Repayments from loans to third
parties 435,250 1,000,000 11,239,623 1,589,824
Payments made for loans to
third parties (1,960,000) (4,000,000) (9,480,000) (1,340,928)
Payments and prepayments for
construction in progress (9,157,103) (4,606,823) (3,782,912) (535,086)
Net cash used in investing
activities (17,552,968) (13,547,859) (2,108,363) (298,224)
Cash flows from financing
activities:
Proceeds from short-term bank
loans 45,000 2,500,000 9,520,000 1,346,586
Repayments of short-term bank
loans (45,000) (2,500,000) (353,620)
Proceeds from short-term
borrowings 4,600,000 1,081,096 200,000 28,290
Repayments of short-term
borrowings (4,900,000) (1,000,000) (141,448)
Proceeds from short-term
borrowings-related parties 20,188,318 5,000,000 17,415,000 2,463,319
Repayments of short-term
borrowings-related parties (21,332,036) (5,000,000) (16,195,000) (2,290,753)
Proceeds from long-term
borrowings-related party 10,000,000
Repayments of long-term
borrowings-related party (371,975) (684,191) (747,630) (105,751)
Proceeds from sale of common
stock, net of issuance costs 65,004,531 26,141,051 3,697,603
Refund of capital contribution
by a non-controlling (200,000)
shareholder
Capital contribution by non-
controlling shareholders 3,700,000 850,000 405,000 57,286
Net cash provided by financing
activities 76,888,838 3,546,905 33,238,421 4,701,512
Effect of exchange rate
fluctuation on cash 1,765,249 1,393,873 (84,203) (11,906)
Net (decrease) increase in cash 41,531,299 (40,819,253) 25,815,179 3,651,509
Cash at beginning of year 3,809,279 45,340,578 4,521,325 639,533
Cash at end of year YEN 45,340,578 YEN 4,521,325 YEN 30,336,504 $
4,291,042
Supplemental cash flow
information
Cash paid during the year for
interest YEN 868,042 YEN 1,542,381 YEN 1,400,462 $
198,093
Cash paid (received) during the
year for taxes YEN (22,671) YEN 2,002 YEN 282,322 $
39,934
Non-cash investing and
financing activities
Shares issued to settle salary
payable YEN 1,554,908 YEN YEN
$
Issuance of common stock in
exchange of shares of FGS, YEN YEN 21,433,796 YEN
$
net of issuance costs
Investment payable in exchange
of interest of FGS YEN YEN 6,400,000 YEN
$
Right-of-use assets obtained
in exchange for operating YEN YEN YEN 1,228,963 $
173,834
lease obligations
Inventories used for fixed
assets YEN YEN YEN 409,735 $
57,956
Payable for construction in
progress YEN 3,096,781 YEN 5,694,980 YEN 732,513 $
103,613
Receivable for disposal of
property and equipment YEN 81,900 YEN YEN 110,000 $
15,559
Payable for issuance cost of
common stock YEN YEN YEN 374,696 $
53,000
The accompanying notes are an integral part of these consolidated financial statements.
* Retrospectively restated for effect of stock split on December 27, 2019.
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SOURCE Recon Technology, Ltd.
