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Recon Technology, Ltd. Reports Fiscal Year 2015 Financial Results

BEIJING, Sept. 25, 2015 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported its financial results for the fiscal year 2015, which ended June 30, 2015.

FY2015 Financial Highlights:

  • Total revenues for FY2015 were RMB51.5 million ($8.5 million), a decrease of 44.9% from FY2014.
  • Gross profit for FY2015 was RMB10.1million ($1.7 million), a decrease of 68.8% from FY2014. Gross margin was 19.6% for FY2015 compared to 34.7% for FY2014.
  • Operating loss was RMB35.5 million ($5.8 million) for FY2015, compared to operating income of RMB2.8 million for FY2014.
  • Net loss attributable to Recon for FY2015 was RMB31.5 million ($5.2 million), or RMB6.45 ($1.06) per diluted share, compared to net income attributable to Recon of RMB0.8 million, or RMB0.18 per diluted share, for FY2014.
  • Adjusted EBITDA (non-GAAP) was negative RMB10.8 million ($1.8 million) for FY2015, compared to positive RMB8.8 million for FY2014.
  • Adjusted net loss attributable to Recon was RMB9.9 million ($1.6 million), or RMB2.03 ($0.33) per diluted shares, for FY2015, compared to adjusted net income attributable to Recon of RMB5.1 million, or RMB1.17 per diluted share, for FY2014.

Mr. Shenping Yin, Chairman and CEO of Recon stated, "The past twelve months have been difficult for us as our major customers cut their capital budgets, canceled or delayed new projects in light of slowing domestic production for oil and gas and plunges in oil and gas prices. As a result, we faced continued challenges throughout the fiscal year of 2015 and saw declines in overall revenues for the first time in the Company history. While the oil and gas industry is likely to continue to face multifaceted challenges in the near term, we firmly believe that we are well prepared to withstand the storm and to capitalize on an eventual recovery of the oil and gas industry."  

FY2015 Financial Results

Revenues















For the Twelve Months Ended June 30,



2014


2015


2015


%

(thousands)


RMB


RMB


USD


Change

Revenues


RMB

93,447


RMB

51,513


RMB

8,460


-44.9%

Hardware and software



86,229



48,981



8,044


-43.2%

Service



478



104



17


-78.3%

Hardware and software - related parties



6,740



2,428



399


-64.0%

Gross margin



34.7%



19.6%



NM  


-15.1%

Operating (loss) margin



3.0%



-68.9%



-68.9%


NM

Net income (loss) attributable to RCON



807



(31,456)



(5,166)


NM

Diluted earnings (loss) per share



0.18



(6.45)



(1.06)


NM

For the twelve months ended June 30, 2015, total revenues decreased by RMB41.9 million, or 44.9%, to RMB51.5 million ($8.5 million) from RMB93.4 million for the same period of last fiscal year as a result of weakness across all of our businesses, particularly during the first half of fiscal year 2015. Revenues from non-related party hardware and software sales decreased by RMB37.2 million, or 43.2%, to RMB49.0 million ($8.0 million) for the twelve months ended June 30, 2015, compared to RMB86.2 million for the same period of last fiscal year. Revenues from related-party hardware and software sales decreased by RMB4.3 million, or 64.0%, to RMB2.4 million ($0.4 million) for the twelve months ended June 30, 2015, compared to RMB6.7 million for the same period of last fiscal year. Revenues from service decreased by RMB0.4 million, or 78.3%, to RMB0.1 million ($0.02 million) for the twelve months ended June 30, 2015, compared to RMB0.5 million for the same period of last fiscal year.

Gross profit and gross margin

Gross profit decreased by RMB22.3million, or 68.8%, to RMB10.1 million ($1.7 million) for the twelve months ended June 30, 2015 from RMB32.4 million for the same period of last fiscal year. Overall gross margin was 19.6% for the twelve months ended June 30, 2015, compared to 34.7% for the same period of last fiscal year.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses increased by RMB6.0 million, or 113.7%, to RMB11.3 million ($1.9 million) for the twelve months ended June 30, 2015 from RMB5.3 million for the same period of last fiscal year. General and administrative expenses increased by RMB13.9 million, or 86.1%, to RMB30.1 million ($5.0 million) for the twelve months ended June 30, 2015 from RMB16.2 million for the same period of last fiscal year. Research and development expenses decreased by RMB3.9 million, or 48.5%, to RMB4.2 million ($0.7 million) for the twelve months ended June 30, 2015 from RMB8.1 million for the same period of last fiscal year. Total operating expenses increased by RMB16.0 million, or 54.2%, to RMB45.6 million ($7.5 million) for the twelve months ended June 30, 2015 from RMB29.6 million for the same period of last fiscal year.

Operating loss was RMB35.5 million ($5.8million) for the twelve months ended June 30, 2015, compared to operating income of RMB2.8 million for the same period of last fiscal year. Operating loss margin was 68.9% for the twelve months ended June 30, 2015, compared to operating margin of 3.0% for the same period of last fiscal year. 

Net income (loss)

Net loss for the twelve months ended June 30, 2015 was RMB31.5 million ($5.2 million), compared to net income of RMB1.8 million for the same period of last fiscal year. After deduction of non-controlling interest, net loss for our shareholders was RMB31.5 million ($5.2 million), or RMB6.45 ($1.06) per diluted share, for the twelve months ended June 30, 2015, compared to net income attributable to our shareholders of RMB0.8 million, or RMB0.18 per diluted share, for the same period of last fiscal year. 

Non-GAAP Measures



For the Twelve Months Ended June 30,



2014


2015


2015

(thousands)


RMB


RMB


USD

Net income (loss)


 RMB

1,828


 RMB 

(31,456)


$

(5,166)

Provision for income taxes



961



(2,552)



(419)

Interest expenses and foreign currency adjustment



1,141



1,130



186

Change in fair value of warrants liability



(61)



(4,034)



(663)

Write down of accounts receivable



-



10,684



1,755

Provision for slow moving inventories



-



7,701



1,265

Loss from investment



1,535



-



-

Restricted shares issued for consulting services



408



1,585



260

Loss from warrants redemption



-



2,496



410

Stock compensation expense



2,429



3,123



513

Depreciation and amortization



596



526



86

Adjusted EBITDA



8,837



(10,797)



(1,773)











Net income (loss) attributable to RCON



807



(31,456)



(5,166)

Change in fair value of warrants liability



(61)



(4,034)



(663)

Loss from investment



1,535



-



-

Restricted shares issued for consulting services



408



1,585



260

Write down of accounts receivable



-



10,684



1,755

Provision for slow moving inventories



-



7,701



1,265

Loss from warrants redemption



-



2,496



410

Stock compensation expense



2,429



3,123



513

Adjusted net income (loss) attributalbe to RCON



5,118



(9,901)



(1,626)

Adjusted earnings per diluted share



1.17



(2.03)



(0.33)

Adjusted EBITDA (non-GAAP), which we define as net income (loss) adjusted for income tax expense, interest expense, one-time write down expenses, provision for slow moving inventories, loss from investment, non-cash stock compensation expense, depreciation and amortization, was negative RMB10.8 million ($1.8 million) for the twelve months ended June 30, 2015, compared to RMB8.8 million for the same period of last fiscal year. Adjusted net loss attributable to our shareholders was RMB9.9 million ($1.6 million), or RMB2.03 ($0.33) per diluted shares, for the twelve months ended June 30, 2015, compared to adjusted net income attributable to our shareholders of RMB5.1 million, or RMB1.16 per diluted share, for the same period of last fiscal year.

Financial Position  

As of June 30, 2015, the Company had cash and cash equivalents of RMB12.3 million ($2.0 million), short-term bank loans of RMB7.0 million ($1.1 million), and short-term borrowings from related parties of RMB16.9 million ($2.8 million), compared to RMB18.1 million, RMB10.0 million, and RMB5.2 million, respectively, at June 30, 2014. Working capital as of June 30, 2015 was RMB72.4 million ($11.9 million) as compared to RMB83.1 million at June 30, 2014. Net cash used in operating activities was RMB15.1 million ($2.5 million) for the twelve months ended June 30, 2015, compared to RMB8.0 million for the same period of last fiscal year. Net cash used in investing activities was RMB1.7 million ($0.3 million) for the twelve months ended June 30, 2015, compared to RMB0.3 million for the same period of last fiscal year. Net cash provided by financing activities was RMB11.1 million ($1.8 million) for the twelve months ended June 30, 2015, compared to RMB14.0 million for the same period of last fiscal year. During the fiscal year twelve-month period, we repaid RMB3.0 million ($0.5 million) in short term bank loans and received RMB11.7 million ($1.9 million) net proceeds from a related party. In June 2015, we had stock offerings to issue 297,197 shares of common stocks through an at-the-market offering, and received net proceeds of RMB2.3 million ($0.4 million).

Recent Development 

On August 6, 2015, the Company announced that it will set up a scientific research and training base (the "Workstation") in collaboration with the College of Information Science & Technology of Nanjing Agricultural University ("CIST-NAU").  With current enrollment of over 26,400 full-time students, including over 9,400 full-time master's and doctoral students, NAU is a premier university under the administration of Ministry of Education. Often ranked among the nation's top 100 universities, NAU is a national key university with both Project 211 and Project 985 designations.

On July 29, 2015, the Company entered into a memorandum of understanding (the "MOU") with Qinghai Huayou Downhole Technologies Co., Ltd. ("QHHY"), a PRC corporation and oilfield service provider in Qinghai province, to acquire 100% stake in QHHY with a combination of cash and the Company stock (the "Transaction"). The terms and conditions of a definitive agreement are currently being negotiated between the two parties. Further details will be disclosed upon completion of the definitive agreement.

On June 17, 2015, the Company announced that Wednesday, June 3, 2015's issue of the Wall Street Journal included an article entitled, "Six Faces in the Race to Pump More Oil" (the "Article"). Mr. Shenping Yin, Chairman and Chief Executive Officer of Recon, was among the "Six Faces" featured in the Article. The Article can be found at: http://graphics.wsj.com/global-oil-men.

On June 10, 2015, the Company announced that it had received Contractor (Subcontractor) Qualification (the "Qualification") from Jianghan Oilfield Construction Engineering Company ("JOCEC"), a subsidiary of China Petroleum & Chemical Corporation (NYSE: SNP) ("Sinopec"). The Qualification, which is valid for one year from June 4, 2015 and extendable on a yearly basis thereafter, qualifies Recon as a general contractor (subcontractor) to participate in certain construction and engineering projects at JOCEC ranging from the expansion and renovation of existing facilities to the construction of new facilities.  In connection with the Qualification, the Company also announced that it has secured a contract with JOCEC worth approximately RMB550,000.

About Recon

Recon Technology, Ltd. is China's first independent oil and gas field service company listed on NASDAQ (RCON). Working closely with leading global partners, Recon has achieved rapid growth supplying China's largest oil and gas exploration companies, including Sinopec and China National Petroleum Corporation, with advanced automated technologies, efficient gathering and transportation equipment and reservoir stimulation measures. The solutions Recon provides are aimed at increasing gas and petroleum extraction levels, reducing impurities, improving safety and lowering production costs. For additional information, please visit www.recon.cn.

Cautionary Statements

Statements made in this release with respect to Recon's current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Recon. Forward-looking statements include, but are not limited to, those statements using words such as "believe," "expect," "plans," "strategy," "prospects," "forecast," "estimate," "project," "anticipate," "aim," "intend," "seek," "may," "might," "could" or "should," and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management's assumptions, judgments and beliefs in light of the information currently available to it. Recon cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, 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. Therefore investors should not place undue reliance on such forward-looking statements. Actual results may differ significantly from those set forth in the forward-looking statements. 

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

Recon Technology, Ltd.
Ivy Xia
Tel: +86-10-8494-5799
Email: [email protected]

Weitian Investor Relations
Tina Xiao
Tel: +1-917-609-0333
Email: [email protected]

RECON TECHNOLOGY, LTD

CONSOLIDATED BALANCE SHEETS











As of June 30,


As of June 30,


As of June 30,


2014


2015


2015

ASSETS

RMB


RMB


U.S. Dollars

Current assets









Cash and cash equivalents 

RMB

18,094,586


RMB

12,344,929


$

2,027,481

Notes receivable


-



4,205,530



690,699

Trade accounts receivable, net 


43,553,737



52,186,397



8,570,884

Trade accounts receivable- related parties, net


7,479,298



4,769,800



783,373

Inventories, net


14,336,602



10,845,007



1,781,140

Other receivables, net 


18,293,043



18,064,568



2,966,852

Other receivables- related parties


1,414,433



91,021



14,949

Purchase advances, net


25,759,065



18,622,538



3,058,490

Purchase advances- related parties


394,034



394,034



64,715

Prepaid expenses 


2,634,664



826,314



135,711

Prepaid expenses - related parties


230,000



420,000



68,979

Deferred tax asset


1,209,961



1,742,098



286,115

Total current assets


133,399,423



124,512,236



20,449,388










Property and equipment, net


1,321,538



2,666,953



438,010

Long-term trade accounts receivable, net





4,440,665



729,317

Long-term trade accounts receivable - related parties, net


14,456,317



-



-

Long-term other receivable


5,353,104



2,729,033



448,205

Total Assets

RMB

154,530,382


RMB

134,348,887


$

22,064,920










LIABILITIES AND EQUITY 









Current liabilities









Short-term bank loans

RMB

10,000,000


RMB

7,000,000


$

1,149,652

Trade accounts payable


11,413,505



13,627,088



2,238,058

Trade accounts payable- related parties


-



3,528,705



579,540

Other payables 


1,765,079



2,103,057



345,398

Other payable- related parties


3,306,024



4,309,702



707,808

Deferred revenue


4,419,824



2,285,529



375,366

Advances from customers


801,385



529,700



86,996

Accrued payroll and employees' welfare


417,624



246,789



40,532

Accrued expenses


203,051



199,166



32,715

Taxes payable


7,589,846



1,153,216



189,400

Short-term borrowings - related parties


5,207,728



16,916,905



2,778,364

Deferred tax liability


180,186



180,186



29,593

Warrants liability 


5,021,621



-



-

Total current liabilities


50,325,873



52,080,043



8,553,422










Equity









Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000
and 100,000,000 shares authorized as of June 30, 2014 and
2015 respectively
; 4,717,336 and 5,427,946 shares issued and
outstanding as of June 30, 2014 and June 30, 2015,
respectively)


616,865



697,217



114,508

Additional paid-in capital


83,061,058



92,541,687



15,198,674

Appropriated retained earnings


4,148,929



4,148,929



681,403

Unappropriated retained earnings


8,431,453



(23,024,935)



(3,781,526)

Accumulated other comprehensive loss


(279,275)



(317,551)



(52,155)

Total shareholders' equity


95,979,030



74,045,347



12,160,904

Non-controlling interest


8,225,479



8,223,497



1,350,594

Total equity


104,204,509



82,268,844



13,511,498

Total Liabilities and Equity

RMB

154,530,382


RMB

134,348,887


$

22,064,920




























The accompanying notes are an integral part of these consolidated financial statements

 

 

 

RECON TECHNOLOGY, LTD

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)











For the years ended


June 30,


2014


2015


2015


RMB


RMB


USD










Revenues









Hardware and software

RMB

86,229,283


RMB

48,980,953


$

8,044,435

Service


477,778



103,774



17,043

Hardware and software - related parties


6,740,047



2,428,173



398,793

Total revenues


93,447,108



51,512,900



8,460,271










Cost of revenues









Hardware and software

RMB

57,333,670


RMB

33,672,729


$

5,530,273

Service


77,107



-



0

Hardware and software - related parties


3,619,470



27,161



4,461

Provision for slow moving inventories


-



7,700,837



1,264,755

Total cost of revenues


61,030,247



41,400,727



6,799,489

Gross profit


32,416,861



10,112,173



1,660,782



















Selling and distribution expenses


5,293,343



11,312,452



1,857,912

General and administrative expenses


16,198,947



30,147,141



4,951,245

Research and development expenses


8,094,333



4,168,813



684,669

Operating expenses


29,586,623



45,628,406



7,493,826





















2,830,238



(35,516,233)



(5,833,044)










Other income (expenses)









Subsidy income


1,250,509



781,457



128,343

Interest income


384,182



293,499



48,203

Interest expense


(952,574)



(1,110,451)



(182,376)

Loss from investment


(1,535,250)



-



-

Change in fair value of warrants liability


60,647



4,034,272



662,573

Loss from foreign currency exchange


(188,495)



(19,190)



(3,152)

Loss from warrants redemption


-



(2,496,375)



(409,995)

Other expense


939,699



24,558



4,033










Income (loss) before income tax


2,788,956



(34,008,463)



(5,585,415)

Provision (benefit) for income tax


961,136



(2,552,075)



(419,143)

Net Income (loss)


1,827,820



(31,456,388)



(5,166,272)










Less: Net income attributable to non-controlling interest


1,020,632



-



-

Net Income (loss) attributable to Recon Technology, Ltd

RMB

807,188


 RMB 

(31,456,388)


$

(5,166,272)










Comprehensive income (loss)









Net income (loss)


1,827,820



(31,456,388)



(5,166,272)

Foreign currency translation adjustment


17,783



(38,276)



(6,286)

Comprehensive income (loss)


1,845,603



(31,494,664)



(5,172,558)

Less: Comprehensive income attributable to non-controlling interest


1,022,410



(1,982)



(326)

Comprehensive income (loss) attributable to Recon Technology, Ltd

RMB

823,193


 RMB 

(31,492,682)


$

(5,172,232)










Earnings (loss) per common share - basic 

RMB

0.19


RMB

(6.45)


$

(1.06)

Earnings (loss) per common share - diluted

RMB

0.18


RMB

(6.45)


$

(1.06)

Weighted - average shares -basic 


4,303,955



4,876,504



4,876,504

Weighted - average shares - diluted


4,368,162



4,876,504



4,876,504










The accompanying notes are an integral part of these consolidated financial statements

 

 

 

RECON TECHNOLOGY, LTD 

CONSOLIDATED STATEMENTS OF CASH FLOWS 











For the years ended


2014


2015


2015


RMB


RMB


U.S. Dollars










Cash flows from operating activities:









Net income (loss)

RMB

1,827,820


RMB

(31,456,388)


$

(5,166,272)

Adjustments to reconcile net income (loss) to net cash used
in operating activities:









Depreciation


595,647



526,046



86,396

Loss (Gain) from disposal of  equipment


128,902



(193,657)



(31,805)

Provision for doubtful accounts


1,518,778



3,252,868



534,238

Provision for slow moving inventories


-



7,700,836



1,264,754

Share based compensation


2,429,028



3,123,417



512,977

Loss from investment


1,535,250



-



-

Deferred tax benefit (provision)


(23,054)



(532,136)



(87,396)

Change in fair value of warrants liability


(60,647)



(4,034,272)



(662,573)

Restricted shares issued for services


407,593



1,585,462



260,390

Loss from warrants redemption


-



2,496,375



409,995

Income tax benefit


-



(2,111,281)



(346,748)

Changes in operating assets and liabilities:









Trade accounts receivable


(5,291,233)



(3,245,218)



(532,982)

Trade accounts receivable-related parties


(3,819,299)



4,315,755



708,803

Inventories


(1,065,532)



(4,209,241)



(691,309)

Notes receivable


2,578,855



(4,205,530)



(690,699)

Other receivable, net


(981,099)



2,481,328



407,522

Other receivables related parties, net


(671,905)



1,323,412



217,352

Purchase advance, net


(6,879,156)



3,271,935



537,369

Tax recoverable


575,650



-



-

Prepaid expense


(146,708)



1,808,350



296,996

Prepaid expense - related party, net


136,000



(190,000)



(31,205)

Trade accounts payable


4,029,340



2,213,583



363,550

Trade accounts payable-related parties


(3,994,718)



3,528,705



579,540

Other payables


(199,612)



337,978



55,508

Other payables-related parties


(933,651)



1,003,678



164,840

Deferred income


1,038,442



(2,134,295)



(350,528)

Advances from customers


330,685



(271,685)



(44,620)

Accrued payroll and employees' welfare


(1,575,159)



(170,835)



(28,057)

Accrued expenses


(285,679)



5,291



869

Taxes payable


835,418



(1,322,818)



(217,254)

Net cash used in operating activities


(7,960,044)



(15,102,337)



(2,480,349)










Cash flows from investing activities:









Purchase of property and equipment


(477,957)



(2,078,204)



(341,316)

Proceeds from disposal of equipment


141,716



400,400



65,760

Net cash used in investing activities


(336,241)



(1,677,804)



(275,556)










Cash flows from financing activities:









Proceeds from short-term bank loans


23,500,000



7,000,000



1,149,652

Repayments of short-term bank loans


(23,500,000)



(10,000,000)



(1,642,360)

Proceeds from short-term borrowings-related parties


5,007,728



18,250,000



2,997,307

Repayment of  short-term borrowings


(570,375)



-



-

Repayment of short-term borrowings-related parties


(5,303,279)



(6,550,000)



(1,075,746)

Proceeds from sale of common stock, net of issuance costs

12,132,882



2,392,027



392,857

Proceeds from stock options exercised


2,704,909



-



-

Net cash provided by financing activities


13,971,865



11,092,027



1,821,710










Effect of exchange rate fluctuation on cash and cash
equivalents


68,614



(61,543)



(10,106)










Net decrease in cash and cash equivalents


5,744,194



(5,749,657)



(944,301)

Cash and cash equivalents at beginning of year


12,350,392



18,094,586



2,971,782

Cash and cash equivalents at end of year

RMB

18,094,586


RMB

12,344,929


$

2,027,481






-



-










Supplemental cash flow information









Cash paid during the period for interest

RMB

939,416


RMB

1,060,529


$

174,177

Cash paid during the period for taxes

RMB

704,982


RMB

881,794


$

144,822










Non-cash investing and financing activities









Issuance of common stock to prepay professional services

RMB

1,002,721


RMB

-


$

-

Issuance of common stock to redeem warrants

RMB

-


RMB

3,462,438


$

568,657










The accompanying notes are an integral part of these consolidated financial statements

 

SOURCE Recon Technology, Ltd.


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