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Recon Technology Reports its Operation Results for Fiscal Year 2016

BEIJING, Sept. 28, 2016 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today announced its financial results for fiscal year ended June 30, 2016.

Fiscal Year 2016 Highlights:

  • Revenues were approximately RMB42.7 million ($6.4 million) for the year ended June 30, 2016, a decrease of 17.1% from RMB51.5 million from the previous fiscal year.
  • During fiscal year 2016, the Company expanded the new market of oilfield waste water treatment, with revenue of RMB2.3 million.
  • Gross profit was approximately RMB7.2 million ($1.1 million) for the year ended June 30, 2016, compared to approximately RMB10.1 million for the same period in 2015.
  • Operating loss was RMB39.9 million ($6.0 million) for FY2016, compared to operating loss of RMB35.5 million for FY2015.
  • Net loss attributable to Recon for FY2016 was RMB40.9 million ($6.2 million), or RMB7.23 ($1.09) per diluted share, compared to net loss attributable to Recon of RMB31.5 million, or RMB6.45 per diluted share, for FY2015.

Although total revenue for the year ended June 30, 2016 decreased RMB8.8 million or 17.1% from the previous fiscal year, our service business increased 1,040% to RMB1.2 million from fiscal year of 2015 and we expanded the new market of oilfield waste water treatment in fiscal year 2016.

Mr. Shenping Yin, Chairman and CEO of Recon stated, "We are facing a tough economic environment, however we expect to expand to new markets and develop more opportunities in the following year to better prepare for the eventual recovery of the oil and gas industry."

FY2016 Financial Results

Revenues



2015


2016



%


(thousands)


RMB


RMB



Change


Revenues



51,513



42,728



-17.1%

Hardware and software



48,981



41,544



-15.2%

Service



104



1,183



1040.3%

Hardware and software - related parties



2,428



-



-100%

Gross margin



19.6%



17.0%



-2.6%

Operating (loss) margin



-68.9%



-93.4%



24.5%

Net income (loss) attributable to RCON



-31,456



-40,883



29.97%

Diluted earnings (loss) per share



-6.45



-7.23



12.09%














Total revenues for the year ended June 30, 2016 were approximately RMB42.7 million ($6.4 million), a decrease of approximately RMB8.8 million or 17.1% from RMB51.5 million for the year ended June 30, 2015. Revenues from non-related party hardware and software sales decreased 15.2% to RMB41.5 million mainly caused by weak equipment requirements for furnaces for the first half of fiscal year 2016. There was no revenue or cost of hardware and software from related parties since the company developed business directly with oilfield during 2016. Revenues from service increased by RMB1.1 million, or 1040.3%, to RMB1.18 million for the twelve months ended June 30, 2016, compared to RMB0.1 million for the same period of last fiscal year.

Gross profit and gross margin

Gross profit decreased to approximately RMB7.2 million ($1.1 million) for the year ended June 30, 2016 from approximately RMB10.1 million for the same period in 2015. Gross margin was 17.0% for the year ended June 30, 2016, compared to 19.6% for last fiscal year.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses decreased approximately RMB5.7 million to RMB5.6 million for the year ended June 30, 2016 compared to the same period in 2015. General and administrative expenses decreased by 24.9% or RMB6.7 million ($1.0 million), from approximately RMB26.9 million in the year ended June 30, 2015 to approximately RMB20.2 million ($3.0 million) in the same period of 2016. Research and development expenses increased from approximately RMB4.2 million for the year ended June 30, 2015 to approximately RMB6.9 million ($1.0 million) for the same period of 2016. Total operating expenses increased by RMB1.5 million, or 3.4%, to RMB47.2 million for the year ended June 30, 2016 from RMB45.6 million for last fiscal year.

Operating loss was approximately RMB39.9 million ($6.0 million) for the year ended June 30, 2016, compared to a loss of RMB35.5 million for the same period of 2015. Operating loss margin was 93.4% for the year ended June 30, 2016, compared to operating margin of 68.9% for last fiscal year.

Net income (loss)

Net loss was approximately RMB40.9 million ($6.2 million) for the year ended June 30, 2016, an increase of approximately RMB9.4 million ($1.4 million) from net loss of RMB31.5 million for last fiscal year.

Financial Position 

As of June 30, 2016, we had cash in the amount of approximately RMB1.8 million ($0.3 million), compared to approximately RMB12.3 million at June 20, 2015. Working capital as of June 30, 2016 was RMB44.5 million ($6.7 million) as compared to RMB72.4 million at June 30, 2015. Net cash used in operating activities was RMB0.3 million ($0.04 million) for the year ended June 30, 2016, compared to RMB15.1 million for the last fiscal year. Net cash used in investing activities was approximately RMB0.1 million ($18.2 thousand) for the year ended June 30, 2016, a decrease of approximately RMB1.6 million compared to last fiscal year. Net cash used in financing activities amounted to RMB10.2 million ($1.5 million) for the year ended June 30, 2016, as compared to net cash provided by financing activities of $11.1 million for the same period ended June 30, 2015. During the year ended June 30, 2016, we repaid RMB16.8 million ($2.5 million) short-term borrowings to two related parties and repaid RMB7.5 million ($1.1 million) short-term bank loans, and we received RMB12.9 million ($1.9 million) from two related parties, received RMB0.5 million ($0.1 million) in short-term bank loans and received RMB0.5 million ($0.1 million) in short-term borrowings from one third-party.

Recent Development

On July 23, 2016, our board of directors resolved not to proceed with the Company's plan to acquire Qinghai Huayou Downhole Technology Co., Ltd., a PR China limited liability company ("QHHY"), and, as a result, terminated the share purchase agreement and related control agreements (together, the "Agreements") between the Company, its wholly owned subsidiary Recon Hengda Technology (Beijing) Co., Ltd., QHHY and QHHY's shareholders.

As previously reported on our Form 8-K filed with the Securities and Exchange Commission on December 7, 2015, pursuant to the Agreements, Recon BJ was to acquire QHHY, a China-based oil field service provider, in exchange for $3.60 million worth of the Company's ordinary shares and up to $4.8 million in cash, subject to QHHY achieving certain operating goals. The Board of Directors determined that it would terminate the Agreements following the completion of an audit of QHHY for the 2014 and 2015 fiscal years and a review of the first two quarters of the 2016 fiscal year, after which time the Company determined that QHHY had not met its financial projections for fiscal 2015 and was not expected to achieve its projections for fiscal 2016. The parties attempted to renegotiate the terms of the acquisition, but were unable to reach an agreement based on the decreased valuation of QHHY. The Company faces no early termination penalties as a result of terminating the Agreements.

About Recon

Recon Technology, Ltd. is China's first listed non-state owned oil and gas field service company on Nasdaq (RCON). Recon supplies China's largest oil exploration companies, Sinopec and CNPC, with advanced automated technologies, efficient gathering and transportation equipment and reservoir stimulation measure for increasing petroleum extraction levels, reducing impurities and lowering production costs. Through the years, RCON has taken leading positions on several segmented markets of the oil and gas filed service industry. RCON also has developed stable long-term cooperation relationship with its major clients, and its products and service are also well accepted by clients. For additional information please visit us at www.recon.cn.

Company Contact

Jia Liu
Recon Technology, Ltd.
+86 (10) 84945799
[email protected]

 

 

RECON TECHNOLOGY, LTD
CONSOLIDATED BALANCE SHEETS




As of June 30,



As of June 30,



As of June 30,




2015



2016



2016


ASSETS


RMB



RMB



U.S. Dollars


Current assets













Cash



12,344,929




1,817,620



$

273,560


Notes receivable



4,205,530




4,660,177




701,377


Trade accounts receivable, net



52,186,397




38,097,626




5,733,855


Trade accounts receivable- related parties, net



4,769,800




-




-


Inventories, net



10,845,007




6,313,070




950,144


Other receivables, net



18,064,568




22,000,112




3,311,111


Other receivables- related parties



91,021




-




-


Purchase advances, net



18,622,538




1,323,305




199,163


Purchase advances- related parties



394,034




-




-


Prepaid expenses



826,314




110,310




16,602


Prepaid expenses - related parties



420,000




-




-


Deferred tax assets



1,742,098




-




-


Total current assets



124,512,236




74,322,220




11,185,812















Property and equipment, net



2,666,953




2,907,762




437,631


Long-term trade accounts receivable, net



4,440,665




2,220,332




334,169


Long-term other receivable



2,729,033




-




-


Total Assets



134,348,887




79,450,314



$

11,957,612















Current liabilities













Short-term bank loans



7,000,000




-



$

-


Trade accounts payable



13,627,088




7,540,430




1,134,867


Trade accounts payable- related parties



3,528,705




-




-


Other payables



2,103,057




2,972,192




447,328


Other payable- related parties



4,309,702




3,680,244




553,892


Deferred revenue



2,285,529




406,681




61,207


Advances from customers



529,700




200,600




30,191


Accrued payroll and employees' welfare



246,789




381,109




57,359


Accrued expenses



199,166




261,348




39,334


Taxes payable



1,153,216




755,880




113,763


Short-term borrowings



-




530,000




79,767


Short-term borrowings - related parties



16,916,905




12,941,848




1,947,803


Deferred tax liability



180,186




180,186




27,119


Total current liabilities



52,080,043




29,850,518




4,492,630















Equity













Common stock, ($ 0.0185 U.S. dollar par value, 100,000,000 shares authorized; 5,427,946 and 5,804,005 shares issued and outstanding as of June 30, 2015 and 2016, respectively)



697,217




741,467




111,594


Additional paid-in capital



92,541,687




100,612,455




15,142,604


Statutory reserve



4,148,929




4,148,929




624,432


Accumulated deficits



(23,024,935)




(63,907,512)




(9,618,353)


Accumulated other comprehensive loss



(317,551)




(219,040)




(32,966)


Total shareholders' equity



74,045,347




41,376,299




6,227,311


Non-controlling interest



8,223,497




8,223,497




1,237,671


Total equity



82,268,844




49,599,796




7,464,982


Total Liabilities and Equity



134,348,887




79,450,314



$

11,957,612




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


 

 

RECON TECHNOLOGY, LTD

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS




For the years ended




June 30,




2015



2016



2016




RMB



RMB



USD












Revenues













Hardware and software



48,980,953




41,544,925



$

6,252,688


Service



103,774




1,183,352




178,100


Hardware and software - related parties



2,428,173




-




-


Total revenues



51,512,900




42,728,277




6,430,788


Cost of revenues













Hardware and software



41,373,566




34,732,965



$

5,227,459


Service



-




748,429




112,642


Hardware and software - related parties



27,161




-




-


Total cost of revenues



41,400,727




35,481,394




5,340,101


Gross profit



10,112,173




7,246,883




1,090,687















Selling and distribution expenses



11,312,452




5,630,715




847,447


General and administrative expenses



26,894,273




20,195,701




3,039,539


Provision for doubtful accounts



3,252,868




14,475,074




2,178,560


Research and development expenses



4,168,813




6,856,522




1,031,936


Operating expenses



45,628,406




47,158,012




7,097,482















Loss from operations



(35,516,233)




(39,911,129)




(6,006,795)















Other income (expenses)













Subsidy income



781,457




289,087




43,509


Interest income



293,499




183,553




27,626


Interest expense



(1,110,451)




(903,368)




(135,961)


Change in fair value of warrants liability



4,034,272




-




-


Income (loss) from foreign currency exchange



(19,190)




7,570




1,139


Loss from warrants redemption



(2,496,375)




-




-


Other income (expense)



24,558




(2,445)




(368)


Other income (expense)



1,507,770




(425,603)




(64,055)


Loss before income tax



(34,008,463)




(40,336,732)




(6,070,850)


Provision (benefit) for income tax



(2,552,075)




545,845




82,152


Net loss



(31,456,388)




(40,882,577)




(6,153,002)















Comprehensive loss













Net loss



(31,456,388)




(40,882,577)




(6,153,002)


Foreign currency translation adjustment



(38,276)




98,511




14,826


Comprehensive loss



(31,494,664)




(40,784,066)




(6,138,176)


Less: Comprehensive loss attributable to non-controlling interest



(1,982)




-




-


Comprehensive loss attributable to Recon Technology, Ltd



(31,492,682)




(40,784,066)



$

(6,138,176)















Loss per common share - basic



(6.45)




(7.23)



$

(1.09)


Loss per common share - diluted



(6.45)




(7.23)



$

(1.09)


Weighted - average shares -basic



4,876,504




5,653,149




5,653,149


Weighted - average shares -diluted



4,876,504




5,653,149




5,653,149




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


 

 

RECON TECHNOLOGY, LTD

CONSOLIDATED STATEMENTS OF CASH FLOWS




For the years ended June 30,




2015



2016



2016




RMB



RMB



U.S. Dollars












Cash flows from operating activities:













Net loss



(31,456,388)




(40,882,577)



$

(6,153,002)


Adjustments to reconcile net loss to net cash used in operating activities:













Depreciation



526,046




955,083




143,744


Gain from disposal of  equipment



(193,657)




(40,688)




(6,124)


Provision for doubtful accounts



3,252,868




14,475,074




2,178,560


Provision for slow moving inventories



7,700,836




2,428,288




365,468


Share based compensation



3,123,417




5,691,308




856,566


Deferred tax (benefit) provision



(532,136)




1,742,098




262,193


Change in fair value of warrants liability



(4,034,272)




-




-


Restricted shares issued for services



1,585,462




2,287,415




344,266


Loss from warrants redemption



2,496,375




-




-


Income tax benefit



(2,111,281)




(1,196,253)




(180,041)


Changes in operating assets and liabilities:













Notes receivable



(4,205,530)




(454,647)




(68,426)


Trade accounts receivable



(3,245,218)




14,658,360




2,206,146


Trade accounts receivable-related parties



4,315,755




1,090,453




164,118


Inventories



(4,209,241)




1,191,811




179,373


Other receivable, net



2,481,328




(1,775,659)




(267,244)


Other receivables-related parties, net



1,323,412




91,021




13,699


Purchase advance, net



3,271,935




4,930,479




742,058


Purchase advance-related parties, net



-




1,374,034




206,798


Prepaid expense



1,808,350




716,004




107,762


Prepaid expense - related parties, net



(190,000)




420,000




63,212


Trade accounts payable



2,213,583




(9,615,363)




(1,447,153)


Trade accounts payable-related parties



3,528,705




-




-


Other payables



337,978




869,135




130,809


Other payables-related parties



1,003,678




1,869,889




281,426


Deferred revenue



(2,134,295)




(1,878,848)




(282,775)


Advances from customers



(271,685)




(329,100)




(49,531)


Accrued payroll and employees' welfare



(170,835)




134,320




20,216


Accrued expenses



5,291




172,490




25,960


Taxes payable



(1,322,818)




790,199




118,928


Net cash used in operating activities



(15,102,337)




(285,674)




(42,994)















Cash flows from investing activities:













Purchase of property and equipment



(2,078,204)




(181,075)




(27,253)


Proceeds from disposal of equipment



400,400




60,000




9,030


Net cash used in investing activities



(1,677,804)




(121,075)




(18,223)















Cash flows from financing activities:













Proceeds from short-term bank loans



7,000,000




500,000




75,252


Repayments of short-term bank loans



(10,000,000)




(7,500,000)




(1,128,782)


Proceeds from short-term borrowings



-




530,000




79,767


Proceeds from short-term borrowings-related parties



18,250,000




12,895,400




1,940,813


Repayment of short-term borrowings-related parties



(6,550,000)




(16,780,765)




(2,525,577)


Proceeds from sale of common stock, net of issuance costs



2,392,027




171,919




25,874


Net cash provided by (used in) financing activities



11,092,027




(10,183,446)




(1,532,653)















Effect of exchange rate fluctuation on cash and cash equivalents



(61,543)




62,886




9,466















Net decrease in cash



(5,749,657)




(10,527,309)




(1,584,404)


Cash at beginning of the year



18,094,586




12,344,929




1,857,964


Cash at end of the year



12,344,929




1,817,620



$

273,560















Supplemental cash flow information













Cash paid during the period for interest



1,060,529




903,368



$

135,961


Cash paid during the period for taxes



881,794




142,477



$

21,443















Non-cash investing and financing activities













Issuance of common stock to redeem warrants



3,462,438




-




-


AR and short-term borrowings-related parties offset



-




200,000




30,101


Inventories used for fixed assets



-




1,025,410




154,329















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


 

SOURCE Recon Technology, Ltd.


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