Recon Technology, Ltd. Reports Financial Results for the First Six Months of Fiscal Year 2020

NEW YORK,March 18,2020 -- Recon Technology,Ltd. (Nasdaq: RCON) ("Recon" or the "Company"),today announced its financial results for the first six months of fiscal year 2020.

First Six Months of Fiscal 2019 Financial:

Total revenues for the six months ended December 31,2019 decreased by 28.1% to $4.4 million (RMB30.4 million).

Total cost of revenues for the six months ended December 31,2019 decreased by 31.8% to $2.6 million (RMB18.4 million).

Gross profit for the six months ended December 31,2019 was $1.7 million (RMB12.0 million). Gross profit margin for the six months ended December 31,2019 was 39.4%,an increase of 3.4 percentage points compared to the six months ended December 31,2018.

Net loss attributable to Recon for the six months ended December 31,2019 was $1.0 million (RMB6.7 million),or $0.22 (RMB1.51) per basic and diluted share,compared to RMB10.1 million,or RMB2.72 per basic and diluted share,for the six months ended December 31,2018.

Management Commentary

Mr. Shenping Yin,co-founder and CEO of Recon stated,"Ever since the year 2019,our management has been focusing on cash management and operating risk control,expanding our business structure from traditional oilfield service to some other energy sectors with higher margin and opportunities. As a result,2019,the cash position and overall operation results were improved,and the total loss was narrowed. Besides,as our oily sludge treatment production was temporarily postponed by late acceptance inspection,the revenue from oilfield environmental protection was not recognized. We expect the production will be enabled and revenue to be earned later this year."

Mr. Yin continued,"Due to the coronavirus disease 2019 outbreak,our business has slowed down in the short term. We believe the outbreak will affect our operation result from the beginning of calendar year 2020 to date and in the whole fiscal year 2020. However,we don't expect a significant impact on the Company's operation and financial results in the long run."

First Six Months Fiscal 2020 Financial Results:

Revenue

Total revenues for the six months ended December 31,2019 decreased by RMB11.9 million ($1.7 million) or 28.1%,to RMB30.4 million ($4.4 million) compared to RMB42.3 million for the six months ended December 31,2018 mainly due to the decreased revenue from all three segments during the six months ended December 31,2019.

Revenue from automation product and software decreased by RMB6.4 million ($0.9 million),or 22.0%,to RMB22.6 million ($3.2 million) for the six months ended December 31,2019 from RMB29.0 million for the six months ended December 31,2018,as the Company selected to take those orders with higher margin to optimize the use of cash rather than accepting all orders.

Revenue from equipment and accessories decreased by RMB2.5 million ($0.4 million),or 24.3%,to RMB7.8 million ($1.1 million) for the six months ended December 31,2019 from RMB10.3 million for the six months ended December 31,2018 as a result of less furnaces sold to commercial and general industry markets.

Revenue from oilfield environmental protection projects decreased by RMB3.0 million ($0.4 million),or 99.1%,to RMB26,085 ($3,744) for the six months ended December 31,2019 from RMB3.0 million for the six months ended December 31,2018. As of December 31,the Company won contracts of over 1,708 tons of oily sludge treatment and collected the basic materials. As of December 31,the Company billed the customers RMB2.6 million ($0.4 million) in total and RMB0.7 million ($0.1 million) was received and recorded as advance from customer. The Company received RMB1.9 million ($0.3 million) in January 2020. Affected by late acceptance inspection of Gansu production project,the Company is still in the process of treating oil sludge collected,hence,revenue was not recognized during the six months ended December 31,2019. The Company expects this revenue could be recognized and reflected in the financial data by end of fiscal year 2020.

Cost and Margin

Total cost of revenues decreased by RMB8.6 million ($1.2 million),or 31.8%,to RMB18.4 million ($2.6 million) for the six months ended December 31,2019. The decrease was mainly caused by decrease in cost of revenue from all three segments during the six months ended December 31,which is in line with the decrease in revenue.

Gross profit decreased by RMB3.3 million ($0.5 million),or 21.5%,to RMB12.0 million ($1.7 million) for the six months ended December 31,2019 from RMB15.2 million from the six months ended December 31,2018. The gross profit as a percentage of revenue increased to 39.4% for the six months ended December 31,2019 from 36.0% for the same period in 2018. While the gross profit margin of automation production and software remained relatively stable with a slight increase of 2.1%,gross profit margin of equipment and accessories increased by 11.4% due to higher margin equipment sales during the six months ended December 31,2019 as the Company focused on higher margin business. However,since the Company didn't launch the large-scale treatment of oily sludge treatment,zero revenue was recognized and costs of pilot testing was recorded,resulting to a negative margin of oilfield environmental protection business. The Company believes this situation would change as the Company began the official treatment process in calendar year 2020.

Operating Expenses

Selling and distribution expenses decreased by RMB2.2 million ($0.3 million),or 45.8%,to RMB2.7 million ($0.4 million) for the six months ended December 31,2019 from RMB4.9 million for the six months ended December 31,2018. This decrease was primarily due to the decrease in traveling expenses as well as entertainment expenses as the Company tried to control the operating expenditures during the six months ended December 31,2019.

General and administrative expenses decreased by RMB5.5 million ($0.8 million),or 29.3%,to RMB13.4 million ($1.9 million) for the six months ended December 31,2019 from RMB18.9 million for the six months ended December 31,2018. The decrease in general and administrative expenses was mainly due to the decrease in stock-based compensation expense during the six months ended December 31,2019.

Provision for doubtful accounts was RMB25,537 ($3,665) for the six months ended December 31,compared to reversal of provision for doubtful accounts of RMB1.5 million for the six months ended December 31,2018. The increase in provision for doubtful accounts was mainly resulted by additional provision made for long outstanding account receivables. Management will continue to monitor account receivables to maintain the provision at a lower risk level.

Research and development expenses increased from approximately RMB1.7 million for the six months ended December 31,2018 to RMB2.9 million ($0.4 million) for the same period of 2019. This increase was primarily due to more research and development expense spent on design of new automation platform systems.

Net Loss

Loss from operations was RMB7.0 million ($1.0 million) for the six months ended December 31,compared to a loss of RMB8.7 million for the six months ended December 31,2018. This RMB1.8 million ($0.3 million) decrease in loss from operations was primary due to a decrease in general and administrative expenses and selling and distribution expenses,partially offset by decrease in gross profit as discussed above.

Net loss was RMB7.0 million ($1.0 million) for the six months ended December 31,a decrease of RMB2.9 million ($0.4 million) from net loss of RMB9.9 million for the six months ended December 31,2018. Net loss attributable to Recon for the six months ended December 31,2018 was RMB10.1 million,compared to RMB6.7 million ($1.0 million),or RMB1.51 ($0.22) per basic and diluted share for the six months ended December 31,2019.

EBITDA

Adjusted EBITDA loss was RMB1.5 million ($0.2 million) for the six months ended December 31,compared to an adjusted EBITDA income of RMB0.9 million for the same period last year. Please see the section titled "Non-GAAP Financial Measures" below for a discussion of this metric,which the Company believes may be informative for investors but is not a GAAP financial measure.

Financial Condition

As of December 31,the Company had cash of RMB10.3 million ($1.5 million),compared to RMB4.5 million as of June 30,2019. As of December 31,the Company had working capital of RMB51.4 million ($7.4 million) while as of June 30,the Company had working capital of RMB55.7 million.

Net cash provided by operating activities was RMB0.3 million ($0.04 million) for the six months ended December 31,compared to net cash used in operating activities of approximately RMB27.0 million for the six months ended December 31,2018. Net cash provided by investing activities was RMB3.7 million ($0.5 million) for the six months ended December 31,compared to net cash used in investing activities RMB8.5 million for the six months ended December 31,2018. Net cash provided by financing activities was RMB1.9 million ($0.3 million) for the six months ended December 31,compared to net cash provided by financing activities of RMB1.0 million for the six months ended December 31,2018.

Exchange Rate

The translation of RMB amounts into U.S. dollars are included solely for the convenience of readers and have been made at the rate of RMB6.9680 to $1.00,the approximate exchange rate prevailing on December 31,2019.

About Recon Technology,Ltd.

Recon Technology,Ltd.(RCON)isChina'sfirstnon-state-owned oil and gas field service company listed on NASDAQ. Recon suppliesChina'slargest oil exploration companieswith advanced automated technologies,efficient gathering and transportation equipment and reservoir stimulation measures for increasing petroleum extraction levels,reducing impurities and lowering production costs. Since 2017,the Company has expanded its business operations into other segments of the broader energy industry including electric power,coal chemicals,renewable energy and environmental protection in the energy and chemical industries.Through the years,Recon has taken leading positions on several market segments of the oil and gas field service industry. Recon also has developed stable long-term cooperation relationshipswith its major clients,and its products and service are well accepted by clients. For additional information please visit:www.recon.cn.

Safe Harbor Statement

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,the effect of novel coronavirus and other health matters on target markets,and other risks contained in reports filed 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.

IRcontact:

Dragon Gate Investment Partners LLC

Tel: +1(646)-801-2803

Email: RCON@dgipl.com

RECON TECHNOLOGY,LTD

CONDENSED BALANCE SHEETS

(UNAUDITED)

As of June30

As of December31

As of December31

2019

2019

2019

RMB

RMB

U.S. Dollars

ASSETS

Current assets

Cash

¥

4,521,325

¥

10,325,219

$

1,481,806

Notes receivable

3,073,680

4,060,506

582,736

Trade accounts receivable,net

68,535,282

63,063,443

9,050,441

Trade accounts receivable- related party,net

3,409,912

3,912

489,368

Inventories,net

1,270,523

1,796,411

257,809

Other receivables,net

5,665,593

4,784,811

686,684

Loans to third parties

4,960,000

-

-

Purchase advances,343,576

187,174

26,862

Contract assets,net

4,633,940

14,604,897

2,095,996

Prepaid expenses

192,837

75,920

10,896

Prepaid expenses - related parties

217,600

-

-

Total current assets

97,824,268

102,308,293

14,682,598

Property and equipment,661,321

3,267,226

468,890

Construction in progress

21,524,994

23,143,654

3,321,421

Land use right,307,887

1,294,267

185,744

Investment in unconsolidated entity

31,078,971

31,220,259

4,480,521

Long-term other receivables,net

440,015

23,922

3,433

Prepayments for construction in progress

1,144,098

1,059,404

152,039

Right of use assets

-

532,491

76,420

Total Assets

¥

156,981,554

¥

162,849,516

$

23,371,066

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Short-term bank loan

¥

2,500,000

¥

2,000

$

358,783

Trade accounts payable

14,089,293

14,688,353

2,107,972

Other payables

2,246,410

2,086,665

299,464

Other payable- related parties

2,290,873

4,081,028

585,682

Advance from customers

120,000

2,024,753

290,579

Accrued payroll and employees' welfare

1,384,529

2,885,935

414,170

Investment payable

6,400,000

6,000

918,485

Taxes payable

2,180,847

2,831,702

406,387

Short-term borrowings

1,096

-

-

Short-term borrowings - related parties

9,010,525

11,931,310

1,712,301

Long-term borrowings - related party - current portion

780,797

813,334

116,724

Operating lease liabilities - current

-

640,491

91,919

Total Current Liabilities

42,084,370

50,883,571

7,302,466

Long-term borrowings - related party

8,196,204

7,782

1,118,942

Total Liabilities

50,280,574

58,680,353

8,421,408

Commitments and Contingencies

Equity

Common stock,($ 0.0925 U.S. dollar par value,

20,000,000 shares authorized; 4,611,720 shares and

4,361,634 shares issued and outstanding as of

December31,2019 and June30,respectively)*

2,773

2,876,228

412,777

Additional paid-in capital

250,624,798

254,552,363

36,531,641

Statutory reserve

4,148,929

4,509,040

647,107

Accumulated deficit

(164,780,885)

(171,842,193)

(24,634)

Accumulated other comprehensive gain

2,909,936

2,919,546

418,994

Total stockholders' equity

95,615,551

93,014,984

13,348,885

Non-controlling interests

11,085,429

11,154,179

1,600,773

Total equity

106,700,980

104,169,163

14,949,658

Total Liabilities and Equity

¥

156,066

* Retrospectively restated for effect of stock split on December27,2019

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

RECON TECHNOLOGY,LTD

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

For the six months ended

December31,

2018

2019

2019

RMB

RMB

USD

Revenues

Revenues - third party

¥

41,954,746

¥

30,405,153

$

4,363,543

Revenues - related party

316,983

-

-

Revenues

42,271,729

30,153

4,543

Cost of revenues

Cost of revenues and related tax - third party

26,914,495

18,437,241

2,645,989

Cost of revenues and related tax - related party

120,142

-

-

Cost of revenues and related tax

27,034,637

18,241

2,989

Gross profit

15,237,092

11,967,912

1,717,554

Selling and distribution expenses

4,361

2,660,873

381,871

General and administrative expenses

18,903,138

13,366,413

1,918,258

Provision for (net recovery of) doubtful accounts

(1,494,707)

25,537

3,665

Research and development expenses

1,654,702

2,895,286

415,512

Operating expenses

23,972,494

18,948,109

2,719,306

Loss from operations

(8,735,402)

(6,980,197)

(1,001,752)

Other income (expenses)

Subsidy income

55,706

854,389

122,616

Interest income

32,109

85,745

12,306

Interest expense

(856,571)

(761,322)

(109,260)

Income (loss) from investment in unconsolidated entity

(844,369)

141,288

20,277

Foreign exchange transaction gain

17,651

209

30

Other income (expense)

387,439

(60,760)

(8,720)

Other income (expense),net

(1,208,035)

259,549

37,249

Loss before income tax

(9,943,437)

(6,720,648)

(964,503)

Income tax expenses

2,002

316,799

45,465

Net loss

(9,945,439)

(7,037,447)

(1,009,968)

Less: Net income (loss) attributable to non-controlling interests

138,804

(336,250)

(48,256)

Net loss attributable to Recon Technology,Ltd

¥

(10,243)

¥

(6,701,197)

$

(961,712)

Comprehensive loss

Net loss

(9,439)

(7,447)

(1,968)

Foreign currency translation adjustment

1,195,328

9,610

1,379

Comprehensive loss

(8,750,111)

(7,027,837)

(1,008,589)

Less: Comprehensive income (loss) attributable to non-

controlling interests

138,256)

Comprehensive loss attributable to Recon Technology,Ltd

¥

(8,888,915)

¥

(6,691,587)

$

(960,333)

Loss per common share - basic and diluted

¥

(2.72)

¥

(1.51)

$

(0.22)

Weighted - average shares -basic and diluted*

3,711,083

4,449,980

4,980

* Retrospectively restated for effect of stock split on December27,LTD

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the six months ended December 31,

2018

2019

2019

RMB

RMB

U.S. Dollars

Cash flows from operating activities:

Net loss

¥

(9,439)

¥

(7,447)

$

(1,968)

Adjustments to reconcile net loss to net cash (used in)

provided by operating activities:

Depreciation and amortization

515,457

411,592

59,069

Loss from disposal of equipment

-

3,189

458

Provision for (net recovery of) doubtful accounts

(1,665

Provision for slow moving inventories

65,380

25,312

3,633

Amortization of right of use assets

-

718,000

103,043

Restricted shares issued for management and employees

9,539,917

4,057,093

582,247

Loss (income) from investment in unconsolidated entity

844,369

(141,288)

(20,277)

Restricted shares issued for services

516,194

33,927

4,869

Changes in operating assets and liabilities:

Notes receivable

217,436

(986,826)

(141,623)

Trade accounts receivable

(11,251,794)

5,412,201

776,723

Inventories

(150,754)

(551,200)

(79,105)

Other receivable

(6,468,866)

1,364,500

195,824

Purchase advance

(3,105,872)

1,108,902

159,142

Contract assets

(11,115,958)

(9,951,981)

(1,428,241)

Prepaid expense

(124,589)

116,917

16,779

Prepaid expense - related parties

-

217,600

31,228

Operating lease liabilities

-

(610,000)

(87,543)

Trade accounts payable

740,274

362,758

52,061

Other payables

(1,218,860)

(160,316)

(23,007)

Other payables-related parties

3,122

1,790,155

256,911

Advance from customers

4,462,975

1,904,753

273,357

Accrued payroll and employees' welfare

285,135

1,501,406

215,472

Taxes payable

645,328

650,855

93,406

Net cash (used in) provided by operating activities

(27,041,252)

265,639

38,123

Cash flows from investing activities:

Investment in unconsolidated entity

(3,815,080)

-

-

Purchases of property and equipment

(283,129)

(12,967)

(1,861)

Proceeds from disposal of equipment

-

900

129

Repayments from loans to third parties

-

4,000

711,826

Payments and prepayments for construction in progress

(4,411,620)

(1,297,663)

(186,232)

Net cash (used in) provided by investing activities

(8,829)

3,650,270

523,862

Cash flows from financing activities:

Proceeds from short-term borrowings

1,031,507

-

-

Repayments of short-term borrowings

-

(1,096)

(155,152)

Proceeds from short-term borrowings-related parties

5,000

13,000

1,882,176

Repayments of short-term borrowings-related parties

(5,000)

(10,000)

(1,463,118)

Repayments of long-term borrowings-related party

(334,513)

(365,530)

(52,458)

Refund of capital contribution by a non-controlling shareholder

(200,000)

-

-

Capital contribution by non-controlling shareholders

500,000

405,000

58,123

Net cash provided by financing activities

996,994

1,878,374

269,571

Effect of exchange rate fluctuation on cash

1,329

9,611

1,380

Net (decrease) increase in cash

(33,358,758)

5,803,894

832,936

Cash at beginning of period

45,340,578

4,325

648,870

Cash at end of period

¥

11,820

¥

10,219

$

1,806

Supplemental cash flow information

Cash paid during the period for interest

¥

805,613

¥

718,201

$

103,071

Cash paid (received) during the period for taxes

¥

2,002

¥

(2,002)

$

(287)

Non-cash investing and financing activities

Issuance of common stock in exchange of shares of FGS,net of

issuance costs

¥

21,433,796

¥

-

$

-

Investment payable in exchange of interest of FGS

¥

6,000

¥

-

$

-

Right-of-use assets obtained in exchange for operating lease

obligations

¥

-

¥

1,228,963

$

176,372

Payable for construction in progress

¥

5,957,463

¥

236,302

$

33,912

Receivable for disposal of property and equipment

¥

-

¥

5,000

$

718

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

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