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Recon Technology, Ltd Reports Financial Results for the First Six Months of Fiscal Year 2021

·17 min read

BEIJING, April 5, 2021 /PRNewswire/ -- Recon Technology, Ltd (Nasdaq: RCON) ("Recon" or the "Company"), today announced its financial results for the first six months of Fiscal Year 2021.

First Six Months of Fiscal 2021 Financial:

  • Total revenues for the six months ended December 31, 2020 decreased by 17.2% to $3.9 million (RMB25.2 million), while revenue from oily sludge and waste water increased by 10,618.7% or $0.4 million (RMB2.8 million).

  • Gross profit for the six months ended December 31, 2020 was $1.0 million (RMB6.7 million). Gross profit margin for the six months ended December 31, 2020 was 26.7%, representing a decrease of 12.7 percentage points compared to the six months ended December 31, 2019.

  • Net loss attributable to Recon for the six months ended December 31, 2020 was $1.4 million (RMB8.9 million), or $0.19 (RMB1.22) per basic and diluted share, compared to RMB6.7 million, or RMB1.51 per basic and diluted share, for the six months ended December 31, 2019.

Management Commentary

Mr. Shenping Yin, co-founder and CEO of Recon stated, "During the six months period ended December 31, 2020, our management focused on fund reserve and cash management to prepare for a rapid development in the coming year. We believe oil companies in China will continue to increase their capital expenditures in 2021. We expect more orders to be released in year 2021 which might be a busy year of the overall oil industry. We expect our business will benefit from this trend and our numbers will be improved from the second half year of calendar 2021."

Mr. Yin continued, "Besides, the oil industry is experiencing digital transformation. We believe oil companies will continue to increase their usages of intelligent solutions to improve the operation efficiency. We have been devoting resources and participating testing projects with our clients to develop leading solutions. We will continue to enhance our competitive strength through up-gradation with big data and intelligent analysis. We have also seen the trend of digitalization and intelligence in downstream of the oil and gas industry, especially in the management and operation of gas stations in China. We have acquired 51% of Future Gas Station (Beijing) Technology, Ltd. by January 2021 and will continue to invest more in this segment."

First Six Months Fiscal 2021 Financial Results:

Revenue

Total revenues for the six months ended December 31, 2020 decreased by RMB5.2 million ($0.8 million) or 17.2%, to RMB25.2 million ($3.9 million) compared to RMB30.4 million for the six months ended December 31, 2019 mainly due to the decreased revenue from automation products during the six months ended December 31, 2020.

Revenue from automation product and software decreased by RMB10.0 million ($1.5 million), or 44.1%, to RMB12.6 million ($1.9 million) for the six months ended December 31, 2020 from RMB22.6 million for the six months ended December 31, 2019, as the Company's sales activities were not able to return to normal level which was affected by Covid-19. To make a breakthrough, the Company's management has been upgrading its automation solutions and introducing big data and intelligent technology to the Company's products and enhancing its capacity of downhole solutions to enhance its competitive strength.

Revenue from equipment and accessories increased by RMB1.9 million ($0.3 million), or 24.9%, to RMB9.8 million ($1.5 million) for the six months ended December 31, 2020 from RMB7.8 million for the six months ended December 31, 2019 as requirement from maintenance of heating furnaces continued to increase.

Revenue from oilfield environmental protection projects increased by RMB2.8 million ($0.4 million), or 10,618.7%, to RMB2.8 million ($0.4 million) for the six months ended December 31, 2020 as the Company stared to process oily sludge during the six months ended December 31, 2020 and revenue was recorded. As of December 31, 2020, the Company received 4,680 tons of oily sludge from several oil companies and processed 796 tons of them, which was reflected in its revenue for the six months ended December 31, 2020.

Cost and Margin

Total cost of revenues increased slightly from RMB18.4 million for the six months ended December 31, 2019 to RMB18.5 million ($2.8 million) for the same period in 2020. The increase was mainly caused by increased cost of revenue from equipment and accessories and oilfield environmental protection segments.

Gross profit decreased by RMB5.3 million ($0.8 million), or 43.9%, to RMB6.7 million ($1.0 million) for the six months ended December 31, 2020 from RMB12.0 million from the six months ended December 31, 2019. The gross profit as a percentage of revenue decreased to 26.7% for the six months ended December 31, 2020 from 39.4% for the same period in 2019.

Operating Expenses

Selling and distribution expenses maintained at the same level of RMB2.7 million ($0.4 million) compared to the six months ended December 31, 2019.

General and administrative expenses decreased by RMB0.4 million ($0.1 million), or 2.7%, to RMB13.0 million ($2.0 million) for the six months ended December 31, 2020 from RMB13.4 million for the six months ended December 31, 2019. The decrease in general and administrative expenses was mainly due to the decrease in stock-based compensation expense as well as social security expenses during the six months ended December 31, 2020.

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 RMB3.7 million for the six months ended December 31, 2020, mainly due to the collection of long outstanding receivables during the six months ended December 31, 2020.

Research and development expenses increased from approximately RMB2.9 million for the six months ended December 31, 2019 to RMB3.8 million ($0.6 million) for the same period of 2020. This increase was primarily due to more research and development expense spent on design of new automation platform systems and treatment of wastewater.

Net Loss

Loss from operations was RMB9.1 million ($1.4 million) for the six months ended December 31, 2020, compared to a loss of RMB7.0 million for the six months ended December 31, 2019. This RMB2.1 million ($0.3 million) increase in loss from operations was primary due to decreased revenue and increase in R&D expenses.

Net loss was RMB10.0 million ($1.5 million) for the six months ended December 31, 2020, an increase of RMB3.3 million ($0.5 million) from net loss of RMB7.0 million for the six months ended December 31, 2019. Net loss attributable to the Company for the six months ended December 31, 2019 was RMB6.7 million, or RMB1.51 per basic and diluted share, compared to RMB8.9 million ($1.4 million), or RMB1.22 ($0.19) per basic and diluted share for the six months ended December 31, 2020.

As of December 31, 2020, the Company had cash of RMB70.8 million ($10.8 million), compared to RMB30.3 million as of June 30, 2020. As of December 31, 2020, the Company had working capital of RMB67.0 million ($10.3 million) while as of June 30, 2020, the Company had working capital of RMB64.1 million.

Net cash used in operating activities was RMB16.7 million ($2.6 million) for the six months ended December 31, 2020, compared to net cash provided by operating activities of approximately RMB0.3 million for the six months ended December 31, 2019. Net cash provided by investing activities was RMB1.9 million ($0.3 million) for the six months ended December 31, 2020, compared to net cash provided by investing activities RMB3.7 million for the six months ended December 31, 2019. Net cash provided by financing activities was RMB56.2 million ($8.6 million) for the six months ended December 31, 2020, compared to net cash provided by financing activities of RMB1.9 million for the six months ended December 31, 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 RMB6.5326 to $1.00, the approximate exchange rate prevailing on December 31, 2020.

About Recon Technology, Ltd

Recon Technology, Ltd (NASDAQ: RCON) is China's first NASDAQ-listed non-state owned oil and gas field service company. Recon supplies China's largest oil exploration companies, Sinopec (NYSE: SNP) and The China National Petroleum Corporation ("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, RCON has taken leading positions on several segmented markets of the oil and gas filed service industry. RCON also has developed stable long-term cooperation relationship with its major clients, and its products and service are also 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.

For more information, please contact:

Ms. Liu Jia
Chief Financial Officer
Recon Technology, Ltd
Phone: +86 (10) 8494-5188
Email: info@recon.cn

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(UNAUDITED)




As of June 30



As of
December 31



As of
December 31




2020



2020



2020




RMB



RMB



U.S. Dollars


ASSETS













Current assets













Cash


¥

30,336,504



¥

70,807,497



$

10,839,024


Notes receivable



4,180,885




7,789,997




1,192,472


Trade accounts receivable, net



48,244,015




35,471,068




5,429,817


Trade accounts receivable- related party, net



3,068,920




-




-


Inventories, net



1,985,723




2,117,754




324,180


Other receivables, net



6,350,802




11,004,821




1,684,589


Loans to third parties



3,200,377




950,000




145,423


Purchase advances, net



178,767




82,437




12,619


Contract assets, net



31,537,586




45,621,966




6,983,690


Prepaid expenses



198,294




-




-


Total current assets



129,281,873




173,845,540




26,611,814















Property and equipment, net



29,756,879




29,078,178




4,451,210


Land use right, net



1,280,648




1,267,028




193,953


Investment in unconsolidated entity



31,541,850




31,290,554




4,789,875


Long-term other receivables, net



3,640




-




-


Operating lease right-of-use assets (including ¥803,503 and ¥508,888 ($88,921) from a related party as of June 30, 2020 and December 31, 2020, respectively)



2,549,914




2,070,548




316,954


Total Assets


¥

194,414,804



¥

237,551,848



$

36,363,806















LIABILITIES AND STOCKHOLDERS' EQUITY


























Current liabilities













Short-term bank loans


¥

9,520,000



¥

12,020,000



$

1,839,990


Convertible notes payable



-




42,448,810




6,497,951


Trade accounts payable



23,034,347




19,273,046




2,950,267


Other payables



2,609,486




1,563,002




239,260


Other payable- related parties



4,498,318




1,655,668




253,445


Contract liabilities



3,486,033




6,686,592




1,023,566


Accrued payroll and employees' welfare



1,917,635




954,304




146,081


Investment payable



6,400,000




6,400,000




979,695


Taxes payable



1,108,288




1,381,912




211,539


Short-term borrowings



200,000




215,699




33,019


Short-term borrowings - related parties



10,230,746




12,009,174




1,838,333


Long-term borrowings - related party - current portion



847,346




882,900




135,152


Operating lease liabilities - current (including ¥450,728 and ¥461,859 ($70,700) from a related party as of June 30, 2020 and December 31, 2020, respectively)



1,328,976




1,333,113




204,069


Total Current Liabilities



65,181,175




106,824,220




16,352,367















Operating lease liabilities - non-current (including ¥352,775 and ¥119,029 ($18,221) from a related party as of June 30, 2020 and December 31, 2020, respectively)



1,210,088




729,909




111,733


Long-term borrowings - related party



7,379,253




6,942,795




1,062,785


Total Liabilities



73,770,516




114,496,924




17,526,885















Commitments and Contingencies


























Equity













Common stock, ($ 0.0925 U.S. dollar par value, 20,000,000 shares authorized; 7,202,832 shares and 8,416,721 shares issued and outstanding as of June 30, 2020 and December 31, 2020, respectively)*



4,577,233




5,312,021




813,150


Additional paid-in capital



282,505,455




295,104,195




45,173,769


Statutory reserve



4,148,929




4,148,929




635,107


Accumulated deficit



(184,027,586)




(192,963,238)




(29,538,302)


Accumulated other comprehensive gain



2,825,731




1,894,365




289,984


Total stockholders' equity



110,029,762




113,496,272




17,373,708


Non-controlling interests



10,614,526




9,558,652




1,463,213


Total equity



120,644,288




123,054,924




18,836,921


Total Liabilities and Equity


¥

194,414,804



¥

237,551,848



$

36,363,806



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

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)




For the six months ended




December 31,




2019



2020



2020




RMB



RMB



USD


Revenues










Revenues - third party


¥

30,405,153



¥

25,083,622



$

3,839,734


Revenues - related party



-




85,657




13,112


Revenues



30,405,153




25,169,279




3,852,847















Cost of revenues













Cost of revenues - third party



18,437,241




18,452,239




2,824,620


Cost of revenues



18,437,241




18,452,239




2,824,620















Gross profit



11,967,912




6,717,040




1,028,227















Selling and distribution expenses



2,660,873




2,750,389




421,022


General and administrative expenses



13,366,413




13,009,013




1,991,385


Provision for (net recovery of) doubtful accounts



25,537




(3,697,024)




(565,931)


Research and development expenses



2,895,286




3,756,839




575,087


Operating expenses



18,948,109




15,819,217




2,421,563















Loss from operations



(6,980,197)




(9,102,177)




(1,393,336)















Other income (expenses)













Subsidy income



854,389




222,038




33,989


Interest income



85,745




20,168




3,087


Interest expense



(761,322)




(1,000,182)




(153,105)


Income (loss) from investment in unconsolidated entity



141,288




(251,296)




(38,468)


Foreign exchange transaction gain (loss)



209




(78,784)




(12,060)


Other income (loss)



(60,760)




50,369




7,711


Other income (expense), net



259,549




(1,037,687)




(158,846)


Loss before income tax



(6,720,648)




(10,139,864)




(1,552,182)


Income tax expenses (benefit)



316,799




(98,338)




(15,053)


Net loss



(7,037,447)




(10,041,526)




(1,537,129)















Less: Net loss attributable to non-controlling interests



(336,250)




(1,105,874)




(169,284)


Net loss attributable to Recon Technology, Ltd


¥

(6,701,197)



¥

(8,935,652)



$

(1,367,845)















Comprehensive loss













Net loss



(7,037,447)




(10,041,526)




(1,537,129)


Foreign currency translation adjustment



9,610




(931,366)




(142,571)


Comprehensive loss



(7,027,837)




(10,972,892)




(1,679,700)


Less: Comprehensive loss attributable to non-controlling interests



(336,250)




(1,105,874)




(169,284)


Comprehensive loss attributable to Recon Technology, Ltd


¥

(6,691,587)



¥

(9,867,018)



$

(1,510,416)















Loss per common share - basic and diluted


¥

(1.51)



¥

(1.22)



$

(0.19)


Weighted - average shares -basic and diluted*



4,449,980




7,330,866




7,330,866



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

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(UNAUDITED)




For the six months ended December 31,




2019



2020



2020




RMB



RMB



U.S. Dollars


Cash flows from operating activities:













Net loss


¥

(7,037,447)



¥

(10,041,526)



$

(1,537,129)


Adjustments to reconcile net loss to net cash used in operating activities:













Depreciation and amortization



411,592




1,369,590




209,653


Loss from disposal of equipment



3,189




1,095




168


Provision for (net recovery of) doubtful accounts



25,537




(3,697,024)




(565,931)


Provision for slow moving inventories



25,312




423,714




64,861


Amortization of right of use assets



718,000




542,896




83,105


Restricted shares issued for management and employees



4,057,093




3,403,513




521,001


Loss (income) from investment in unconsolidated entity



(141,288)




251,296




38,468


Interest expenses related to convertible notes



-




84,607




12,951


Restricted shares issued for services



33,927




-




-


Changes in operating assets and liabilities:













Notes receivable



(986,826)




(3,609,112)




(552,473)


Trade accounts receivable



5,412,201




15,866,295




2,428,770


Trade accounts receivable-related party



-




3,409,912




521,980


Inventories



(551,200)




(765,595)




(117,195)


Other receivable



1,364,500




(4,262,681)




(652,520)


Other receivables-related parties



-




(23,800)




(3,643)


Purchase advance



1,108,902




96,330




14,746


Contract assets



(9,951,981)




(14,262,839)




(2,183,318)


Prepaid expense



116,917




(19,306)




(2,955)


Prepaid expense - related parties



217,600




217,600




33,310


Operating lease liabilities



(610,000)




(539,572)




(82,596)


Trade accounts payable



362,758




(3,761,301)




(575,770)


Other payables



(160,316)




(850,478)




(130,189)


Other payables-related parties



1,790,155




(2,842,651)




(435,145)


Advance from customers



1,904,753




3,200,559




489,933


Accrued payroll and employees' welfare



1,501,406




(963,905)




(147,552)


Accrued expenses



-




(198,483)




(30,383)


Taxes payable



650,855




273,624




41,886


Net cash provided by (used in) operating activities



265,639




(16,697,242)




(2,555,967)















Cash flows from investing activities:













Purchases of property and equipment



(12,967)




(375,569)




(57,491)


Proceeds from disposal of equipment



900




-




-


Repayments from loans to third parties



4,960,000




3,200,377




489,905


Payments made for loans to third parties



-




(950,000)




(145,423)


Payments and prepayments for construction in progress



(1,297,663)




-




-


Net cash provided by investing activities



3,650,270




1,874,808




286,991















Cash flows from financing activities:













Proceeds from short-term bank loans



-




3,520,000




538,832


Repayments of short-term bank loans



-




(1,020,000)




(156,139)


Proceeds from short-term borrowings



-




2,460,000




376,570


Repayments of short-term borrowings



(1,081,096)




(2,460,000)




(376,570)


Proceeds from short-term borrowings-related parties



13,115,000




10,100,000




1,546,081


Repayments of short-term borrowings-related parties



(10,195,000)




(8,320,000)




(1,273,604)


Repayments of long-term borrowings-related party



(365,530)




(399,422)




(61,142)


Proceeds from sale of common stock, net of issuance costs



-




9,930,015




1,520,060


Proceeds from issuance of convertible notes



-




42,364,203




6,485,000


Capital contribution by non-controlling shareholders



405,000




50,000




7,654


Net cash provided by financing activities



1,878,374




56,224,796




8,606,742















Effect of exchange rate fluctuation on cash



9,611




(931,369)




(142,574)















Net increase in cash



5,803,894




40,470,993




6,195,192


Cash at beginning of period



4,521,325




30,336,504




4,643,832


Cash at end of period


¥

10,325,219



¥

70,807,497



$

10,839,024















Supplemental cash flow information













Cash paid during the period for interest


¥

718,201



¥

849,409



$

130,025


Cash received during the period for taxes


¥

(2,002)



¥

(98,338)



$

(15,053)















Non-cash investing and financing activities













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


¥

1,228,963



¥

63,530



$

9,725


Inventories used as fixed assets


¥

-



¥

302,795



$

46,351


Payable for construction in progress


¥

236,302



¥

-



$

-


Receivable for disposal of property and equipment


¥

5,000



¥

-



$

-


Cision
Cision

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SOURCE Recon Technology, Ltd.