PR Newswire | Apr 5, 2021 08:30AM EDT

Fiscal Year 2021

04/05 07:30 CDT

Recon Technology, Ltd Reports Financial Results for the First Six Months of Fiscal Year 2021 BEIJING, April 5, 2021

BEIJING, April 5, 2021 /PRNewswire/ -- Recon Technology, Ltd (Nasdaq: RCON) ("Recon" or the "Company"), today announced its financial results for the first six months of Fiscal Year 2021.

First Six Months of Fiscal 2021 Financial:

* Total revenues for the six months ended December 31, 2020 decreased by 17.2% to $3.9 million (RMB25.2 million), while revenue from oily sludge and waste water increased by 10,618.7% or $0.4 million (RMB2.8 million). * Gross profit for the six months ended December 31, 2020 was $1.0 million (RMB6.7 million). Gross profit margin for the six months ended December 31, 2020 was 26.7%, representing a decrease of 12.7 percentage points compared to the six months ended December 31, 2019. * Net loss attributable to Recon for the six months ended December 31, 2020 was $1.4 million (RMB8.9 million), or $0.19 (RMB1.22) per basic and diluted share, compared to RMB6.7 million, or RMB1.51 per basic and diluted share, for the six months ended December 31, 2019.

Management Commentary

Mr. Shenping Yin, co-founder and CEO of Recon stated, "During the six months period ended December 31, 2020, our management focused on fund reserve and cash management to prepare for a rapid development in the coming year. We believe oil companies in China will continue to increase their capital expenditures in 2021. We expect more orders to be released in year 2021 which might be a busy year of the overall oil industry. We expect our business will benefit from this trend and our numbers will be improved from the second half year of calendar 2021."

Mr. Yin continued, "Besides, the oil industry is experiencing digital transformation. We believe oil companies will continue to increase their usages of intelligent solutions to improve the operation efficiency. We have been devoting resources and participating testing projects with our clients to develop leading solutions. We will continue to enhance our competitive strength through up-gradation with big data and intelligent analysis. We have also seen the trend of digitalization and intelligence in downstream of the oil and gas industry, especially in the management and operation of gas stations in China. We have acquired 51% of Future Gas Station (Beijing) Technology, Ltd. by January 2021 and will continue to invest more in this segment."

First Six Months Fiscal 2021 Financial Results:

Revenue

Total revenues for the six months ended December 31, 2020 decreased by RMB5.2 million ($0.8 million) or 17.2%, to RMB25.2 million ($3.9 million) compared to RMB30.4 million for the six months ended December 31, 2019 mainly due to the decreased revenue from automation products during the six months ended December 31, 2020.

Revenue from automation product and software decreased by RMB10.0 million ($1.5 million), or 44.1%, to RMB12.6 million ($1.9 million) for the six months ended December 31, 2020 from RMB22.6 million for the six months ended December 31, 2019, as the Company's sales activities were not able to return to normal level which was affected by Covid-19. To make a breakthrough, the Company's management has been upgrading its automation solutions and introducing big data and intelligent technology to the Company's products and enhancing its capacity of downhole solutions to enhance its competitive strength.

Revenue from equipment and accessories increased by RMB1.9 million ($0.3 million), or 24.9%, to RMB9.8 million ($1.5 million) for the six months ended December 31, 2020 from RMB7.8 million for the six months ended December 31, 2019 as requirement from maintenance of heating furnaces continued to increase.

Revenue from oilfield environmental protection projects increased by RMB2.8 million ($0.4 million), or 10,618.7%, to RMB2.8 million ($0.4 million) for the six months ended December 31, 2020 as the Company stared to process oily sludge during the six months ended December 31, 2020 and revenue was recorded. As of December 31, 2020, the Company received 4,680 tons of oily sludge from several oil companies and processed 796 tons of them, which was reflected in its revenue for the six months ended December 31, 2020.

Cost and Margin

Total cost of revenues increased slightly from RMB18.4 million for the six months ended December 31, 2019 to RMB18.5 million ($2.8 million) for the same period in 2020. The increase was mainly caused by increased cost of revenue from equipment and accessories and oilfield environmental protection segments.

Gross profit decreased by RMB5.3 million ($0.8 million), or 43.9%, to RMB6.7 million ($1.0 million) for the six months ended December 31, 2020 from RMB12.0 million from the six months ended December 31, 2019. The gross profit as a percentage of revenue decreased to 26.7% for the six months ended December 31, 2020 from 39.4% for the same period in 2019.

Operating Expenses

Selling and distribution expenses maintained at the same level of RMB2.7 million ($0.4 million) compared to the six months ended December 31, 2019.

General and administrative expenses decreased by RMB0.4 million ($0.1 million), or 2.7%, to RMB13.0 million ($2.0 million) for the six months ended December 31, 2020 from RMB13.4 million for the six months ended December 31, 2019. The decrease in general and administrative expenses was mainly due to the decrease in stock-based compensation expense as well as social security expenses during the six months ended December 31, 2020.

Provision for doubtful accounts was RMB25,537($3,665) for the six months ended December 31, 2019, compared to reversal of provision for doubtful accounts of RMB3.7 million for the six months ended December 31, 2020, mainly due to the collection of long outstanding receivables during the six months ended December 31, 2020.

Research and development expenses increased from approximately RMB2.9 million for the six months ended December 31, 2019 to RMB3.8 million ($0.6 million) for the same period of 2020. This increase was primarily due to more research and development expense spent on design of new automation platform systems and treatment of wastewater.

Net Loss

Loss from operations was RMB9.1 million ($1.4 million) for the six months ended December 31, 2020, compared to a loss of RMB7.0 million for the six months ended December 31, 2019. This RMB2.1 million ($0.3 million) increase in loss from operations was primary due to decreased revenue and increase in R&D expenses.

Net loss was RMB10.0 million ($1.5 million) for the six months ended December 31, 2020, an increase of RMB3.3 million ($0.5 million) from net loss of RMB7.0 million for the six months ended December 31, 2019. Net loss attributable to the Company for the six months ended December 31, 2019 was RMB6.7 million, or RMB1.51 per basic and diluted share, compared to RMB8.9 million ($1.4 million), or RMB1.22($0.19) per basic and diluted share for the six months ended December 31, 2020.

As of December 31, 2020, the Company had cash of RMB70.8 million ($10.8 million), compared to RMB30.3 million as of June 30, 2020. As of December 31, 2020, the Company had working capital of RMB67.0 million ($10.3 million) while as of June 30, 2020, the Company had working capital of RMB64.1 million.

Net cash used in operating activities was RMB16.7 million ($2.6 million) for the six months ended December 31, 2020, compared to net cash provided by operating activities of approximately RMB0.3 million for the six months ended December 31, 2019. Net cash provided by investing activities was RMB1.9 million ($0.3 million) for the six months ended December 31, 2020, compared to net cash provided by investing activities RMB3.7 million for the six months ended December 31, 2019. Net cash provided by financing activities was RMB56.2 million ($8.6 million) for the six months ended December 31, 2020, compared to net cash provided by financing activities of RMB1.9 million for the six months ended December 31, 2019.

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 RMB6.5326 to $1.00, the approximate exchange rate prevailing on December 31, 2020.

About Recon Technology, Ltd

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: 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.

For more information, please contact:

Ms. Liu JiaChief Financial OfficerRecon Technology, LtdPhone: +86 (10) 8494-5188Email: info@recon.cn

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS

(UNAUDITED)

As of June 30 As of As of December 31 December 31

2020 2020 2020

RMB RMB U.S. Dollars

ASSETS

Current assets

Cash ? 30,336,504 ? 70,807,497 $ 10,839,024

Notes receivable 4,180,885 7,789,997 1,192,472

Trade accounts receivable, 48,244,015 35,471,068 5,429,817net

Trade accounts receivable- 3,068,920 - -related party, net

Inventories, net 1,985,723 2,117,754 324,180

Other receivables, net 6,350,802 11,004,821 1,684,589

Loans to third parties 3,200,377 950,000 145,423

Purchase advances, net 178,767 82,437 12,619

Contract assets, net 31,537,586 45,621,966 6,983,690

Prepaid expenses 198,294 - -

Total current assets 129,281,873 173,845,540 26,611,814

Property and equipment, 29,756,879 29,078,178 4,451,210net

Land use right, net 1,280,648 1,267,028 193,953

Investment in 31,541,850 31,290,554 4,789,875unconsolidated entity

Long-term other 3,640 - -receivables, net

Operating leaseright-of-use assets(including ?803,503 and ?508,888 ($88,921) from a 2,549,914 2,070,548 316,954related party as ofJune 30, 2020 andDecember 31, 2020,respectively)

Total Assets ? 194,414,804 ? 237,551,848 $ 36,363,806

LIABILITIES ANDSTOCKHOLDERS' EQUITY

Current liabilities

Short-term bank loans ? 9,520,000 ? 12,020,000 $ 1,839,990

Convertible notes payable - 42,448,810 6,497,951

Trade accounts payable 23,034,347 19,273,046 2,950,267

Other payables 2,609,486 1,563,002 239,260

Other payable- related 4,498,318 1,655,668 253,445parties

Contract liabilities 3,486,033 6,686,592 1,023,566

Accrued payroll and 1,917,635 954,304 146,081employees' welfare

Investment payable 6,400,000 6,400,000 979,695

Taxes payable 1,108,288 1,381,912 211,539

Short-term borrowings 200,000 215,699 33,019

Short-term borrowings - 10,230,746 12,009,174 1,838,333related parties

Long-term borrowings -related party - current 847,346 882,900 135,152portion

Operating leaseliabilities - current(including ?450,728 and ?461,859 ($70,700) from a 1,328,976 1,333,113 204,069related party as ofJune 30, 2020 andDecember 31, 2020,respectively)

Total Current Liabilities 65,181,175 106,824,220 16,352,367

Operating leaseliabilities - non-current(including ?352,775 and ?119,029 ($18,221) from a 1,210,088 729,909 111,733related party as ofJune 30, 2020 andDecember 31, 2020,respectively)

Long-term borrowings - 7,379,253 6,942,795 1,062,785related party

Total Liabilities 73,770,516 114,496,924 17,526,885

Commitments andContingencies

Equity

Common stock, ($ 0.0925U.S. dollar par value,20,000,000 sharesauthorized; 7,202,832shares and 8,416,721 4,577,233 5,312,021 813,150shares issued andoutstanding as of June 30,2020 and December 31,2020, respectively)*

Additional paid-in capital 282,505,455 295,104,195 45,173,769

Statutory reserve 4,148,929 4,148,929 635,107

Accumulated deficit (184,027,586) (192,963,238) (29,538,302)

Accumulated other 2,825,731 1,894,365 289,984comprehensive gain

Total stockholders' equity 110,029,762 113,496,272 17,373,708

Non-controlling interests 10,614,526 9,558,652 1,463,213

Total equity 120,644,288 123,054,924 18,836,921

Total Liabilities and ? 194,414,804 ? 237,551,848 $ 36,363,806Equity

* Retrospectively restated for effect of stock split on December 27, 2019.

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

For the six months ended

December 31,

2019 2020 2020

RMB RMB USD

Revenues

Revenues - third party ? 30,405,153 ? 25,083,622 $ 3,839,734

Revenues - related party - 85,657 13,112

Revenues 30,405,153 25,169,279 3,852,847

Cost of revenues

Cost of revenues - third party 18,437,241 18,452,239 2,824,620

Cost of revenues 18,437,241 18,452,239 2,824,620

Gross profit 11,967,912 6,717,040 1,028,227

Selling and distribution 2,660,873 2,750,389 421,022expenses

General and administrative 13,366,413 13,009,013 1,991,385expenses

Provision for (net recovery 25,537 (3,697,024) (565,931)of) doubtful accounts

Research and development 2,895,286 3,756,839 575,087expenses

Operating expenses 18,948,109 15,819,217 2,421,563

Loss from operations (6,980,197) (9,102,177) (1,393,336)

Other income (expenses)

Subsidy income 854,389 222,038 33,989

Interest income 85,745 20,168 3,087

Interest expense (761,322) (1,000,182) (153,105)

Income (loss) from investment 141,288 (251,296) (38,468)in unconsolidated entity

Foreign exchange transaction 209 (78,784) (12,060)gain (loss)

Other income (loss) (60,760) 50,369 7,711

Other income (expense), net 259,549 (1,037,687) (158,846)

Loss before income tax (6,720,648) (10,139,864) (1,552,182)

Income tax expenses (benefit) 316,799 (98,338) (15,053)

Net loss (7,037,447) (10,041,526) (1,537,129)

Less: Net loss attributable to (336,250) (1,105,874) (169,284)non-controlling interests

Net loss attributable to Recon ? (6,701,197) ? (8,935,652) $ (1,367,845)Technology, Ltd

Comprehensive loss

Net loss (7,037,447) (10,041,526) (1,537,129)

Foreign currency translation 9,610 (931,366) (142,571)adjustment

Comprehensive loss (7,027,837) (10,972,892) (1,679,700)

Less: Comprehensive lossattributable to (336,250) (1,105,874) (169,284)non-controlling interests

Comprehensive lossattributable to Recon ? (6,691,587) ? (9,867,018) $ (1,510,416)Technology, Ltd

Loss per common share - basic ? (1.51) ? (1.22) $ (0.19)and diluted

Weighted - average shares 4,449,980 7,330,866 7,330,866-basic and diluted*

* Retrospectively restated for effect of stock split on December 27, 2019.

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the six months ended December 31,

2019 2020 2020

RMB RMB U.S. Dollars

Cash flows from operatingactivities:

Net loss ? (7,037,447) ? (10,041,526) $ (1,537,129)

Adjustments to reconcile netloss to net cash used inoperating activities:

Depreciation and amortization 411,592 1,369,590 209,653

Loss from disposal of 3,189 1,095 168equipment

Provision for (net recovery 25,537 (3,697,024) (565,931)of) doubtful accounts

Provision for slow moving 25,312 423,714 64,861inventories

Amortization of right of use 718,000 542,896 83,105assets

Restricted shares issued for 4,057,093 3,403,513 521,001management and employees

Loss (income) from investment (141,288) 251,296 38,468in unconsolidated entity

Interest expenses related to - 84,607 12,951convertible notes

Restricted shares issued for 33,927 - -services

Changes in operating assetsand liabilities:

Notes receivable (986,826) (3,609,112) (552,473)

Trade accounts receivable 5,412,201 15,866,295 2,428,770

Trade accounts - 3,409,912 521,980receivable-related party

Inventories (551,200) (765,595) (117,195)

Other receivable 1,364,500 (4,262,681) (652,520)

Other receivables-related - (23,800) (3,643)parties

Purchase advance 1,108,902 96,330 14,746

Contract assets (9,951,981) (14,262,839) (2,183,318)

Prepaid expense 116,917 (19,306) (2,955)

Prepaid expense - related 217,600 217,600 33,310parties

Operating lease liabilities (610,000) (539,572) (82,596)

Trade accounts payable 362,758 (3,761,301) (575,770)

Other payables (160,316) (850,478) (130,189)

Other payables-related 1,790,155 (2,842,651) (435,145)parties

Advance from customers 1,904,753 3,200,559 489,933

Accrued payroll and 1,501,406 (963,905) (147,552)employees' welfare

Accrued expenses - (198,483) (30,383)

Taxes payable 650,855 273,624 41,886

Net cash provided by (used 265,639 (16,697,242) (2,555,967)in) operating activities

Cash flows from investingactivities:

Purchases of property and (12,967) (375,569) (57,491)equipment

Proceeds from disposal of 900 - -equipment

Repayments from loans to 4,960,000 3,200,377 489,905third parties

Payments made for loans to - (950,000) (145,423)third parties

Payments and prepayments for (1,297,663) - -construction in progress

Net cash provided by 3,650,270 1,874,808 286,991investing activities

Cash flows from financingactivities:

Proceeds from short-term bank - 3,520,000 538,832loans

Repayments of short-term bank - (1,020,000) (156,139)loans

Proceeds from short-term - 2,460,000 376,570borrowings

Repayments of short-term (1,081,096) (2,460,000) (376,570)borrowings

Proceeds from short-term 13,115,000 10,100,000 1,546,081borrowings-related parties

Repayments of short-term (10,195,000) (8,320,000) (1,273,604)borrowings-related parties

Repayments of long-term (365,530) (399,422) (61,142)borrowings-related party

Proceeds from sale of common - 9,930,015 1,520,060stock, net of issuance costs

Proceeds from issuance of - 42,364,203 6,485,000convertible notes

Capital contribution by 405,000 50,000 7,654non-controlling shareholders

Net cash provided by 1,878,374 56,224,796 8,606,742financing activities

Effect of exchange rate 9,611 (931,369) (142,574)fluctuation on cash

Net increase in cash 5,803,894 40,470,993 6,195,192

Cash at beginning of period 4,521,325 30,336,504 4,643,832

Cash at end of period ? 10,325,219 ? 70,807,497 $ 10,839,024

Supplemental cash flowinformation

Cash paid during the period ? 718,201 ? 849,409 $ 130,025for interest

Cash received during the ? (2,002) ? (98,338) $ (15,053)period for taxes

Non-cash investing andfinancing activities

Right-of-use assets obtainedin exchange for operating ? 1,228,963 ? 63,530 $ 9,725lease obligations

Inventories used as fixed ? - ? 302,795 $ 46,351assets

Payable for construction in ? 236,302 ? - $ -progress

Receivable for disposal of ? 5,000 ? - $ -property and equipment

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SOURCE Recon Technology, Ltd.