Recon Technology, Ltd Reports Financial Results for the First Six Months of Fiscal Year 2022

BEIJING,March 30,2022 -- Recon Technology,Ltd(Nasdaq: RCON) ("Recon" or the "Company"),today announced its financial results for the first six months of Fiscal Year 2022.

First Six Months of Fiscal 2022 Financial:

Total revenues for the six months ended December 31,2021 increased by 116.2% to $8.6 million (RMB54.4 million),while revenue from our oily sludge and waste water segments increased by 605.9% or $2.7 million (RMB16.9 million).

Gross profit for the six months ended December 31,2021 was $2.3 million (RMB14.5 million).Our gross profit as a percentage of revenue remained at the same level of 26.7% for the six months ended December 31,2021 compared with the same period in 2020.

Net income attributable to Recon for the six months ended December 31,2021 was $17.5 million (RMB111.4 million),RMB4.08 ($0.64) per basic and RMB3.87 ($0.61) per diluted share,compared to a net loss attributable to Recon of RMB8.9 million,or RMB1.22 per basic and diluted share,for the six months ended December 31,2020.

Management Commentary

Mr. Shenping Yin,co-founder and CEO of Recon stated,"We are very pleased to see the rapid recovery of our business. Our revenue for the period reached twice the level of the same period last year and even exceeded the total revenue for the entire fiscal year 2021. As the overall level of oil and gas prices continues to rise,we expect our upstream customers,mainly domestic oil and gas companies,to increase Capital Expenditures (also known as "CapEx") on oil and gas production,which brings more opportunities for the rapid development of the Company. More particularly,as the oil prices increase,we have observed China's oil companies' performances greatly improve and we expect the companies to increase their investments in drilling for new oil and gas wells and production activities as compared to prior years. As their vendor,we anticipate benefiting from these trends,especially with respect to our wastewater and sludge treatment business and specialized equipment for oil and gas fields clients with relatively high technology content. As oil and gas companies ramp up productions,we have also seen the number of orders and average order amount increased from late 2022 to date."

Mr. Yin continued,"With rising oil prices and increased investments by domestic oil companies,the market demand will continue to increase,and competition is expected to become more intensive. In anticipation of increased competition,we will strengthen investments in the research and development of new products and continue to integrate automation technology into other business segments to improve the digital content and enhance the overall competitive advantage of our products. In addition,the Company's financing,which was completed in June 2021,has greatly enhanced the Company's cash reserves and financial condition. We will use our enhanced cash reserves and financial condition to our advantage by expanding our business scope to further improve the Company's business structure,its long-term profitability,enhance our values,and safeguard the interests of our shareholders."

First Six Months Fiscal 2022 Financial Results:

Revenue

Total revenues for the six months ended December 31,2021 increased by RMB29.2 million ($4.6 million) or 116.2%,to RMB54.4 million ($8.6 million) compared to RMB25.2 million for the six months ended December 31,2020. The overall increase in revenue was mainly due to the increased revenue from automation product and software,oilfield environmental protection and platform outsourcing servicessegments,which was partially offset by the decreased revenue from equipment and accessoriessegment during the six months ended December 31,2021.

Revenue from automation product and software increased by RMB11.2 million ($1.8 million),or 89.1%,to RMB23.9 million ($3.8 million) for the six months ended December 31,2021 from RMB12.6 million for the six months ended December 31,2020.The increase was mainly caused by 1) the completion of previously delayed projects in the Ji Dong oilfield; 2) the recovery of Shenhua Group's requirement; and 3) the contributions from operation and maintenance services regarding metering instruments,which were new business resources developed by the Company from fiscal year 2021.

Revenue from equipment and accessories decreased by RMB3.6 million ($0.6 million),or 36.6%,to RMB6.2 million ($1.00 million) for the six months ended December 31,2021 from RMB9.8 million for the six months ended December 31,2020.Although oil prices rose from early 2021,our clients were prudent in budgeting expenditures,and they preferred continued maintenance of old equipment instead of replacing them with new ones. At the same time,there was usually several months' lag time from oil price increase to capital expenditure made. Thus,revenue from equipment and accessories decreased.

Revenue from oilfield environmental protection projects increased by RMB16.9 million ($2.7 million),or 605.9%,to RMB19.7 million ($3.1 million) for the six months ended December 31,2021.This was mainly contributed to continuously increased reequipment of our wastewater treatment and oily sludge treatment.

Revenue from platform outsourcing services increased by RMB4.6 million ($0.7 million) or 100.0%. The increase was mainly due to the acquisition of FGS. FGS was consolidated into our operations from January 2021.

Cost and Margin

Total cost of revenues increased from RMB18.5 million for the six months ended December 31,2020 to RMB39.9 million ($6.3 million) for the same period in 2021. This increase was mainly caused by the increased cost of revenue from automation product and software,oilfield environmental protection and platform outsourcing servicessegments.

Gross profit increasedby RMB7.8 million ($1.2 million),or 116.0%,to RMB14.5 million ($2.3 million) for the six months ended December 31,2021 from RMB6.7 million from the six months ended December 31,2020. Our gross profit as a percentage of revenue remained at the same level of 26.7% for the six months ended December 31,2021 from 26.7% for the same period in 2020.

Operating Expenses

Selling expenses increased by 71.9% or RMB2.0 million ($0.3 million),from RMB2.8 million in the six months ended December 31,2020 to RMB4.7 million ($0.7 million) in the same period of 2021. An increase of RMB1.6 million ($0.3 million) was primarily due to the step acquisition of FGS.

General and administrative expenses increasedby RMB34.3 million ($5.4 million),or 263.7%,to RMB47.3 million ($7.4 million) for the six months ended December 31,2021 from RMB13.0 million for the six months ended December 31,2020. The increase was primarily due to the increased share-based compensation and salary to our management and employees.

Net recovery of provision for credit losses was RMB5.7 million ($0.9 million) for the six months ended December 31,2021,compared to net recovery of provision for credit losses of RMB3.7 million for the six months ended December 31,2020.

Research and development expenses increased from approximately RMB3.8 million for the six months ended December 31,2020 to RMB5.5 million ($0.9 million) for the same period of 2021. This increase was primarily due to more research and development expense spent on design of new automation platform systems and treatment of wastewater during the period as compared to the same period last year.

Net Income/Loss

Loss from operations was RMB37.3 million ($5.9 million) for the six months ended December 31,compared to a loss from operations of RMB9.1 million for the six months ended December 31,2020. This RMB28.2 million ($4.4 million) increase in loss from operations was primarily due to the increasein operating expense partially offset by the increase in gross profit as discussed above.

Net income was RMB111.4million ($17.5million) for the six months ended December 31,an increase of RMB121.4 million ($19.1 million) from net loss of RMB10.0 million for the six months ended December 31,2020. Net loss attributable tothe Companyfor the six months ended December 31,2020 was RMB8.9 million,compared to a net income of RMB111.4 million ($17.5million). or RMB4.08 ($0.64) per basic and RMB3.87($0.61) per diluted share for the six months ended December 31,2021.

As of December 31,the Company had cash of RMB332.9 million ($52.3 million),compared to RMB344.0 million as of June 30,2021. As of December 31,the Company had working capital of RMB403.8 million ($63.5 million) while as of June 30,the Company had working capital of RMB412.0 million.

Net cash used in operating activities was RMB23.0 million ($3.6 million) for the six months ended December 31,compared to net cash used in operating activities of approximately RMB16.7 million for the six months ended December 31,2020. Net cashprovided byinvesting activities was RMB26.8 million ($4.2 million) for the six months ended December 31,compared to net cashprovided byinvesting activities RMB1.9 million for the six months ended December 31,2020. Net cash used in financing activities was RMB9.2 million ($1.5 million) for the six months ended December 31,compared to net cash provided by financing activities of RMB56.2 million for the six months ended December 31,2020.

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 RMB6.3614 to $1.00,the approximate exchange rate prevailing on December 31,2021.

About Recon Technology,Ltd ("RCON")

Recon Technology,Ltd (NASDAQ: RCON) is China's first NASDAQ-listed non-state-owned oil and gas field service company. Recon supplies China's largest oil exploration companies,Sinopec (NYSE: SNP) and The China National Petroleum Corporation ("CNPC"),with advanced automated technologies,efficient gathering and transportation equipment and reservoir stimulation measure for increasing petroleum extraction levels,reducing impurities and lowering production costs. Through the years,RCON has taken leading positions on several segmented markets of the oil and gas filed service industry. RCON also has developed stable long-term cooperation relationship with its major clients,and its products and service are also well accepted by clients. For additional information please visit: http://www.recon.cn/.

Forward-Looking Statements

Forward-Looking Statements in this press release,which are not historical facts,are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our actual results,performance or achievements may differ materially from those expressed or implied by these forward-looking statements. In some cases,you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," "continue," "likely," "will," "would" and variations of these terms and similar expressions,or the negative of these terms or similar expressions. Such forward-looking statements are necessarily based upon estimates and assumptions that,while considered reasonable by us and our management,are inherently uncertain. Factors that may cause actual results to differ materially from current expectations include,among others,whether we will establish successfully cooperation with major clients; changes in the competitive environment in our industry and the markets where we operate; our ability to access the capital markets; and other risks discussed in the Company's filings with the U.S. Securities and Exchange Commission ("SEC"),including our Annual Report on Form 20-F,which filings are available from the SEC. We caution you not to place undue reliance on any forward-looking statements,which are made as of the date of this press release. We undertake no obligation to update publicly any of these forward-looking statements to reflect actual results,new information or future events,changes in assumptions or changes in other factors affecting forward-looking statements,except to the extent required by applicable laws. If we update one or more forward-looking statements,no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

For more information,please contact:

Ms. Liu Jia

Chief Financial Officer

Recon Technology,Ltd

Phone: +86 (10) 8494-5799

Email: info@recon.cn

RECON TECHNOLOGY,LTD

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(UNAUDITED)

AsofJune30

Asof December 31

AsofDecember 31

2021

2021

2021

ASSETS

RMB

RMB

U.S.Dollars

Current assets

Cash

¥

343,998,570

¥

332,864,077

$

52,325,453

Notes receivable

6,305,633

14,808,067

2,327,793

Trade accounts receivable,net

26,686,888

41,748,478

6,562,763

Inventories,net

3,644,522

4,958,889

779,526

Other receivables,net

6,939,676

8,596,816

1,351,399

Loans to third parties

50,476,782

25,464,035

4,002,887

Purchase advances,net

1,078,137

537,305

84,463

Contract costs,net

48,795,906

31,364,473

4,930,422

Prepaid expenses

146,071

29,917

4,702

Prepaid expenses- related parties

433,000

—

—

Total current assets

488,505,185

460,372,057

72,369,408

Property and equipment,net

27,138,768

26,118,829

4,105,819

Land use right,253,408

1,239,789

194,892

Intangible assets,650,000

6,300,000

990,345

Investment in unconsolidated entity

27,931,795

—

—

Long-term other receivables,net

114,679

324,515

51,013

Goodwill

6,996,895

6,895

1,099,895

Operating lease right-of-use assets (including ¥352,775 and ¥119,029 ($18,423) from a related

party as of June 30,2021 and December 31,respectively)

7,925,930

6,084,606

956,486

Total Assets

¥

566,516,660

¥

507,436,691

$

79,767,858

LIABILITIES AND EQUITY

Current liabilities

Short-term bank loans

¥

15,000,000

¥

10,000

$

1,571,977

Trade accounts payable

21,956,481

22,058,660

3,467,570

Other payables

9,862,762

2,299,233

361,435

Other payable- related parties

2,400,667

3,569,788

561,162

Contract liabilities

7,276

1,195,862

187,987

Accrued payroll and employees' welfare

1,954,484

1,832,255

288,023

Taxes payable

1,248,994

2,337,895

367,512

Short-term borrowings

530,000

260,000

40,871

Short-term borrowings - related parties

12,676,042

9,149,292

1,438,247

Long-term borrowings - related party - current portion

920,066

958,916

150,739

Operating lease liabilities - current (including ¥352,respectively)

2,226,832

2,928,987

460,430

Total Current Liabilities

76,462,604

56,590,888

8,895,953

Operating lease liabilities - non-current

4,792,101

3,278,574

515,384

Long-term borrowings - related party

6,486,551

6,009,625

944,699

Deferred tax liability

624,088

728,402

114,503

Warrant liability

190,635,850

42,816

6,640,000

Total Liabilities

279,001,194

108,847,305

17,110,539

Commitments and Contingencies

Equity

Class A ordinary shares,$0.0925 U.S. dollar par value,150,000 shares authorized;

26,868,391 shares and 27,180,718 shares issued and outstanding as of June 30,2021 and

December 31,respectively

16,340,826

16,524,894

2,597,675

Class B ordinary shares,20,000 shares authorized; nil shares

and 2,500,000 shares issued and outstanding as of June 30,respectively

—

1,474,543

231,795

Additional paid-in capital

479,490,763

482,163,636

75,794,994

Statutory reserve

4,148,929

4,929

652,202

Accumulated deficit

(206,860,320)

(95,502,810)

(15,012,818)

Accumulated other comprehensive income (loss)

1,974,836

(2,662,155)

(418,485)

Total shareholders' equity

295,095,034

406,147,037

63,845,363

Non-controlling interests

(7,579,568)

(7,557,651)

(1,188,044)

Total equity

287,515,466

398,589,386

62,657,319

Total Liabilities and Equity

¥

566,858

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

RECON TECHNOLOGY,LTD

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE

INCOME (LOSS)

(UNAUDITED)

For the six months ended

December 31,

2020

2021

2021

RMB

RMB

USD

Revenues

Revenues - third party

¥

25,083,622

¥

54,411,724

$

8,553,395

Revenues - related party

85,657

-

-

Revenues

25,169,279

54,724

8,395

Cost of revenues

Cost of revenues - third party

18,452,239

39,904,645

6,272,917

Cost of revenues

18,239

39,645

6,917

Gross profit

6,717,040

14,507,079

2,280,478

Selling and distribution expenses

2,750,389

4,727,496

743,151

General and administrative expenses

13,013

47,314,621

7,437,748

Net recovery of credit losses

(3,697,024)

(5,671,285)

(891,513)

Research and development expenses

3,756,839

5,477,213

861,005

Operating expenses

15,819,217

51,848,045

8,391

Loss from operations

(9,102,177)

(37,966)

(5,869,913)

Other income (expenses)

Subsidy income

222,038

2,278

358

Interest income

20,168

2,649

407,244

Interest expense

(1,182)

(784,077)

(123,255)

Income (loss) from investment in unconsolidated entity

(251,296)

15,411

2,423

Fair value changes of warrants liability

-

147,168,952

23,134,614

Foreign exchange transaction loss

(78,784)

(151,986)

(23,892)

Other income (loss)

50,369

(13,630)

(2,143)

Other income (expense),net

(1,037,687)

148,827,597

23,395,349

Income (loss) before income tax

(10,139,864)

111,631

17,525,436

Income tax expenses (benefit)

(98,338)

107,204

16,852

Net income (loss)

(10,041,526)

111,379,427

17,508,584

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

(1,874)

21,917

3,445

Net income (loss) attributable to Recon Technology,Ltd

¥

(8,935,652)

¥

111,357,510

$

17,139

Comprehensive income (loss)

Net income (loss)

(10,526)

111,427

17,584

Foreign currency translation adjustment

(931,366)

(4,636,991)

(728,924)

Comprehensive income (loss)

(10,972,892)

106,742,436

16,779,660

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

(1,445

Comprehensive income (loss) attributable to Recon Technology,Ltd

¥

(9,867,018)

¥

106,720,519

$

16,776,215

Eearning (loss) per ordinary share

-Basic

¥

(1.22)

¥

4.08

$

0.64

-Diluted

¥

(1.22)

¥

3.87

$

0.61

Weighted average shares

-Basic

7,330,866

27,312,581

27,581

-Diluted

7,866

28,992

28,992

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

RECON TECHNOLOGY,LTD

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the six months ended December 31,

2020

2021

2021

RMB

RMB

U.S.Dollars

Cash flows from operating activities:

Net income (loss)

¥

(10,526)

¥

111,427

$

17,584

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization

1,590

1,682,450

264,477

Loss from disposal of equipment

1,095

35,279

5,546

Changes in warrants liabilities

—

(147,952)

(23,614)

Net recovery of credit losses

(3,513)

Provision for slow moving inventories

423,714

38,856

6,108

Amortization of right of use assets

542,896

1,556,830

244,730

Restricted shares issued for management and employees

3,403,513

27,375,871

4,303,423

Loss (income) from investment in unconsolidated entity

251,296

(15,411)

(2,423)

Deferred tax expense

—

104,315

16,398

Interest expenses related to convertible notes

84,607

—

—

Interest income from loans to third parties

—

(2,101,366)

(330,330)

Restricted shares issued for services

—

4,631,063

727,992

Changes in operating assets and liabilities:

Notes receivable

(3,609,112)

(8,433)

(1,336,563)

Trade accounts receivable

15,866,295

(12,696)

(1,943,701)

Trade accounts receivable-related party

3,409,912

—

—

Inventories

(765,595)

(1,367)

(206,615)

Other receivable

(4,262,681)

(1,495,225)

(235,046)

Other receivables-related parties

(23,800)

(23,800)

(3,741)

Purchase advance

96,330

543,832

85,489

Contract costs

(14,839)

20,068,844

3,154,775

Prepaid expense

(19,306)

116,153

18,259

Prepaid expense - related parties

217,600

433,000

68,067

Operating lease liabilities

(539,572)

(526,878)

(82,824)

Trade accounts payable

(3,761,301)

102,178

16,062

Other payables

(1,048,961)

(7,400)

(1,189,891)

Other payables-related parties

(2,842,651)

1,121

183,783

Contract liabilities

3,200,559

(6,414)

(1,020,278)

Accrued payroll and employees' welfare

(963,905)

(122,226)

(19,213)

Taxes payable

273,624

1,088,901

171,173

Net cash used in operating activities

(16,242)

(23,040,333)

(3,621,886)

Cash flows from investing activities:

Purchases of property and equipment

(375,569)

(337,171)

(53,002)

Repayments of third parties loans

3,377

113,146,100

17,786,302

Payments made for loans to third parties

(950,000)

(86,031,987)

(13,027)

Net cash provided by investing activities

1,874,808

26,942

4,209,273

Cash flows from financing activities:

Proceeds from short-term bank loans

3,520,000

—

—

Repayments of short-term bank loans

(1,000)

(5,000)

(785,988)

Proceeds from short-term borrowings

2,460,871

Repayments of short-term borrowings

(2,000)

(530,000)

(83,315)

Proceeds from short-term borrowings-related parties

10,100,000

5,000

785,988

Repayments of short-term borrowings-related parties

(8,320,000)

(8,522,500)

(1,339,717)

Repayments of long-term borrowings-related party

(399,422)

(436,457)

(68,610)

Proceeds from sale of ordinary shares,net of issuance costs

9,015

—

—

Proceeds from issuance of convertible notes

42,203

—

—

Capital contribution by non-controlling shareholders

50,000

—

—

Net cash provided by (used in) financing activities

56,224,796

(9,228,957)

(1,450,771)

Effect of exchange rate fluctuation on cash

(931,369)

(5,642,145)

(886,932)

Net increase (decrease) in cash

40,470,993

(11,493)

(1,316)

Cash at beginning of period

30,504

343,570

54,075,769

Cash at end of period

¥

70,807,497

¥

332,077

$

52,453

Supplemental cash flow information

Cash paid during the period for interest

¥

849,409

¥

732,842

$

115,201

Cash received during the period for taxes

¥

(98,338)

¥

2,889

$

454

Non-cash investing and financing activities

Cancellation of ordinary shares issued

¥

—

¥

27,675,450

$

4,350,516

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

¥

63,530

¥

—

$

—

Inventories used as fixed assets

¥

302,795

¥

—

$

—

Receivable for disposal of property and equipment

¥

—

¥

3,000

$

472

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

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