What changed in this filing

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Item 5. Other Information

2016-11-14 compared with 2016-05-16 · 576 added, 744 removed, 292 unchanged (82% of the section changed)

1 unchanged sentence

The following exhibits are filed herewith:

Amended and Restated

Articles of Association of the Registrant (1)

Amended and Restated

Memorandum of Association of the Registrant (1)

Amended and Restated Articles of Association of the Registrant (1)

Amended and Restated Memorandum of Association of the Registrant (1)

Specimen Share Certificate (1)

Translation of Exclusive

Technical Consulting Service Agreement between Recon Technology (Jining) Co., Ltd.

and Beijing BHD Petroleum Technology Co.,

Translation of Power

of Attorney for rights of Chen Guangqiang in Beijing BHD Petroleum Technology Co., Ltd.

Translation of Power

of Attorney for rights of Yin Shenping in Beijing BHD Petroleum Technology Co., Ltd.

Translation of Power

of Attorney for rights of Li Hongqi in Beijing BHD Petroleum Technology Co., Ltd.

Translation of Exclusive

Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Chen Guangqiang and Beijing BHD Petroleum Technology

Translation of Exclusive

Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Yin Shenping and Beijing BHD Petroleum Technology

Translation of Exclusive

Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Li Hongqi and Beijing BHD Petroleum Technology

Translation of Equity

Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Beijing BHD Petroleum Technology

Translation of Equity

Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Yin Shenping and Beijing BHD Petroleum Technology Co.,

Translation of Equity

Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Li Hongqi and Beijing BHD Petroleum Technology Co.,

Translation of Exclusive

Technical Consulting Service Agreement between Recon Technology (Jining) Co., Ltd.

Translation of Exclusive Technical Consulting Service Agreement between Recon Technology (Jining) Co., Ltd.

and Beijing BHD Petroleum Technology Co., Ltd.

Translation of Power of Attorney for rights of Chen Guangqiang in Beijing BHD Petroleum Technology Co., Ltd.

Translation of Power of Attorney for rights of Yin Shenping in Beijing BHD Petroleum Technology Co., Ltd.

Translation of Power of Attorney for rights of Li Hongqi in Beijing BHD Petroleum Technology Co., Ltd.

Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Chen Guangqiang and Beijing BHD Petroleum Technology Co., Ltd.

Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Yin Shenping and Beijing BHD Petroleum Technology Co., Ltd.

Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Li Hongqi and Beijing BHD Petroleum Technology Co., Ltd.

Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Beijing BHD Petroleum Technology Co., Ltd.

Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Yin Shenping and Beijing BHD Petroleum Technology Co., Ltd.

Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Li Hongqi and Beijing BHD Petroleum Technology Co., Ltd.

Translation of Exclusive Technical Consulting Service Agreement between Recon Technology (Jining) Co., Ltd.

and Jining ENI Energy Technology Co., Ltd.

Translation of Power

of Attorney for rights of Chen Guangqiang in Jining ENI Energy Technology Co., Ltd.

Translation of Power

of Attorney for rights of Yin Shenping in Jining ENI Energy Technology Co., Ltd.

Translation of Power

of Attorney for rights of Li Hongqi in Jining ENI Energy Technology Co., Ltd.

of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Chen Guangqiang and Jining ENI

Energy Technology Co., Ltd.

Translation of Exclusive

Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Yin Shenping and Jining ENI Energy Technology

Translation of Exclusive

Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Li Hongqi and Jining ENI Energy Technology

Translation of Equity

Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Jining ENI Energy Technology Co.,

Translation of Equity

Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Yin Shenping and Jining ENI Energy Technology Co.,

Translation of Equity

Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Li Hongqi and Jining ENI Energy Technology Co., Ltd.

Translation of Exclusive

Technical Consulting Service Agreement between Recon Technology (Jining) Co., Ltd.

Translation of Power of Attorney for rights of Chen Guangqiang in Jining ENI Energy Technology Co., Ltd.

Translation of Power of Attorney for rights of Yin Shenping in Jining ENI Energy Technology Co., Ltd.

Translation of Power of Attorney for rights of Li Hongqi in Jining ENI Energy Technology Co., Ltd.

Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Chen Guangqiang and Jining ENI Energy Technology Co., Ltd.

Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Yin Shenping and Jining ENI Energy Technology Co., Ltd.

Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Li Hongqi and Jining ENI Energy Technology Co., Ltd.

Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Jining ENI Energy Technology Co., Ltd.

Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Yin Shenping and Jining ENI Energy Technology Co., Ltd.

Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Li Hongqi and Jining ENI Energy Technology Co., Ltd.

Translation of Exclusive Technical Consulting Service Agreement between Recon Technology (Jining) Co., Ltd.

and Nanjing Recon Technology Co., Ltd.

Translation of Power

of Attorney for rights of Chen Guangqiang in Nanjing Recon Technology Co., Ltd.

Translation of Power

of Attorney for rights of Yin Shenping in Nanjing Recon Technology Co., Ltd.

Translation of Power

of Attorney for rights of Li Hongqi in Nanjing Recon Technology Co., Ltd.

Translation of Exclusive

Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Chen Guangqiang and Nanjing Recon Technology

Translation of Exclusive

Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Yin Shenping and Nanjing Recon Technology Co.,

Translation of Exclusive

Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Li Hongqi and Nanjing Recon Technology Co.,

Translation of Equity

Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Nanjing Recon Technology Co., Ltd.

Translation of Equity

Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Yin Shenping and Nanjing Recon Technology Co., Ltd.

Translation of Equity

Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Li Hongqi and Nanjing Recon Technology Co., Ltd.

Employment Agreement

between Recon Technology (Jining) Co., Ltd.

Translation of Power of Attorney for rights of Chen Guangqiang in Nanjing Recon Technology Co., Ltd.

Translation of Power of Attorney for rights of Yin Shenping in Nanjing Recon Technology Co., Ltd.

Translation of Power of Attorney for rights of Li Hongqi in Nanjing Recon Technology Co., Ltd.

Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Chen Guangqiang and Nanjing Recon Technology Co., Ltd.

Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Yin Shenping and Nanjing Recon Technology Co., Ltd.

Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co.

Ltd., Li Hongqi and Nanjing Recon Technology Co., Ltd.

Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Nanjing Recon Technology Co., Ltd.

Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Yin Shenping and Nanjing Recon Technology Co., Ltd.

Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Li Hongqi and Nanjing Recon Technology Co., Ltd.

Employment Agreement between Recon Technology (Jining) Co., Ltd.

Yin Shenping (1)

Employment Agreement

between Recon Technology (Jining) Co., Ltd.

Employment Agreement between Recon Technology (Jining) Co., Ltd.

Chen Guangqiang (1)

Employment Agreement

between Recon Technology (Jining) Co., Ltd.

Agreement between Recon Technology (Jining) Co., Ltd.

Li Hongqi (1)

11 unchanged sentences

Li Hongqi (1)

Agreement among Recon Technology (Jining) Co.

Operating Agreement

among Recon Technology (Jining) Co.

Ltd., Beijing BHD and Mr.

1 unchanged sentence

Chen Guangqiang and Mr.

Li Hongqi (1)

Subsidiaries of

the Registrant (2)

Stock Option Plan

Code of Business

Conduct and Ethics (1)

Certifications pursuant

8 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Stock Option Plan (1)

Code of Business

Conduct and Ethics (1)

Press Release (3)

XBRL Instance Document (3)

XBRL Taxonomy Extension Schema Document (3)

XBRL Taxonomy Extension Calculation Linkbase

XBRL Taxonomy Extension Calculation Linkbase Document (3)

XBRL Taxonomy Extension Label Linkbase Document (3)

XBRL Taxonomy Extension Presentation Linkbase

XBRL Taxonomy Extension Definition Linkbase

Incorporated by

reference to the Company’s Registration Statement on Form S-1, Registration No.

Incorporated by

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

XBRL Taxonomy Extension Presentation Linkbase Document (3)

XBRL Taxonomy Extension Definition Linkbase Document (3)

Incorporated by reference to the Company’s Registration Statement on Form S-1, Registration No.

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

Filed herewith.

3 unchanged sentences

TECHNOLOGY, LTD

November 14, 2016

Chief Financial

4 unchanged sentences

TECHNOLOGY, LTD

November 14, 2016

/s/ Yin Shenping

Yin Shen ping

Chief Executive

RECON TECHNOLOGY,

INDEX TO UNAUDITED CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of June 30, 2015 and March 31, 2016

Unaudited Condensed Consolidated

Statements of Operations and Comprehensive Loss for the nine and three months ended March 31, 2015 and 2016

Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2015 and 2016

Notes to Unaudited Condensed

Consolidated Financial Statements

RECON TECHNOLOGY, LTD

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited Condensed Consolidated Balance Sheets as of June 30, 2016 and September 30, 2016

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended September 30, 2015 and 2016

Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2015 and 2016

Notes to the Unaudited Condensed Consolidated Financial Statements

RECON TECHNOLOGY,

Consolidated Balance Sheets

As of Jun 30,

As of Mar 31,

As of June 30,

As of September 30,

Current assets

1 unchanged sentence

Trade accounts receivable, net

Trade accounts receivable- related parties, net

Inventories, net

Other receivables, net

Other receivables- related parties

Purchase advances, net

Purchase advances- related parties

Prepaid expenses

Prepaid expenses - related parties

Deferred tax assets

Total current assets

1 unchanged sentence

Long-term trade accounts receivable, net

Long-term other receivable

LIABILITIES AND EQUITY

Current liabilities

Short-term bank loans

Trade accounts payable

Trade accounts payable- related parties

Other payables

5 unchanged sentences

Taxes payable

Short-term borrowings

Short-term borrowings - related parties

3 unchanged sentences

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

5,427,946 and 5,804,005

shares issued and outstanding as of June 30, 2015 and March 31, 2016, respectively)

5,804,005 and 5,980,792 shares issued and outstanding as of June 30, 2016 and September 30, 2016, respectively)

Additional paid-in capital

Statutory reserve

Accumulated deficit

Accumulated deficits

(63,907,512 )

(69,368,096 )

(10,399,671 )

Accumulated other comprehensive loss

2 unchanged sentences

Total Liabilities and Equity

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements

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

RECON TECHNOLOGY,

Consolidated Statements of operations and Comprehensive LOSS

For the nine 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

Hardware and software - related parties

Provision for (reversal of) slow moving inventories

Total cost of revenues

1 unchanged sentence

General and administrative expenses

Provision for doubtful accounts

Research and development expenses

Operating expenses

Income (loss) from operations

(20,201,921 )

Loss from operations

Other income (expenses)

2 unchanged sentences

Interest expense

Change in fair value of warrants liability

Income (loss) from foreign currency exchange

Loss from warrants redemption

Other income (expense)

Income (loss) before income tax

(20,450,410 )

Provision (benefit) for income tax

Net Income (loss)

(20,995,182 )

Net income attributable to non-controlling interest

Net Loss attributable to Recon Technology, Ltd

(20,995,182 )

$ (3,255,395 )

$ (1,492,771 )

Comprehensive income (loss)

Net income (loss)

(20,995,182 )

Other income (expense)

Loss before income tax

Benefit for income tax

Comprehensive loss

Foreign currency translation adjustment

Comprehensive income (loss)

(20,931,782 )

Comprehensive income attributable to non-controlling interest

Comprehensive loss attributable to Recon Technology,

(20,938,826 )

$ (3,246,657 )

$ (1,500,957 )

Earnings (loss) per common share - basic

Earnings (loss) per common share - diluted

Weighted - average shares -basic

Weighted - average shares -diluted

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements.

Comprehensive loss

Comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to Recon Technology, Ltd

Loss per common share - basic and diluted

Weighted - average shares -basic and diluted

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

RECON TECHNOLOGY,

Consolidated Statements of Cash flows

For the nine months

ended March 31,

For the three months ended September 30,

Cash flows from operating activities:

Net income (loss)

(20,995,182 )

$ (3,255,395 )

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

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

Gain from disposal of equipment

Provision for doubtful accounts

Reversal of slow moving inventories

Provision for (reversal of) slow moving inventories

Share based compensation

Deferred tax (benefit) provision

Change in fair value of warrants liability

Deferred tax benefit

Restricted shares issued for services

Loss from warrants redemption

Changes in operating assets and liabilities:

1 unchanged sentence

Trade accounts receivable

(29,115,292 )

Trade accounts receivable-related parties

2 unchanged sentences

Purchase advance, net

Purchase advance-related party, net

Purchase advance-related parties, net

Prepaid expense

Prepaid expense - related party, net

Prepaid expense - related parties, net

Trade accounts payable

Trade accounts payable-related parties

Other payables

6 unchanged sentences

Net cash used in operating activities

(16,219,350 )

Cash flows from investing activities:

1 unchanged sentence

Proceeds from disposal of equipment

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from short-term bank loans

Repayments of short-term bank loans

Repayment of short-term borrowings

Proceeds from short-term borrowings-related parties

Repayment of short-term borrowings-related parties

(16,748,394 )

Proceeds from sale of common stock, net of issuance costs

Net cash provided by (used in) financing activities

Effect of exchange rate fluctuation on cash and cash

Net cash used in financing activities

Effect of exchange rate fluctuation on cash and cash equivalents

Net decrease in cash

(13,428,717 )

Cash at beginning of period

Cash at end of period

Cas at end of period

Supplemental cash flow information

2 unchanged sentences

Non-cash investing and financing activities

Issuance of common stock to prepay professional services

Non-cash transaction for AR and short-term borrowings-related parties offset

The accompanying notes are an integral

part of these unaudited condensed consolidated financial statements

AR and short-term borrowings-related parties offset

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

RECON TECHNOLOGY, LTD

NOTES TO THE UNAUDITED

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Notes to the unaudited condensed consolidated financial statements

ORGANIZATION AND NATURE OF OPERATIONS

Organization –Recon

Organization –

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

Yin Shenping, Chen Guangqiang and 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

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”).

The Company, along with its wholly-owned

subsidiaries, Recon Technology Co., Limited (“Recon HK”), Jining Recon Technology Ltd.

(“Recon JN”), Recon

Investment Ltd.

The Company, along with its wholly-owned subsidiaries, Recon

Technology Co., Limited (“Recon HK”), Jining Recon Technology Ltd.

(“Recon JN”), Recon Investment Ltd.

(“Recon IN”) and Recon Hengda Technology (Beijing) Co., Ltd.

(“Recon BJ”), 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

(“Recon BJ”), conducts its business through

the following PRC legal entities (“Domestic Companies”) that are consolidated as variable interest entities (“VIEs”)

and operate in the Chinese oilfield equipment & service industry:

Beijing BHD Petroleum Technology Co., Ltd.

(“BHD”),

Recon Technology Co., Ltd.

(“Nanjing Recon”), and

BHD Petroleum equipment manufacturing Company, Ltd (“Hanghua BHD”).

On January 29, 2015, the Company increased

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

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 the 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.

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.

Nanjing Recon Technology Co., Ltd.

(“Nanjing Recon”).

The Company has signed Exclusive Technical Consulting Service

Agreements with each of the Domestic Companies, which are our VIEs and Equity Interest Pledge Agreements and Exclusive Equity Interest

Purchase Agreements with their shareholders.

Through these contractual arrangements, the Company has the ability to substantially

influence each of the Domestic Companies’

daily operations and financial affairs, appoint their senior executives and approve

all matters requiring shareholder approval.

As a result of these contractual arrangements, which enable the Company to control

the Domestic Companies, the Company is considered as the primary beneficiary of each Domestic Company.

Thus, the Company is able

to absorb 90% of net interest or 100% of net loss of those VIEs.

On December 17, 2015, Huang Hua BHD Petroleum Equipment Manufacturing

LTD, a fully owned subsidiary established by BHD was organized under the laws of the PRC.

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:

As reflected in the Company’s unaudited condensed consolidated

financial statements, the Company had recurring net losses for the three months ended September 30, 2015 and 2016.

In assessing its liquidity, management monitors and analyzes the Company’s cash on-hand and its ability

to generate sufficient revenue sources in the future to support its operating and capital expenditure commitments.

plans to fund its continuing operations through identifying new prospective joint venture and strategic alliance opportunities

for new revenue sources, financial supports by major shareholders and reducing costs to improve profitability and replenish working

Management believes that the foregoing measures collectively will provide sufficient liquidity for the Company to meet

its future liquidity and capital obligations.

SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation - The

accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles

generally accepted in the United States of America for interim financial information pursuant to the rules of the SEC and have

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.

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.

Variable Interest Entities - A

of presentation - The accompanying unaudited condensed

consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United

States of America for interim financial information pursuant to the rules of the SEC and have been consistently applied.

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, 2016.

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, 2017.

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated financial statements

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.

Interest Entities - A

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

6 unchanged sentences

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

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.

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.

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 nine months ended March 31, 2016 have been translated into United States dollars (“U.S.

The unaudited condensed consolidated financial statements as of and for

the three months ended September 30, 2016 have been translated into United States dollars (“U.S.

dollars”) solely for

1 unchanged sentence

The translation has been made at the rate of ¥6.6702 = US$1.00, the approximate exchange rate

prevailing on March 31, 2016.

prevailing on September 30, 2016.

These translated U.S.

1 unchanged sentence

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.

and assumptions - The

preparation of the unaudited condensed 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

unaudited condensed consolidated financial statements include revenue recognition, allowance for doubtful accounts, allowance for

inventory, 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.

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

6 unchanged sentences

the valuation methodology are unobservable.

The carrying amounts reported in the consolidated

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated financial statements

The carrying amounts reported in the unaudited condensed consolidated

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

3 unchanged sentences

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 nine months ended March 31, 2016 using level 1

(See Note 8.)

The fair value of the warrants liability

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

Trade Accounts and Other Receivables

- Accounts receivable are carried at original invoiced amount 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.

Accounts and Other Receivables - Accounts

receivable are carried at original invoiced amount 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.

Accounts are written off after extensive efforts at collection.

Other receivables arise from transactions with non-trade customers.

Purchase Advances - Purchase

Other receivables

arise from transactions with non-trade customers.

Advances - Purchase

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

1 unchanged sentence

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.

Long-term investment –

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,”

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.

Long-Lived Assets - The

are stated at the lower of cost or market value, on a first-in-first-out basis.

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 is lower than the cost.

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

Office equipment

Leasehold improvement

Production equipment

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.

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.

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 March 31, 2016.

Revenue Recognition - The

There were no impairments at June 30, 2016 and September 30, 2016.

Recognition - The

Company recognizes revenue when the following four criteria are met:

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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.”

Revenue from software is recognized according to project contracts.

Contract costs are accumulated during the periods of installation

and testing or commissioning.

acceptance provisions have been

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

Hardware and software:

Revenue from hardware and software sales is generally recognized

when the product with the embedded software system is shipped to the customer and when there are no unfulfilled company obligations

that affect the customer’s final acceptance of the arrangement.

Revenue from software is recognized according to project

Usually this is short term.

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.

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.

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.

EPS 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 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 and nine months ended March 31, 2015 and 2016.

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

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated financial 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.

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

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.

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.

The Company has not been subject to any income

taxes in the United States or the Cayman Islands.

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.

per Share - Basic

Earnings/Loss Per Share (“EPS”) is

computed by dividing net loss by the weighted average number of ordinary shares outstanding.

Diluted EPS are computed by dividing

net 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 method).

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, 2015 and 2016.

Recently Issued Accounting Pronouncements

In January 2016, the FASB issued Accounting

In October 2016, the FASB has 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

The new guidance is effective for public companies for fiscal years beginning after December 15, 2017, including interim

periods within those 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 February 2016, the FASB issued ASU

2016-02, Leases (Topic 842), which supersedes the existing guidance for lease accounting, Leases (Topic 840).

requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged.

The amendments in

this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years.

application is permitted for all entities.

ASU 2016-02 requires a modified retrospective approach for all leases existing at,

or entered into after, the date of initial application, with an option to elect to use certain transition relief.

is currently evaluating the impact of this new standard on its consolidated financial statements.

In March 2016, the FASB issued Accounting

Standards Update No.

2016-06, Derivatives and Hedging (Topic 815):

Contingent Put and Call Options in Debt Instruments.

The amendments

apply to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined

to have a debt host) with embedded call (put) options.

The amendments clarify what steps are required when assessing whether the

economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks

of their debt hosts, which is one of the criteria for bifurcating an embedded derivative.

Consequently, when a call (put) option

is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call

(put) option is related to interest rates or credit risks.

Public business entities must apply the new requirements for fiscal

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

All other entities must apply the new requirements

for fiscal years beginning after December 15, 2017 and interim periods within fiscal years beginning after December 15, 2018.

All entities have the option of adopting the new requirements early, including adoption in an interim period.

If an entity early

adopts the new requirements in an interim period, it must reflect any adjustments as of the beginning of the fiscal year that

includes that interim period.

The Company does not expect any material impact of this new standard on its consolidated financial

In March 2016, the FASB issued Accounting

Standards Update No.

2016-07, Investments - Equity Method and Joint Ventures (Topic 323):

Simplifying the Transition to the Equity

Method of Accounting.

The amendments affect all entities that have an investment that becomes qualified for the equity method

of accounting as a result of an increase in the level of ownership interest or degree of influence.

The amendments eliminate the

requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership

interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively

on a step-by-step basis as if the equity method had been in effect during all previous periods that the investment had been held.

The amendments require that the equity method investor add the cost of acquiring the additional interest in the investee to the

current basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment

becomes qualified for equity method accounting.

Therefore, upon qualifying for the equity method of accounting, no retroactive

adjustment of the investment is required.

The amendments require that an entity that has an available-for-sale equity security

that becomes qualified for the equity method of accounting recognize through earnings the unrealized holding gain or loss in accumulated

other comprehensive income at the date the investment becomes qualified for use of the equity method.

The amendments are effective

for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016.

The amendments

should be applied prospectively upon their effective date to increases in the level of ownership interest or degree of influence

that result in the adoption of the equity method.

Earlier application is permitted.

The Company is currently evaluating the impact

of this new standard on its consolidated financial statements.

In April 2016, the FASB released ASU 2016-09,

Compensation - Stock Compensation (Topic 718):

Improvements to Employee Share-Based Payment Accounting .

The ASU includes

multiple provisions intended to simplify various aspects of the accounting for share-based payments.

While aimed at reducing the

cost and complexity of the accounting for share-based payments, the amendments are expected to significantly impact net income,

EPS, and the statement of cash flows.

Implementation and administration may present challenges for companies with significant

share-based payment activities.

The ASU is effective for public companies in annual periods beginning after December 15, 2016,

and interim periods within those years.

The Company is currently evaluating the impact of this new standard on its consolidated

financial statements.

In April 2016, FASB issued Accounting

Standards Update No.

2016-10, Revenue from Contracts with Customers (Topic 606):

Identifying Performance Obligations and Licensing .

The amendments clarify the following two aspects of Topic 606:

(a) identifying performance obligations;

licensing implementation guidance.

The amendments do not change the core principle of the guidance in Topic 606.

The effective

date and transition requirements for the amendments are the same as the effective date and transition requirements in Topic 606.

Public entities should apply the amendments for annual reporting periods beginning after December 15, 2017, including interim

reporting periods therein (i.e., January 1, 2018, for a calendar year entity).

Early application for public entities is permitted

only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting

The Company is currently evaluating the impact of this new standard on its consolidated financial statements.

2016-17, Consolidation (Topic 810):

Interest Held through Related Parties That Are under Common

Control, to provide guidance on the evaluation of whether a reporting entity is the primary beneficiary of a VIE by amending how

a reporting entity, that is a single decision maker of a VIE, treats indirect interests in that entity held through related parties

that are under common control.

The amendments are effective for public business entities for fiscal years beginning after December

15, 2016, including interim periods within those fiscal years.

For all other entities, the amendments are effective for fiscal

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

Early adoption

is permitted, including adoption in an interim period.

The Company is currently evaluating the impact of this new standard on its

unaudited condensed consolidated financial statements and related disclosures.

TRADE ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

September 30,

Trade accounts receivable

for doubtful accounts

third- party, net

Related Party

Beijing Langchen Construction

Xiamen Huangsheng Hitek Computer

Network Co.Ltd.

Hitek Computer Network Co.

related-parties, net

Allowance for doubtful accounts

Total - third-party, net

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated financial statements

September 30,

Third Party –

Beijing Yabei Nuoda

Science and Technology Co.

for doubtful accounts

long-term trade accounts receivable, net

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 was to be collected in two years beginning

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

During the nine months period ended March 31, 2016, the Company enhanced

collection of long aging accounts receivable and thus reduced the outstanding balance of Yabei Nuoda, significantly.

Beijing Yabei Nuoda Science and Technology Co.

Allowance for doubtful accounts

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.

Based on the repayment agreement signed on September 2,

2015, the outstanding balance was to be collected in three installments during the period from September, 2015 to December, 2017,

with each installment of ¥2,467,036 ($369,858).

During the year ended June 30, 2016, the Company received the first payment

on time as scheduled.

Provision for accounts receivables due from third party was

¥32,038 for the three months ended September 30, 2015 and recovery of accounts receivables due from third party was ¥205,944

($30,875) for the three months ended September 30, 2016, respectively.

During the three months ended September 30, 2016, no accounts receivable write-off against allowance for doubtful accounts, the

recovery was due to the collections of accounts receivable.

OTHER RECEIVABLES, NET

Other receivables consisted of the following:

September 30,

Current Portion

3 unchanged sentences

Deposits for projects

for doubtful accounts

Provision for other receivables were ¥93,500

and ¥309,000 ($47,912) for the nine months ended March 31, 2015 and 2016, respectively.

Non-Current Portion

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 each.

In March, June, September and December

of 2012, the Company received RMB 4.8 million.

Starting March 2013, installments for

each quarter would be ¥1,777,653.

The Company received the payments on time in March

and June, 2013.

On September 30, 2013, ENI proposed to extend the payment period and

signed a new contract with the Company.

According to the new arrangement, the remaining

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

The Company has continued to receive the payments under the agreement.

to third-parties are mainly used for short-term funding to support the Company’s

external business partners.

Allowance for doubtful accounts

Provision for other receivables was ¥19,000 and ¥17,648

($2,646) for the three months ended September 30, 2015 and 2016, respectively.

(A) The remaining part of this loan will be repaid over four years with

quarterly installments of ¥699,147, which is due by June 30, 2017.

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 the Company’s external business partners.

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

business travel and sundry expenses related to oilfield or on-site installation and inspection of products through customer approval

and acceptance.

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated financial statements

PURCHASE ADVANCES

2 unchanged sentences

Purchase advances consisted of the following:

Prepayment for inventory

for doubtful accounts

Provision for purchase advances were ¥88,678

and ¥3,836,441 ($594,857) for the nine months ended March 31, 2015 and 2016, respectively.

September 30,

Prepayment for inventory purchase

Allowance for doubtful accounts

(16,591,247 )

(16,787,569 )

Provision for purchase advances were ¥2,058,888 and ¥196,322

($29,432) for the three months ended September 30, 2015 and 2016, respectively.

The Company recorded allowance for these down payments

and will continue to try to collect or get inventories delivered.

These payments were advanced for certain customized equipment

of the planned projects.

As those projects were delayed or canceled or there is rare chance to be profitable, the Company decided

to suspend those projects and recorded allowances related to advanced payments for those projects as the Company may not be able

to receive those funds back.

Management is still making efforts to collect partially or negotiate with venders for some other alternative

solutions to minimize the Company’s loss.

Inventories consisted of the following:

September 30,

Small component parts

2 unchanged sentences

Finished goods

for slow moving inventory

Total inventories,

reversal of slow moving inventory was nil and ¥95,122 ($14,749) for the nine months ended March 31, 2015 and 2016.

Allowance for slow moving inventory

Total inventories, net

Recovery of slow moving inventory was ¥123,332 for the three

months ended September 30, 2015 and provision for slow moving inventory was ¥262,135 ($39,299) for the three months ended September

30, 2016, respectively.

PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

September 30,

Motor vehicles

Office equipment and fixtures

Production equipment

Total property and equipment

and equipment, net

Depreciation expense was ¥94,773 and

¥232,022 ($35,976) for the three months ended March 31, 2015 and 2016, respectively.

Depreciation expense was ¥369,284

and ¥728,092 ($112,894) for the nine months ended March 31, 2015 and 2016, respectively.

LONG-TERM INVESTMENT

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 ($250,000).

Since the restriction for the shares is 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 March 31, 2016, Recon owned

16.92% and 15.39% 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 in the US.

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 to zero.

On April 13, 2015, BHD reached an agreement

to invest RMB 80 million in Huanghua Heng Da Xiang Tong Manufacture Ltd (“HHBHDXT”) 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.

On March 18, 2016, BHD decided to terminate this investment transaction with HHBHDXT, and was no

longer a shareholder of HHBHDXT.

As of this termination, no payment was ever made to HHBHDXT.

Accumulated depreciation

Property and equipment, net

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated financial statements

Depreciation expense was ¥259,768 and ¥205,580 ($30,821)

for the three months ended September 30, 2015 and 2016, respectively.

OTHER PAYABLES

Other payables consisted of the following:

Consulting services

September 30,

Distributors and employees

Funds collected on behalf of others

September 30,

Related Party

Due to related parties

Expenses paid by the major shareholders

Due to family member of one owner

Due to management

staff for costs incurred on behalf of Recon

Due to management staff for costs incurred on behalf of Recon

TAXES PAYABLE

1 unchanged sentence

consisted of the following:

Enterprise income tax payable

SHORT-TERM BANK LOANS

Short-term bank loans consisted of the following:

Industrial and Commercial

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

and Commercial Bank, floating interest rate at 5.37 %, due on July 19, 2016

Total short-term

expense for the short-term bank loans was ¥162,000 and ¥108,239 ($16,783) for the three months ended March 31, 2015 and

2016, respectively.

expense for the short-term bank loans was ¥400,178 and ¥322,888 ($50,065) for the nine months ended March 31, 2015 and

2016, respectively.

September 30,

Other taxes payable

Total taxes payable

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated financial statements

SHORT-TERM BORROWINGS

Short-term borrowings from a third party were fully repaid in

2016 without interest, due on August 15, 2016.

Short-term borrowings from related parties consisted of the

September 30,

Short-term borrowings due to related parties:

Short-term borrowings due to related

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

Short-term borrowing from a Founder,

5.75% annual interest, due on September 25, 2016

Short-term borrowings from Xiamen

Huasheng Haitian Computer Network Co.

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

borrowing from a Founder, 5.22% annual interest, due on March 10, 2017

Total short-term

borrowings due to related parties

Short-term borrowing from a Founder, 5.75% annual interest, due on September 25, 2016

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 **

Short-term borrowing from a Founder's family member, no interest, due on December 9, 2016

Short-term borrowing from a Founder's family member, no interest, due on December 16, 2016

Short-term borrowing from a Founder's family member, no interest, due on December 28, 2016

Short-term borrowing from a Founder's family member, no interest, due on December 31, 2016

Short-term borrowing from a Founder, 5.22% annual interest, due on March 10, 2017

Short-term borrowing from a Founder, 5.22% annual interest, due on May 6, 2017

Short-term borrowing from a Founder, 5.65% annual interest, due on August 24, 2017

Short-term borrowing from a Founder, 5.65% annual interest, due on September 18, 2017

Short-term borrowing from a Founder, 5.65% annual interest, due on September 30, 2017

Total short-term borrowings due to related parties

* As of October 10, 2016, ¥719,854 ($107,921)

was fully paid back.

** As of November 4, 2016, the Company repaid ¥540,245

Interest expense for short-term borrowings due to related parties

was ¥177,109 and ¥92,382 ($14,324) for the three months ended March 31, 2015 and 2016, respectively.

Interest expense for short-term borrowings

due to related parties was ¥407,887 and ¥349,901 ($54,254) for the nine months ended March 31, 2015 and 2016, respectively.

was ¥171,448 and ¥132,490 ($19,863) for the three months ended September 30, 2015 and 2016, respectively.

SHAREHOLDERS’

Stock offering –

the nine months ended March 31, 2016, the Company offered 15,874 ordinary shares under the same purchase agreement from June 2015.

Stock offering

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 (4,000 shares

at an average of $1.64 on June 9, 2015;

288,105 shares at an average of $2.12 on June 10, 2015;

5,092 shares at an average of $2.00

on June 11, 2015).

The net cash proceeds received from the stock offering, after deducting ¥1,294,922 ($212,673) underwriter

commission and other associated fees, were ¥2,392,027 (approximately $0.6 million).

the year ended June 30, 2016, the Company offered 15,874 ordinary shares under the same purchase agreement from June 2015.

The net cash proceeds received from the stock offering were ¥158,268 ($23,820) .

During the three months ended

September 30, 2016, the Company did not offer any ordinary shares under the purchase agreement.

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 March 31, 2016, the balance of total statutory reserves was ¥4,148,929 and ¥4,148,929

($643,310), respectively.

- 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, 2016 and September 30, 2016, the balance of total

statutory reserves was ¥4,148,929 and ¥4,148,929 ($622,008), respectively .

STOCK-BASED COMPENSATION

Stock-Based Awards Plan

following is a summary of the status of options outstanding and exercisable at March 31, 2016:

Incentive Plan –

Company granted options to purchase 415,000 ordinary shares to its employees and non-employee director on March 26, 2012.

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.

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.

Incentive Plan –

The Company granted options

to purchase 400,000 ordinary shares to its employees and non-employee director 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 one third vesting on January 31, 2016.

The options expire ten years after the date of grant,

on January 31, 2025.

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated 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 ¥10.13 ($1.65) per share.

The following is a summary of the stock options activity:

Stock Options

Weighted Average Exercise Price Per Share

Outstanding as of June 30, 2016

Outstanding as of September 30, 2016

The following is a summary of the status of options outstanding

and exercisable at September 30, 2016:

Outstanding Options

Exercisable Options

Average Exercise

Remaining Contractual life (Years)

Average Exercise

Remaining Contractual life (Years)

Restricted Shares

As of March 31, 2016, the Company has

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

During the nine months

ended March 31, 2016, the following grants were made:

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.

The fair value

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

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.

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 platform

development services.

The fair value of the restricted shares was $247,176 based on the

closing stock price $0.95 at November 19, 2015.

Contractual life

The Share-based compensation expense recorded

for stock options granted were ¥797,016 and ¥1,564,094 ($242,519) for the nine months ended March 31, 2015 and 2016, respectively.

The Share-based compensation expense recorded for stock options granted were ¥387,598 and ¥534,277 ($82,842) for the three

months ended March 31, 2015 and 2016, respectively.

The total unrecognized share-based compensation expense for stock options

as of March 31, 2016 was approximately ¥3.3 million ($0.51 million), which is expected to be recognized over a weighted average

period of approximately 1.66 years.

for stock options granted were ¥509,528 and ¥543,102 ($81,422) for the three months ended September 30, 2015 and 2016,

respectively.

The total unrecognized share-based compensation expense for stock options as of September 30, 2016 was approximately

¥2.3 million ($0.35 million), which is expected to be recognized over a weighted average period of approximately 1.21 years.

Restricted Shares to senior manager

As of September 30, 2016, the Company has

granted restricted shares of common stock to senior management as follows:

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 was vested on December 13, 2014 and are

now non-restricted.

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.

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated financial statements

On October 18, 2015, the Company granted

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

The fair value of the restricted

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

On July 27, 2016, the Company granted 876,000

restricted shares to its employees and non-employee director as compensation cost for awards.

The fair value of the restricted

shares was $963,600 based on the closing stock price $1.10 at July 27, 2016, and no shares were issued as of September 30, 2016.

The Share-based compensation expense recorded

for restricted shares granted were ¥1,226,745 and ¥2,569,948 ($398,482) for the nine months ended March 31, 2015 and 2016,

for restricted shares granted were ¥617,024 and ¥1,423,568 ($213,421) for the three months ended September 30, 2015 and

2016, respectively.

The Share-based compensation expense recorded for restricted shares granted were ¥521,133 and ¥1,026,192

($159,116) for the three months ended March 31, 2015 and 2016, respectively.

The total unrecognized share-based compensation expense

for restricted shares granted as of March 31, 2016 was approximately ¥6.9 million ($1.1 million), which is expected to be

recognized over a weighted average period of approximately 2.07 years.

The total unrecognized share-based compensation expense for restricted shares granted as of September 30, 2016

was approximately ¥11.0 million ($1.66 million), which is expected to be recognized over a weighted average period of approximately

Restricted Shares for service

For the three months ended September 30,

2016, the Company has granted restricted shares of common stock to consultants as follows:

On July 27, 2016, the Company

approved the grant of 250,000 restricted shares with a value of $275,000 to designees of an independent consulting firm as

compensation for advisory services.

Those restricted shares were officially issued on October 21,

Following is a summary of the restricted

stock grants:

Restricted stock

stock granted:

Restricted stock grants

Non-vested as of June 30, 2016

Non-vested adjustment

Non-vested as of March 31,

Non-vested as of September 30, 2016

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

9 unchanged sentences

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 a reduced income tax rate

of 15% through November 2015.

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

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

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

15% through November 25, 2018.

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated financial statements

Loss before provision for income taxes consisted of:

September 30,

Cayman Island and other areas

Deferred tax asset is comprised of the following:

Allowance for doubtful

Net operating

loss carry forward

Total deferred

income tax assets

September 30,

Allowance for doubtful receivables

Net operating loss carry forward

Valuation allowance

Total deferred income tax assets

Deferred tax liability is comprised of the following:

tax cost due to unpayable accounts

Total deferred

income tax liability

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

For the three months ended March 31,

Current income tax

Adjust over accrued income taxes

income taxes provision (benefit)

(benefit) for income tax

the nine months ended March 31,

Current income tax

Adjust over accrued tax of prior

income taxes provision (benefit)

September 30,

Income tax cost due to unpayable accounts

Total deferred income tax liability

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

For the three months ended September 30,

Deferred income taxes benefit

Benefit for income tax

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated financial statements

NON-CONTROLLING INTEREST

Non-controlling

interest consisted of the following:

of June 30, 2015

Non-controlling interest consisted of the following:

As of June 30, 2016

Paid-in capital

Unappropriated retained earnings

other comprehensive loss

Total noncom-trolling

of March 31, 2016

Accumulated other comprehensive loss

Total non-controlling interest

As of September 30, 2016

Paid-in capital

Unappropriated retained earnings

other comprehensive loss

Total non-controlling

Accumulated other comprehensive loss

Total non-controlling interest

CONCENTRATIONS

For the three months ended March 31, 2015 and 2016, the one

largest customer, China National Petroleum Corporation (“CNPC”), represented approximately 29.65% and 71.17% of

the Company’s revenue, respectively.

the nine months ended March 31, 2015 and 2016, the two largest customers, China National Petroleum Corporation (“CNPC”)

and China Petroleum & Chemical Corporation Limited (“SINOPEC”), represented approximately 44.89%, and 7.70%, and

74.21% and 10.19% of the Company’s revenue,

respectively.

For the three months ended March 31, 2015, one major supplier

For the three months ended September 30, 2015 and 2016, the

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

Limited (“SINOPEC”), represented approximately 81.21% and 91.77% of the Company’s total revenue, respectively.

the three months ended September 30, 2015, four major suppliers accounted for 60% of the company’s total purchases.

For the three months ended September 30, 2016, two major suppliers

accounted for 58% of the company’s total purchases.

For the three months ended March 31, 2016, two major suppliers accounted

for 36% of the Company’s total purchases.

For the nine months ended March 31, 2015,

one major supplier accounted for 21% of the Company’s total purchases.

For the nine months ended March 31, 2016, two major

suppliers accounted for 50% of the Company’s total purchases.

COMMITMENTS AND CONTINGENCY

(a) Office Leases

The Company leases three offices in Beijing

1 unchanged sentence

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

Future payments under such leases are as follows

as of March 31, 2016:

months ending March 31,

lease payment

Future payments under such leases are as follows as

of September 30, 2016:

Twelve months ending September 30,

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 March 31, 2016, the Company estimated its severance payments of approximately ¥1.6

million ($0.25 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.

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, 2016, the Company estimated its severance payments of approximately ¥1.7 million ($0.25

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

Notes to the unaudited condensed consolidated financial statements

RELATED PARTY TRANSACTIONS

There was no purchases from related party for the three month

periods ended March 31, 2015 and 2016.

the nine months ended March 31 ,

Huanghua Xiang Tong

Xiamen Huangsheng

Hitek Computer Network Co.Ltd.

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

(Huangsheng Hitek) and Huanghua Xiang Tong, the ending balance of accounts payable due to Huangsheng Hitek as of March 31, 2016

and June 30, 2015 were both nil.

On March 18, 2016, the Company terminated its equity investment in Huanghua Xiang Tong and therefore

has no related-party relationship with this entity after March 18, 2016.

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 ¥140 thousand with annual rental

expense at ¥1.68 million ($0.26 million).

Purchases from related parties –

from related parties consisted of the following:

For the three months ended September 30,

Huanghua Heng Da Xiang Tong Manufacture Ltd

Xiamen Huangsheng Hitek Computer Network Co.

Purchase from related parties

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 ¥140,000 with annual rental expense at ¥1.68 million ($0.25 million).

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

Yin and his family member

started from April 1, 2016.

The one-year lease agreements between BHD and Mr.

Chen Guangqiang and his family member started from

January 1, 2016 and the annual lease between the Company and Mr.

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

Short-term borrowings from related

parties - The Company borrowed ¥16,916,905 and ¥8,557,771 ($1,326,920) from the Founders and their family members

as of June 30, 2015 and March 31, 2016, respectively.

Yin and his family member started from April 1, 2016.

lease agreements between BHD and Mr.

Chen Guangqiang and his family member started from January 1, 2016 and the annual lease between

Recon BJ and Mr.

Yin started from July 1, 2016.

borrowings from related parties - The Company

borrowed ¥12,941,848 and ¥12,515,253 ($1,876,288) from the Founders and their family members as of June 30, 2016 and September

30, 2016, respectively.

For the specific terms and interest rates of the borrowings, see Note 11.

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 expenses for

As of June 30, 2015 and March 31, 2016, ¥1,558,738 and ¥2,764,390 ($428,631) was due to them, respectively.

Chen paid certain operating expenses for the Company.

30, 2016 and September 30, 2016, ¥3,144,263 and ¥2,889,437 ($433,185) was due to them, respectively.

Variable Interest Entities

3 unchanged sentences

equity as non-controlling interests in the unaudited condensed consolidated financial

RECON TECHNOLOGY, LTD

Notes to the unaudited condensed consolidated financial statements

Summary information regarding consolidated VIEs is as follows:

September 30,

Current Assets

Cash and cash equivalents

Notes receivable

2 unchanged sentences

Total current assets

Non-current assets

Trade accounts payable

1 unchanged sentence

Other liabilities

Total current

financial performance of VIEs reported in the unaudited condensed consolidated statement of operations and comprehensive income

for the three months ended March 31, 2016 includes revenues of ¥4,539,099 ($703,807), operating expenses of ¥4,780,316

($741,209), and net loss of ¥4,478,185 ($694,362).

The financial performance of VIEs reported

in the unaudited condensed consolidated statement of operations and comprehensive income for the nine months ended March 31, 2016

includes revenues of ¥36,975,489 ($5,733,212), operating expenses of ¥16,546,759 ($2,565,648), and net loss of ¥9,578,364

($1,485,167).

Total current liabilities

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, 2016 includes

revenues of ¥7,802,103 ($1,169,692), operating expenses of ¥3,106,810 ($465,773), and net loss of ¥2,013,555 ($301,872).

SUBSEQUENT EVENTS

On October 11, 2016, the Company borrowed ¥720,000 ($107,942)

from one of its founders bearing an annual interest of 5.66%, due by October 11, 2017 to supplement the Company’s working

On November 1, 2016, the Company borrowed ¥1,420,000 ($212,887)

from one of its founders bearing an annual interest of 5.66%, due by August 31, 2017 to supplement the Company’s working

On November 12, 2016, the Board approved to issue 330,000 restricted

shares to Beijing San Li Hai Tian Technology Co.

(“BJSL”) for certain mold and software platform development

The fair value of the restricted shares was $306,900 based on the closing stock price of $0.93 on November 11, 2016.

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