What changed in this filing

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Item 5. Other Information

2016-02-16 compared with 2015-11-13 · 661 added, 658 removed, 464 unchanged (74% of the section changed)

67 unchanged sentences

Li Hongqi (1)

Share Purchase Agreement, dated as of December 1, 2015, by and between Recon Technology Ltd., Recon Hengda

Technology (Beijing) Co., Ltd., Qinghai Hua You Downhole Technologies Co., Ltd.

and its shareholders.

Equity Interest Purchase Agreement, dated as of December 1, 2015, by and between Recon Hengda Technology (Beijing) Co., Ltd., Haung

Baokun, Shi Jing and Li Suzhen.

Equity Pledge

Agreement, dated as of December 1, 2015, by and among Recon Hengda Technology (Beijing) Co., Ltd., Huang Boakun, Shi Jing and Li

Attorney of Huang Baokun.

Attorney of Shi Jing.

Attorney of Li Suzhen.

Technical Consulting and Service Agreement, dated as of December 1, 2015, between Recon Hengda Technology (Beijing) Co., Ltd.

Qinghai Hua You Downhole Technologies Co., Ltd.

Subsidiaries of the Registrant (2)

15 unchanged sentences

(2) Incorporated by reference to the Company’s Quarterly Report on Form 10-Q/A, filed on January 31, 2012.

(3) Incorporated by reference to the Company’s Current

Reprot on Form 8-K filed on December 7, 2015.

(4) Filed herewith.

In accordance with the requirements

of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly

In accordance with the requirements of

the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RECON TECHNOLOGY, LTD

November 13, 2015

Chief Financial Officer

3 unchanged sentences

RECON TECHNOLOGY, LTD

November 13, 2015

February 16, 2016

/s/ Yin Shen ping

2 unchanged sentences

RECON TECHNOLOGY,

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Unaudited Condensed

Consolidated Balance Sheets as of June 30, 2015 and September 30, 2015

Unaudited Condensed

Consolidated Statements of Operations and Comprehensive Loss for the three months ended September 30, 2014 and 2015

Unaudited Condensed

Consolidated Statements of Cash Flows for the three months ended September 30, 2014 and 2015

Notes to Unaudited

Condensed Consolidated Financial Statements

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2015

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the six and three months ended December 31, 2014 and 2015

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2014 and 2015

Notes to Unaudited Condensed Consolidated Financial Statements

RECON TECHNOLOGY, LTD

CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED BALANCE SHEETS

As of Jun 30,

As of September 30,

As of Dec 31,

Current assets

32 unchanged sentences

dollar par value, 100,000,000 shares authorized;

5,427,946 and 5,438,763 shares issued and outstanding as of June 30, 2015 and September 30, 2015, respectively)

5,427,946 and 5,804,005 shares issued and outstanding as of June 30, 2015 and December 31, 2015, respectively)

Additional paid-in capital

7 unchanged sentences

Total Liabilities and Equity

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements

RECON TECHNOLOGY,

Consolidated Statements of OPERATIONS and Comprehensive LOSS

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE LOSS

For the six months ended

For the three months ended

September 30,

Hardware and software

Hardware and software - related parties

Total revenues

1 unchanged sentence

Hardware and software

Provision for slow moving inventories

Hardware and software - related parties

Total cost of revenues

3 unchanged sentences

Operating expenses

Loss from operations

Income (loss) from operations

(11,955,822 )

Other income (expenses)

4 unchanged sentences

Loss from foreign currency exchange

Other expense

Other income (expense)

Loss before income tax

Other income (expense)

Income (loss) before income tax

(12,235,955 )

Provision (benefit) for income tax

Net loss attributable to non-controlling interest

Net loss attributable to Recon Technology, Ltd

Net Income (loss)

(11,367,782 )

Comprehensive loss

Net income attributable to non-controlling interest

Net Income (loss) attributable to Recon Technology, Ltd

(11,367,782 )

$ (1,751,395 )

Comprehensive income (loss)

Net income (loss)

(11,367,782 )

Foreign currency translation adjustment

Comprehensive loss

Comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to Recon Technology, Ltd

Comprehensive income (loss)

(11,244,992 )

Loss per common share - basic

Comprehensive income attributable to non-controlling interest

Comprehensive income (loss) attributable to Recon Technology, Ltd

(11,258,635 )

$ (1,734,579 )

Earnings (loss) per common share - basic

Earnings (loss) per common share - diluted

Weighted - average shares -basic

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements

RECON TECHNOLOGY,

Consolidated Statements of Cash Flows

For the three months ended September

Weighted - average shares -diluted

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements

RECON TECHNOLOGY, LTD

CONDENSED CONSOLIDATED STATEMENTS

OF CASH FLOWS

For the six months ended December 31,

Cash flows from operating activities:

Net income (loss)

(11,367,782 )

Adjustments to reconcile net loss to net cash used in operating activities:

Provision for (recovery of) doubtful accounts

$ (1,751,395 )

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

Loss (Gain) from disposal of equipment

Provision for doubtful accounts

Provision for slow moving inventories

6 unchanged sentences

Trade accounts receivable

(13,793,992 )

Trade accounts receivable-related parties

14 unchanged sentences

Taxes payable

Net cash used in operating activities

Net cash provided by (used in) operating activities

(15,389,618 )

Cash flows from investing activities:

Purchase of property and equipment

Proceeds from disposal of equipment

Net cash used in investing activities

3 unchanged sentences

Repayment of short-term borrowings-related parties

(15,522,619 )

Proceeds from sale of common stock, net of issuance costs

Net cash used in financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate fluctuation on cash and cash equivalents

7 unchanged sentences

Non-cash investing and financing activities

Cancelation of prior issuance of 40,625 shares of common stock for professional services

Issuance of common stock to prepay professional services

Non-cash transaction for AR and loan payable offset

The accompanying notes are an integral part

of these unaudited condensed consolidated financial statements

The accompanying notes are an integral part of these unaudited

condensed consolidated financial statements.

RECON TECHNOLOGY, LTD

1 unchanged sentence

FINANCIAL STATEMENTS

AND NATURE OF OPERATIONS

ORGANIZATION AND NATURE OF OPERATIONS

Organization –

Recon Technology, Ltd (the “Company”)

was incorporated under the laws of the Cayman Islands on August 21, 2007 by Mr.

Yin Shenping, Mr.

Technology, Ltd (the “Company”) was incorporated under the laws of the Cayman Islands on August 21, 2007 by Mr.

Shenping, Mr.

Chen Guangqiang and Mr.

(the “Founders”) as a limited liability company.

The Company provides specialized oilfield equipment, automation systems,

tools, chemicals and field services to petroleum companies mainly in the People’s Republic of China (the “PRC”).

Its wholly owned subsidiary, Recon Technology Co., Limited (“Recon-HK”) was incorporated on September 6, 2007 in Hong

Other than the equity interest in Recon-HK, the Company does not own any assets or conduct any operations.

On November 15,

2007, Recon-HK established one wholly owned subsidiary, Jining Recon Technology Ltd.

(“Recon-JN”) under the laws of

Other than the equity interest in Recon-JN, Recon-HK does not own any assets or conduct any operations.

19, 2010 , Recon-CI established one wholly owned subsidiary, Recon Investment Ltd.

(“Recon-IN”) under the laws

Other than the equity interest in Recon-IN, Recon-CI does not own any assets or conduct any operations.

On January 18, 2014,

Recon-IN established one wholly owned subsidiary, Recon Hengda Technology (Beijing) Co., Ltd.

(“Recon-BJ”) under the

laws of the PRC.

Other than the equity interest in Recon-BJ, Recon-IN does not own any assets or conduct any operations.

The Company conducts its business through the following PRC legal

entities that are consolidated as variable interest entities (“VIEs”) and operate in the Chinese oilfield equipment

& service industry:

Beijing BHD Petroleum Technology Co., Ltd.

Li Hongqi (the “Founders”) as a limited liability company.

The Company provides

specialized oilfield equipment, automation systems, tools, chemicals and field services to petroleum companies mainly in the People’s

Republic of China (the “PRC”).

Its wholly owned subsidiary, Recon Technology Co., Limited (“Recon-HK”)

was incorporated on September 6, 2007 in Hong Kong.

Other than the equity interest in Recon-HK, the Company does not own any assets

or conduct any operations.

On November 15, 2007, Recon-HK established one wholly owned subsidiary, Jining Recon Technology Ltd.

(“Recon-JN”) under the laws of the PRC.

Other than the equity interest in Recon-JN, Recon-HK does not own any assets

or conduct any operations.

On November 19, 2010 , Recon-CI established one wholly owned subsidiary, Recon Investment

(“Recon-IN”) under the laws of HK.

Other than the equity interest in Recon-IN, Recon-CI does not own any assets

or conduct any operations.

On January 18, 2014, Recon-IN established one wholly owned subsidiary, Recon Hengda Technology (Beijing)

(“Recon-BJ”) under the laws of the PRC.

Other than the equity interest in Recon-BJ, Recon-IN does not own

any assets or conduct any operations.

The Company conducts its business through

the following PRC legal entities that are consolidated as variable interest entities (“VIEs”) and operate in the Chinese

oilfield equipment & service industry:

BHD Petroleum Technology Co., Ltd.

(“BHD”), and

Nanjing Recon Technology Co., Ltd.

Recon Technology Co., Ltd.

(“Nanjing Recon”).

On January 29, 2015, the Company increased its authorized shares

from 25,000,000 to 100,000,000 ordinary shares.

Chinese laws and regulations currently do not prohibit or restrict

foreign ownership in petroleum businesses.

However, Chinese laws and regulations do prevent direct foreign investment in certain

However, on January 1, 2008, to protect the Company’s shareholders from possible future foreign ownership restrictions,

the Founders, who also held the controlling interest of BHD and Nanjing Recon, reorganized the corporate and shareholding structure

of these entities by entering into certain exclusive agreements with Recon-JN, which entitles Recon-JN to receive a majority of

the residual returns.

On May 29, 2009 Recon-JN and BHD and Nanjing Recon entered into an operating agreement to provide full guarantee

for the performance of such contracts, agreements or transactions entered into by BHD and Nanjing Recon.

As a result of the new

agreement, Recon-JN absorbs 100% of the expected losses and receives 90% of the expected gains of BHD and Nanjing Recon, which

resulted in Recon-JN being the primary beneficiary of these Companies.

Recon-JN also entered into Share Pledge Agreements with the Founders,

who pledged all their equity interest in these entities to Recon-JN.

The Share Pledge Agreements, which were entered into by each

Founder, pledged each of the Founders’

equity interest in BHD and Nanjing Recon as a guarantee for the service payment under

the Service Agreement.

The Service Agreement, entered into on January 1, 2008, between

Recon-JN and BHD and Nanjing Recon, states that Recon-JN will provide technical consulting services to BHD and Nanjing Recon in

exchange for 90% of their annual net profits as a service fee, which is to be paid quarterly.

In addition, Recon-HK entered into Option Agreements to allow Recon-HK

to acquire the Founders’

On January 29, 2015, the Company increased

its authorized shares from 25,000,000 to 100,000,000 ordinary shares.

Chinese laws and regulations

currently do not prohibit or restrict foreign ownership in petroleum businesses.

However, Chinese laws and regulations do

prevent direct foreign investment in certain industries.

However, on January 1, 2008, to protect the Company’s

shareholders from possible future foreign ownership restrictions, the Founders, who also held the controlling interest of BHD

and Nanjing Recon, reorganized the corporate and shareholding structure of these entities by entering into certain exclusive

agreements with Recon-JN, entitling Recon-JN to receive a majority of the residual returns.

On May 29, 2009 Recon-JN, BHD

and Nanjing Recon entered into an operating agreement to provide full guarantee for the performance of such contracts,

agreements or transactions entered into by BHD and Nanjing Recon.

As a result of the new agreement, Recon-JN absorbs 100% of

the expected losses and receives 90% of the expected gains of BHD and Nanjing Recon, which resulted in Recon-JN being the

primary beneficiary of these Companies.

Recon-JN also entered into Share Pledge

Agreements with the Founders, who pledged all their equity interest in these entities to Recon-JN.

The Share Pledge Agreements,

which were entered into by each Founder, pledged each of the Founders’

equity interest in BHD and Nanjing Recon as a guarantee

for the service payment under the Service Agreement.

The Service Agreement, entered into on

January 1, 2008, between Recon-JN and BHD and Nanjing Recon, states that Recon-JN will provide technical consulting services to

BHD and Nanjing Recon in exchange for 90% of their annual net profits as a service fee, which is to be paid quarterly.

In addition, Recon-HK entered into Option

Agreements to allow Recon-HK to acquire the Founders’

interest in these entities if or when permitted by the PRC laws.

Based on these exclusive agreements, the Company consolidated BHD

and Nanjing Recon as VIEs as required by Accounting Standards Codification (“ASC”) Topic 810, Consolidation because

the Company was the primary beneficiary of the VIEs.

Management makes ongoing reassessment of whether Recon-JN is the primary beneficiary

of BHD and Nanjing Recon.

Based on these exclusive agreements, the

Company consolidated BHD and Nanjing Recon as VIEs as required by Accounting Standards Codification (“ASC”) Topic 810,

Consolidation because the Company was the primary beneficiary of the VIEs.

Management makes ongoing reassessment of whether

Recon-JN is the primary beneficiary of BHD and Nanjing Recon.

RECON TECHNOLOGY, LTD

1 unchanged sentence

FINANCIAL STATEMENTS

On August 28, 2000, a Founder of the Company purchased a controlling

interest in BHD which was organized under the laws of the PRC on June 29, 1999.

Through December 15, 2010, the Founders held a

67.5% ownership interest in BHD.

On August 28, 2000, a Founder of the

Company purchased a controlling interest in BHD which was organized under the laws of the PRC on June 29, 1999.

December 15, 2010, the Founders held a 67.5% ownership interest in BHD.

From December 16, 2010 to June 30, 2012, Messers.

Yin Shenping and Chen Guangqiang held an 86.24%

ownership interest of BHD.

BHD was combined with the Company through the date of the exclusive agreements, and has been consolidated

and Chen held an 86.24% ownership interest of BHD.

BHD was combined with the Company through the date of the exclusive

agreements, and has been consolidated following January 1, 2008, the date of the agreements based on ASC Topic 810.

Company allocates profits and losses of 90% and 100%, respectively, based upon the control agreements.

Profits allocated to

the minority interest are the remaining amount (10%).

On July 4, 2003, Nanjing Recon was organized

under the laws of the PRC.

On August 27, 2007, the Founders of the Company purchased a majority ownership of Nanjing Recon from

a related party who was a majority owner of Nanjing Recon.

Through December 15, 2010, the Founders held an 80% ownership interest

in Nanjing Recon.

From December 16, 2010 to June 30, 2012, Messers.

Yin Shenping and Chen Guangqiang held an 80% ownership interest

in Nanjing Recon.

Nanjing Recon is combined with the Company through the date of the exclusive agreements, and is consolidated

following January 1, 2008, the date of the agreements based on ASC Topic 810.

1 unchanged sentence

100%, respectively, based upon the control agreements.

Profits allocated to the minority interest are the remaining amount (10%).

On July 4, 2003, Nanjing Recon was organized under the laws

On August 27, 2007, the Founders of the Company purchased a majority ownership of Nanjing Recon from a related party

who was a majority owner of Nanjing Recon.

Through December 15, 2010, the Founders held an 80% ownership interest in Nanjing Recon.

From December 16, 2010 to June 30, 2012, Messers.

Yin Shenping and Chen Guangqiang held an 80% ownership interest in Nanjing Recon.

Nanjing Recon is combined with the Company through the date of the exclusive agreements, and is consolidated following January

1, 2008, the date of the agreements based on ASC Topic 810.

The Company allocates profits and losses 90% and 100%, respectively,

based upon the control agreements.

Profits allocated to the non-controlling interest are the remaining amount

Nature of Operations –The Company engaged in (1) providing

equipment, tools and other hardware related to oilfield production and management, including simple installations in connection

with some projects;

(2) service to improve production and efficiency of exploited oil wells, and (3) developing and selling its

own specialized industrial automation control and information solutions.

The products and services provided by the Company include:

High-Efficiency Heating Furnaces - High-Efficiency Heating

Furnaces are designed to remove the impurities and to prevent solidification blockage in transport pipes carrying crude petroleum.

Crude petroleum contains certain impurities including water and natural gas, which must be removed before the petroleum can be

Multi-Purpose Fissure Shaper - Multipurpose fissure shapers

improve the extractors’

ability to test for and extract petroleum which requires perforation into the earth before any petroleum

extractor can test for the presence of oil.

Horizontal Multistage Fracturing related Service - The Company

mainly uses Baker Hughes FracPoint™

On December 1, 2015, the Company entered

into a share purchase agreement (the “SPA”) by and among Qinghai Hua You Downhole Technology Co., Ltd.

(“QHHY”),

China limited liability company, providing oilfield service in Qinghai province, the shareholders of QHHY, and Recon Hengda

Technology (Beijing) Co., Ltd., our wholly owned P.R.

China subsidiary (“Recon BJ”).

In conjunction with the SPA,

Recon BJ entered into a series of control agreements with QHHY and its shareholders related to the transfer of ownership in QHHY

The Control Agreements granting Recon BJ the right to provide exclusive technical consulting services to QHHY in

exchange for 100% of QHHY’s quarterly profit, among other things.

The Control Agreements will not become effective until

after the Company obtains shareholder approval of the transaction.

Nature of Operations –The

Company engaged in (1) providing equipment, tools and other hardware related to oilfield production and management, including simple

installations in connection with some projects;

(2) service to improve production and efficiency of exploited oil wells, and (3)

developing and selling its own specialized industrial automation control and information solutions.

The products and services provided

by the Company include:

High-Efficiency Heating Furnaces -

High-Efficiency Heating Furnaces are designed to remove the impurities and to prevent solidification blockage in transport pipes

carrying crude petroleum.

Crude petroleum contains certain impurities including water and natural gas, which must be removed before

the petroleum can be sold.

Multi-Purpose Fissure Shaper - Multipurpose

fissure shapers improve the extractors’

ability to test for and extract petroleum which requires perforation into the earth

before any petroleum extractor can test for the presence of oil.

Horizontal Multistage Fracturing related

Service - The Company mainly uses Baker Hughes FracPoint™

system and provides related service to oilfield companies.

The Baker Hughes FracPoint™

system provided a completion method using packers to isolate sections of the wellbore (stages) and frac sleeves to direct the frac

treatment to the desired stage.

The use of this type of completion eliminated the need for cementing the liner, coiled tubing operations,

and wireline operations, while significantly reducing overall pumping time.

Supervisory Control and Data Acquisition System (“SCADA”)

- SCADA is an industrial computerized process control system for monitoring, managing and controlling petroleum extraction.

integrates underground and aboveground activities of the petroleum extraction industry.

This system can help to manage the oil

extraction process in real-time to reduce the costs associated with extraction.

system provided a completion method using packers to isolate sections of the wellbore (stages)

and frac sleeves to direct the frac treatment to the desired stage.

The use of this type of completion eliminated the need for

cementing the liner, coiled tubing operations, and wireline operations, while significantly reducing overall pumping time.

Supervisory Control and Data Acquisition

System (“SCADA”) - SCADA is an industrial computerized process control system for monitoring, managing and controlling

petroleum extraction.

SCADA integrates underground and aboveground activities of the petroleum extraction industry.

can help to manage the oil extraction process in real-time to reduce the costs associated with extraction.

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

been consistently applied.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered

necessary for a fair presentation have been included.

These financial statements should be read in conjunction with the audited

financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2015.

results of operations for the interim periods presented may not be indicative of the operating results to be expected for the

Company’s fiscal year ending June 30, 2016..

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary

for a fair presentation have been included.

These financial statements should be read in conjunction with the audited financial

statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended June 30, 2015.

The results of

operations for the interim periods presented may not be indicative of the operating results to be expected for the Company’s

fiscal year ending June 30, 2016.

Principles of Consolidation –

The unaudited

condensed consolidated financial statements include the accounts of the Company, all the subsidiaries and VIEs of the Company.

All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon consolidation.

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Variable Interest Entities - A VIE is an entity

that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial

support or (ii) has equity investors who lack the characteristics of a controlling financial interest.

A VIE is consolidated by

its primary beneficiary.

The primary beneficiary has both the power to direct the activities that most significantly impact the

entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could

potentially be significant to the VIE.

The Company performs ongoing assessments to determine whether an entity should be considered

a VIE and whether an entity previously identified as a VIE continues to be a VIE and whether the Company continues to be the primary

Assets recognized as a result of consolidating VIEs do not represent

additional assets that could be used to satisfy claims against the Company’s general assets.

Conversely, liabilities recognized

as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets;

represent claims against the specific assets of the consolidated VIEs.

Currency Translation - The Company’s functional

currency is the Chinese Yuan (“RMB”) and the accompanying unaudited condensed consolidated financial statements have

been expressed in Chinese Yuan.

The unaudited condensed consolidated financial statements as of and for the three months ended

September 30, 2015 have been translated into United States dollars (“U.S.

dollars”) solely for the convenience of the

The translation has been made at the rate of ¥6.3538 = US$1.00, the approximate exchange rate prevailing on September

The unaudited condensed consolidated financial statements include the accounts of the Company, all the subsidiaries and

VIEs of the Company.

All transactions and balances between the Company and its subsidiaries and VIEs have been eliminated upon

consolidation.

Variable Interest Entities -

A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional

subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest.

VIE is consolidated by its primary beneficiary.

The primary beneficiary has both the power to direct the activities that most significantly

impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity

that could potentially be significant to the VIE.

The Company performs ongoing assessments to determine whether an entity should

be considered a VIE and whether an entity previously identified as a VIE continues to be a VIE and whether the Company continues

to be the primary beneficiary.

Assets recognized as a result of consolidating

VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets.

liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general

rather, they represent claims against the specific assets of the consolidated VIEs.

Currency Translation - The

Company’s functional currency is the Chinese Yuan (“RMB”) and the accompanying unaudited condensed consolidated

financial statements have been expressed in Chinese Yuan.

The unaudited condensed consolidated financial statements as of and for

the three months ended December 31, 2015 have been translated into United States dollars (“U.S.

dollars”) solely for

the convenience of the readers.

The translation has been made at the rate of ¥6.4907 = US$1.00, the approximate exchange rate

prevailing on December 31, 2015.

These translated U.S.

dollar amounts should not be construed as representing Chinese Yuan amounts or that the Chinese

Yuan amounts have been or could be converted into U.S.

Estimates and assumptions - The preparation of the

consolidated financial statements in conformity with U.S.

GAAP requires that management make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial

statements and the reported amounts of revenues and expenses during the reporting periods.

Estimates are adjusted to reflect

actual experience when necessary.

Significant accounting estimates reflected in the Company’s consolidated financial statements

include revenue recognition, allowance for doubtful accounts, allowance for inventory, deferred taxes, warrants liabilities, the

useful lives of property and equipment and the fair value of share- based payments.

Since the use of estimates is an integral component

of the financial reporting process, actual results could differ from those estimates.

Fair Values of Financial Instruments - The US GAAP

accounting standards regarding fair value of financial instruments and related fair value measurements define fair value, establish

a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable

inputs when measuring fair value.

The three levels of inputs are defined as follows:

dollar amounts should not be construed as representing Chinese Yuan amounts

or that the Chinese Yuan amounts have been or could be converted into U.S.

Estimates and assumptions -

The preparation of the consolidated financial statements in conformity with U.S.

GAAP requires that management make estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the

dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

are adjusted to reflect actual experience when necessary.

Significant accounting estimates reflected in the Company’s consolidated

financial statements include revenue recognition, allowance for doubtful accounts, allowance for inventory, deferred taxes, warrants

liabilities, the useful lives of property and equipment and the fair value of share- based payments.

Since the use of estimates

is an integral component of the financial reporting process, actual results could differ from those estimates.

Fair Values of Financial Instruments

- The US GAAP accounting standards regarding fair value of financial instruments and related fair value measurements define fair

value, establish a three-level valuation hierarchy that requires an entity to maximize the use of observable inputs and minimize

the use of unobservable inputs when measuring fair value.

The three levels of inputs are defined

Level 1 inputs to the valuation

3 unchanged sentences

asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to the

valuation methodology are unobservable.

The carrying amounts reported in the consolidated balance sheets for trade accounts receivable, other

receivables, purchase advances, trade accounts payable, accrued liabilities, advances from customers, short-term bank loan and

short-term borrowings approximate fair value because of the immediate or short-term maturity of these financial instruments.

borrowings approximate fair value because the interest rate charged approximates the market rate.

Long-term other receivables approximate

fair value because interest rate approximates the market rate.

Long-term investment is measured at fair value

which was determined to be zero during the three months ended September 30, 2015 using level 1 inputs.

(See Note 8.)

RECON TECHNOLOGY, LTD

1 unchanged sentence

FINANCIAL STATEMENTS

The fair value of the warrants liability was

determined using the Black-Scholes Model, as Level 2 inputs (See Note 13).

Level 3 inputs to

the valuation methodology are unobservable.

The carrying amounts reported in the consolidated

balance sheets for trade accounts receivable, other receivables, purchase advances, trade accounts payable, accrued liabilities,

advances from customers, short-term bank loan and short-term borrowings approximate fair value because of the immediate or short-term

maturity of these financial instruments.

It was impracticable to estimate the fair value of long-term other receivables, because

this is due from the Company’s former VIE and there are no comparable markets for receivables with similar terms.

investment is measured at fair value which was determined to be zero during the six months ended December 31, 2015 using level

(See Note 8.)

The fair value of the warrants liability

was determined using the Black-Scholes Model, as Level 2 inputs (See Note 13).

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 original maturities of no more than six months.

Since a majority of

the company’s bank accounts are located in the PRC, those bank balances are uninsured.

Trade Accounts and Other Receivables - Accounts

receivable are carried at original invoiced amounts less a provision for any potential uncollectible amounts.

Accounts are considered

past due when the related receivables are more than a year old.

Provision is made against trade accounts and other receivables

to the extent they are considered to be doubtful.

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

original maturities of no more than six months.

Since a majority of the bank accounts are located in the PRC, those bank balances

are uninsured.

Trade Accounts and Other Receivables

- Accounts receivable are carried at original invoiced amount less a provision for any potential uncollectible amounts.

are considered past due when the related receivables are more than a year old.

Provision is made against trade accounts and other

receivables to the extent they are considered to be doubtful.

Accounts are written off after extensive efforts at collection.

Other receivables

arise from transactions with non-trade customers.

Purchase Advances - Purchase advances are the amounts

prepaid to suppliers for purchases of inventory and are recognized as inventory when the final amount is paid to the suppliers

and the inventory is delivered.

Inventories - Inventories are stated at the lower

of cost or market value, on a weighted average basis for BHD.

Inventories are stated at the lower of cost or market value, on a

first-in-first-out basis for Nanjing Recon.

The methods of determining inventory costs are used consistently from year to year.

Allowance for inventory obsolescence is provided when the market value of certain inventory items are lower than the cost.

Property and Equipment - Property and equipment

are stated at cost.

Depreciation on motor vehicles and office equipment is computed using the straight-line method over the estimated

useful lives of the assets, which range from two to ten years.

Leasehold improvements are amortized over the shorter of the lease

term or the estimated useful life of the assets.

receivables arise from transactions with non-trade customers.

Purchase Advances - Purchase

advances are the amounts prepaid to suppliers for purchases of inventory and are recognized as inventory when the final amount

is paid to the suppliers and the inventory is delivered.

Inventories - Inventories

are stated at the lower of cost or market value, on a weighted average basis for BHD.

Inventories are stated at the lower of cost

or market value, on a first-in-first-out basis for Nanjing Recon.

The methods of determining inventory costs are used consistently

from year to year.

Allowance for inventory obsolescence is provided when the market value of certain inventory items are lower

than the cost.

Property and Equipment -

Property and equipment are stated at cost.

Depreciation on motor vehicles and office equipment is computed using the straight-line

method over the estimated useful lives of the assets, which range from two to ten years.

Leasehold improvements are amortized over

the shorter of the lease term or the estimated useful life of the assets.

Motor vehicles

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Long-term investment –

Long-term investment

in equity over which the Company has the ability to exercise significant influence but not control, and that, in general, are 20-50

percent owned, are stated at cost plus equity in undistributed net income (loss) of the investee.

These investments are evaluated

for impairment, in which an impairment loss would be recorded whenever a decline in the value of an equity investment below its

carrying amount is determined to be “other than temporary.”

investment in equity over which the Company has the ability to exercise significant influence but not control, and that, in general,

are 20-50 percent owned, are stated at cost plus equity in undistributed net income (loss) of the investee.

These investments are

evaluated for impairment, in which an impairment loss would be recorded whenever a decline in the value of an equity investment

below its carrying amount is determined to be “other than temporary.”

In judging “other than temporary,”

would consider the length of time and extent to which the fair value of the investment has been less than the carrying amount of

the investment, the near-term and longer-term operating and financial prospects of the investee, and the Company’s longer-term

intent of retaining the investment in the investee.

Long-Lived Assets - The Company applies the ASC Topic

360 “Property, plant and equipment.”

ASC Topic 360 requires that long-lived assets, such as property and equipment

be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group

may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset

to estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its

estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the

asset exceeds the fair value of the asset.

Fair value is determined based on the estimated discounted future cash flows expected

to be generated by the asset.

There were no impairments at June 30, 2015 and September 30, 2015.

the Company would consider the length of time and extent to which the fair value of the investment has been less than the carrying

amount of the investment, the near-term and longer-term operating and financial prospects of the investee, and the Company’s

longer-term intent of retaining the investment in the investee.

RECON TECHNOLOGY, LTD

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FINANCIAL STATEMENTS

Revenue Recognition - The Company recognizes revenue

when the following four criteria are met:

(1) persuasive evidence of an arrangement, (2) delivery has occurred or services

have been provided, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured.

does not occur until products have been shipped or services have been provided to the customers and the customers have signed a

completion and acceptance report, risk of loss has transferred to the customers, customers’

acceptance provisions have lapsed,

or the Company has objective evidence that the criteria specified in customers’

acceptance provisions have been satisfied.

The sales price is not considered to be fixed or determinable until all contingencies related to the sale have been resolved.

Revenue from hardware sales is generally recognized when the product

is shipped to the customer and when there are no unfulfilled company obligations that affect the customer’s final acceptance

of the arrangement.

The Company sells self-developed software.

For software sales,

the Company recognizes revenues in accordance with ASC Topic 985 - 605 “Software Revenue Recognition.”

software is recognized according to project contracts.

Contract costs are accumulated during the periods of installation and testing

or commissioning.

Long-Lived Assets - The Company

applies the ASC Topic 360 “Property, plant and equipment.”

ASC Topic 360 requires that long-lived assets, such as property

and equipment be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

or asset group may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying

amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of

an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized for the amount by which the carrying

amount of the asset exceeds the fair value of the asset.

Fair value is determined based on the estimated discounted future cash

flows expected to be generated by the asset.

There were no impairments at June 30, 2015 and December 31, 2015.

Revenue Recognition - The

Company recognizes revenue when the following four criteria are met:

(1) persuasive evidence of an arrangement, (2) delivery

has occurred or services have been provided, (3) the sales price is fixed or determinable, and (4) collectability is

reasonably assured.

Delivery does not occur until products have been shipped or services have been provided to the customers and

the customers have signed a completion and acceptance report, risk of loss has transferred to the customers, customers’

provisions have lapsed, or the Company has objective evidence that the criteria specified in customers’

acceptance provisions

have been satisfied.

The sales price is not considered to be fixed or determinable until all contingencies related to the sale

have been resolved.

Revenue from hardware sales is generally

recognized when the product is shipped to the customer and when there are no unfulfilled company obligations that affect the customer’s

final acceptance of the arrangement.

The Company sells self-developed

For software sales, the Company recognizes revenues in accordance with ASC Topic 985 - 605 “Software Revenue

Recognition.”

Revenue from software is recognized according to project contracts.

Contract costs are accumulated

during the periods of installation and testing or commissioning.

Usually this is short term.

Revenue is not recognized until completion of the contracts and receipt of acceptance

The Company provides services to improve software function and

systems operation on separated fixed-price contracts.

Revenue is recognized on the completed contract method when acceptance is

determined by a completion report signed by the customer.

Deferred revenue represents unearned amounts billed to customers

related to sales contracts.

Subsidy Income - Grants are given by the government

to support local software companies’

Revenue is not recognized until

completion of the contracts and receipt of acceptance statements.

The Company provides services to improve

software function and system operation on separated fixed-price contracts.

Revenue is recognized on the completed contract method

when acceptance is determined by a completion report signed by the customer.

Deferred revenue represents unearned amounts

billed to customers related to sales contracts.

Subsidy Income - Grants are

given by the government to support local software companies’

operation and research and development.

Grants related to research and development projects

are recognized as subsidy income in the unaudited condensed consolidated statements of operations when received.

Grants in the

form of value-added-tax refund for software products are recognized when received.

Share-Based Compensation - The Company accounts for

share-based compensation in accordance with ASC Topic 718, Share-Based Payment .

Under the fair value recognition provisions

of this topic, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized

as expense with graded vesting on a straight–line basis over the requisite service period for the entire award.

has elected to recognize compensation expenses using the Binomial Lattice valuation model estimated at the grant date based on

the award’s fair value.

Income Taxes - Income taxes are provided based upon

the liability method of accounting pursuant to ASC Topic 740, Accounting for Income Taxes .

Provisions for income taxes are

based on taxes payable or refundable for the current year and deferred taxes.

Deferred taxes are provided on differences between

the tax bases of assets and liabilities and their reported amounts in the financial statements, and tax carry forwards.

tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period

in which the deferred tax assets and liabilities are expected to be realized or settled.

As changes in tax laws or rates are enacted,

deferred tax assets and liabilities are adjusted through the provision for income taxes.

The Company has not been subject to any

income taxes in the United States or the Cayman Islands.

Under ASC Topic 740, the Company may recognize the tax benefit from

an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing

authorities, based on the technical merits of the position.

The tax benefits recognized in the financial statements from such a

position would be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon

ultimate settlement.

Income tax returns for the year prior to 2010 are no longer subject to examination by tax authorities.

Grants related to research

and development projects are recognized as subsidy income in the unaudited condensed consolidated statements of operations when

Grants in the form of value-added-tax refund for software products are recognized when received.

Share-Based Compensation -

The Company accounts for share-based compensation in accordance with ASC Topic 718, Share-Based Payment .

Under the fair

value recognition provisions of this topic, share-based compensation cost is measured at the grant date based on the fair value

of the award and is recognized as expense with graded vesting on a straight–line basis over the requisite service period

for the entire award.

The Company has elected to recognize compensation expenses using the Binomial Lattice valuation model estimated

at the grant date based on the award’s fair value.

RECON TECHNOLOGY, LTD

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FINANCIAL STATEMENTS

Earnings (loss) per Share (“EPS”) - Basic

EPS is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding.

Diluted EPS are computed

by dividing net income (loss) by the weighted-average number of ordinary shares and dilutive potential ordinary share equivalents

Potentially dilutive ordinary shares consist of ordinary shares

issuable upon the conversion of ordinary stock options, restricted shares and warrants (using the treasury stock method).

The effect from options, restricted shares and warrants would have been anti-dilutive due to the fact that we incurred a net loss

during the three months ended September 30, 2014 and 2015.

Income Taxes - Income taxes

are provided based upon the liability method of accounting pursuant to ASC Topic 740, Accounting for Income Taxes .

for income taxes are based on taxes payable or refundable for the current year and deferred taxes.

Deferred taxes are provided

on differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, and tax

carry forwards.

Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates

applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.

As changes in

tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

has not been subject to any income taxes in the United States or the Cayman Islands.

Under ASC Topic 740, the Company may recognize

the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination

by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the financial statements

from such a position would be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized

upon ultimate settlement.

Income tax returns for the year prior to 2010 are no longer subject to examination by tax authorities.

Earnings (loss) per Share (“EPS”)

- Basic EPS is computed by dividing net income (loss) by the weighted average number of ordinary shares outstanding.

are computed by dividing net income (loss) by the weighted-average number of ordinary shares and dilutive potential ordinary share

equivalents outstanding.

Potentially dilutive ordinary shares consist

of ordinary shares issuable upon the conversion of ordinary stock options, restricted shares and warrants (using the treasury stock

The effect from options, restricted shares and warrants would have been anti-dilutive due to the fact that we incurred

a net loss during the three months and six months ended December 31, 2014 and 2015.

Recently Issued Accounting Pronouncements -

8 unchanged sentences

The Company is evaluating

the effect of this standard the Company's consolidated financial position, results of operations and cash flows.

In August 2015, the FASB has issued Accounting

the effect of this standard on the Company's consolidated financial position, results of operations and cash flows.

In August 2015, the FASB issued Accounting

Standards Update (ASU) No.

12 unchanged sentences

impact on the Company's consolidated financial position, results of operations and cash flows.

In September 2015, the FASB issued

ASU 2015-16, Business Combinations (Topic 805):

Simplifying the Accounting for Measurement-Period Adjustments, which eliminates

the requirement to retrospectively account for changes to provisional amounts initially recorded in a business acquisition opening

balance sheet.

Prior to the issuance of ASU 2015-16, an acquirer was required to restate prior period financial statements as of

the acquisition date for adjustments to provisional amounts.

This guidance is effective for fiscal years beginning after December

15, 2015, including interim periods within fiscal years.

The Company does not expect this update will have a material impact on

the Company's consolidated financial position, results of operations and cash flows.

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

In September 2015, the FASB issued ASU

2015-16, Business Combinations (Topic 805):

Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement

to retrospectively account for changes to provisional amounts initially recorded in a business acquisition opening balance sheet.

Prior to the issuance of ASU 2015-16, an acquirer was required to restate prior period financial statements as of the acquisition

date for adjustments to provisional amounts.

This guidance is effective for fiscal years beginning after December 15, 2015, including

interim periods within fiscal years.

The Company does not expect this update will have a material impact on the Company's consolidated

Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the

requirement to retrospectively account for changes to provisional amounts initially recorded in a business acquisition opening

balance sheet.

Prior to the issuance of ASU 2015-16, an acquirer was required to restate prior period financial statements as of

the acquisition date for adjustments to provisional amounts.

This guidance is effective for fiscal years beginning after December

15, 2015, including interim periods within fiscal years.

The Company does not expect this update will have a material impact on

the presentation of the Company's consolidated financial position, results of operations and cash flows.

In November 2015, the FASB issued Accounting

Standards Update (ASU) No.

2015-17, Income Taxes (Topic 740):

Balance Sheet Classification of Deferred Taxes, which changes how

deferred taxes are classified on organizations’

balance sheets.

The ASU eliminates the current requirement for organizations

to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet.

Instead, organizations

will be required to classify all deferred tax assets and liabilities as noncurrent.

The amendments apply to all organizations that

present a classified balance sheet.

For public companies, the amendments are effective for financial statements issued for annual

periods beginning after December 15, 2016, and interim periods within those annual periods.

The Company does not expect this update

will have a material impact on the presentation of the Company's consolidated financial position, results of operations and cash

In January 2016, the FASB issued Accounting

Standards Update (ASU) No.

2016-01, Financial Instruments –

Overall (Subtopic 825-10):

Recognition and Measurement of Financial

Assets and Financial Liabilities.

The new guidance makes targeted improvements to existing U.S.

(1) Requiring equity investments

to be measured at fair value with changes in fair value recognized in net income;

(2) Requiring separate presentation of financial

assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes

to the financial statements;

(3) Eliminating the requirement for public business entities to disclose the method(s) and significant

assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost

on the balance sheet;

(4) Requiring a reporting organization to present separately in other comprehensive income the portion

of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk.

The new guidance

is effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal

The Company does not expect this update will have a material impact on the presentation of the Company's consolidated

financial position, results of operations and cash flows.

5 unchanged sentences

June 30, 2015

September 30, 2015

December 31, 2015

Trade accounts receivable

2 unchanged sentences

June 30, 2015

September 30, 2015

December 31, 2015

Related Party

4 unchanged sentences

June 30, 2015

September 30, 2015

December 31, 2015

Third Party –

2 unchanged sentences

Total - long-term trade accounts receivable, net

* The receivable

from Yabei Nuoda was recognized primarily from the sale of automation system and services based on written contracts.

the repayment agreement signed on September 2, 2015, the outstanding balance will be collected in two years beginning 2017, with

each installment of ¥2,467,036.

receivable from Yabei Nuoda was recognized primarily from the sale of automation system and services based on written contracts.

Based on the repayment agreement signed on September 2, 2015, the outstanding balance will be collected in two years beginning

2017, with each installment of ¥2,467,036 ($380,000).

RECON TECHNOLOGY, LTD

4 unchanged sentences

June 30, 2015

September 30, 2015

December 31, 2015

Current Portion

5 unchanged sentences

June 30, 2015

September 30, 2015

December 31, 2015

Non-Current Portion

Due from ENI (A)

ENI ceased to be a VIE of the Company, ENI in January 2012 agreed to repay the loan on a payment schedule, with interest accrued

during the period at an annual rate of 4%.

In accordance with the payment schedule, the principal plus accrued interest is required

to be repaid over approximately three years on a quarterly basis beginning March 2012.

The first four payments are RMB 1.2 million

(A) After ENI ceased to

be a VIE of the Company, ENI in January 2012 agreed to repay the loan on a payment schedule, with interest accrued during the

period at an annual rate of 4%.

In accordance with the payment schedule, the principal plus accrued interest is required to be

repaid over approximately three years on a quarterly basis beginning March 2012.

The first four payments were RMB 1.2 million

In March, June, September and December of 2012, the Company received RMB 4.8 million.

6 unchanged sentences

the remaining part of this loan will be repaid over four years with quarterly installments of ¥699,147.

Company has continued to receive payments under the agreement.

(B) Loans to third-parties are mainly used for short-term funding to

support cooperative companies.

The Company has continued

to receive the payments under the agreement.

(B) Loans to third-parties

are mainly used for short-term funding to support cooperative companies.

These loans are due on demand bearing no interest.

advance to staff represents advances for business travel and sundry expenses related

to oilfield or on-site installation and inspection of products through customer approval

and acceptance.

receivables - related parties represent loans to related parties for working capital advances to related entities.

Such advances

are due-on-demand and are non-interest bearing.

staff represents advances for business travel and sundry expenses related to oilfield or on-site installation and inspection of

products through customer approval and acceptance.

RECON TECHNOLOGY, LTD

1 unchanged sentence

FINANCIAL STATEMENTS

Below is a summary of other receivables - related parties which

consisted of the following:

Related Party

June 30, 2015

September 30, 2015

Name of Related Party

Beijing Langchen Construction Company

PURCHASE ADVANCES

4 unchanged sentences

Allowance for doubtful accounts

Below is a summary of purchase advances to related party.

Related Party

Xiamen Huangsheng Hitek Computer Network Co.

Inventories consisted of the following:

September 30,

Small component parts

4 unchanged sentences

Total inventories, net

for slow moving inventory was ¥7,700,836 and ¥2,846,559 ($448,008) at June 30, 2015 and September 30, 2015,

respectively.

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

provision for slow moving inventory was ¥

87,558 ($13,490) for the six months ended December 31, 2015.

PROPERTY AND EQUIPMENT, NET

6 unchanged sentences

Property and equipment, net

Depreciation expense was ¥121,347 and ¥

259,768 ($40,884) for the three months ended September 30, 2014 and 2015, respectively.

Depreciation expense was ¥153,164 and

¥236,303($36,406) for the three months ended December 31, 2014 and 2015, respectively.

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Depreciation expense was ¥274,511 and

¥496,070 ($76,428) for the six months ended December 31, 2014 and 2015, respectively.

LONG-TERM INVESTMENT

On June 28, 2013, the Company purchased 2,800,000 restricted

shares of Avalon Oil and Gas, Inc.

On June 28, 2013, the Company purchased

2,800,000 restricted shares of Avalon Oil and Gas, Inc.

("Avalon") for $0.089 per share, or approximately ¥1.5 million

the shares are restricted for two years, the Company was able to acquire the shares at 50% of the market value.

The investment

was accounted for using the equity method and no gain or loss from equity investment was recorded for the year ended June 30, 2013

due to immateriality.

As of June 30, 2015 and September 30, 2015, Recon owned 16.92% and 16.00% of Avalon’s outstanding

shares, respectively.

Avalon is an independent US domestic oil and natural gas producer listed on the OTCBB under the ticker symbol

Avalon engages in the acquisition, exploration and development of oil and gas producing properties in the US.

available information and discussion with the management team of Avalon, the Company believes Avalon’s operating loss would

not be recovered in the foreseeable future, therefore, the Company considered the investment to be impaired and recorded an investment

loss of ¥1,535,250 ($250,000) for the year ended June 30, 2014 and has written its investment down to zero.

On April 13, 2015, BHD reached an agreement to invest RMB 80 million in Huanghua Heng Da Xiang Tong Manufacture

Ltd (“HHBHD”) for a 54.05% ownership interest.

BHD’s board of Directors and shareholders approved the transaction

to invest in HHBHD.

The investment is to enhance cooperation with HHBHD and protect BHD’s design copyright.

Based on mutual

agreements, BHD shall not enjoy voting right until the payment of investment is on position.

As of November 13, 2015, no payment

was made to HHBHD for this investment and BHD did not have control or significant influence over HHBHD.

Since the restriction for the shares is for two years, the Company was able to acquire the shares at 50% of the market

The investment was accounted for using the equity method and no gain or loss from equity investment was recorded for the

year ended June 30, 2013 due to immateriality.

As of June 30, 2015 and December 31, 2015, Recon owned 16.92% and 16.00% of

Avalon’s outstanding shares, respectively.

Avalon is an independent US domestic oil and natural gas producer listed on the

OTCBB under the ticker symbol AOGN.

Avalon engages in the acquisition, exploration and development of oil and gas producing properties

Based on the available information and discussion with the management team of Avalon, the Company believes Avalon’s

operating loss would not be recovered in the foreseeable future, therefore, the Company considered the investment to be impaired

and recorded an investment loss of ¥1,535,250 ($250,000) for the year ended June 30, 2014 to write its investment down

On April 13, 2015, BHD reached an agreement

to invest RMB 80 million in Huanghua Heng Da Xiang Tong Manufacture Ltd (“HHBHD”) for a 54.05% ownership interest.

BHD’s board of Directors and shareholders approved the transaction to invest in HHBHD.

The investment is to enhance cooperation

with HHBHD and protect BHD’s design copyright.

Based on mutual agreements, BHD shall not enjoy voting right until the payment

of investment is on position.

As of February 16, 2016, no payment was made to HHBHD for this investment and BHD did not have

control or significant influence over HHBHD.

RECON TECHNOLOGY, LTD

3 unchanged sentences

Other payables consisted of the following:

June 30, 2015

Consulting services

Distributors and employees

Funds collected on behalf of others

June 30, 2015

Related Party

1 unchanged sentence

Expenses paid by the major shareholders

Due to management staff on behalf of Recon

Due to management staff for costs incurred on behalf of Recon

TAXES PAYABLE

2 unchanged sentences

June 30, 2015

September 30, 2015

December 31, 2015

Enterprise income tax payable

1 unchanged sentence

Total taxes payable

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

SHORT-TERM BANK LOAN

1 unchanged sentence

June 30, 2015

September 30, 2015

December 31, 2015

Industrial and Commercial Bank, floating interest rate at 6.12 %, due on June 19, 2016

Total short-term bank loans

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Interest expense

for the short-term bank loan was ¥157,511 and ¥108,407 ($17,062) for the three months ended September 30, 2014 and 2015,

expense for the short-term bank loan was ¥80,667 and ¥106,242 ($16,368) for the three months ended December 31, 2014 and

2015, respectively.

expense for the short-term bank loan was ¥238,178 and ¥214,649 ($33,070) for the six months ended December 31, 2014 and

2015, respectively.

SHORT-TERM BORROWINGS DUE TO RELATED PARTIES

Short-term borrowings due to related

September 30,

Short-term borrowing from a Founder, 7.2% annual interest, due on October 20, 2015(A)

Short-term borrowing from a Founder, 6.0% annual interest, due on October 2, 2015 (B)

Short-term borrowing from a Founder, 5.13% annual interest, due on October 12, 2015.(C)

Short-term borrowing from a Founder, 7.2% annual interest, due on October 20, 2015

Short-term borrowing from a Founder, 6.06% annual interest, due on October 2, 2015

Short-term borrowing from a Founder, 5.13% annual interest, due on October 12, 2015

Short-term borrowing from a Founder's family member, no interest, due on various dates

2 unchanged sentences

Ltd., no interest, due on November 14, 2015

Short-term borrowing from a Founder, 5.75% annual interest,due on October 10, 2016

Short-term borrowing from a Founder, 5.43% annual interest,due on November 4, 2016

Total short-term borrowings due to related parties

October 20, 2015, ¥

1,800,000 ( $283,295 )

was paid back.

September 30, 2015, the principle of ¥3,400,000 ( $535,113 )

was paid back, and the interest was paid as scheduled on October 2, 2015.

October 12, 2015, the Company repaid ¥1,600,000 ($251,818) of short-term borrowing

with an interest of ¥5,749 ($905).

Interest expense for short-term borrowings due to related parties

was ¥84,333 and ¥171,448 ($26,984) for the three months ended September 30, 2014 and 2015, respectively.

SHAREHOLDERS’

Stock offering –

On November 25, 2013, the

Company entered into a securities purchase agreement (“Purchase Agreement”) with certain institutional investors for

the sale of 546,500 ordinary shares in a registered direct offering at the price of $4.81 per ordinary share (amended to $4.30

per ordinary share on November 29, 2013).

The net cash proceeds received from the stock offering, after deducting underwriter commission

and other associated fees, were ¥12,132,882 (approximately $2.0 million).

In addition, warrants to purchase 163,950 ordinary

shares in the aggregate were issued to the investors.

The warrants are exercisable at an exercise price of $6.01 per ordinary share

(amended to $5.38 per ordinary share on November 29, 2013) and expire three years from the date of issuance.

The Company also issued

warrants to purchase 54,650 ordinary shares to the placement agent (“Placement Agent Warrant”).

The Placement Agent

Warrants are on substantially the same terms as the warrants issued pursuant to the Purchase Agreement, except that these warrants

are not exercisable for a period of six months and will expire three years from the initial issuance date.

In addition to the above warrants issued to the placement agent,

the Company granted 170,000 shares of warrants on connection with its IPO offering, and none of these warrants was exercised during

the years ended June 30, 2015 and September 30, 2015.

RECON TECHNOLOGY, LTD

1 unchanged sentence

FINANCIAL STATEMENTS

In June 2015, the Company entered into a securities purchase

agreement with certain institutional investors for the sale of 297,197 ordinary shares in a registered direct offering.

cash proceeds received from the stock offering, after deducting ¥1,294,922 ($212,673) in underwriter commission and other associated

fees, were ¥2,392,027 (approximately $0.6 million).

During the three months ended September 30, 2015, the Company

sold 15,874 ordinary shares under the same purchase agreement.

expense for short-term borrowings due to related parties was ¥146,445 and ¥86,071 ($13,261) for the three months

ended December 31 , 2014 and 2015, respectively.

expense for short-term borrowings due to related parties was ¥230,778 and ¥257,519 ($39,675) for the six months

ended December 31 , 2014 and 2015, respectively.

SHAREHOLDERS’

Stock offering –

the six months ended December 31, 2015, the Company offered 15,874 ordinary shares under the same purchase agreement from June

The net cash proceeds received from the stock offering were ¥169,398 ($26,098).

(approximately $26,098).

Appropriated Retained

Earnings - According to the Memorandum and Articles of Association, the Company is required to transfer a certain

portion of its net profit, as determined under PRC accounting regulations, from current net income to the statutory reserve

In accordance with the PRC Company Law, companies are required to transfer 10% of their profit after tax, as determined

in accordance with PRC accounting standards and regulations, to the statutory reserves until such reserves reach 50% of the

registered capital or paid-in capital of the companies.

As of June 30, 2015 and September 30, 2015, the balance of total

statutory reserves was ¥4,148,929 and ¥4,148,929 ($681,403), respectively.

STOCK-BASED COMPENSATION

Stock-Based Awards Plan

2009 Options Plan - The Company

granted options to purchase 293,000 ordinary shares under the Stock Incentive 2009 Plan to its employees and non-employee directors

on July 29, 2009.

The options have an excise price of $6.00, equal to the IPO price of the Company’s ordinary shares, and

will vest over a period of five years, with the first 20% vesting on July 29, 2010.

The options expire ten years after the date

of grant, on July 29, 2019.

The fair value was estimated on July 29, 2009 using the Binomial Lattice valuation model, with the

following weighted-average assumptions:

Stock price at grant date

Exercise price (per share)

Risk free rate of interest***

Dividend yield

Life of option (years)**

Forfeiture rate****

* Volatility is projected using the performance

of PHLX Oil Service Sector index.

** The life of options represents the period

the option is expected to be outstanding.

*** The risk-free interest rate is based on

the Chinese international bond denominated in U.S.

dollar, with a maturity that approximates the life of the option.

**** Forfeiture rate is the estimated percentage

of options forfeited by employees by leaving or being terminated before vesting.

The Company recognizes compensation cost for

awards with graded vesting on a straight-line basis over the requisite service period for the entire award.

The grant date fair

value of the options was ¥30.17 ($4.42) per share.

Options Plan –

The Company granted options to purchase 415,000 ordinary shares

to its employees and non-employee director on March 26, 2012.

The options have an excise price of $2.96, which was equal to the

share price of the Company’s ordinary shares at March 26, 2012, and will vest over a period of five years, with the first

20% vesting on March 26, 2013.

The options expire ten years after the date of grant, on March 26, 2022.

Appropriated Retained Earnings

- According to the Memorandum and Articles of Association, the Company is required to transfer a certain portion of its net profit,

as determined under PRC accounting regulations, from current net income to the statutory reserve fund.

In accordance with the PRC

Company Law, companies are required to transfer 10% of their profit after tax, as determined in accordance with PRC accounting

standards and regulations, to the statutory reserves until such reserves reach 50% of the registered capital or paid-in capital

of the companies.

As of June 30, 2015 and December 31, 2015, the balance of total statutory reserves was ¥4,148,929 and ¥4,148,929

($639,211), respectively.

RECON TECHNOLOGY, LTD

1 unchanged sentence

FINANCIAL STATEMENTS

The Company recognizes compensation cost for awards with graded

vesting on a straight-line basis over the requisite service period for the entire award.

The grant date fair value of the options

was ¥10.06 ($1.49) per share.

2015 Options Plan –

The Company granted options

to purchase 400,000 ordinary shares to its employees and non-employee directors on January 31, 2015.

The options have an excise

price of $1.65, which was equal to the share price of the Company’s ordinary shares at January 31, 2015, and will vest equally

over a period of three years, with the one third vesting on January 31, 2016.

The options expire ten years after the date of grant,

on January 31, 2025 and will be subject to the terms and conditions of the Plan.

The Company recognizes compensation cost for awards with graded

vesting on a straight-line basis over the requisite service period for the entire award.

The grant date fair value of the options

was ¥10.13 ($1.65) per share.

The following is a summary of the stock options activity:

Stock Options

Weighted Average Exercise Price

Outstanding as of June 30, 2015

Outstanding as of September 30, 2015

STOCK-BASED COMPENSATION

Stock-Based Awards Plan

The following

is a summary of the status of options outstanding and exercisable at September 30, 2015:

is a summary of the status of options outstanding and exercisable at December 31, 2015:

Outstanding Options

3 unchanged sentences

Restricted Shares

As of September 30, 2015, the Company had granted restricted

shares of common stock, which are still vesting, to senior management and consultants as follows:

On July 19, 2014, the Company granted 50,000 restricted shares

to a non-affiliate as compensation for certain consulting services.

The fair value of the restricted shares was $190,000 based on

the closing stock price $3.8 at July 18, 2014.

On January 29, 2015, 10,000 of those restricted shares were canceled based on the

agreement with the consultant.

As of December 31, 2015, the Company has

granted restricted shares of common stock, which are still vesting, to senior management and consultants.

During the six months

ended December 31, 2015, the following grants were made:

On October 18, 2015, the Company agreed

to issue a total of 800,000 restricted shares to its employees and non-employee director as compensation cost for awards.

value of the restricted shares was $704,000 based on the closing stock price $0.88 at October 18, 2015.

On November 16, 2015, the Company agreed

to issue a total of 100,000 restricted shares to two investor relations firms in exchange for services.

The fair value of the restricted

shares was $108,400 based on the closing stock price $1.08 at November 16, 2015.

On November 19, 2015, the Company issued

260,185 restricted shares to Bei Jing Tian Hong Tong Xin Technology Co.

(“BJTH”) for certain mold and software

development services.

The fair value of the restricted shares was $247,176 based on the closing stock price $0.95 at November

The Share-based compensation expense

recorded for stock options granted were ¥409,418 and ¥1,029,822 ($158,661) for the six months ended December 31, 2014

and 2015, respectively.

The Share-based compensation expense recorded for stock options granted were ¥162,277 and

¥520,294 ($80,160) for the three months ended December 31, 2014 and 2015, respectively.

The total unrecognized

share-based compensation expense for stock options as of December 31, 2015 was approximately ¥3.8 million ($0.59

million), which is expected to be recognized over a weighted average period of approximately 1.90 years.

The Share-based compensation expense

recorded for restricted shares granted were ¥705,612 and ¥1,543,756 ($237,841) for the six months ended December 31,

2014 and 2015, respectively.

The Share-based compensation expense recorded for restricted shares granted were ¥352,175

and ¥926,732 ($142,778) for the three months ended December 31, 2014 and 2015, respectively.

The total unrecognized

share-based compensation expense for restricted shares granted as of December 31, 2015 was approximately ¥7.92 million

($1.22 million), which is expected to be recognized over a weighted average period of approximately 2.27 years.

RECON TECHNOLOGY, LTD

1 unchanged sentence

FINANCIAL STATEMENTS

On July 19, 2014, the Company decided to cancel 40,625 restricted

shares, which had been issued to Expert Asia Investment Ltd.

on May 8, 2014, as the services had not been provided pursuant to

the agreement it had with the Company.

On December 13, 2013, the Company granted 95,181 restricted

shares to Mr.

Yin Shenping and 135,181 restricted shares to Mr.

Chen Guangqiang at an aggregate value of ¥4,207,496 ($688,782),

based on the stock closing price of $2.99 at December 13, 2013.

These restricted shares will vest over three years with one third

of the shares vesting every year from the grant date.

The first one third vested on December 13, 2014.

On January 31, 2015, the Company granted 150,000 restricted

shares to Mr.

Yin Shenping and 150,000 restricted shares to Mr.

Chen Guangqiang at an aggregate value of ¥3,038,558($495,000),

based on the stock closing price of $1.65 at January 31, 2015.

These restricted shares will vest over three years with one third

of the shares vesting every year from the grant date.

On February 2, 2015, the Company issued 24,000 restricted shares

to Maxim Group LLC (“Maxim”) for certain consulting service.

The fair value of the restricted shares was $43,440

based on the closing stock price of $1.81 at February 2, 2015.

On April 8, 2015, the Company granted 40,000

restricted shares to a non-affiliate as compensation for certain consulting services.

The fair value of the restricted shares was

$62,400 based on the closing stock price $1.56 at April 8, 2015.

The Share-based compensation expense recorded

for stock options granted were ¥247,141 and ¥509,528 ($80,193) for the three months ended September 30, 2014 and

2015, respectively.

The total unrecognized share-based compensation expense for stock options as of September 30, 2015 was approximately

¥4.3 million ($0.67 million), which is expected to be recognized over a weighted average period of approximately 2.14 years.

The Share-based compensation expense recorded

for restricted shares granted were ¥353,437 and ¥617,024 ($97,111) for the three months ended September 30, 2014

and 2015, respectively.

The total unrecognized share-based compensation expense for restricted shares granted as of September 30,

2015 was approximately ¥4.2 million ($0.66 million), which is expected to be recognized over a weighted average period of approximately

The following is a summary of the restricted

Following is a summary of the restricted

stock grants:

2 unchanged sentences

Non-vested adjustment

Non-vested as of September 30, 2015

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The Company is not subject to any income taxes in the United States

or the Cayman Islands and had minimal operations in jurisdictions other than the PRC.

BHD and Nanjing Recon are subject to PRC’s

income taxes as PRC domestic companies.

The Company follows Implementing Rules for the Enterprise Income Tax Law (“Implementing

Rules”), which took effect on January 1, 2008 and unified the income tax rate for domestic-invested and foreign-invested

enterprises at 25%.

The Company reapplied for high-technology enterprise approval and

has passed all relevant reviews.

Thus, for the calendar years 2014 and 2015, Nanjing Recon is subject to an income tax rate of

As approved by the domestic tax authority in the PRC, BHD was

recognized as a government-certified high technology company on November 25, 2009 and is subject to an income tax rate of 15% through

November 2015.

Non-vested as of December 31, 2015

The Company is not subject to any income

taxes in the United States or the Cayman Islands and had minimal operations in jurisdictions other than the PRC.

BHD and Nanjing

Recon are subject to PRC’s income taxes as PRC domestic companies.

The Company follows Implementing Rules for the Enterprise

Income Tax Law (“Implementing Rules”), which took effect on January 1, 2008 and unified the income tax rate for domestic-invested

and foreign-invested enterprises at 25%.

The Company reapplied for high-technology

enterprise approval and has passed all relevant reviews.

Thus, for the calendar years 2014 and 2015, Nanjing Recon is subject

to an income tax rate of 15%.

As approved by the domestic tax authority

in the PRC, BHD was recognized as a government-certified high technology company on November 25, 2009 and is subject to an income

tax rate of 15% through November 2015.

BHD reapplied for high-technology enterprise approval and successfully got the approval

on November 25, 2015.

Thus, the valid date of BHD’s high-technology enterprise certificate is extended to November 25, 2018.

Deferred tax asset is comprised of the following:

September 30,

Allowance for doubtful receivables

4 unchanged sentences

Total deferred income tax liability

The Company’s tax provision is comprised of the following:

For the three months ended September 30,

Current income taxes

Deferred income taxes provision (benefit)

Provision for income tax

RECON TECHNOLOGY, LTD

1 unchanged sentence

FINANCIAL STATEMENTS

The Company’s tax provision is comprised of the following:

For the three months

ended December 31,

Current income tax provision

Adjust over accrued income taxes

Deferred income taxes provision (benefit)

Provision (benefit) for income tax

For the six months

ended December 31,

Current income tax provision

Adjust over accrued tax of prior years

Deferred income taxes provision (benefit)

Provision (benefit) for income tax

NON-CONTROLLING INTEREST

6 unchanged sentences

Total noncom-trolling interest

As of September 30, 2015

As of December 31, 2015

Paid-in capital

3 unchanged sentences

CONCENTRATIONS

For the three months ended September 30, 2014 and 2015,

our two largest customers, China National Petroleum Corporation (“CNPC”) and China Petroleum & Chemical Corporation

Limited (“SINOPEC”), represented approximately 46.65%, 1.64% , and 57.58%, 23.63% of the Company’s revenue, respectively.

For the three months ended September 30, 2014, two major suppliers

accounted for 25% of the company’s total purchases.

For the three months ended September 30, 2015, four major suppliers

accounted for 60% of the company’s total purchases.

For the three months ended December 31,

2014 and 2015, the two largest customers, China National Petroleum Corporation (“CNPC”) and China Petroleum & Chemical

Corporation Limited (“SINOPEC”), represented approximately 58.83%, 10.35% and 76.76%, 10.03% of the Company’s

revenue, respectively.

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

For the six months ended December

31, 2014 and 2015, the two largest customers, China National Petroleum Corporation (“CNPC”) and China Petroleum

& Chemical Corporation Limited (“SINOPEC”), represented approximately 56.79% and 8.89%, and 74.63% and

11.54% of the Company’s revenue, respectively.

For the three months ended December 31,

2014, one major supplier accounted for 20% of the company’s total purchases.

For the three months ended December 31, 2015,

two major suppliers accounted for 68% of the Company’s total purchases.

For the six months ended December 31, 2014,

one major supplier accounted for 14% of the Company’s total purchases.

For the six months ended December 31, 2015, two major

suppliers accounted for 57% of the Company’s total purchases.

COMMITMENTS AND CONTINGENCY

The Company leases three offices in Beijing (two

(a) Office Leases

The Company leases three offices in Beijing

(two for BHD;

one for Recon-JN) and one office in Nanjing for Nanjing Recon.

Future payments under such leases are as follows as of

September 30, 2015:

Twelve months ending September 30,

Future payments under such leases are as follows

as of December 31, 2015:

Twelve months ending December 31,

Office lease payment

(b) Contingency

The Labor Contract Law of the PRC requires

employers to assure the liability of severance payments if employees are terminated and have been working for the employers for

at least two years prior to January 1, 2008.

The employers will be liable for one month of severance pay for each year of the

service provided by the employees.

As of December 31, 2015, the Company estimated its severance payments of approximately ¥1.6

million ($0.26 million) which has not been reflected in its unaudited condensed consolidated financial statements, because management

cannot predict what the actual payment, if any will be in the future.

RECON TECHNOLOGY, LTD

1 unchanged sentence

FINANCIAL STATEMENTS

(b) Contingency

The Labor Contract Law of the PRC requires employers to assure

the liability of severance payments if employees are terminated and have been working for the employers for at least two years

prior to January 1, 2008.

The employers will be liable for one month of severance pay for each year of the service provided by

the employees.

As of September 30, 2015, the Company estimated its severance payments of approximately ¥1.6 million ($0.26

million) which has not been reflected in its unaudited condensed consolidated financial statements, because management cannot predict

what the actual payment, if any, will be in the future.

RELATED PARTY TRANSACTIONS AND

RELATED PARTY TRANSACTIONS

Purchases from related parties –

from related parties consisted of the following:

the three months ended September 30,

the three months ended December 31,

Huanghua Xiang Tong Manufacture

Xiamen Huangsheng Hitek Computer Network Co.

Xiamen Huangsheng Hitek Computer Network Co.Ltd.

Purchase from related parties

Leases from related parties - The Company has

various agreements for the lease of office space owned by the Founders and their family members.

The terms of the agreement

state that the Company will continue to lease the property at a monthly rent of ¥95,000 with annual rental expense at

approximately ¥1.1 million ($0.2 million).

The two-year lease agreements between Nanjing Recon and Mr.

the six months ended December 31,

Huanghua Xiang Tong Manufacture

Xiamen Huangsheng Hitek Computer Network Co.Ltd.

Purchase from related parties

Account payable due to related parties

- The Company purchased automation products and heating furnaces from Xiamen Huangsheng Hitek Computer Network Co.Ltd and

Huanghua Xiang Tong, the ending balance of accounts payable due to the two related parties as of December 31, 2015 and June 30,

2015 is RMB 2,736,879 ($421,662) and RMB 3,528,705, respectively.

Leases from related parties

- The Company has various agreements for the lease of office space owned by the Founders and their family members.

the agreement state that the Company will continue to lease the property at a monthly rent of ¥95 thousand with annual rental

expense at ¥1.14 million ($0.18 million).

The one-year lease agreements between Nanjing Recon and Mr.

Yin and his family member

started from July 10, 2014, the one-year lease agreements between BHD and Mr.

started from May 10, 2015.

The one-year lease agreements between BHD and Mr.

Chen Guangqiang and his family member started from

1 unchanged sentence

Chen Guangqiang’s family member started from July 1, 2015.

Short-term borrowings from related parties -

The Company borrowed ¥16,916,905 and ¥9,405,714 ($1,480,329) from the Founders and their family members as of June 30,

2015 and September 30, 2015, respectively.

Short-term borrowings from related

parties - The Company borrowed ¥16,916,905 and ¥7,225,775($1,113,250) from the Founders and their family members

as of June 30, 2015 and December 31, 2015, respectively.

For the specific terms and interest rates of the borrowings, see Note

Expenses paid by the owner on behalf of Recon - One

owner of Nanjing Recon, Mr.

Expenses paid by the owner on behalf

of Recon - One owner of Nanjing Recon, Mr.

Yin and the major owner of BHD, Mr.

Chen paid certain operating expense for the Company.

30, 2015 and September 30, 2015, ¥1,558,738 and ¥1,592,981 ($250,713) was due to them, respectively.

Chen paid certain operating expense for

As of June 30, 2015 and December 31, 2015, ¥1,558,738 and ¥1,220,503($188,039) was due to them, respectively.

RECON TECHNOLOGY, LTD

8 unchanged sentences

June 30, 2015

September 30,

Current Assets

10 unchanged sentences

Total Liabilities

The financial performance of VIEs reported in the

unaudited condensed consolidated statement of operations and comprehensive income for the three months ended September 30, 2015

The financial performance of VIEs reported

in the unaudited condensed consolidated statement of operations and comprehensive income for the three months ended December 31,

2015 includes revenues of ¥28,842,430 ($4,443,655), operating expenses of ¥7,404,066 ($1,140,719), and net loss of ¥1,142,211

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

computation of basic and diluted earnings per common share is as follows:

For the three months ended September 30,

Weighted average number of common shares outstanding used in

computing basic earnings (loss) per share

Net income (loss) attributable to common stockholders

$ (1,392,649 )

Earnings (loss) per share attributable to common stockholders

Weighted average number of common shares outstanding used in computing basic earnings

(loss) per share

Assumed exercise of stock options, stock awards and warrants

Weighted average number of common shares outstanding

Net income (loss) attributable to common stockholders

$ (1,392,649 )

Earnings (loss) per share attributable to common stockholders

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

SUBSEQUENT EVENTS

10, 2015, the Company borrowed ¥2,400,000 ($377,727) of short-term borrowing with an annual interest rate of 5.75% .

12, 2015, the Company repaid ¥1,600,000 ($251,818) of short-term borrowing with an interest of ¥5,749 ($905).

20, 2015, the Company repaid ¥1,800,000 ($283,295) of short-term borrowing with an interest of ¥

10,800 ($1,700).

On October 18, 2015, the Company’s board approved an incentive plan under its 2015 incentive option

pool to grant 800,000 restricted shares to management.

The financial performance of VIEs reported

in the unaudited condensed consolidated statement of operations and comprehensive income for the six months ended December 31,

2015 includes revenues of ¥32,436,390 ($4,997,364), operating expenses of ¥11,766,443 ($1,812,816), and net loss of ¥5,100,179

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 5. Other Information