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Recon Technology Reports Second Quarter 2014 Financial Results
Operations continue to improve, Revenue and Net profit increased
PR Newswire
BEIJING

BEIJING, Feb.13, 2014 /PRNewswire/ -- Recon Technology, Ltd. (Nasdaq: RCON) ("Recon" or the "Company"), a Chinese non-state-owned oilfield services provider to oil and gas companies and their affiliates, today reported results for its second quarter of fiscal 2014 ended December 31, 2013.

Q2 FY2014 Highlights

                                                             For the Three Months Ended

                                                                    December 31,
                                                                    ------------

                                                                   2012                   2013 % Change
                                                                   ----                   ---- --------

    Revenues                                             RMB 45,980,600      RMB 46,266,326              0.6%

    Gross Profit                                             14,019,773             16,524,412          17.9%

    Net income attributable to ordinary shareholders          5,288,361              5,814,671          10.0%

    Non GAAP net income                                       7,479,058              9,295,123          24.3%

    Basic Earnings per share                         RMB           1.34     RMB           1.40           4.5%

    Basic Weighted-average shares                             3,951,811              4,162,115           5.3%

    Diluted Earnings per share                       RMB           1.34     RMB           1.38           2.8%

    Diluted Weighted-average shares - diluted                 3,951,811              4,224,560           6.9%
                                                              ---------              ---------           ---
    --  Total revenues for the second quarter of FY2014 were approximately
        RMB46.3 million ($7.6 million), an increase of 0.6% from the same period
        of FY2013, which were mainly contributed by sales of furnaces and
        automation products from our newly developed clients.
    --  Gross profit for the second quarter of FY2014 increased 17.9% to above
        RMB16.5 million ($2.7 million). Gross margin improved from 30.5% to
        35.7%.
    --  Net income attributable to ordinary shareholders for the second quarter
        of FY2014 was RMB5.8 million ($1.0 million), or RMB1.38 ($0.23) per
        diluted share. Net income attributable to ordinary shareholders for the
        same period of FY2013 was RMB5.3 million, or RMB1.34 ($0.21) per diluted
        share.
    --  Non GAAP net income[1]( )for the second quarter of FY2014 increased
        24.3% to RMB9.3 million ($1.5 million). Non GAAP diluted EPS for the
        second quarter was  RMB2.2 (or $0.36).
    [1]       We define Non GAAP net income
              as net income (loss) adjusted
              for income tax expense,
              interest expense, loss from
              investment, non-cash stock
              compensation expense,
              depreciation and
              amortization. Detailed
              explanation of the Company's
              non-GAAP financial measures
              and related reconciliations
              to net income are included in
              the accompanying "Adjusted
              EBITDA" part and in our
              10Q.We think it is useful to
              an equity investor in
              evaluating our operating
              performance because: (1) it
              is widely used by investors
              in our industry to measure a
              company's operating
              performance without regard to
              items such as interest
              expense, depreciation and
              amortization, which can vary
              substantially from company to
              company depending upon
              accounting methods and book
              value of assets, capital
              structure and the method by
              which the assets were
              acquired; and (2) it helps
              investors more meaningfully
              evaluate and compare the
              results of our operations
              from period to period by
              removing the impact of our
              capital structure and asset
              base from our operating
              results.

Six Months Highlights

                                                              For the Six Months Ended

                                                                    December 31,
                                                                    ------------

                                                                   2012                    2013 % Change
                                                                   ----                    ---- --------

    Revenues                                             RMB 55,034,792          RMB 57,779,036           5.0%

    Gross Profit                                             16,465,198              21,815,512          32.5%

    Net income attributable to ordinary shareholders          2,944,195               5,861,115          99.1%

    Non GAAP net income                                       5,762,878              10,776,811            87%

    Basic and Diluted Earnings per share             RMB           0.75     RMB            1.44          93.9%

    Basic and Diluted Weighted-average shares                 3,951,811               4,056,963           2.7%
                                                              ---------               ---------           ---
    --  Total revenues for the first half year of FY2014 were approximately
        RMB57.8 million ($9.5 million), an increase of 5.0% from the same period
        of FY2013, mainly caused by increase of sales of furnaces and automation
        products.
    --  Gross profit for the first half year of FY2014 increased 32.5% to
        RMB21.8 million ($3.6 million). Gross margin increased from 29.9% to
        37.8%.
    --  Net income attributable to ordinary shareholders for the six months
        ended December 31, 2013 was RMB5.9 million ($1.0 million), or RMB1.44
        ($0.24) per diluted share. Net income attributable to ordinary
        shareholders for the same period of FY2013 was RMB2.9 million, or
        RMB0.75 ($0.12) per diluted share.
    --  Non GAAP net income for the first half year of FY2014 increased 87% to
        RMB10.8 million ($1.8 million). Non GAAP diluted EPS for the six months
        ended December 31, 2013 was  RMB2.66 (or $0.43).

"We're very pleased to continue improving our net profit in the quarter, as it was up almost 100% for the first half of fiscal year 2014," said Mr. Yin, CEO of Recon Technology. "We have been expanding our client base actively since last year, and our newly developed clients, such as Jilin Petroleum Group, North China Bureau of CNPC and Southwest Oil and Gas Branch of Sinopec, contributed more than half to our furnaces and automation business increase. As we strengthen our design capacity and service offerings, we believe our leading position in the furnace and oilfield automation segment will be consolidated.

"Our onsite service business, mainly focused on the fracturing segment, is well underway. We have achieved new contracts. Also, our cooperation with Baker Hughes has expanded to additional down well services, such as milling. Through these collaborative experimental projects with well-known international companies, our working performance and solutions can continue to improve, which will position us for new business opportunities from our oilfield clients.

"As to the coming year, we are still positive and confident," Mr. Yin continued. "According to the 2014 Energy Task Guidance of China's National Energy Bureau, the government's goals include increasing oil and gas production, improving proven ratios and extraction rates, encouraging the development of unconventional oil and gas resources and accelerating construction of oil and gas infrastructures. These points are quite favorable for our industry and our business. Our business operates mainly in China's northeast, northwest and Bohai Bay districts, where China's major producing oil and gas fields are located. Recon's product lines mainly focus on helping our clients improve extraction rates and reduce production costs. Over the years, our products and services have been well-received by our clients, and we will continue to devote our efforts as professional technology and service integrators."

Q2 FY2014 Financial Results

Total revenues for the second quarter of FY2013 increased slightly to RMB46.3 million ($7.6 million). Revenues from automation business and furnaces were quite strong, increasing 50%. Overall, our newly developed clients, Jilin Petroleum Group, Qinghai Oilfield and Southwest Branch of Sinopec, contributed most of our increasing business.

Gross profit increased to approximately RMB16.5 million ($2.7 million) for the second quarter of FY2014, up 17.9% from the same period of FY2013. Gross margin increased to 35.7% for the second quarter of FY2014 from 30.5% for the same period in FY2013. The improvement in overall gross margin was mainly due to software and furnace sales contributing to a higher portion of total revenues.

Selling and distribution expenses increased by 37.7%, from approximately RMB1.6 million for the three months ended December 31, 2012 to approximately RMB2.3 million ($0.4 million) for the second quarter of FY2014. This increase was primarily due to increased shipping charge and service charges. General and administrative expenses increased by 48.5%, or RMB1.2 million ($0.2 million), from approximately RMB2.5 million in the three months ended December 31, 2012 to approximately RMB3.7 million ($0.6 million) in the same period of 2013, mainly due to increases in fees related to IR service and salaries. Research and development expenses were RMB2.7 million ($0.4 million) for the second quarter of FY2014, down 36.6% compared to the second quarter FY2013. Overall, operating expenses increased by 3.5% year over year to RMB8.6 million ($1.3 million) for the second quarter of FY2014.

Income from operations was RMB7.9 million ($1.3 million) for the second quarter of FY2014, up 38.9% compared to RMB5.7 million for the same period of FY2013. This increase in income from operations is mainly driven by increased revenue as well as a decrease in R&D expenses.

Investment loss was approximately RMB0.4 million ($0.06 million) for the second quarter of FY2014. As of the date, we held approximately 25.0% interest of Avalon. As it has not yet filed its current period report with the SEC, this amount assumes similar performance to the prior quarter.

Net income attributable to ordinary shareholders increased by 10.0% to RMB5.8 million ($0.9 million) for the second quarter of FY2014 from RMB5.3 million for the same period of FY2013. Diluted earnings per share was RMB1.38 ($0.23) for the second quarter of FY2014, compared to RMB1.34 ($0.22) for the same period of FY2013 due to the issuance of additional shares in the current period.

Adjusted EBITDA was RMB9.3 million ($1.5 million) for the second quarter of FY2014, up 24.3% compared to RMB7.5 million for the same period of FY2013.

Reconciliation of Adjusted EBITDA to Net Income

                                                                  For the Three Months Ended

                                                                         December 31,
                                                                         ------------

                                                                    2012           2013           2013

                                                               RMB               RMB            USD
                                                               ---               ---            ---

         Net income                                        RMB 5,887,567      6,579,742     $1,076,810

         Provision for income taxes                              423,308      1,251,862        204,874

         Interest expense and foreign currency adjustment        473,057        472,081         77,259

         Loss from investment                                          -            556             91

         Stock compensation expense                              452,348        360,466         58,992

         Depreciation and amortization                           242,778        480,555         78,645
                                                                 -------        -------         ------

    Adjusted EBITDA                                        RMB 7,479,058      9,295,123     $1,521,198
                                                          =============       =========     ==========

As of December 31, 2013, cash and cash equivalents were RMB21.7 million ($3.6 million). Cash and cash equivalents consist of cash on hand, demand deposits and highly liquid short-term debt investments with stated maturities of no more than six months.

Year-to-Date FY2014 Financial Results

Total revenues for the six months ended December 31, 2013 increased by 5.0%, or approximately RMB2.7 million ($0.4 million) to RMB57.8 million ($9.5 million) from RMB55.0 million for the same period of fiscal 2013, primarily driven by strong sales from furnaces and automation products sales.

Gross profit increased to approximately RMB21.8 million ($3.6 million) for the six months ended December 31, 2013, up 32.5% from the same period of fiscal 2013. Gross margin increased from 29.9% for the six months ended December 31, 2012 to 37.8% for the same period ended December 31, 2013. This was mainly because revenues for fracturing services, which have lower margin than our other services accounted for a larger part of our revenue during the six months ended December 31, 2012.

Selling and distribution expenses increased by 24.2%, from approximately RMB2.9 million for the six months ended December 31, 2012 to approximately RMB3.6 million ($0.6 million) for the same period of 2013. This increase was primarily from the increased shipping and service charges. General and administrative expenses increased by 44.0% from RMB4.5 million for the six months ended December 31, 2012 to RMB6.5 million ($1.1 million) for the same period of fiscal 2014. Research and development expenses decreased by 41.5%, from approximately RMB5.7 million for the six months ended December 31, 2012 to approximately RMB3.4 million ($0.5 million) for the same period of 2013. This decrease was primarily due to lower spending on R&D materials and equipment for our furnaces and fracturing servies. Overall, operating expense were RMB13.4 million ($2.2 million) for the six months ended December 31, 2013, steady compared to same period of last year.

Income from operations was RMB8.4 million ($1.4 million) for the six months ended December 31, 2013, compared to income of RMB3.3 million for the same period of 2012. This increase in income from operations can be attributed primarily to the increased revenue, gross margins and decreases in percentage of research and development expenses.

Net income attributable to ordinary shareholders increased to RMB5.9 million ($1.0 million) for the six months ended December 31, 2013, an improvement of approximately RMB2.9 million ($0.5 million) compared to the same period of fiscal 2013. Diluted earnings per share was RMB1.44($0.24) for the six months ended December 31, 2013, compared to diluted earnings per share of RMB0.75 ($0.12) for the same period ended December 31, 2012.

Adjusted EBITDA was RMB10.8 million ($1.8 million) for the six months ended December 31, 2013, compared to approximately RMB5.8 million income for the same period in 2012, an improvement of 87.0%.

Reconciliation of Adjusted EBITDA to Net Income (Loss)

                           For the Six Months Ended
                                 December 31,

                           2012                     2013            2013

                          RMB                     RMB                 USD
                          ---                     ---                 ---

          Net
          income
          (loss)       RMB        3,549,283     RMB       6,786,096       $1,110,581

          Provision
          for
          income
          taxes                     454,932               1,459,189          238,804

          Interest
          expense
          and
          foreign
          currency
          adjustment                536,353                 599,040           98,036

          Change
          in
          fair
          value
          of
          warrants
          liability                       -                     556               91

          Loss
          from
          investment                      -                 735,080          120,300

          Stock
          compensation
          expense                   907,153                 895,509          146,555

          Depreciation
          and
          amortization              315,157                 301,341           49,316
                                    -------                 -------           ------

     Adjusted
     EBITDA            RMB        5,762,878     RMB      10,776,811       $1,763,683
                       ===        =========     ===      ==========         ========

For the six months ended December 31, 2013, net cash used in operating activities was approximately RMB6.8 million ($1.1 million) for the six months ended December 31, 2013. This was a decrease of approximately RMB12.0 million ($2.0 million) compared to net cash provided by operating activities of approximately RMB5.2 million for the six months ended December 31, 2012. Our net cash used in operating activities were primarily for purchase of inventories for projects in the upcoming quarters.

Net cash used in investing activities was RMB36,495 ($5,973) for the six months ended December 31, 2013, a decrease of RMB359,495 ($58,883) from RMB395,990 for the same period of 2012. The decrease was due to decrease in purchase of property and equipment.

Net cash provided by financing activities amounted to approximately RMB16.1 million ($2.6 million) for the six months ended December 31, 2013, compared to net cash used in financing activities of approximately RMB6.6 million for the six months ended December 31, 2012. During the six-month period ended December 31, 2013, we received net proceeds of RMB12.1 million ($2.0 million) from the common stock issuance of 546,500 shares to institutional investors in November 2013. In addition, we repaid approximately RMB5.3 million ($0.9 million) short term borrowings to related parties with fund generated from operation and received RMB9.36 million ($1.5 million) net loan proceeds from a commercial bank, which was guaranteed by one of our shareholders.

About Recon Technology, Ltd.

Recon Technology, Ltd. is a non-state-owned oil field service company in China. The company has been providing software, equipment and services designed to increase the efficiency and automation in oil and gas exploration, extraction, production and refinery for Chinese oil and gas fields for more than 10 years. More information may be found at http://www.recon.cn or e-mail: [email protected]

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.

Contact:

At the Company:
Recon Technology, Ltd.
Tel: +86-10-8494-5799
Email: [email protected]
Web: http://www.recon.cn

                                        RECON TECHNOLOGY, LTD

                           UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


                                          As of                      As of                   As of
                                        June 30,                 December 31,              December 31,
                                        --------                 ------------              ------------

                                             2013                        2013                    2013
                                             ----                        ----                    ----

    ASSETS                                 RMB                        RMB                 U.S. Dollars
                                           ---                        ---                 ------------

    Current assets

    Cash and cash
     equivalents                           RMB       12,350,392        RMB     21,733,565               $3,556,815

    Notes receivable                    2,578,855                           -                       -

    Trade accounts receivable,
     net                                             38,648,780                66,732,266               10,921,096

    Trade accounts receivable-
     related parties, net                            18,744,364                17,798,136                2,912,761

    Inventories, net                                 13,271,070                22,070,728                3,611,994

    Other receivables, net                           19,131,503                14,191,630                2,322,537

    Other receivables- related
     parties                                            742,528                   595,304                   97,425

    Purchase advances, net                           18,412,507                17,680,032                2,893,433

    Purchase advances- related
     parties                                            394,034                   394,034                   64,486

    Tax recoverable                       575,650                           -                       -

    Prepaid expenses                                  2,853,956                 1,630,388                  266,821

    Deferred tax asset                                1,006,721                 1,038,932                  170,027
                                                      ---------                 ---------                  -------

    Total current assets                            128,710,360               163,865,015               26,817,395


    Property and equipment, net                       1,709,846                 1,445,001                  236,482

    Long-term investment                              1,549,450                   816,310                  133,594

    Long-term other receivable                        3,502,680                 6,627,046                1,084,552
                                                      ---------                 ---------                ---------

    Total Assets                           RMB      135,472,336        RMB    172,753,372              $28,272,023
                                           ===      ===========        ===    ===========              ===========


    LIABILITIES AND EQUITY

    Current liabilities

    Short-term bank
     loans                                 RMB       10,000,000        RMB     19,360,000               $3,168,369

    Trade accounts payable                            7,384,165                23,101,652                3,780,710

    Trade accounts payable-
     related parties                    3,994,718                           -                       -

    Other payables                                    1,964,691                 1,408,449                  230,500

    Other payable- related
     parties                                          4,239,675                 3,516,222                  575,449

    Deferred revenue                                  3,381,382                 3,926,136                  642,533

    Advances from customers                             470,700                   554,162                   90,692

    Accrued payroll and
     employees' welfare                               1,992,783                   353,382                   57,833

    Accrued expenses                                    488,730                   758,000                  124,052

    Taxes payable                                     6,754,428                10,047,404                1,644,312

    Short-term borrowings-
     related parties                                  5,503,279                   200,000                   32,731

    Short-term borrowings- other                        570,375                   460,000                   75,281

    Warrants liability                          -                   5,044,722                 825,596

    Total current liabilities                        46,744,926                68,730,129               11,248,058
                                                     ----------                ----------               ----------


    Commitments and Contingency


    Equity

    Common stock, ($ 0.0185 U.S.
     dollar par value,
     25,000,000 shares
     authorized; 3,951,811 and
     4,528,311shares issued and
     outstanding as of June 30,
     2013 and December 31, 2013,
     respectively)                                      529,979                   595,335                   97,428

    Additional paid-in capital                       69,516,447                77,883,568               12,746,067

    Appropriated retained
     earnings                                         3,023,231                 4,655,550                  761,906

    Unappropriated retained
     earnings                                         8,749,963                12,978,762                2,124,045

    Accumulated other
     comprehensive loss                                (293,201)                 (231,698)                 (37,918)

    Total controlling
     shareholders' equity                            81,526,419                95,881,517               15,691,528

    Non-controlling interest                          7,200,991                 8,141,726                1,332,437
                                                      ---------                 ---------                ---------

    Total equity                                     88,727,410               104,023,243               17,023,965
                                                     ----------               -----------               ----------

    Total Liabilities
     and Equity                            RMB      135,472,336        RMB    172,753,372              $28,272,023
                                           ===      ===========        ===    ===========              ===========

                                                                    RECON TECHNOLOGY, LTD

                                  UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)


                                       For the six months ended                                   For the three months ended

                                             December 31,                                                December 31,
                                             ------------                                                ------------

                                    2012                         2013                       2013                        2012                     2013                     2013
                                    ----                         ----                       ----                        ----                     ----                     ----

                                   RMB                      RMB                        USD                       RMB                     RMB                       USD
                                   ---                      ---                        ---                       ---                     ---                       ---


    Revenues

    Hardware and
     software                      RMB     31,797,756         RMB       55,339,141                $9,056,550         RMB     23,275,615       RMB      44,242,049              $7,240,451

    Service                                20,504,959                      397,589                    65,068                 20,504,959                   397,589                  65,068

    Hardware and software -
     related parties                        2,732,077                    2,042,306                   334,234                  2,200,026                 1,626,688                 266,216
                                            ---------                    ---------                   -------                  ---------                 ---------                 -------

    Total revenues                         55,034,792                   57,779,036                 9,455,852                 45,980,600                46,266,326               7,571,735
                                           ----------                   ----------                 ---------                 ----------                ----------               ---------


    Cost of revenues

    Hardware and
     software                      RMB     20,506,088         RMB       35,599,656                $5,826,076         RMB     14,739,526       RMB      29,480,982              $4,824,722

    Service                                15,722,614                       34,946                     5,719                 15,701,994                    34,946                   5,719

    Hardware and software -
     related parties                        2,340,892                      328,922                    53,830                  1,519,307                   225,986                  36,984
                                            ---------                      -------                    ------                  ---------                   -------                  ------

    Total cost of revenues                 38,569,594                   35,963,524                 5,885,625                 31,960,827                29,741,914               4,867,425
                                                                                                                             ----------                ----------

    Gross profit                           16,465,198                   21,815,512                 3,570,227                 14,019,773                16,524,412               2,704,310
                                           ----------                   ----------                 ---------                 ----------                ----------               ---------



    Selling and distribution
     expenses                               2,902,994                    3,604,440                   589,886                  1,634,196                 2,250,518                 368,309

    General and administrative
     expenses                               4,485,758                    6,457,563                 1,056,815                  2,502,647                 3,715,640                 608,085

    Research and development
     expenses                               5,732,189                    3,353,997                   548,900                  4,198,860                 2,661,397                 435,552
                                                                                                                              ---------                 ---------

    Operating expenses                     13,120,941                   13,416,000                 2,195,601                  8,335,703                 8,627,555               1,411,946
                                           ----------                   ----------                 ---------                  ---------                 ---------               ---------



    Income from operations                  3,344,257                    8,399,512                 1,374,626                  5,684,070                 7,896,857               1,292,364
                                            ---------                    ---------                 ---------                  ---------                 ---------               ---------


    Other income (expenses)

    Subsidy income                            800,000                    1,018,313                   166,652                    800,000                   684,601                 112,039

    Interest income                           305,588                      204,970                    33,544                    304,278                   101,769                  16,655

    Interest expense                         (876,414)                    (479,648)                  (78,497)                  (546,658)                 (258,389)                (42,287)

    Loss from investment               -                     (735,080)                 (120,300)                           -                 (360,466)                (58,992)

    Change in fair value of
     warrants liability                -                          556                         91                           -                      556                       91

    Gain (loss) from foreign
     currency exchange                        340,061                     (119,392)                  (19,539)                    73,601                  (213,692)                (34,972)

    Other income (expense)                     90,723                      (43,946)                   (7,192)                    (4,416)                  (19,632)                 (3,213)
                                               ------                      -------                    ------                     ------                   -------                  ------


    Income before income tax                4,004,215                    8,245,285                 1,349,385                  6,310,875                 7,831,604               1,281,685

    Provision for income tax                  454,932                    1,459,189                   238,804                    423,308                 1,251,862                 204,874
                                                                                                                                -------                 ---------                 -------

    Net Income                              3,549,283                    6,786,096                 1,110,581                  5,887,567                 6,579,742               1,076,811


    Less: Net income attributable
     to non-controlling interest              605,088                      924,981                   151,378                    599,206                   765,071                 125,208
                                                                                                                                -------                   -------                 -------

    Net Income
     attributable to
     Recon Technology,
     Ltd                           RMB      2,944,195          RMB       5,861,115                  $959,203          RMB     5,288,361        RMB      5,814,671                $951,603
                                   ===      =========         ===        =========                  ========         ===      =========       ===       =========                ========


    Comprehensive income

    Net income                              3,549,283                    6,786,096                 1,110,581                  5,887,567                 6,579,742               1,076,811

    Foreign currency translation
     adjustment                               (16,172)                      77,277                    12,647                       (210)                   82,881                  13,564
                                              -------                       ------                    ------                       ----                    ------                  ------

    Comprehensive income                    3,533,111                    6,863,373                 1,123,228                  5,887,357                 6,662,623               1,090,375

    Less: Comprehensive income
     attributable to non-
     controlling interest                     603,291                      932,709                   152,643                    595,635                   773,360                 126,565
                                              -------                      -------                   -------                    -------                   -------                 -------

    Comprehensive income
     attributable to
     Recon Technology,
     Ltd                           RMB      2,929,820          RMB       5,930,664                  $970,585          RMB     5,291,722        RMB      5,889,263                $963,810
                                   ===      =========         ===        =========                  ========         ===      =========       ===       =========                ========


    Earnings per common
     share -basic                  RMB           0.75         RMB             1.44                     $0.24         RMB           1.34       RMB            1.40                   $0.23
                                   ===           ====         ===             ====                     =====         ===           ====       ===            ====                   =====

    Earnings per common
     share -diluted                RMB           0.75         RMB             1.44                     $0.24         RMB           1.34       RMB            1.38                   $0.23
                                   ===           ====         ===             ====                     =====         ===           ====       ===            ====                   =====

    Weighted -average shares
     -basic                                 3,951,811                    4,056,963                 4,056,963                  3,951,811                 4,162,115               4,162,115
                                            =========                    =========                 =========                  =========                 =========               =========

    Weighted -average shares
     -diluted                               3,951,811                    4,056,963                 4,056,963                  3,951,811                 4,224,560               4,224,560
                                            =========                    =========                 =========                  =========                 =========               =========

                                          RECON TECHNOLOGY, LTD

                        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                    For the six months ended
                                                          December 31,
                                                          ------------

                                           2012                          2013                         2013
                                           ----                          ----                         ----

                                         RMB                         RMB                     U.S. Dollars
                                         ---                         ---                     ------------


    Cash flows from operating
     activities:

    Net income                           RMB         3,549,283         RMB         6,786,096                 $1,110,581

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

    Depreciation                                       315,157                       301,341                     49,316

    Gain from disposal of
     equipment                          (68,339)                            -                            -

    Provision/(recovery of)
     for doubtful accounts                            (251,451)                      378,584                     61,957

    Share based compensation                           907,153                       895,509                    146,555

    Loss from investment                      -                       735,080                      120,300

    Deferred tax provision/
     (benefit)                                           6,024                       (32,211)                    (5,272)

    Change in fair value of
     warrants liability                       -                          (556)                         (91)

    Restricted shares issued
     to consulting firm                       -                       407,972                       66,767

    Changes in operating
     assets and liabilities:

    Trade accounts receivable                      (20,620,729)                  (27,881,579)               (4,562,971)

    Trade accounts
     receivable-related
     parties                                         4,145,640                       610,501                     99,912

    Notes receivable                          -                     2,578,855                      422,044

    Other receivable, net                             (793,654)                    1,830,372                    299,549

    Other receivables related
     parties, net                                     (517,022)                      147,224                     24,094

    Purchase advance, net                           (1,435,147)                      472,846                     77,384

    Purchase advance-related
     party, net                         699,500                             -                            -

    Tax recoverable                                  2,790,722                       575,650                     94,208

    Prepaid expense                                    424,771                     1,223,568                    200,244

    Inventories                                     11,056,578                    (8,799,658)               (1,440,112)

    Trade accounts payable                          (2,698,700)                   15,717,487                  2,572,252

    Trade accounts payable-
     related parties                                 3,421,001                    (3,994,718)                  (653,757)

    Other payables                                    (958,746)                     (556,242)                   (91,032)

    Other payables-related
     parties                                         4,898,274                      (723,453)                  (118,397)

    Deferred income                                   (258,569)                      544,754                     89,152

    Advances from customers                            475,295                        83,462                     13,659

    Accrued payroll and
     employees' welfare                                272,755                    (1,639,401)                  (268,297)

    Accrued expenses                                  (203,646)                      269,270                     44,067

    Taxes payable                                       54,589                     3,292,976                    538,913

    Net cash provided by
     (used in) operating
     activities                                      5,210,739                    (6,776,271)               (1,108,975)
                                                     ---------                    ----------                 ----------


    Cash flows from investing
     activities:

    Purchase of property and
     equipment                                        (490,144)                      (36,495)                    (5,973)

    Proceeds from disposal of
     equipment                           94,154                             -                            -

    Net cash used in
     investing activities                             (395,990)                      (36,495)                    (5,973)
                                                      --------                       -------                     ------


    Cash flows from financing
     activities:

    Proceeds from short-term
     bank loans                                      5,000,000                    15,400,000                  2,520,293

    Repayments of short-term
     bank loans                                    (12,000,000)                   (6,040,000)                  (988,479)

    Proceeds from borrowings-
     related parties                  1,610,000                             -                            -

    Repayment of  short-term
     borrowings                                       (949,183)                     (110,375)                   (18,063)

    Repayment of short-term
     borrowings-related
     parties                                          (242,434)                   (5,303,279)                  (867,910)

    Proceeds from sale of
     common stock, net of
     issuance costs                           -                    12,132,882                    1,985,612

    Capital contribution in
     VIE                                 20,000                             -                            -

    Net cash provided by
     (used in) financing
     activities                                     (6,561,617)                   16,079,228                  2,631,453
                                                    ----------                    ----------                  ---------


    Effect of exchange rate
     fluctuation on cash and
     cash equivalents                                  282,730                       116,711                     19,102
                                                       -------                       -------                     ------


    Net increase (decrease)
     in cash and cash
     equivalents                                    (1,464,138)                    9,383,173                  1,535,607

    Cash and cash equivalents
     at beginning of period                          3,533,283                    12,350,392                  2,021,208
                                                     ---------                    ----------                  ---------

    Cash and cash
     equivalents at
     end of period                       RMB         2,069,145         RMB        21,733,565                 $3,556,815
                                         ===         =========         ===        ==========                 ==========



    Supplemental cash flow
     information

    Cash paid during
     the period for
     interest                            RMB           943,986         RMB           689,828                   $112,894
                                         ===           =======         ===           =======                   ========

    Cash paid during
     the period for
     taxes                               RMB                 -         RMB                 -             $            -
                                         ===               ===         ===               ===            ==          ===

SOURCE Recon Technology, Ltd.

SOURCE: Recon Technology, Ltd.

Recon Technology Reports Second Quarter 2014 Financial Results

Operations continue to improve, Revenue and Net profit increased

PR Newswire

BEIJING, Feb.13, 2014 /PRNewswire/ -- Recon Technology, Ltd. (Nasdaq: RCON) ("Recon" or the "Company"), a Chinese non-state-owned oilfield services provider to oil and gas companies and their affiliates, today reported results for its second quarter of fiscal 2014 ended December 31, 2013.

Q2 FY2014 Highlights


For the Three Months Ended


December 31,


2012


2013


% Change

Revenues

 RMB 45,980,600   


 RMB 46,266,326  


0.6%

Gross Profit

14,019,773


16,524,412


17.9%

Net income attributable to ordinary shareholders

5,288,361


5,814,671


10.0%

Non GAAP net income

7,479,058


9,295,123


24.3%

Basic Earnings per share

RMB            1.34   


RMB           1.40   


4.5%

Basic Weighted-average shares

3,951,811


4,162,115


5.3%

Diluted Earnings per share

RMB            1.34   


RMB           1.38   


2.8%

Diluted Weighted-average shares - diluted

3,951,811


4,224,560


6.9%

  • Total revenues for the second quarter of FY2014 were approximately RMB46.3 million ($7.6 million), an increase of 0.6% from the same period of FY2013, which were mainly contributed by sales of furnaces and automation products from our newly developed clients.
  • Gross profit for the second quarter of FY2014 increased 17.9% to above RMB16.5 million ($2.7 million). Gross margin improved from 30.5% to 35.7%.
  • Net income attributable to ordinary shareholders for the second quarter of FY2014 was RMB5.8 million ($1.0 million), or RMB1.38 ($0.23) per diluted share. Net income attributable to ordinary shareholders for the same period of FY2013 was RMB5.3 million, or RMB1.34 ($0.21) per diluted share.
  • Non GAAP net income[1] for the second quarter of FY2014 increased 24.3% to RMB9.3 million ($1.5 million). Non GAAP diluted EPS for the second quarter was  RMB2.2 (or $0.36).

[1]

We define Non GAAP net income as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization. Detailed explanation of the Company's non-GAAP financial measures and related reconciliations to net income are included in the accompanying "Adjusted EBITDA" part and in our 10Q.We think it is useful to an equity investor in evaluating our operating performance because: (1) it is widely used by investors in our industry to measure a company's operating performance without regard to items such as interest expense, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which the assets were acquired; and (2) it helps investors more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure and asset base from our operating results.

Six Months Highlights


For the Six Months Ended


December 31,


2012


2013


% Change

Revenues

RMB 55,034,792   


 RMB 57,779,036   


5.0%

Gross Profit

16,465,198


21,815,512


32.5%

Net income attributable to ordinary shareholders

2,944,195


5,861,115


99.1%

Non GAAP net income

5,762,878


10,776,811


87%

Basic and Diluted Earnings per share

RMB            0.75   


RMB            1.44   


93.9%

Basic and Diluted Weighted-average shares

3,951,811


4,056,963


2.7%

  • Total revenues for the first half year of FY2014 were approximately RMB57.8 million ($9.5 million), an increase of 5.0% from the same period of FY2013, mainly caused by increase of sales of furnaces and automation products.
  • Gross profit for the first half year of FY2014 increased 32.5% to RMB21.8 million ($3.6 million). Gross margin increased from 29.9% to 37.8%.
  • Net income attributable to ordinary shareholders for the six months ended December 31, 2013 was RMB5.9 million ($1.0 million), or RMB1.44 ($0.24) per diluted share. Net income attributable to ordinary shareholders for the same period of FY2013 was RMB2.9 million, or RMB0.75 ($0.12) per diluted share.
  • Non GAAP net income for the first half year of FY2014 increased 87% to RMB10.8 million ($1.8 million). Non GAAP diluted EPS for the six months ended December 31, 2013 was  RMB2.66 (or $0.43).

"We're very pleased to continue improving our net profit in the quarter, as it was up almost 100% for the first half of fiscal year 2014," said Mr. Yin, CEO of Recon Technology. "We have been expanding our client base actively since last year, and our newly developed clients, such as Jilin Petroleum Group, North China Bureau of CNPC and Southwest Oil and Gas Branch of Sinopec, contributed more than half to our furnaces and automation business increase. As we strengthen our design capacity and service offerings, we believe our leading position in the furnace and oilfield automation segment will be consolidated.

"Our onsite service business, mainly focused on the fracturing segment, is well underway. We have achieved new contracts. Also, our cooperation with Baker Hughes has expanded to additional down well services, such as milling. Through these collaborative experimental projects with well-known international companies, our working performance and solutions can continue to improve, which will position us for new business opportunities from our oilfield clients.

"As to the coming year, we are still positive and confident," Mr. Yin continued. "According to the 2014 Energy Task Guidance of China's National Energy Bureau, the government's goals include increasing oil and gas production, improving proven ratios and extraction rates, encouraging the development of unconventional oil and gas resources and accelerating construction of oil and gas infrastructures. These points are quite favorable for our industry and our business. Our business operates mainly in China's northeast, northwest and Bohai Bay districts, where China's major producing oil and gas fields are located. Recon's product lines mainly focus on helping our clients improve extraction rates and reduce production costs. Over the years, our products and services have been well-received by our clients, and we will continue to devote our efforts as professional technology and service integrators." 

Q2 FY2014 Financial Results

Total revenues for the second quarter of FY2013 increased slightly to RMB46.3 million ($7.6 million). Revenues from automation business and furnaces were quite strong, increasing 50%. Overall, our newly developed clients, Jilin Petroleum Group, Qinghai Oilfield and Southwest Branch of Sinopec, contributed most of our increasing business.

Gross profit increased to approximately RMB16.5 million ($2.7 million) for the second quarter of FY2014, up 17.9% from the same period of FY2013. Gross margin increased to 35.7% for the second quarter of FY2014 from 30.5% for the same period in FY2013. The improvement in overall gross margin was mainly due to software and furnace sales contributing to a higher portion of total revenues.

Selling and distribution expenses increased by 37.7%, from approximately RMB1.6 million for the three months ended December 31, 2012 to approximately RMB2.3 million ($0.4 million) for the second quarter of FY2014. This increase was primarily due to increased shipping charge and service charges. General and administrative expenses increased by 48.5%, or RMB1.2 million ($0.2 million), from approximately RMB2.5 million in the three months ended December 31, 2012 to approximately RMB3.7 million ($0.6 million) in the same period of 2013, mainly due to increases in fees related to IR service and salaries. Research and development expenses were RMB2.7 million ($0.4 million) for the second quarter of FY2014, down 36.6% compared to the second quarter FY2013. Overall, operating expenses increased by 3.5% year over year to RMB8.6 million ($1.3 million) for the second quarter of FY2014.

Income from operations was RMB7.9 million ($1.3 million) for the second quarter of FY2014, up 38.9% compared to RMB5.7 million for the same period of FY2013. This increase in income from operations is mainly driven by increased revenue as well as a decrease in R&D expenses.

Investment loss was approximately RMB0.4 million ($0.06 million) for the second quarter of FY2014. As of the date, we held approximately 25.0% interest of Avalon. As it has not yet filed its current period report with the SEC, this amount assumes similar performance to the prior quarter.

Net income attributable to ordinary shareholders increased by 10.0% to RMB5.8 million ($0.9 million) for the second quarter of FY2014 from RMB5.3 million for the same period of FY2013. Diluted earnings per share was RMB1.38 ($0.23) for the second quarter of FY2014, compared to RMB1.34 ($0.22) for the same period of FY2013 due to the issuance of additional shares in the current period.

Adjusted EBITDA was RMB9.3 million ($1.5 million) for the second quarter of FY2014, up 24.3% compared to RMB7.5 million for the same period of FY2013. 

Reconciliation of Adjusted EBITDA to Net Income


For the Three Months Ended


December 31,


2012


2013


2013


RMB


RMB


USD

     Net income

 RMB 5,887,567


6,579,742


$ 1,076,810

     Provision for income taxes

423,308


1,251,862


204,874

     Interest expense and foreign currency adjustment

473,057


472,081


77,259

     Loss from investment

-


556


91

     Stock compensation expense

452,348


360,466


58,992

     Depreciation and amortization

242,778


480,555


78,645

Adjusted EBITDA

 RMB 7,479,058


9,295,123


$ 1,521,198

As of December 31, 2013, cash and cash equivalents were  RMB21.7 million ($3.6 million). Cash and cash equivalents consist of cash on hand, demand deposits and highly liquid short-term debt investments with stated maturities of no more than six months.

Year-to-Date FY2014 Financial Results

Total revenues for the six months ended December 31, 2013 increased by 5.0%, or approximately RMB2.7 million ($0.4 million) to  RMB57.8 million ($9.5 million) from RMB55.0 million for the same period of fiscal 2013, primarily driven by strong sales from furnaces and automation products sales.

Gross profit increased to approximately RMB21.8 million ($3.6 million) for the six months ended December 31, 2013, up 32.5% from the same period of fiscal 2013. Gross margin increased from 29.9% for the six months ended December 31, 2012 to 37.8% for the same period ended December 31, 2013. This was mainly because revenues for fracturing services, which have lower margin than our other services accounted for a larger part of our revenue during the six months ended December 31, 2012.

Selling and distribution expenses increased by 24.2%, from approximately RMB2.9 million for the six months ended December 31, 2012 to approximately RMB3.6 million ($0.6 million) for the same period of 2013. This increase was primarily from the increased shipping and service charges. General and administrative expenses increased by 44.0% from RMB4.5 million for the six months ended December 31, 2012 to RMB6.5 million ($1.1 million) for the same period of fiscal 2014. Research and development expenses decreased by 41.5%, from approximately RMB5.7 million for the six months ended December 31, 2012 to approximately RMB3.4 million ($0.5 million) for the same period of 2013. This decrease was primarily due to lower spending on R&D materials and equipment for our furnaces and fracturing servies. Overall, operating expense were RMB13.4 million ($2.2 million) for the six months ended December 31, 2013, steady compared to same period of last year.

Income from operations was RMB8.4 million ($1.4 million) for the six months ended December 31, 2013, compared to income of RMB3.3 million for the same period of 2012. This increase in income from operations can be attributed primarily to the increased revenue, gross margins and decreases in percentage of research and development expenses.

Net income attributable to ordinary shareholders increased to RMB5.9 million ($1.0 million)  for the six months ended December 31, 2013, an improvement of approximately RMB2.9 million ($0.5 million) compared to the same period of fiscal 2013. Diluted earnings per share was RMB1.44($0.24) for the six months ended December 31, 2013, compared to diluted earnings per share of RMB0.75 ($0.12) for the same period ended December 31, 2012.

Adjusted EBITDA was RMB10.8 million ($1.8 million) for the six months ended December 31, 2013, compared to approximately RMB5.8 million income for the same period in 2012, an improvement of 87.0%.

Reconciliation of Adjusted EBITDA to Net Income (Loss)


For the Six Months Ended
December 31,


2012


2013


2013


RMB


RMB


USD

     Net income (loss)

RMB

3,549,283


RMB

6,786,096


$

1,110,581

     Provision for income taxes


454,932



1,459,189



238,804

     Interest expense and foreign currency adjustment


536,353



599,040



98,036

     Change in fair value of warrants liability


-



556



91

     Loss from investment


-



735,080



120,300

     Stock compensation expense


907,153



895,509



146,555

     Depreciation and amortization


315,157



301,341



49,316

Adjusted EBITDA

RMB

5,762,878


RMB

10,776,811


$

1,763,683

For the six months ended December 31, 2013, net cash used in operating activities was approximately RMB6.8 million ($1.1 million) for the six months ended December 31, 2013. This was a decrease of approximately RMB12.0 million ($2.0 million) compared to net cash provided by operating activities of approximately RMB5.2 million for the six months ended December 31, 2012. Our net cash used in operating activities were primarily for purchase of inventories for projects in the upcoming quarters.

Net cash used in investing activities was RMB36,495 ($5,973) for the six months ended December 31, 2013, a decrease of RMB359,495 ($58,883) from RMB395,990 for the same period of 2012. The decrease was due to decrease in purchase of property and equipment.

Net cash provided by financing activities amounted to approximately RMB16.1 million ($2.6 million) for the six months ended December 31, 2013, compared to net cash used in financing activities of approximately RMB6.6 million for the six months ended December 31, 2012. During the six-month period ended December 31, 2013, we received net proceeds of RMB12.1 million ($2.0 million) from the common stock issuance of 546,500 shares to institutional investors in November 2013. In addition, we repaid approximately RMB5.3 million ($0.9 million) short term borrowings to related parties with fund generated from operation and received RMB9.36 million ($1.5 million) net loan proceeds from a commercial bank, which was guaranteed by one of our shareholders.

About Recon Technology, Ltd.

Recon Technology, Ltd. is a non-state-owned oil field service company in China. The company has been providing software, equipment and services designed to increase the efficiency and automation in oil and gas exploration, extraction, production and refinery for Chinese oil and gas fields for more than 10 years. More information may be found at http://www.recon.cn or e-mail: [email protected].

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.

Contact:      

At the Company:
Recon Technology, Ltd.
Tel: +86-10-8494-5799
Email: [email protected]
Web: http://www.recon.cn

 

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS



As of
June 30,


As of
December 31,


As of
December 31,


2013


2013


2013

ASSETS

RMB


RMB


U.S. Dollars

Current assets









Cash and cash equivalents 

RMB

12,350,392


RMB

21,733,565


$

3,556,815

Notes receivable


2,578,855



-



-

Trade accounts receivable, net 


38,648,780



66,732,266



10,921,096

Trade accounts receivable- related parties, net


18,744,364



17,798,136



2,912,761

Inventories, net


13,271,070



22,070,728



3,611,994

Other receivables, net 


19,131,503



14,191,630



2,322,537

Other receivables- related parties


742,528



595,304



97,425

Purchase advances, net


18,412,507



17,680,032



2,893,433

Purchase advances- related parties


394,034



394,034



64,486

Tax recoverable


575,650



-



-

Prepaid expenses 


2,853,956



1,630,388



266,821

Deferred tax asset


1,006,721



1,038,932



170,027

Total current assets


128,710,360



163,865,015



26,817,395










Property and equipment, net


1,709,846



1,445,001



236,482

Long-term investment


1,549,450



816,310



133,594

Long-term other receivable


3,502,680



6,627,046



1,084,552

Total Assets

RMB

135,472,336


RMB

172,753,372


$

28,272,023










LIABILITIES AND EQUITY 









Current liabilities









Short-term bank loans

RMB

10,000,000


RMB

19,360,000


$

3,168,369

Trade accounts payable


7,384,165



23,101,652



3,780,710

Trade accounts payable- related parties


3,994,718



-



-

Other payables 


1,964,691



1,408,449



230,500

Other payable- related parties


4,239,675



3,516,222



575,449

Deferred revenue


3,381,382



3,926,136



642,533

Advances from customers


470,700



554,162



90,692

Accrued payroll and employees' welfare


1,992,783



353,382



57,833

Accrued expenses


488,730



758,000



124,052

Taxes payable


6,754,428



10,047,404



1,644,312

Short-term borrowings- related parties


5,503,279



200,000



32,731

Short-term borrowings- other


570,375



460,000



75,281

Warrants liability 


-



5,044,722



825,596

Total current liabilities


46,744,926



68,730,129



11,248,058










Commitments and Contingency


















Equity 









Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000 shares authorized; 3,951,811 and 4,528,311shares issued and outstanding as of June 30, 2013 and December 31, 2013, respectively)


529,979



595,335



97,428

Additional paid-in capital


69,516,447



77,883,568



12,746,067

Appropriated retained earnings


3,023,231



4,655,550



761,906

Unappropriated retained earnings


8,749,963



12,978,762



2,124,045

Accumulated other comprehensive loss


(293,201)



(231,698)



(37,918)

Total controlling shareholders' equity


81,526,419



95,881,517



15,691,528

Non-controlling interest


7,200,991



8,141,726



1,332,437

Total equity


88,727,410



104,023,243



17,023,965

Total Liabilities and Equity

RMB

135,472,336


RMB

172,753,372


$

28,272,023

 

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)



For the six months ended


For the three months ended


December 31,


December 31,


2012


2013


2013


2012


2013


2013


RMB


RMB


USD


RMB


RMB


USD



















Revenues


















Hardware and software

RMB

31,797,756


RMB

55,339,141


$

9,056,550


RMB

23,275,615


RMB

44,242,049


$

7,240,451

Service


20,504,959



397,589



65,068



20,504,959



397,589



65,068

Hardware and software - related parties


2,732,077



2,042,306



334,234



2,200,026



1,626,688



266,216

Total revenues


55,034,792



57,779,036



9,455,852



45,980,600



46,266,326



7,571,735



















Cost of revenues


















Hardware and software

RMB

20,506,088


RMB

35,599,656


$

5,826,076


RMB

14,739,526


RMB

29,480,982


$

4,824,722

Service


15,722,614



34,946



5,719



15,701,994



34,946



5,719

Hardware and software - related parties


2,340,892



328,922



53,830



1,519,307



225,986



36,984

Total cost of revenues


38,569,594



35,963,524



5,885,625



31,960,827



29,741,914



4,867,425

Gross profit


16,465,198



21,815,512



3,570,227



14,019,773



16,524,412



2,704,310





































Selling and distribution expenses


2,902,994



3,604,440



589,886



1,634,196



2,250,518



368,309

General and administrative expenses


4,485,758



6,457,563



1,056,815



2,502,647



3,715,640



608,085

Research and development expenses


5,732,189



3,353,997



548,900



4,198,860



2,661,397



435,552

Operating expenses


13,120,941



13,416,000



2,195,601



8,335,703



8,627,555



1,411,946





































Income from operations


3,344,257



8,399,512



1,374,626



5,684,070



7,896,857



1,292,364



















Other income (expenses)


















Subsidy income


800,000



1,018,313



166,652



800,000



684,601



112,039

Interest income


305,588



204,970



33,544



304,278



101,769



16,655

Interest expense


(876,414)



(479,648)



(78,497)



(546,658)



(258,389)



(42,287)

Loss from investment


-



(735,080)



(120,300)



-



(360,466)



(58,992)

Change in fair value of warrants liability


-



556



91



-



556



91

Gain (loss) from foreign currency exchange


340,061



(119,392)



(19,539)



73,601



(213,692)



(34,972)

Other income (expense)


90,723



(43,946)



(7,192)



(4,416)



(19,632)



(3,213)



















Income before income tax


4,004,215



8,245,285



1,349,385



6,310,875



7,831,604



1,281,685

Provision for income tax


454,932



1,459,189



238,804



423,308



1,251,862



204,874

Net Income 


3,549,283



6,786,096



1,110,581



5,887,567



6,579,742



1,076,811



















Less: Net income attributable to non-controlling interest


605,088



924,981



151,378



599,206



765,071



125,208

Net Income attributable to Recon Technology, Ltd

RMB

2,944,195


 RMB 

5,861,115


$

959,203


 RMB 

5,288,361


 RMB 

5,814,671


$

951,603



















Comprehensive income 


















Net income 


3,549,283



6,786,096



1,110,581



5,887,567



6,579,742



1,076,811

Foreign currency translation adjustment


(16,172)



77,277



12,647



(210)



82,881



13,564

Comprehensive income 


3,533,111



6,863,373



1,123,228



5,887,357



6,662,623



1,090,375

Less: Comprehensive income attributable to non-controlling interest


603,291



932,709



152,643



595,635



773,360



126,565

Comprehensive income attributable to Recon Technology, Ltd

RMB

2,929,820


 RMB 

5,930,664


$

970,585


 RMB 

5,291,722


 RMB 

5,889,263


$

963,810



















Earnings per common share - basic 

RMB

0.75


RMB

1.44


$

0.24


RMB

1.34


RMB

1.40


$

0.23

Earnings per common share - diluted

RMB

0.75


RMB

1.44


$

0.24


RMB

1.34


RMB

1.38


$

0.23

Weighted - average shares -basic 


3,951,811



4,056,963



4,056,963



3,951,811



4,162,115



4,162,115

Weighted - average shares -diluted


3,951,811



4,056,963



4,056,963



3,951,811



4,224,560



4,224,560

 

RECON TECHNOLOGY, LTD 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 



For the six months ended
December 31,


2012


2013


2013


RMB


RMB


U.S. Dollars










Cash flows from operating activities:









Net income 

RMB

3,549,283


RMB

6,786,096


$

1,110,581

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









Depreciation


315,157



301,341



49,316

Gain from disposal of  equipment


(68,339)



-



-

Provision/(recovery of) for doubtful accounts


(251,451)



378,584



61,957

Share based compensation


907,153



895,509



146,555

Loss from investment


-



735,080



120,300

Deferred tax provision/(benefit)


6,024



(32,211)



(5,272)

Change in fair value of warrants liability


-



(556)



(91)

Restricted shares issued to consulting firm


-



407,972



66,767

Changes in operating assets and liabilities:









Trade accounts receivable


(20,620,729)



(27,881,579)



(4,562,971)

Trade accounts receivable-related parties


4,145,640



610,501



99,912

Notes receivable


-



2,578,855



422,044

Other receivable, net


(793,654)



1,830,372



299,549

Other receivables related parties, net


(517,022)



147,224



24,094

Purchase advance, net


(1,435,147)



472,846



77,384

Purchase advance-related party, net


699,500



-



-

Tax recoverable


2,790,722



575,650



94,208

Prepaid expense


424,771



1,223,568



200,244

Inventories


11,056,578



(8,799,658)



(1,440,112)

Trade accounts payable


(2,698,700)



15,717,487



2,572,252

Trade accounts payable-related parties


3,421,001



(3,994,718)



(653,757)

Other payables


(958,746)



(556,242)



(91,032)

Other payables-related parties


4,898,274



(723,453)



(118,397)

Deferred income


(258,569)



544,754



89,152

Advances from customers


475,295



83,462



13,659

Accrued payroll and employees' welfare


272,755



(1,639,401)



(268,297)

Accrued expenses


(203,646)



269,270



44,067

Taxes payable


54,589



3,292,976



538,913

Net cash provided by (used in) operating activities


5,210,739



(6,776,271)



(1,108,975)










Cash flows from investing activities:









Purchase of property and equipment


(490,144)



(36,495)



(5,973)

Proceeds from disposal of equipment


94,154



-



-

Net cash used in investing activities


(395,990)



(36,495)



(5,973)










Cash flows from financing activities:









Proceeds from short-term bank loans


5,000,000



15,400,000



2,520,293

Repayments of short-term bank loans


(12,000,000)



(6,040,000)



(988,479)

Proceeds from borrowings-related parties


1,610,000



-



-

Repayment of  short-term borrowings


(949,183)



(110,375)



(18,063)

Repayment of short-term borrowings-related parties


(242,434)



(5,303,279)



(867,910)

Proceeds from sale of common stock, net of issuance costs


-



12,132,882



1,985,612

Capital contribution in VIE


20,000



-



-

Net cash provided by (used in) financing activities


(6,561,617)



16,079,228



2,631,453










Effect of exchange rate fluctuation on cash and cash equivalents


282,730



116,711



19,102










Net increase (decrease) in cash and cash equivalents


(1,464,138)



9,383,173



1,535,607

Cash and cash equivalents at beginning of period


3,533,283



12,350,392



2,021,208

Cash and cash equivalents at end of period

RMB

2,069,145


RMB

21,733,565


$

3,556,815



















Supplemental cash flow information









Cash paid during the period for interest

RMB

943,986


RMB

689,828


$

112,894

Cash paid during the period for taxes

RMB

-


RMB

-


$

-

SOURCE Recon Technology, Ltd.


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