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Recon Reports Third Quarter 2012 Financial Results

Stocks in this article: RCON

Third Quarter 2012 Financial Results

Total revenues increased by 48.59% for the third quarter of fiscal year 2012. The overall increase of hardware sales was mainly attributable our recently developed products to new customers consisting mainly of Sinopec's subsidiaries. During the nine months ended March 31, 2012, total revenues decreased by 22.21% compared to the year before, of which the deconsolidation of ENI was responsible for a decrease of RMB18.68 million in hardware and hardware-related revenues. Separating out the deconsolidation of ENI, our operating revenue increased by 7.56%.

Gross profit increased by RMB4.79 million, or 332.69%, to RMB6.23 million ( $0.99 million) for the third quarter of fiscal year 2012. Gross profit as a percentage of revenues increased from 16.44% for the three months ended March 31, 2011 to 47.88% for the same period of 2012, which was due mainly to the higher gross profit margin of our new product based on horizontal well fracturing technology. Gross profit decreased by RMB3.02 million, or 14.50%, to RMB17.83 million ( $2.82 million) for the nine months ended March 31, 2012. Gross profit as a percentage of revenue increased from 33.23% for the nine months ended March 31, 2011 to 36.52% for the same period of 2012.

General and administrative expenses increased by RMB1.56 million, or 47.16%, from RMB3.30 million in three months ended March 31, 2011 to RMB4.86 million ( $0.77 million) in the same period of 2012, which was mainly attributable to increased expenses for research and development activities, and increased expenses related to staff wages in order to retain talented staff. General and administrative expenses decreased by RMB11.28 million, or 42.39%, from RMB26.60 million in the nine months ended March 31, 2011 to RMB15.33 million ( $2.42 million) in the same period of 2012, as a result of the deconsolidation of ENI offset by increased research and development expenses and increased professional and consulting fees.

Income from operations was RMB103,000 ($16,000) for the three months ended March 31, 2012, an increase of RMB3.39 million, or 103.15%, from a loss of RMB3.29 million for the same period of 2011, attributable mainly to the increased revenues and lower costs. Loss from operations was RMB1.04 million ($164,000) for the nine months ended March 31, 2012, an improvement of RMB11.22 million from a loss of RMB12.26 million for the same period of 2011. The decrease in losses from operations was attributable primarily to lower operating expenses.

Net income attributable to ordinary shareholders was RMB119,000 ($19,000) for the three months ended March 31, 2012, an increase of RMB2.13 million or 105.90%, from a loss of RMB2.01 million for same period of 2011, attributable mainly to increased gross profit. Net loss attributable to ordinary shareholders was RMB1.89 million ( $0.3 million) for the nine months ended March 31, 2012, an improvement of RMB19.95 million, or 91.35%, from a loss of RMB21.85 million for the same period of 2011, attributable mainly to lower operating expenses.

As of March 31, 2012, cash and cash equivalents was RMB2.36 million ( $0.37 million). Except for RMB6.93 million ( $1.1 million) of short-term borrowings and RMB9 million ( $1.42 million) of short-term bank loans, there were no other finance leases or hire purchase commitments, guarantees or other material contingent liabilities.

Net cash used in operating activities was RMB9.24 million ( $1.46 million) for the nine months ended March 31, 2012, an increase of RMB4.26 million from RMB4.98 million for the same period of 2011. The increase in the use of cash in the current period was due to an increase in trade accounts receivable and purchase advances, which resulted from increased business.

Net cash provided in financing activities was RMB8.77 million ( $1.39 million) for the nine months ended March 31, 2012, compared to net cash provided by financing activities amounting to RMB2.62 million for the same period of 2011. The increase in net cash provided by financing activities was mainly due to the increase of bank loans and short-term borrowings from related parties to supplement our working capital.

Net cash used in investing activities was RMB559,000 ($89,000) for the nine months ended March 31, 2012, a decrease of RMB1.84 million from RMB2.40 million for the same period of 2011. The decrease was mainly caused by a loss of cash due to the deconsolidation of ENI amounting to RMB2.23 million, while there was no such loss for the same period of 2012.

The current ratio decreased from 3.75 at June 30, 2011 to 2.68 at March 31, 2012. This was mainly caused by the increase in trade accounts payable, short-term bank loans and short-term borrowings.  



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