EX-99.3 6 v342911_ex99-3.htm EX-99.3

Exhibit 99.3

 

Recon Technology Reports Third Quarter Fiscal 2013 Financial Results

 

BEIJING, May 13, 2013 /PRNewswire-FirstCall/ -- Recon Technology, Ltd. (Nasdaq: RCON) ("Recon" or the "Company"), a Chinese non-state-owned oilfield services provider to oil and gas companies and their affiliates, today reported results for its third quarter of fiscal 2013 ended March 31, 2013.

 

Nine Month Financial Highlights

 

•Total revenue for the nine months ended March 31, 2013 increased 28% to RMB 62.5 million ($10.0 million).

 

•Gross profit for the nine months ended March 31, 2013 increased 16% to RMB 20.6 million ($3.3 million).

 

•Operating profit was RMB1.2 million ($0.2 million), up 214.6% compared to an operating loss of RMB1.0 million for the nine months ended March 31, 2012.

 

•Net profit attributable to ordinary shareholders for the nine months ended March 31, 2013 was RMB 1.7 million ($0.3 million), or RMB 0.43 ($0.07) per diluted share, as compared to net loss attributable to ordinary shareholders for the same period of FY2012 of RMB 2.0 million, or a loss of RMB 0.48 per diluted share.

 

Q3 FY2013 Financial Highlights

 

•Total revenue for the third quarter of FY2013 was RMB7.5 million ($1.2 million), a decrease of 42.4% from the same period of FY2012.

 

•Gross margin increased to 55.4% for the third quarter of FY2013 from 47.9% for the same period of FY2012.

 

•Net loss attributable to ordinary shareholders for the third quarter of FY2013 was RMB1.2 million ($0.2 million), or RMB0.32 ($0.05) per diluted share. Net income attributable to ordinary shareholders for the same period of FY2012 was RMB0.1 million or RMB0.03 per diluted share.

 

"Year to date in FY2013, our operating efficiency has continued to improve, which is reflected in our overall financial performance," said Mr. Yin Shenping, CEO of Recon. "The temporary revenue decline in the third quarter was mainly due to timing issues related to current project completion status, rather than any changes in business fundamentals.  As we complete outstanding projects, and assuming we obtain new contracts for our fracturing services and furnace business, we anticipate the coming quarters will reflect what we believe are positive results for our company."

 

Mr. Yin continued, "Since our IPO in 2009, we have successfully expanded our market penetration, including in the Sichuan Oilfield, Zhongyuan Oilfield and Jilin Oilfield. Our fracturing services were recently qualified at Sinopec, which gives us the opportunity to continue to expand this new service line beyond Sinopec's affiliate, Zhongyuan Oilfield. As we continue to capitalize on our position in China's fragmented oil services industry and broaden our integrated products and service offerings through R&D and collaboration with Chinese and international companies involved in the oilfield services industry, we believe Recon is well-positioned to continue to grow."

 

Q3 FY2013 Financial Results

 

Total revenue for the third quarter of FY2013 decreased by 42.4% to RMB7.5 million ($1.2 million) from RMB13.0 million for the same period of FY2012. The decline in revenue was mainly attributable to lower sales of automation equipment and service business as a result of unfinished projects.

 

Gross profit decreased to RMB4.2 million ($0.7 million) for the third quarter of FY2013, down 33.3% from the same period of FY2012. Gross margin increased to 55.4% for the third quarter of FY2013 from 47.9% for the same period of FY2012. This was mainly because software sales, which have higher gross margin, accounted for a higher percentage of total revenue during the third quarter of FY2013 compared to the same period in FY2012.

 

Selling and distribution expenses increased by 40.6% to RMB1.8 million ($0.3 million) for the third quarter of FY2013 from RMB1.3 million for the same period of FY2012. This increase was primarily due to increased business travelling expenses, bidding maintenance expenses. General and administrative expenses decreased by 5.4% to RMB4.0 million ($0.6 million) for the third quarter of FY2013 from RMB4.2 million for the same period of FY2012. Research and development expenses decreased by 16.6% to RMB0.6 million ($0.1 million) for the third quarter of FY2013 from RMB0.7 million for the same period of FY2012.

 

Loss from operations was RMB2.2 million ($0.3 million) for the third quarter of FY2013, compared to an income of RMB0.1 million for the same period of FY2012. This decrease in income from operations is attributed to the decrease in revenue and increase in SG&A expenses as a percentage of revenue.  

 

 
 

 

 

Net loss attributable to ordinary shareholders was RMB1.2 million ($0.2 million) for the third quarter of FY2013 versus net income of RMB0.1 million for the same period of FY2012. Diluted loss per share was RMB0.32 ($0.05) for the third quarter of FY2013, compared to diluted earnings per share of RMB0.03 ($0.005) for the same period of FY2012.

 

Adjusted EBITDA was (RMB0.1) million for the third quarter of FY2013, compared to RMB1.0 million for the same period of FY2012.

 

      For the Three Months Ended 
      March 31, 
Reconciliation of Adjusted EBITDA     2012      2013   2013 
to Net Income (Loss)     RMB      RMB   USD 
                      
Net income (loss)  RMB   259,106    RMB   (1,248,860)  $(198,812)
Provision for income taxes      132,883       (152,382)   (24,258)
Interest expense      225,718       618,473    98,458 
Stock compensation expense      259,164       451,572    71,888 
Depreciation, amortization and accretion      86,685       395,535    62,967 
                      
Adjusted EBITDA  RMB   954,305    RMB   64,338   $10,243 

 

As of March 31, 2013, cash and cash equivalents were RMB6.5 million ($1 million). Cash and cash equivalents consist of cash on hand, demand deposits and highly liquid short-term debt investments with stated maturities of no more than six months.

 

Year-to-Date FY2013 Financial Results

 

Total revenue for the nine months ended March 31, 2013 increased by 28.1% to RMB62.5 million ($10.0 million) from RMB48.8 million for the same period of FY2012, primarily driven by increased sales from the Hardware business as well as the Fracturing Service business.

 

Gross profit increased to RMB20.6 million ($3.3 million) for the nine months ended March 31, 2013, up 15.7% from the same period of FY2012. Gross margin decreased to 33.0% for the nine months ended March 31, 2013 from 36.5% for the same period of FY 2012. This was mainly related to margin contraction in our furnace business as a result of higher material and labor costs.

 

Selling and distribution expenses increased by 32.7% to RMB4.7 million ($0.7 million) for the nine months ended March 31, 2013 from RMB3.5 million for the same period FY 2012. This increase was primarily due to increased shipping costs and maintenance expenses. General and administrative expenses decreased by 15.5% to RMB8.5 million ($1.3 million) for the nine months ended March 31, 2013 from RMB10.0 million for the same period FY 2012. Research and development expenses were RMB6.3 million ($1 million) for the nine months ended March 31, 2013, up 18.2% from the same period of FY2012. Overall, operating expenses were RMB19.4 million ($3.1 million) for the nine months ended March 31, 2013, up 3.0% from the same period of FY2012.

 

Income from operations was RMB1.2 million ($0.2 million) for the nine months ended March 31, 2013, compared to a loss of RMB1.0 million for the same period of FY2012. This increase in income from operations can be attributed primarily to an increase in total revenue and decrease in general and administrative expenses as a percentage of total revenue.

 

Net income attributable to ordinary shareholders was RMB1.7 million ($0.3 million) for the nine months ended March 31, 2013, an improvement of RMB3.6 million from net loss of RMB1.9 million for the same period of FY2012. Diluted earnings per share was RMB0.43 ($0.07) for the nine months ended March 31, 2013, compared to diluted loss per share of RMB0.48 for the same period of FY2012.

 

Adjusted EBITDA was RMB5.9 million ($0.9 million) for the nine months ended March 31, 2013, 1,750.7% increased compared to RMB0.3 million for the same period of FY2012.

 

 
 

 

 

      For the Nine Months Ended 
      March 31, 
Reconciliation of Adjusted EBITDA     2012      2013   2013 
to Net Income (Loss)     RMB      RMB   USD 
                      
Net income (loss)  RMB   (1,564,708)   RMB   2,300,423   $366,218 
Provision for income taxes      345,964       302,550    48,164 
Interest expense      502,013       1,494,887    237,979 
Stock compensation expense      784,010       1,358,726    216,303 
Depreciation, amortization and accretion      252,842       467,914    74,490 
                      
Adjusted EBITDA  RMB   320,121    RMB   5,924,500   $943,154 

 

For the nine months ended March 31, 2012, net cash provided by operating activities was RMB17.3 million ($2.8 million). This was an increase of RMB26.5 million ($4.2 million) compared to net cash used in operating activities of RMB9.2 million for the same period of FY2012.  

 

Net cash used in financing activities amounted to RMB14.1 million ($2.2 million) for the nine months ended March 31, 2013, compared to net cash provided by financing activities of RMB8.8 million for the same period of FY2012. During the fiscal 2013 nine-month period, we repaid RMB21.7 million ($3.4 million) commercial bank loan and received a RMB8.35 million ($1.3 million) loan from two banks, which was guaranteed by one of our shareholders.

 

Net cash used in investing activities was RMB0.5 million ($0.1 million) for the nine months ended March 31, 2013, compared to RMB0.6 million for the same period of FY2012. The slight decrease was mainly due to approximately RMB0.2 million increase in proceeds from disposal of fixed assets and offset by approximately RMB0.1 million increase in purchase of property and equipment.

 

About Recon Technology, Ltd.

 

Recon Technology, Ltd. is a non-state-owned oil field service company in China. The company has been providing software, equipment and services designed to increase the efficiency and automation in oil and gas exploration, extraction, production and refinery for Chinese oil and gas fields for more than 10 years. More information may be found at http://www.recon.cn or e-mail: info@recon.cn.

 

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.

 

Contact:      

 

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

 

Investor Relations: Tina Xiao Weitian Group LLC Email: tina.xiao@weitian-ir.com Web: http://www.weitian-ir.com

 

 
 

 

 

RECON TECHNOLOGY, LTD
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

                 
  As of June 30,   As of March 31,   As of March 31,
  2012   2013   2013
ASSETS RMB   RMB   U.S. Dollars
Current assets                
Cash and cash equivalents  RMB 3,533,283   RMB 6,452,691   $ 1,027,237
Trade accounts receivable, net    61,993,942     49,012,257     7,802,512
Trade accounts receivable- related parties, net   20,394,749     17,693,490     2,816,717
Inventories, net   24,281,300     14,884,099     2,369,476
Other receivables, net    8,074,096     17,858,793     2,843,033
Other receivables- related parties   17,729     1,056,696     168,221
Purchase advances, net   16,250,616     21,687,064     3,452,475
Purchase advances- related parties   1,093,534     1,394,034     221,923
Tax recoverable   2,790,722     -     -
Prepaid expenses    535,336     809,686     128,898
Deferred tax asset   1,106,801     1,094,438     174,229
Total current assets   140,072,108     131,943,248     21,004,721
                 
Property and equipment, net   1,774,820     1,795,564     285,845
Long-term other receivable   10,302,349     5,228,053     832,280
Total Assets RMB 152,149,277   RMB 138,966,865   $ 22,122,846
                 
LIABILITIES AND EQUITY                 
Current liabilities                
Short-term bank loans RMB 23,000,000   RMB 9,697,048   $ 1,543,723
Trade accounts payable   11,905,560     6,262,528     996,964
Trade accounts payable- related parties   5,339,231     5,449,388     867,516
Other payables    2,341,826     2,290,687     364,666
Other payable- related parties   1,099,259     5,998,879     954,992
Deferred revenue   3,291,073     3,135,904     499,221
Advances from customers   936,124     1,181,120     188,029
Accrued payroll and employees' welfare   949,579     1,663,438     264,811
Accrued expenses   476,416     343,163     54,630
Taxes payable   9,681,620     6,693,590     1,065,587
Short-term borrowings- related parties   4,123,306     5,751,381     915,592
Short-term borrowings- other   2,767,066     570,375     90,801
Total current liabilities 65,911,060     49,037,501     7,806,532
                 
Commitments and Contingency                
                 
Equity                 
Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000 
shares authorized; 3,951,811 shares issued and outstanding as
of June 30, 2012 and March 31, 2013)   529,979     529,979     84,370
Additional paid-in capital   67,643,791     69,053,281     10,992,945
Appropriated retained earnings   2,378,961     2,378,961     378,719
Unappropriated retained earnings   9,354,535     11,051,996     1,759,424
Accumulated other comprehensive loss   (290,496)     (307,385)     (48,936)
Total controlling shareholders' equity   79,616,770     82,706,832     13,166,522
Non-controlling interest   6,621,447     7,222,532     1,149,792
Total equity   86,238,217     89,929,364     14,316,314
Total Liabilities and Equity RMB 152,149,277   RMB 138,966,865   $ 22,122,846

 

 

 
 

 

 

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,
  2012   2013   2013   2012   2013   2013
  RMB   RMB   USD   RMB   RMB   USD
                                   
Revenues                                  
Hardware RMB 30,162,440   RMB 30,766,627   $ 4,897,897   RMB 6,997,916   RMB 4,161,583   $ 662,504
Service   5,547,005     20,567,637     3,274,267     1,990,000     62,678     9,978
Software   3,952,991     5,192,712     826,654     -     -     -
Software - related parties   -     2,273,504     361,931     -     2,273,504     361,931
Hardware - related parties   9,143,503     3,736,107     594,770     4,031,206     1,004,030     159,837
Total revenues   48,805,939     62,536,587     9,955,519     13,019,122     7,501,795     1,194,250
                                   
Cost of revenues   30,979,868     41,915,938     6,672,812     6,786,052     3,346,344     532,722
Gross profit   17,826,071     20,620,649     3,282,707     6,233,070     4,155,451     661,528
                                   
                                   
Selling and distribution expenses   3,537,806     4,693,193     747,133     1,273,126     1,790,199     284,991
General and administrative expenses   10,008,519     8,452,540     1,345,603     4,193,772     3,966,782     631,492
Research and development expenses   5,318,048     6,284,834     1,000,515     662,743     552,645     87,978
Operating expenses   18,864,373     19,430,567     3,093,251     6,129,641     6,309,626     1,004,461
                                   
                                   
Income (loss) from operations   (1,038,302)     1,190,082     189,456     103,429     (2,154,175)     (342,933)
                                   
Other income (expenses)                                  
Subsidy income   554,856     2,143,669     341,262     540,756     1,343,669     213,906
Interest income   3,089     443,391     70,586     286     137,803     21,938
Interest expense   (502,013)     (1,494,887)     (237,979)     (225,718)     (618,473)     (98,458)
Gain from foreign currency exchange   -     339,876     54,107     -     (185)     (29)
Other income (expense)   (236,374)     (19,158)     (3,050)     (26,764)     (109,881)     (17,493)
                                   
Income (loss) before income tax   (1,218,744)     2,602,973     414,382     391,989     (1,401,242)     (223,069)
Provision (benefit) for income tax   345,964     302,550     48,164     132,883     (152,382)     (24,258)
Net Income (loss)   (1,564,708)     2,300,423     366,218     259,106     (1,248,860)     (198,811)
                                   
Less: Net income attributable to non-controlling interest   325,867     602,961     95,988     140,410     (2,127)     (339)
Net Income (loss) attributable to Recon Technology, Ltd RMB (1,890,575)   RMB 1,697,462   $ 270,230   RMB 118,696   RMB (1,246,733)   $ (198,472)
                                   
Comprehensive income (loss)                                  
Net income (loss)   (1,564,708)     2,300,423     366,218     259,106     (1,248,860)     (198,811)
Foreign currency translation adjustment   (119,795)     (16,889)     (2,689)     (119,973)     (717)     (114)
Comprehensive income (loss)   (1,684,503)     2,283,534     363,529     139,133     (1,249,577)     (198,925)
Less: Comprehensive income attributable to non-controlling interest   313,888     601,084     95,690     128,449     (2,207)     (351)
Comprehensive income (loss) attributable to Recon
Technology, Ltd RMB (1,998,391)   RMB 1,682,450   $ 267,839    RMB  10,684   RMB (1,247,370)   $ (198,574)
                                   
Earning (loss) per common share - basic and diluted RMB (0.48)   RMB 0.43   $ 0.07   RMB 0.03   RMB (0.32)   $ (0.05)
Weighted - average shares -basic and diluted   3,951,811     3,951,811     3,951,811     3,951,811     3,951,811     3,951,811

 

 
 

 

 

RECON TECHNOLOGY, LTD 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
                 
  For the nine months ended March 31,
  2012   2013   2013
  RMB   RMB   U.S. Dollars
                 
Cash flows from operating activities:                
Net income (loss) RMB (1,564,708)   RMB 2,300,423   $ 366,218
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:                
Depreciation   252,842     467,914     74,490
Loss from disposal of equipment   18,887     26,845     4,274
Provision/(recovery of) for doubtful accounts   1,695,435     (82,420)     (13,121)
Stock based compensation   784,010     1,358,726     216,303
Deferred tax (benefit)/provision    (315,125)     12,363     1,968
Changes in operating assets and liabilities:                
Trade accounts receivable   (16,718,352)     13,156,606     2,094,467
Trade accounts receivable-related parties   -     2,701,259     430,027
Notes receivable   1,276,574     -     -
Other receivable, net   2,301,650     (4,641,896)     (738,968)
Other receivables related parties, net   -     (1,038,967)     (165,398)
Purchase advance, net   (10,691,586)     (5,597,453)     (891,087)
Purchase advance-related party, net   -     (300,500)     (47,838)
Tax recoverable   -     2,790,722     444,269
Prepaid expense   (1,409,973)     (274,350)     (43,675)
Inventories   6,586,927     9,397,201     1,495,988
Trade accounts payable   6,462,714     (5,643,032)     (898,343)
Trade accounts payable-related parties   -     110,157     17,536
Other payables   2,087,020     (51,139)     (8,141)
Other payables-related parties   -     4,899,620     779,996
Deferred income   (899,460)     (155,169)     (24,702)
Advances from customers   30,705     244,996     39,002
Accrued payroll and employees' welfare   (41,042)     713,859     113,643
Accrued expenses   (34,268)     (133,253)     (21,213)
Taxes payable   934,906     (2,988,030)     (475,680)
Net cash provided by (used in) operating activities   (9,242,844)     17,274,482     2,750,015
                 
Cash flows from investing activities:                
Purchase of property and equipment   (564,831)     (676,504)     (107,696)
Proceeds from disposal of equipment   4,900     161,000     25,630
Net cash used in investing activities   (559,931)     (515,504)     (82,066)
                 
Cash flows from financing activities:                
Proceeds from short-term bank loans   9,000,000     8,350,000     1,329,279
Repayments of short-term bank loans   (5,000,000)     (21,652,952)     (3,447,044)
Proceeds from short-term borrowings   574,597     -     -
Proceeds from borrowings-related parties   4,198,901     3,658,102     582,352
Repayment of  short-term borrowings   (500,000)     (2,275,764)     (362,290)
Repayment of short-term borrowings-related parties   -     (2,232,477)     (355,399)
Capital contribution in VIE   500,000     20,000     3,184
Net cash provided by (used in) financing activities   8,773,498     (14,133,091)     (2,249,918)
                 
Effect of exchange rate fluctuation on cash and cash equivalents   (100,863)     293,521     46,724
                 
Net increase (decrease in) cash and cash equivalents   (1,130,140)     2,919,408     464,755
Cash and cash equivalents at beginning of period   3,485,944     3,533,283     562,482
Cash and cash equivalents at end of period RMB 2,355,804   RMB 6,452,691   $ 1,027,237
                 
                 
Supplemental cash flow information                
Cash paid during the period for interest RMB 334,014   RMB 1,356,581   $ 215,961
Cash paid during the period for taxes RMB 481,723   RMB 832,028   $ 132,455