What changed in this filing

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Item 1. Financial Statements

2015-05-15 compared with 2015-02-13 · 333 added, 385 removed, 536 unchanged (57% of the section changed)

Financial Statements.

See the unaudited condensed consolidated

financial statements following the signature page of this report, which are incorporated herein by reference.

Management’s

Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition

and Results of Operations.

The following

5 unchanged sentences

differ materially from those anticipated in these forward-looking statements as a result of various factors.

We are a company

with limited liability incorporated in 2007 under the laws of the Cayman Islands.

Headquartered in Beijing, we provide

products and services to oil and gas companies and their affiliates through Nanjing Recon Technology Co.

Ltd (“Nanjing

Recon”) and Beijing Recon BHD Petroleum Technology Co.

Ltd (“BHD”and together with Nanjing Recon, our

“Domestic Companies”).

As the company contractually controlling the Domestic Companies, we are the center

of strategic management, financial control and human resources allocation.

Our business is mainly

focused on the upstream sectors of the oil and gas industry.

We derive our revenues from the sales and provision of (1) hardware

products, (2) software products, and (3) services.

Our products and services involve most of the key procedures of the extraction

and production of oil and gas, and include automation systems, equipment, tools and on-site technical services.

Our VIEs provide

the oil and gas industry with equipment, production technologies, automation and services.

We are a company with

limited liability incorporated in 2007 under the laws of the Cayman Islands.

Headquartered in Beijing, we provide products and

services to oil and gas companies and their affiliates through Nanjing Recon Technology Co.

Ltd (“Nanjing Recon”) and

Beijing BHD Petroleum Technology Co, Ltd (“BHD”), our Domestic Companies.

As the Company contractually is controlling

the Domestic Companies, we are the center of strategic management, financial control and human resources allocation.

Nanjing Recon and

BHD, our business is mainly focused on the upstream sectors of the oil and gas industry.

We derive our revenues from the sales

and provision of (1) hardware products, (2) software products, and (3) services.

Our products and services involve most of the

key procedures of the extraction and production of oil and gas, and include automation systems, equipment, tools and on-site technical

Our Variable Interest

Entities (“VIEs”) provide the oil and gas industry with equipment, production technologies, automation and services.

Nanjing Recon is a high-tech company that specializes in automation services for

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Recent Developments

During this six-month period,

affected by decreased oil prices and CAPEX expenditures of our clients, our finished projects were maintained at a lower

level compared to the same period of last year.

Management expects the volume of finished projects will recover and thus

revenue will increase during the balance of fiscal year ending June 30, 2015.

During this period, we have achieved

some major accomplishments on our self-developed down-hole equipment and oversees business development.

During this nine-month period, affected by

decreased oil prices and CAPEX expenditures of our clients, our finished projects were maintained at a lower level compared to

the same period of last year.

Although management expects the volume of finished projects will recover and thus revenue increase

during the balance of fiscal year ending June 30, 2015.

During this period, we achieved some major accomplishment on our self-developed

down-hole equipment and oversea business development.

On January 29, 2015, the shareholders of the Company approved the Second Amended and Restated Memorandum

of Association and Articles of Association which, among other things, include the increase of the authorized ordinary shares from

25,000,000 to 100,000,000.

Products and Services

113 unchanged sentences

and construction processes.

Our management still believe we need to expand our core business, move into new markets, and develop

Our management still believes we need to expand our core business, move into new markets, and develop

new businesses quickly for the coming years.

Management anticipates great opportunities both in new markets and our existing markets.

Management anticipates opportunities both in new markets and our existing markets.

We also believe that many existing wells and oilfields need to improve or renew their equipment and service to maintain production

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Growth Strategy

company with our current customers mostly based in China, it is our basic strategy to focus on

developing our onshore oilfield business, that is, the upstream of the industry.

Due to the remote location and difficult

environments of China’s oil and gas fields, foreign competitors rarely enter those areas.

As a smaller China-focused

company, it is our basic strategy to focus on developing our onshore oilfield business, that is, the upstream of the industry.

Due to the remote location and difficult environments of China’s oil and gas fields, foreign competitors rarely enter those

Large domestic oil

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companies have formed separate service companies, high-tech service has gradually opened up to private companies.

(2) As worldwide oil and gas prices

decreased, development transform and strict management have been recent subject of domestic oil companies.

reforms have been their first choice to achieve their goals about quality and efficiency upgrade.

The construction of digital

oilfield have also been one of oil companies’

(2) As worldwide oil and gas prices decreased,

development transform and strict management haven been recent subject of domestic oil companies.

Technology reforms have been

their first choice to achieve their goals about quality and efficiency upgrade.

Furthermore, the construction of digital oilfield

have also been one of oil companies’

long term development strategies.

Even though total capital expenditure

is expected to be reduced, we believe investment in technology reform will maintain at a high level.

the Company will benefit from this trend.

Even though total capital expenditure is expected

to be reduced, we believe investment in technology reform will maintain at a higher level.

We believe the Company will benefit

from this trend.

Management is focused on these factors and will seek to extend

our business on the industrial chain, including providing more integrated services and incremental measures and growing our business

our business on the industrial chain, such as providing more integrated services and incremental measures and growing our business

from a predominantly up-ground business to include some down-hole services as well.

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procurement processes of our customers, especially those in the oil and gas industry;

seasonality caused by own customers’

capital expenditure planning and change of

Generally speaking, the second quarter ending December 31 is

our high season when the customers make payment to use up their budget for the calendar year;

while the third quarter ending

March 31 and the fourth quarter ending June 30 are generally our low seasons due to the cold weather in the oil field and the

customers’

pending approval of their expenditure.

and related pricing pressure from other oilfield service solution providers, especially

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in any period are more directly affected by company-specific factors including:

our revenue growth, due to the high percentage of the

proportion of our business dedicated to large state-owned oil and gas companies and

ability to successfully collect and recognize revenue from such large companies and develop, introduce and market new

revenue growth, in terms of the proportion of our business dedicated to large companies

and our ability to successfully develop, introduce and market new solutions and services;

ability to increase our revenues from both old and new customers in the oil and gas industry

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Significant accounting estimates reflected in our Company’s

consolidated financial statements include revenue recognition, allowance for doubtful accounts, and useful lives of property and

consolidated financial statements include revenue recognition, allowance for doubtful accounts, inventory valuation, warrants

liability, fair value of share based payments, and useful lives of property and equipment.

Consolidation of VIEs

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charged to operations.

Long-term investment is measured at fair value on a non-recurring basis at December 31, 2014, since the

Company recorded an impairment loss during the year ended June 30, 2014.

The fair value was determined to be zero using Level

Long-term investment is measured at fair value on a non-recurring basis at March 31, 2015, since the Company

recorded an impairment loss during the year ended June 30, 2014.

The fair value was determined to be zero using Level 2 inputs.

Trade receivables

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current economic trends and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts.

We believe based on the current economic condition and our history of collections on accounts and notes receivable, our allowance

for doubtful accounts was adequate at December 31, 2014.

Increase in our allowance for doubtful accounts would lower our net income and earnings per share.

Deferred Tax Estimates

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This analysis requires considerable judgment and is subject to change to reflect future events and changes in the tax laws.

Valuation of Long-Lived Assets

We review the carrying

values of our long-lived assets for impairment whenever events or changes in circumstances indicate that they may not be recoverable.

When such an event occurs, we project undiscounted cash flows to be generated from the use of the asset and its eventual disposition

over the remaining life of the asset.

If projections indicate that the carrying value of the long-lived asset will not be recovered,

we reduce the carrying value of the long-lived asset by the estimated excess of the carrying value over the projected discounted

In the past, we have not had to make significant adjustments to the carrying values of our long-lived assets, and

we do not anticipate a need to do so in the future.

However, circumstances could cause us to have to reduce the value of our capitalized

assets more rapidly than we have in the past if our revenues were to significantly decline.

Estimated cash flows from the use

of the long-lived assets are highly uncertain and therefore the estimation of the need to impair these assets is reasonably likely

to change in the future.

Should the economy or acceptance of our assets change in the future, it is likely that our estimate of

the future cash flows from the use of these assets will change by a material amount.

There were no impairments at June 30, 2014

and December 31, 2014.

an allowance is established against our deferred tax assets because they may not be fully realizable in the future, our net income

and earnings per share would decrease.

Share-Based Compensation

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Recently enacted accounting pronouncements

November 2014, The FASB issued Accounting Standards Update (ASU) No.

2014-17, “Business Combinations (Topic 805):

Pushdown Accounting, a consensus of the FASB Emerging Issues Task Force, which was ratified by the Financial Accounting

Standards Board (FASB) on Oct 8, 2014.

2014-17 impacts the stand-alone financial statements of an acquired entity

(subsidiary), however it does not change the requirement for an acquirer (parent) to apply business combination accounting

and record its new basis in the acquired entity’s assets, liabilities, and non-controlling interests in the

acquirer’s consolidated financial statements.

The amendments in this Update are

effective on November 18, 2014.

After the effective date, an acquired entity can make an election to apply the guidance to

future change-in-control events or to its most recent change-in-control event.

Management believes this ASU No.

not have any significant impact on the Company’s consolidated financial position and results of operations.

In January 2015, the

FASB issued ASU 2015-01, “Income Statement—Extraordinary and Unusual Items (Subtopic 225-20), Simplifying Income Statement

Presentation by Eliminating the Concept of Extraordinary Items (“ASU 2015-01”).

ASU 2015-01 eliminates from GAAP the

concept of extraordinary items.

The amendments will eliminate the requirements in Subtopic 225-20 for reporting entities to consider

whether an underlying event or transaction is extraordinary, the presentation and disclosure guidance for items that are unusual

in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently

The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning

after December 15, 2015.

In January 2015,

the FASB issued ASU 2015-02, "Consolidation (Topic 810) –

Amendments to the Consolidation Analysis".

The ASU concludes

the FASB’s project to rescind the indefinite deferral of the VIE guidance in ASU 2009-17 (FAS 1672) for reporting entities

with variable interests in legal entities that have the attributes of an investment company that meet certain criteria (ASU 2010-103).

The ASU also makes changes to the VOE consolidation model.

The ASU does not change the general order in which the consolidation

models are applied.

A reporting entity that holds an economic interest in, or is otherwise involved with, another legal entity

(has a “variable interest”) should first determine if the VIE model applies, and if so, whether it holds a controlling

financial interest under that model.

If the entity being evaluated for consolidation is not a VIE, then the VOE model should be

applied to determine whether the entity should be consolidated by the reporting entity.

Since consolidation is only assessed for

legal entities, the determination of whether there is a legal entity is important.

It is often clear when the entity is incorporated,

but unincorporated structures can also be legal entities and judgment may be required to make that determination.

The amendments

in this Update are effective for public business entities for fiscal years, and for interim periods within those fiscal years,

beginning after December 15, 2015.

For all other entities, the amendments in this Update are effective for fiscal years beginning

after December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017.

Early adoption is permitted,

The impact upon adoption would not affect the Company’s consolidated

financial position or results of operations.

including adoption in an interim period.

Management is evaluating the impact, if any, of this ASU on the Company’s consolidated

financial statements.

Results of Operations

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necessarily indicative of the results to be expected for any future period.

Three Months Ended December 31, 2014 Compared to Three

Months Ended December 31, 2013

During the three months ended December

31, 2014, we encountered worldwide decline of oil and gas prices and decreased CAPEX expense of our major clients.

our projects were slowed and/or cancelled.

Our operation and revenue were affected negatively.

For the Three Months Ended

Three Months Ended March 31, 2015 Compared to Three Months

Ended March 31, 2014

three months ended March 31, 2015, we encountered a worldwide decline of oil and gas prices and decreased CAPEX expense of

our major clients.

As a result, our projects were slowed and/or cancelled.

Our operations and revenue were affected

For the Three

Hardware - non-related parties

(21,001,766 )

Hardware - related parties

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Total revenues

(24,937,354 )

total revenues decreased by 53.9%, or approximately ¥24.9 million ($4.1 million), from approximately ¥46.3 million

for the three months ended December 31, 2013 to ¥21.3 million ($3.5 million) for the same period of 2014.

three months ended December 31, 2014, our largest customers CNPC and SINOPEC, continued to reduce their capitalized exploration

and production expenditure.

As a result, the number of projects we provided to these customers during this quarter decreased

compared to the same period last year.

In addition, we were not able to finish a number of our projects with these customers

as they or their general contractors were not able to finish the overall projects which our projects are a part of.

Therefore, finished projects also decreased compared to same period last year.

The changes in our revenues for

the three-month period were due to the following factors:

(1) Hardware business

- non related parties.

During the three-month ended December 31, 2014, the decrease in

hardware revenue was mainly caused by lower sales of furnaces, which are the majority of our hardware sales.

total revenues increased by 9.8%, or approximately ¥1.8 million ($0.3 million), from approximately ¥18.2 million for the

three months ended March 31, 2014 to ¥20.0 million ($3.3 million) for the same period of 2015.

The changes in our revenues

for the three-month period was due to the following factors:

(1) Hardware business - non related parties.

During the three-month ended March 31, 2015, a slight decrease of ¥0.5 million ($0.1

million) in hardware revenue was mainly caused by lower sales of furnaces.

(2) Hardware –

related parties.

After we achieved business entrance certification in the name of Recon

and could directly enter into contract with oilfield customers directly two years ago, we no longer required

the services of a related party with such certification and, accordingly, revenue from

related-parties decreased.

As long as the local agency continue purchasing automation products

from Recon, we will continue to recognize revenue from related parties, but we anticipate

that such hardware and software related party revenue is likely to fluctuate from year

(3) Service business

- non related parties.

Service revenue for three months ended December 31, 2014 consisted

mainly of minor maintenance services, which were provided upon request by customers.

(4) Software business.

The software sales to non-related parties decreased approximately ¥2.7 million ($0.4

We record revenue as software sales if (1) the customer signs a separate software

contract with us, or (2) the customer accepts VAT invoices for software.

The amount of

our revenues categorized as software sales may fluctuate because certain software may

be sold with hardware at times as a whole product and not separately priced.

The majority of our

hardware revenue with related parties of this period was from increased requirement of system upgrading and remote guidance related

(3) Service business - non related parties.

Service revenue

for three months ended March 31, 2014 consisted mainly of minor maintenance services, which were provided upon request by customers.

(4) Software business.

The software sales to non-related

parties increased approximately ¥0.9 million ($0.1 million).

We record revenue as software sales when (1) the customer signs

a separate software contract with us, or (2) the customer accepts VAT invoices for software.

The amount of our revenues categorized

as software sales may fluctuate because certain software may be sold with hardware at times as a whole product and not separately

(5) Software business –

related parties.

During the quarter ended December 31, 2013, we recorded software

revenue of ¥1.1 million to a related party.

As mentioned above, we used to develop

our Ji Dong oilfield business through a local agent that is a related party.

achieved business entrance certification by ourselves and could thus directly compete

for projects, revenue through this related party decreased overall.

So Software revenue

from related party also decreased during this period.

We reclassified some prior related

party software sales to non-related because they are not a related party anymore.

The increase of software revenue was mainly due to increased

demand of our clients, which were also software companies.

Cost and Margin

For the Three Months Ended

For the Three

Total revenues

(24,937,354 )

Cost of revenues

(17,390,873 )

Cost of revenues .

8 unchanged sentences

Our cost of revenues

decreased from approximately ¥29.7 million in the three months ended December 31, 2013 to approximately ¥12.3 million

($2.0 million) for the same period of 2014, a decrease of approximately ¥17.4 million ($2.8 million), or 58.5%.

This decrease

was mainly caused by lower revenue during the three months ended December 31, 2014 compared to the same period of 2013.

increased from approximately ¥13.0 million in the three months ended March 31, 2014 to approximately ¥13.8 million ($2.3

million) for the same period of 2015, an increase of approximately ¥0.8 million ($0.1 million), or 6.0%.

This increase was

mainly caused by higher revenue during the three months ended March 31, 2015 compared to the same period of 2014.

As a percentage

of revenues, our cost of revenues decreased from 64.3% in 2013 to 57.9% in 2014, mainly due to decreased hardware cost of revenue.

of revenues, our cost of revenues decreased from 71.2% in 2014 to 68.8% in 2015, mainly due to some contracts with lower cost during

Gross profit .

Our gross profit decreased to approximately ¥9.0 million ($1.5 million) for the three months ended December 31, 2014 from

approximately ¥16.5 million for the same period in 2013.

Our gross profit as a percentage of revenue increased to 42.1% for

the three months ended December 31, 2014 from 35.7% for the same period in 2013.

This was mainly due to decreased hardware cost

of revenue during the three months ended December 31, 2014 as compared to the same period last year.

Our gross profit increased to approximately ¥1.0 million ($0.2 million) for the three months ended March 31, 2015 from approximately

¥5.2 million for the same period in 2014 to approximately ¥6.5 million ($1.0 million) for the same period of 2015.

gross profit as a percentage of revenue increased to 31.2% for the three months ended March 31, 2015 from 28.8% for the same period

This was mainly because we seized some system updating service related contracts with higher margin.

In more detail:

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Total revenues-hardware and software- non related parties

(23,726,478 )

Cost of revenues -hardware and software- non related parties

(17,146,703 )

The revenue decrease from hardware and

software to non-related parties of ¥23.7 million was mainly due to the decrease from the furnaces sales and automation business

in the three months ended December 31, 2014.

The revenue increase from hardware and

software to non-related parties of ¥0.4 million was mainly due to the increase from the furnaces sales and automation business

in the three months ended March 31, 2015.

The gross profit from the hardware and software sales to non-related parties decreased

¥6.6 million ($1.1 million) compared to the same period of last year.

¥0.6 million ($0.1 million) compared to the same period of last year, because gross margin from burner business were lower

compared to same period last year.

For the Three Months Ended

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Cost of revenues -hardware and software - related parties

Revenue from related parties decreased

was mainly due to reclassification.

Besides, cost of revenue from hardware and software-related parties decreased as revenue decreased.

While gross profit decreased was mainly because revenue decreased as we developed business directly with oilfield, rather than

cooperation with some local agency, which used to be our related parties.

Revenue from related parties increased

mainly due to increased sales of automation metering system increased during the three months ended March 31, 2015.

kind of business was minor because there were only some software upgrading and online debugging cost, which were much lower than

general hardware business sales.

For the Three Months Ended

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Cost of revenues -service

revenue for three months ended December 31, 2014 consisted mainly of minor maintenance services, which were provided upon request

revenue for three months ended March 31, 2014 consisted mainly of minor maintenance services, which were provided upon request

by customers.

Our fracturing projects are still on process and not officially accepted by our clients, thus no revenue from fracturing

was recorded this period.

Operating Expenses

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facilities and depreciation expenses.

Selling expenses decreased by 44.3%, from approximately ¥2.3 million for the three months

ended December 31, 2013 to approximately ¥1.3 million ($0.2 million) for the same period of 2014.

This decrease was primarily

from decreased shipping fee, traveling expenses, and service fee.

Selling expenses were 4.9% of total revenues in the three months

ended December 31, 2013 and 5.9% of total revenues in the same period of 2014.

Selling expenses remained flat at approximately ¥1.1 million for each of the three months

ended March 31, 2014 and 2015.

Selling expenses were 6.0% of total revenues in the three months ended March 31, 2014 and 5.5% of

total revenues in the same period of 2015.

and administrative expenses .

2 unchanged sentences

miscellaneous expenses incurred in connection with general operations.

General and administrative expenses increased by 10.2%

or ¥0.4 million ($61,000), from approximately ¥3.7 million in the three

months ended December 31, 2013 to approximately ¥4.1 million ($0.7 million) in the

same period of 2014.

General and administrative expenses increased by 5.0% or

¥0.2 million ($32,000), from approximately ¥4.0 million in the three months

ended March 31, 2014 to approximately ¥4.2 million ($0.7 million) in the same period

General and administrative expenses were 21.9% of total revenues in 2014 and 20.9% of total revenues in 2015.

The increase in general and administrative expenses was mainly due to increase in consulting fee, share-based compensation and

traveling fees.

in general and administrative expenses was mainly due to an increase in share-based compensation.

Research and development

3 unchanged sentences

Research and development expenses decreased from approximately ¥0.7 million for

the three months ended December 31, 2013 to approximately ¥1.2 million ($0.2 million) for the same period of 2014.

the three months ended March 31, 2014 to approximately ¥0.5 million ($0.1 million) for the same period of 2015.

This decrease

was primarily due to the Company spending less research and development expense on furnaces.

was primarily due to less research and development expense on furnaces.

We will continue to strengthen R&D project management

and control spending.

For the Three Months Ended

Income from operations

Interest and other income (expense)

Income before income tax

Provision for income tax

Income (loss) from operations

Interest and other expense

Loss before income tax

Provision (benefit) for income tax

Net income attributable to non-controlling interest

Net income attributable to Recon Technology, Ltd

Income from operations .

Income from operations was approximately ¥2.4 million ($0.4 million) for the three months ended December 31, 2014, compared

to income of ¥7.9 million for the same period of 2013.

This decrease in income from operations can be attributed primarily

to the decreased revenue and increases in general and administrative expenses.

Net loss attributable to Recon Technology, Ltd

Income (loss)

from operations .

Income from operations was approximately ¥0.4 million ($0.1 million) for the three months ended March

31, 2015, compared to a loss of ¥0.6 million for the same period of 2014.

This increase in income from operations can be attributed

primarily to the increased revenue and higher gross profit.

Interest and other

income (expense).

Interest and other income was approximately ¥4.0 million ($0.7 million) for the three months ended December

31, 2014, compared to interest and other expense of ¥65,000 for the same period of 2013.

Interest and other expense was approximately ¥2.0 million ($0.3 million) for the three months ended March 31,

2015, compared to interest and other expense of ¥1.1 million for the same period of 2014.

The ¥0.9 million ($0.1 million)

increase in interest and other income was primarily due to changes in the fair value of warrant liability and a decrease in loss

from investment.

Provision for

Provision for income tax for the three months ended December 31, 2013 was approximately ¥1.3 million and ¥0.6

million ($0.1 million) for the three months ended December 31, 2014.

This decrease of provision for income tax was mainly due

to the pre-consolidation income from operations in subsidiaries in China on which we must pay income tax decreased for the three

months ended December 31, 2014.

As a result of the factors described above, net income was approximately ¥5.8 million ($0.9 million) for the three months

ended December 31, 2014, an decrease of approximately ¥0.9 million ($0.1 million) from net income of ¥6.6 million for

the same period of 2013.

Net income attributable

increase in interest and other expense was primarily due to a loss from warrant redemptions and an increase in interest expense .

Provision (benefit)

for income tax .

Provision for income tax for the three months ended March 31, 2014 was approximately ¥0.2 million.

for income tax was ¥0.2 million ($30,000) for the three months ended March 31, 2015.

This decrease in provision for income

tax was mainly due to the pre-consolidation income from operations in subsidiaries in China on which we must pay income tax, decreased

for the three months ended March 31, 2015.

a result of the factors described above, net loss was approximately ¥1.4 million ($0.2 million) for the three months ended

March 31, 2015, a decrease of approximately ¥0.4 million ($0.1 million) from net loss of ¥1.8 million for the same period

Net loss attributable

to Recon Technology, Ltd .

As a result of the factors described above, net income attributable to ordinary shareholders was

approximately ¥5.3 million ($0.9 million) for the three months ended December 31, 2014, an decrease of approximately ¥0.5

million ($0.1 million) from net income attributable to ordinary shareholders of approximately ¥5.8 million for same period

Six Months Ended December 31, 2014 Compared to Six Months

Ended December 31, 2013

For the Six Months Ended

As a result of the factors described above, net loss attributable to ordinary shareholders was approximately

¥1.5 million ($0.2 million) for the three months ended March 31, 2015, a decrease of approximately ¥0.4 million ($0.1

million) from net loss attributable to ordinary shareholders of approximately ¥1.9 million for same period of 2014.

Nine Months Ended March 31, 2015 Compared to Nine Months

Ended March 31, 2014

For the Nine Months Ended

Hardware - non-related parties

6 unchanged sentences

total revenues decreased by 39.9%, or approximately ¥30.4 million ($5.0 million), from approximately ¥76.0 million for

the six months ended December 31, 2013 to ¥25.6 million ($4.2 million) for the same period of 2014.

The changes in our revenues

for the six-month period were due to the following factors:

(1) Hardware business - non related

During the six-month ended December 31, 2014, the decrease in hardware revenue

was mainly caused by lower sales of furnaces and automation system.

the nine months ended March 31, 2014 to ¥45.7 million ($7.5 million) for the same period of 2015.

The change in our revenues

for the nine-month period was due to the following factors:

1) Hardware business - non related parties.

During the nine-months

ended March 31, 2015, the decrease in hardware revenue was mainly caused by lower sales

of furnaces and automation system.

2) Hardware –

related parties.

After we achieved business

entrance certification in the name of Recon and could cooperate with oilfield customers directly two years ago, we no longer required

the services of a related party with such certification and, accordingly, revenue from related-parties decreased.

As long as the

local agency still purchases automation products from Recon, we will continue to recognize revenue from related parties, but we

anticipate that such hardware and software related party revenue is likely to fluctuate from year to year.

After we achieved

business entrance certification in the name of Recon and could cooperate with oilfield customers directly two years ago, we no

longer required the services of a related party with such certification and, accordingly, revenue from related-parties would decrease.

As long as the local agency still purchases automation products from Recon through our related parties, we will continue to recognize

revenue from related parties, but we anticipate that such hardware and software related party revenue is likely to fluctuate from

year to year.

Major part of related party hardware revenue of this period was from increased requirement of system upgrading and

remote guidance related service from some other related clients other than those of same period last year.

3) Service business - non related parties.

Service revenue

for six months ended December 31, 2014 consisted mainly of minor maintenance services, which were provided upon request by customers.

Service revenue for nine

months ended March 31, 2015 consisted mainly of minor maintenance services, which were

provided upon request by customers.

4) Software business.

The software sales to non-related

parties decreased approximately ¥3.4 million ($0.6 million), mainly caused by reclassification of some company to non-related.

The software sales to non-related parties decreased

approximately ¥2.6 million ($0.4 million), mainly caused by reclassification of some

company sales to non-related.

5) Software business –

related parties.

six months ended December 31, 2013, we recorded software revenue of ¥1.4 million to a related party.

We record revenue as

software sales if (1) the customer signs a separate software contract with us, or (2) the customer accepts VAT invoices for software.

The amount of our revenues categorized as software sales may fluctuate because certain software may be sold with hardware at times

as a whole product and not separately priced.

During the nine months ended March 31, 2014 and 2015, we recorded software revenue

of ¥1.4 million and ¥1.1 million ($0.2 million) to a related party, respectively.

We record revenue as software sales if (1) the customer signs a separate software contract

with us, or (2) the customer accepts VAT invoices for software.

The amount of our revenues

categorized as software sales may fluctuate because certain software may be sold with

hardware at times as a whole product and not separately priced.

Cost and Margin

For the Six Months Ended

For the Nine Months Ended

Total revenues

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Our cost of revenues

decreased from approximately ¥36.0 million for the six months ended December 31, 2013 to approximately ¥16.0 million ($2.6

decreased from approximately ¥49.0 million for the nine months ended March 31, 2014 to approximately ¥29.8 million ($4.9

million) for the same period of 2015, a decrease of approximately ¥19.1 million ($3.1 million), or 39.1%.

This decrease was

mainly caused by lower revenue during the six months ended December 31, 2014 compared to the same period of 2013.

mainly caused by lower revenue during the nine months ended March 31, 2015 compared to the same period of 2014.

As a percentage

of revenues, our cost of revenues changed slightly from 64.4% in 2014 to 65.3% in 2015.

Gross profit .

Our gross profit decreased to approximately ¥9.6 million ($1.6 million) for the six months ended December 31, 2014 from approximately

¥21.8 million for the same period in 2013.

Our gross profit as a percentage of revenue decreased to 37.4% for the six months

ended December 31, 2014 from 37.8% for the same period in 2013.

This was mainly due to decreased hardware revenue during the six

months ended December 31, 2014 as compared to the same period last year when we had higher software revenue with higher gross

margins during the six months ended December 31, 2013.

Our gross profit decreased to approximately ¥15.8 million ($2.6 million) for the nine months ended March 31,

2015 from approximately ¥27.1 million for the same period in 2014.

Our gross profit as a percentage of revenue decreased

to 34.7% for the nine months ended March 31, 2015 from 35.6% for the same period in 2014.

This was mainly due to decreased

hardware revenue during the nine months ended March 31, 2015 as compared to the same period last year and also had higher

software revenue with higher gross margins during the nine months ended March 31, 2014.

In more detail:

For the Six Months Ended

For the Nine Months Ended

Total revenues-hardware and software- non related parties

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(11,552,495 )

The revenue decrease from hardware and

software to non-related parties of ¥30.6 million was mainly due to the decrease from the furnaces sales and automation business

in the six months ended December 31, 2014.

The gross profit from the hardware and software sales to non-related parties decreased

¥11.0 million ($1.8 million) compared to the same period of last year.

For the Six Months Ended

The revenue from hardware and software

to non-related parties decreased by approximately ¥30.2 million was mainly due to the decrease from the furnaces sales and

automation business in the nine months ended March 31, 2015.

The gross profit from the hardware and software sales to non-related

parties decreased by approximately ¥11.6 million ($1.9 million) compared to the same period of last year.

For the Nine Months Ended

Total revenues-hardware and software - related parties

Cost of revenues -hardware and software - related parties

Cost of revenue from hardware

and software-related parties decreased as revenue decreased.

The decrease in gross profit was mainly due to

revenue decrease as we developed business directly with oilfield, rather than cooperation with the previous related party.

For the Six Months Ended

Cost of revenue from hardware and software-related

parties decreased as revenue increased.

Gross profit increased mainly due to most of the revenues to related parties were automation

upgrad and maintaining service sales with higher gross profit.

For the Nine Months Ended

Total revenues-service

Cost of revenues -service

revenue for six months ended December 31, 2014 consisted mainly of minor maintenance services, which were provided upon request

by customers.

revenue for nine months ended March 31, 2014 and 2015 consisted mainly of minor maintenance services, which were provided upon

request by customers.

Operating Expenses

For the Six Months Ended

For the Nine Months Ended

Selling and distribution expenses

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facilities and depreciation expenses.

Selling expenses decreased by 45.8%, from approximately ¥3.6 million for the six months

ended December 31, 2013 to approximately ¥2.0 million ($0.3 million) for the same period of 2014.

Selling expenses decreased by 34.8%, from approximately ¥4.7 million for the nine months

ended March 31, 2014 to approximately ¥3.1 million ($0.5 million) for the same period of 2015.

This decrease was primarily

from decreased service fee, shipping fee and traveling expenses.

Selling expenses were 6.2% of total revenues in the six months

ended December 31, 2013 and 7.6% of total revenues in the same period of 2014.

from decreased shipping fees, service fees and traveling expenses.

Selling expenses were 6.2% of total revenues in the nine months

ended March 31, 2014 and 6.7% of total revenues in the same period of 2015.

and administrative expenses .

General and administrative expenses consist primarily of costs in human resources, facilities

costs, depreciation expenses, professional advisor fees, audit fees, option expenses stock based comprehensive expense and other

miscellaneous.

expenses incurred in connection with general operations.

General and administrative expenses increased by 20.7%,

or ¥1.3 million ($0.2 million), from approximately ¥6.5 million in the

six months ended December 31, 2013 to approximately ¥7.8 million ($1.3 million)

in the same period of 2014.

General and administrative expenses were 11.2% of total revenues in 2013 and 30.4% of total revenues

The increase in general and administrative expenses was mainly due to increase in consulting fee, salaries, share-based

compensation and traveling expenses.

General and administrative expenses consist primarily of costs in human resources,

facilities costs, depreciation expenses, professional advisor fees, audit fees, option expenses stock based comprehensive

expense and other miscellaneous expenses incurred in connection with general operations.

General and administrative expenses

increased by 14.7%, or approximately ¥1.5 million ($0.3 million), from

approximately ¥10.5 million in the nine months ended March 31, 2014 to approximately ¥12.0

million ($2.0 million) in the same period of 2015.

General and administrative

expenses were 13.7% of total revenues in 2014 and 26.3% of total revenues in 2015.

The increase in general and administrative

expenses was mainly due to an increase in consulting fees, salaries, and share-based compensation.

Research and development

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Research and development expenses decreased by 40.0%, from approximately ¥4.1 million

for the six months ended December 31, 2013 to approximately ¥1.9 million ($0.3 million) for the same period of 2014.

decrease was primarily due to the Company spending less research and development expenses on furnaces.

For the Six Months Ended

for the nine months ended March 31, 2014 to approximately ¥2.4 million ($0.4 million) for the same period of 2015.

This decrease

was primarily due to lower research activities on our furnaces products.

We enhanced our cost/expense control this year and may

continue to be strict on our R&D project selection and implementation.

For the Nine Months Ended

Income (loss) from operations

(10,458,215 )

Interest and other income (expense)

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Net income attributable to non-controlling interest

Net income attributable to Recon Technology, Ltd

Net income (loss) attributable to Recon Technology, Ltd

Income (loss)

from operations .

Loss from operations was approximately ¥2.1 million ($0.3 million) for the six months ended December

Loss from operations was approximately ¥1.7 million ($0.3 million) for the nine months ended March 31,

2015, compared to income of ¥7.8 million for the same period of 2014.

1 unchanged sentence

primarily to the decreased revenue and increases in general and administrative expenses.

Interest and other

income (expense).

Interest and other income was approximately ¥4.3 million ($0.7 million) for the six months ended December

31, 2014, compared to interest and other expense of ¥0.2 million for the same period of 2013.

The ¥4.5 million ($0.7 million)

increase in interest and other income was primarily due to changes in the fair value of warrant liability and a decrease in loss

from investment, offset by a decrease in subsidy income .

other income (expense).

Interest and other income was approximately ¥2.3 million ($0.4 million) for the nine months

ended March 31, 2015, compared to interest and other expense of ¥1.2 million for the same period of 2014.

million ($0.6 million) increase in interest and other income was primarily due to changes in the fair value of our warrant

liability and a decrease in loss from an investment, offset by a decrease in subsidy income and loss on warrants

Provision for

Provision for income tax for the six months ended December 31, 2013 was approximately ¥1.5 million and ¥0.6

million ($0.1 million) for the six months ended December 31, 2014.

This decrease of provision for income tax was mainly due to

the pre-consolidation income from operations in subsidiaries in China on which we must pay income tax decreased for the six months

ended December 31, 2014.

As a result of the factors described above, net income was approximately ¥1.6 million ($0.3 million) for the six months ended

December 31, 2014, a decrease of approximately ¥5.2 million ($0.8 million) from net income of ¥6.8 million for the same

period of 2013.

Net income attributable

to Recon Technology, Ltd .

As a result of the factors described above, net income attributable to ordinary shareholders was

approximately ¥1.2 million ($0.2 million) for the six months ended December 31, 2014, a decrease of approximately ¥4.7

Provision for income tax for the nine months ended March 31, 2014 was approximately ¥1.6 million and ¥0.5

million ($0.1 million) for the nine months ended March 31, 2015.

This decrease of provision for income tax was mainly due to the

pre-consolidation income from operations in subsidiaries in China on which we must pay income tax, decreased for the nine months

ended March 31, 2015.

As a result of the factors described above, net income was approximately ¥0.2 million ($30,000) for the nine months ended

March 31, 2015, a decrease of approximately ¥4.8 million ($0.8 million) from net income of approximately ¥5.0 million

for the same period of 2014.

Net income (loss)

attributable to Recon Technology, Ltd .

As a result of the factors described above, net loss attributable to ordinary shareholders

was approximately ¥0.4 million ($0.1 million) for the nine months ended March 31, 2015, a decrease of approximately ¥4.3

million ($0.7 million) from net income attributable to ordinary shareholders of approximately ¥3.9 million for same period

10 unchanged sentences

the impact of our capital structure and asset base from our operating results.

For the Six Months Ended

For the Nine Months Ended

Reconciliation of Adjusted EBITDA to Net Income

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Restricted shares issued for consulting services

Loss from warrant redemptions

Stock compensation expense

2 unchanged sentences

Adjusted EBITDA decreased

by approximately ¥10 million ($1.6 million) to approximately income of ¥1.2 million ($0.2 million) for the six months

ended December 31, 2014 compared to approximately of ¥11.2 million income for the same period in 2013.

due to decreased revenue and increased expenses.

Adjusted Net Income and Adjusted Earnings Per Share

For the Six Months Ended

Reconciliation of Net Income attributable to Recon Technology, Ltd to Adjusted Net Income (loss) attributable to Recon Technology, Ltd

Net income attributable to Recon Technology, Ltd

by approximately ¥8.8 million ($1.4 million) to income of approximately ¥2.9 million ($0.5 million) for the nine months

ended March 31, 2015 compared to income of approximately ¥11.7 million income for the same period in 2014.

This was mainly

due to decreased revenue, non-operation income related to warrant and warrant redemptions and increased share-based expenses.

Adjusted Net Income and Adjusted Earnings (Loss) Per Share

For the Nine Months Ended

Reconciliation of Net Income (loss) attributable to Recon Technology, Ltd to Adjusted Net Income (loss) attributable to Recon Technology, Ltd

Net income (loss) attributable to Recon Technology, Ltd

Noncash items (A) :

2 unchanged sentences

Restricted shares issued for consulting services

Loss from warrants redemption

Stock compensation expense

Adjusted net income(loss) attributable to Recon Technology, Ltd

Adjusted net income attributable to Recon Technology, Ltd

Reconciliation of U.S.

GAAP Earnings (Loss) Per Share to Non U.S.

GAAP Adjusted Earnings (loss) Per Share

GAAP earnings per share

Impact of special items on earnings per share

GAAP Adjusted Earnings Per Share

GAAP earnings (loss) per share

Impact of noncash items on earnings per share

GAAP adjusted earnings per share

Weighted - average shares -diluted

(A) Noncash items are certain expenses that are included in our U.S.

GAAP reported results.

no income tax benefit associated with the noncash items.

The non-GAAP financial measures are provided to enhance investors' overall

understanding of Recon's current financial performance.

(A) Noncash items are certain non-cash expenses that are included

4 unchanged sentences

Liquidity and Capital Resources

Cash and Cash

Equivalents .

Cash and cash equivalents are comprised of cash on hand, demand deposits and highly liquid short-term debt investments

with stated maturities of no more than six months.

As of December 31, 2014, we had cash and cash equivalents in the amount of

approximately ¥5.0 million ($0.8 million).

Cash and Cash Equivalents .

Cash and cash equivalents are comprised of cash on hand, demand deposits and highly liquid short-term debt investments with stated

maturities of no more than six months.

As of March 31, 2015, we had cash and cash equivalents in the amount of approximately ¥4.7

million ($0.8 million).

As of June 30, 2014, we had cash and cash equivalents in the amount of approximately ¥18.1 million

($2.9 million).

Indebtedness .

As of December 31, 2014, except for approximately ¥9.6 million ($1.6 million) of short-term borrowings from related parties,

As of March 31, 2015, except for approximately ¥10.2 million ($1.7 million) of short-term borrowings from related parties,

and ¥8.0 million ($1.3 million) in commercial loans from local banks, we did not have any finance leases or purchase commitments,

26 unchanged sentences

market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Capital Resources .

To date we have financed our operations primarily through cash flows from operations, bank loans and short-term borrowings.

of December 31, 2014, we had total assets of approximately ¥156.1 million ($25.4 million), which includes cash of approximately

¥5.0 million ($0.8 million), net accounts receivable from third parties of approximately ¥50.3 million ($8.2 million),

and net accounts receivable from related parties of approximately ¥3.0 million ($0.5 million).

Working capital amounted to

approximately ¥87.1 million ($14.2 million), and shareholders’

To date we have financed our operations primarily through cash flows from operations, bank loans and

short-term borrowings and loans from related parties including our Chief Technology Officer.

As of March 31, 2015, we had total

assets of approximately ¥161.0 million ($26.4 million), which includes cash of approximately ¥4.7 million ($0.8

million), net accounts receivable from third parties of approximately ¥56.4 million ($9.2 million), and net accounts

receivable from related parties of approximately ¥4.9 million ($0.8 million).

Working capital amounted to approximately

¥90.0 million ($14.7 million), and shareholders’

equity amounted to approximately ¥100.5 million ($16.4

Cash from Operating

Net cash used in operating activities was approximately ¥15.4 million ($2.5 million) for the six months ended

December 31, 2014.

This was a decrease of approximately ¥8.6 million ($1.4 million) compared to net cash used in operating

activities of approximately ¥6.8 million for the six months ended December 31, 2013.

Net cash used in operating activities was approximately ¥16.2 million ($2.7 million) for the nine months ended

March 31, 2015.

This was an increase of approximately ¥0.9 million ($0.2 million) compared to net cash used in operating activities

of approximately ¥15.3 million for the nine months ended March 31, 2014.

In more detail:

Net cash used in

operating activities totaled approximately ¥15.4 million for the six months ended December 31, 2014, are primarily attributable

to net income adjusted to reconcile to net cash provided by operating activities of ¥1.6 million, which primarily included

a ¥1.2 million of restricted shares issued to consulting firm, a ¥1.1 million of share based compensation and an adjustment

for a ¥4.1 million change in fair value of warrant liability.

Net cash used in changes in operating assets and liabilities

resulted in a net cash use of ¥15.4 million, which mainly due to a ¥4.8 million change in inventory, a ¥6.2 million

change in other receivable, a ¥3.0 million change in notes receivable, a ¥1.9 million change in prepaid expense, a ¥2.5

million change in accounts receivable and a ¥1.2 million change in deferred income, offset by a ¥2.6 million change in

purchase advance and a ¥1.3 million change in trade payable and other payable.

Our net cash used in operating activities were

primarily for purchase of inventories for projects in the upcoming quarters.

Net cash used in operating

activities totaled approximately ¥16.2 million for the nine months ended March 31, 2015, and was primarily attributable to

net income adjusted to reconcile to net cash used in operating activities of ¥0.2 million, which primarily included ¥2.0

million of share based compensation, an adjustment for a ¥4.1 million change in fair value of a warrant liability and a ¥1.9

million loss from warrant redemptions.

Net cash used in changes in operating assets and liabilities resulted in a net cash used

of ¥17.9 million, which was mainly due to a ¥10.4 million change in accounts receivable, a ¥4.8 million change in inventory,

a ¥5.6 million change in other receivable, a ¥1.6 million change in prepaid expense, and a ¥1.6 million change in deferred

income, offset by a ¥1.8 million change in purchase advance and a ¥6.0 million change in trade payable and other payable.

Our net cash used in operating activities were primarily for purchases of inventories for projects in the upcoming quarters.

Cash from Investing

Net cash used in investing activities was approximately ¥0.2 million ($28,000) for the six months ended December

31, 2014, an increase of ¥0.1 million ($22,000) from ¥36,000 for the same period of 2013.

The increase was due to an increase

in the purchase of property and equipment and offset by the proceeds from disposal of equipment.

Net cash used in investing activities was approximately ¥0.2 million ($26,000) for the nine months ended March

31, 2015, which remained flat as compared to the same period of 2014.

A ¥0.3 million increase in the purchase of property and

equipment was offset by the proceeds from disposal of equipment.

Cash from Financing

Net cash provided by financing activities amounted to ¥2.4 million ($0.4 million) for the six months ended

December 31, 2014, compared to cash flows provided by financing activities of approximately ¥16.1 million for the same period

During the six-month period ended December 31, 2014, we repaid ¥2.0 million ($0.3 million) in short term bank loans

and received ¥4.4 million ($0.7 million) net proceeds from a related party.

Total working capital as of December 31, 2014 amounted to approximately ¥87.1 million ($14.2

million), compared to approximately ¥83.1 million as of June 30, 2014.

Total current assets as of December 31, 2014

amounted to approximately ¥136.1 million ($22.2 million), an increase of approximately ¥2.7 million ($0.4 million)

compared to approximately ¥133.4 million at June 30, 2014.

The increase in total current assets at December 31, 2014

compared to June 30, 2014 was mainly due to an increase in trade accounts receivable, inventory and other receivables.

expect that our current working capital is sufficient to maintain our routine operation for the next twelve months without

extraordinary business expansion.

Net cash provided by financing activities amounted to ¥3.0 million ($0.5 million) for the nine months ended

March 31, 2015, as compared to cash flows provided by financing activities of approximately ¥11.9 million for the same period

During the nine-month period ended March 31, 2015, we repaid ¥2.0 million ($0.3 million) in short term bank loans

and received ¥5.0 million ($0.9 million) of net proceeds from a related party.

Working Capital .

Total working capital as of March 31, 2015 amounted to approximately ¥90.0 million ($14.7 million), compared to approximately

¥83.1 million as of June 30, 2014.

Total current assets as of March 31, 2015 amounted to approximately ¥141.8 million ($23.2

million), an increase of approximately ¥8.4 million ($1.5 million) compared to approximately ¥133.4 million at June 30,

The increase in total current assets at March 31, 2015 compared to June 30, 2014 was mainly due to an increase in trade accounts

receivable, inventory and other receivables.

Current liabilities

amounted to approximately ¥49.0 million ($8.0 million) at December 31, 2014, in comparison to approximately ¥50.3 million

amounted to approximately ¥51.7 million ($8.5 million) at March 31, 2015, in comparison to approximately ¥50.3 million

at June 30, 2014.

This decrease of liabilities was attributable mainly to a decrease in warrant liability and short-term bank

loans, offset by an increase in trade accounts payable and short-term borrowings –

This decrease of liabilities was attributable mainly to a decrease in warrant liability and short-term bank loans,

offset by an increase in trade accounts payable and short-term borrowings –

related party.

Quantitative and Qualitative Disclosures about Market

Our management believes that our current operations can satisfy our daily working capital needs.

We may also raise

capital through public offering or private placement to finance further expansion of our business and to consummate any

possible merge and acquisition, if necessary.

Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements