Exhibit 99.1

 

NASDAQ:RCON

 

 

 

Recon Technology Reports Strong Gains in FY 2014 and Announces Growth Goals

 

FY 2014 Results Were Boosted By Sharp Increases in Oilfield Automation and Furnaces Revenues, Improved Gross Margins, and an Operating Profit Versus Operating Loss in the Prior Year

 

BEIJING, September 29, 2014 -- Recon Technology, Ltd.(NASDAQ: RCON), (“Recon” or the “Company”), a leading independent oilfield services provider operating primarily in China, today reported that in its fiscal year ended June 30, 2014, the Company was able to record the following results:

 

·

Revenues grew 22% to $15,181,815 from $12,442,444* in FY 2013 as sales of oilfield hardware products to non-related parties more than doubled,

 

·

Adjusted net income attributable to Recon (non- U.S. GAAP)** grew 170% to approximately $831,550 from $307,440 in FY 2013

 

·

Adjusted EBIDTA (non- U.S. GAAP) increased 88% year over year to $1,435,679, from $763,800*

 

·

Net income attributable to Recon (U.S. GAAP) rose to approximately $131,140 from approximately $6,450* in the prior year

 

·

Diluted EPS (U.S. GAAP) rose 1,400% to $0.03 from EPS of $0.002 in FY 2013

 

·

Adjusted diluted EPS** (non- U.S. GAAP) rose 137% to $0.19 compared with $0.08 a year earlier

 

* Based on the exchange rate of RMB6.1552 to US$1.00.

 

** Non- U.S. GAAP measures are explained in tables 3 and 4 below. Non -U.S. GAAP adjusted net income and EPS exclude certain special non-cash after tax expenses totaling $ 700,419 ($0.16 per share) that are included in net income

 

  

Other FY 2014 Highlights

 

·

Hardware and Software sales to non-related parties grew 108.2% year over year, offsetting a decline in revenues related to fracturing

·

Gross margins increased year-over-year from 32.7% to 34.7%, in part reflecting the decline in lower margin fracturing related sales

·

Operating income increased from a loss in FY2013 of $91,751 to income of $459,813

·

Current assets as of June 30, 2014, including approximately $2.94 million in cash and cash equivalents, were approximately $25.1 million.

·

The Company reported no long term debt and total current liabilities of approximately $8.18 million as of June 30, 2014

·

Working capital as of June 30, 2014 was approximately $13.5 million

·

There were approximately 4.4 million weighted average outstanding ordinary shares, on a fully diluted basis, as of June 30, 2014, up from approximately 4.0 million as of June 30, FY 2013, in part reflecting a registered direct offering in November 2013 of 546,500 ordinary shares and warrants to initially purchase an aggregate of 163,950 ordinary shares. This offering generated net proceeds of approximately $2.0 million.

 

Continuing Strong Outlook

 

Commenting on results, Mr. Shenping Yin, Chairman and CEO of Recon stated, “FY 2014 delivered a number of favorable highlights on both the top and bottom line despite reduced drilling activity and fallout from burgeoning reforms of China’s oil industry. Our strong hardware sales, reflecting growing acceptance by customers of our deep understanding of their needs and the excellent technology and know-how we can provide to improve their production efficiency, safety and profits, was certainly a key highlight as was the swing into the black of results from operations. While we didn’t generate significant revenues from our fracturing services this past year, we are optimistic we will see these grow in the future based on our ongoing fracturing projects, which are located at not only Zhongyuan Oilfield, but also Northeast Oilfield and Sichuan Province.”

 

Promising Year Again For Furnaces and Burners

 

“As new wells are developed,” Mr. Yin continued, “we believe we will see continued strong growth this year in sales of our burners and furnaces. Another promising growth area is in down-hole tools, and we now have good experience with this technology and have seen strong opportunities. We also see a continuing focus on developing new sources of energy in China. Natural gas obtained through fracturing will certainly be part of this trend and as I’ve noted, we anticipate a pick up in our activity in the fracturing business in FY 2014.”

 

“Not least of all,” Mr. Yin added, “we are cognizant of the need to further improve our profits and believe that further integration into our offerings of our higher margin services will be one key to accomplishing this, as well as growing our business to include some down-hole services to add to the up-ground business we have concentrated on to date.”

 

  

Growth in Automation Products

 

Mr. Yin continued, “In FY 2014, we see particularly good continuing demand for ‘Digital Oil Field’ automation products and services, further enhanced by our recent appointment as an authorized third party system integrator for world renowned automation leader ABB. While I believe this partnership, as well as our partnerships with global oil servicing leaders such as Baker Hughes, Emerson and others reflects well on our abilities, more importantly, it inspires further confidence in our customers and helps to expand the range of products and services we are able to customize for the unique needs of the oil and gas fields in China.”

 

Growth Goals: Organic Growth Plus Acquisitions

 

“In recent weeks,” Mr. Yin said, “we have focused on developing growth goals to guide the efforts of our still young Company that we believe is entering a new stage of development. Our major focus going forward will continue to be on the organic development of our business, built on strong technology, our very well developed solid relationships with China’s large oil companies, and our focus on building our business in China’s most challenging oil fields away from large potential competitors. However, we believe we can supplement this growth with carefully chosen acquisitions and joint ventures, and have put a greater effort into accomplishing this.”

 

Double Our Revenues Over Next 2 to 3 Years

 

“Looking ahead,” Mr. Yin said, “we believe that an achievable goal for Recon is annual average revenue growth of a minimum of 20%. We further believe that if we couple this with appropriate acquisitions, we can aim to double our revenues over the next two to three fiscal years.”

 

Mr. Yin concluded, “While pursuing these goals, we will keep in mind the best interests of our shareholders, who we know would also like to see a growing bottom line as we grow our revenues, and also don’t want us to stray from our areas of expertise. We think we have a very exciting future ahead and look forward to continuing to inform shareholders of our progress.”

 

Please See Attached Tables

 

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

 

 

Cautionary Statements

 

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

 

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

 

Investor Relations Contacts:

 

China

 

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

 

U.S.

 

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

 

  

Recon Technology Financial Tables

 

Table 1: Gross Profit and Gross Profit Margin

 

 

		FY 2013				FY 2014				%  Change
Revenues   (‘000 USD)		$	12,442			$	15,182				+22%
Cost of revenues		$	8,372			$	9,915				+18.4%
Gross profit		$	4,070			$	5,267				+29.4%
GP Margin (%)			32.7	%			34.7	%			+2%

   

Table 2: Operating Expense and Operating Income

 

 

Unit: ‘000 USD		FY 2013				FY 2014				% Change
Selling and distribution expenses			995				860				(13.6	)%
% of revenue			8.0	%			5.7	%			__
General and administrative expenses			1,784				2,632				+47.6%
% of revenue			14.3	%			17.3	%			__
Research and development expenses			1,383				1,315				(4.9	)%
% of revenue			11.1	%			8.7	%			__
Operating expenses		$	4,162			$	4,806				+15.5%
Operating income(loss)			(91,751	)			459,812				+601.2%

 

 

  

Table 3:

 

Adjusted EBITDA

   

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

 

  

		FY2013				FY2014				FY2014				Percentage
		RMB				RMB				USD				Change
Reconciliation of Adjusted EBITDA
to Net Income
Net income		¥	619,541			¥	1,827,820			$	296,956			195.0%
Provision for income tax			286,871				961,136				156,150			235.0%
Interest expense and foreign currency adjustment			1,323,726				1,141,069				185,383			(13.8)%
Change in fair value of warrants liability			-				(60,647	)			(9,853	)		100%
Loss from investment			-				1,535,250				249,423			100%
Restricted shares issued for consulting services			-				407,593				66,219			100%
Share-based compensation expense			1,852,656				2,429,028				394,630			31.1%
Depreciation and amortization			618,552				595,647				96,771			(3.7)%
Adjusted EBITDA		¥	4,701,346			¥	8,836,896			$	1,435,679			88.0%

 

  

Table 4:

 

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

  

 

		For the Years Ended
		June 30,
		2013				2014				2014
		RMB				RMB				USD
Reconciliation of Net Income
to Adjusted Net Income attributable to Recon Technology, Ltd
Net income attributable to Recon Technology, Ltd		¥	39,698			¥	807,188			$	131,140
Special items:
Change in fair value of warrants liability			-				(60,647	)			(9,853	)
Loss from investment			-				1,535,250				249,423
Restricted shares issued for consulting services			-				407,593				66,219
Share-based compensation expense			1,852,656				2,429,028				394,630
Adjusted net income attributable to Recon Technology, Ltd		¥	1,892,354			¥	5,118,412			$	831,559
Reconciliation of U.S. GAAP Earnings Per Share
to Non U.S. GAAP Adjusted Earnings Per Share - diluted
U.S. GAAP earnings per share - diluted		¥	0.01			¥	0.18			$	0.03
Impact of special items on earnings per share			0.47				0.99				0.16
Non U.S. GAAP adjusted earnings per share -  diluted		¥	0.48			¥	1.17			$	0.19
Weighted - average shares -diluted			3,951,811				4,368,162				4,368,162

 

 

Special items are certain non-cash expenses that are included in our U.S. GAAP reported results. There was no income tax benefit associated with the special items. The non-GAAP financial measures are provided to enhance investors' overall understanding of Recon's current financial performance. These non-GAAP measures are not intended to replace the presentation of the Company’s financial results in accordance with GAAP. Use of the terms non-GAAP adjusted EPS may differ from similar measures reported by other companies. All of the non-GAAP measures discussed above are reconciled from their respective GAAP measures in the “Reconciliation of U.S. GAAP Earnings Per Share to Non U.S. GAAP Adjusted Earnings Per Share - diluted" table set forth above. We define adjusted EBITDA as net income (loss) adjusted for income tax expense, interest expense, loss from investment, non-cash stock compensation expense, depreciation and amortization. We define non GAAP EPS as adjusted net income divided by the total outstanding shares, on a fully-diluted basis.  We define non-GAAP EPS as non-GAAP net income divided by the weighted average outstanding shares, on a fully-diluted basis.

   

FOR ADDITIONAL INFORMATION WE URGE YOU TO PLEASE CAREFULLY STUDY THE COMPANY’S ANNUAL REPORT ON FORM 10-K FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 2014

 

 

RECON TECHNOLOGY, LTD
CONSOLIDATED BALANCE SHEETS
		As of June 30,				As of June 30,				As of June 30,
		2013				2014				2014
ASSETS		RMB				RMB				U.S. Dollars
Current assets
Cash and cash equivalents		¥	12,350,392			¥	18,094,586			$	2,939,723
Notes receivable			2,578,855				-				-
Trade accounts receivable, net			38,648,780				43,553,737				7,075,926
Trade accounts receivable- related parties, net			18,744,364				7,479,298				1,215,119
Inventories, net			13,271,070				14,336,602				2,329,185
Other receivables, net			19,131,503				18,293,043				2,971,966
Other receivables- related parties			742,528				1,414,433				229,795
Purchase advances, net			18,412,507				25,759,065				4,184,927
Purchase advances- related parties			394,034				394,034				64,016
Tax recoverable			575,650				-				-
Prepaid expenses			2,487,956				2,634,664				428,039
Prepaid expenses - related parties			366,000				230,000				37,367
Deferred tax asset			1,006,721				1,209,961				196,575
Total current assets			128,710,360				133,399,423				21,672,638
Property and equipment, net			1,709,846				1,321,538				214,703
Long-term trade accounts receivable, net			-				14,456,317				2,348,635
Long-term investment			1,549,450				-				-
Long-term other receivable			3,502,680				5,353,104				869,688
Total Assets		¥	135,472,336			¥	154,530,382			$	25,105,664
LIABILITIES AND EQUITY
Current liabilities
Short-term bank loans		¥	10,000,000			¥	10,000,000			$	1,624,643
Trade accounts payable			7,384,165				11,413,505				1,854,287
Trade accounts payable- related parties			3,994,718				-				-
Other payables			1,964,691				1,765,079				286,762
Other payable- related parties			4,239,675				3,306,024				537,111
Deferred revenue			3,381,382				4,419,824				718,063
Advances from customers			470,700				801,385				130,196
Accrued payroll and employees' welfare			1,992,783				417,624				67,849
Accrued expenses			488,730				203,051				32,989
Income before income tax			6,754,428				7,589,846				1,233,079
Short-term borrowings- related parties			5,503,279				5,207,728				846,070
Net Income			570,375				-				-
Deferred tax liability			-				180,186				29,274
Warrants liability			-				5,021,621				815,834
Total current liabilities			46,744,926				50,325,873				8,176,157
Comprehensive income
Comprehensive income attributable to Recon Technology, Ltd
Common stock, ($ 0.0185 U.S. dollar par value, 25,000,000 shares authorized; 3,951,811 and 4,717,336 shares issued and outstanding as of June 30, 2013 and June 30, 2014, respectively)			529,979				616,865				100,217
Earnings per common share - basic			69,516,447				83,061,058				13,494,453
Earnings per common share - diluted			3,023,231				4,148,929				674,053
Unappropriated retained earnings			8,749,963				8,431,453				1,369,810
Accumulated other comprehensive loss			(293,201	)			(279,275	)			(45,374	)
Total shareholders’ equity			81,526,419				95,979,030				15,593,159
Non-controlling interest			7,200,991				8,225,479				1,336,348
Total equity			88,727,410				104,204,509				16,929,507
Total Liabilities and Equity		¥	135,472,336			¥	154,530,382			$	25,105,664

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

RECON TECHNOLOGY, LTD
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
		For the years ended
		June 30,
		2013				2014				2014
		RMB				RMB				USD
Revenues
Hardware and software		¥	41,408,517			¥	86,229,283			$	14,009,176
Service			25,464,003				477,778				77,622
Hardware and software - related parties			9,713,209				6,740,047				1,095,017
Total revenues			76,585,729				93,447,108				15,181,815
Cost of revenues
Hardware and software		¥	26,617,786			¥	57,333,670			$	9,314,672
Service			18,567,123				77,107				12,527
Hardware and software - related parties			6,346,850				3,619,470				588,035
Total cost of revenues			51,531,759				61,030,247				9,915,234
Gross profit			25,053,970				32,416,861				5,266,581
Selling and distribution expenses			6,126,095				5,293,343				859,979
General and administrative expenses			10,978,942				16,198,947				2,631,750
Research and development expenses			8,513,680				8,094,333				1,315,040
Operating expenses			25,618,717				29,586,623				4,806,769
Income (loss) from operations			(564,747	)			2,830,238				459,812
Other income (expenses)
Subsidy income			2,257,344				1,250,509				203,163
Interest income			570,442				384,182				62,416
Interest expense			(1,557,204	)			(952,574	)			(154,759	)
Loss from investment			-				(1,535,250	)			(249,423	)
Change in fair value of warrants liability			-				60,647				9,853
Gain (loss) from foreign currency exchange			233,478				(188,495	)			(30,624	)
Other income (expense)			(32,901	)			939,699				152,668
Income before income tax			906,412				2,788,956				453,106
Provision for income tax			286,871				961,136				156,150
Net Income			619,541				1,827,820				296,956
Less: Net income attributable to non-controlling interest			579,843				1,020,632				165,816
Net Income attributable to Recon Technology, Ltd		¥	39,698			¥	807,188			$	131,140
Comprehensive income
Net income			619,541				1,827,820				296,956
Foreign currency translation adjustment			(3,004	)			17,783				2,889
Comprehensive income			616,537				1,845,603				299,845
Less: Comprehensive income attributable to non-controlling interest			579,543				1,022,410				166,105
Comprehensive income attributable to Recon Technology, Ltd		¥	36,994			¥	823,193			$	133,740
Earnings per common share - basic		¥	0.01			¥	0.19			$	0.03
Earnings per common share - diluted		¥	0.01			¥	0.18			$	0.03
Weighted - average shares -basic			3,951,811				4,303,955				4,303,955
Weighted - average shares -diluted			3,951,811				4,368,162				4,368,162

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

RECON TECHNOLOGY, LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
		For the years ended June 30,
		2013				2014				2014
		RMB				RMB				U.S. Dollars
Cash flows from operating activities:
Net income		¥	619,541			¥	1,827,820			$	296,956
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			618,552				595,647				96,771
Loss from disposal of  equipment			38,006				128,902				20,942
Provision/(recovery of) for doubtful accounts			(749,121	)			1,518,778				246,747
Share based compensation			1,852,656				2,429,028				394,630
Loss from investment			-				1,535,250				249,423
Deferred tax provision/(benefit)			100,080				(23,054	)			(3,745	)
Change in fair value of warrants liability			-				(60,647	)			(9,853	)
Restricted shares issued for services			-				407,593				66,219
Changes in operating assets and liabilities:
Notes receivable			(2,578,855	)			2,578,855				418,972
Trade accounts receivable			25,107,519				(5,291,233	)			(859,636	)
Trade accounts receivable-related parties			672,175				(3,819,299	)			(620,500	)
Inventories			11,010,230				(1,065,532	)			(173,111	)
Other receivable, net			(4,263,858	)			(981,099	)			(159,395	)
Other receivables related parties, net			(724,799	)			(671,905	)			(109,161	)
Purchase advance, net			(2,190,796	)			(6,879,156	)			(1,117,617	)
Purchase advance-related party, net			699,500				-				-
Tax recoverable			2,215,072				575,650				93,523
Prepaid expense			(1,952,620	)			(146,708	)			(23,835	)
Prepaid expense - related party, net			(366,000	)			136,000				22,095
Trade accounts payable			(4,521,395	)			4,029,340				654,624
Trade accounts payable-related parties			(1,344,513	)			(3,994,718	)			(648,999	)
Other payables			(377,135	)			(199,612	)			(32,430	)
Other payables-related parties			3,140,416				(933,651	)			(151,685	)
Deferred income			90,309				1,038,442				168,710
Advances from customers			(465,424	)			330,685				53,724
Accrued payroll and employees' welfare			1,043,204				(1,575,159	)			(255,907	)
Accrued expenses			12,314				(285,679	)			(46,413	)
Taxes payable			(2,927,192	)			835,418				135,726
Net cash provided by (used in) operating activities			24,757,866				(7,960,044	)			(1,293,225	)
Cash flows from investing activities:
Purchase of property and equipment			(753,583	)			(477,957	)			(77,651	)
Long-term investment			(1,549,450	)			-				-
Proceeds from disposal of equipment			162,000				141,716				23,024
Net cash used in investing activities			(2,141,033	)			(336,241	)			(54,627	)
Cash flows from financing activities:
Proceeds from short-term bank loans			10,000,000				23,500,000				3,817,910
Repayments of short-term bank loans			(23,000,000	)			(23,500,000	)			(3,817,910	)
Proceeds from short-term borrowings			579,073				-				-
Proceeds from borrowings-related parties			1,962,450				5,007,728				813,577
Repayment of  short-term borrowings			(2,775,764	)			(570,375	)			(92,666	)
Repayment of short-term borrowings-related parties			(582,477	)			(5,303,279	)			(861,594	)
Proceeds from sale of common stock, net of issuance costs			-				12,132,882				1,971,160
Proceeds from stock options exercised			-				2,704,909				439,451
Capital contribution in VIE			20,000				-				-
Net cash provided by (used in) financing activities			(13,796,718	)			13,971,865				2,269,928
Effect of exchange rate fluctuation on cash and cash equivalents			(3,006	)			68,614				11,150
Net increase (decrease) in cash and cash equivalents			8,817,109				5,744,194				933,226
Cash and cash equivalents at beginning of period			3,533,283				12,350,392				2,006,497
Cash and cash equivalents at end of period		¥	12,350,392			¥	18,094,586			$	2,939,723
							-				-
Supplemental cash flow information
Cash paid during the period for interest		¥	1,356,581			¥	939,416			$	152,622
Cash paid during the period for taxes		¥	832,028			¥	704,982			$	114,534
Non-cash investing and financing activities
Issurance of common stock to prepay professional services		¥	-			¥	1,002,721			$	165,142

 

The accompanying notes are an integral part of these consolidated financial statements