EX-99.1 2 v390232_ex99-1.htm EXHIBIT 99.1

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