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Recon Technology Revenue and Profit Growth Continue at Double Digit Rate. Q3'10 Revenue Up 111%, Net Income Up 50%
PRNewswire

Strong Results Reflect Continued Business Expansion

BEIJING, May 18 /PRNewswire-Asia-FirstCall/ -- Recon Technology, Ltd. , a leading Chinese non-state-owned oil field services provider, today reported financial results for its FY '10 third quarter ended March 31, 2010.

  Q3 FY '10 Highlights

  -- Revenue increased 111.2% to $3.85 million from $1.82 million in Q3 FY
     '09 due to the rapid development of our core business and expansion
     into a new market.
  -- Gross profit increased 96.5% to $1.72 million for Q3 FY '10 from $0.87
     million in Q3 FY '09.
  -- Income from operations rose 75.6% to $1.01 million compared with $0.57
     million in Q3 FY '09 due to an increase in sales.
  -- Net income available for common shareholders was $0.66 million, an
     increase of 50.1% from the same period of 2009.
  -- Diluted EPS was $0.17, compared to $0.20 per diluted share in Q3 FY '09,
     reflecting an increase in shares issued associated with the company's
     2009 IPO.
  -- Gross margin was 44.7%, compared to 48.0% in Q3 FY '09
  -- Weighted average number of diluted shares outstanding was 4 million,
     compared to 2.25 million in Q3 FY '09.

  First Nine Months FY '10 Highlights
  -- Revenue was $14.46 million, an increase of 59.0% over $9.09 million for
     the nine months ended March 31, 2009.
  -- Gross profit increased 74.4% to $6.26 million vs. $3.59 million for the
     same period in 2009
  -- Gross margin increased to 43.3% for the nine months ended March 31,
     2010 from 39.5% for the nine months ended March 31, 2009.
  -- Income from operations was $3.73 million, a gain of 59.8% from $2.33
     million for the same period in 2009, primarily attributable to the
     increase in sales.
  -- Net income available for common shareholders was $2.56 million, an
     increase of 42.5% over the first nine months of FY '09.
  -- Diluted EPS was $0.68, compared to $0.80 per diluted share for the
     first nine months of FY '09, reflecting an increase in shares issued
     associated with the company's 2009 IPO.
  -- Weighted average number of diluted shares outstanding was 3.76 million,
     compared to 2.25 million for the nine months ended March 31, 2009.


  Liquidity and Capital Resources

The company's cash balance on March 31, 2010 was approximately $3.26 million. Recon had short-term debt to its internal management team of $1.1 million and no outside or long-term debt. Working capital was $16.6 million. Controlling stockholders' equity totaled $15.5 million. The current ratio was 3.06, up from 1.90 on June 30, 2009. Net cash provided in financing activities totaled $9.0 million for the nine months ended March 31, 2010, which included the debt from the management team to supplement working capital and from the Company's IPO on July 30, 2009.

Management Commentary

Shenping Yin, Recon's Chief Executive Officer, said, "I am very pleased to see continued growth of our business. It is a strong credential of our capability to serve the increasingly sophisticated demand of our clients and to expand to new market area."

"Rising energy demand associated with China's continued economic growth, government initiatives to increase safety and security in the Chinese energy industry and focus by oil and gas field operators for digital operation are all positive indicators for Chinese oil field service providers," commented Mr. Yin.

"I am also happy to see the new 36 Guidelines issued on May 13th by Chinese State Council to expand market access for private investment in the monopolized sectors including upstream oil and gas exploration (Chinese version government document available at http://www.gov.cn/zwgk/2010-05/13/content_1605218.htm ) I believe we are well-positioned to leverage our industry expertise and established business relationships to identify and capitalize on the growth opportunities," concluded Mr. Yin.

  The financial statements follow.

  About Recon Technology, Ltd.

Recon Technology, Ltd is a non-state-owned oil field service company in China. The company provides services designed to automate the extraction of petroleum for Chinese oil and gas fields. The company has developed software and hardware to manage the oil extraction process in real-time. More information may be found at http://www.recon.cn/ or e-mail: recon@hawkassociates.com.

Recon's online investor kit, including an investment profile, press releases, current price quotes, stock charts and more is available at http://www.hawkassociates.com/profile/rcon.cfm. To receive notification of future releases via e-mail, subscribe at http://www.hawkassociates.com/about/alert/ .

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks 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.

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.

  For more information, please contact:

  Investor Contact:

  In USA
   Hawk Associates
   Julie Marshall
   Frank Hawkins
   Tel:   +1-305-451-1888
   Email: recon@hawkassociates.com

  In China
   Recon Technology Ltd
   Peggy Yuan
   Investor Relations
   Tel:   +86-10-8494-5799
   Email: yuan.peggie@gmail.com



                      RECON TECHNOLOGY, LTD
             CONSOLIDATED STATEMENTS OF BALANCE SHEETS

                                       Chinese Yuan (Renminbi) U.S. Dollars
                                        June 30,    March 31,    March 31,
                                          2009        2010         2010
  ASSETS                                           (Unaudited)  (Unaudited)
  Current assets
  Cash and cash equivalents             2,727,735   22,292,927   $3,261,059
  Trade accounts receivable, net of
   allowance for doubtful accounts of
   RMB604,953 ($88,570) and
   RMB1,993,588($291,627),
   respectively                        44,103,981   87,749,487   12,836,191
  Trade accounts receivable-related
   parties, net of allowance for
   doubtful accounts of RMB350,498
   ($51,316)and RMB0($0), respectively  7,458,302           --           --
  Other receivable, net of allowance
   for doubtful accounts of
   RMB1,291,923 ($189,149) and
   RMB158,968($23,254), respectively    2,048,015    6,565,432      960,406
  Other receivable-related parties,
   net of allowance for doubtful
   accounts of RMB169,074 ($24,754)
   and RMB0($0), respectively             507,541           --           --
  Purchase advances, net of allowance
   for doubtful accounts of
   RMB1,239,234 ($181,435) and
   RMB654,740($95,777), respectively    5,637,082   38,239,189    5,593,714
  Purchase advances-related parties        73,028           --           --
  Prepaid expenses                        338,072    1,116,579      163,336
  Inventories                          10,710,018   13,152,071    1,923,914
  Deferred offering costs               1,622,048           --           --
  Total current assets                 75,225,822  169,115,685   24,738,621
  Property and equipment, net of
   accumulated depreciation of
   RMB1,006,761 ($147,398) and
   RMB1,085,419($158,778),
   respectively                         1,406,876    1,505,068      220,165
                                       76,632,698   170,620,753 $24,958,785

  LIABILITIES AND SHAREHOLDERS' EQUITY
  Current liabilities
  Trade accounts payable               15,601,101   17,582,246   $2,571,970
  Trade accounts payable-related
   parties                                189,744           --           --
  Other payables                        1,767,005    2,607,624      381,449
  Other payables-related parties           73,579           --           --
  Deferred income                       2,361,605    4,184,521      612,121
  Advances from customers                 910,215       25,650        3,752
  Accrued payroll and employees'
   welfare                                393,074      296,635       43,392
  Accrued expenses                        262,083      293,760       42,972
  Taxes payable                         9,182,676   18,884,422    2,762,455
  Short-term notes payable              3,143,792    3,602,881      527,037
  Short-term notes payable-related
   parties                              3,344,377    4,147,657      606,729
  Deferred tax liabilities              2,365,225    3,694,658    $540,463
  Total current liabilities            39,594,476   55,320,053    8,092,341
  Redeemable common stock               1,434,342           --
  Equity
  common stock, $0.0185 U.S. dollar
   par value, 25,000,000 shares
   authorized; 2,139,203 and 3,951,811
   shares issued and outstanding as of
   June 30, 2009 and March 31, 2010       300,534      529,637       77,476
  Additional paid-in capital            8,732,266   68,734,489   10,054,635
  Appropriated retained earnings        1,687,772    3,286,861      480,809
  Unappropriated retained earnings     18,043,692   33,720,232    4,932,671
  Accumulated other comprehensive
   income                                      --     (128,902)     (18,856)
  Total controlling shareholders'
   equity                              28,764,264  106,142,317   15,526,736
  Non-controlling interest, net of tax  6,839,616    9,158,383    1,339,709
  Total equity                         35,603,880  115,300,700   16,866,444
  Liabilities and Equity               76,632,698  170,620,753  $24,958,785




                         RECON TECHNOLOGY, LTD
  CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

                                       Chinese Yuan (Renminbi)
                                      For the Nine Months ended
                                              March 31,
                                           2010        2009
                                       (Unaudited) (Unaudited)
  Revenues

  Hardware                              90,932,348  57,656,322
  Service                                7,675,214   1,495,662
  Software                                 226,496     226,496
  Hardware - related parties                    --   2,143,590
  Software - related parties                    --     649,572
  Total revenues                        98,834,057  62,171,642
  Cost of revenues                      56,007,688  37,608,500
  Gross margin                          42,826,369  24,563,142
  Selling and distribution expenses      7,557,188   4,760,272
  General and administrative expenses    9,803,491   3,867,763
  Operating expenses                    17,360,679   8,628,035
  Income (loss) from operations         25,465,690  15,935,107
  Subsidy income                         1,178,034   2,038,015
  Interest income                            5,693      12,608
  Interest expense                        (110,075)   (152,405)
  Other income (expenses)                  471,914          --
  Income before income taxes and non-
   controlling interest                 27,011,256  17,833,325
  Provision for income taxes            (7,189,566) (3,481,115)
  Income from continuing operations     19,821,690  14,352,210
  Income from operations of
   discontinued subsidiaries, net of
   income taxes                                 --    (442,547)
  Net income                            19,821,690  13,909,663
  Non-controlling interest, net of tax  (2,318,767) (1,574,687)
  Accrued dividend for redeemable
   common stock                                 --     (51,331)
  Net income available for common
   shareholders                         17,502,923  12,283,645
  Basic earnings per share:
  Income from continuing operations        RMB5.28     RMB6.71
  Income from discontinued operations        RMB--    RMB(0.21)
  Net income                               RMB5.28     RMB6.50
  Net income available for common
   shareholders                            RMB4.66     RMB5.74
  Basic weighted average common stock
  outstanding                            3,753,350   2,139,203
  Diluted earnings per share:
  Income from continuing operations        RMB5.27     RMB6.37
  Income (loss) from discontinued
   operations                                RMB--    RMB(0.20)
  Net income                               RMB5.27     RMB6.18
  Net income available for common
   shareholders                            RMB4.65     RMB5.46
  Diluted weighted average common stock
   outstanding                           3,763,408   2,251,811
  Comprehensive income(loss)
   Net income                           19,821,690  13,858,332
   Foreign currency translation
    adjustment                             119,992          --
  Comprehensive income (loss)           19,941,682  13,858,332

  Comprehensive income (loss)
   attributable to non-controlling
   interest                              2,330,766   1,574,687
  Comprehensive income (loss)
   attributable to common shareholders  17,610,916  12,283,645


                                       Chinese Yuan (Renminbi)  U.S. Dollars
                                         For the Three Months  For the Nine
                                                ended          Months ended
                                              March 31,          March 31,
                                           2010        2009        2010
                                       (Unaudited) (Unaudited)  (Unaudited)
  Revenues
  Hardware                              24,578,963  12,124,602  $13,301,787
  Service                                1,709,402      95,662    1,122,747
  Software                                      --     226,495       33,132
  Hardware - related parties                    --          --           --
  Software - related parties                    --          --           --
  Total revenues                        26,288,365  12,446,759   14,457,667
  Cost of revenues                      14,538,530   6,467,134    8,192,930
  Gross margin                          11,749,835   5,979,625    6,264,737
  Selling and distribution expenses      1,534,090   1,422,598    1,105,482
  General and administrative expenses    3,337,591     640,148    1,434,077
  Operating expenses                     4,871,681   2,062,746    2,539,559
  Income (loss) from operations          6,878,153   3,916,878    3,725,178
  Subsidy income                            20,000     373,400      172,325
  Interest income                              (79)        683          833
  Interest expense                         (32,762)    (92,376)     (16,102)
  Other income (expenses)                  389,668     (38,167)      69,033
  Income before income taxes and non-
   controlling interest                  7,254,979   4,160,419    3,951,267
  Provision for income taxes            (2,082,801)   (230,006)  (1,051,706)
  Income from continuing operations      5,172,178   3,930,413    2,899,561
  Income from operations of
   discontinued subsidiaries, net of
   income taxes                                 --    (442,547)           -
  Net income                             5,172,178   3,487,866    2,899,561
  Non-controlling interest, net of tax    (647,827)   (456,265)    (339,194)
  Accrued dividend for redeemable
   common stock                                 --     (17,044)          --
  Net income available for common
   shareholders                          4,524,351   3,014,557   $2,560,367
  Basic earnings per share:
  Income from continuing operations        RMB1.31     RMB1.84        $0.77
  Income from discontinued operations        RMB--   RMB(0.21)          $--
  Net income                               RMB1.31     RMB1.63        $0.77
  Net income available for common
   shareholders                            RMB1.14     RMB1.41        $0.68
  Basic weighted average common stock
  outstanding                            3,951,811   2,139,203    3,753,350
  Diluted earnings per share:
  Income from continuing operations        RMB1.29     RMB1.75        $0.77
  Income (loss) from discontinued
   operations                                RMB--   RMB(0.20)          $--
  Net income                               RMB1.29     RMB1.55        $0.77
  Net income available for common
   shareholders                            RMB1.13     RMB1.34        $0.68
  Diluted weighted average common stock
   outstanding                           4,002,298   2,251,811    3,763,408
  Comprehensive income(loss)
   Net income                            5,172,178   3,470,822    2,899,561
   Foreign currency translation
    adjustment                             119,992          --       17,553
  Comprehensive income (loss)            5,292,170   3,470,822   $2,917,114
  Comprehensive income (loss)
   attributable to non-controlling
   interest                                659,826     456,265      340,950
  Comprehensive income (loss)
   attributable to common shareholders   4,632,344   3,014,557   $2,576,164



                   RECON TECHNOLOGY, LTD.
           CONSOLIDATED STATEMENTS OF CASH FLOWS

                                     For the Nine       For the Nine
                                     Months ended       Months ended
                                       March 31,          March 31,
                                         2009                2010
                                    Chinese Yuan  Chinese Yuan  U.S. Dollars
                                      (Renminbi)   (Renminbi)

  Cash flows from operating
   activities:                        (Unaudited)  (Unaudited)  (Unaudited)
  Net income (loss) available for
   common shareholders                 19,821,690   14,352,210  $2,899,561
  Adjustments to reconcile net income
   to net cash provided by operating
   activities:
  Depreciation                            263,036      248,401       38,477
  Share-based compensation expenses     1,178,701           --      172,423
  Accrued dividend for redeemable
   common stock                                --       51,331           --
  Movement of deferred taxation         1,329,433           --      194,472
  Changes in operating assets and
   liabilities:                                --
  Trade accounts receivable, net      (43,645,506) (20,455,176)  (6,384,562)
  Trade accounts receivable-related
   parties, net                         7,458,302   (1,630,676)   1,091,017
  Other receivable, net                (4,517,417)    (501,661)    (660,818)
  Other receivable related parties,
   net                                    507,541      117,794       74,244
  Purchase advance, net               (33,963,030)    (134,115)  (4,968,188)
  Prepaid expense                        (778,507)    (354,169)    (113,882)
  Inventories                          (2,442,053)   1,441,121     (357,229)
  Trade accounts payable                1,981,145    3,528,582      289,806
  Trade accounts payable-related
   parties                               (189,744)    (965,826)     (27,756)
  Other payables                          840,619   (1,767,525)     122,968
  Other payables-related parties           73,579   (1,337,918)      10,763
  Deferred income                       1,822,916   (1,508,896)     266,660
  Advances from customers                (884,565)     107,345     (129,396)
  Accrued payroll                         (96,439)          --      (14,107)
  Accrued employees' welfare                   --      (81,921)          --
  Accrued expense                          31,677      (18,333)       4,634
  Taxes payable                         9,701,746    6,044,796    1,419,193
  Net cash (used in) provided by
   operating activities               (41,506,877)  (2,864,636) $(6,071,719)

  Cash flows from investing
   activities:
  Purchases of property and equipment    (371,162)    (781,397)     (54,294)
  Proceeds from sale of property and
   equipment                                  320           --           47
  Cash paid from short-term notes
   receivable                                  --   (1,356,496)          --
  Net cash used in investing
   activities                            (370,842)  (2,137,893)    $(54,248)

  Cash flows from financing
   activities:
  Proceeds from stock issuance         60,209,057           --    8,807,516
  Proceeds from short-term notes
   payable                                459,089    1,831,655       67,157
  Proceeds from short-term notes
   payable-related party                  803,280      184,377      117,506
  Net cash (used in) provided by
   financing activities                61,471,426    2,016,032  $8,992,178

  Effect of exchange rate fluctuation
   on cash and cash equivalent            (28,514)          --       (4,171)
  Net change in cash                   19,565,192   (3,037,828)  $2,862,040
  Cash and cash equivalents at
   beginning of period                  2,727,735    7,637,421      399,019
  Cash and cash equivalents at end of
   period                              22,292,927    4,599,593   $3,261,059


  Supplemental cash flow information
  Cash paid during the period for
   interest                                    --           --           --
  Cash paid during the period for
   taxes                                   98,834      323,340       14,458

SOURCE: Recon Technology, Ltd.

CONTACT: Investor Contact: In USA: Julie Marshall or Frank Hawkins,
+1-305-451-1888, recon@hawkassociates.com, both of Hawk Associates; In China:
Peggy Yuan, Investor Relations, +86-10-8494-5799, yuan.peggie@gmail.com, of
Recon Technology Ltd


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