20-F/A: Recon Technology Reports FY2023 Results, Amends 20-F Filing to Reflect Reverse Stock Split

Recon Technology amends its annual report on Form 20-F for the fiscal year ended June 30, 2023, to reflect a one-for-eighteen reverse stock split and changes in capital structure.

Summary

• Recon Technology has filed Amendment No. 2 on Form 20-F/A to its annual report for the fiscal year ended June 30, 2023.
• The amendment reflects a one-for-eighteen reverse stock split of the company's Class A Ordinary Shares, effective May 1, 2024.
• The company's shareholder also approved a change in capital structure on March 29, 2024.
• The authorized share capital was changed to US$58,000 divided into 500,000,000 Class A Ordinary Shares and 80,000,000 Class B Ordinary Shares, each with a par value of US$0.0001.
• The amendment also updates Items 3, 6, 7, 10, 16, 18, and 19 in the Form 20-F.
• Revenue for the year ended June 30, 2023, was RMB 67,114,378.
• Net loss attributable to Recon Technology, Ltd was RMB (59,167,301).
• Basic and diluted loss per share were RMB (27.43).
• Weighted average number of Class A and Class B Ordinary Shares used in computation was 2,157,158.
• Total assets as of June 30, 2023, were RMB 531,824,577.
• Total liabilities were RMB 92,673,674.
• Total shareholders' equity was RMB 449,206,962.
• The company employed 188 full-time employees as of June 30, 2023.

Sentiment

Score: 4

Explanation: The document contains both positive and negative elements. The reverse stock split and capital structure changes are neutral events, while the reported net loss is a negative indicator. The company's future outlook is uncertain due to the ongoing impact of COVID-19.

Positives

• The company has a new high-technology company certificate for Nanjing Recon Technology Co., Ltd. approved as of October 12, 2022, which will expire on October 12, 2025.
• The company has a high-technology company certificate for Beijing BHD Petroleum Technology Co., Ltd. approved as of December 17, 2021, which will expire on December 17, 2024.

Negatives

• The company reported a net loss attributable to Recon Technology, Ltd of RMB (59,167,301) for the year ended June 30, 2023.
• The company has a significant amount of unprotected cash held in banks in the PRC and Hong Kong.
• The company is involved in legal proceedings with Henan Puxinfangfu Construction Engineering Co., Ltd. and Jiuquan Third Construction and Installation Engineering Company.

Risks

• The company operates in a competitive industry and may not be able to maintain its revenue and profitability.
• The company must continually research and develop new technologies and products to remain competitive.
• The company's financial performance is dependent upon the sale and implementation of petroleum mining and extraction software and hardware and related services, a single, concentrated group of products.
• The company's revenue is highly dependent on a very limited number of customers, which subjects its business to high seasonality.
• Changes in environmental and regulatory factors may harm the company's business.
• The company is heavily dependent upon the services of experienced personnel who possess skills that are valuable in its industry, and it may have to actively compete for their services.
• The company is substantially dependent upon its key personnel, particularly Mr. Yin Shenping, its Chief Executive Officer, Mr. Chen Guangqiang, its Chief Technology Officer and Ms. Liu Jia, its Chief Financial Officer.
• The company is a holding company with no operations of its own and substantially all of its operations are conducted through Nanjing Recon and BHD, which are established as variable interest entities (VIEs) under the laws of the PRC.
• The recent state government interference into business activities on U.S. listed Chinese companies may negatively impact the company's existing and future operations in China.
• The company's shares may be delisted under the Holding Foreign Companies Accountable Act if the PCAOB is unable to inspect the company's auditors for three consecutive years beginning in 2021.
• The Chinese government exerts oversight and control over overseas offerings and listing conducted by China-based issuers under the Listing Records Rules and/or the Confidentiality Provisions, which could significantly limit or completely hinder the company's ability to offer or continue to offer its Class A Ordinary Shares to investors and could cause the value of its Class A Ordinary Shares to significantly decline or become worthless.
• Changes in China's economic, political or social conditions or government policies could have a material adverse effect on the company's future business and operations.
• The company may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption law.
• The company may be subject to a variety of laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material and adverse effect on its business, financial condition and results of operations.
• Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us.
• The company may be subject to foreign exchange controls in the PRC.
• Fluctuations in exchange rates could adversely affect the value of the company's securities.
• PRC regulations and potential registration requirements relating to acquisitions of PRC companies by foreign entities may create regulatory uncertainties that could restrict or limit the company's ability to operate.
• PRC registration requirements for stock option plans of overseas publicly-listed companies may restrict the company's ability to adopt equity compensation plans for its directors and employees or otherwise limit its PRC subsidiaries' ability to distribute profits to us.
• The Chinese government could change its policies toward private enterprise or even nationalize or expropriate private enterprises, which could result in the total loss of our investment in that country.
• The company may be unable to establish and maintain an effective system of internal control over financial reporting, and as a result it may be unable to accurately report its financial results or prevent fraud.
• The recent joint statement by the SEC, proposed rule changes submitted by NASDAQ, and an act passed by the U.S. Senate and the U.S. House of Representatives, all call for additional and more stringent criteria to be applied to emerging market companies.
• The market price for the company's securities may be volatile, which could result in substantial losses to investors.
• NASDAQ may apply additional and more stringent criteria for the company's continued listing.

Future Outlook

The extent of the future impact of COVID-19 is still highly uncertain and cannot be predicted, but the company doesn't expect a significant impact on the company's operations and financial results in a long run.

Industry Context

The document provides insight into the financial performance and corporate actions of a company operating in the Chinese energy industry, which is subject to government regulations and economic conditions in China.

Legal Proceedings

• Henan Puxinfangfu Construction Engineering Co., Ltd. submitted a Civil Complaint to the Peoples Court of Suzhou District, Jiuquan City, Gansu Province against Gan Su BHD.
• On January 9, 2023, the Peoples Court of Yumen City, Gansu Province issued its civil judgement, pursuant to which the Company is required to pay the Plaintiff a settlement payment totaling approximately 1.80 million.
• Jiuquan Third Construction and Installation Engineering Company submitted a Civil Complaint to the Peoples Court of Yumen, Jiuquan City, Gansu Province against Gan Su BHD.
• On August 25, 2023, the Company entered into a Settlement Agreement with the Plaintiff, pursuant to which the Company needs to pay the Plaintiff a total sum of 2.8 million as settlement payment.

Related Party Transactions

• The company had sales to a related party, Urumqi Yikeli Automatic Control Equipment Co., Ltd., of RMB 85,657 for the year ended June 30, 2021.
• The company had other payables to related parties of RMB 2,592,395 as of June 30, 2023.
• The company had short-term borrowings due to related parties of RMB 20,018,222 as of June 30, 2023.
• The company had long-term borrowings due to a related party of RMB 5,511,076 as of June 30, 2022.
• The company has various agreements for the lease of office space owned by the Founders and their family members.
• The Companys founders provide guarantee and collateral for the Companys short-term bank loans.

Stakeholder Impact

• Shareholders will be affected by the reverse stock split and changes in capital structure.
• Employees may be affected by the company's ability to compete in the industry and retain skilled personnel.
• Customers may be affected by the company's ability to continually improve its software and hardware to address the changing needs of the Chinese petroleum industry.
• Suppliers may be affected by the company's ability to fulfill its obligations under purchase contracts.

Key Dates

Keywords

Reverse stock split, Financial results, Capital structure, Form 20-F, Recon Technology, Amendment, Financials, China