BEIJING, Feb. 15, 2011 /PRNewswire-Asia-FirstCall/ -- Recon Technology, Ltd. (Nasdaq: RCON) ("Recon" or the "Company"), a leading Chinese non-state-owned oilfield services provider to oil and gas companies and their affiliates, today announced its financial results for the second fiscal quarter ended December 31, 2010. Summary financial data is provided below:

Second Quarter Fiscal 2011 Financial Highlights

    --  Revenues for the second quarter of fiscal year 2011 decreased by 6.2%
        year-over-year to $7.1 million, down from $7.6 million in the second
        quarter of fiscal 2010
    --  Net income attributable to Recon for the second quarter decreased 51.1%
        year-over-year to $0.93 million compared with $1.9 million for the
        second quarter of fiscal 2010
    --  Gross margin for the second quarter was 42.2% based on gross profit of
        $3.0 million, compared with a 49.3% margin based on gross profit of $3.7
        million in the same period last year
    --  Operating income and operating margin for the second quarter were $1.4
        million and 19.2%, respectively, compared to $2.6 million and 34.5%,
        respectively, in the second quarter of fiscal 2010
    --  Earnings per diluted share were $0.23 for the quarter, down 50.0% from
        diluted EPS of $0.47 achieved in the same period a year ago

Six Months Financial Highlights

    --  Revenues for the first half of fiscal year 2011 decreased by 5.2%
        year-over-year to $10.4 million, down from $11.0 million in the first
        half of fiscal 2010
    --  Net income attributable to Recon for the first half of fiscal 2011
        decreased 46.2% year-over-year to $1.06 million, compared with $1.96
        million for the first half of fiscal 2010
    --  Gross margin for the first half of fiscal 2011 was 40.1% based on gross
        profit of $4.2 million, compared with a 42.8% margin based on gross
        profit of $4.7 million in the same period last year
    --  Operating income and operating margin for the six months ended December
        31, 2010 were $1.6 million and 15.6%, respectively, compared to $2.8
        million and 25.6%, respectively, for the same period in 2009
    --  Earnings per diluted share were $0.27 for the six-month period, down
        49.7% from diluted EPS of $0.53 achieved in the same period a year ago

Shenping Yin, Recon's Chief Executive Officer, stated, "Our second quarter was a challenging one for Recon, as we faced several unanticipated obstacles to our growth strategy. Due to delays in several of our clients' oilfield construction projects, we were unable to provide equipment to the clients on schedule, which prevented us from recognizing the corresponding revenues. Raw material costs and manufacturers' equipment prices have also risen recently, driving some of our customers to adjust their procurement policies and cut costs by purchasing hardware, especially some foreign-brand products, directly from the manufacturers instead of through Recon."

Mr. Yin continued, "We are currently working to adjust and streamline our business structure in order to develop our automation and services segment and maintain higher margins, which have historically been a key component of our competitive advantage. We still see strong potential in our industry as China's oil consumption grows and major domestic oil and gas companies upgrade their equipment, and we remain committed to growing our business in the niche domestic oilfield services market we serve."

Second Quarter Fiscal 2011 Results of Operations

Revenues

Revenues for the three months ended December 31, 2010 were $7.1 million as compared to $7.6 million for the three months ended December 31, 2009. The slight decrease of 6.2% was primarily due to some of Recon's clients shifting their equipment procurement policies to increase direct purchases from manufacturers rather than through third-party agents such as Recon. Additionally, a number of clients experienced temporary delays in their oilfield projects, which prevented Recon from providing equipment to them and recognizing the corresponding revenues.

Gross Profit

Gross profit for the second quarter of fiscal 2011 was $3.0 million as compared to $3.7 million for the second quarter of fiscal 2010. The decrease of 19.6% was primarily due to raw material price increases and less preferential policies and higher prices from the Company's contracted manufacturers. Costs of sales for the three-month period were $4.1 million as compared to $3.8 million for the same period a year ago. The Company's gross margin was 42.2% and 49.3% for the three months ended December 31, 2010 and 2009, respectively.

Income from Operations

Operating income for the three months ended December 31, 2010 amounted to $1.4 million as compared to $2.6 million for the three months ended December 31, 2009. The decrease of 47.8% or $1.2 million was primarily attributable to advanced payments to equipment suppliers related to contracts that could not be finished on schedule due to clients' delays, increased expenses related to being a public company, and an increase in expenses related to Recon's secondary offering, which was withdrawn due to unfavorable market conditions. Operating expenses for the three-month period totaled $1.6 million as compared to $1.1 million for the same period a year ago.

Net Income

Net income attributable to Recon for the fiscal 2011 second quarter was $0.93 million as compared to $1.9 million for the same period a year ago, due to the reasons set forth above. Earnings per diluted share were $0.23 for the quarter, a decrease of 50.0% compared with diluted EPS of $0.47 for the same period a year ago.

First Half Fiscal 2011 Results of Operations

Revenues

Revenue for the six months ended December 31, 2010 was $10.4 million as compared to $11.0 million for the six months ended December 31, 2009. The decrease of 5.2% was primarily due to the same factors that affected revenues for the three months ended December 31, 2010.

Gross Profit

Gross profit for the first half of fiscal 2011 was $4.2 million as compared to $4.7 million for the six months ended December 31, 2009. The decrease of 11.4% was primarily due to the decrease in revenues and an increase in the price of both raw materials and equipment the Company purchases from manufacturers. Costs of sales for the six-month period were $6.2 million, down slightly from $6.3 million for the same period a year ago. The Company's gross margin was 40.1% and 42.8% for the six months ended December 31, 2010 and 2009, respectively.

Income from Operations

Operating income for the six months ended December 31, 2010 amounted to $1.6 million as compared to $2.8 million for the six months ended December 31, 2009. The decrease of 42.3% or $2.2 million was primarily due to the decrease in revenues and an increase in administrative expenses. General and administrative expenses for the six-month period increased 81.3% over the first half of fiscal 2010, driven by higher expenses related to being a public company and expenses related to the planned secondary offering, which was withdrawn due to unfavorable market conditions. The increase in general and administrative expenses was partially offset by a 15.4% decrease in selling and distribution expenses.

Net Income

Net income attributable to Recon for the six months ended December 31, 2010 was $1.06 million as compared to $1.96 million for the six months ended December 31, 2009, due to the reasons set forth above. Earnings per diluted share were $0.27 for the six-month period, compared with diluted EPS of $0.53 for the same period a year ago.

Liquidity and Capital Resources

As of December 31, 2010, the Company's current assets were $29.2 million and current liabilities were $10.2 million. Cash and cash equivalents totaled $1.8 million as of December 31, 2010. The Company has no long-term liabilities, and total shareholders' equity at December 31, 2010 was $19.4 million. The Company had cash used in operating activities of $474,462 during the six months ended December 31, 2010, compared to cash used in operating activities of $2.56 million for the six months ended December 31, 2009. The Company used $3,758 in cash for investing activities during the six months ended December 31, 2010, compared to $20,199 for the six months ended December 31, 2009. The Company generated $475,151 in cash from financing activities during the six months ended December 31, 2010, compared to $8.98 million for the six months ended December 31, 2009.

About Recon Technology, Ltd.

Recon Technology, Ltd. has been providing leading Chinese oil and gas companies with automation services that increase efficiency and profitability in exploring, extracting, producing, processing, refining and transporting petroleum products for over 10 years. The Company's proprietary computerized process control system manages oil production in real-time to increase extraction levels, reduce impurities in extracted petroleum and lower production costs. In addition, as one of only two acoustic system providers in the world, Recon's acoustic pipeline monitoring system is widely used to prevent gas leakage in the transport pipeline. Recon's technology is based on three software copyrights, eight product patents and four pending patents. Recon Technology is the first Chinese non-state-owned oil and gas service company to go public in the U.S.

More information may be found at http://www.recon.cn or via e-mail at info@recon.cn.

Forward-Looking Statements

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, and other risks contained in reports field 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.

                                  RECON TECHNOLOGY, LTD
                               CONSOLIDATED BALANCE SHEETS

                    June 30,            December 31,         December 31,
                    --------            ------------         ------------
                            2010                2010               2010
                            ----                ----               ----
                       RMB                  RMB              U.S. Dollars
                       ---                  ---              ------------
                                        (Unaudited)          (Unaudited)
    ASSETS            12,142,957          12,087,113         $1,828,112

    Current assets

    Cash and cash
     equivalents
     (including
     balance from
     consolidated
     parent
     companies of
     RMB7,453,184
     and
     RMB3,796,211
     ($574,157)
     as of June
     30, 2010 and
     December 31,
     2010,
     respectively)
    Trade accounts
     receivable,
     net              89,425,990         104,434,261         15,795,133
    Other
     receivables,
     net              12,850,547          18,685,512          2,826,085
    Purchase
     advances
     (including
     balance from
     consolidated
     parent
     companies of
     RMB255,323
     and
     RMB171,907
     ($26,000)  as
     of June 30,
     2010 and
     December 31,
     2010,
     respectively) 46,551,402     27,025,069      4,087,400
    Prepaid
     expenses
     (including
     balance from
     consolidated
     parent
     companies of
     RMB237,879
     and
     RMB140,038
     ($21,180)  as
     of June 30,
     2010 and
     December 31,
     2010,
     respectively)    766,638        140,038         21,180
    Inventories       13,150,911          30,833,264          4,663,369
                      ----------          ----------          ---------
    Total current
     assets          174,888,445         193,205,257         29,221,280

    Property and
     equipment,
     net
     (including
     balance from
     consolidated
     parent
     companies of
     RMB10,690 and
     RMB9,720
     ($1,470) as
     of June 30,
     2010 and
     December 31,
     2010,
     respectively)  1,482,881      1,304,452        197,292
    Deferred tax
     assets              275,960             789,450            119,400
                         -------             -------            -------
    Total Assets     176,647,286         195,299,159        $29,537,971
                     ===========         ===========        ===========

    LIABILITIES
     AND EQUITY
    Current
     liabilities
    Trade accounts
     payable          16,536,796          21,148,001         $3,198,524
    Other payables
     (including
     balance from
     consolidated
     parent
     companies of
     RMB194,361
     and
     RMB456,221
     ($69,001)  as
     of June 30,
     2010 and
     December 31,
     2010,
     respectively)  3,096,309      3,472,063        525,131
    Deferred
     income            4,267,711           2,438,253            368,773
    Advances from
     customers           439,761             120,650             18,248
    Accrued
     payroll and
     employees'
     welfare             360,540              87,169             13,184
    Accrued
     expenses            290,803             278,873             42,178
    Taxes payable     20,203,104          24,105,472          3,645,826
    Short-term
     bank loan                 -           5,000,000            756,224
    Short-term
     borrowings        5,024,881           4,568,540            690,968
    Short-term
     borrowings-
     related
     parties           7,343,457           5,941,399            898,605
    Total current
     liabilities      57,563,362          67,160,420         10,157,661
                      ----------          ----------         ----------
    Total
     Liabilities      57,563,362          67,160,420         10,157,661

    Commitments
     and
     Contingencies

    Equity
    Ordinary
     shares, $
     0.0185 U.S.
     dollar par
     value,
     25,000,000
     shares
     authorized;
     3,951,811 and
     3,951,811
     shares issued
     and
     outstanding
     at June 30
     and December
     31, 2010         529,979        529,979         80,157
    Additional
     paid-in
     capital          69,257,098          70,141,123         10,608,476
    Appropriated
     retained
     earnings          3,755,503           4,557,675            689,324
    Unappropriated
     retained
     earnings         36,034,500          42,209,270          6,383,930
    Accumulated
     other
     comprehensive
     loss                (76,997)           (114,368)           (17,298)

    Total
     controlling
     shareholders'
     equity          109,500,083         117,323,680         17,744,589
    Non-
     controlling
     interest, net
     of tax            9,583,841           9,770,056          1,477,670
                       ---------           ---------          ---------
    Total equity     119,083,924         127,093,736         19,222,259
                     -----------         -----------         ----------
    Total
     Liabilities
     and Equity      176,647,286         194,254,156        $29,379,920
                     ===========         ===========        ===========

    (Note: except for some items including balances from consolidated
    parent companies as indicated above, all of the assets represented
    assets of consolidated variable interest entities (VIEs) that can be
    used only to settle obligations of the consolidated VIEs, all of the
    liabilities represented liabilities of the consolidated VIEs for
    which creditors (or beneficial interest holders) do not have
    recourse to the general credit of the primary beneficiary. For the
    summary information regarding VIEs, please refer to note 18)

                                     RECON TECHNOLOGY, LTD
                   CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                                   For the Six Months ended
                                         December 31,
                                         ------------
                                        2009                2010
                                         ---                 ---
                                    RMB                   RMB
                                    ---                   ---
                                (Unaudited)           (Unaudited)
    Revenues
    Hardware                      10,035,601          10,079,915
    Service                          902,298             319,294
    Software                          34,256                   -
                                      ------                 ---
    Total revenues                10,972,154          10,399,210

    Cost of revenues               6,271,992           6,232,571

    Gross margin                   4,700,163           4,166,639
                                   ---------           ---------

    Selling and
     distribution expenses           910,962             770,791
    General and
     administrative
     expenses                        977,933           1,773,354

    Operating expenses             1,888,895           2,544,145
                                   ---------           ---------

    Income from operations         2,811,267           1,622,493

    Other income
     (expenses)
    Subsidy income                   175,147              68,290
    Interest income                      873                 747
    Interest expense                  (5,322)            (11,086)
    Interest expense -
     related parties                  (6,371)            (38,340)
    Other income                      12,439                 765
                                      ------                 ---
    Other income
     (expenses)                      176,766              20,376
                                     -------              ------

    Income before income
     taxes and non-
     controlling interest          2,988,034           1,642,869
    Provision for income
     taxes                           772,371             400,800

    Net income before
     allocation to non-
     controlling interests         2,215,663           1,242,069
    Less: Net income
     attributable to non-
     controlling interest           (252,721)           (186,843)

    Net income
     attributable to
     ordinary shareholders         1,962,942           1,055,226
                                   =========           =========

    Comprehensive income
    Net income before
     allocation to non-
     controlling interests         2,215,663           1,242,069
    Foreign currency
     translation
     adjustment                       (8,400)             (6,280)
                                      ------              ------
    Comprehensive income           2,207,263           1,235,789
    Comprehensive income
     attributable to non-
     controlling interests          (252,721)           (186,215)
    Comprehensive income
     attributable to
     ordinary shareholders         1,954,542           1,049,574
                                   =========           =========
    Earnings per ordinary
     share -basic
    Net income
     attributable to
     ordinary shareholders              0.54                0.27
                                        ====                ====
    Earnings per ordinary
     share -diluted
    Net income
     attributable to
     ordinary shareholders              0.53                0.27
                                        ====                ====
    Weighted -average
     shares -basic                 3,656,277           3,951,811
                                   =========           =========
    Weighted -average
     shares -diluted               3,698,981           3,951,811
                                   =========           =========

                                 For the Three Months ended
                                        December 31,
                                        ------------
                                       2009               2010
                                       ----               ----
                                   RMB                   RMB
                                   ---                   ---
                               (Unaudited)           (Unaudited)
    Revenues
    Hardware                      7,120,866          6,782,884
    Service                         452,578            319,294
    Software                              -                  -
                                        ---                ---
    Total revenues                7,573,443          7,102,179

    Cost of revenues              3,841,104          4,102,819

    Gross margin                  3,732,340          2,999,359
                                  ---------          ---------

    Selling and
     distribution expenses          584,392            498,074
    General and
     administrative
     expenses                       532,419          1,134,827

    Operating expenses            1,116,811          1,632,901
                                  ---------          ---------

    Income from operations        2,615,529          1,366,458

    Other income
     (expenses)
    Subsidy income                  171,165                  -
    Interest income                     619                537
    Interest expense                 (2,661)            (5,543)
    Interest expense -
     related parties                 (2,794)           (26,726)
    Other income                      1,327              7,178
                                      -----              -----
    Other income
     (expenses)                     167,656            (24,554)
                                    -------            -------

    Income before income
     taxes and non-
     controlling interest         2,783,186          1,341,904
    Provision for income
     taxes                          667,607            278,923
                                    -------
    Net income before
     allocation to non-
     controlling interests        2,115,579          1,062,981
    Less: Net income
     attributable to non-
     controlling interest          (216,828)          (135,370)

    Net income
     attributable to
     ordinary shareholders        1,898,751            927,611
                                  =========            =======

    Comprehensive income
    Net income before
     allocation to non-
     controlling interests        2,115,579          1,062,981
    Foreign currency
     translation
     adjustment                        (569)            10,059
                                       ----             ------
    Comprehensive income          2,115,009          1,073,041
    Comprehensive income
     attributable to non-
     controlling interests         (216,828)          (136,376)
    Comprehensive income
     attributable to
     ordinary shareholders        1,898,181            936,665
                                  =========            =======
    Earnings per ordinary
     share -basic
    Net income
     attributable to
     ordinary shareholders             0.48               0.23
                                       ====               ====
    Earnings per ordinary
     share -diluted
    Net income
     attributable to
     ordinary shareholders             0.47               0.23
                                       ====               ====
    Weighted -average
     shares -basic                3,951,811          3,951,811
                                  =========          =========
    Weighted -average
     shares -diluted              4,046,573          3,951,811
                                  =========          =========

                                      RECON TECHNOLOGY, LTD.
                              CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 For the Six Months ended
                                       December 31,
                                       ------------
                                     2009           2010          2010
                                     ----           ----          ----
                                 RMB              RMB        U.S. Dollars
                                 ---              ---        ------------
                             (Unaudited)    (Unaudited)   (Unaudited)
    Cash flows from
     operating activities:
    Net income before
     allocation to non-
     controlling interests      2,215,663      1,242,069      $187,856
    Adjustments to reconcile
     net income before non-
     controlling interests
     to net cash used in
     operating activities:
    Depreciation                  170,864        203,278        30,745
    Stock based payment           736,688        870,084       131,596
    Provision for doubtful
     debts                              -      2,644,369       399,947
    Movement of deferred
     taxation                   3,923,533       (513,490)      (77,663)
    Changes in operating
     assets and liabilities:                                         -
    Trade accounts
     receivable, net         (29,594,234)   (15,008,271)    (2,269,922)
    Trade accounts
     receivable-related
     parties, net            (11,590,498)              -             -
    Other receivable, net      (1,484,297)    (8,471,365)   (1,281,249)
    Other receivables
     related parties, net        (500,000)             -             -
    Purchase advance, net        (783,333)    19,526,333     2,953,255
    Prepaid expense            (7,160,434)       626,600        94,770
    Inventories                  (399,430)  (17,682,353)    (2,674,363)
    Trade accounts payable     (2,241,257)     4,611,205       697,421
    Trade accounts payable-
     related parties           12,119,119              -             -
    Other payables               (103,868)       375,754        56,831
    Other payables-related
     parties                     (326,557)             -             -
    Deferred income                     -     (1,829,458)     (276,696)
    Advances from customers     2,678,536       (319,111)      (48,264)
    Accrued payroll and
     employees' welfare          (885,846)      (273,371)      (41,346)
    Accrued expenses                    -        (11,930)       (1,804)
    Interest payable            3,707,849              -             -
    Taxes payable                 171,407      3,902,368       590,213
    Net cash used in
     operating activities    (29,346,096)   (10,107,289)    (1,528,674)
                              -----------    -----------    ----------

    Cash flows from
     investing activities:
    Purchases of property
     and equipment               (133,554)       (24,849)       (3,758)
    Net cash used in
     investing activities        (133,554)       (24,849)       (3,758)
                                 --------        -------        ------

    Cash flows from
     financing activities:
    Proceeds from stock
     issuance                  60,209,057              -             -
    Proceeds from short-
     term bank loan                     -      5,000,000       756,224
    Proceeds from (Repayment
     to) short-term
     borrowings                 1,806,464       (456,341)      (69,019)
    Repayment to short-term
     borrowings-related
     party                     (2,633,759)    (1,402,058)     (212,054)
    Net cash provided by
     financing activities      59,381,762      3,141,601       475,151
                               ----------      ---------       -------

    Effect of exchange rate
     fluctuation on cash and
     cash equivalents             (76,116)       (35,551)       (5,377)
                                  -------        -------        ------

    Net increase (decrease)
     in cash and cash
     equivalent                29,825,996     (7,026,088)  $(1,062,659)
    Cash and cash
     equivalents at
     beginning of year          2,727,735     12,142,957    $1,836,558
                                ---------     ----------    ----------
    Cash and cash
     equivalents at end of
     year                      32,553,731      5,116,869      $773,900
                               ==========      =========      ========


    Supplemental cash flow
     information
    Cash paid during the
     year for interest                  -         36,000        $5,445
                                      ===         ======        ------
    Cash paid during the
     year for taxes               248,176      2,337,279      $353,501
                                  =======      =========      ========

This information is intended to be reviewed in conjunction with the Company's filings with the Securities and Exchange Commission, which includes the accompanying notes.

    Contact:

    At the Company:
    Recon Technology, Ltd
    Tel:   +86-10-8494-5799
    Email: info@recon.cn

    Investor Relations:
    Dave Gentry, U.S.
    RedChip Companies, Inc.
    Tel: +1-800-733-2447, Ext. 104
    Email: info@redchip.com

    Jing Zhang, China
    RedChip Beijing Representative Office
    Tel: +86 10-8591-0635
    Web: http://www.RedChip.com

SOURCE Recon Technology, Ltd.

SOURCE: Recon Technology, Ltd.