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Recon Technology, Ltd Reports Financial Results for Fiscal Year 2020

BEIJING, Oct. 10, 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

¥

4,521,325

¥

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 ¥Nil and ¥803,503
($113,654) from a related party as of June 30, 2019 and 2020, respectively)

2,549,914

360,681

Total Assets

¥

156,981,554

¥

194,414,804

$

27,499,611

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Short-term bank loans

¥

2,500,000

¥

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 ¥Nil and ¥450,728
($63,755) from a related party as of June 30, 2019 and 2020, respectively)

1,328,976

187,981

Total Current Liabilities

42,084,370

65,181,175

9,219,754

Operating lease liabilities – non-current (including ¥Nil and ¥352,775
($49,899) from a related party as of June 30, 2019 and 2020, respectively)

1,210,088

171,165

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
authorized; 4,361,634 shares and 7,202,832 shares issued and outstanding
as of June 30, 2019 and June 30, 2020, respectively) *

2,712,773

4,577,233

647,441

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

¥

156,981,554

¥

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

¥

84,135,037

¥

98,657,433

¥

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

¥

(44,072,321)

¥

(25,355,905)

¥

(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
interests

(1,302,913)

(426,501)

(875,903)

(123,895)

Comprehensive loss attributable to Recon Technology,
Ltd

¥

(42,307,072)

¥

(23,962,062)

¥

(19,330,906)

$

(2,734,324)

Loss per common share – basic and diluted

¥

(19.19)

¥

(6.49)

¥

(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

¥

(45,375,234)

¥

(25,782,406)

¥

(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
shareholder

(200,000)

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

¥

45,340,578

¥

4,521,325

¥

30,336,504

$

4,291,042

Supplemental cash flow information

Cash paid during the year for interest

¥

868,042

¥

1,542,381

¥

1,400,462

$

198,093

Cash paid (received) during the year for taxes

¥

(22,671)

¥

2,002

¥

282,322

$

39,934

Non-cash investing and financing activities

Shares issued to settle salary payable

¥

1,554,908

¥

¥

$

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

$

173,834

Inventories used for fixed assets

¥

¥

¥

409,735

$

57,956

Payable for construction in progress

¥

3,096,781

¥

5,694,980

¥

732,513

$

103,613

Receivable for disposal of property and equipment

¥

81,900

¥

¥

110,000

$

15,559

Payable for issuance cost of common stock

¥

¥

¥

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.

Cision View original content:http://www.prnewswire.com/news-releases/recon-technology-ltd-reports-financial-results-for-fiscal-year-2020-301149639.html

Source: Recon Technology, Ltd.

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