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Recon Reports Lower First Quarter Results But Maintains Full Year Growth Outlook
Following Temporary First Quarter Delays Anticipates Significant Pick Up in Project Completions in Subsequent Quarters
Recon Technology Fiscal Year 2015 First Quarter Investor Conference Call Scheduled for Friday, November 14th at 8:00am EST
PR Newswire
BEIJING

BEIJING, Nov. 13, 2014 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported that in its fiscal 2015 first quarter ended September 30, 2014, results were impacted by capital expenditure reductions by its industry leading state-owned customers reflecting changing industry conditions. One major consequence was the temporary postponement of a number of oil and gas projects. To a lesser extent, the reduced capital expenditures also resulted in some reduction in sales opportunities for Recon as compared to the same period last year. These factors translated to a year over year decline in FY 2015 first quarter revenues and profitability and resulted in a loss in the period.

Mr. Sheping Yin, Chairman and CEO of Recon stated, "We fully expect that projects originally scheduled to be completed in the quarter will be completed in subsequent periods during the fiscal year. Coupled with the continuing high degree of interest we are seeing in our products and technology we are anticipating a significant recovery and increase in revenues as projects are expected to be completed during this fiscal year that we believe will keep us on track with our growth plans."

Financial Highlights

In the first quarter ended September, 30, 2014:

    --  Revenues declined 62.6% to $699,450 from $1,870,951* in the first fiscal
        quarter last year for the reasons noted above. Nevertheless, we believe
        customer interest in Recon products and technology remained strong.
    --  With the decline in revenues, adjusted net income attributable to Recon
        (non-U.S. GAAP)** declined to a loss of approximately $(432,936) from a
        gain of approximately $135,862* in the same period last year.
    --  Adjusted EBIDTA (non-U.S. GAAP) decreased year over year from
        approximately $240,611* in the first quarter of FY 2014 to a loss of
        approximately $(368,662) in first quarter of FY 2015.
    --  The net loss attributable to Recon (U.S. GAAP) was approximately
        $(676,299), compared with net income of approximately $7,548* a year
        earlier.
    --  Diluted EPS (U.S. GAAP) was a loss of $(0.14) per share in the first
        quarter of FY 2015, compared with a net profit of $0.002 per share in
        the first quarter of FY2014.
    --  Adjusted diluted EPS** (non-U. S. GAAP) was a loss of $(0.09) compared
        with a gain of $0.03 in the year ago first quarter.

    * Based on the exchange
     rate of RMB 6.1534 to US
     $1.00.


    ** Non-U.S. GAAP measures
     are explained in tables 1
     and 2 below. Non-U.S.
     GAAP adjusted net income
     (loss) and EPS exclude
     certain special non-cash
     after tax expenses
     totaling $243,363, or
     $0.05 per share that are
     included in net income
     (loss).

Other FY 2015 First Quarter Highlights

    --  Finished goods in inventory totaled $2.4 million, of which approximately
        20% were furnaces shipped to customer sites.
    --  Gross margins declined to 14.3% from 46% a year earlier mainly
        reflecting the sharp decline in revenues, as well as decreased revenue
        from higher gross margin software.
    --  Operating income declined to a loss of $(722,446) compared with $81, 687
        in the year ago quarter.
    --  Current assets as of September 30, 2014 were approximately $20.5
        million, including approximately $7.5 million in accounts receivable and
        about $1 million in cash and cash equivalents.
    --  The Company reported no long term debt and total current liabilities of
        approximately $7.3 million as of September 30, 2014. After the end of
        the quarter, the Company received a short term loan of $975,071 from a
        founder of the Company.
    --  Working capital as of September 30, 2014 was approximately $13.2
        million.
    --  Weighted average outstanding ordinary shares as of September 30, 2014
        were approximately 4.76 million.

Outlook

Mr. Yin commented further, "Despite reduced drilling and lower oil prices -- as well as the continuing reforms taking place in China's oil industry -- we see continuing opportunity to expand our share of our customers' budgets with products and services that improve their productivity, safety and reduce their costs. Currently they are looking to us primarily for hardware -- in particular our oilfield furnaces -- as well as our automation products and services. We believe that with current conditions in the industry, the budgets of our customers will be shifting from exploration to increased production and development expenditures. We think we can meet their needs with our products and will continue to seek additional opportunities to expand our role on their behalf."

Research and Development and Fracking

"While focused on generating increasing near term revenue and profit," Mr. Yin continued, "we are also focused on developing new products with our outstanding research and development team that we count on to expand our Company's role in China's oil and gas fields in the future. A particular focus in recent months has been on reducing the high cost of fracking in China, which has been a major obstacle to its growth. We are confident of achieving breakthroughs in this area that will keep Recon in the forefront of future fracking activity in China."

Growth Goals: at least 20% year over year

"In our year end press release," Mr. Yin said, "we announced and discussed the growth goals we have developed. It is our belief that an achievable goal for Recon is average annual revenue growth of a minimum of 20%. Additionally, we believe that if we couple this with appropriate acquisitions, we can aim to double our revenues over the next two to three years. We further believe that with respect to our current fiscal year 2015, despite the poor start, we are still on track to achieve at least 20% year over year growth in revenues which should become more evident over the course of the year."

Conference Call Invitation

The Company will discuss Fiscal Year 2015 First Quarter results during a live conference call and webcast on Friday, November 14, 2014 at 8:00 am Eastern Standard Time.

To participate in the call, interested participants should call 1-866-620-9467 or 0086-010-95057 when calling within the United States or 010-95057 when calling from China. The Password for the Recon Technology First Quarter Investor Conference Call is: 9739 9962. Playback of the call will be available on the Recon website: www.recon.cn

SEE ATTACHED TABLES

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

Cautionary Statements

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

All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

Investor Relations Contacts:

China

Liu Jia
Chief Financial Officer
Recon Technology, Ltd.
info@recon.cn
+86 (10) 84945799

U.S.

Ken Donenfeld
DGI Investor Relations
kdonenfeld@dgiir.com
1-212-425-5700

Table 1 Adjusted EBITDA

Adjusted EBITDA.

We define adjusted EBITDA as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization. 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.


                                                                       For the Three Months Ended

                                                                             September 30,
                                                                             -------------

                                                                  2013                              2014                  2014    Increase /  Percentage

                                                              RMB                                 RMB         USD              (Decrease)    Change
                                                              ---                                 ---         ---              ---------     ------

    Reconciliation of Adjusted EBITDA

    to Net Income (loss)

         Net income  (loss)                               RMB                        206,354             RMB      (4,161,545)                       $(676,299)  RMB   (4,367,899)   (2,116.7)%

         Provision for income taxes                                                  207,327                           30,245                             4,915           (177,082)      (85.4)%

         Interest expense and foreign currency adjustment                            126,959                          243,918                            39,639             116,959         92.1%

         Change in fair value of warrants liability                                        -                       (274,399)                         (44,593)          (274,399)       (100)%

         Loss from investment                                                        374,614                                -                                -          (374,614)       (100)%

         Restricted shares issued for consulting services                                  -                       1,171,331                           190,355           1,171,331          100%

         Stock compensation expense                                                  414,954                          600,578                            97,601             185,624         44.7%

         Depreciation and amortization                                               150,368                          121,347                            19,720            (29,021)      (19.3)%
                                                                                     -------                          -------                            ------             -------

    Adjusted EBITDA                                       RMB                      1,480,576              RMB     (2,268,525)                       $(368,662)  RMB   (3,749,101)     (253.2)%
                                                          ===                      =========             ===       ==========                         =========   ===    ==========

Adjusted EBITDA decreased by approximately RMB3.7 million ($0.6 million) to approximately loss of RMB2.3 million ($0.4 million) for the three months ended September 30, 2014 compared to approximately income of RMB1.5 million income for the same period in 2013. This decrease was due to decreased revenue and increased professional service consulting expense.

Table 2 Adjusted Net Income (Loss) and Adjusted Earnings (Loss) Per Share


                                                                                                                                                                                                       For the Three Months Ended

                                                                                                                                                                                                              September 30,
                                                                                                                                                                                                              -------------

                                                                                                                                                                                                  2013                                          2014                  2014

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

    Reconciliation of Net Income (loss) attributable to Recon Technology, Ltd

    to Adjusted Net Income  (loss) attributable to Recon Technology, Ltd

         Net income (loss) attributable to Recon Technology, Ltd                                                                                                                          RMB                                        46,444          RMB      (4,161,545)  $(676,299)

    Noncash items (A):

         Change in fair value of warrants liability                                                                                                                                                                                       -                    (274,399)    (44,593)

         Loss from investment                                                                                                                                                                                                       374,614                             -           -

         Restricted shares issued for consulting services                                                                                                                                                                                 -                    1,171,331      190,355

         Stock compensation expense                                                                                                                                                                                                 414,954                       600,578       97,601
                                                                                                                                                                                                                                    -------                       -------       ------

    Adjusted net income (loss) attributable to Recon Technology, Ltd                                                                                                                      RMB                                       836,012           RMB     (2,664,035)  $(432,936)
                                                                                                                                                                                          ===                                       =======          ===       ==========    =========


    Reconciliation of U.S. GAAP Earnings (Loss) Per Share

    to Non U.S. GAAP Adjusted Earnings (Loss) Per Share

    U.S. GAAP earnings (loss) per share                                                                                                                                                   RMB                                          0.01          RMB           (0.87)     $(0.14)
                                                                                                                                                                                          ===                                          ====          ===            =====       ======

      Impact of special items on earnings per share                                                                                                                                                                                    0.20                          0.31         0.05
                                                                                                                                                                                                                                       ====                          ====         ====

    Non U.S. GAAP adjusted earnings (loss) per share                                                                                                                                      RMB                                          0.21          RMB           (0.56)     $(0.09)
                                                                                                                                                                                          ===                                          ====          ===            =====       ======

    Weighted - average shares -diluted                                                                                                                                                                                            3,951,811                     4,757,112    4,757,112
                                                                                                                                                                                                                                  =========                     =========    =========


    (A) Noncash items are certain expenses that are included in our U.S. GAAP reported results. There was no income tax benefit associated with the noncash items. The non-GAAP financial
    measures are provided to enhance investors' overall understanding of Recon's current financial performance.

FOR ADDITIONAL INFORMATION WE URGE YOU TO PLEASE CAREFULLY STUDY THE COMPANY'S FIRST QUARTER REPORT ON FORM 10-Q FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION NOVEMBER 13, 2014.


                                                                                                                 RECON TECHNOLOGY, LTD

                                                                                                    UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


                                                                                                                                    As of June 30,                As of September 30,                     As of September 30,
                                                                                                                                    --------------                -------------------                     -------------------

                                                                                                                                               2014                             2014                                   2014
                                                                                                                                               ----                             ----                                   ----

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

    Current assets

    Cash and cash equivalents                                                                                                             RMB          18,094,586          RMB             6,030,111                               $979,964

    Trade accounts receivable, net                                                                                                                   43,553,737                         38,445,529                              6,247,851

    Trade accounts receivable- related parties, net                                                                                                   7,479,298                          7,934,047                              1,289,376

    Inventories, net                                                                                                                                 14,336,602                         17,216,371                              2,797,863

    Other receivables, net                                                                                                                           18,293,043                         22,759,066                              3,698,616

    Other receivables- related parties                                                                                                    1,414,433                                  -                                       -

    Purchase advances, net                                                                                                                           25,759,065                         26,500,238                              4,306,601

    Purchase advances- related parties                                                                                                                  394,034                          1,500,000                                243,767

    Prepaid expenses                                                                                                                                  2,634,664                          4,388,693                                713,214

    Prepaid expenses - related parties                                                                                                      230,000                                  -                                       -

    Deferred tax asset                                                                                                                                1,209,961                          1,211,995                                196,963
                                                                                                                                                      ---------                          ---------                                -------

    Total current assets                                                                                                                            133,399,423                        125,986,050                             20,474,215


    Property and equipment, net                                                                                                                       1,321,538                          1,296,199                                210,648

    Long-term trade accounts receivable, net                                                                                                         14,456,317                         13,588,962                              2,208,366

    Long-term other receivable                                                                                                                        5,353,104                          4,706,703                                764,895
                                                                                                                                                      ---------                          ---------                                -------

    Total Assets                                                                                                                          RMB         154,530,382          RMB           145,577,914                            $23,658,124
                                                                                                                                          ===         ===========          ===           ===========                            ===========


    LIABILITIES AND EQUITY

    Current liabilities

    Short-term bank loans                                                                                                                 RMB          10,000,000          RMB             8,000,000                             $1,300,094

    Trade accounts payable                                                                                                                           11,413,505                          9,846,517                              1,600,175

    Trade accounts payable-related parties                                                                                                        -                           389,143                                   63,240

    Other payables                                                                                                                                    1,765,079                          1,041,711                                169,290

    Other payable- related parties                                                                                                                    3,306,024                          3,441,336                                559,258

    Deferred revenue                                                                                                                                  4,419,824                          4,136,518                                672,233

    Advances from customers                                                                                                                             801,385                            282,035                                 45,834

    Accrued payroll and employees' welfare                                                                                                              417,624                            446,297                                 72,529

    Accrued expenses                                                                                                                                    203,051                            217,106                                 35,281

    Taxes payable                                                                                                                                     7,589,846                          6,830,082                              1,109,969

    Short-term borrowings- related parties                                                                                                            5,207,728                          5,209,561                                846,615

    Deferred tax liability                                                                                                                              180,186                            180,186                                 29,282

    Warrants liability                                                                                                                                5,021,621                          4,745,754                                771,241

    Total current liabilities                                                                                                                        50,325,873                         44,766,246                              7,275,041
                                                                                                                                                     ----------                         ----------                              ---------


    Commitments and Contingency


    Equity

    Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000 shares authorized; 4,717,336 and 4,726,711 shares issued and
     outstanding as of June 30, 2014 and September 30, 2014, respectively)                                                                              616,865                            617,943                                100,421

    Additional paid-in capital                                                                                                                       83,061,058                         83,829,527                             13,623,286

    Appropriated retained earnings                                                                                                                    4,148,929                          4,148,929                                674,250

    Unappropriated retained earnings                                                                                                                  8,431,453                          4,269,908                                693,910

    Accumulated other comprehensive loss                                                                                                              (279,275)                         (280,077)                              (45,518)

    Total shareholders' equity                                                                                                                       95,979,030                         92,586,230                             15,046,349

    Non-controlling interest                                                                                                                          8,225,479                          8,225,438                              1,336,734
                                                                                                                                                      ---------                          ---------                              ---------

    Total equity                                                                                                                                    104,204,509                        100,811,668                             16,383,083
                                                                                                                                                    -----------                        -----------                             ----------

    Total Liabilities and Equity                                                                                                          RMB         154,530,382          RMB           145,577,914                            $23,658,124
                                                                                                                                          ===         ===========          ===           ===========                            ===========


                                                                                                                                                  -                                 -                                       -


                                                                                                          RECON TECHNOLOGY, LTD

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


                                                                                                                                                                      For the three months ended

                                                                                                                                                                            September 30,
                                                                                                                                                                            -------------

                                                                                                                                                                            2013                                    2014        2014
                                                                                                                                                                            ----                                    ----        ----

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


    Revenues

    Hardware and software                                                                                                                                   RMB         11,097,092                RMB            4,245,509                $689,945

    Service                                                                                                                                                         -                                58,491                     9,505

    Hardware and software - related parties                                                                                                                   415,618                                      -                        -
                                                                                                                                                              -------                                                             ---

    Total revenues                                                                                                                                                    11,512,710                               4,304,000                 699,450
                                                                                                                                                                      ----------                               ---------                 -------

    Cost of revenues

    Hardware and software                                                                                                                                   RMB          6,118,674                RMB            3,688,686                $599,455

    Hardware and software - related parties                                                                                                                   102,936                                      -                        -
                                                                                                                                                              -------                                    ---                      ---

    Total cost of revenues                                                                                                                                             6,221,610                               3,688,686                 599,455

    Gross profit                                                                                                                                                       5,291,100                                 615,314                  99,995
                                                                                                                                                                       ---------                                 -------                  ------



    Selling and distribution expenses                                                                                                                                  1,353,922                                 700,790                 113,887

    General and administrative expenses                                                                                                                                2,741,923                               3,703,291                 601,828

    Research and development expenses                                                                                                                                    692,600                                 656,729                 106,726

    Operating expenses                                                                                                                                                 4,788,445                               5,060,810                 822,441
                                                                                                                                                                       ---------                               ---------                 -------



    Income (loss) from operations                                                                                                                                        502,655                             (4,445,496)              (722,446)
                                                                                                                                                                         -------                              ----------                --------


    Other income (expenses)

    Subsidy income                                                                                                                                                       333,712                                 214,703                  34,892

    Interest income                                                                                                                                                      103,201                                  83,032                  13,494

    Interest expense                                                                                                                                                   (221,259)                              (241,844)               (39,302)

    Loss from investment                                                                                                                                    (374,614)                                     -                        -

    Change in fair value of warrants liability                                                                                                                      -                               274,399                    44,593

    Gain?loss?from foreign currency exchange                                                                                                                              94,300                                 (2,074)                  (337)

    Other expense                                                                                                                                                       (24,314)                               (14,020)                (2,278)
                                                                                                                                                                         -------                                 -------                  ------

    Other income (expenses)                                                                                                                                             (88,974)                                314,196                  51,062
                                                                                                                                                                         -------                                 -------                  ------


    Income (loss) before income tax                                                                                                                                      413,681                             (4,131,300)              (671,384)

    Provision for income tax                                                                                                                                             207,327                                  30,245                   4,915
                                                                                                                                                                                                                                         -----

    Net Income (loss)                                                                                                                                                    206,354                             (4,161,545)              (676,299)


    Less: Net income attributable to non-controlling interest                                                                                                 159,910                                      -                        -
                                                                                                                                                                                                                                 ---

    Net Income (loss) attributable to Recon Technology, Ltd                                                                                                 RMB             46,444                RMB          (4,161,545)             $(676,299)
                                                                                                                                                            ===             ======                ===           ==========               =========


    Comprehensive income (loss)

    Net income (loss)                                                                                                                                                    206,354                             (4,161,545)              (676,299)

    Foreign currency translation adjustment                                                                                                                              (5,604)                                  (802)                  (138)
                                                                                                                                                                          ------                                    ----                    ----

    Comprehensive income (loss)                                                                                                                                          200,750                             (4,162,347)              (676,437)

    Less: Comprehensive income attributable to non-controlling interest                                                                                                  159,349                                    (41)                   (14)
                                                                                                                                                                         -------                                     ---                     ---

    Comprehensive income (loss) attributable to Recon Technology, Ltd                                                                                       RMB             41,401                RMB          (4,162,306)             $(676,423)
                                                                                                                                                            ===             ======                ===           ==========               =========


    Earnings per common share - basic and diluted                                                                                                           RMB               0.01                RMB               (0.87)                $(0.14)
                                                                                                                                                            ===               ====                ===                =====                  ======

    Weighted - average shares -basic and diluted                                                                                                                       3,951,811                               4,757,112               4,757,112
                                                                                                                                                                       =========                               =========               =========


                                                                                                                RECON TECHNOLOGY, LTD

                                                                                              UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                                                                                        For the three months ended September 30,
                                                                                                                                                        ----------------------------------------

                                                                                                                                                         2013                         2014                                2014
                                                                                                                                                         ----                         ----                                ----

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


    Cash flows from operating activities:

    Net income (loss)                                                                                                                               RMB               206,354                       RMB           (4,161,545)                 $(676,299)

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

    Depreciation                                                                                                                                                    150,368                                         121,347                      19,720

    Provision/(recovery of) for doubtful accounts                                                                                                                    84,728                                        (68,361)                   (11,109)

    Share based compensation                                                                                                                                        414,954                                         600,578                      97,601

    Loss from investment                                                                                                                              374,614                                               -                           -

    Deferred tax provision/(benefit)                                                                                                                                 11,868                                         (2,034)                      (331)

    Change in fair value of warrants liability                                                                                                              -                                      (274,399)                    (44,593)

    Restricted shares issued to consulting firm                                                                                                             -                                      1,171,331                      190,355

    Changes in operating assets and liabilities:

    Trade accounts receivable                                                                                                                                     2,568,115                                       5,087,718                     826,814

    Trade accounts receivable-related parties                                                                                                                       263,726                                         508,979                      82,715

    Inventories                                                                                                                                                 (4,673,420)                                    (2,879,769)                  (467,996)

    Notes receivable                                                                                                                                2,578,855                                               -                           -

    Other receivable, net                                                                                                                                       (1,703,837)                                    (3,818,122)                  (620,491)

    Other receivables related parties, net                                                                                                                        (428,699)                                      1,414,433                     229,862

    Purchase advance, net                                                                                                                                       (2,097,795)                                    (1,752,557)                  (284,811)

    Purchase advance-related party, net                                                                                                                     -                                    (1,105,966)                   (179,733)

    Tax recoverable                                                                                                                                 (199,225)                                              -                           -

    Prepaid expense                                                                                                                                               (224,273)                                    (1,754,029)                  (285,050)

    Prepaid expense - related party, net                                                                                                                    -                                        230,000                       37,378

    Trade accounts payable                                                                                                                                        1,090,211                                     (1,566,988)                  (254,654)

    Trade accounts payable-related parties                                                                                                                      (3,994,718)                                        389,143                      63,240

    Other payables                                                                                                                                              (1,013,574)                                      (723,368)                  (117,556)

    Other payables-related parties                                                                                                                              (1,568,907)                                        135,312                      21,990

    Deferred income                                                                                                                                                  78,484                                       (283,306)                   (46,041)

    Advances from customers                                                                                                                                        (35,385)                                      (519,350)                   (84,400)

    Accrued payroll and employees' welfare                                                                                                                          136,258                                          28,673                       4,660

    Accrued expenses                                                                                                                                                  9,543                                          14,055                       2,284

    Taxes payable                                                                                                                                                    11,396                                       (759,764)                  (123,471)

    Net cash used in operating activities                                                                                                                       (7,960,359)                                    (9,967,989)                (1,619,916)
                                                                                                                                                                 ----------                                      ----------                  ----------


    Cash flows from investing activities:

    Purchase of property and equipment                                                                                                                              (6,720)                                       (96,008)                   (15,602)

    Net cash used in investing activities                                                                                                                           (6,720)                                       (96,008)                   (15,602)
                                                                                                                                                                     ------                                         -------                     -------


    Cash flows from financing activities:

    Proceeds from short-term bank loans                                                                                                             7,560,000                                               -                           -

    Repayments of short-term bank loans                                                                                                                     -                                    (2,000,000)                   (325,024)

    Repayment of  short-term borrowings                                                                                                              (40,000)                                              -                           -

    Repayment of short-term borrowings-related parties                                                                                            (5,236,377)                                              -                           -

    Net cash provided by (used in) financing activities                                                                                                           2,283,623                                     (2,000,000)                  (325,024)
                                                                                                                                                                  ---------                                      ----------                    --------


    Effect of exchange rate fluctuation on cash and cash equivalents                                                                                                 14,967                                           (478)                       (77)
                                                                                                                                                                     ------                                            ----                         ---


    Net decrease in cash and cash equivalents                                                                                                                   (5,668,489)                                   (12,064,475)                (1,960,619)

    Cash and cash equivalents at beginning of year                                                                                                               12,350,392                                      18,094,586                   2,940,583
                                                                                                                                                                 ----------                                      ----------                   ---------

    Cash and cash equivalents at end of year                                                                                                        RMB             6,681,903                       RMB             6,030,111                    $979,964
                                                                                                                                                    ===             =========                       ===             =========                    ========



    Supplemental cash flow information

    Cash paid during the period for interest                                                                                                        RMB               212,187                       RMB               230,035                     $37,383
                                                                                                                                                    ===               =======                       ===               =======                     =======

    Cash paid during the period for taxes                                                                                                           RMB                     -                      RMB                32,280                      $5,246
                                                                                                                                                    ===                   ===                      ===                ======                      ======


    Non-cash investing and financing activities

    Cancelation of  prior issuance of 40,625 shares of common stock for professional services                                                               -                                      1,002,721                      162,954

SOURCE Recon Technology, Ltd.

SOURCE: Recon Technology, Ltd.

Recon Reports Lower First Quarter Results But Maintains Full Year Growth Outlook

Following Temporary First Quarter Delays Anticipates Significant Pick Up in Project Completions in Subsequent Quarters

Recon Technology Fiscal Year 2015 First Quarter Investor Conference Call Scheduled for Friday, November 14th at 8:00am EST

PR Newswire

BEIJING, Nov. 13, 2014 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported that in its fiscal 2015 first quarter ended September 30, 2014, results were impacted by capital expenditure reductions by its industry leading state-owned customers reflecting changing industry conditions. One major consequence was the temporary postponement of a number of oil and gas projects. To a lesser extent, the reduced capital expenditures also resulted in some reduction in sales opportunities for Recon as compared to the same period last year. These factors translated to a year over year decline in FY 2015 first quarter revenues and profitability and resulted in a loss in the period.

Mr. Sheping Yin, Chairman and CEO of Recon stated, "We fully expect that projects originally scheduled to be completed in the quarter will be completed in subsequent periods during the fiscal year. Coupled with the continuing high degree of interest we are seeing in our products and technology we are anticipating a significant recovery and increase in revenues as projects are expected to be completed during this fiscal year that we believe will keep us on track with our growth plans."

Financial Highlights

In the first quarter ended September, 30, 2014:

  • Revenues declined 62.6% to $699,450 from $1,870,951* in the first fiscal quarter last year for the reasons noted above. Nevertheless, we believe customer interest in Recon products and technology remained strong.
  • With the decline in revenues, adjusted net income attributable to Recon (non-U.S. GAAP)** declined to a loss of approximately $(432,936) from a gain of approximately $135,862* in the same period last year.
  • Adjusted EBIDTA (non-U.S. GAAP) decreased year over year from approximately $240,611* in the first quarter of FY 2014 to a loss of approximately $(368,662) in first quarter of FY 2015.
  • The net loss attributable to Recon (U.S. GAAP) was approximately $(676,299), compared with net income of approximately $7,548* a year earlier.
  • Diluted EPS (U.S. GAAP) was a loss of $(0.14) per share in the first quarter of FY 2015, compared with a net profit of $0.002 per share in the first quarter of FY2014.
  • Adjusted diluted EPS** (non-U. S. GAAP) was a loss of $(0.09) compared with a gain of $0.03 in the year ago first quarter.

* Based on the exchange rate of RMB 6.1534 to US $1.00.


** Non-U.S. GAAP measures are explained in tables 1 and 2 below. Non-U.S. GAAP adjusted net income (loss) and EPS exclude certain special non-cash after tax expenses totaling $243,363, or $0.05 per share that are included in net income (loss).

Other FY 2015 First Quarter Highlights

  • Finished goods in inventory totaled $2.4 million, of which approximately 20% were furnaces shipped to customer sites.
  • Gross margins declined to 14.3% from 46% a year earlier mainly reflecting the sharp decline in revenues, as well as decreased revenue from higher gross margin software.
  • Operating income declined to a loss of $(722,446) compared with $81, 687 in the year ago quarter.
  • Current assets as of September 30, 2014 were approximately $20.5 million, including approximately $7.5 million in accounts receivable and about $1 million in cash and cash equivalents.
  • The Company reported no long term debt and total current liabilities of approximately $7.3 million as of September 30, 2014. After the end of the quarter, the Company received a short term loan of $975,071 from a founder of the Company.
  • Working capital as of September 30, 2014 was approximately $13.2 million.
  • Weighted average outstanding ordinary shares as of September 30, 2014 were approximately 4.76 million.

Outlook

Mr. Yin commented further, "Despite reduced drilling and lower oil prices -- as well as the continuing reforms taking place in China's oil industry -- we see continuing opportunity to expand our share of our customers' budgets with products and services that improve their productivity, safety and reduce their costs. Currently they are looking to us primarily for hardware -- in particular our oilfield furnaces -- as well as our automation products and services. We believe that with current conditions in the industry, the budgets of our customers will be shifting from exploration to increased production and development expenditures. We think we can meet their needs with our products and will continue to seek additional opportunities to expand our role on their behalf."

Research and Development and Fracking

"While focused on generating increasing near term revenue and profit," Mr. Yin continued, "we are also focused on developing new products with our outstanding research and development team that we count on to expand our Company's role in China's oil and gas fields in the future. A particular focus in recent months has been on reducing the high cost of fracking in China, which has been a major obstacle to its growth. We are confident of achieving breakthroughs in this area that will keep Recon in the forefront of future fracking activity in China."

Growth Goals: at least 20% year over year

"In our year end press release," Mr. Yin said, "we announced and discussed the growth goals we have developed. It is our belief that an achievable goal for Recon is average annual revenue growth of a minimum of 20%. Additionally, we believe that if we couple this with appropriate acquisitions, we can aim to double our revenues over the next two to three years. We further believe that with respect to our current fiscal year 2015, despite the poor start, we are still on track to achieve at least 20% year over year growth in revenues which should become more evident over the course of the year."

Conference Call Invitation

The Company will discuss Fiscal Year 2015 First Quarter results during a live conference call and webcast on Friday, November 14, 2014 at 8:00 am Eastern Standard Time.

To participate in the call, interested participants should call 1-866-620-9467 or 0086-010-95057 when calling within the United States or 010-95057 when calling from China. The Password for the Recon Technology First Quarter Investor Conference Call is: 9739 9962. Playback of the call will be available on the Recon website: www.recon.cn

SEE ATTACHED TABLES

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

Cautionary Statements

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

All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

Investor Relations Contacts:

China

Liu Jia 
Chief Financial Officer
Recon Technology, Ltd.
info@recon.cn
+86 (10) 84945799

U.S.

Ken Donenfeld 
DGI Investor Relations 
kdonenfeld@dgiir.com
1-212-425-5700

Table 1 Adjusted EBITDA 

Adjusted EBITDA.

 We define adjusted EBITDA as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization. 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.


For the Three Months Ended


September 30,


2013


2014


2014


Increase /

Percentage


RMB


RMB


USD


(Decrease)

Change

Reconciliation of Adjusted EBITDA















to Net Income (loss)















     Net income  (loss)

RMB

206,354


RMB

(4,161,545)


$

(676,299)


RMB

(4,367,899)


(2,116.7)

%

     Provision for income taxes


207,327



30,245



4,915



(177,082)


(85.4)

%

     Interest expense and foreign currency adjustment


126,959



243,918



39,639



116,959


92.1

%

     Change in fair value of warrants liability


-



(274,399)



(44,593)



(274,399)


(100)

%

     Loss from investment


374,614



-



-



(374,614)


(100)

%

     Restricted shares issued for consulting services


-



1,171,331



190,355



1,171,331


100

%

     Stock compensation expense


414,954



600,578



97,601



185,624


44.7

%

     Depreciation and amortization


150,368



121,347



19,720



(29,021)


(19.3)

%

Adjusted EBITDA

RMB

1,480,576


 RMB

(2,268,525)


$

(368,662)


RMB

(3,749,101)


(253.2)

%

Adjusted EBITDA decreased by approximately RMB3.7 million ($0.6 million) to approximately loss of RMB2.3 million ($0.4 million) for the three months ended September 30, 2014 compared to approximately income of RMB1.5 million income for the same period in 2013. This decrease was due to decreased revenue and increased professional service consulting expense.

Table 2 Adjusted Net Income (Loss) and Adjusted Earnings (Loss) Per Share



For the Three Months Ended



September 30,



2013


2014


2014



RMB


RMB


USD

Reconciliation of Net Income (loss) attributable to Recon Technology, Ltd










to Adjusted Net Income  (loss) attributable to Recon Technology, Ltd










     Net income (loss) attributable to Recon Technology, Ltd


RMB

46,444


RMB

(4,161,545)


$

(676,299)

Noncash items (A):










     Change in fair value of warrants liability



-



(274,399)



(44,593)

     Loss from investment



374,614



-



-

     Restricted shares issued for consulting services



-



1,171,331



190,355

     Stock compensation expense



414,954



600,578



97,601

Adjusted net income (loss) attributable to Recon Technology, Ltd


RMB

836,012


 RMB

(2,664,035)


$

(432,936)











Reconciliation of U.S. GAAP Earnings (Loss) Per Share










to Non U.S. GAAP Adjusted Earnings (Loss) Per Share










U.S. GAAP earnings (loss) per share


RMB

0.01


RMB

(0.87)


$

(0.14)

  Impact of special items on earnings per share



0.20



0.31



0.05

Non U.S. GAAP adjusted earnings (loss) per share


RMB

0.21


RMB

(0.56)


$

(0.09)

Weighted - average shares -diluted



3,951,811



4,757,112



4,757,112


(A) Noncash items are certain expenses that are included in our U.S. GAAP reported results. There was no income tax benefit associated with the noncash items. The non-GAAP financial
measures are provided to enhance investors' overall understanding of Recon's current financial performance.

FOR ADDITIONAL INFORMATION WE URGE YOU TO PLEASE CAREFULLY STUDY THE COMPANY'S FIRST QUARTER REPORT ON FORM 10-Q FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION NOVEMBER 13, 2014.

 

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS












As of June 30,



As of September 30,



As of September 30,


2014


2014


2014

ASSETS

RMB


RMB


U.S. Dollars

Current assets









Cash and cash equivalents 

RMB

18,094,586


RMB

6,030,111


$

979,964

Trade accounts receivable, net 


43,553,737



38,445,529



6,247,851

Trade accounts receivable- related parties, net


7,479,298



7,934,047



1,289,376

Inventories, net


14,336,602



17,216,371



2,797,863

Other receivables, net 


18,293,043



22,759,066



3,698,616

Other receivables- related parties


1,414,433



-



-

Purchase advances, net


25,759,065



26,500,238



4,306,601

Purchase advances- related parties


394,034



1,500,000



243,767

Prepaid expenses 


2,634,664



4,388,693



713,214

Prepaid expenses - related parties


230,000



-



-

Deferred tax asset


1,209,961



1,211,995



196,963

Total current assets


133,399,423



125,986,050



20,474,215










Property and equipment, net


1,321,538



1,296,199



210,648

Long-term trade accounts receivable, net


14,456,317



13,588,962



2,208,366

Long-term other receivable


5,353,104



4,706,703



764,895

Total Assets

RMB

154,530,382


RMB

145,577,914


$

23,658,124










LIABILITIES AND EQUITY 









Current liabilities









Short-term bank loans

RMB

10,000,000


RMB

8,000,000


$

1,300,094

Trade accounts payable


11,413,505



9,846,517



1,600,175

Trade accounts payable-related parties


-



389,143



63,240

Other payables 


1,765,079



1,041,711



169,290

Other payable- related parties


3,306,024



3,441,336



559,258

Deferred revenue


4,419,824



4,136,518



672,233

Advances from customers


801,385



282,035



45,834

Accrued payroll and employees' welfare


417,624



446,297



72,529

Accrued expenses


203,051



217,106



35,281

Taxes payable


7,589,846



6,830,082



1,109,969

Short-term borrowings- related parties


5,207,728



5,209,561



846,615

Deferred tax liability


180,186



180,186



29,282

Warrants liability 


5,021,621



4,745,754



771,241

Total current liabilities


50,325,873



44,766,246



7,275,041










Commitments and Contingency


















Equity 









Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000 shares authorized; 4,717,336 and 4,726,711 shares issued and outstanding as of June 30, 2014 and September 30, 2014, respectively)


616,865



617,943



100,421

Additional paid-in capital


83,061,058



83,829,527



13,623,286

Appropriated retained earnings


4,148,929



4,148,929



674,250

Unappropriated retained earnings


8,431,453



4,269,908



693,910

Accumulated other comprehensive loss


(279,275)



(280,077)



(45,518)

Total shareholders' equity


95,979,030



92,586,230



15,046,349

Non-controlling interest


8,225,479



8,225,438



1,336,734

Total equity


104,204,509



100,811,668



16,383,083

Total Liabilities and Equity

RMB

154,530,382


RMB

145,577,914


$

23,658,124












-



-



-











 

RECON TECHNOLOGY, LTD

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











For the three months ended


September 30,



2013



2014


2014



RMB



RMB


USD










Revenues









Hardware and software

RMB

11,097,092


RMB

4,245,509


$

689,945

Service


-



58,491



9,505

Hardware and software - related parties


415,618



-



-

Total revenues


11,512,710



4,304,000



699,450

Cost of revenues









Hardware and software

RMB

6,118,674


RMB

3,688,686


$

599,455

Hardware and software - related parties


102,936



-



-

Total cost of revenues


6,221,610



3,688,686



599,455

Gross profit


5,291,100



615,314



99,995



















Selling and distribution expenses


1,353,922



700,790



113,887

General and administrative expenses


2,741,923



3,703,291



601,828

Research and development expenses


692,600



656,729



106,726

Operating expenses


4,788,445



5,060,810



822,441



















Income (loss) from operations


502,655



(4,445,496)



(722,446)










Other income (expenses)









Subsidy income


333,712



214,703



34,892

Interest income


103,201



83,032



13,494

Interest expense


(221,259)



(241,844)



(39,302)

Loss from investment


(374,614)



-



-

Change in fair value of warrants liability


-



274,399



44,593

Gain(loss)from foreign currency exchange


94,300



(2,074)



(337)

Other expense


(24,314)



(14,020)



(2,278)

Other income (expenses)


(88,974)



314,196



51,062










Income (loss) before income tax


413,681



(4,131,300)



(671,384)

Provision for income tax


207,327



30,245



4,915

Net Income (loss)


206,354



(4,161,545)



(676,299)










Less: Net income attributable to non-controlling interest


159,910



-



-

Net Income (loss) attributable to Recon Technology, Ltd

RMB

46,444


 RMB 

(4,161,545)


$

(676,299)










Comprehensive income (loss)









Net income (loss)


206,354



(4,161,545)



(676,299)

Foreign currency translation adjustment


(5,604)



(802)



(138)

Comprehensive income (loss)


200,750



(4,162,347)



(676,437)

Less: Comprehensive income attributable to non-controlling interest


159,349



(41)



(14)

Comprehensive income (loss) attributable to Recon Technology, Ltd

RMB

41,401


 RMB 

(4,162,306)


$

(676,423)










Earnings per common share - basic and diluted

RMB

0.01


RMB

(0.87)


$

(0.14)

Weighted - average shares -basic and diluted


3,951,811



4,757,112



4,757,112



 

RECON TECHNOLOGY, LTD 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 











For the three months ended September 30,


2013


2014


2014


RMB


RMB


U.S. Dollars










Cash flows from operating activities:









Net income (loss)

RMB

206,354


RMB

(4,161,545)


$

(676,299)

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









Depreciation


150,368



121,347



19,720

Provision/(recovery of) for doubtful accounts


84,728



(68,361)



(11,109)

Share based compensation


414,954



600,578



97,601

Loss from investment


374,614



-



-

Deferred tax provision/(benefit)


11,868



(2,034)



(331)

Change in fair value of warrants liability


-



(274,399)



(44,593)

Restricted shares issued to consulting firm


-



1,171,331



190,355

Changes in operating assets and liabilities:









Trade accounts receivable


2,568,115



5,087,718



826,814

Trade accounts receivable-related parties


263,726



508,979



82,715

Inventories


(4,673,420)



(2,879,769)



(467,996)

Notes receivable


2,578,855



-



-

Other receivable, net


(1,703,837)



(3,818,122)



(620,491)

Other receivables related parties, net


(428,699)



1,414,433



229,862

Purchase advance, net


(2,097,795)



(1,752,557)



(284,811)

Purchase advance-related party, net


-



(1,105,966)



(179,733)

Tax recoverable


(199,225)



-



-

Prepaid expense


(224,273)



(1,754,029)



(285,050)

Prepaid expense - related party, net


-



230,000



37,378

Trade accounts payable


1,090,211



(1,566,988)



(254,654)

Trade accounts payable-related parties


(3,994,718)



389,143



63,240

Other payables


(1,013,574)



(723,368)



(117,556)

Other payables-related parties


(1,568,907)



135,312



21,990

Deferred income


78,484



(283,306)



(46,041)

Advances from customers


(35,385)



(519,350)



(84,400)

Accrued payroll and employees' welfare


136,258



28,673



4,660

Accrued expenses


9,543



14,055



2,284

Taxes payable


11,396



(759,764)



(123,471)

Net cash used in operating activities


(7,960,359)



(9,967,989)



(1,619,916)










Cash flows from investing activities:









Purchase of property and equipment


(6,720)



(96,008)



(15,602)

Net cash used in investing activities


(6,720)



(96,008)



(15,602)










Cash flows from financing activities:









Proceeds from short-term bank loans


7,560,000



-



-

Repayments of short-term bank loans


-



(2,000,000)



(325,024)

Repayment of  short-term borrowings


(40,000)



-



-

Repayment of short-term borrowings-related parties


(5,236,377)



-



-

Net cash provided by (used in) financing activities


2,283,623



(2,000,000)



(325,024)










Effect of exchange rate fluctuation on cash and cash equivalents


14,967



(478)



(77)










Net decrease in cash and cash equivalents


(5,668,489)



(12,064,475)



(1,960,619)

Cash and cash equivalents at beginning of year


12,350,392



18,094,586



2,940,583

Cash and cash equivalents at end of year

RMB

6,681,903


RMB

6,030,111


$

979,964



















Supplemental cash flow information









Cash paid during the period for interest

RMB

212,187


RMB

230,035


$

37,383

Cash paid during the period for taxes

RMB

-


RMB

32,280


$

5,246










Non-cash investing and financing activities









Cancelation of  prior issuance of 40,625 shares of common stock for professional services


-



1,002,721



162,954



 

SOURCE Recon Technology, Ltd.


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