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Recon Technology, Ltd. Reports Fiscal Year 2015 Third Quarter Financial Results

BEIJING, May 18, 2015 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported its financial results for the third quarter of fiscal year 2015, which ended March 31, 2015.

Q3 FY2015 Financial Highlights:

  • Total revenues for the third quarter of FY2015 were RMB20.0 million ($3.3 million), an increase of 9.8% from the same period of FY2014.
  • Gross profit for the third quarter of FY2015 was RMB6.2 million ($1.0 million), an increase of 19.1% from the same period of FY2014. Gross margin also expanded by 2.4 points to 31.2% for the third quarter of FY2015 from 28.8% for the same period of FY2014.
  • Operating income was RMB0.4 million ($0.1 million) for the third quarter of FY2015, compared to an operating loss of RMB0.6 million for the same period of FY2014.
  • Net loss attributable to Recon for the third quarter of FY2015 was RMB1.5 million ($0.2 million), or RMB0.32 ($0.05) loss per diluted share, compared to RMB1.9 million, or RMB0.43 loss per diluted share, for the same period of FY2014.
  • Adjusted EBITDA (non-GAAP) was RMB1.7 million ($0.3 million) for the third quarter of FY2015, compared to RMB0.5 million for the same period of FY2014.
  • Adjusted net income attributable to Recon was RMB1.3 million ($0.2 million), or RMB0.28 ($0.05) per diluted shares, for the third quarter of FY2015, compared to adjusted net loss attributable to Recon of RMB0.1 million, or RMB0.03 loss per diluted share, for the same period of FY2014.

Mr. Shenping Yin, Chairman and CEO of Recon stated, "It has been a challenging quarter for the oil and gas industry with the plunge in oil and gas prices continuing to put severe pressure on China's already-weak growth momentum, forcing many of our major customers to cut their CAPEX budget and to cancel or delay projects and thus hampering our efforts to carry out business plan. Despite these challenges, revenues increased by 9.8% from the same quarter last year while both gross and operating margins also improved from a year ago, thanks to solid contribution from our automation business as a result of our heightened sales and marketing effort."   

Mr. Yin continued, "While we continue to face significant headwinds in the near term, we believe challenges can turn into potential opportunities for us as our competitors also struggle to stay afloat. With relatively light in assets, strong R&D capability, and deep industry connections forged by years of providing a wide range of hardware, software and service solutions to leading SOEs such as Sinopec and Petro China, in our view Recon is well prepared to withstand the challenges ahead."   

Third Quarter FY2015 Financial Results



For the Three Months Ended March 31,



2014


2015


2015


%

(thousands)


RMB


RMB


USD


Change

Revenues



18,232



20,019



3,277


9.8%

Hardware and software



17,998



18,359



3,005


2.0%

Service



80



-



-


-100.0%

Hardware and software - related parties



154



1,660



272


979.0%

Gross margin



28.8%



31.2%



31.2%


2.4%

Operating (loss) margin



-3.1%



2.0%



2.0%


5.1%

Net income (loss) attributable to RCON



(1,931)



(1,527)



(250)


NM

Diluted earnings per share



(0.43)



(0.32)



(0.05)


NM

Revenues

For the three months ended March 31, 2015, total revenues increased by RMB1.8 million, or 9.8%, to RMB20.0 million ($3.3 million) from RMB18.2 million for the same period of last fiscal year. The increase in total revenues was mainly related to demand of our automation business from our related parties. Revenues from non-related parties hardware and software sales increased by RMB0.4 million, or 2.0%, to RMB18.4 million ($3.0 million) for the three months ended March 31, 2015, compared to RMB18.0 million for the same period of last fiscal year. Revenues from related-party hardware and software sales increased by RMB1.5 million, or 979.0%, to RMB1.7 million ($0.3 million) for the three months ended March 31, 2015, compared to RMB0.2 million for the same period of last fiscal year. We did not book revenues from our service business for the three months ended March 31, 2015, compared to RMB0.1 million for the same period of last fiscal year.

Gross profit and gross margin

Gross profit increased by RMB1.0 million, or 19.1%, to RMB6.2 million ($1.0 million) for the three months ended March 31, 2015 from RMB5.2 million for the same period of last fiscal year. Overall gross margin increased to 31.2% for the three months ended March 31, 2015 from 28.8% for the same period of last fiscal year. The increases in overall gross profit and gross margin were mainly related to our automation software business. Gross margins for hardware and software sales to non-related parties and related parties were 25.1% and 99.4% for the three months ended March 31, 2015, compared to 28.6% and 36.8% for the same period of last fiscal year, respectively. We did not book revenues for our service business for the three months ended March 31, 2015, compared to gross profit and gross margin for our service business of RMB0.04 million and 47.4%, respectively, for the same period of last fiscal year.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses increased slightly by 1.1% to RMB1.1 million for the three months ended March 31, 2015. General and administrative expenses increased by RMB0.2 million, or 5.0%, to RMB4.2 million for the three months ended March 31, 2015 from RMB4.0 million for the same period of last fiscal year. Research and development expenses decreased by RMB0.2 million, or 24.5%, to RMB0.5 million for the three months ended March 31, 2015 from RMB0.7 million for the same period of last fiscal year. Total operating expenses were essentially unchanged at RMB5.8 million ($1.0 million) for the three months ended March 31, 2015.

Operating income of RMB0.4 million ($0.1 million) for the three months ended March 31, 2015 compared to operating loss of RMB0.6 million for the same period of last fiscal year. Operating margin was 2.0% for the three months ended March 31, 2015, compared to operating loss margin of 3.1% for the same period of last fiscal year. 

Net loss

Net loss for the three months ended March 31, 2015 was RMB1.4 million ($0.2 million), compared to RMB1.8 million for the same period of last fiscal year. After deduction of non-controlling interest, net loss for our shareholders was RMB1.5 million ($0.3 million), or RMB0.32 ($0.05) loss per diluted share, for the three months ended March 31, 2015, compared to RMB1.9 million, or RMB0.43 loss per diluted share, for the same period of last fiscal year. 

Non-GAAP Measures



For the Three Months Ended March 31,



2014


2015


2015

(thousands)


RMB


RMB


USD

Net income (loss)



(1,810)



(1,416)



(232)

Provision for income taxes



151



(181)



(30)

Interest expenses and foreign currency adjustment



246



337



55

Change in fair value of warrants liability



905



9



2

Loss from investment



136



-



-

Restricted shares issued for consulting services



-



34



5

Loss from warrants redemption



-



1,913



313

Stock compensation expense



765



909



149

Depreciation and amortization



156



95



16

Adjusted EBITDA



548



1,700



278











Net income (loss) attributable to RCON



(1,931)



(1,527)



(250)

Change in fair value of warrants liability



905



9



2

Loss from investment



136



-



-

Restricted shares issued for consulting services



-



34



5

Loss from warrants redemption



-



1,913



313

Stock compensation expense



765



909



149

Adjusted net income attributable to RCON



(126)



1,337



219

Adjusted earnings (loss) per diluted share



(0.03)



0.28



0.05

Adjusted EBITDA (non-GAAP), which we define as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization, was RMB1.7 million ($0.3 million) for the three months ended March 31, 2015, compared to RMB0.5 million for the same period of last fiscal year. Adjusted net income attributable to our shareholders was RMB1.3 million ($0.2 million), or RMB0.28 ($0.05) per diluted shares, for the three months ended March 31, 2015, compared to adjusted net loss attributable to our common shareholders of RMB0.1 million, or RMB0.03 loss per diluted share, for the same period of last fiscal year.

Year-to-Date (Nine Months) FY2015 Financial Results




For the Nine Months Ended March 31,



2014


2015


2015


%

(thousands)


RMB


RMB


USD


Change

Revenues



76,012



45,652



7,473


-39.9%

Hardware and software



73,338



43,120



7,059


-41.2%

Service



478



104



17


-78.3%

Hardware and software - related parties



2,196



2,428



397


10.6%

Gross margin



35.6%



34.7%



34.7%


-0.9%

Operating (loss) margin



-25.3%



-3.6%



-3.6%


21.7%

Net income (loss) attributable to RCON



3,931



(363)



(59)


NM

Diluted earnings per share



0.92



(0.08)



(0.01)


NM

Revenues

For the nine months ended March 31, 2015, total revenues decreased by RMB30.4 million ($5.0 million), or 39.9%, to RMB45.7 million ($7.5 million) from RMB76.0 million for the same period of last fiscal year as a result of weakness across all of our businesses, particularly during the first half of fiscal year 2015. Revenues from non-related party hardware and software sales decreased by RMB30.2 million, or 41.2%, to RMB43.1 million ($7.1 million) for the nine months ended March 31, 2015, compared to RMB73.3 million for the same period of last fiscal year. Revenues from related-party hardware and software sales increased by RMB0.2 million, or 10.6%, to RMB2.4 million ($0.4 million) for the nine months ended March 31, 2015, compared to RMB2.2 million for the same period of last fiscal year. Revenues from service decreased by RMB0.4 million, or 78.3%, to RMB0.1 million ($0.02 million) for the nine months ended March 31, 2015, compared to RMB0.5 million for the same period of last fiscal year.

Gross profit and gross margin

Gross profit decreased by RMB11.2 million, or 41.5%, to RMB15.8 million ($2.6 million) for the nine months ended March 31, 2015 from RMB27.1 million for the same period of last fiscal year. Overall gross margin decreased to 34.7% for the nine months ended March 31, 2015 from 35.6% for the same period of last fiscal year. The decreases in gross profit were across all of our businesses. Gross margins for hardware and software sales to non-related parties and related parties were 30.9% and 98.9% for the nine months ended March 31, 2015, compared to 33.9% and 80.6% for the same period of last fiscal year, respectively.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses decreased by RMB1.6 million, or 34.8%, to RMB3.1 million for the nine months ended March 31, 2015 from RMB4.7 million for the same period of last fiscal year. General and administrative expenses increased by RMB1.5 million, or 14.7%, to RMB12.0 million for the nine months ended March 31, 2015 from RMB10.5 million for the same period of last fiscal year. Research and development expenses decreased by RMB1.6 million, or 40.0%, to RMB2.4 million for the nine months ended March 31, 2015 from RMB4.1 million for the same period of last fiscal year. Total operating expenses decreased by RMB1.7 million, or 9.0%, to RMB17.5 million ($2.9 million) for the nine months ended March 31, 2015 from RMB19.2 million for the same period of last fiscal year.

Operating loss was RMB1.7 million ($0.3 million) for the nine months ended March 31, 2015, compared to operating income of RMB7.8 million for the same period of last fiscal year. Operating loss margin was 3.6% for the nine months ended March 31, 2015, compared to operating margin of 10.3% for the same period of last fiscal year. 

Net income (loss)

Net income for the nine months ended March 31, 2015 was RMB0.2 million ($0.03 million), compared to RMB5.0 million for the same period of last fiscal year. After deduction of non-controlling interest, net loss for our shareholders was RMB0.4 million ($0.06 million), or RMB0.08 ($0.01) loss per diluted share, for the nine months ended March 31, 2015, compared to net income attributable to our shareholders of RMB3.9 million, or RMB0.92 per diluted share, for the same period of last fiscal year. 

Non-GAAP Measures



For the Nine Months Ended March 31,



2014


2015


2015

(thousands)


RMB


RMB


USD

Net income (loss)



4,976



183



30

Provision for income taxes



1,610



468



77

Interest expenses and foreign currency adjustment



845



827



135

Change in fair value of warrants liability



904



(4,068)



(666)

Loss from investment



871



-



-

Restricted shares issued for consulting services



408



1,205



197

Loss from warrants redemption



-



1,913



313

Stock compensation expense



1,660



2,024



331

Depreciation and amortization



457



369



60

Adjusted EBITDA



11,732



2,921



478











Net income (loss) attributable to RCON



3,931



(363)



(59)

Change in fair value of warrants liability



904



(4,068)



(666)

Loss from investment



871



-



-

Restricted shares issued for consulting services



408



1,205



197

Loss from warrants redemption



-



1,913



313

Stock compensation expense



1,660



2,023



331

Adjusted net income attributable to RCON



7,774



710



116

Adjusted earnings per diluted share



1.81



0.15



0.02

Adjusted EBITDA (non-GAAP), which we define as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization, was RMB2.9 million ($0.5 million) for the nine months ended March 31, 2015, compared to RMB11.7 million for the same period of last fiscal year. Adjusted net income attributable to our shareholders was RMB0.7 million ($0.1 million), or RMB0.15 ($0.02) per diluted shares, for the nine months ended March 31, 2015, compared to RMB7.8 million, or RMB1.81 per diluted share, for the same period of last fiscal year.

Financial Position  

As of March 31, 2015, the Company had cash and cash equivalents of RMB4.7 million ($0.8 million), short-term bank loans of RMB8.0 million ($1.3 million), and short-term loan to related parties of RMB10.2 million ($1.7 million), compared to RMB18.1 million, RMB10.0 million, and RMB5.2 million, respectively, at June 30, 2014. Working capital as of March 31, 2015 was RMB90.1 million ($14.7 million) as compared to RMB83.1 million at June 30, 2014. Net cash used in operating activities was RMB16.2 million ($2.7 million) for the nine months ended March 31, 2015, compared to RMB15.3 million for the same period of last fiscal year. Net cash used in investing activities was RMB0.2 million ($0.03 million) for the nine months ended March 31, 2015, essentially unchanged from a year ago. Net cash provided by financing activities was RMB3.0 million ($0.5 million) for the nine months ended March 31, 2015, compared to RMB11.9 million for the same period of last fiscal year. During the fiscal 2015 nine-month period, we repaid RMB2.0 million in short term bank loans and received RMB5.0 million net proceeds from a related party.

Recent Development 

On February 18, 2015, the Company announced that it has signed an agreement with Aktobe Petroleum Machinery Co. Ltd., an affiliate of the Company's key customer -- Petro China, to jointly construct a pressure container technical service center for heating furnaces and separators in Kazakhstan.

On January 29, 2015, the Company held its annual general meeting of stockholders at which a majority of the Company's shareholders voted for: 1) an increase of authorized shares from 25 million to 75 million; 2) election of directors; 3) an approval of the Company's 2015 Equity Incentive Plan; and 4) the ratification of Friedman LLP as the Company's independent registered public accounting firm for FY2015 ending June 30, 2015.

About Recon

Recon Technology, Ltd. is China's first independent oil and gas field service company listed on NASDAQ (RCON). Closely working with leading global partners, Recon has achieved rapid growth supplying China's largest oil and gas exploration companies, including Sinopec and China National Petroleum Corporation, with advanced automated technologies, efficient gathering and transportation equipment and reservoir stimulation measures. The solutions Recon provides are aimed at increasing gas and petroleum extraction levels, reducing impurities, improving safety and lowering production costs. For additional information, please visit www.recon.cn.

Cautionary Statements

Statements made in this release with respect to Recon's current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Recon. Forward-looking statements include, but are not limited to, those statements using words such as "believe," "expect," "plans," "strategy," "prospects," "forecast," "estimate," "project," "anticipate," "aim," "intend," "seek," "may," "might," "could" or "should," and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management's assumptions, judgments and beliefs in light of the information currently available to it. Recon cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, 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. Therefore investors should not place undue reliance on such forward-looking statements. Actual results may differ significantly from those set forth in the forward-looking statements. 

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.

Contact:    

Recon Technology, Ltd.
Tel: +86-10-8494-5799
Email: info@recon.cn
Web: http://www.recon.cn

Weitian Investor Relations
Tina Xiao
Tel: +1-917-609-0333
Email: tina.xiao@weitian-ir.com

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS











As of June 30,


As of March 31,


As of March 31,


2014


2015


2015

ASSETS

RMB


RMB


USD

Current assets









Cash and cash equivalents 


18,094,586



4,665,869



763,757

Notes receivable


-



400,000



65,476

Trade accounts receivable, net 


43,553,737



56,444,463



9,239,407

Trade accounts receivable - related parties, net


7,479,298



4,860,821



795,669

Inventories, net


14,336,602



19,127,861



3,131,044

Other receivables, net 


18,293,043



27,180,449



4,449,174

Other receivables - related parties


1,414,433



-



-

Purchase advances, net


25,759,065



22,870,397



3,743,660

Purchase advances - related parties


394,034



394,034



64,500

Prepaid expenses 


2,634,664



4,200,662



687,608

Prepaid expenses - related parties


230,000



362,400



59,321

Deferred tax asset


1,209,961



1,260,442



206,322

Total current assets


133,399,423



141,767,398



23,205,938










Property and equipment, net


1,321,538



1,273,521



208,463

Long-term trade accounts receivable, net





14,545,865



2,381,016

Long-term trade accounts receivable - related parties, net


14,456,317






-

Long-term investment


-



-



-

Long-term other receivable


5,353,104



3,394,731



555,684

Total Assets


154,530,382



160,981,515



26,351,101










LIABILITIES AND EQUITY 









Current liabilities









Short-term bank loans


10,000,000



8,000,000



1,309,522

Trade accounts payable


11,413,505



17,456,282



2,857,423

Other payables 


1,765,079



1,199,015



196,267

Other payable - related parties


3,306,024



3,725,403



609,812

Deferred revenue


4,419,824



2,776,485



454,483

Advances from customers


801,385



395,600



64,756

Accrued payroll and employees' welfare


417,624



309,558



50,672

Accrued expenses


203,051



356,980



58,435

Taxes payable


7,589,846



6,900,393



1,129,527

Short-term borrowings - related parties


5,207,728



10,218,308



1,612,637

Deferred tax liability


180,186



180,186



29,495

Warrants liability 


5,021,621



199,179



32,604

Total current liabilities


50,325,873



51,717,389



8,465,633










Commitments and Contingency


















Equity 









Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000 shares authorized; 4,717,336 and 5,022,436 shares issued and outstanding as of June 30, 2014 and March 31, 2015, respectively)


616,865



651,495



106,641

Additional paid-in capital


83,061,058



87,906,399



14,389,419

Appropriated retained earnings


4,148,929



4,725,803



773,568

Unappropriated retained earnings


8,431,453



7,491,128



1,226,224

Accumulated other comprehensive loss


(279,275)



(282,129)



(46,183)

Total shareholders' equity


95,979,030



100,492,696



16,449,669

Non-controlling interest


8,225,479



8,771,430



1,435,799

Total equity


104,204,509



109,264,126



17,885,468

Total Liabilities and Equity


154,530,382



160,981,515



26,514,791











RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)




















For the nine months ended


For the three months ended


March 31,


March 31,


2014


2015


2015


2014


2015


2015


RMB


RMB


USD


RMB


RMB


USD



















Revenues


















Hardware and software


73,337,585



43,119,915



7,058,309



17,998,444



18,358,835



3,005,162

Service


477,769



103,774



16,987



80,180



-



-

Hardware and software - related parties


2,196,152



2,428,173



397,468



153,846



1,660,055



271,735

Total revenues


76,011,506



45,651,862



7,472,764



18,232,470



20,018,890



3,276,897

Cost of revenues


















Hardware and software


48,447,792



29,782,617



4,875,124



12,848,136



13,759,652



2,252,321

Service


77,107



-



-



42,161



-



-

Hardware and software - related parties


426,139



27,161



4,446



97,217



10,399



1,702

Total cost of revenues


48,951,038



29,809,778



4,879,570



12,987,514



13,770,051



2,254,023

Gross profit


27,060,468



15,842,084



2,593,194



5,244,956



6,248,839



1,022,874





































Selling and distribution expenses


4,701,989



3,065,098



501,727



1,097,549



1,109,838



181,670

General and administrative expenses


10,450,904



11,987,761



1,962,279



3,993,341



4,191,030



686,031

Research and development expenses


4,074,953



2,444,020



400,062



720,956



544,063



89,058

Operating expenses


19,227,846



17,496,879



2,864,068



5,811,846



5,844,931



956,759





































Income (loss) from operations


7,832,622



(1,654,795)



(270,874)



(566,890)



403,908



66,115



















Other income (expenses)


















Subsidy income


1,220,024



639,473



104,675



201,711



155,155



25,397

Interest income


296,997



225,701



36,945



92,027



68,233



11,169

Interest expense


(757,226)



(808,065)



(132,272)



(277,578)



(339,109)



(55,509)

Loss from investment


(870,627)



-



-



(135,547)



-



-

Change in fair value of warrants liability


(904,327)



4,068,329



665,946



(904,883)



(9,188)



(1,504)

Loss from foreign currency exchange


(88,080)



(19,081)



(3,123)



31,312



1,799



294

Loss from warrants redemption


-



(1,913,262)



(313,182)



-



(1,913,262)



(313,182)

Other expense


(143,498)



112,325



18,387



(99,552)



35,653



5,836



















Income (loss) before income tax


6,585,885



650,625



106,502



(1,659,400)



(1,596,811)



(261,384)

Provision (benefit) for income tax


1,609,976



468,005



76,608



150,787



(180,927)



(29,616)

Net Income (loss)


4,975,909



182,620



29,894



(1,810,187)



(1,415,884)



(231,768)



















Less: Net income attributable to non-controlling interest


1,045,396



546,071



89,386



120,415



111,398



18,235

Net Income (loss) attributable to Recon Technology, Ltd


3,930,513



(363,451)



(59,492)



(1,930,602)



(1,527,282)



(250,003)



















Comprehensive income (loss)


















Net income (loss)


4,975,909



182,620



29,894



(1,810,187)



(1,415,884)



(231,768)

Foreign currency translation adjustment


(40,833)



(2,854)



(467)



(118,110)



(7,580)



(1,241)

Comprehensive income (loss)


4,935,076



179,766



29,427



(1,928,297)



(1,423,464)



(233,009)

Less: Comprehensive income attributable to non-controlling interest


1,041,313



545,952



89,367



108,604



111,032



18,175

Comprehensive income (loss) attributable to Recon Technology, Ltd


3,893,763



(366,186)



(59,940)



(2,036,901)



(1,534,496)



(251,184)



















Earnings (loss) per common share - basic 


0.93



(0.08)



(0.01)



(0.43)



(0.32)



(0.05)

Earnings (loss) per common share - diluted


0.92



(0.08)



(0.01)



(0.43)



(0.32)



(0.05)

Weighted - average shares - basic 


4,211,785



4,773,803



4,757,112



4,528,311



4,839,004



4,839,004

Weighted - average shares - diluted


4,269,510



4,773,803



4,757,112



4,528,311



4,839,004



4,839,004


RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS











For the nine months ended


2014


2015


2015


RMB


RMB


USD










Cash flows from operating activities:









Net income


4,975,909



182,620



29,894

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









Depreciation


457,439



369,284



60,448

Loss from disposal of equipment


67,587



(149,504)



(24,472)

Provision for doubtful accounts


668,610



254,622



41,679

Share based compensation


1,660,144



2,023,761



331,270

Loss from investment


870,627



-



-

Deferred tax benefit


(75,715)



(50,481)



(8,263)

Change in fair value of warrants liability


904,327



(4,068,329)



(665,946)

Restricted shares issued for services


407,972



1,204,903



197,231

Loss from warrants redemption


-



1,913,262



313,182

Changes in operating assets and liabilities:









Trade accounts receivable


(17,127,239)



(29,115,292)



(4,765,889)

Trade accounts receivable - related parties


1,487,501



18,681,051



3,057,906

Inventories


(8,823,683)



(4,791,259)



(784,282)

Notes receivable


2,578,855



(400,000)



(65,476)

Other receivable, net


688,724



(7,022,533)



1,149,521

Other receivables related parties, net


77,697



1414,433



231,529

Purchase advance, net


(5,325,269)



1,797,628



294,254

Tax recoverable


575,650



-



-

Prepaid expense


(580,144)



(1,565,998)



(256,339)

Prepaid expense - related party, net


-



(132,400)



(21,673)

Trade accounts payable


6,211,777



6,042,777



989,144

Trade accounts payable - related parties


(3,994,718)



-



-

Other payables


(191,528)



(566,064)



92,659

Other payables - related parties


(857,338)



419,379



68,648

Deferred income


945,091



(1,643,339)



(268,999)

Advances from customers


(195,100)



(405,785)



(66,423)

Accrued payroll and employees' welfare


(1,603,340)



(108,066)



(17,689)

Accrued expenses


(242,617)



185,433



30,354

Taxes payable


1,155,303



(689,453)



(112,857)

Net cash used in operating activities


(15,283,478)



(16,219,350)



(2,654,949)










Cash flows from investing activities:









Purchase of property and equipment


(258,922)



(514,009)



(84,138)

Proceeds from disposal of equipment


98,000



356,247



58,314

Net cash used in investing activities


(160,922)



(157,762)



(25,824)










Cash flows from financing activities:









Proceeds from short-term bank loans


18,500,000



-



-

Repayments of short-term bank loans


(12,870,000)



(2,000,000)



(327,380)

Proceeds from short-term borrowings - related parties


-



12,550,000



2,054,312

Repayment of short-term borrowings


(570,375)



-



-

Repayment of short-term borrowings - related parties


(5,303,279)



(7,550,000)



(1,235,861)

Proceeds from sale of common stock, net of issuance costs


12,132,882



-



-

Net cash provided by financing activities


11,889,228



3,000,000



491,071










Effect of exchange rate fluctuation on cash and cash equivalents


68,669



(51,605)



(8,449)










Net decrease in cash and cash equivalents


(3,486,503)



(13,428,717)



(2,198,151)

Cash and cash equivalents at beginning of period


12,350,392



18,094,586



2,961,908

Cash and cash equivalents at end of period


8,863,889



4,665,869



763,757



















Supplemental cash flow information









Cash paid during the period for interest


952,125



808,065



132,272

Cash paid during the period for taxes


700,268



616,225



100,870










Non-cash investing and financing activities









Cancellation of prior issuance of 40,625 shares of common stock for professional services


-



(1,002,721)



(164,136)










SOURCE Recon Technology, Ltd.


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