Recon Technology, Ltd Reports Financial Results for the First Six Months of Fiscal Year 2022
Recon Technology, Ltd (RCON) reported a 116.2% increase in total revenues to $8.6 million for the first six months of Fiscal Year 2022, driven by a 605.9% surge in oily sludge and wastewater segments. The company achieved a net income of $17.5 million, a significant turnaround from a net loss of $10 million in the previous year. Gross profit remained stable at 26.7% of revenue. Despite increased operating expenses, including a 263.7% rise in general and administrative costs, management is optimistic about future growth opportunities as oil prices rise.
- Total revenues increased by 116.2% to $8.6 million
- Net income of $17.5 million, up from a loss of $10 million
- Oily sludge and wastewater revenue rose by 605.9%
- Cash reserves at $52.3 million, indicating a solid financial position
- Loss from operations increased to $5.9 million
- General and administrative expenses rose by 263.7% to $7.4 million
- Net cash used in operating activities increased to $3.6 million
BEIJING, March 30, 2022 /PRNewswire/ -- Recon Technology, Ltd (Nasdaq: RCON) ("Recon" or the "Company"), today announced its financial results for the first six months of Fiscal Year 2022.
First Six Months of Fiscal 2022 Financial:
- Total revenues for the six months ended December 31, 2021 increased by
116.2% to$8.6 million (RMB54.4 million), while revenue from our oily sludge and waste water segments increased by605.9% or$2.7 million (RMB16.9 million). - Gross profit for the six months ended December 31, 2021 was
$2.3 million (RMB14.5 million). Our gross profit as a percentage of revenue remained at the same level of26.7% for the six months ended December 31, 2021 compared with the same period in 2020. - Net income attributable to Recon for the six months ended December 31, 2021 was
$17.5 million (RMB111.4 million), RMB4.08 ($0.64) per basic and RMB3.87 ($0.61) per diluted share, compared to a net loss attributable to Recon of RMB8.9 million, or RMB1.22 per basic and diluted share, for the six months ended December 31, 2020.
Management Commentary
Mr. Shenping Yin, co-founder and CEO of Recon stated, "We are very pleased to see the rapid recovery of our business. Our revenue for the period reached twice the level of the same period last year and even exceeded the total revenue for the entire fiscal year 2021. As the overall level of oil and gas prices continues to rise, we expect our upstream customers, mainly domestic oil and gas companies, to increase Capital Expenditures (also known as "CapEx") on oil and gas production, which brings more opportunities for the rapid development of the Company. More particularly, as the oil prices increase, we have observed China's oil companies' performances greatly improve and we expect the companies to increase their investments in drilling for new oil and gas wells and production activities as compared to prior years. As their vendor, we anticipate benefiting from these trends, especially with respect to our wastewater and sludge treatment business and specialized equipment for oil and gas fields clients with relatively high technology content. As oil and gas companies ramp up productions, we have also seen the number of orders and average order amount increased from late 2022 to date."
Mr. Yin continued, "With rising oil prices and increased investments by domestic oil companies, the market demand will continue to increase, and competition is expected to become more intensive. In anticipation of increased competition, we will strengthen investments in the research and development of new products and continue to integrate automation technology into other business segments to improve the digital content and enhance the overall competitive advantage of our products. In addition, the Company's financing, which was completed in June 2021, has greatly enhanced the Company's cash reserves and financial condition. We will use our enhanced cash reserves and financial condition to our advantage by expanding our business scope to further improve the Company's business structure, its long-term profitability, enhance our values, and safeguard the interests of our shareholders."
First Six Months Fiscal 2022 Financial Results:
Revenue
Total revenues for the six months ended December 31, 2021 increased by RMB29.2 million (
Revenue from automation product and software increased by RMB11.2 million (
Revenue from equipment and accessories decreased by RMB3.6 million (
Revenue from oilfield environmental protection projects increased by RMB16.9 million (
Revenue from platform outsourcing services increased by RMB4.6 million (
Cost and Margin
Total cost of revenues increased from RMB18.5 million for the six months ended December 31, 2020 to RMB39.9 million (
Gross profit increased by RMB7.8 million (
Operating Expenses
Selling expenses increased by
General and administrative expenses increased by RMB34.3 million (
Net recovery of provision for credit losses was RMB5.7 million (
Research and development expenses increased from approximately RMB3.8 million for the six months ended December 31, 2020 to RMB5.5 million (
Net Income/Loss
Loss from operations was RMB37.3 million (
Net income was RMB111.4 million (
As of December 31, 2021, the Company had cash of RMB332.9 million (
Net cash used in operating activities was RMB23.0 million (
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 RMB6.3614 to
About Recon Technology, Ltd ("RCON")
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: http://www.recon.cn/.
Forward-Looking Statements
Forward-Looking Statements in this press release, which are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our actual results, performance or achievements may differ materially from those expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," "continue," "likely," "will," "would" and variations of these terms and similar expressions, or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that, while considered reasonable by us and our management, are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include, among others, whether we will establish successfully cooperation with major clients; changes in the competitive environment in our industry and the markets where we operate; our ability to access the capital markets; and other risks discussed in the Company's filings with the U.S. Securities and Exchange Commission ("SEC"), including our Annual Report on Form 20-F, which filings are available from the SEC. We caution you not to place undue reliance on any forward-looking statements, which are made as of the date of this press release. We undertake no obligation to update publicly any of these forward-looking statements to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting forward-looking statements, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
For more information, please contact:
Ms. Liu Jia
Chief Financial Officer
Recon Technology, Ltd
Phone: +86 (10) 8494-5799
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 | |||||||
2021 | 2021 | 2021 | |||||||
ASSETS | RMB | RMB | U.S. Dollars | ||||||
Current assets | |||||||||
Cash | ¥ | 343,998,570 | ¥ | 332,864,077 | $ | 52,325,453 | |||
Notes receivable | 6,305,633 | 14,808,067 | 2,327,793 | ||||||
Trade accounts receivable, net | 26,686,888 | 41,748,478 | 6,562,763 | ||||||
Inventories, net | 3,644,522 | 4,958,889 | 779,526 | ||||||
Other receivables, net | 6,939,676 | 8,596,816 | 1,351,399 | ||||||
Loans to third parties | 50,476,782 | 25,464,035 | 4,002,887 | ||||||
Purchase advances, net | 1,078,137 | 537,305 | 84,463 | ||||||
Contract costs, net | 48,795,906 | 31,364,473 | 4,930,422 | ||||||
Prepaid expenses | 146,071 | 29,917 | 4,702 | ||||||
Prepaid expenses- related parties | 433,000 | — | — | ||||||
Total current assets | 488,505,185 | 460,372,057 | 72,369,408 | ||||||
Property and equipment, net | 27,138,768 | 26,118,829 | 4,105,819 | ||||||
Land use right, net | 1,253,408 | 1,239,789 | 194,892 | ||||||
Intangible assets, net | 6,650,000 | 6,300,000 | 990,345 | ||||||
Investment in unconsolidated entity | 27,931,795 | — | — | ||||||
Long-term other receivables, net | 114,679 | 324,515 | 51,013 | ||||||
Goodwill | 6,996,895 | 6,996,895 | 1,099,895 | ||||||
Operating lease right-of-use assets (including | 7,925,930 | 6,084,606 | 956,486 | ||||||
Total Assets | ¥ | 566,516,660 | ¥ | 507,436,691 | $ | 79,767,858 | |||
LIABILITIES AND EQUITY | |||||||||
Current liabilities | |||||||||
Short-term bank loans | ¥ | 15,000,000 | ¥ | 10,000,000 | $ | 1,571,977 | |||
Trade accounts payable | 21,956,481 | 22,058,660 | 3,467,570 | ||||||
Other payables | 9,862,762 | 2,299,233 | 361,435 | ||||||
Other payable- related parties | 2,400,667 | 3,569,788 | 561,162 | ||||||
Contract liabilities | 7,686,276 | 1,195,862 | 187,987 | ||||||
Accrued payroll and employees' welfare | 1,954,484 | 1,832,255 | 288,023 | ||||||
Taxes payable | 1,248,994 | 2,337,895 | 367,512 | ||||||
Short-term borrowings | 530,000 | 260,000 | 40,871 | ||||||
Short-term borrowings - related parties | 12,676,042 | 9,149,292 | 1,438,247 | ||||||
Long-term borrowings - related party - current portion | 920,066 | 958,916 | 150,739 | ||||||
Operating lease liabilities - current (including | 2,226,832 | 2,928,987 | 460,430 | ||||||
Total Current Liabilities | 76,462,604 | 56,590,888 | 8,895,953 | ||||||
Operating lease liabilities - non-current | 4,792,101 | 3,278,574 | 515,384 | ||||||
Long-term borrowings - related party | 6,486,551 | 6,009,625 | 944,699 | ||||||
Deferred tax liability | 624,088 | 728,402 | 114,503 | ||||||
Warrant liability | 190,635,850 | 42,239,816 | 6,640,000 | ||||||
Total Liabilities | 279,001,194 | 108,847,305 | 17,110,539 | ||||||
Commitments and Contingencies | |||||||||
Equity | |||||||||
Class A ordinary shares, | 16,340,826 | 16,524,894 | 2,597,675 | ||||||
Class B ordinary shares, | — | 1,474,543 | 231,795 | ||||||
Additional paid-in capital | 479,490,763 | 482,163,636 | 75,794,994 | ||||||
Statutory reserve | 4,148,929 | 4,148,929 | 652,202 | ||||||
Accumulated deficit | (206,860,320) | (95,502,810) | (15,012,818) | ||||||
Accumulated other comprehensive income (loss) | 1,974,836 | (2,662,155) | (418,485) | ||||||
Total shareholders' equity | 295,095,034 | 406,147,037 | 63,845,363 | ||||||
Non-controlling interests | (7,579,568) | (7,557,651) | (1,188,044) | ||||||
Total equity | 287,515,466 | 398,589,386 | 62,657,319 | ||||||
Total Liabilities and Equity | ¥ | 566,516,660 | ¥ | 507,436,691 | $ | 79,767,858 | |||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. | |||||||||
RECON TECHNOLOGY, LTD | |||||||||
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE | |||||||||
(UNAUDITED) | |||||||||
For the six months ended | |||||||||
December 31, | |||||||||
2020 | 2021 | 2021 | |||||||
RMB | RMB | USD | |||||||
Revenues | |||||||||
Revenues - third party | ¥ | 25,083,622 | ¥ | 54,411,724 | $ | 8,553,395 | |||
Revenues - related party | 85,657 | - | - | ||||||
Revenues | 25,169,279 | 54,411,724 | 8,553,395 | ||||||
Cost of revenues | |||||||||
Cost of revenues - third party | 18,452,239 | 39,904,645 | 6,272,917 | ||||||
Cost of revenues | 18,452,239 | 39,904,645 | 6,272,917 | ||||||
Gross profit | 6,717,040 | 14,507,079 | 2,280,478 | ||||||
Selling and distribution expenses | 2,750,389 | 4,727,496 | 743,151 | ||||||
General and administrative expenses | 13,009,013 | 47,314,621 | 7,437,748 | ||||||
Net recovery of credit losses | (3,697,024) | (5,671,285) | (891,513) | ||||||
Research and development expenses | 3,756,839 | 5,477,213 | 861,005 | ||||||
Operating expenses | 15,819,217 | 51,848,045 | 8,150,391 | ||||||
Loss from operations | (9,102,177) | (37,340,966) | (5,869,913) | ||||||
Other income (expenses) | |||||||||
Subsidy income | 222,038 | 2,278 | 358 | ||||||
Interest income | 20,168 | 2,590,649 | 407,244 | ||||||
Interest expense | (1,000,182) | (784,077) | (123,255) | ||||||
Income (loss) from investment in unconsolidated entity | (251,296) | 15,411 | 2,423 | ||||||
Fair value changes of warrants liability | - | 147,168,952 | 23,134,614 | ||||||
Foreign exchange transaction loss | (78,784) | (151,986) | (23,892) | ||||||
Other income (loss) | 50,369 | (13,630) | (2,143) | ||||||
Other income (expense), net | (1,037,687) | 148,827,597 | 23,395,349 | ||||||
Income (loss) before income tax | (10,139,864) | 111,486,631 | 17,525,436 | ||||||
Income tax expenses (benefit) | (98,338) | 107,204 | 16,852 | ||||||
Net income (loss) | (10,041,526) | 111,379,427 | 17,508,584 | ||||||
Less: Net income (loss) attributable to non-controlling interests | (1,105,874) | 21,917 | 3,445 | ||||||
Net income (loss) attributable to Recon Technology, Ltd | ¥ | (8,935,652) | ¥ | 111,357,510 | $ | 17,505,139 | |||
Comprehensive income (loss) | |||||||||
Net income (loss) | (10,041,526) | 111,379,427 | 17,508,584 | ||||||
Foreign currency translation adjustment | (931,366) | (4,636,991) | (728,924) | ||||||
Comprehensive income (loss) | (10,972,892) | 106,742,436 | 16,779,660 | ||||||
Less: Comprehensive income (loss) attributable to non-controlling interests | (1,105,874) | 21,917 | 3,445 | ||||||
Comprehensive income (loss) attributable to Recon Technology, Ltd | ¥ | (9,867,018) | ¥ | 106,720,519 | $ | 16,776,215 | |||
Eearning (loss) per ordinary share | |||||||||
-Basic | ¥ | (1.22) | ¥ | 4.08 | $ | 0.64 | |||
-Diluted | ¥ | (1.22) | ¥ | 3.87 | $ | 0.61 | |||
Weighted average shares | |||||||||
-Basic | 7,330,866 | 27,312,581 | 27,312,581 | ||||||
-Diluted | 7,330,866 | 28,776,992 | 28,776,992 | ||||||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. | |||||||||
RECON TECHNOLOGY, LTD | |||||||||
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS | |||||||||
(UNAUDITED) | |||||||||
For the six months ended December 31, | |||||||||
2020 | 2021 | 2021 | |||||||
RMB | RMB | U.S. Dollars | |||||||
Cash flows from operating activities: | |||||||||
Net income (loss) | ¥ | (10,041,526) | ¥ | 111,379,427 | $ | 17,508,584 | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||||
Depreciation and amortization | 1,369,590 | 1,682,450 | 264,477 | ||||||
Loss from disposal of equipment | 1,095 | 35,279 | 5,546 | ||||||
Changes in warrants liabilities | — | (147,168,952) | (23,134,614) | ||||||
Net recovery of credit losses | (3,697,024) | (5,671,285) | (891,513) | ||||||
Provision for slow moving inventories | 423,714 | 38,856 | 6,108 | ||||||
Amortization of right of use assets | 542,896 | 1,556,830 | 244,730 | ||||||
Restricted shares issued for management and employees | 3,403,513 | 27,375,871 | 4,303,423 | ||||||
Loss (income) from investment in unconsolidated entity | 251,296 | (15,411) | (2,423) | ||||||
Deferred tax expense | — | 104,315 | 16,398 | ||||||
Interest expenses related to convertible notes | 84,607 | — | — | ||||||
Interest income from loans to third parties | — | (2,101,366) | (330,330) | ||||||
Restricted shares issued for services | — | 4,631,063 | 727,992 | ||||||
Changes in operating assets and liabilities: | |||||||||
Notes receivable | (3,609,112) | (8,502,433) | (1,336,563) | ||||||
Trade accounts receivable | 15,866,295 | (12,364,696) | (1,943,701) | ||||||
Trade accounts receivable-related party | 3,409,912 | — | — | ||||||
Inventories | (765,595) | (1,314,367) | (206,615) | ||||||
Other receivable | (4,262,681) | (1,495,225) | (235,046) | ||||||
Other receivables-related parties | (23,800) | (23,800) | (3,741) | ||||||
Purchase advance | 96,330 | 543,832 | 85,489 | ||||||
Contract costs | (14,262,839) | 20,068,844 | 3,154,775 | ||||||
Prepaid expense | (19,306) | 116,153 | 18,259 | ||||||
Prepaid expense - related parties | 217,600 | 433,000 | 68,067 | ||||||
Operating lease liabilities | (539,572) | (526,878) | (82,824) | ||||||
Trade accounts payable | (3,761,301) | 102,178 | 16,062 | ||||||
Other payables | (1,048,961) | (7,569,400) | (1,189,891) | ||||||
Other payables-related parties | (2,842,651) | 1,169,121 | 183,783 | ||||||
Contract liabilities | 3,200,559 | (6,490,414) | (1,020,278) | ||||||
Accrued payroll and employees' welfare | (963,905) | (122,226) | (19,213) | ||||||
Taxes payable | 273,624 | 1,088,901 | 171,173 | ||||||
Net cash used in operating activities | (16,697,242) | (23,040,333) | (3,621,886) | ||||||
Cash flows from investing activities: | |||||||||
Purchases of property and equipment | (375,569) | (337,171) | (53,002) | ||||||
Repayments of third parties loans | 3,200,377 | 113,146,100 | 17,786,302 | ||||||
Payments made for loans to third parties | (950,000) | (86,031,987) | (13,524,027) | ||||||
Net cash provided by investing activities | 1,874,808 | 26,776,942 | 4,209,273 | ||||||
Cash flows from financing activities: | |||||||||
Proceeds from short-term bank loans | 3,520,000 | — | — | ||||||
Repayments of short-term bank loans | (1,020,000) | (5,000,000) | (785,988) | ||||||
Proceeds from short-term borrowings | 2,460,000 | 260,000 | 40,871 | ||||||
Repayments of short-term borrowings | (2,460,000) | (530,000) | (83,315) | ||||||
Proceeds from short-term borrowings-related parties | 10,100,000 | 5,000,000 | 785,988 | ||||||
Repayments of short-term borrowings-related parties | (8,320,000) | (8,522,500) | (1,339,717) | ||||||
Repayments of long-term borrowings-related party | (399,422) | (436,457) | (68,610) | ||||||
Proceeds from sale of ordinary shares, net of issuance costs | 9,930,015 | — | — | ||||||
Proceeds from issuance of convertible notes | 42,364,203 | — | — | ||||||
Capital contribution by non-controlling shareholders | 50,000 | — | — | ||||||
Net cash provided by (used in) financing activities | 56,224,796 | (9,228,957) | (1,450,771) | ||||||
Effect of exchange rate fluctuation on cash | (931,369) | (5,642,145) | (886,932) | ||||||
Net increase (decrease) in cash | 40,470,993 | (11,134,493) | (1,750,316) | ||||||
Cash at beginning of period | 30,336,504 | 343,998,570 | 54,075,769 | ||||||
Cash at end of period | ¥ | 70,807,497 | ¥ | 332,864,077 | $ | 52,325,453 | |||
Supplemental cash flow information | |||||||||
Cash paid during the period for interest | ¥ | 849,409 | ¥ | 732,842 | $ | 115,201 | |||
Cash received during the period for taxes | ¥ | (98,338) | ¥ | 2,889 | $ | 454 | |||
Non-cash investing and financing activities | |||||||||
Cancellation of ordinary shares issued | ¥ | — | ¥ | 27,675,450 | $ | 4,350,516 | |||
Right-of-use assets obtained in exchange for operating lease obligations | ¥ | 63,530 | ¥ | — | $ | — | |||
Inventories used as fixed assets | ¥ | 302,795 | ¥ | — | $ | — | |||
Receivable for disposal of property and equipment | ¥ | — | ¥ | 3,000 | $ | 472 | |||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. | |||||||||
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SOURCE Recon Technology, Ltd.
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