PR Newswire | Oct 9, 2020 05:00PM EDT

10/09 16:00 CDT

Recon Technology, Ltd Reports Financial Results for Fiscal Year 2020 BEIJING, Oct. 9, 2020

BEIJING, Oct. 9, 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 JiaRecon 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 68,535,282 48,244,015 6,824,026receivable, net

Trade accountsreceivable- related 3,409,912 3,068,920 434,093party, net

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 - 217,600 - -related parties

Total current assets 97,824,268 129,281,873 18,286,679

Property and equipment, 3,661,321 29,756,879 4,209,055net

Construction in progress 21,524,994 - -

Land use right, net 1,307,887 1,280,648 181,145

Investment in 31,078,971 31,541,850 4,461,536unconsolidated entity

Long-term other 440,015 3,640 515receivables, net

Prepayments for 1,144,098 - -construction in progress

Operating leaseright-of-use assets(including ?Nil and ?803,503 - 2,549,914 360,681($113,654) from a relatedparty as of June 30, 2019and 2020, respectively)

Total Assets ? 156,981,554 ? 194,414,804 $ 27,499,611

LIABILITIES ANDSTOCKHOLDERS' 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 2,290,873 4,498,318 636,279parties

Contract Liabilities 120,000 3,486,033 493,093

Accrued payroll and 1,384,529 1,917,635 271,246employees' welfare

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 - 9,010,525 10,230,746 1,447,120related parties

Long-term borrowings -related party - current 780,797 847,346 119,856portion

Operating leaseliabilities - current(including ?Nil and ?450,728 - 1,328,976 187,981($63,755) from a relatedparty as of June 30, 2019and 2020, respectively)

Total Current Liabilities 42,084,370 65,181,175 9,219,754

Operating leaseliabilities - non-current(including ?Nil and ?352,775 - 1,210,088 171,165($49,899) from a relatedparty as of June 30, 2019and 2020, respectively)

Long-term borrowings - 8,196,204 7,379,253 1,043,782related party

Total Liabilities 50,280,574 73,770,516 10,434,701

Commitments andContingencies

Equity

Common stock, ($ 0.0925U.S. dollar par value,20,000,000 sharesauthorized; 4,361,634shares and 7,202,832 2,712,773 4,577,233 647,441shares issued andoutstandingas of June 30, 2019 andJune 30, 2020,respectively) *

Additional paid-in 250,624,798 282,505,455 39,959,870capital

Statutory reserve 4,148,929 4,148,929 586,858

Accumulated deficit (164,780,885) (184,027,586) (26,030,358)

Accumulated other 2,909,936 2,825,731 399,694comprehensive gain

Total stockholders' 95,615,551 110,029,762 15,563,505equity

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 ? 156,981,554 ? 194,414,804 $ 27,499,611Equity

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 - ? 84,135,037 ? 98,657,433 ? 65,760,651 $ 9,301,722third party

Revenues - 577,009 3,726,894 - -related party

Revenues 84,712,046 102,384,327 65,760,651 9,301,722

Cost ofrevenues

Cost ofrevenues - 80,097,834 70,316,198 46,154,255 6,528,433third party

Cost ofrevenues - 464,027 2,202,765 - -related party

Cost of 80,561,861 72,518,963 46,154,255 6,528,433revenues

Gross profit 4,150,185 29,865,364 19,606,396 2,773,289

Selling anddistribution 8,013,353 9,076,266 4,417,413 624,835expenses

General andadministrative 34,687,317 41,288,351 26,120,099 3,694,644expenses

Provision for(net recovery (841,242) 610,776 2,203,531 311,685of) doubtfulaccounts

Research anddevelopment 3,215,653 3,133,545 7,042,385 996,132expenses

Operating 45,075,081 54,108,938 39,783,428 5,627,296expenses

Loss from (40,924,896) (24,243,574) (20,177,032) (2,854,007)operations

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 (897,521) (1,589,045) (1,451,890) (205,367)expense

Income (loss)from investmentin - (959,905) 462,879 65,473unconsolidatedentity

Impairment lossof investmentin (4,037,736) - - -unconsolidatedentity

Foreignexchange (4,068) 56,603 (17,720) (2,506)transactiongain (loss)

Other income 65,539 162,585 78,417 11,092

Other income (4,434,108) (1,140,355) 336,750 47,633(expense), net

Loss before (45,359,004) (25,383,929) (19,840,282) (2,806,374)income tax

Income tax 16,230 398,477 282,322 39,934expenses

Net loss (45,375,234) (25,782,406) (20,122,604) (2,846,308)

Less: Net lossattributable to (1,302,913) (426,501) (875,903) (123,895)non-controllinginterests

Net lossattributable to ? (44,072,321) ? (25,355,905) ? (19,246,701) $ (2,722,413)ReconTechnology, Ltd

Comprehensiveloss

Net loss (45,375,234) (25,782,406) (20,122,604) (2,846,308)

Foreigncurrency 1,765,249 1,393,843 (84,205) (11,911)translationadjustment

Comprehensive (43,609,985) (24,388,563) (20,206,809) (2,858,219)loss

Less:Comprehensiveloss (1,302,913) (426,501) (875,903) (123,895)attributable tonon-controllinginterests

Comprehensivelossattributable to ? (42,307,072) ? (23,962,062) ? (19,330,906) $ (2,734,324)ReconTechnology,Ltd

Loss per commonshare - basic ? (19.19) ? (6.49) ? (4.16) $ (0.59)and diluted

Weighted -average shares 2,296,693 3,908,833 4,624,615 4,624,615-basic anddiluted

RECON TECHNOLOGY, LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended

2018 2019 2020 2020

RMB RMB RMB U.S. Dollars

Cash flows fromoperatingactivities:

Net loss ? (45,375,234) ? (25,782,406) ? (20,122,604) $ (2,846,308)

Adjustments toreconcile net lossto net cash usedinoperatingactivities:

Depreciation and 1,119,049 1,124,011 1,609,700 227,689amortization

Gain from disposal (78,285) - (89,156) (12,611)of equipment

Provision for (netrecovery of) (841,242) 610,776 2,203,531 311,685doubtful accounts

Provision for slow 65,245 65,380 56,817 8,037moving inventories

Amortization ofright of use - - 1,408,551 199,237assets

Reversal of - - (81,096) (11,471)interests expense

Restricted sharesissued for 15,462,124 21,288,204 7,944,835 1,123,782management andemployees

Loss (income) frominvestment in - 959,905 (462,879) (65,473)unconsolidatedentity

Impairment lossof investment in 4,037,736 - - -unconsolidatedentity

Restricted sharesissued for 3,050,896 845,781 33,927 4,799services

Changes inoperating assetsand liabilities:

Notes receivable 2,116,998 922,282 (1,107,205) (156,612)

Trade accounts 11,972,175 (40,461,376) 18,428,088 2,606,619receivable

Trade accountsreceivable-related - (3,409,912) - -party

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 - - (217,600) 217,600 30,779related parties

Operating lease - - (1,419,402) (200,772)liabilities

Trade accounts (2,706,304) (400,034) 8,205,660 1,160,675payable

Other payables (179,507) (861,620) (23,600) (3,338)

Otherpayables-related (102,563) (920,584) 2,207,445 312,239parties

Deferred revenue (1,174,585) - - -

Advance from 27,756 (37,856) 3,366,033 476,119customers

Accrued payrolland employees' 140,828 784,095 533,109 75,407welfare

Accrued expenses - - 9,425 1,333

Taxes payable (269,358) 1,748,934 (1,085,213) (153,501)

Net cash used inoperating (19,569,820) (32,212,172) (5,230,676) (739,873)activities

Cash flows frominvestingactivities:

Investment inunconsolidated (4,037,736) (4,205,080) - -entity

Purchases ofproperty and (1,503,410) (1,735,956) (85,974) (12,161)equipment

Proceeds fromdisposal of 32,000 - 900 127equipment

Payments for land (1,361,969) - - -use right

Repayments fromloans to third 435,250 1,000,000 11,239,623 1,589,824parties

Payments made forloans to third (1,960,000) (4,000,000) (9,480,000) (1,340,928)parties

Payments andprepayments for (9,157,103) (4,606,823) (3,782,912) (535,086)construction inprogress

Net cash used ininvesting (17,552,968) (13,547,859) (2,108,363) (298,224)activities

Cash flows fromfinancingactivities:

Proceeds fromshort-term bank 45,000 2,500,000 9,520,000 1,346,586loans

Repayments ofshort-term bank (45,000) - (2,500,000) (353,620)loans

Proceeds fromshort-term 4,600,000 1,081,096 200,000 28,290borrowings

Repayments ofshort-term (4,900,000) - (1,000,000) (141,448)borrowings

Proceeds fromshort-term 20,188,318 5,000,000 17,415,000 2,463,319borrowings-relatedparties

Repayments ofshort-term (21,332,036) (5,000,000) (16,195,000) (2,290,753)borrowings-relatedparties

Proceeds fromlong-term 10,000,000 - - -borrowings-relatedparty

Repayments oflong-term (371,975) (684,191) (747,630) (105,751)borrowings-relatedparty

Proceeds from saleof common stock, 65,004,531 - 26,141,051 3,697,603net of issuancecosts

Refund of capitalcontribution by a - (200,000) - -non-controllingshareholder

Capitalcontribution by 3,700,000 850,000 405,000 57,286non-controllingshareholders

Net cash providedby financing 76,888,838 3,546,905 33,238,421 4,701,512activities

Effect of exchangerate fluctuation 1,765,249 1,393,873 (84,203) (11,906)on cash

Net (decrease) 41,531,299 (40,819,253) 25,815,179 3,651,509increase in cash

Cash at beginning 3,809,279 45,340,578 4,521,325 639,533of year

Cash at end of ? 45,340,578 ? 4,521,325 ? 30,336,504 $ 4,291,042year

Supplemental cashflow information

Cash paid duringthe year for ? 868,042 ? 1,542,381 ? 1,400,462 $ 198,093interest

Cash paid(received) during ? (22,671) ? 2,002 ? 282,322 $ 39,934the year for taxes

Non-cash investingand financingactivities

Shares issued tosettle salary ? 1,554,908 ? - ? - $ -payable

Issuance of commonstock in exchangeof shares of FGS, ? ? 21,433,796 ? - $ -net of issuancecosts

Investment payablein exchange of ? - ? 6,400,000 ? - $ -interest of FGS

Right-of-useassets obtained inexchange for ? - ? - ? 1,228,963 $ 173,834operatinglease obligations

Inventories used ? - ? - ? 409,735 $ 57,956for fixed assets

Payable forconstruction in ? 3,096,781 ? 5,694,980 ? 732,513 $ 103,613progress

Receivable fordisposal of ? 81,900 ? - ? 110,000 $ 15,559property andequipment

Payable forissuance cost of ? - ? - ? 374,696 $ 53,000common stock

The accompanying notes are an integral part of these consolidated financialstatements.

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

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SOURCE Recon Technology, Ltd.