BEIJING, Sept. 27 /PRNewswire-Asia-FirstCall/ -- Recon Technology, Ltd. (Nasdaq: RCON), a leading Chinese non-state-owned oil field services provider to oil and gas companies and their affiliates, today announced its audited financial results for the fiscal year ended June 30, 2010.

    Fiscal Year 2010 Highlights

    -- Total revenues increased 54.67% year over year to $17.18 million.
       Exceeding RCON's guidance between $12.7 million and $13.3million
    -- Non-GAAP EBITDA increased 54.9% year over year to $4.8 million
    -- Net income attributable to common shareholders was $2.9 million,
       exceeding RCON's guidance between $2.5 million and $2.7 million, or
       $0.77 diluted net income per share attributable to common shareholders,
       exceeding RCON's guidance between $0.65 and $0.68 per share.

"Although environment of global macro social 2010 was not good, our business performed very well, driven mostly by our automation business," said Mr. Yin Shenping, CEO of Recon. "We expect our business to continue to develop rapidly and benefit from our strong R&D capabilities and rich industry experience."

Financial Results

For the year ended June 30, 2010, RCON reported total revenues of $17.2 million, increased from $11.1 million in the same period of 2009. Gross profit for fiscal year 2010 increased to $7.3 million, from $4.4 of the same period in 2009.For the year ended June 30, 2010, gross profit margin increased to 42.23%, from 39.51% for the same period in 2009. The increases were mainly due to the increase in sales volume to CNPC and Sinopec and development of lower cost software and service business.

Management believes it can better safeguard RCON's profitability by quickly upgrading technology and products and adjusting its internal business structure. RCON will focus more on automation system business and related engineering services, oilfield surface production management and expansion of gas field business.

For the year ended June 30, 2010, income tax expense was $1.1 million with an effective tax rate of 25%, increased from $538,000 with an effective tax rate of 17%. This increase resulted from increased revenues from sales and business structure changes. RCON expects the effective EIT will vary, depending on which of its Domestic Companies generate greater revenues and their applicable tax rates.

For the year ended June 30, 2010, adjusted EBITDA increased 54.88%. Compared to the 31.92% increase in net income available for ordinary shareholders, management believes this can reflect improvement of operation much better.

Cash position. As of June 30, 2010, RCON's cash and cash equivalents totaled $1.8 million. The current ratio equalled 3.04 up from 1.90 at June 30, 2009.

Business Outlook

The oilfield engineering and technical service industry is generally divided into five sections: (1) exploration, (2) drilling and completion, (3) testing and logging, (4) production, and (5) oilfield construction. Thus far RCON's businesses have only been involved in production. Management of Recon believes it's time to expand core business, move into new markets, and develop new businesses. They also believe that many existing wells and oilfields need to improve or renew their equipment and service to maintain production and our techniques and services will be needed as new oil and gas fields are developed. Furthermore, the Several Opinions of the State Council on Encouraging and Guiding the Healthy Development of Private Investment (the "New 36 Guidelines on Non-State-owned Economy") promulgated in 2010 by the State encourages private investors to take part in oil and natural gas construction, and supports private enterprise investors entering into exploration and development of oilfield area. As exploration of oil and gas fields involves a wide range of professional technologies, it is expected that in the future the private investors investing in oil and gas field exploration will seek out general contracting and integrated services. This will bring RCON new opportunities to the integrated service projects.

Conference Call

RCON will host a conference call in October to review the company's financial results and respond to questions and comments. A specific time and detailed information are to be noticed further.

In order to attend meetings, please provide contact information to info@recon.cn , the company can send an email alert then.

    The financial statements follow.



                              RECON TECHNOLOGY, LTD
                    CONSOLIDATED STATEMENTS OF BALANCE SHEETS

                                                     As of June 30,
                                           2009        2010          2010
                                            RMB         RMB      U.S. Dollars

    ASSETS
    Current assets
    Cash and cash equivalents            2,727,735   12,142,957   $1,783,473
    Trade accounts receivable, net of
     allowance for doubtful accounts of
     RMB604,953 and RMB1,089,331($159,993)
     for 2009 and 2010, respectively    44,103,981   89,425,990   13,134,270
    Trade accounts receivable-related
     parties, net of allowance for
     doubtful accounts of RMB350,498
     for 2009                            7,458,302           --           --
    Other receivables, net               2,048,015   12,850,547    1,887,399
    Other receivables-related parties,
     net                                   507,541           --           --
    Purchase advances                    5,637,082   46,551,402    6,837,147
    Purchase advances-related parties       73,028           --           --
    Prepaid expenses                       338,072      766,638      112,598
    Inventories                         10,710,018   13,150,911    1,931,515
    Deferred tax assets                         --      275,960       40,531
    Deferred offering costs              1,622,048           --           --
    Total current assets                75,225,822  175,164,405   25,726,933

    Property and equipment, net of
     accumulated depreciation            1,406,876    1,482,881      217,795
                                        76,632,698  176,647,286  $25,944,728

    LIABILITIES AND SHAREHOLDERS'
     EQUITY
    Current liabilities
    Trade accounts payable              15,601,101   16,536,796   $2,428,810
    Trade accounts payable-related
     parties                               189,744           --           --
    Other payables                       1,767,005    3,096,309      454,764
    Other payables-related parties          73,579           --           --
    Deferred income                      2,361,605    4,267,711      626,812
    Advances from customers                910,215      439,761       64,589
    Accrued payroll and employees'
     welfare                               393,074      360,540       52,954
    Accrued expenses                       262,083      290,803       42,711
    Taxes payable                        9,182,676   20,203,104    2,967,292
    Short-term notes payable             3,143,792    5,024,881      738,020
    Short-term notes payable-related
     parties                             3,344,377    7,343,457    1,078,556
    Deferred tax liabilities             2,365,225           --           --
    Total current liabilities           39,594,476   57,563,362    8,454,508

    Redeemable ordinary shares           1,434,342           --           --

    Commitments and Contingencies

    Shareholders' equity
    Ordinary shares, $0.0185 U.S.
     dollar par value, 25,000,000
     shares authorized; 2,139,203 and
     3,951,811 shares issued and
     outstanding at June 30,
     2009 and 2010                         300,534      529,979       77,840
    Additional paid-in capital           8,732,266   69,257,098   10,172,003
    Appropriated retained earnings       1,687,772    3,755,503      551,582
    Unappropriated retained earnings    18,043,692   36,034,500    5,292,498
    Accumulated other comprehensive
     loss                                       --      (76,997)     (11,311)
    Total controlling shareholders'
     equity                             28,764,264  109,500,083   16,082,612
    Non-controlling interest, net of
     tax                                 6,839,616    9,583,841    1,407,608
    Total shareholders' equity          35,603,880  119,083,924   17,490,220
                                        76,632,698  176,647,286  $25,944,728



                              RECON TECHNOLOGY, LTD
            CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                                             For the Years ended June 30,
                                           2009        2010          2010
                                            RMB         RMB      U.S. Dollars


    Revenues
    Hardware                            70,121,586  108,351,654  $15,913,940
    Service                              1,495,662      750,769      110,268
    Software                               226,496    7,901,709    1,160,548
    Hardware-related parties             2,143,590           --           --
    Software-related parties             1,659,573           --           --
    Total revenues                      75,646,907  117,004,132   17,184,756

    Cost of revenues                    45,758,804   67,593,524    9,927,669
    Gross margin                        29,888,103   49,410,608    7,257,087

    Selling and distribution expenses    5,660,198    8,198,742    1,204,174
    General and administrative expenses  5,593,382   13,269,162    1,948,883
    Operating expenses                  11,253,580   21,467,904    3,153,057

    Income from operations              18,634,523   27,942,704    4,104,030

    Other income (expenses)
    Subsidy income                       2,038,015    2,132,880      313,263
    Interest income                         15,159       10,476        1,539
    Interest expense                      (113,179)    (214,431)     (31,494)
    Other income (expenses)                (10,700)     444,567       65,295
                                         1,929,295    2,373,492      348,603

    Income before income taxes and non-
     controlling interest               20,563,818   30,316,196    4,452,633

    Provision for income taxes          (3,677,887)  (7,504,877)  (1,102,264)
    Net income before allocation to
     non-controlling interests          16,885,931   22,811,319    3,350,369

    Less: Net income attributable to
     non-controlling interest           (1,629,056)  (2,752,780)    (404,309)
    Accrued dividend for redeemable
     ordinary shares                       (51,554)          --           --

    Net income attributable to common
     shareholders                       15,205,321   20,058,539    2,946,060

    Net income from operations          16,885,931   22,811,319    3,350,369

    Net income attributable to common
     shareholders                       15,205,321   20,058,539    2,946,060
    Comprehensive income
       Net income from operations       16,885,931   22,811,319    3,350,369
       Foreign currency translation
        adjustment                              --      (85,552)     (12,565)
    Comprehensive income                16,885,931   22,725,767    3,337,804
    Comprehensive income attributable
     to non-controlling interests       (1,629,056)  (2,744,225)    (403,053)
    Comprehensive income attributable
     to redeemable common shares           (51,554)          --           --
    Comprehensive income attributable
     to common shareholders             15,205,321   19,981,542   $2,934,751
    Earnings per common share - basic
    Net income attributable to common
     shareholders                             7.11         5.26        $0.77
    Earnings per common share - diluted
    Net income attributable to common
     shareholders                             6.75         5.23        $0.77
    Weighted - average shares -basic     2,139,203    3,812,085    3,812,085
    Weighted - average shares -diluted   2,251,811    3,836,469    3,836,469



                             RECON TECHNOLOGY, LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                             For the Years ended June 30,
                                           2009        2010          2010
                                            RMB         RMB      U.S. Dollars
    Cash flows from operating
     activities:
    Net income before allocation to
     non-controlling interests           16,885,931   22,811,319  $3,350,369
    Adjustments to reconcile net income
     before non-controlling interests
     to net cash provided by
     operating activities:
    Depreciation                            321,300      368,804      54,167
    Loss from disposal of office
     equipment                                   --        9,715       1,427
    Stock based payment                          --    1,623,034     238,380
    Accrued dividend for redeemable
     common stock                            (5,855)          --          --
    Movement of deferred taxation         3,986,259   (2,641,185)   (387,919)
    Changes in operating assets and
     liabilities:
    Trade accounts receivable, net      (22,988,109) (45,322,009) (6,656,583)
    Trade accounts receivable-related
     parties, net                        (1,105,319)   7,458,302   1,095,424
    Other receivables, net                  343,000   (8,367,477) (1,228,957)
    Other receivables related parties,
     net                                   (407,991)     507,541      74,544
    Purchase advance, net                (2,066,514) (40,914,320) (6,009,212)
    Purchase advance-related party, net     (50,790)      73,028      10,726
    Prepaid expense                        (225,097)    (428,566)    (62,945)
    Inventories                          (1,933,901)  (2,440,893)   (358,501)
    Trade accounts payable                6,774,850      935,695     137,428
    Trade accounts payable-related
     parties                             (1,067,534)    (189,744)    (27,868)
    Other payables                       (2,080,751)     236,681      34,762
    Other payables-related parties         (980,280)     (73,579)    (10,807)
    Deferred income                      (2,182,086)   1,906,106     279,956
    Advances from customers                (158,096)    (470,454)    (69,097)
    Accrued employees' welfare              (72,802)     (32,534)     (4,778)
    Accrued expenses                           (561)      28,720       4,218
    Taxes payable                           977,966   11,020,428   1,618,604
    Net cash used in operating
     activities                          (6,036,381) (53,901,388) (7,916,662)

    Cash flows from investing
     activities:
    Purchases of property and equipment    (952,153)    (260,214)    (38,218)
    Net cash used in investing
     activities                            (952,153)    (260,214)    (38,218)

    Cash flows from financing
     activities:
    Proceeds from stock issuance                 --   59,318,949   8,712,356
    Proceeds from short-term notes
     payable                              1,842,896    1,881,089     276,281
    Proceeds from short-term notes
     payable-related party                1,858,000    3,999,080     587,357
    Payments for initial public
     offering cost                       (1,622,048)          --          --
    Loan to third-party companies                --   (1,536,742)   (225,706)
    Net cash provided by financing
     activities                           2,078,848   63,662,376   9,350,288

    Effect of exchange rate fluctuation
     on cash and cash equivalent                 --      (85,552)    (2,565)

    Net increase (decrease) in cash and
     cash equivalent                     (4,909,686)   9,415,222   1,382,842
    Cash and cash equivalents at
     beginning of year                    7,637,421    2,727,735     400,631
    Cash and cash equivalents at end of
     year                                 2,727,735   12,142,957  $1,783,473

Non GAAP EBITDA

Since fiscal year 2010, RCON begins to report Adjusted EBITDA as income from continuing operations before income tax expense, interest expense, non-cash stock compensation expense, and depreciation, amortization and accretion expense. RCON thinks it useful to an equity investor in evaluating our operating performance because: (1) it is widely used by investors in oil field service industry to measure a company's operating performance without regard to items such as interest expense, depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which the assets were acquired; and (2) it helps investors more meaningfully evaluate and compare the results of our operations from period to period by removing the impact of our capital structure and asset base from our operating results.

About Recon Technology, Ltd.

Recon Technology, Ltd. has been providing leading Chinese oil and gas companies with automation services that increase efficiency and profitability in exploring, extracting, producing, processing, refining and transporting petroleum products for over 10 years. The company's proprietary computerized process control system manages oil production in real-time to increase extraction levels, reduce impurities in extracted petroleum and lower production costs. In addition, as one of only two acoustic system providers in the world, Recon's acoustic pipeline monitoring system is widely used to prevent gas leakage in the transport pipeline. Recon's technology is based on three software copyrights, eight product patents and four pending patents. Recon Technology is the first Chinese non-state-owned oil and gas service company to go public in the U.S. More information may be found at http://www.recon.cn or e-mail: info@recon.cn .

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports field by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

    Investor Contact:

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

SOURCE Recon Technology, Ltd.

SOURCE: Recon Technology, Ltd.