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Recon Technology, Ltd. Reports Fiscal Year 2015 Third Quarter Financial Results
PR Newswire
BEIJING

BEIJING, May 18, 2015 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported its financial results for the third quarter of fiscal year 2015, which ended March 31, 2015.

Q3 FY2015 Financial Highlights:

    --  Total revenues for the third quarter of FY2015 were RMB20.0 million
        ($3.3 million), an increase of 9.8% from the same period of FY2014.
    --  Gross profit for the third quarter of FY2015 was RMB6.2 million ($1.0
        million), an increase of 19.1% from the same period of FY2014. Gross
        margin also expanded by 2.4 points to 31.2% for the third quarter of
        FY2015 from 28.8% for the same period of FY2014.
    --  Operating income was RMB0.4 million ($0.1 million) for the third quarter
        of FY2015, compared to an operating loss of RMB0.6 million for the same
        period of FY2014.
    --  Net loss attributable to Recon for the third quarter of FY2015 was
        RMB1.5 million ($0.2 million), or RMB0.32 ($0.05) loss per diluted
        share, compared to RMB1.9 million, or RMB0.43 loss per diluted share,
        for the same period of FY2014.
    --  Adjusted EBITDA (non-GAAP) was RMB1.7 million ($0.3 million) for the
        third quarter of FY2015, compared to RMB0.5 million for the same period
        of FY2014.
    --  Adjusted net income attributable to Recon was RMB1.3 million ($0.2
        million), or RMB0.28 ($0.05) per diluted shares, for the third quarter
        of FY2015, compared to adjusted net loss attributable to Recon of RMB0.1
        million, or RMB0.03 loss per diluted share, for the same period of
        FY2014.

Mr. Shenping Yin, Chairman and CEO of Recon stated, "It has been a challenging quarter for the oil and gas industry with the plunge in oil and gas prices continuing to put severe pressure on China's already-weak growth momentum, forcing many of our major customers to cut their CAPEX budget and to cancel or delay projects and thus hampering our efforts to carry out business plan. Despite these challenges, revenues increased by 9.8% from the same quarter last year while both gross and operating margins also improved from a year ago, thanks to solid contribution from our automation business as a result of our heightened sales and marketing effort."

Mr. Yin continued, "While we continue to face significant headwinds in the near term, we believe challenges can turn into potential opportunities for us as our competitors also struggle to stay afloat. With relatively light in assets, strong R&D capability, and deep industry connections forged by years of providing a wide range of hardware, software and service solutions to leading SOEs such as Sinopec and Petro China, in our view Recon is well prepared to withstand the challenges ahead."

Third Quarter FY2015 Financial Results


                                                       For the Three Months Ended March 31,
                                                       ------------------------------------

                                               2014                   2015                       2015       %

    (thousands)                             RMB                   RMB                        USD      Change
                                            ---                   ---                        ---      ------

    Revenues                                         18,232                                   20,019             3,277      9.8%

    Hardware and software                            17,998                                   18,359             3,005      2.0%

    Service                                              80                                        -                -  -100.0%

    Hardware and software - related parties             154                                    1,660               272    979.0%

    Gross margin                                      28.8%                                   31.2%            31.2%     2.4%

    Operating (loss) margin                           -3.1%                                    2.0%             2.0%     5.1%

    Net income (loss) attributable to RCON          (1,931)                                 (1,527)            (250)       NM

    Diluted earnings per share                       (0.43)                                  (0.32)           (0.05)       NM
                                                      -----                                    -----             -----       ---

Revenues

For the three months ended March 31, 2015, total revenues increased by RMB1.8 million, or 9.8%, to RMB20.0 million ($3.3 million) from RMB18.2 million for the same period of last fiscal year. The increase in total revenues was mainly related to demand of our automation business from our related parties. Revenues from non-related parties hardware and software sales increased by RMB0.4 million, or 2.0%, to RMB18.4 million ($3.0 million) for the three months ended March 31, 2015, compared to RMB18.0 million for the same period of last fiscal year. Revenues from related-party hardware and software sales increased by RMB1.5 million, or 979.0%, to RMB1.7 million ($0.3 million) for the three months ended March 31, 2015, compared to RMB0.2 million for the same period of last fiscal year. We did not book revenues from our service business for the three months ended March 31, 2015, compared to RMB0.1 million for the same period of last fiscal year.

Gross profit and gross margin

Gross profit increased by RMB1.0 million, or 19.1%, to RMB6.2 million ($1.0 million) for the three months ended March 31, 2015 from RMB5.2 million for the same period of last fiscal year. Overall gross margin increased to 31.2% for the three months ended March 31, 2015 from 28.8% for the same period of last fiscal year. The increases in overall gross profit and gross margin were mainly related to our automation software business. Gross margins for hardware and software sales to non-related parties and related parties were 25.1% and 99.4% for the three months ended March 31, 2015, compared to 28.6% and 36.8% for the same period of last fiscal year, respectively. We did not book revenues for our service business for the three months ended March 31, 2015, compared to gross profit and gross margin for our service business of RMB0.04 million and 47.4%, respectively, for the same period of last fiscal year.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses increased slightly by 1.1% to RMB1.1 million for the three months ended March 31, 2015. General and administrative expenses increased by RMB0.2 million, or 5.0%, to RMB4.2 million for the three months ended March 31, 2015 from RMB4.0 million for the same period of last fiscal year. Research and development expenses decreased by RMB0.2 million, or 24.5%, to RMB0.5 million for the three months ended March 31, 2015 from RMB0.7 million for the same period of last fiscal year. Total operating expenses were essentially unchanged at RMB5.8 million ($1.0 million) for the three months ended March 31, 2015.

Operating income of RMB0.4 million ($0.1 million) for the three months ended March 31, 2015 compared to operating loss of RMB0.6 million for the same period of last fiscal year. Operating margin was 2.0% for the three months ended March 31, 2015, compared to operating loss margin of 3.1% for the same period of last fiscal year.

Net loss

Net loss for the three months ended March 31, 2015 was RMB1.4 million ($0.2 million), compared to RMB1.8 million for the same period of last fiscal year. After deduction of non-controlling interest, net loss for our shareholders was RMB1.5 million ($0.3 million), or RMB0.32 ($0.05) loss per diluted share, for the three months ended March 31, 2015, compared to RMB1.9 million, or RMB0.43 loss per diluted share, for the same period of last fiscal year.

Non-GAAP Measures


                                                       For the Three Months Ended March 31,
                                                       ------------------------------------

                                                        2014                     2015            2015

    (thousands)                                       RMB                     RMB            USD
                                                      ---                     ---            ---

    Net income (loss)                                            (1,810)                    (1,416)   (232)

    Provision for income taxes                                       151                       (181)    (30)

    Interest expenses and foreign currency adjustment                246                         337       55

    Change in fair value of warrants liability                       905                           9        2

    Loss from investment                                             136                           -       -

    Restricted shares issued for consulting services                   -                         34        5

    Loss from warrants redemption                                      -                      1,913      313

    Stock compensation expense                                       765                         909      149

    Depreciation and amortization                                    156                          95       16

    Adjusted EBITDA                                                  548                       1,700      278


    Net income (loss) attributable to RCON                       (1,931)                    (1,527)   (250)

    Change in fair value of warrants liability                       905                           9        2

    Loss from investment                                             136                           -       -

    Restricted shares issued for consulting services                   -                         34        5

    Loss from warrants redemption                                      -                      1,913      313

    Stock compensation expense                                       765                         909      149

    Adjusted net income attributable to RCON                       (126)                      1,337      219

    Adjusted earnings (loss) per diluted share                    (0.03)                       0.28     0.05
                                                                   -----                        ----     ----

Adjusted EBITDA (non-GAAP), which we define as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization, was RMB1.7 million ($0.3 million) for the three months ended March 31, 2015, compared to RMB0.5 million for the same period of last fiscal year. Adjusted net income attributable to our shareholders was RMB1.3 million ($0.2 million), or RMB0.28 ($0.05) per diluted shares, for the three months ended March 31, 2015, compared to adjusted net loss attributable to our common shareholders of RMB0.1 million, or RMB0.03 loss per diluted share, for the same period of last fiscal year.

Year-to-Date (Nine Months) FY2015 Financial Results



                                                       For the Nine Months Ended March 31,
                                                       -----------------------------------

                                               2014                  2015                      2015       %

    (thousands)                             RMB                  RMB                       USD      Change
                                            ---                  ---                       ---      ------

    Revenues                                        76,012                                  45,652            7,473   -39.9%

    Hardware and software                           73,338                                  43,120            7,059   -41.2%

    Service                                            478                                     104               17   -78.3%

    Hardware and software - related parties          2,196                                   2,428              397    10.6%

    Gross margin                                     35.6%                                  34.7%           34.7%   -0.9%

    Operating (loss) margin                         -25.3%                                  -3.6%           -3.6%   21.7%

    Net income (loss) attributable to RCON           3,931                                   (363)            (59)      NM

    Diluted earnings per share                        0.92                                  (0.08)          (0.01)      NM
                                                      ----                                   -----            -----      ---

Revenues

For the nine months ended March 31, 2015, total revenues decreased by RMB30.4 million ($5.0 million), or 39.9%, to RMB45.7 million ($7.5 million) from RMB76.0 million for the same period of last fiscal year as a result of weakness across all of our businesses, particularly during the first half of fiscal year 2015. Revenues from non-related party hardware and software sales decreased by RMB30.2 million, or 41.2%, to RMB43.1 million ($7.1 million) for the nine months ended March 31, 2015, compared to RMB73.3 million for the same period of last fiscal year. Revenues from related-party hardware and software sales increased by RMB0.2 million, or 10.6%, to RMB2.4 million ($0.4 million) for the nine months ended March 31, 2015, compared to RMB2.2 million for the same period of last fiscal year. Revenues from service decreased by RMB0.4 million, or 78.3%, to RMB0.1 million ($0.02 million) for the nine months ended March 31, 2015, compared to RMB0.5 million for the same period of last fiscal year.

Gross profit and gross margin

Gross profit decreased by RMB11.2 million, or 41.5%, to RMB15.8 million ($2.6 million) for the nine months ended March 31, 2015 from RMB27.1 million for the same period of last fiscal year. Overall gross margin decreased to 34.7% for the nine months ended March 31, 2015 from 35.6% for the same period of last fiscal year. The decreases in gross profit were across all of our businesses. Gross margins for hardware and software sales to non-related parties and related parties were 30.9% and 98.9% for the nine months ended March 31, 2015, compared to 33.9% and 80.6% for the same period of last fiscal year, respectively.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses decreased by RMB1.6 million, or 34.8%, to RMB3.1 million for the nine months ended March 31, 2015 from RMB4.7 million for the same period of last fiscal year. General and administrative expenses increased by RMB1.5 million, or 14.7%, to RMB12.0 million for the nine months ended March 31, 2015 from RMB10.5 million for the same period of last fiscal year. Research and development expenses decreased by RMB1.6 million, or 40.0%, to RMB2.4 million for the nine months ended March 31, 2015 from RMB4.1 million for the same period of last fiscal year. Total operating expenses decreased by RMB1.7 million, or 9.0%, to RMB17.5 million ($2.9 million) for the nine months ended March 31, 2015 from RMB19.2 million for the same period of last fiscal year.

Operating loss was RMB1.7 million ($0.3 million) for the nine months ended March 31, 2015, compared to operating income of RMB7.8 million for the same period of last fiscal year. Operating loss margin was 3.6% for the nine months ended March 31, 2015, compared to operating margin of 10.3% for the same period of last fiscal year.

Net income (loss)

Net income for the nine months ended March 31, 2015 was RMB0.2 million ($0.03 million), compared to RMB5.0 million for the same period of last fiscal year. After deduction of non-controlling interest, net loss for our shareholders was RMB0.4 million ($0.06 million), or RMB0.08 ($0.01) loss per diluted share, for the nine months ended March 31, 2015, compared to net income attributable to our shareholders of RMB3.9 million, or RMB0.92 per diluted share, for the same period of last fiscal year.

Non-GAAP Measures


                      For the Nine Months Ended March 31,
                      -----------------------------------

                      2014                      2015          2015

    (thousands)     RMB                      RMB          USD
                    ---                      ---          ---

    Net income
     (loss)                       4,976                       183      30

    Provision for
     income taxes                 1,610                       468      77

    Interest
     expenses and
     foreign
     currency
     adjustment                     845                       827     135

    Change in fair
     value of
     warrants
     liability                      904                   (4,068)  (666)

    Loss from
     investment                     871                         -      -

    Restricted
     shares issued
     for consulting
     services                       408                     1,205     197

    Loss from
     warrants
     redemption                       -                    1,913     313

    Stock
     compensation
     expense                      1,660                     2,024     331

    Depreciation
     and
     amortization                   457                       369      60

    Adjusted EBITDA              11,732                     2,921     478


    Net income
     (loss)
     attributable
     to RCON                      3,931                     (363)   (59)

    Change in fair
     value of
     warrants
     liability                      904                   (4,068)  (666)

    Loss from
     investment                     871                         -      -

    Restricted
     shares issued
     for consulting
     services                       408                     1,205     197

    Loss from
     warrants
     redemption                       -                    1,913     313

    Stock
     compensation
     expense                      1,660                     2,023     331

    Adjusted net
     income
     attributable
     to RCON                      7,774                       710     116

    Adjusted
     earnings per
     diluted share                 1.81                      0.15    0.02
                                   ----                      ----    ----

Adjusted EBITDA (non-GAAP), which we define as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization, was RMB2.9 million ($0.5 million) for the nine months ended March 31, 2015, compared to RMB11.7 million for the same period of last fiscal year. Adjusted net income attributable to our shareholders was RMB0.7 million ($0.1 million), or RMB0.15 ($0.02) per diluted shares, for the nine months ended March 31, 2015, compared to RMB7.8 million, or RMB1.81 per diluted share, for the same period of last fiscal year.

Financial Position

As of March 31, 2015, the Company had cash and cash equivalents of RMB4.7 million ($0.8 million), short-term bank loans of RMB8.0 million ($1.3 million), and short-term loan to related parties of RMB10.2 million ($1.7 million), compared to RMB18.1 million, RMB10.0 million, and RMB5.2 million, respectively, at June 30, 2014. Working capital as of March 31, 2015 was RMB90.1 million ($14.7 million) as compared to RMB83.1 million at June 30, 2014. Net cash used in operating activities was RMB16.2 million ($2.7 million) for the nine months ended March 31, 2015, compared to RMB15.3 million for the same period of last fiscal year. Net cash used in investing activities was RMB0.2 million ($0.03 million) for the nine months ended March 31, 2015, essentially unchanged from a year ago. Net cash provided by financing activities was RMB3.0 million ($0.5 million) for the nine months ended March 31, 2015, compared to RMB11.9 million for the same period of last fiscal year. During the fiscal 2015 nine-month period, we repaid RMB2.0 million in short term bank loans and received RMB5.0 million net proceeds from a related party.

Recent Development

On February 18, 2015, the Company announced that it has signed an agreement with Aktobe Petroleum Machinery Co. Ltd., an affiliate of the Company's key customer -- Petro China, to jointly construct a pressure container technical service center for heating furnaces and separators in Kazakhstan.

On January 29, 2015, the Company held its annual general meeting of stockholders at which a majority of the Company's shareholders voted for: 1) an increase of authorized shares from 25 million to 75 million; 2) election of directors; 3) an approval of the Company's 2015 Equity Incentive Plan; and 4) the ratification of Friedman LLP as the Company's independent registered public accounting firm for FY2015 ending June 30, 2015.

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:

Recon Technology, Ltd.
Tel: +86-10-8494-5799
Email: info@recon.cn
Web: http://www.recon.cn

Weitian Investor Relations
Tina Xiao
Tel: +1-917-609-0333
Email: tina.xiao@weitian-ir.com


                                                                 RECON TECHNOLOGY, LTD

                                                    UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


                                     As of June 30,                              As of March 31,                 As of March 31,
                                     --------------                              ---------------                 ---------------

                                               2014                                       2015                          2015
                                               ----                                       ----                          ----

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

    Current assets

    Cash and cash equivalents                                  18,094,586                             4,665,869                     763,757

    Notes receivable                                                    -                              400,000                      65,476

    Trade accounts receivable, net                             43,553,737                            56,444,463                   9,239,407

    Trade accounts receivable -
     related parties, net                                       7,479,298                             4,860,821                     795,669

    Inventories, net                                           14,336,602                            19,127,861                   3,131,044

    Other receivables, net                                     18,293,043                            27,180,449                   4,449,174

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

    Purchase advances, net                                     25,759,065                            22,870,397                   3,743,660

    Purchase advances -related
     parties                                                      394,034                               394,034                      64,500

    Prepaid expenses                                            2,634,664                             4,200,662                     687,608

    Prepaid expenses -related
     parties                                                      230,000                               362,400                      59,321

    Deferred tax asset                                          1,209,961                             1,260,442                     206,322
                                                                ---------                             ---------                     -------

    Total current assets                                      133,399,423                           141,767,398                  23,205,938


    Property and equipment, net                                 1,321,538                             1,273,521                     208,463

    Long-term trade accounts
     receivable, net                                                                                14,545,865                   2,381,016

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

    Long-term investment                                                -                                    -                          -

    Long-term other receivable                                  5,353,104                             3,394,731                     555,684
                                                                ---------                             ---------                     -------

    Total Assets                                              154,530,382                           160,981,515                  26,351,101
                                                              ===========                           ===========                  ==========


    LIABILITIES AND EQUITY

    Current liabilities

    Short-term bank loans                                      10,000,000                             8,000,000                   1,309,522

    Trade accounts payable                                     11,413,505                            17,456,282                   2,857,423

    Other payables                                              1,765,079                             1,199,015                     196,267

    Other payable - related parties                             3,306,024                             3,725,403                     609,812

    Deferred revenue                                            4,419,824                             2,776,485                     454,483

    Advances from customers                                       801,385                               395,600                      64,756

    Accrued payroll and employees'
     welfare                                                      417,624                               309,558                      50,672

    Accrued expenses                                              203,051                               356,980                      58,435

    Taxes payable                                               7,589,846                             6,900,393                   1,129,527

    Short-term borrowings -
     related parties                                            5,207,728                            10,218,308                   1,612,637

    Deferred tax liability                                        180,186                               180,186                      29,495

    Warrants liability                                          5,021,621                               199,179                      32,604

    Total current liabilities                                  50,325,873                            51,717,389                   8,465,633
                                                               ----------                            ----------                   ---------


    Commitments and Contingency


    Equity

    Common stock, ($ 0.0185 U.S.
     dollar par value, 25,000,000
     shares authorized; 4,717,336
     and 5,022,436 shares issued and
     outstanding as of June 30, 2014
     and March 31, 2015,
     respectively)                                                616,865                               651,495                     106,641

    Additional paid-in capital                                 83,061,058                            87,906,399                  14,389,419

    Appropriated retained earnings                              4,148,929                             4,725,803                     773,568

    Unappropriated retained earnings                            8,431,453                             7,491,128                   1,226,224

    Accumulated other comprehensive
     loss                                                       (279,275)                            (282,129)                   (46,183)

    Total shareholders' equity                                 95,979,030                           100,492,696                  16,449,669

    Non-controlling interest                                    8,225,479                             8,771,430                   1,435,799
                                                                ---------                             ---------                   ---------

    Total equity                                              104,204,509                           109,264,126                  17,885,468
                                                              -----------                           -----------                  ----------

    Total Liabilities and Equity                              154,530,382                           160,981,515                  26,514,791
                                                              ===========                           ===========                  ==========



                                                                                                                  RECON TECHNOLOGY, LTD

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


                                         For the nine months ended                                      For the three months ended

                                                 March 31,                                                       March 31,
                                                 ---------                                                       ---------

                                                       2014           2015                      2015                                            2014                     2015                   2015
                                                       ----           ----                      ----                                            ----                     ----                   ----

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


    Revenues

    Hardware and software                        73,337,585                  43,119,915                                                   7,058,309                              17,998,444               18,358,835      3,005,162

    Service                                         477,769                     103,774                                                      16,987                                  80,180                        -             -

    Hardware and software -related
     parties                                      2,196,152                   2,428,173                                                     397,468                                 153,846                1,660,055        271,735
                                                  ---------                                                                                -------                                 -------                ---------        -------

    Total revenues                               76,011,506                  45,651,862                                                   7,472,764                              18,232,470               20,018,890      3,276,897
                                                 ----------                  ----------                                                   ---------                              ----------               ----------      ---------

    Cost of revenues

    Hardware and software                        48,447,792                  29,782,617                                                   4,875,124                              12,848,136               13,759,652      2,252,321

    Service                                          77,107                           -                                                          -                                 42,161                        -             -

    Hardware and software -related
     parties                                        426,139                      27,161                                                       4,446                                  97,217                   10,399          1,702
                                                    -------                      ------                                                       -----                                  ------                   ------          -----

    Total cost of revenues                       48,951,038                  29,809,778                                                   4,879,570                              12,987,514               13,770,051      2,254,023
                                                                                                                                                                              ----------               ----------

    Gross profit                                 27,060,468                  15,842,084                                                   2,593,194                               5,244,956                6,248,839      1,022,874
                                                 ----------                  ----------                                                   ---------                               ---------                ---------      ---------



    Selling and distribution expenses             4,701,989                   3,065,098                                                     501,727                               1,097,549                1,109,838        181,670

    General and administrative expenses          10,450,904                  11,987,761                                                   1,962,279                               3,993,341                4,191,030        686,031

    Research and development expenses             4,074,953                   2,444,020                                                     400,062                                 720,956                  544,063         89,058
                                                                                                                                                                                 -------

    Operating expenses                           19,227,846                  17,496,879                                                   2,864,068                               5,811,846                5,844,931        956,759
                                                 ----------                  ----------                                                   ---------                               ---------                ---------        -------



    Income (loss) from operations                 7,832,622                 (1,654,795)                                                  (270,874)                              (566,890)                 403,908         66,115
                                                  ---------                  ----------                                                    --------                                --------                  -------         ------


    Other income (expenses)

    Subsidy income                                1,220,024                     639,473                                                     104,675                                 201,711                  155,155         25,397

    Interest income                                 296,997                     225,701                                                      36,945                                  92,027                   68,233         11,169

    Interest expense                              (757,226)                  (808,065)                                                  (132,272)                              (277,578)               (339,109)      (55,509)

    Loss from investment                          (870,627)                          -                                                          -                              (135,547)                       -             -

    Change in fair value of warrants
     liability                                    (904,327)                  4,068,329                                                     665,946                               (904,883)                 (9,188)       (1,504)

    Loss from foreign currency exchange            (88,080)                   (19,081)                                                    (3,123)                                 31,312                    1,799            294

    Loss from warrants redemption                         -                (1,913,262)                                                  (313,182)                                      -             (1,913,262)     (313,182)

    Other expense                                 (143,498)                    112,325                                                      18,387                                (99,552)                  35,653          5,836
                                                   --------                     -------                                                      ------                                 -------                   ------          -----


    Income (loss) before income tax               6,585,885                     650,625                                                     106,502                             (1,659,400)             (1,596,811)     (261,384)

    Provision (benefit) for income tax            1,609,976                     468,005                                                      76,608                                 150,787                (180,927)      (29,616)
                                                                                                                                           ------                                 -------                 --------        -------

    Net Income (loss)                             4,975,909                     182,620                                                      29,894                             (1,810,187)             (1,415,884)     (231,768)


    Less: Net income attributable to
     non-controlling interest                     1,045,396                     546,071                                                      89,386                                 120,415                  111,398         18,235
                                                                                                                                           ------                                 -------                  -------         ------

    Net Income (loss) attributable to
     Recon Technology, Ltd                        3,930,513                   (363,451)                                                   (59,492)                            (1,930,602)             (1,527,282)     (250,003)
                                                  =========                    ========                                                     =======                              ==========               ==========       ========


    Comprehensive income (loss)

    Net income (loss)                             4,975,909                     182,620                                                      29,894                             (1,810,187)             (1,415,884)     (231,768)

    Foreign currency translation
     adjustment                                    (40,833)                    (2,854)                                                      (467)                              (118,110)                 (7,580)       (1,241)
                                                    -------                      ------                                                        ----                                --------                   ------         ------

    Comprehensive income (loss)                   4,935,076                     179,766                                                      29,427                             (1,928,297)             (1,423,464)     (233,009)

    Less: Comprehensive income
     attributable to non-controlling
     interest                                     1,041,313                     545,952                                                      89,367                                 108,604                  111,032         18,175
                                                  ---------                     -------                                                      ------                                 -------                  -------         ------

    Comprehensive income (loss)
     attributable to Recon Technology,
     Ltd                                          3,893,763                   (366,186)                                                   (59,940)                            (2,036,901)             (1,534,496)     (251,184)
                                                  =========                    ========                                                     =======                              ==========               ==========       ========


    Earnings (loss) per common share -
     basic                                             0.93                      (0.08)                                                     (0.01)                                 (0.43)                  (0.32)        (0.05)
                                                       ====                       =====                                                       =====                                   =====                    =====          =====

    Earnings (loss) per common share -
     diluted                                           0.92                      (0.08)                                                     (0.01)                                 (0.43)                  (0.32)        (0.05)
                                                       ====                       =====                                                       =====                                   =====                    =====          =====

    Weighted - average shares - basic             4,211,785                   4,773,803                                                   4,757,112                               4,528,311                4,839,004      4,839,004
                                                  =========                   =========                                                   =========                               =========                =========      =========

    Weighted - average shares - diluted           4,269,510                   4,773,803                                                   4,757,112                               4,528,311                4,839,004      4,839,004
                                                  =========                   =========                                                   =========                               =========                =========      =========


                                                                    RECON TECHNOLOGY, LTD

                                                  UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                 For the nine months ended
                                 -------------------------

                            2014                                                  2015                                        2015
                            ----                                                  ----                                        ----

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


    Cash flows from
     operating
     activities:

    Net income                                          4,975,909                                                 182,620                 29,894

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

    Depreciation                                          457,439                                                 369,284                 60,448

    Loss from disposal of
     equipment                                             67,587                                               (149,504)              (24,472)

    Provision for
     doubtful accounts                                    668,610                                                 254,622                 41,679

    Share based
     compensation                                       1,660,144                                               2,023,761                331,270

    Loss from investment                                  870,627                                                       -                     -

    Deferred tax benefit                                 (75,715)                                               (50,481)               (8,263)

    Change in fair value
     of warrants
     liability                                            904,327                                             (4,068,329)             (665,946)

    Restricted shares
     issued for services                                  407,972                                               1,204,903                197,231

    Loss from warrants
     redemption                                                 -                                              1,913,262                313,182

    Changes in operating
     assets and
     liabilities:

    Trade accounts
     receivable                                      (17,127,239)                                           (29,115,292)           (4,765,889)

    Trade accounts
     receivable -related
     parties                                            1,487,501                                              18,681,051              3,057,906

    Inventories                                       (8,823,683)                                            (4,791,259)             (784,282)

    Notes receivable                                    2,578,855                                               (400,000)              (65,476)

    Other receivable, net                                 688,724                                             (7,022,533)             1,149,521

    Other receivables
     related parties, net                                  77,697                                                1414,433                231,529

    Purchase advance, net                             (5,325,269)                                              1,797,628                294,254

    Tax recoverable                                       575,650                                                       -                     -

    Prepaid expense                                     (580,144)                                            (1,565,998)             (256,339)

    Prepaid expense -
     related party, net                                         -                                              (132,400)              (21,673)

    Trade accounts
     payable                                            6,211,777                                               6,042,777                989,144

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

    Other payables                                      (191,528)                                              (566,064)                92,659

    Other payables -
     related parties                                    (857,338)                                                419,379                 68,648

    Deferred income                                       945,091                                             (1,643,339)             (268,999)

    Advances from
     customers                                          (195,100)                                              (405,785)              (66,423)

    Accrued payroll and
     employees' welfare                               (1,603,340)                                              (108,066)              (17,689)

    Accrued expenses                                    (242,617)                                                185,433                 30,354

    Taxes payable                                       1,155,303                                               (689,453)             (112,857)

    Net cash used in
     operating activities                            (15,283,478)                                           (16,219,350)           (2,654,949)
                                                      -----------                                             -----------             ----------


    Cash flows from
     investing
     activities:

    Purchase of property
     and equipment                                      (258,922)                                              (514,009)              (84,138)

    Proceeds from
     disposal of
     equipment                                             98,000                                                 356,247                 58,314

    Net cash used in
     investing activities                               (160,922)                                              (157,762)              (25,824)
                                                         --------                                                --------                -------


    Cash flows from
     financing
     activities:

    Proceeds from short-
     term bank loans                                   18,500,000                                                       -                     -

    Repayments of short-
     term bank loans                                 (12,870,000)                                            (2,000,000)             (327,380)

    Proceeds from short-
     term borrowings -
     related parties                                            -                                             12,550,000              2,054,312

    Repayment of short-
     term borrowings                                    (570,375)                                                      -                     -

    Repayment of short-
     term borrowings -
     related parties                                  (5,303,279)                                            (7,550,000)           (1,235,861)

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

    Net cash provided by
     financing activities                              11,889,228                                               3,000,000                491,071
                                                       ----------                                               ---------                -------


    Effect of exchange
     rate fluctuation on
     cash and cash
     equivalents                                           68,669                                                (51,605)               (8,449)
                                                           ------                                                 -------                 ------


    Net decrease in cash
     and cash equivalents                             (3,486,503)                                           (13,428,717)           (2,198,151)

    Cash and cash
     equivalents at
     beginning of period                               12,350,392                                              18,094,586              2,961,908
                                                       ----------                                              ----------              ---------

    Cash and cash
     equivalents at end
     of period                                          8,863,889                                               4,665,869                763,757
                                                        =========                                               =========                =======



    Supplemental cash
     flow information

    Cash paid during the
     period for interest                                  952,125                                                 808,065                132,272
                                                          =======                                                 =======                =======

    Cash paid during the
     period for taxes                                     700,268                                                 616,225                100,870
                                                          =======                                                 =======                =======


    Non-cash investing
     and financing
     activities

    Cancellation of prior
     issuance of 40,625
     shares of common
     stock for
     professional
     services                                                   -                                            (1,002,721)             (164,136)

SOURCE Recon Technology, Ltd.

SOURCE: Recon Technology, Ltd.

Recon Technology, Ltd. Reports Fiscal Year 2015 Third Quarter Financial Results

PR Newswire

BEIJING, May 18, 2015 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON), ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported its financial results for the third quarter of fiscal year 2015, which ended March 31, 2015.

Q3 FY2015 Financial Highlights:

  • Total revenues for the third quarter of FY2015 were RMB20.0 million ($3.3 million), an increase of 9.8% from the same period of FY2014.
  • Gross profit for the third quarter of FY2015 was RMB6.2 million ($1.0 million), an increase of 19.1% from the same period of FY2014. Gross margin also expanded by 2.4 points to 31.2% for the third quarter of FY2015 from 28.8% for the same period of FY2014.
  • Operating income was RMB0.4 million ($0.1 million) for the third quarter of FY2015, compared to an operating loss of RMB0.6 million for the same period of FY2014.
  • Net loss attributable to Recon for the third quarter of FY2015 was RMB1.5 million ($0.2 million), or RMB0.32 ($0.05) loss per diluted share, compared to RMB1.9 million, or RMB0.43 loss per diluted share, for the same period of FY2014.
  • Adjusted EBITDA (non-GAAP) was RMB1.7 million ($0.3 million) for the third quarter of FY2015, compared to RMB0.5 million for the same period of FY2014.
  • Adjusted net income attributable to Recon was RMB1.3 million ($0.2 million), or RMB0.28 ($0.05) per diluted shares, for the third quarter of FY2015, compared to adjusted net loss attributable to Recon of RMB0.1 million, or RMB0.03 loss per diluted share, for the same period of FY2014.

Mr. Shenping Yin, Chairman and CEO of Recon stated, "It has been a challenging quarter for the oil and gas industry with the plunge in oil and gas prices continuing to put severe pressure on China's already-weak growth momentum, forcing many of our major customers to cut their CAPEX budget and to cancel or delay projects and thus hampering our efforts to carry out business plan. Despite these challenges, revenues increased by 9.8% from the same quarter last year while both gross and operating margins also improved from a year ago, thanks to solid contribution from our automation business as a result of our heightened sales and marketing effort."   

Mr. Yin continued, "While we continue to face significant headwinds in the near term, we believe challenges can turn into potential opportunities for us as our competitors also struggle to stay afloat. With relatively light in assets, strong R&D capability, and deep industry connections forged by years of providing a wide range of hardware, software and service solutions to leading SOEs such as Sinopec and Petro China, in our view Recon is well prepared to withstand the challenges ahead."   

Third Quarter FY2015 Financial Results



For the Three Months Ended March 31,



2014


2015


2015


%

(thousands)


RMB


RMB


USD


Change

Revenues



18,232



20,019



3,277


9.8%

Hardware and software



17,998



18,359



3,005


2.0%

Service



80



-



-


-100.0%

Hardware and software - related parties



154



1,660



272


979.0%

Gross margin



28.8%



31.2%



31.2%


2.4%

Operating (loss) margin



-3.1%



2.0%



2.0%


5.1%

Net income (loss) attributable to RCON



(1,931)



(1,527)



(250)


NM

Diluted earnings per share



(0.43)



(0.32)



(0.05)


NM

Revenues

For the three months ended March 31, 2015, total revenues increased by RMB1.8 million, or 9.8%, to RMB20.0 million ($3.3 million) from RMB18.2 million for the same period of last fiscal year. The increase in total revenues was mainly related to demand of our automation business from our related parties. Revenues from non-related parties hardware and software sales increased by RMB0.4 million, or 2.0%, to RMB18.4 million ($3.0 million) for the three months ended March 31, 2015, compared to RMB18.0 million for the same period of last fiscal year. Revenues from related-party hardware and software sales increased by RMB1.5 million, or 979.0%, to RMB1.7 million ($0.3 million) for the three months ended March 31, 2015, compared to RMB0.2 million for the same period of last fiscal year. We did not book revenues from our service business for the three months ended March 31, 2015, compared to RMB0.1 million for the same period of last fiscal year.

Gross profit and gross margin

Gross profit increased by RMB1.0 million, or 19.1%, to RMB6.2 million ($1.0 million) for the three months ended March 31, 2015 from RMB5.2 million for the same period of last fiscal year. Overall gross margin increased to 31.2% for the three months ended March 31, 2015 from 28.8% for the same period of last fiscal year. The increases in overall gross profit and gross margin were mainly related to our automation software business. Gross margins for hardware and software sales to non-related parties and related parties were 25.1% and 99.4% for the three months ended March 31, 2015, compared to 28.6% and 36.8% for the same period of last fiscal year, respectively. We did not book revenues for our service business for the three months ended March 31, 2015, compared to gross profit and gross margin for our service business of RMB0.04 million and 47.4%, respectively, for the same period of last fiscal year.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses increased slightly by 1.1% to RMB1.1 million for the three months ended March 31, 2015. General and administrative expenses increased by RMB0.2 million, or 5.0%, to RMB4.2 million for the three months ended March 31, 2015 from RMB4.0 million for the same period of last fiscal year. Research and development expenses decreased by RMB0.2 million, or 24.5%, to RMB0.5 million for the three months ended March 31, 2015 from RMB0.7 million for the same period of last fiscal year. Total operating expenses were essentially unchanged at RMB5.8 million ($1.0 million) for the three months ended March 31, 2015.

Operating income of RMB0.4 million ($0.1 million) for the three months ended March 31, 2015 compared to operating loss of RMB0.6 million for the same period of last fiscal year. Operating margin was 2.0% for the three months ended March 31, 2015, compared to operating loss margin of 3.1% for the same period of last fiscal year. 

Net loss

Net loss for the three months ended March 31, 2015 was RMB1.4 million ($0.2 million), compared to RMB1.8 million for the same period of last fiscal year. After deduction of non-controlling interest, net loss for our shareholders was RMB1.5 million ($0.3 million), or RMB0.32 ($0.05) loss per diluted share, for the three months ended March 31, 2015, compared to RMB1.9 million, or RMB0.43 loss per diluted share, for the same period of last fiscal year. 

Non-GAAP Measures



For the Three Months Ended March 31,



2014


2015


2015

(thousands)


RMB


RMB


USD

Net income (loss)



(1,810)



(1,416)



(232)

Provision for income taxes



151



(181)



(30)

Interest expenses and foreign currency adjustment



246



337



55

Change in fair value of warrants liability



905



9



2

Loss from investment



136



-



-

Restricted shares issued for consulting services



-



34



5

Loss from warrants redemption



-



1,913



313

Stock compensation expense



765



909



149

Depreciation and amortization



156



95



16

Adjusted EBITDA



548



1,700



278











Net income (loss) attributable to RCON



(1,931)



(1,527)



(250)

Change in fair value of warrants liability



905



9



2

Loss from investment



136



-



-

Restricted shares issued for consulting services



-



34



5

Loss from warrants redemption



-



1,913



313

Stock compensation expense



765



909



149

Adjusted net income attributable to RCON



(126)



1,337



219

Adjusted earnings (loss) per diluted share



(0.03)



0.28



0.05

Adjusted EBITDA (non-GAAP), which we define as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization, was RMB1.7 million ($0.3 million) for the three months ended March 31, 2015, compared to RMB0.5 million for the same period of last fiscal year. Adjusted net income attributable to our shareholders was RMB1.3 million ($0.2 million), or RMB0.28 ($0.05) per diluted shares, for the three months ended March 31, 2015, compared to adjusted net loss attributable to our common shareholders of RMB0.1 million, or RMB0.03 loss per diluted share, for the same period of last fiscal year.

Year-to-Date (Nine Months) FY2015 Financial Results




For the Nine Months Ended March 31,



2014


2015


2015


%

(thousands)


RMB


RMB


USD


Change

Revenues



76,012



45,652



7,473


-39.9%

Hardware and software



73,338



43,120



7,059


-41.2%

Service



478



104



17


-78.3%

Hardware and software - related parties



2,196



2,428



397


10.6%

Gross margin



35.6%



34.7%



34.7%


-0.9%

Operating (loss) margin



-25.3%



-3.6%



-3.6%


21.7%

Net income (loss) attributable to RCON



3,931



(363)



(59)


NM

Diluted earnings per share



0.92



(0.08)



(0.01)


NM

Revenues

For the nine months ended March 31, 2015, total revenues decreased by RMB30.4 million ($5.0 million), or 39.9%, to RMB45.7 million ($7.5 million) from RMB76.0 million for the same period of last fiscal year as a result of weakness across all of our businesses, particularly during the first half of fiscal year 2015. Revenues from non-related party hardware and software sales decreased by RMB30.2 million, or 41.2%, to RMB43.1 million ($7.1 million) for the nine months ended March 31, 2015, compared to RMB73.3 million for the same period of last fiscal year. Revenues from related-party hardware and software sales increased by RMB0.2 million, or 10.6%, to RMB2.4 million ($0.4 million) for the nine months ended March 31, 2015, compared to RMB2.2 million for the same period of last fiscal year. Revenues from service decreased by RMB0.4 million, or 78.3%, to RMB0.1 million ($0.02 million) for the nine months ended March 31, 2015, compared to RMB0.5 million for the same period of last fiscal year.

Gross profit and gross margin

Gross profit decreased by RMB11.2 million, or 41.5%, to RMB15.8 million ($2.6 million) for the nine months ended March 31, 2015 from RMB27.1 million for the same period of last fiscal year. Overall gross margin decreased to 34.7% for the nine months ended March 31, 2015 from 35.6% for the same period of last fiscal year. The decreases in gross profit were across all of our businesses. Gross margins for hardware and software sales to non-related parties and related parties were 30.9% and 98.9% for the nine months ended March 31, 2015, compared to 33.9% and 80.6% for the same period of last fiscal year, respectively.

Operating income (loss) and operating (loss) margin

Selling and distribution expenses decreased by RMB1.6 million, or 34.8%, to RMB3.1 million for the nine months ended March 31, 2015 from RMB4.7 million for the same period of last fiscal year. General and administrative expenses increased by RMB1.5 million, or 14.7%, to RMB12.0 million for the nine months ended March 31, 2015 from RMB10.5 million for the same period of last fiscal year. Research and development expenses decreased by RMB1.6 million, or 40.0%, to RMB2.4 million for the nine months ended March 31, 2015 from RMB4.1 million for the same period of last fiscal year. Total operating expenses decreased by RMB1.7 million, or 9.0%, to RMB17.5 million ($2.9 million) for the nine months ended March 31, 2015 from RMB19.2 million for the same period of last fiscal year.

Operating loss was RMB1.7 million ($0.3 million) for the nine months ended March 31, 2015, compared to operating income of RMB7.8 million for the same period of last fiscal year. Operating loss margin was 3.6% for the nine months ended March 31, 2015, compared to operating margin of 10.3% for the same period of last fiscal year. 

Net income (loss)

Net income for the nine months ended March 31, 2015 was RMB0.2 million ($0.03 million), compared to RMB5.0 million for the same period of last fiscal year. After deduction of non-controlling interest, net loss for our shareholders was RMB0.4 million ($0.06 million), or RMB0.08 ($0.01) loss per diluted share, for the nine months ended March 31, 2015, compared to net income attributable to our shareholders of RMB3.9 million, or RMB0.92 per diluted share, for the same period of last fiscal year. 

Non-GAAP Measures



For the Nine Months Ended March 31,



2014


2015


2015

(thousands)


RMB


RMB


USD

Net income (loss)



4,976



183



30

Provision for income taxes



1,610



468



77

Interest expenses and foreign currency adjustment



845



827



135

Change in fair value of warrants liability



904



(4,068)



(666)

Loss from investment



871



-



-

Restricted shares issued for consulting services



408



1,205



197

Loss from warrants redemption



-



1,913



313

Stock compensation expense



1,660



2,024



331

Depreciation and amortization



457



369



60

Adjusted EBITDA



11,732



2,921



478











Net income (loss) attributable to RCON



3,931



(363)



(59)

Change in fair value of warrants liability



904



(4,068)



(666)

Loss from investment



871



-



-

Restricted shares issued for consulting services



408



1,205



197

Loss from warrants redemption



-



1,913



313

Stock compensation expense



1,660



2,023



331

Adjusted net income attributable to RCON



7,774



710



116

Adjusted earnings per diluted share



1.81



0.15



0.02

Adjusted EBITDA (non-GAAP), which we define as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization, was RMB2.9 million ($0.5 million) for the nine months ended March 31, 2015, compared to RMB11.7 million for the same period of last fiscal year. Adjusted net income attributable to our shareholders was RMB0.7 million ($0.1 million), or RMB0.15 ($0.02) per diluted shares, for the nine months ended March 31, 2015, compared to RMB7.8 million, or RMB1.81 per diluted share, for the same period of last fiscal year.

Financial Position  

As of March 31, 2015, the Company had cash and cash equivalents of RMB4.7 million ($0.8 million), short-term bank loans of RMB8.0 million ($1.3 million), and short-term loan to related parties of RMB10.2 million ($1.7 million), compared to RMB18.1 million, RMB10.0 million, and RMB5.2 million, respectively, at June 30, 2014. Working capital as of March 31, 2015 was RMB90.1 million ($14.7 million) as compared to RMB83.1 million at June 30, 2014. Net cash used in operating activities was RMB16.2 million ($2.7 million) for the nine months ended March 31, 2015, compared to RMB15.3 million for the same period of last fiscal year. Net cash used in investing activities was RMB0.2 million ($0.03 million) for the nine months ended March 31, 2015, essentially unchanged from a year ago. Net cash provided by financing activities was RMB3.0 million ($0.5 million) for the nine months ended March 31, 2015, compared to RMB11.9 million for the same period of last fiscal year. During the fiscal 2015 nine-month period, we repaid RMB2.0 million in short term bank loans and received RMB5.0 million net proceeds from a related party.

Recent Development 

On February 18, 2015, the Company announced that it has signed an agreement with Aktobe Petroleum Machinery Co. Ltd., an affiliate of the Company's key customer -- Petro China, to jointly construct a pressure container technical service center for heating furnaces and separators in Kazakhstan.

On January 29, 2015, the Company held its annual general meeting of stockholders at which a majority of the Company's shareholders voted for: 1) an increase of authorized shares from 25 million to 75 million; 2) election of directors; 3) an approval of the Company's 2015 Equity Incentive Plan; and 4) the ratification of Friedman LLP as the Company's independent registered public accounting firm for FY2015 ending June 30, 2015.

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:    

Recon Technology, Ltd.
Tel: +86-10-8494-5799
Email: info@recon.cn
Web: http://www.recon.cn

Weitian Investor Relations
Tina Xiao
Tel: +1-917-609-0333
Email: tina.xiao@weitian-ir.com

RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS











As of June 30,


As of March 31,


As of March 31,


2014


2015


2015

ASSETS

RMB


RMB


USD

Current assets









Cash and cash equivalents 


18,094,586



4,665,869



763,757

Notes receivable


-



400,000



65,476

Trade accounts receivable, net 


43,553,737



56,444,463



9,239,407

Trade accounts receivable - related parties, net


7,479,298



4,860,821



795,669

Inventories, net


14,336,602



19,127,861



3,131,044

Other receivables, net 


18,293,043



27,180,449



4,449,174

Other receivables - related parties


1,414,433



-



-

Purchase advances, net


25,759,065



22,870,397



3,743,660

Purchase advances - related parties


394,034



394,034



64,500

Prepaid expenses 


2,634,664



4,200,662



687,608

Prepaid expenses - related parties


230,000



362,400



59,321

Deferred tax asset


1,209,961



1,260,442



206,322

Total current assets


133,399,423



141,767,398



23,205,938










Property and equipment, net


1,321,538



1,273,521



208,463

Long-term trade accounts receivable, net





14,545,865



2,381,016

Long-term trade accounts receivable - related parties, net


14,456,317






-

Long-term investment


-



-



-

Long-term other receivable


5,353,104



3,394,731



555,684

Total Assets


154,530,382



160,981,515



26,351,101










LIABILITIES AND EQUITY 









Current liabilities









Short-term bank loans


10,000,000



8,000,000



1,309,522

Trade accounts payable


11,413,505



17,456,282



2,857,423

Other payables 


1,765,079



1,199,015



196,267

Other payable - related parties


3,306,024



3,725,403



609,812

Deferred revenue


4,419,824



2,776,485



454,483

Advances from customers


801,385



395,600



64,756

Accrued payroll and employees' welfare


417,624



309,558



50,672

Accrued expenses


203,051



356,980



58,435

Taxes payable


7,589,846



6,900,393



1,129,527

Short-term borrowings - related parties


5,207,728



10,218,308



1,612,637

Deferred tax liability


180,186



180,186



29,495

Warrants liability 


5,021,621



199,179



32,604

Total current liabilities


50,325,873



51,717,389



8,465,633










Commitments and Contingency


















Equity 









Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000 shares authorized; 4,717,336 and 5,022,436 shares issued and outstanding as of June 30, 2014 and March 31, 2015, respectively)


616,865



651,495



106,641

Additional paid-in capital


83,061,058



87,906,399



14,389,419

Appropriated retained earnings


4,148,929



4,725,803



773,568

Unappropriated retained earnings


8,431,453



7,491,128



1,226,224

Accumulated other comprehensive loss


(279,275)



(282,129)



(46,183)

Total shareholders' equity


95,979,030



100,492,696



16,449,669

Non-controlling interest


8,225,479



8,771,430



1,435,799

Total equity


104,204,509



109,264,126



17,885,468

Total Liabilities and Equity


154,530,382



160,981,515



26,514,791











RECON TECHNOLOGY, LTD

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




















For the nine months ended


For the three months ended


March 31,


March 31,


2014


2015


2015


2014


2015


2015


RMB


RMB


USD


RMB


RMB


USD



















Revenues


















Hardware and software


73,337,585



43,119,915



7,058,309



17,998,444



18,358,835



3,005,162

Service


477,769



103,774



16,987



80,180



-



-

Hardware and software - related parties


2,196,152



2,428,173



397,468



153,846



1,660,055



271,735

Total revenues


76,011,506



45,651,862



7,472,764



18,232,470



20,018,890



3,276,897

Cost of revenues


















Hardware and software


48,447,792



29,782,617



4,875,124



12,848,136



13,759,652



2,252,321

Service


77,107



-



-



42,161



-



-

Hardware and software - related parties


426,139



27,161



4,446



97,217



10,399



1,702

Total cost of revenues


48,951,038



29,809,778



4,879,570



12,987,514



13,770,051



2,254,023

Gross profit


27,060,468



15,842,084



2,593,194



5,244,956



6,248,839



1,022,874





































Selling and distribution expenses


4,701,989



3,065,098



501,727



1,097,549



1,109,838



181,670

General and administrative expenses


10,450,904



11,987,761



1,962,279



3,993,341



4,191,030



686,031

Research and development expenses


4,074,953



2,444,020



400,062



720,956



544,063



89,058

Operating expenses


19,227,846



17,496,879



2,864,068



5,811,846



5,844,931



956,759





































Income (loss) from operations


7,832,622



(1,654,795)



(270,874)



(566,890)



403,908



66,115



















Other income (expenses)


















Subsidy income


1,220,024



639,473



104,675



201,711



155,155



25,397

Interest income


296,997



225,701



36,945



92,027



68,233



11,169

Interest expense


(757,226)



(808,065)



(132,272)



(277,578)



(339,109)



(55,509)

Loss from investment


(870,627)



-



-



(135,547)



-



-

Change in fair value of warrants liability


(904,327)



4,068,329



665,946



(904,883)



(9,188)



(1,504)

Loss from foreign currency exchange


(88,080)



(19,081)



(3,123)



31,312



1,799



294

Loss from warrants redemption


-



(1,913,262)



(313,182)



-



(1,913,262)



(313,182)

Other expense


(143,498)



112,325



18,387



(99,552)



35,653



5,836



















Income (loss) before income tax


6,585,885



650,625



106,502



(1,659,400)



(1,596,811)



(261,384)

Provision (benefit) for income tax


1,609,976



468,005



76,608



150,787



(180,927)



(29,616)

Net Income (loss)


4,975,909



182,620



29,894



(1,810,187)



(1,415,884)



(231,768)



















Less: Net income attributable to non-controlling interest


1,045,396



546,071



89,386



120,415



111,398



18,235

Net Income (loss) attributable to Recon Technology, Ltd


3,930,513



(363,451)



(59,492)



(1,930,602)



(1,527,282)



(250,003)



















Comprehensive income (loss)


















Net income (loss)


4,975,909



182,620



29,894



(1,810,187)



(1,415,884)



(231,768)

Foreign currency translation adjustment


(40,833)



(2,854)



(467)



(118,110)



(7,580)



(1,241)

Comprehensive income (loss)


4,935,076



179,766



29,427



(1,928,297)



(1,423,464)



(233,009)

Less: Comprehensive income attributable to non-controlling interest


1,041,313



545,952



89,367



108,604



111,032



18,175

Comprehensive income (loss) attributable to Recon Technology, Ltd


3,893,763



(366,186)



(59,940)



(2,036,901)



(1,534,496)



(251,184)



















Earnings (loss) per common share - basic 


0.93



(0.08)



(0.01)



(0.43)



(0.32)



(0.05)

Earnings (loss) per common share - diluted


0.92



(0.08)



(0.01)



(0.43)



(0.32)



(0.05)

Weighted - average shares - basic 


4,211,785



4,773,803



4,757,112



4,528,311



4,839,004



4,839,004

Weighted - average shares - diluted


4,269,510



4,773,803



4,757,112



4,528,311



4,839,004



4,839,004


RECON TECHNOLOGY, LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS











For the nine months ended


2014


2015


2015


RMB


RMB


USD










Cash flows from operating activities:









Net income


4,975,909



182,620



29,894

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









Depreciation


457,439



369,284



60,448

Loss from disposal of equipment


67,587



(149,504)



(24,472)

Provision for doubtful accounts


668,610



254,622



41,679

Share based compensation


1,660,144



2,023,761



331,270

Loss from investment


870,627



-



-

Deferred tax benefit


(75,715)



(50,481)



(8,263)

Change in fair value of warrants liability


904,327



(4,068,329)



(665,946)

Restricted shares issued for services


407,972



1,204,903



197,231

Loss from warrants redemption


-



1,913,262



313,182

Changes in operating assets and liabilities:









Trade accounts receivable


(17,127,239)



(29,115,292)



(4,765,889)

Trade accounts receivable - related parties


1,487,501



18,681,051



3,057,906

Inventories


(8,823,683)



(4,791,259)



(784,282)

Notes receivable


2,578,855



(400,000)



(65,476)

Other receivable, net


688,724



(7,022,533)



1,149,521

Other receivables related parties, net


77,697



1414,433



231,529

Purchase advance, net


(5,325,269)



1,797,628



294,254

Tax recoverable


575,650



-



-

Prepaid expense


(580,144)



(1,565,998)



(256,339)

Prepaid expense - related party, net


-



(132,400)



(21,673)

Trade accounts payable


6,211,777



6,042,777



989,144

Trade accounts payable - related parties


(3,994,718)



-



-

Other payables


(191,528)



(566,064)



92,659

Other payables - related parties


(857,338)



419,379



68,648

Deferred income


945,091



(1,643,339)



(268,999)

Advances from customers


(195,100)



(405,785)



(66,423)

Accrued payroll and employees' welfare


(1,603,340)



(108,066)



(17,689)

Accrued expenses


(242,617)



185,433



30,354

Taxes payable


1,155,303



(689,453)



(112,857)

Net cash used in operating activities


(15,283,478)



(16,219,350)



(2,654,949)










Cash flows from investing activities:









Purchase of property and equipment


(258,922)



(514,009)



(84,138)

Proceeds from disposal of equipment


98,000



356,247



58,314

Net cash used in investing activities


(160,922)



(157,762)



(25,824)










Cash flows from financing activities:









Proceeds from short-term bank loans


18,500,000



-



-

Repayments of short-term bank loans


(12,870,000)



(2,000,000)



(327,380)

Proceeds from short-term borrowings - related parties


-



12,550,000



2,054,312

Repayment of short-term borrowings


(570,375)



-



-

Repayment of short-term borrowings - related parties


(5,303,279)



(7,550,000)



(1,235,861)

Proceeds from sale of common stock, net of issuance costs


12,132,882



-



-

Net cash provided by financing activities


11,889,228



3,000,000



491,071










Effect of exchange rate fluctuation on cash and cash equivalents


68,669



(51,605)



(8,449)










Net decrease in cash and cash equivalents


(3,486,503)



(13,428,717)



(2,198,151)

Cash and cash equivalents at beginning of period


12,350,392



18,094,586



2,961,908

Cash and cash equivalents at end of period


8,863,889



4,665,869



763,757



















Supplemental cash flow information









Cash paid during the period for interest


952,125



808,065



132,272

Cash paid during the period for taxes


700,268



616,225



100,870










Non-cash investing and financing activities









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


-



(1,002,721)



(164,136)










SOURCE Recon Technology, Ltd.


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