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Recon Technology, Ltd. Reports First Quarter Fiscal Year 2017 Financial Results

BEIJING, Nov. 14, 2016 /PRNewswire/ --

  • Revenue grew 117% YoY; gross profit increased 172% and gross margin improved 280 basis points YoY

Recon Technology (the "Company" or "Recon") (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported its financial results for the first quarter of fiscal year 2017, which ended September 30, 2016.

Q1 FY2017 Financial Highlights:  

  • Total revenues for Q1 FY2017 were RMB7.8 million ($1.2 million),* an increase of RMB4.2 million or 117.1% from RMB3.6 million for the same period last fiscal year;
  • Gross profit increased 171.9% to RMB1.1 million ($0.2 million) for the three months ended September 30, 2016 from RMB0.4 million for the same period in 2015;
  • Gross margin improved more than 280 basis points to 14.0% in Q1 FY2017, compared to 11.2% for the same period last fiscal year;
  • Newly launched Oilfield waste management business saw RMB1.9 million ($0.3 million) in revenues, as compared to RMB0 in the same period of last year;
  • Operating loss was RMB5.5 million ($0.8 million) for the first quarter of FY2017, compared to a loss of RMB8.7 million for the same period last fiscal year;
  • Net loss and net loss attributable to ordinary shareholders for Q1 FY2017 was RMB5.5 million ($0.8 million), or RMB0.92 ($0.14) per diluted share, compared to RMB8.8 million, or RMB1.63 ($0.26) per diluted share, for the same period last fiscal year.

Courtesy foreign exchange rates are calculated based on RMB 6.6702: US$1.00.

Mr. Shenping Yin, Chairman and CEO of Recon stated, "We continued to develop and expand our new oilfield waste management business this quarter. We are pleased with these results so far in fiscal 2017. And we look forward to expanding more business sectors and potential markets in the following quarters."

Q1 FY2017 Financial Results


For the Three Months Ended September 30,

(thousands)

2015

 RMB

2016

 RMB

 2016

  USD

   %

   Change

Revenues

3,594

7,802

1,169

117.10%

Hardware and software

3,481

7,802

1,169

124.10%

Service

113

-

-

-100%

Gross margin

11.20%

14%

14%

2.80%

Net income (loss) attributable to RCON

(8,849)

(5,461)

(818)

38.30%

Revenues

Revenues for the three months ended September 30, 2016 were RMB7.8 million ($1.2 million), an increase of RMB4.2 million or 117.1% from RMB3.6 million for the three months ended September 30, 2015. The overall increase in revenue was mainly caused by our increased hardware and software revenue. In particular, (a) revenue from automation products and embedded software increased slightly to RMB2.1 million; (b) revenues from equipment and accessories increased by RMB2.3 million, or 160.5%, to RMB3.8 million for the three months ended September 30, 2016, as compared to RMB1.5 million for the same period of last fiscal year; and (c) as of first quarter of fiscal year 2017, the new oilfield waste water treatment products segment contributed RMB1.9 million revenue to our operations.

Gross Profit and Gross Margin 

Cost of revenues increased from RMB3.2 million in the three months ended September 30, 2015 to RMB6.7 million ($1.0 million) for the same period in 2016, an increase of approximately RMB3.5 million ($0.5 million), or 110.2%.

Gross profit increased to approximately RMB1.1 million ($0.2 million) for the three months ended September 30, 2016 from approximately RMB0.4 million for the same period in 2015. Gross profit as a percentage of revenue increased to 14.0% for the three months ended September 30, 2016 from 11.2% for the same period in 2015.

Operating Loss and Operating Loss Margin 

Selling expenses decreased approximately RMB62.5 thousand ($9.4 thousand) for the three months ended September 30, 2016 compared to the same period in 2015. General and administrative expenses increased by 20.5% or RMB0.8 million ($0.1 million), from  RMB4.1 million in the three months ended September 30, 2015 to RMB4.9 million ($0.7 million) in the same period of 2016. Research and development expenses decreased from approximately RMB1.8 million for three months ended September 30, 2015 to approximately RMB0.6 million ($0.1 million) for the same period of 2016. Total operating expenses decreased by RMB2.5 million, or 27.6%, to RMB6.6 million ($1.0 million) for the three months ended September 30, 2016 from RMB9.08 million for the same period during last fiscal year.

Operating loss was approximately RMB5.5 million ($0.8 million) for the three months ended September 30, 2016, compared to a loss of RMB8.7 million for the same period of 2015.

Net Loss

Net loss and net loss attributable to ordinary shareholders for the three months ended September 30, 2016 was RMB5.5 million ($0.8 million), or RMB0.92 ($0.14) per diluted share, compared to RMB8.85 million, or RMB1.63 ($0.26) per diluted share, for the same period last fiscal year.

Financial Position

As of September 30, 2016, the Company had cash and cash equivalents of RMB0.6 million ($0.08 million), and short-term borrowings from related parties of RMB12.5 million ($1.9 million), compared to RMB3.9 million and RMB9.4 million, respectively, for the same period last fiscal year. Working capital as of September 30, 2016 was RMB41.2 million ($6.2 million) as compared to RMB66.5 million at September 30, 2015. Net cash used in operating activities was RMB0.3 million ($0.05 million) for the three months ended September 30, 2016, compared to RMB1.0 million for the same period of last fiscal year. Net cash used in investing activities was RMB22.3 thousand ($3.3 thousand) for the three months ended September 30, 2016, compared to RMB0.5 million for the same period of last fiscal year. Net cash used in financing activities was RMB1.0 million ($0.1 million) for the three months ended September 30, 2016, compared to RMB7.1 million ($1.1 million) for the same period last fiscal year.

Recent Developments 

As of the first quarter of fiscal year 2017, the Company has achieved remarkable achievement in its oilfield waste water treatment segment. In January 2016, the Company announced its cooperation with Qinghai Oilfield Company, signing an agreement to sell the oilfield RMB3.98 million of related products and services. For the three months period ended September 30, 2016, the Company has completed this agreement and continues to expand markets in the environmental protection industry, including oilfield water treatment and other industrial and sewage disposal projects.

The Company has also developed new clients China's top producing Changqing Oilfield, which is located in China's Xi'an Province.

About Recon

Recon Technology, Ltd. is China's first listed non-state owned oil and gas field service company on Nasdaq (RCON). Recon supplies China's largest oil exploration companies, Sinopec and 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 us at www.recon.cn.

Safe Harbor

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, 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.

Company Contact

Liu Jia
Recon Technology, Ltd.
+86 (10) 84945799
info@recon.cn

 

RECON TECHNOLOGY, LTD  

CONDENSED CONSOLIDATED BALANCE SHEETS 

(UNAUDITED)  



As of 
June 30, 


As of 
September 30,


As of 
September 30, 

2016

2016

2016

ASSETS

RMB


RMB


U.S. Dollars

Current assets






Cash

1,817,620


554,630


83,150

Notes receivable

4,660,177


3,105,770


465,617

Trade accounts receivable, net

38,097,626


37,267,708


5,587,178

Inventories, net

6,313,070


6,339,234


950,379

Other receivables, net

22,000,112


20,101,962


3,013,688

Purchase advances, net

1,323,305


4,000,124


599,699

Prepaid expenses

110,310


55,260


8,285

Total current assets

74,322,220


71,424,688


10,707,996

Property and equipment, net

2,907,762


2,723,363


408,287

Long-term trade accounts receivable, net

2,220,332


2,220,332


332,872

 Total Assets

79,450,314


76,368,383


11,449,155


Current liabilities






Trade accounts payable

7,540,430


9,267,662


1,389,409

Other payables

2,972,192


2,787,443


417,894

Other payable- related parties

3,680,244


3,712,698


556,608

Deferred revenue

406,681


231,187


34,660

Advances from customers

200,600


200,100


29,999

Accrued payroll and employees' welfare

381,109


499,155


74,833

Accrued expenses

261,348


193,274


28,974

Taxes payable

755,880


683,148


102,418

Short-term borrowings

530,000


-


-

Short-term borrowings - related parties

12,941,848


12,515,253


1,876,288

Deferred tax liability

180,186


180,186


27,014

Total current liabilities

29,850,518


30,270,106


4,538,097

Equity






Common stock, ($ 0.0185 U.S. dollar par value, 100,000,000 shares authorized; 5,804,005 and 5,980,792 shares issued and outstanding as of June 30, 2016 and September 30, 2016, respectively)












741,467

763,340

114,440

Additional paid-in capital

100,612,455


102,557,249


15,375,392

Statutory reserve

4,148,929


4,148,929


622,008

Accumulated deficits

(63,907,512)


(69,368,096)


(10,399,671)

Accumulated other comprehensive loss

(219,040)


(226,642)


(33,978)

Total shareholders' equity

41,376,299


37,874,780


5,678,191

Non-controlling interest

8,223,497


8,223,497


1,232,867

Total equity

49,599,796


46,098,277


6,911,058

Total Liabilities and Equity

79,450,314


76,368,383


11,449,155


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements  































RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)


For the three months ended  


September 30, 


2015


2016


2016


RMB 


RMB 


USD

Revenues






Hardware and software

3,480,752


7,802,103


1,169,692

Service

113,208


-


-

Total revenues

3,593,960


7,802,103


1,169,692







Cost of revenues






Hardware and software

3,315,627


6,447,643


966,632

Provision for (reversal of) slow moving inventories

(123,332)


262,135


39,299

Total cost of revenues

3,192,295


6,709,778


1,005,931

Gross profit

401,665


1,092,325


163,761

Selling and distribution expenses

1,112,670


1,050,141


157,437

General and administrative expenses

4,067,219


4,899,328


734,508

Provision for doubtful accounts

2,109,926


8,026


1,203

Research and development expenses

1,792,997


618,674


92,752

Operating expenses

9,082,812


6,576,169


985,900







Loss from operations

(8,681,147)


(5,483,844)


(822,139)

Other income (expenses)






Subsidy income

49,000


7,807


1,170

Interest income

55,510


27,894


4,182

Interest expense

(277,824)


(132,490)


(19,863)

Income (loss) from foreign currency exchange

(938)


388


58

Other income (expense)

(9,664)


99,518


14,920

Other income (expense)

(183,916)


3,117


467

Loss before income tax

(8,865,063)


(5,480,727)


(821,672)

Benefit for income tax

(16,457)


(20,143)


(3,020)

Net loss

(8,848,606)


(5,460,584)


(818,652)

Comprehensive loss






Net loss

(8,848,606)


(5,460,584)


(818,652)

Foreign currency translation adjustment

124,218


(7,602)


(1,140)

Comprehensive loss

(8,724,388)


(5,468,186)


(819,792)

Less: Comprehensive loss attributable to non-controlling interest

16,620


-


-

Comprehensive loss attributable to Recon Technology, Ltd

(8,741,008)


(5,468,186)


(819,792)







Loss per common share - basic and diluted

(1.63)


(0.92)


(0.14)

Weighted - average shares -basic and diluted 

5,438,763


5,957,733


5,957,733




The accompanying notes are an integral part of these unaudited condensed consolidated financial statements  













RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


For the three months ended September 30,         


2015


2016


2016


RMB


RMB


U.S. Dollars

Cash flows from operating activities:






Net loss

(8,848,606)


(5,460,584)


(818,652)

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






Depreciation

259,768


205,580


30,821

Gain from disposal of  equipment

-


(35,919)


(5,385)

Provision for doubtful accounts

2,109,926


8,026


1,203

Provision for (reversal of) slow moving inventories

(123,332)


262,135


39,299

Share based compensation

1,126,552


1,966,670


294,843

Deferred tax benefit

(16,458)


-


-

Restricted shares issued for services

202,475


-


-

Changes in operating assets and liabilities:






Notes receivable

977,950


1,554,407


233,037

Trade accounts receivable

1,685,745


1,035,863


155,297

Trade accounts receivable-related parties

4,569,800


-


-

Inventories

(908,544)


(288,299)


(43,222)

Other receivable, net

(419,821)


1,866,616


279,843

Other receivables-related parties, net

91,021


-


-

Purchase advance, net

(847,071)


(2,873,141)


(430,742)

Purchase advance-related parties, net

394,034


-


-

Prepaid expense

216,619


55,050


8,253

Prepaid expense - related parties, net

210,000


-


-

Trade accounts payable

(217,263)


1,727,232


258,947

Trade accounts payable-related parties

(254,826)


-


-

Other payables

(308,852)


(184,749)


(27,698)

Other payables-related parties

(2,465,074)


32,454


4,866

Deferred revenue

166,982


(175,494)


(26,310)

Advances from customers

(158,716)


(500)


(75)

Accrued payroll and employees' welfare

83,268


118,046


17,697

Accrued expenses

(7,505)


(56,539)


(8,476)

Taxes payable

1,507,434


(80,273)


(12,035)

Net cash used in operating activities

(974,494)


(323,419)


(48,489)

Cash flows from investing activities:






Purchase of property and equipment

(470,265)


(29,621)


(4,441)

Proceeds from disposal of equipment

-


51,900


7,781

Net cash provided by (used in) investing activities

(470,265)


22,279


3,340

Cash flows from financing activities:






Repayment of short-term borrowings

-


(530,000)


(79,458)

Proceeds from short-term borrowings-related parties

1,800,000


4,838,318


725,361

Repayment of short-term borrowings-related parties

(9,100,000)


(5,276,448)


(791,046)

Proceeds from sale of common stock, net of issuance costs

165,823


-


-

Net cash used in financing activities

(7,134,177)


(968,130)


(145,143)

Effect of exchange rate fluctuation on cash and cash equivalents

111,279


6,280


943

Net decrease in cash

(8,467,657)


(1,262,990)


(189,349)

Cash at beginning of period

12,344,929


1,817,620


272,498

Cash at end of period

3,877,272


554,630


83,149


Supplemental cash flow information






Cash paid during the period for interest

277,824


167,403


25,097

Cash paid during the period for taxes

72,217


-


-

Non-cash investing and financing activities






AR and short-term borrowings-related parties offset

200,000


-


-




The accompanying notes are an integral part of these unaudited condensed consolidated financial statements  

SOURCE Recon Technology, Ltd.


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