BEIJING, September 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
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.
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