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Recon Reports FY 2015 Second Quarter Results
Performance Improved Compared to First Quarter;
Maintain Full Year Growth Outlook
PR Newswire
BEIJING

BEIJING, Feb. 13, 2015 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported its operating results for the second quarter of fiscal year 2015, which ended December 31, 2014.

Mr. Sheping Yin, Chairman and CEO of Recon stated, "Affected by the lower oil and gas price worldwide and decreased CAPEX expense of our clients, some of our projects are postponed or cancelled, and our financial performance for the first half year of fiscal 2015 may not be satisfactory. Overall, based on our reported revenue in this second quarter, our performance this quarter improved significantly compared to last quarter. The dollar amount of our current contracts on hand and actual onsite workload also increased significantly during this quarter. As such, our management continue to be optimistic for the coming year. We believe that the continued decline of oil and gas prices stimulated oil companies' demand for technology and better production management for producing wells, which is exactly the focus of our business. We believe this is a great opportunity for us and our years of investment in R&D are paying off. We remain optimistic aboutour future growth."

Three Month Financial Highlights

For the second quarter ended December, 31, 2014:

    --  Revenues declined 53.9% to $3.5 million from $7.5 million(*) in the
        second fiscal quarter last year due to projects delay or cancellation.
        Nevertheless, management believe customer interest in Recon products and
        technology remain strong.
    --  Net income attributable to Recon (U.S. GAAP) was $0.9 million, compared
        with net income of approximately $1.0 million* a year earlier.
    --  With the decline in revenues, adjusted net income attributable to Recon
        (non-U.S. GAAP)** declined to approximately $0.3 million from
        approximately $1.2 million* in the same period last year.
    --  Adjusted EBIDTA (non-U.S. GAAP) decreased year over year from
        approximately $1.6 million* in the second quarter of FY 2014 to
        approximately $0.6 million in second quarter of FY 2015.
    --  Diluted EPS (U.S. GAAP) was $0.18 per share in the second quarter of FY
        2015, compared with $0.22 per share in the second quarter of FY2014.
    --  Adjusted diluted EPS** (non-U. S. GAAP) was $0.07 compared with $0.27 in
        the second quarter a year ago.
    * Based on the exchange
     rate of RMB 6.1385 to US
     $1.00.


    ** Non-U.S. GAAP adjusted
     net income (loss) and EPS
     exclude certain special
     non-cash after tax
     income totaling $0.5
     million, or $0.11 per
     share that is included in
     net income.

Six Month Financial Highlights

For the six-month period ended December, 31, 2014:

    --  Total revenue for the six months ended December 31, 2014 decreased 55.6%
        to $4.2 million.
    --  Net income attributable to Recon for the six months ended December 31,
        2014 decreased 80.1% to $0.2 million.
    --  Adjusted EBITDA for the six months ended December 31, 2014 decreased
        89.1% to $0.2 million
    --  Diluted EPS (U.S. GAAP) was $0.04 per share in the second quarter of FY
        2015, compared with $0.23 per share in the second quarter of FY2014.
    --  Adjusted diluted EPS*** (non-U.S.GAAP) was a loss of $0.02 per share
        compared with a net income of $0.31 per share in the same period a year
        ago.
    *** Non-U.S. GAAP
     adjusted net income
     (loss) and EPS exclude
     certain special non-
     cash after tax income
     totaling $0.3 million,
     or $0.06 per share
     that are included in
     net income.

Other Financial and Operation Highlights

For the three months ended in December 31, 2014:

    --  Gross margins increased to 42.1% from 35.7% a year earlier mainly
        because of the decreased hardware cost of revenue during the period
        compared to same period last year.
    --  Operating income declined to $0.4 million from $1.3 million for the same
        period last year.
    --  Current assets as of December 31, 2014 were approximately $22.2 million,
        including approximately $0.8 million in cash and $8.2 million in trade
        accounts receivable from non related parties.
    --  The Company reported no long term debt and total current liabilities of
        approximately $8.0 million as of December 31, 2014.
    --  Weighted average outstanding ordinary shares as of December 31, 2014
        were approximately 4.82 million shares.

For the Six months ended in December 31, 2014:

    --  Gross margins remained stable at 37.4% compared to 37.8% a year earlier.
    --  Operating loss declined to $0.3 million compared with an operating
        income of $1.4 million a year ago.
    --  Weighted average outstanding ordinary shares as of December 31, 2014 was
        approximately 4.85 million.

Outlook

Mr. Yin commented further, "Most of our peer companies need to undertake heavy burden of depreciation and amortization due to their excessive investment in the past few years and are suffering from heavy losses now. Compared to them, as a light asset service company, we believe our burden is smaller and have more flexibility to adjust and satisfy our clients' requirements. As our clients, CNPC and Sinopec, launched their reform of intelligent oilfield construction, we see continuing opportunity to expand our share of our customers' budgets with products and services that improve their productivity, safety and reduce their producing costs. The trend is that more and more oil and gas companies prefer to use highly automated and cost efficient equipment, including our customers. It not only saves costs, but also improves safety. We think we can help our customers' needs with our products and will continue to seek additional opportunities to expand our role on their behalf. We believe that our efforts will be reflected in our financial performance in the coming years."

Broaden Oversea Market Share

"As part of our growth strategies previously announced," Mr. Yin continued, "one of them is to follow our customers overseas to broaden our oversea market share, as we successfully did in Turkmenistan. We will keep implementing our growth strategies and update our progress once we have more detailed information."

About Recon

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.

Contact:

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

                                                                                                            RECON TECHNOLOGY, LTD

                                                                                               UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


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

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

    ASSETS                                                                                                     RMB                                     RMB                         USD
                                                                                                               ---                                     ---                         ---

    Current assets

    Cash and cash equivalents                                                                                           18,094,586                                   4,947,964                       806,054

    Notes receivable                                                                                                             -                                  2,977,565                       485,064

    Trade accounts receivable, net                                                                                      43,553,737                                  50,350,533                     8,202,416

    Trade accounts receivable- related parties, net                                                                      7,479,298                                   2,980,821                       485,594

    Inventories, net                                                                                                    14,336,602                                  19,170,009                     3,122,914

    Other receivables, net                                                                                              18,293,043                                  27,201,739                     4,431,333

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

    Purchase advances, net                                                                                              25,759,065                                  22,116,442                     3,602,906

    Purchase advances- related parties                                                                                     394,034                                     394,034                        64,191

    Prepaid expenses                                                                                                     2,634,664                                   4,762,485                       775,840

    Prepaid expenses - related parties                                                                                     230,000                                           -                            -

    Deferred tax asset                                                                                                   1,209,961                                   1,237,938                       201,668
                                                                                                                         ---------                                   ---------                       -------

    Total current assets                                                                                               133,399,423                                 136,139,530                    22,177,980


    Property and equipment, net                                                                                          1,321,538                                   1,368,636                       222,959

    Long-term trade accounts receivable, net                                                                                     -                                 14,545,865                     2,369,612

    Long-term trade accounts receivable - related parties, net                                                          14,456,317                                           -                            -

    Long-term other receivable                                                                                           5,353,104                                   4,053,933                       660,411
                                                                                                                         ---------                                   ---------                       -------

    Total Assets                                                                                                       154,530,382                                 156,107,964                    25,430,962
                                                                                                                       ===========                                 ===========                    ==========


    LIABILITIES AND EQUITY

    Current liabilities

    Short-term bank loans                                                                                               10,000,000                                   8,000,000                     1,303,250

    Trade accounts payable                                                                                              11,413,505                                  12,602,016                     2,052,947

    Other payables                                                                                                       1,765,079                                   1,627,676                       265,159

    Other payable- related parties                                                                                       3,306,024                                   3,596,762                       585,935

    Deferred revenue                                                                                                     4,419,824                                   3,196,427                       520,718

    Advances from customers                                                                                                801,385                                     384,200                        62,589

    Accrued payroll and employees' welfare                                                                                 417,624                                     284,937                        46,418

    Accrued expenses                                                                                                       203,051                                     212,378                        34,597

    Taxes payable                                                                                                        7,589,846                                   8,369,413                     1,363,430

    Short-term borrowings- related parties                                                                               5,207,728                                   9,631,504                     1,569,032

    Deferred tax liability                                                                                                 180,186                                     180,186                        29,353

    Warrants liability                                                                                                   5,021,621                                     930,480                       151,581

    Total current liabilities                                                                                           50,325,873                                  49,015,979                     7,985,009
                                                                                                                        ----------                                  ----------                     ---------



    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 December 31, 2014,
     respectively)                                                                                                         616,865                                     617,943                       100,665

    Additional paid-in capital                                                                                          83,061,058                                  84,343,979                    13,740,161

    Appropriated retained earnings                                                                                       4,148,929                                   4,631,899                       754,565

    Unappropriated retained earnings                                                                                     8,431,453                                   9,112,314                     1,484,453

    Accumulated other comprehensive loss                                                                                 (279,275)                                  (274,549)                     (44,727)

    Total shareholders' equity                                                                                          95,979,030                                  98,431,586                    16,035,117

    Non-controlling interest                                                                                             8,225,479                                   8,660,399                     1,410,836
                                                                                                                         ---------                                   ---------                     ---------

    Total equity                                                                                                       104,204,509                                 107,091,985                    17,445,953
                                                                                                                       -----------                                 -----------                    ----------

    Total Liabilities and Equity                                                                                       154,530,382                                 156,107,964                    25,430,962
                                                                                                                       ===========                                 ===========                    ==========

                                                                                                                                    RECON TECHNOLOGY, LTD

                                                                                                     UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME


                                                                              For the six months ended                                            For the three months ended

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

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

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


    Revenues

    Hardware and software                                                                       55,339,141                                                 24,761,080                          4,033,735                 44,242,049      20,515,571     3,342,115

    Service                                                                                        397,589                                                    103,774                             16,905                    397,589          45,283         7,377

    Hardware and software - related parties                                                      2,042,306                                                    768,118                            125,131                  1,626,688         768,118       125,131
                                                                                                 ---------                                                                                      -------                  ---------         -------       -------

    Total revenues                                                                              57,779,036                                                 25,632,972                          4,175,771                 46,266,326      21,328,972     3,474,623
                                                                                                ----------                                                 ----------                          ---------                 ----------      ----------     ---------


    Cost of revenues

    Hardware and software                                                                       35,599,656                                                 16,022,965                          2,610,241                 29,480,982      12,334,279     2,009,331

    Service                                                                                         34,946                                                          -                                 -                    34,946               -            -

    Hardware and software - related parties                                                        328,922                                                     16,762                              2,731                    225,986          16,762         2,731
                                                                                                   -------                                                     ------                              -----                    -------          ------         -----

    Total cost of revenues                                                                      35,963,524                                                 16,039,727                          2,612,972                 29,741,914      12,351,041     2,012,062
                                                                                                                                                                                                                      ----------      ----------

    Gross profit                                                                                21,815,512                                                  9,593,245                          1,562,799                 16,524,412       8,977,931     1,462,561
                                                                                                ----------                                                  ---------                          ---------                 ----------       ---------     ---------



    Selling and distribution expenses                                                            3,604,440                                                  1,955,260                            318,524                  2,250,518       1,254,470       204,361

    General and administrative expenses                                                          6,457,563                                                  7,796,731                          1,270,136                  3,715,640       4,093,440       666,847

    Research and development expenses                                                            3,353,997                                                  1,899,957                            309,515                  2,661,397       1,243,228       202,530
                                                                                                                                                                                                                       ---------

    Operating expenses                                                                          13,416,000                                                 11,651,948                          1,898,175                  8,627,555       6,591,138     1,073,738
                                                                                                ----------                                                 ----------                          ---------                  ---------       ---------     ---------



    Income ?loss? from operations                                                                8,399,512                                                (2,058,703)                         (335,376)                 7,896,857       2,386,793       388,823
                                                                                                 ---------                                                 ----------                           --------                  ---------       ---------       -------


    Other income (expenses)

    Subsidy income                                                                               1,018,313                                                    484,318                             78,898                    684,601         269,615        43,922

    Interest income                                                                                204,970                                                    157,468                             25,653                    101,769          74,436        12,126

    Interest expense                                                                             (479,648)                                                 (468,956)                          (76,396)                 (258,389)      (227,112)     (36,998)

    Loss from investment                                                                         (735,080)                                                         -                                 -                 (360,466)              -            -

    Change in fair value of warrants liability                                                         556                                                  4,077,517                            664,253                        556       3,803,118       619,552

    Loss from foreign currency exchange                                                          (119,392)                                                  (20,880)                           (3,401)                 (213,692)       (18,806)      (3,064)

    Other expense                                                                                 (43,946)                                                    76,672                             12,490                   (19,632)         90,692        14,774
                                                                                                   -------                                                     ------                             ------                    -------          ------        ------


    Income before income tax                                                                     8,245,285                                                  2,247,436                            366,121                  7,831,604       6,378,736     1,039,135

    Provision for income tax                                                                     1,459,189                                                    648,932                            105,715                  1,251,862         618,687       100,788
                                                                                                                                                                                               -------                  ---------         -------       -------

    Net Income                                                                                   6,786,096                                                  1,598,504                            260,406                  6,579,742       5,760,049       938,347


    Less: Net income attributable to non-controlling interest                                      924,981                                                    434,673                             70,811                    765,071         434,673        70,811
                                                                                                                                                                                                ------                    -------         -------        ------

    Net Income attributable to Recon Technology, Ltd                                             5,861,115                                                  1,163,831                            189,595                  5,814,671       5,325,376       867,536
                                                                                                 =========                                                  =========                            =======                  =========       =========       =======


    Comprehensive income

    Net income                                                                                   6,786,096                                                  1,598,504                            260,406                  6,579,742       5,760,049       938,347

    Foreign currency translation adjustment                                                         77,277                                                      4,726                                770                     82,881           5,528           901
                                                                                                    ------                                                      -----                                ---                     ------           -----           ---

    Comprehensive income                                                                         6,863,373                                                  1,603,230                            261,176                  6,662,623       5,765,577       939,248

    Less: Comprehensive income attributable to non-controlling interest                            932,709                                                    434,920                             70,851                    773,360         434,961        70,858
                                                                                                   -------                                                    -------                             ------                    -------         -------        ------

    Comprehensive income attributable to Recon Technology, Ltd                                   5,930,664                                                  1,168,310                            190,325                  5,889,263       5,330,616       868,390
                                                                                                 =========                                                  =========                            =======                  =========       =========       =======


    Earnings per common share - basic                                                                 1.44                                                       0.25                               0.04                       1.40            1.13          0.18
                                                                                                      ====                                                       ====                               ====                       ====            ====          ====

    Earnings per common share - diluted                                                               1.44                                                       0.24                               0.04                       1.38            1.10          0.18
                                                                                                      ====                                                       ====                               ====                       ====            ====          ====

    Weighted - average shares -basic                                                             4,056,963                                                  4,741,911                          4,741,911                  4,162,115       4,726,711     4,726,711
                                                                                                 =========                                                  =========                          =========                  =========       =========     =========

    Weighted - average shares -diluted                                                           4,056,963                                                  4,846,270                          4,846,270                  4,224,560       4,820,817     4,820,817
                                                                                                 =========                                                  =========                          =========                  =========       =========     =========

                                                                                                               RECON TECHNOLOGY, LTD

                                                                                             UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS


                                                                                                                                                      For six months ended December 31,

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

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


    Cash flows from operating activities:

    Net income                                                                                                                                                                6,786,096              1,598,504               260,406

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

    Depreciation                                                                                                                                                                301,341                274,511                44,720

    Gain from disposal of  equipment                                                                                                                                                  -             (149,480)             (24,351)

    Provision for doubtful accounts                                                                                                                                             378,584                104,589                17,038

    Share based compensation                                                                                                                                                    895,509              1,115,030               181,645

    Loss from investment                                                                                                                                                        735,080                      -                    -

    Deferred tax benefit                                                                                                                                                       (32,211)              (27,977)              (4,558)

    Change in fair value of warrants liability                                                                                                                                    (556)           (4,077,517)            (664,253)

    Restricted shares issued for services                                                                                                                                       407,972              1,171,331               190,817

    Changes in operating assets and liabilities:

    Notes receivable                                                                                                                                                          2,578,855            (2,977,565)            (485,064)

    Trade accounts receivable                                                                                                                                              (27,881,579)           (8,572,529)          (1,396,519)

    Trade accounts receivable-related parties                                                                                                                                   610,501              6,104,734               994,499

    Inventories                                                                                                                                                             (8,799,658)           (4,833,407)            (787,392)

    Other receivable, net                                                                                                                                                     1,830,372            (7,635,508)          (1,243,873)

    Other receivables related parties, net                                                                                                                                      147,224              1,414,433               230,420

    Purchase advance, net                                                                                                                                                       472,846              2,641,583               430,330

    Tax recoverable                                                                                                                                                             575,650                      -                    -

    Prepaid expense                                                                                                                                                           1,223,568            (2,127,821)            (346,635)

    Prepaid expense - related party, net                                                                                                                                              -               230,000                37,468

    Trade accounts payable                                                                                                                                                   15,717,487              1,188,511               193,616

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

    Other payables                                                                                                                                                            (556,242)             (137,403)             (22,384)

    Other payables-related parties                                                                                                                                            (723,453)               290,738                47,363

    Deferred income                                                                                                                                                             544,754            (1,223,397)            (199,299)

    Advances from customers                                                                                                                                                      83,462              (417,185)             (67,962)

    Accrued payroll and employees' welfare                                                                                                                                  (1,639,401)             (132,687)             (21,616)

    Accrued expenses                                                                                                                                                            269,270                  9,327                 1,519

    Taxes payable                                                                                                                                                             3,292,976                779,567               126,996

    Net cash used in operating activities                                                                                                                                   (6,776,271)          (15,389,618)          (2,507,069)
                                                                                                                                                                             ----------            -----------            ----------


    Cash flows from investing activities:

    Purchase of property and equipment                                                                                                                                         (36,495)             (514,009)             (83,735)

    Proceeds from disposal of equipment                                                                                                                                               -               341,880                55,694

    Net cash used in investing activities                                                                                                                                      (36,495)             (172,129)             (28,041)
                                                                                                                                                                                -------               --------               -------


    Cash flows from financing activities:

    Proceeds from short-term bank loans                                                                                                                                      15,400,000                      -                    -

    Repayments of short-term bank loans                                                                                                                                     (6,040,000)           (2,000,000)            (325,812)

    Proceeds from short-term borrowings-related parties                                                                                                                               -             9,400,000             1,531,319

    Repayment of  short-term borrowings                                                                                                                                       (110,375)                     -                    -

    Repayment of short-term borrowings-related parties                                                                                                                      (5,303,279)           (5,000,000)            (814,531)

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

    Net cash provided by financing activities                                                                                                                                16,079,228              2,400,000               390,976
                                                                                                                                                                             ----------              ---------               -------


    Effect of exchange rate fluctuation on cash and cash equivalents                                                                                                            116,711                 15,125                 2,467
                                                                                                                                                                                -------                 ------                 -----


    Net increase (decrease) in cash and cash equivalents                                                                                                                      9,383,173           (13,146,622)          (2,141,667)

    Cash and cash equivalents at beginning of period                                                                                                                         12,350,392             18,094,586             2,947,721
                                                                                                                                                                             ----------             ----------             ---------

    Cash and cash equivalents at end of period                                                                                                                               21,733,565              4,947,964               806,054
                                                                                                                                                                             ==========              =========               =======



    Supplemental cash flow information

    Cash paid during the period for interest                                                                                                                                    689,828                510,956                83,238
                                                                                                                                                                                =======                =======                ======

    Cash paid during the period for taxes                                                                                                                                             -               203,073                33,082
                                                                                                                                                                                    ===               =======                ======


    Non-cash investing and financing activities

    Cancelation of prior issuance of 40,625 shares of common stock for professional services                                                                                          -             1,002,721               163,350

SOURCE Recon Technology, Ltd.

SOURCE: Recon Technology, Ltd.

Recon Reports FY 2015 Second Quarter Results

Performance Improved Compared to First Quarter;

Maintain Full Year Growth Outlook

PR Newswire

BEIJING, Feb. 13, 2015 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported its operating results for the second quarter of fiscal year 2015, which ended December 31, 2014.

Mr. Sheping Yin, Chairman and CEO of Recon stated, "Affected by the lower oil and gas price worldwide and decreased CAPEX expense of our clients, some of our projects are postponed or cancelled, and our financial performance for the first half year of fiscal 2015 may not be satisfactory. Overall, based on our reported revenue in this second quarter, our performance this quarter improved significantly compared to last quarter. The dollar amount of  our current contracts on hand and actual onsite workload also increased significantly during this quarter. As such, our management continue to be optimistic for the coming year. We believe that the continued decline of oil and gas prices stimulated oil companies' demand for technology and better production management for producing wells, which is exactly the focus of our business. We believe this is a great opportunity for us and our years of investment in R&D are paying off. We remain optimistic aboutour future growth."

Three Month Financial Highlights

For the second quarter ended December, 31, 2014:

  • Revenues declined 53.9% to $3.5 million from $7.5 million* in the second fiscal quarter last year due to projects delay or cancellation. Nevertheless, management believe customer interest in Recon products and technology remain strong.
  • Net income attributable to Recon (U.S. GAAP) was $0.9 million, compared with net income of approximately $1.0 million* a year earlier.
  • With the decline in revenues, adjusted net income attributable to Recon (non-U.S. GAAP)** declined to approximately $0.3 million from approximately $1.2 million* in the same period last year.
  • Adjusted EBIDTA (non-U.S. GAAP) decreased year over year from approximately $1.6 million* in the second quarter of FY 2014 to approximately $0.6 million in second quarter of FY 2015.
  • Diluted EPS (U.S. GAAP) was $0.18 per share in the second quarter of FY 2015, compared with $0.22 per share in the second quarter of FY2014.
  • Adjusted diluted EPS** (non-U. S. GAAP) was $0.07 compared with $0.27 in the second quarter a year ago.

* Based on the exchange rate of RMB 6.1385 to US $1.00.


** Non-U.S. GAAP adjusted net income (loss) and EPS exclude certain special non-cash after tax income totaling $0.5 million, or $0.11 per share that is included in net income.

Six Month Financial Highlights

For the six-month period ended December, 31, 2014:

  • Total revenue for the six months ended December 31, 2014 decreased 55.6% to $4.2 million.
  • Net income attributable to Recon for the six months ended December 31, 2014 decreased 80.1% to $0.2 million.
  • Adjusted EBITDA for the six months ended December 31, 2014 decreased 89.1% to $0.2 million
  • Diluted EPS (U.S. GAAP) was $0.04 per share in the second quarter of FY 2015, compared with $0.23 per share in the second quarter of FY2014.
  • Adjusted diluted EPS*** (non-U.S.GAAP) was a loss of $0.02 per share compared with a net income of $0.31 per share in the same period a year ago.

*** Non-U.S. GAAP adjusted net income (loss) and EPS exclude certain special non-cash after tax income totaling $0.3 million, or $0.06 per share that are included in net income.

Other Financial and Operation Highlights

For the three months ended in December 31, 2014:

  • Gross margins increased to 42.1% from 35.7% a year earlier mainly because of the decreased hardware cost of revenue during the period compared to same period last year.
  • Operating income declined to $0.4 million from $1.3 million for the same period last year.
  • Current assets as of December 31, 2014 were approximately $22.2 million, including approximately $0.8 million in cash and $8.2 million in trade accounts receivable from non related parties.
  • The Company reported no long term debt and total current liabilities of approximately $8.0 million as of December 31, 2014.
  • Weighted average outstanding ordinary shares as of December 31, 2014 were approximately 4.82 million shares.

For the Six months ended in December 31, 2014:

  • Gross margins remained stable at 37.4% compared to 37.8% a year earlier.
  • Operating loss declined to $0.3 million compared with an operating income of $1.4 million a year ago.
  • Weighted average outstanding ordinary shares as of December 31, 2014 was approximately 4.85 million.

Outlook

Mr. Yin commented further, "Most of our peer companies need to undertake heavy burden of depreciation and amortization due to their excessive investment in the past few years and are suffering from heavy losses now. Compared to them, as a light asset service company, we believe our burden is smaller and have more flexibility to adjust and satisfy our clients' requirements. As our clients, CNPC and Sinopec, launched their reform of intelligent oilfield construction, we see continuing opportunity to expand our share of our customers' budgets with products and services that improve their productivity, safety and reduce their producing costs. The trend is that more and more oil and gas companies prefer to use highly automated and cost efficient equipment, including our customers. It not only saves costs, but also improves safety. We think we can help our customers' needs with our products and will continue to seek additional opportunities to expand our role on their behalf. We believe that our efforts will be reflected in our financial performance in the coming years."

Broaden Oversea Market Share

"As part of our growth strategies previously announced," Mr. Yin continued, "one of them is to follow our customers overseas to broaden our oversea market share, as we successfully did in Turkmenistan. We will keep implementing our growth strategies and update our progress once we have more detailed information."

About Recon

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.

Contact:    

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

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS



As of June 30,


As of December 31,


As of December 31,


2014


2014


2014

ASSETS

RMB


RMB


USD

Current assets









Cash and cash equivalents 


18,094,586



4,947,964



806,054

Notes receivable


-



2,977,565



485,064

Trade accounts receivable, net 


43,553,737



50,350,533



8,202,416

Trade accounts receivable- related parties, net


7,479,298



2,980,821



485,594

Inventories, net


14,336,602



19,170,009



3,122,914

Other receivables, net 


18,293,043



27,201,739



4,431,333

Other receivables- related parties


1,414,433



-



-

Purchase advances, net


25,759,065



22,116,442



3,602,906

Purchase advances- related parties


394,034



394,034



64,191

Prepaid expenses 


2,634,664



4,762,485



775,840

Prepaid expenses - related parties


230,000



-



-

Deferred tax asset


1,209,961



1,237,938



201,668

Total current assets


133,399,423



136,139,530



22,177,980










Property and equipment, net


1,321,538



1,368,636



222,959

Long-term trade accounts receivable, net


-



14,545,865



2,369,612

Long-term trade accounts receivable - related parties, net


14,456,317



-



-

Long-term other receivable


5,353,104



4,053,933



660,411

Total Assets


154,530,382



156,107,964



25,430,962










LIABILITIES AND EQUITY 









Current liabilities









Short-term bank loans


10,000,000



8,000,000



1,303,250

Trade accounts payable


11,413,505



12,602,016



2,052,947

Other payables 


1,765,079



1,627,676



265,159

Other payable- related parties


3,306,024



3,596,762



585,935

Deferred revenue


4,419,824



3,196,427



520,718

Advances from customers


801,385



384,200



62,589

Accrued payroll and employees' welfare


417,624



284,937



46,418

Accrued expenses


203,051



212,378



34,597

Taxes payable


7,589,846



8,369,413



1,363,430

Short-term borrowings- related parties


5,207,728



9,631,504



1,569,032

Deferred tax liability


180,186



180,186



29,353

Warrants liability 


5,021,621



930,480



151,581

Total current liabilities


50,325,873



49,015,979



7,985,009



















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 December 31, 2014, respectively)


616,865



617,943



100,665

Additional paid-in capital


83,061,058



84,343,979



13,740,161

Appropriated retained earnings


4,148,929



4,631,899



754,565

Unappropriated retained earnings


8,431,453



9,112,314



1,484,453

Accumulated other comprehensive loss


(279,275)



(274,549)



(44,727)

Total shareholders' equity


95,979,030



98,431,586



16,035,117

Non-controlling interest


8,225,479



8,660,399



1,410,836

Total equity


104,204,509



107,091,985



17,445,953

Total Liabilities and Equity


154,530,382



156,107,964



25,430,962

 

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME






For the six months ended


For the three months ended


December 31,


December 31,


2013


2014


2014


2013


2014


2014


RMB


RMB


USD


RMB


RMB


USD



















Revenues


















Hardware and software


55,339,141



24,761,080



4,033,735



44,242,049



20,515,571



3,342,115

Service


397,589



103,774



16,905



397,589



45,283



7,377

Hardware and software - related parties


2,042,306



768,118



125,131



1,626,688



768,118



125,131

Total revenues


57,779,036



25,632,972



4,175,771



46,266,326



21,328,972



3,474,623



















Cost of revenues


















Hardware and software


35,599,656



16,022,965



2,610,241



29,480,982



12,334,279



2,009,331

Service


34,946



-



-



34,946



-



-

Hardware and software - related parties


328,922



16,762



2,731



225,986



16,762



2,731

Total cost of revenues


35,963,524



16,039,727



2,612,972



29,741,914



12,351,041



2,012,062

Gross profit


21,815,512



9,593,245



1,562,799



16,524,412



8,977,931



1,462,561





































Selling and distribution expenses


3,604,440



1,955,260



318,524



2,250,518



1,254,470



204,361

General and administrative expenses


6,457,563



7,796,731



1,270,136



3,715,640



4,093,440



666,847

Research and development expenses


3,353,997



1,899,957



309,515



2,661,397



1,243,228



202,530

Operating expenses


13,416,000



11,651,948



1,898,175



8,627,555



6,591,138



1,073,738





































Income loss from operations


8,399,512



(2,058,703)



(335,376)



7,896,857



2,386,793



388,823



















Other income (expenses)


















Subsidy income


1,018,313



484,318



78,898



684,601



269,615



43,922

Interest income


204,970



157,468



25,653



101,769



74,436



12,126

Interest expense


(479,648)



(468,956)



(76,396)



(258,389)



(227,112)



(36,998)

Loss from investment


(735,080)



-



-



(360,466)



-



-

Change in fair value of warrants liability


556



4,077,517



664,253



556



3,803,118



619,552

Loss from foreign currency exchange


(119,392)



(20,880)



(3,401)



(213,692)



(18,806)



(3,064)

Other expense


(43,946)



76,672



12,490



(19,632)



90,692



14,774



















Income before income tax


8,245,285



2,247,436



366,121



7,831,604



6,378,736



1,039,135

Provision for income tax


1,459,189



648,932



105,715



1,251,862



618,687



100,788

Net Income


6,786,096



1,598,504



260,406



6,579,742



5,760,049



938,347



















Less: Net income attributable to non-controlling interest


924,981



434,673



70,811



765,071



434,673



70,811

Net Income attributable to Recon Technology, Ltd


5,861,115



1,163,831



189,595



5,814,671



5,325,376



867,536



















Comprehensive income


















Net income


6,786,096



1,598,504



260,406



6,579,742



5,760,049



938,347

Foreign currency translation adjustment


77,277



4,726



770



82,881



5,528



901

Comprehensive income


6,863,373



1,603,230



261,176



6,662,623



5,765,577



939,248

Less: Comprehensive income attributable to non-controlling interest


932,709



434,920



70,851



773,360



434,961



70,858

Comprehensive income attributable to Recon Technology, Ltd


5,930,664



1,168,310



190,325



5,889,263



5,330,616



868,390



















Earnings per common share - basic


1.44



0.25



0.04



1.40



1.13



0.18

Earnings per common share - diluted


1.44



0.24



0.04



1.38



1.10



0.18

Weighted - average shares -basic


4,056,963



4,741,911



4,741,911



4,162,115



4,726,711



4,726,711

Weighted - average shares -diluted


4,056,963



4,846,270



4,846,270



4,224,560



4,820,817



4,820,817

 

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS




For six months ended December 31,


2013


2014


2014


RMB


RMB


USD










Cash flows from operating activities:









Net income


6,786,096



1,598,504



260,406

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









Depreciation


301,341



274,511



44,720

Gain from disposal of  equipment


-



(149,480)



(24,351)

Provision for doubtful accounts


378,584



104,589



17,038

Share based compensation


895,509



1,115,030



181,645

Loss from investment


735,080



-



-

Deferred tax benefit


(32,211)



(27,977)



(4,558)

Change in fair value of warrants liability


(556)



(4,077,517)



(664,253)

Restricted shares issued for services


407,972



1,171,331



190,817

Changes in operating assets and liabilities:









Notes receivable


2,578,855



(2,977,565)



(485,064)

Trade accounts receivable


(27,881,579)



(8,572,529)



(1,396,519)

Trade accounts receivable-related parties


610,501



6,104,734



994,499

Inventories


(8,799,658)



(4,833,407)



(787,392)

Other receivable, net


1,830,372



(7,635,508)



(1,243,873)

Other receivables related parties, net


147,224



1,414,433



230,420

Purchase advance, net


472,846



2,641,583



430,330

Tax recoverable


575,650



-



-

Prepaid expense


1,223,568



(2,127,821)



(346,635)

Prepaid expense - related party, net


-



230,000



37,468

Trade accounts payable


15,717,487



1,188,511



193,616

Trade accounts payable-related parties


(3,994,718)



-



-

Other payables


(556,242)



(137,403)



(22,384)

Other payables-related parties


(723,453)



290,738



47,363

Deferred income


544,754



(1,223,397)



(199,299)

Advances from customers


83,462



(417,185)



(67,962)

Accrued payroll and employees' welfare


(1,639,401)



(132,687)



(21,616)

Accrued expenses


269,270



9,327



1,519

Taxes payable


3,292,976



779,567



126,996

Net cash used in operating activities


(6,776,271)



(15,389,618)



(2,507,069)










Cash flows from investing activities:









Purchase of property and equipment


(36,495)



(514,009)



(83,735)

Proceeds from disposal of equipment


-



341,880



55,694

Net cash used in investing activities


(36,495)



(172,129)



(28,041)










Cash flows from financing activities:









Proceeds from short-term bank loans


15,400,000



-



-

Repayments of short-term bank loans


(6,040,000)



(2,000,000)



(325,812)

Proceeds from short-term borrowings-related parties


-



9,400,000



1,531,319

Repayment of  short-term borrowings


(110,375)



-



-

Repayment of short-term borrowings-related parties


(5,303,279)



(5,000,000)



(814,531)

Proceeds from sale of common stock, net of issuance costs


12,132,882



-



-

Net cash provided by financing activities


16,079,228



2,400,000



390,976










Effect of exchange rate fluctuation on cash and cash equivalents


116,711



15,125



2,467










Net increase (decrease) in cash and cash equivalents


9,383,173



(13,146,622)



(2,141,667)

Cash and cash equivalents at beginning of period


12,350,392



18,094,586



2,947,721

Cash and cash equivalents at end of period


21,733,565



4,947,964



806,054



















Supplemental cash flow information









Cash paid during the period for interest


689,828



510,956



83,238

Cash paid during the period for taxes


-



203,073



33,082










Non-cash investing and financing activities









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


-



1,002,721



163,350

 

SOURCE Recon Technology, Ltd.


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