RECON TECHNOLOGY S-1/A Filing by RCON-Agreements

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									Table of Contents

                                          As filed with the Securities and Exchange Commission on June 9, 2010
                                                                                                                                            Registration No. 333- 166540




                            SECURITIES AND EXCHANGE COMMISSION
                                                                       Washington, D.C. 20549


                                        PRE-EFFECTIVE AMENDMENT NO.1
                                                     TO
                                                  FORM S-1
                                          REGISTRATION STATEMENT
                                                                        UNDER
                                                               THE SECURITIES ACT OF 1933



                                      RECON TECHNOLOGY, LTD
                                                       (Exact name of registrant as specified in its charter)



                    Cayman Islands                                                        1389                                              Not Applicable
              (State or other jurisdiction of                                   (Primary Standard Industrial                                 (I.R.S. Employer
             Incorporation or organization)                                      Classification Code Number)                              Identification Number)




                           Room 1902, Buil ding C
                      Ki nglong Internati onal Mansion                                                                CT Corporati on System
                       Fulin Rd 9, Chaoyang District,                                                                   111 Eighth Avenue
                            Beijing, PRC 100107                                                                      New York, New York 10011
                                010-84945799                                                                              (800) 624-0909
                 (Address, including zip code, and telephone number,                                           (Name, address, including zip code, and telephone
            including area code, of registrant’s principal executive offices)                                  number, including area code, of agent for service)



                                                                                      Copies to:

                        Bradley A. Haneberg, Es q.                                                                    Douglas S. Ellenoff, Es q.
                          Anthony W. B asch, Es q.                                                                     Adam S. Mi meles, Es q.
                         Kaufman & Canoles, P.C.                                                                 Ellenoff Grossman & Schole LLP
                      Three J ames Center, 12 th Fl oor                                                                 150 East 42 nd Street
                           1051 East Cary Street                                                                    New York, New York 10017
                         Richmond, Virginia 23219                                                                   (212) 370-1300 – Telephone
                        (804) 771-5700 – Telephone                                                                   (212) 370-7889 – Facsimile
                        (804) 771-5777 – Facsimile


Approximate date of co mmencement of proposed sale to the public: As soon as practicable after the effective date of this reg istration statement.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursu ant to Rule 415 under the
Securities Act of 1933, check the following bo x. 
If this Form is filed to reg ister additional securities for an offering pursuant to Rule 462(b) under the Securit ies Act, che ck the following bo x
and list the Securities Act registration statement number of the earlier effect ive registration statement for the same offering. 
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following bo x and list the
Securities Act registration statement number of the earlier effect ive registration statement for the same o ffering. 
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securit ies Act, check the following box and list the
Securities Act registration statement number of the earliest effective registration statement for the same offering. 
Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, a non -accelerated filer, or a smaller reporting
company. See definit ions of ―large accelerated filer,‖ ―accelerated filer,‖ and ―smaller reporting company‖ in Ru le 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer                                                                                    Accelerated filer                          
Non-accelerated filer                (Do not check if a smaller reporting company)                         Smaller reporting co mpany                 


                                                     CALCULATION OF REGIS TRATION FEE

                                                                                                             Proposed Maximum
                                                                                                             Aggregate Offering       Amount of
                                 Title of Each Class of Securities to Be Registered                               Price (1)         Registration Fee
Units, each unit consisting of four Ordinary Shares, $0.0185 U.S. dollar par value per ordinary share,
  and one Warrant to purchase one Ordinary Share (2)                                                           $17,250,000            $1,229.93
     Ordinary Shares included as part of the Units                                                                 —                      ( 3)

     Warrants included as part of the Units                                                                        —                      (3 )

Ordinary Shares Underly ing Warrants ( 4 )( 5 )                                                                $6,093,750              434.48
Total                                                                                                          $23,343,750          $1,664.41 (6)


(1)
       Estimated solely for the purpose of calculating the registration fee pursuant to Section 6(b) and Rule 457(o) of the Securities Act of 1933.
( 2)
       Includes units that the underwriters have the option to purchase to cover over-allotments, if any.
(3 )
       No fee pursuant to Rule 457(g).
(4 )
       Includes offering price attributable to ordinary shares issuable upon exercise of warrants that we have agreed to issue to ou r underwriters.
(5 )
       Pursuant to Rule 416, this registration statement also covers such number of addit ional ord inary shares to prevent dilution resulting fro m
       stock splits, stock dividends and similar transactions.
(6)
       Previously paid.


The Registrant hereby amends this Registrati on Statement on such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically states that this Registrati on Statement shall thereafter become
effecti ve in accordance wi th Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become
effecti ve on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.
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The information in this prospectus i s not complete and may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commissi on i s effective. This prospectus i s not an offer to
sell these securitie s and is not soliciting an offer to buy the se securitie s in any state where the offer or sale is not
permitted.


                                            SUBJ ECT TO COMPLETION, DATED J UNE 9 , 2010




                                           RECON TECHNOLOGY, LTD
                                                           Units
                           Each Unit Consisting of Four Ordinary Shares and One Warrant


      We are offering, on a firm co mmit ment basis,           un its, with each unit consisting of four ordinary shares and one warrant. The units
will not trade separately, they will not be listed on any exchange or quoted on any market and no certificates will be issued evidencing the
units. Our ordinary shares and the warrants will be issued and trade separately on the Nasdaq Capital Market. We expect that the units will be
offered at a price within a range of $         to $       per unit. Our ord inary shares are currently traded on the Nasdaq Capital Market under
the symbol ―RCON.‖ On June 7, 2010, the last reported market price of our ord inary shares was $5.61 per ord inary share. We exp ect the
warrants to be listed on the Nasdaq Capital Market under the symbol ―RCONW.‖

     Each warrant included in the units entitles its holder to purchase one ordinary share in our company at an exercise price of $              . The
warrants are exercisable at any time until their expiration date, five years after the effect ive date of the registration statement of which this
prospectus is part. We may cancel the warrants, in whole o r in part, and if in part, by lot, at any time following the date t hat is the six month
anniversary of the effective date of the registration statement of which this prospectus is part if the closing price o f our ord inary shares exceeds
$       per ord inary share for at least ten trading days within any period of twenty consecut ive trading days.

     We intend to use the net proceeds of this offering to bid on new pro jects, complete existing projects and pursue favorable op portunities
for mergers and acquisitions. We have no agreements, understandings or obligations regarding any such mergers and acquisitions at this time.



    Investing in these units involves significant risks. See ― Risk Factors ‖ beginning on page 8 of this
prospectus.

                                                                                                           Per Unit            Total
                    Public o ffering price                                                                 $                  $
                    Underwrit ing discounts and commissions                                                $                  $
                    Proceeds to us, before expenses                                                        $                  $

      Our underwriters have an option exercisable within 45 days fro m the date of this prospectus to purchase up to             additional units
fro m us at the public offering price, less the underwrit ing discount solely to cover over-allot ments. The units issuable upon exercise of the
underwriter’s over-allotment option have been registered under the registration statement of wh ich this prospectus forms a part.

      The underwriters are o ffering units as set forth under ―Underwriting.‖ The underwriters expect to deliver the units against payment in
U.S. dollars in New Yo rk, New York on             , 2010.

     These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities
commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or
adequacy of this pros pectus. Any representati on to the contrary is a cri minal offense.




     Ladenburg Thalmann & Co. Inc.                                                              Rodman & Renshaw, LLC
Prospectus dated   , 2010
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      Except where the context otherwise requires and for purposes of this prospectus only:

        •    The terms ―we,‖ ―us,‖ ―our company,‖ ―the Co mpany,‖ ―our‖ and ―Recon‖ refer to Recon Technology, Ltd, a Cay man Islands
             exempted company; Recon Technology Co., Limited, a Hong Kong company; and Recon Technology (Jining) Co., Ltd., a PRC
             company.
        •    ―Shares‖ and ―ordinary shares‖ refer to our ordinary shares.
        •    ―Units‖ refer to the units offered hereby comprised of four ordinary shares and one warrant, which warrant may be exercised to
             purchase one ordinary share.

        •    ―China‖ and ―PRC‖ refer to the People’s Republic of China.
        •    all references to ―RMB‖ and ―¥‖ are to the legal currency of Ch ina and all references to ―USD,‖ ―U.S. dollars,‖ ―dollars‖ and ―$‖
             are to the legal currency of the United States.
        •    ―BHD‖ refers to Beijing BHD Petro leu m Technology Co., Ltd., a PRC co mpany.

        •    ―Nanjing Recon‖ refers to Nanjing Recon Technology Co., Ltd., a PRC co mpany.
        •    ―ENI‖ refers to Jining ENI Energy Technology Co., Ltd., a PRC co mpany.

      For purpose of clarity, where the context requires us to differentiate between the entities generally referred to collectively as ―Recon‖,
and for purposes of this prospectus only:
        •    ―Recon-CI‖ refers to Recon Technology, Ltd, a Cay man Islands exempted co mpany.

        •    ―Recon-HK‖ refers to Recon Technology Co., Limited, a Hong Kong company.
        •    ―Recon-JN‖ refers to Recon Technology (Jining) Co., Ltd., a PRC co mpany.

      This prospectus contains translations of certain RM B amounts into U.S. dollar amounts at a specified rate solely fo r the conv enience of
the reader. Un less otherwise stated, the translations of RM B into U.S. dollars have been made at the rate of exchange of $1.00 t o RM B 6.8361,
the approximate exchange rate prevailing on March 31, 2010. We make no representation that the RMB or U.S. dollar amounts ref erred to in
this prospectus could have been or could be converted into U.S. dollars or RM B, as the case may b e, at any particular rate or at all. Any
discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

      Unless otherwise indicated, all informat ion in this prospectus assumes:
        •    no person will exercise any outstanding options; and

        •    the sale of       units at the public offering price of $       per unit, the midpoint of the range set forth on the cover page.
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                                                             PROSPECTUS S UMMARY

        This summary highlights information that we present more fully in the rest of this prospectus. This summary does not contain all of
  the information you should consider before buying shares in this offering. This summary contains forward -looking statements that involve
  risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In so me cases, you can
  identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,”
  “expect,” “we believe,” “we intend,” “may,” “should,” “could,” and similar expressions. These statements involve estimates,
  assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially fr om any future
  results, performances or achievements expressed or implied by the forward -looking statements. You should read the entire prospectus
  carefully, including the “Risk Factors” section and the financial statements and the notes to those statements.

  Our Company
        Recon Technology, Ltd, a Cay man Islands exempted company (―Recon-CI‖) is the parent company of Recon Technology Co.,
  Limited, our wholly -owned subsidiary in Hong Kong (―Recon-HK‖). Recon-HK is the parent company of Recon Technology (Jining) Co.,
  Ltd., a PRC co mpany (―Recon-JN‖). Recon-JN and Recon-HK are co llect ively referred to herein as the ―PRC Subsidiaries‖. Recon-JN
  operates Beijing BHD Petro leu m Technology Co., Ltd. (―BHD‖), Nanjing Recon Technology Co., Ltd. (―Nanjing Recon‖) and Jining ENI
  Energy Technology Co., Ltd. (―ENI‖) (co llect ively, the ―Do mestic Co mpanies‖) by contract. The Do mestic Co mpanies are not our
  subsidiaries.

          Through the Domestic Co mpanies, we provide services designed to automate and enhance the extraction of petro leum in Ch ina. To
  this end, the Domestic Co mpanies and we have developed specialized s oftware and hardware to manage the oil ext raction process in
  real-t ime and to reduce the costs associated with extract ion. See ―Our Business – General‖. These products and services include:

          •    RSCADA System . Nanjing Recon’s technology includes Recon’s supervisory control and data acquisition system
               (―RSCADA‖), an industrial co mputerized process control system for monitoring, managing and controlling petroleum
               extraction. RSCADA integrates the underground, ground and above-ground levels of the petroleum ext raction industry.
               RSCADA connects the above-ground level central control roo m with the ground level relay station and the relay station with
               the underground bottom intelligent terminal using 2.4G wireless frequency. RSCADA has received grants and awards from the
               State Ministry of Science and Technology and the city of Nanjing.
          •    Water System . In addit ion to RSCA DA, BHD has developed and imp lemented technology designed to find and block water
               content in petroleum. As China ’s extraction of o il has increased, the quantity of available o il has decreased and the water
               content in remaining oil has increased. In order to improve efficiency and profitability in extract ion, BHD has developed
               technology to reduce the amount of water in extracted petroleu m.
          •    Oil Field Furnaces . Crude petroleum contains certain impurities that must be removed before the petroleum can be sold,
               including water and natural gas. To remove the impurities and to prevent solidification and blockage in transport pipes,
               companies employ heating furnaces. BHD researched, developed and imp lemented a new oil field furnace that is advanced,
               highly automated, reliab le, easily operable, and co mparatively safe and highly heat efficient (90% efficiency).

          •    Multipurpose Fissure Shaper . BHD has also developed a multipurpose fissure shaper to improve our ability to test for and
               extract petroleu m. Before any petroleu m ext ractor can test for the presence of oil, it must first perforate a hole fo r testin g. The
               depth of the perforated hole is, of course, extremely impo rtant in the testing process: a hole that is too shallow may cause an
               extractor to miss an oil field entirely. BHD has developed a proprietary mult ipurpose fissure shaper that is used with the
               perforating gun to effectively increase the perforation depth by between 46% and 80%, shape a great number of stratum
               fissures, improve the stratum d iversion capability and, as a result, improve our ability to locate oil fields and increase th e
               output of oil we lls.


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          •    Acoustic pipeline monitoring system . Nan jing Recon’s acoustic oil and gas pipeline safety monitoring system has been widely
               used by China Petro leum and Chemical Corporation (―Sinopec‖). We are also cooperating with Sinopec to implement our
               solutions in imports instrumentation, the introduction of equipment and oilfield chemical additives.

  Industry and Market B ackground
        China is the world’s second-largest consumer of petroleu m products, third-largest importer of petro leu m and fourth-largest producer
  of petroleu m. In the last twenty years, China’s demand fo r oil has more than trip led, while its production of oil has only modestly
  increased. China became a net importer o f petroleu m in 1993, and, as a result, o il production in Ch ina has been aimed at meet in g domestic
  requirements. The oil industry in Ch ina is do minated by three state-owned holding companies: Ch ina National Petro leu m Corp oration
  (CNPC), Ch ina Petroleu m and Chemical Corporation (Sinopec) and Ch ina Nat ional Offshore Oil Corporation (CNOOC). Fo reign
  companies have also recently become involved in Ch ina’s petroleum industry; however, according to Chinese law, China’s national oil
  companies may take a majo rity (o r minority) stake in any co mmercial discovery. As a result, the number of majo r foreign co mpa nies
  involved in the industry is relatively limited: Agip, Apache, BP, ChevronTexaco, ConocoPhillips, Eni, ExxonMobil, Husky En ergy,
  Kerr-McGee, Mitsubishi, Royal Dutch Shell, Saudi Aramco, and Total.

  Our Competiti ve Strengths
         We believe our co mpetitive strengths include the follo wing:

          •    Safety of products.
          •    Efficiency of technology.
          •    Ability to leverage our knowledge of Chinese business culture.

          •    Experienced, successful executive management team.
          •    Ability to leverage Ch ina’s cost structure.
          •    Ownership of our o wn intellectual property.

  Our Strategies
       Our goal is to help our customers improve their efficiency and profitability by providing them with software and hardware solutions
  and service to imp rove their ability to locate productive oil reservoirs, manage the oil extraction process, reduce extraction costs, and
  enhance recovery from extraction activ ities. Key elements of our strategy include:

          •    Increase our market share in Ch ina.
          •    Focus on higher-profit subsection of market.
          •    Offer services to foreign oil fields contracted by Chinese petroleum co mpanies.

          •    Seek opportunities with fo reign co mpanies in China.
          •    Provide services that generate high customer satisfaction levels.

  Our Challenges and Risks
        As a whole, the Ch inese petroleum industry faces four primary challenges: (a) co mpeting globally; (b) balancing environ mental and
  developmental concerns; (c) dealing with configuration of petroleu m resources; and (d) gradually increasing profit margins. Co mpared to
  developed countries, however, there are still certain lags in terms of modernized management levels in China. In particu lar, wit h the
  introduction of computerized techniques over the last ten years, the degree of automation in foreign countries has reached a higher lever,
  while China is still in the init ial stage.


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       In addition, we face risks and uncertainties that may materially affect our business, financial condition, results of operations and
  prospects. Thus, you should consider the risks discussed in ―Risk Factors‖ and elsewhere in this prospectus before investing in our
  company.

  Our Corporate Structure
       We operate our business in China through the Domestic Co mpanies, wh ich are PRC limited liab ility co mpanies controlled by the
  same three PRC residents, Mr. Yin Shenping, Mr. Li Hongqi and Mr. Chen Guangqiang. Mr. Yin , Mr. Li and Mr. Chen are als o significant
  shareholders in and directors of our co mpany, and they serve, respectively, as our Chief Executive Officer, Ch ief Market ing Officer and
  Chief Technology Officer.

        Chinese laws and regulations currently do not prohibit or restrict foreign ownership in petroleu m businesses. However, Chinese laws
  and regulations do prevent direct foreign investment in certain industries. To protect our shareholders from possible future foreign
  ownership restrictions, Mr. Yin, Mr. Li and Mr. Chen reorganized our co mpany, entered into agreements with Recon -JN and caused
  Recon-JN and each of the Do mestic Co mpanies to enter into a series of agreements that give our company (by virtue of its sole owner ship
  of Recon-HK and Recon-HK’s sole ownership of Recon-JN) effective control over each of the Do mestic Co mpanies.

       We have Exclusive Technical Consulting Service Agreements and Operating Agreements with each of the Do mestic Co mpanies and
  Equity Interest Pledge Agreements and Exclusive Equity Interest Purchase Agreements with their shareholders. Through these co ntractual
  arrangements, we have the ability to substantially influence each of the Do mestic Co mpanies ’ daily operations and financial affairs,
  appoint their senior executives and approve all matters requiring shareholder approval. As a result of these contractual arrangements, wh ich
  enable us to control the Domestic Co mpanies, we are considered the primary beneficiary of each Do mestic Co mpany. In addition, we and
  the Domestic Co mpanies are under co mmon control, by virtue of the ownership of more than 60% of our co mpany and each of the
  Do mestic Co mpanies by three shareholders (Mr. Yin Shenping, Mr. Li Hongqi and Mr. Chen Guangqiang).

       Accordingly, we consolidate their results, assets and liabilities in our financial statements. For a description of these contractual
  arrangements, see ―Corporate Structure – Contractual Arrangements with Do mestic Co mpanies and their Shareholders.‖


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       The following diagram illustrates our current corporate structure and the place of format ion, ownership interest and affiliation o f each
  of our subsidiaries and affiliates as of the date of this prospectus.




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  Representati ve ’s Warrants
        In connection with this offering, we will, for a no minal amount, sell to our underwriters warrants to purchase 18,750 units
  (―Representative’s Warrants‖). These warrants are exercisable, on a cashless basis, for a period of five years fro m the date of issuance at a
  price equal to 125% of the price o f the units in this offering. Du ring the term of the warrants, the holders thereof will be g iven the
  opportunity to profit fro m a rise in the market price of our ordinary shares, with a resulting dilution in the interest of our other
  shareholders. The term on wh ich we could obtain additional capital during the life of these warrants may be adversely affected because the
  holders of these warrants might be expected to exercise them when we are able to obtain any needed additional capital in a new offerin g of
  securities at a price greater than the exercise price of the warrants. If the underwriter exercises all of its warrants to purchase units and then
  exercises all of the warrants contained within such units, we would have              % more shares outstanding after the warrant exercise than
  at the conclusion of the offering assuming no other issuances. See ―Underwriting.‖

  Corporate Informati on
         Our principal executive offices are located at Roo m 1902, Building C, Kinglong International Mansion, Fulin Rd 9, Chaoyang
  district, Beijing, PRC 100107. Our telephone number at this address is 010 -84945799, and our fax nu mber is 010-84945792. Our registered
  office in the Cay man Islands is c/o Corporate Filing Serv ices Limited, 4th Floor, Harbour Centre, P.O. Bo x 613, Grand Cay man
  KYI-1107, Cay man Islands.

       Investor inquiries should be directed to us at the address and telephone number of our p rincipal executive offices set forth above. Our
  website is www.recon.cn . Information on our website is substantially in the Mandarin language. Information contained on our website or
  any other website is not a part of this prospectus.

       Our agent for service of process in the United States is CT Corporation System, located at 111 Eighth Avenue, New York, New York
  10011.


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  The Offering

   Securities offered:                               units, each co mprised of four ordinary shares and one warrant.
   Offering Price per Unit :                 $
   Warrant Terms:                            The warrants included in the units will be exercisable any time following the complet ion of the
                                             offering, and will expire on the final day of the 60 th month following the closing of the
                                             offering. Each warrant may be exercised to purchase one ordinary share at an exercise price
                                             equal to $         per ord inary share.

                                             We may cancel the warrants, in whole o r in part, and if in part, by lot, at any time following the
                                             six-month anniversary of the closing date of this offering, if the closing price per ordinary
                                             share exceeds $          for at least ten trading days within any period of twenty consecutive
                                             trading days. In such an event, the warrant exp iration date will be reduced to 30 days from the
                                             date of our issuance of a press release announcing the satisfaction of such condition and such
                                             change to the warrant term.
   Ordinary Shares Outstanding
     Prior to Co mpletion of the Offering:   3,951,811 ordinary shares
   Ordinary Shares Outstanding               Upon closing, we will have            ord inary shares outstanding (not including the ordinary
     upon Closing of the Offering:           shares underlying the warrants offered hereby, the ordinary shares underlying the warrants to
                                             be issued to the underwriters or the ordinary shares underlying any outstanding options or
                                             warrants).
   Nasdaq Capital Market Sy mbo ls/CUSIP     ―RCON‖ for our ord inary shares (CUSIP No. G7415M 108)
     Nu mbers:                               ―RCONW‖ for our warrants (CUSIP No. G7415M 106).
   Transfer Agent:                           Co mputershare Trust Company, N.A., 250 Royall Street, Canton, MA 02021
   Risk Factors:                             Investing in these securities involves a high degree of risk. As an investor, you should be able
                                             to bear a comp lete loss of your investment. You should carefully co nsider the informat ion set
                                             forth in the ―Risk Factors‖ section of this prospectus before deciding to invest in ordinary
                                             shares.
   Option to Purchase Additional Units:      We have granted to the underwriters an option exercisable within 45 days from the date of this
                                             prospectus, to purchase up to an additional       units solely to cover over-allot ments.
   Timing and Settlement for Units:          We expect to deliver the units registered hereunder against payment on            , 2010.
   Use of Proceeds:                          Our net proceeds from this offering are expected to be approximately $         . Net proceeds
                                             will be used to bid on new projects, complete existing projects and pursue favorable
                                             opportunities for mergers and acquisitions. We have no agreements, understandings or
                                             obligations regarding any such mergers or acquisitions at this time. No portion of the net
                                             proceeds will be used to repay any loans due to our employees.


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  Summary Financial Informati on
        In the table below, we p rovide you with historical selected financial data for the fiscal years ended June 30, 2009 and 2008 and the
  nine month period ended March 31, 2010. This informat ion is derived fro m our consolidated and combined financial statements included
  elsewhere in this prospectus. Historical results are not necessarily indicative of the results that may be expected for any future period.
  When you read this historical selected financial data, it is important that you read it along with the hist orical financial statements and
  related notes and ―Management’s Discussion and Analysis of Financial Condition and Results of Operat ions ‖ included elsewhere in this
  prospectus.

                                                                       For the Fiscal Year                                      For the Nine Months
                                                                         Ended June 30,                                           Ended March 31,
                                                                                                         2009                2010                   2010
                                                         2008                     2009                (unaudited)         (unaudited)           (unaudited)
   Total Revenues                                  ¥   65,748,234       ¥        75,646,907       $    11,065,798     ¥     98,834,057         $     14,457,667
   Income fro m Continuing Operations              ¥   11,100,900       ¥        15,256,875       $     2,231,809     ¥     19,821,690         $      2,899,561
   Income (Loss) fro m Discontinued
     Operations                                    ¥       496,223      ¥                  —      $             —     ¥                 —      $              —
   Net Inco me Available for Ordinary
     Shareholders                                  ¥   11,580,304       ¥        15,205,321       $      2,224,268    ¥     17,502,923         $       2,560,367
   Basic Weighted Average Shares
     Outstanding                                         2,139,203                2,139,203              2,139,203            3,753,350                3,753,350
        Basic Earn ings per Share for Ordinary
          Shareholders                             ¥            5.41    ¥                  7.11   $            1.04   ¥             4.66       $             0.68
   Diluted Weighted Average Shares
     Outstanding                                         2,210,892                2,251,811              2,251,811            3,763,408                3,763,408
        Diluted Earnings per Share for
          Ordinary Shareholders                    ¥            5.24    ¥                  6.75   $            0.99   ¥             4.65       $             0.68

                                                                                June 30,                                                March 31,
                                                                                                         2009                2010                      2010
                                                         2008                     2009                (unaudited)         (unaudited)               (unaudited)
   Total Assets                                    ¥   61,230,033       ¥        76,632,698       $    11,210,002     ¥    170,620,753         $     24,958,785
   Total Liab ilities                              ¥   41,071,889       ¥        39,594,476       $     5,791,969     ¥     55,320,053         $      8,092,341
   Redeemable Ord inary Shares                     ¥    1,388,641       ¥         1,434,342       $       209,819     ¥            —           $            —
   Non-controlling Interest in Equ ity             ¥    5,210,560       ¥         6,839,616       $     1,000,514     ¥      9,158,383         $      1,339,709
   Total Controlling Shareholders ’ Equity         ¥   13,558,943       ¥        28,764,264       $     4,207,701     ¥    106,142,317         $     15,526,736


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                                                                R IS K FACTORS

      Investment in our securities involves a high degree of risk. You should carefully consider the risks described below together with all of
the other information included in this prospectus before making an investment decision. The risks and uncertainties described below are not
the only ones we face, but represent the material risks to our business. If any of the following risks actually occurs, our b usiness, financial
condition or results of operations could suffer. In that case, you may lose all or part of your investment. You should not invest in this offer ing
unless you can afford to lose your entire investment.


                                                          Risks Related to Our Business

We operate in a very competitive industry and may not be able to maintain our revenues and profitability.

      Since the 1990s, several international co mpanies engaged in supplying integrated automation services for the petroleu m ext rac tion
industry have been qualified in Ch ina. These competitors have significantly greater financial and market ing resources and name recognition
than we have. In addition, at least five domestic co mpetitors also compete with us, and mo re co mpetitors may enter the market as Chinese
petroleum co mpanies seek to reduce oil production costs and improve efficiencies. There can be no assurance that we will be a ble to compete
effectively in our industry.

      In addition, our co mpetitors may introduce new systems. If these new systems are more a ttractive to customers than the systems we
currently use or may develop, our customers may switch to our competitors ’ services, and we may lose market share. We believ e that
competition may beco me mo re intense as more integrated automation service providers, including Chinese/foreign jo int ventures, are qualified
to conduct business. We cannot assure you that we will be able to compete successfully against any new or existing co mpetitor s, or against any
new systems our competitors may implement. Any of thes e competitive factors could have a material adverse effect on our revenues and
profitability. See ―Our Business – Market Background‖.

We must continually research and develop new technologies and products to remain competitive.

      Because our industry is so competitive, we will need to continually research, develop and refine new technologies and offer new products
to compete effectively. Many factors may limit our ability to develop and refine new products, including the availability of fun ds to dedicate to
this portion of our business and access to new products and technologies that we can incorporate into our products, as well as marketplace
resistance to new products and technologies. We believe that the Do mestic Co mpanies ’ and our products are able to compete in the
marketplace based upon, among other things, our intellectual property. We cannot assure investors that applications of our an d the Do mestic
Co mpanies’ technologies or those of third parties, if developed, will not be rendered superfluous or obso lete by research efforts and
technological advances by others in these fields.

     As new technologies are developed, the Domestic Co mpanies and we may need to adapt and change our products and services, our
method of market ing or delivery or alter our current business in ways that may adversely affect revenue and our ability to achieve our proposed
business goals. Accordingly, there is a risk that the Domestic Co mpanies ’ and our technology will not support a viable co mmercial enterprise.
See ―Our Business – Our Products.‖

Our financial performance is dependent upon the sale and implementation of petroleum mining and extraction software and hardw are and
related services, a single, concentrated group of products.

      We derive substantially all of our revenues from the license and imp lementation of software applications and hardware innovations for
the Chinese petroleum industry. The life cycle o f our products and services is difficu lt to estimate due in large measure to the potential effect of
new software and hardware applications and enhancements, including those we introduce, and the maturation in both the Chinese petroleum
and software/hardware industries. If we are unable to continually imp rove our software and hardware to address the changing needs of the
Chinese petroleum industry, we may experience a significant decline in the demand for the Do mestic Co mpanies ’ and our products and
services. In such a scenario, our revenues may significantly decline. See ―Our Business.‖

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As a technology-oriented business, our ability to operate profitably is directly related to our ability to develop and protect our proprietar y
technology.

     We rely on a co mbination of trademark, trade secret, nondisclosu re, copyright and patent law to protect the Do mestic Co mpanies ’ and our
software and hardware, which may afford only limited protection.

      Although the Chinese government has issued Nanjing Recon three copyrights on software and Nanjing Recon and BHD eight p atents on
products, we cannot guarantee that competitors will be unable to develop technologies that are similar or superior to the Do mestic Co mpanies’
and our technology. Despite our efforts to protect the Domestic Co mpanies ’ and our proprietary rights, unauthorized part ies, in cluding
customers, may attempt to reverse engineer or copy aspects of the Do mestic Co mpanies ’ and our products or to obtain and use information that
the Domestic Co mpanies and we regard as proprietary. Furthermore, our co mpetitors ma y independently develop substantially equivalent or
superior proprietary info rmation and techniques, reverse engineer information and techniques, or otherwise gain access to our proprietary
technology. In the future, we cannot guarantee that others will no t use the Domestic Co mpanies ’ and our technology without proper
authorization. In addit ion, under the Chinese intellectual property law, the 50-year protection period for software copyright and 10-year patent
protection period are not subject to renewal upon expiration.

      The Do mestic Co mpanies and we develop our software products on third -party middleware software programs that are licensed by our
customers fro m third part ies, generally on a non-exclusive basis. The termination of any such licenses, or the failure of the third -party licensors
to adequately maintain or update their products, could result in delay in our ab ility to develop, market or ship certain of o ur pro ducts while we
seek to implement technology offered by alternative sources. While it may be necessary or desirable in the future to obtain other licenses, there
can be no assurance that they will be ab le to do so on commercially reasonable terms or at all.

        In addition, the Do mestic Co mpanies and we may init iate claims or lit igation against third parties for infringement of our proprietary
rights or to establish the validity, scope or enforceability of our proprietary rights. Any such claims could be time consuming, result in costly
lit igation, cause product development or shipment delays or force the Do mestic Co mpanies or us to enter into royalty or license agreements
rather than dispute the merits of such claims, thereby impairing our financial performance by requiring the Do mestic Co mpanie s or us to pay
additional royalt ies and/or license fees to third parties. There is always a risk that patents, if issued, may be subsequently invalidated, either in
whole or in part and this could diminish or ext inguish protection for any technology we may license. In addition, the laws of China may not
protect proprietary rights to the same extent as U.S. law. Therefore, we may be unable to mean ingfully protect our rights in trade secrets,
technical know how and other non-patented technology. Any failure to enforce or protect the Do mestic Co mpanies ’ and our rig hts could cause
us to lose the ability to exclude others from issuing technology to develop or sell co mpeting products. See ―Our Business – Proprietary Rights‖
and ―China’s Intellectual Property Rights Enforcement System.‖

We may not be able to adequately protect our intellectual property, which could cause us to be less competitive and negatively impact our
business.

      We rely on trademark, patent and trade secret law, as well as confidentiality agreements with certain of our emp loyees to protect our
proprietary rights. The product patents owned by the Company are emp loyee service patents invented by the Company ’s key emp loyees. We
generally require the Do mestic Co mpanies ’ and our employees, consultants, advisors and collaborators to execute appropriate confidentiality
agreements with, as applicable, the respective Do mestic Co mpanies and the Company. These agreements typically provide that all material and
confidential informat ion developed or made known to the individual during the course of the individual’s relationship with the Co mpany is
owned by the Company and will be kept confidential and not disclosed to third parties except in specific circu mstances. These agreements may
be breached, and in some instances, we may not have an appropriate remedy availab le fo r breach of the agreements.

We may be accused of infringing the intellectual property rights of others.

      In the future, the Do mestic Co mpanies and we may receive notices claiming that we are infringing the proprietary rights of th ird parties.
We cannot guarantee that the Domestic Co mpanies and we will not become the subject of infringement claims or legal pro ceedings by third
parties with respect to the Domestic Co mpanies ’ and our current programs or future software develop ments. Our standard software license
agreements contain an infringement indemn ity clause under which we agree to indemnify and hold harmles s our customers and business
partners against liability and damages arising fro m claims of various copyright or other intellectual property

                                                                          9
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infringement by our products. Neither the Do mestic Co mpanies nor we have been the subject of an intellectual property claim s ince our
formation. See ―Ou r Business – Proprietary Rights‖ and ―China’s Intellectual Property Rights Enforcement System.‖

Our software products may contain integration challenges, design defects or software errors that could be difficult to detect and cor rect.

        Despite extensive testing, we may, fro m time to time, discover defects or errors in the Do mestic Co mpanies ’ and our software o nly after
use by a customer. We may also experience delays in shipment of our software during the period required to correct such error s. In addition, we
may, fro m time to time, experience d ifficult ies relat ing to the integration of the Do mestic Co mpanies ’ and our software products with other
hardware or software in the customer’s environ ment that are unrelated to defects in such software products. Such defects, errors or difficulties
may cause future delays in product introductions and shipments, result in increased costs and diversion of development resources, require
design modifications or impair customer satisfaction with the Do mestic Co mpanies ’ and our software. Since these software products are used
by our customers to perform mission-crit ical functions related to petroleum min ing and extraction, design defects, software errors, misuse of
these products, incorrect data fro m external sources or other potential problems within or out of our control that may arise fro m the use of the
Do mestic Co mpanies’ and our products could result in financial or other damages to our customers. We do not maintain product liab ility
insurance. Although our license agreements with customers contain provisions designed to limit our exposure to potential clai ms as well as any
liab ilit ies arising fro m such claims, such provisions may not effectively protect us against such claims and the liability an d costs associated
therewith. To the extent we are found liable in a product liability case, we could be required to pay substant ial amount of damages to an injured
customer, thereby impairing our financial condition. See ―Ou r Business.‖

We are dependent on the state of the PRC’s economy as all of our business is conducted in the PRC.

      Currently, all o f our business operations are conducted in the PRC, and all of our customers are also located in the PRC. Accordingly, any
significant slowdown in the PRC economy may cause our customers to reduce expenditures or delay the building of new facilit ie s or projects.
This may in turn lead to a decline in the demand for our products and services. That would have a material adverse effect on our business,
financial condition and results of operations.

Our fut ure success depends on our ability to help our customers find, develop and acquire petro leum reserves.

      To remain competit ive in our industry, our products must help our customers locate and develop or acquire new crude oil reser ves to
replace those depleted by production. Without successful explorat ion or acquisition activit ies, our customers ’ reserves, production and revenues
will decline rap idly. If the Do mestic Co mpanies ’ and our technology is less well accepted for helping our customers locate additional reserves
than our competitors’ technology, our customers may terminate their relations hips with us, which could have a material adverse effect on our
financial condition and future growth prospects. See ―Our Business – Our Products.‖

Our customers are companies engaged in the petroleum industry, a nd, consequently, our fi nancial performance is dependent upon the
economic conditions of that industry.

       We have derived substantially all of our revenues to date fro m provid ing integrated automation services to Chinese petroleu m companies
at oil fields within China. Our customers ’ success is intrinsically lin ked to economic condit ions both in China and in the petroleum industry in
general and the volatility of prices of crude oil and refined products in particular. The petroleu m industry, in turn, is subject to intense
competitive pressures and is affected by overall econo mic conditions. Demand for our services could be harmed by volatility in the petroleum
industry. There can be no assurance that we will be able to continue our historical revenue growth or sustain our profitability on a quarterly or
annual basis or that our results of operations will not be adversely affected by continuing or future volatility in the petro leu m in dustry. See
―Our Business – Market Background.‖

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Our revenues are highly dependent on a very limited number of customers, which subjects our business to high seasonality. Our contracts
with such customers may be terminated at any time, materially and adversely affecting our business.

      We derive the majority of our revenues from t wo customers, (i) CNPC and (ii) Sinopec.

     We provide products and services to Sinopec under a series of agreements, each of wh ich is terminable without notice . We first began to
provide services to Sinopec in 1998. Sinopec accounted for approximately 33.84% and 49.02% of our revenues in 2008 and 2009, respectively,
and any termination of our business relationships with Sinopec would materially harm our operatio ns.

     We provide products and services to CNPC under a series of agreements, each of wh ich is terminable without notice. We first b egan to
provide services to CNPC in 2000. CNPC accounted for approximately 59.82% and 43.11% of our revenues in 2008 and 2009, respectively,
and any termination of our business relationships with CNPC would materially harm our operations.

       Because we derive such a high percentage of our revenues fro m CNPC and Sinopec, our revenue has been subject to high seasonality. We
recognize revenue when it is realized and earned. We consider revenue realized or realizable and earned when (1) we have persuasive evidence
of an arrangement, (2) delivery has occurred, (3) the sales price is fixed or determinable, and (4) collectability is reasonably assured. Because
these matters depend on reaching agreements with each of CNPC and Sinopec, revenue recognition occurs, to a large extent, on their schedule.
Accordingly, revenue recognized in the first quarter is usually the smallest in proportion to t hat for the whole year, due to our clients ’
budgeting and planning schedules. If Sinopec or CNPC were to change its budgeting or planning schedule our high and low qu art ers could also
shift. This seasonality limits our ability to make accurate long -term predict ions about our performance and makes it d ifficult to compare our
revenues across quarters.

Changes in environmental and regulatory factors may harm our business.

      The oil d rilling industry in China to date has not been subject to the type and scope of regulation seen in Europe and the Un ited States.
However, the Chinese government may implement new legislation or regulations or may enforce existing laws more stringe ntly. Either of these
scenarios may have a significant impact on our customers ’ mining and extract ion operations and may require us or our customers to
significantly change operations or to incur substantial costs. We believe that the Domestic Co mpanies ’ and our operations in China are in
compliance with China’s applicab le legal and regulatory requirements. However, there can be no assurance that China ’s central or local
governments will not impose new, stricter regulat ions or interpretations of existing re gulations that would require additional expenditures. See
―Our Business.‖

Petroleum reserve degradation and depletion may reduce our customers’ and our profitability.

      Our profitability depends substantially on our ability to help our customers exp loit thei r oil reserves at competitive costs. Replacement
reserves may not be available to our customers when required or, if available, may not be drilled at costs comparable to thos e characteristics of
the depleting oil field. The Do mestic Co mpanies ’ and our technology may not enable our customers to accurately assess the geological
characteristics of any new reserves, which may adversely affect their decision to use the Domestic Co mpanies ’ and our products in the future.
See ―Our Business.‖

We are heavily dependent upon the services of experienced personnel who possess skills that are valuable in our industry, a nd we may have
to actively compete for their services.

      Our co mpany is much smaller than our main foreign competitors, including Schlu mberger Limited, Baltu r Technologie Per Il Clima,
Honeywell International, Emerson Process Management and Rockwell Automation, and we co mpete in large part on the basis of the quality of
services we are able to provide our clients. As a result, we are heavily dependent upon our ability to attract, retain and motivate skilled
personnel to serve our clients. Many of our personnel possess skills that would be valuable to all co mpanies engaged in the integrated
automation services industry. Consequently, we expect that we will have to actively co mpete for these employees. So me of our competitors
may be ab le to pay our employees more than we are able to pay to retain them. Ou r ability to profitably operate is substantia lly dependent upon
our ability to locate, hire, train and retain our personnel. There can be no assurance that we will be ab le to retain our current personnel, or that
we will be able to attract or assimilate other personnel in the future. If we are unable to effectively obtain and maintain s killed personnel, the
development and quality of our technological products and the effectiveness of installation and training could be materially imp aire d. See ―Ou r
Business – Emp loyees.‖

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We are substantially dependent upon our key personnel, particularly Yin Shenping, our Chief Executive Officer, Mr. Chen Guangqiang,
our Chief Technology Officer, Mr. Li Honqi, o ur Chief Marketing Officer and Ms. Liu Jia, our C hief Financial Officer.

      Our performance is substantially dependent on the performance of our executive officers and key employees. In particular, we rely on the
services of:

        •    Mr. Yin Shenping, Ch ief Executive Officer;
        •    Mr. Chen Guangqiang, Ch ief Technology Officer;
        •    Mr. Li Hongqi, Chief Marketing Officer; and

        •    Ms. Liu Jia, Chief Financial Officer.

Each of these individuals would be d ifficu lt to replace. We do not have in place ―key person‖ life insurance policies on any of our employees.
The loss of the services of any of our executive officers or other key employees could substantially impair our ability to su ccessfully
development new systems and develop new programs and enhancements. In addition, we would need to spend considerable time and other
resources to seek suitable replacements, which might detract fro m our efforts to develop our business. See ―Our Business – Employees‖ and
―Management.‖

Our business is capital intensive and our growth strategy may require additional capital which may not be available on favorable terms or
at all.

       We may require addit ional cash resources due to changed business conditions, implementation of our gro wth strategy or potential
investments or acquisitions we may pursue. To meet our capital needs, we may sell additional equity or debt securities or obtain additional
credit facilit ies. The sale of additional equity securities or other securities convertible into such equity securities could result in dilution of your
holdings. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and
financial covenants that would restrict our operations. Financing may not be available in amounts or on t erms acceptable to us, if at all. Any
failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business o perations and could
harm our overall business prospects.

We do not intend to pay dividends in the foreseeable future.

      We have not previously paid any cash dividends, and we do not anticipate paying any dividends on our ordinary shares. As we intend to
remain in a gro wth mode, we intend to reinvest any profits in the foreseeable future to grow the business. Although each of the Do mestic
Co mpanies has achieved net profitability since 2006, we cannot assure you that our operations will continue to result in suff icient revenues to
enable us to operate at profitable levels or to generate positive cash flows. Furthermo re, there is no assurance our Board of Directors will
declare div idends even if we are profitable. Div idend policy is subject to the discretion of our Board of Directors and will depend on, among
other things, our earnings, financial condition, capital requirements and other factors. If we determine to pay dividends on any of our ordinary
shares in the future, we will be dependent, in large part, on receipt of funds fro m the Do mestic Co mpanies. See ―Dividend Policy.‖

Our certificates, permits, and license are subject to governmental control and renewal, and the failure to obtain renewal would cause all or
part of our operations to be suspended and may have a material adverse effect on our financial condition.

      We are subject to various PRC laws and regulations pertaining to automation services for the petroleum ext raction industry. We have
obtained certain certificates, permits, and licenses required for the operation of an automation services provider for the pe troleu m extract ion
industry and the manufacturing and distribution of software and hardware products in the PRC. The fo llo wing permits and licen se have expire d
or are about to exp ire.
        •    The high-technology company certificate issued by the Science and Technology Bureau of Jiangsu Province to Nanjing Recon
             expired December 19, 2009. This cert ificate entitled us to preferential tax treat ment of 15% enterprise income tax (―EIT‖). We
             have submitted an application to renew our high-tech status certificate in May 2010 and expect to receive the approval in Ju ly
             2010. The loss of this certificate may result in the Co mpany paying an additional 10% EIT on its taxable inco me. While we awa it
             renewal of this certificate, we are subject to a 25% EIT rate; however, upon renewal, the 15% EIT rate will be applied
             retroactively. Fo r this reason, we present our effective EIT fo r Nan jing Recon at 15%. If Nanjing Recon ’s application were not
             approved, we would need to pay an additional amount of taxes to cause Nanjing Recon ’s effective EIT rate to be 25%.

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        •    The notice regarding ―refund upon collection‖ policy issued by Nanjing Provincial Tax Bureau to Nanjing Recon, providing that
             Nanjing Recon is entitled to receive a refund of 14% on the total value-added tax (―VAT‖) paid at a rate of 17% on the net profit
             generated from sale of the product ―Recon SCA DA field mon itoring and data acquisition system software version 1‖ developed by
             Nanjing Recon exp ired in December 2009. The loss of this permit may result in the Co mpany paying an additional 14% VAT o n
             its net gain.

      During the applicat ion or renewal process for our licenses and permits, we will be evaluated and re-evaluated by the appropriate
governmental authorities and must comp ly with the prevailing standards and regulations, which may change fro m time to time. I n the event that
we are not able to obtain or renew the cert ificates, permits and licenses, all or part of our operations may be suspended by the government,
which would have a material adverse effect on our business and financial condition. Furthermore, if escalating co mpliance cos ts associated
with governmental standards and regulations restrict or prohibit any part of our operations, it may adversely affect our resu lts of operations and
profitability.


                                                   Risks Related to Our Corporate Structure

PRC laws and regulations governing our businesses a nd the validity of certain of our contractual arrangements are uncertain. In addition,
changes in such PRC laws and regulations may materially and adversely affect our business.

      There are substantial uncertainties regarding the interpretation and applicatio n of PRC laws and regulations, including, but not limited to,
the laws and regulations governing our business, and the enforcement and performance of our contractual arrangements with the Do mestic
Co mpanies and their shareholders.

      Recon-CI, Recon-HK and Recon-JN are considered foreign persons or foreign invested enterprises under PRC law. As a result,
Recon-CI, Recon-HK and Recon-JN are subject to PRC law limitations on foreign ownership of do mestic companies. Although the primary
business of the Domestic Co mpanies falls within a category in which foreign investment is currently encouraged, the uncertainty of PRC
regulations and governmental policies affecting foreign ownership may result in Recon -CI being required to hold (or, conversely, being
prohibited fro m hold ing), d irectly or indirectly, a given percentage of the Do mestic Co mpanies ’ equity interests. Our contractual arrangements
with the Do mestic Co mpanies and their shareholders, which allo w us to substantially control the Do mestic Co mpanies through Re con-JN, are
governed by Chinese law. We cannot assure you, however, that we will be able to enforce these contracts.

      In addition, Chinese laws and regulations limiting foreign ownership of do mestic companies are relat ively new and may be subject to
change, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted law s,
regulations or amend ments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations th at affect existing
and proposed future businesses may also be applied retroactively.

      The PRC government has broad discretion in dealing with vio lations of laws and regulations, including levying fines, revoking business
and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to us by relevant
governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpret ation of existing or
new PRC laws or regulations on our businesses. We cannot assure you that our current ownership and operating structure would not be fo und
in violat ion of any current or future PRC laws or regulat ions. As a result, we may be subject to sanctions, including fines, and could be required
to restructure our operations or cease to provide certain services. Any of these or similar actions could significantly d isru pt our business
operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our
business, financial condition and results of operations and future growth prospects.

      Although we believe we co mp ly with current PRC regulations, we cannot assure you that the PRC government would agree that the se
operating arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements
or policies that may be adopted in the future. If the PRC government determines that we do not comply with applic able law, it could revoke our
business and operating licenses, require us to discontinue or restrict our operations, restrict our right to collect revenues , require us to
restructure our operations, impose additional conditions or requirements with wh ich we may not be able to comp ly, impose restrictions on our
business operations or on our customers, or take other regulatory or enforcement actions against us that could be harmfu l to our business.

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The PRC government may determine that the agreements we use to control the Domestic Companies are not in compliance with applicable
PRC laws, rules and regulations and are therefore unenforceable.

      In the PRC, fo reign invested enterpris es are forbidden or restricted to engage in certain specified businesses or industries which are
sensitive to the economy. The Chinese government periodically revises its list of encouraged, permitted, restricted, and forb idden industries. As
we intend to centralize our management and operation in the PRC without being restricted to conduct certain business activities which are
important for our current or future business but are restricted or might be restricted in the future, we believe the agreemen ts between Recon-JN
and the Domestic Co mpanies will be essential for our business operation. In order for Recon -JN to manage and operate our business through
the Domestic Co mpanies in the PRC, these agreements were entered into under which almost all the busines s activities of the Domestic
Co mpanies are managed and operated by Recon-JN and almost all economic benefits and risks arising fro m the business of the Do mestic
Co mpanies are transferred to Recon-JN.

      Risks are associated with our operations under the agreements with the Do mestic Co mpanies. If the PRC govern ment determin es that
these agreements used to control the Do mestic Co mpanies are unenforceable as they circumvent the PRC restrictions relat ing to foreign
investment restrictions, the relevant regulatory authorities would have broad discretion in dealing with such breach, including:

        •    imposing economic penalties;
        •    discontinuing or restricting our operations;
        •    imposing conditions or requirements in respect of the agreements with the Do mestic Co mpanies with wh ich we may not be able to
             comply;

        •    requiring us to restructure the relevant ownership structure or operations;
        •    taking other regulatory or enforcement actions that could adversely affect our business; and
        •    revoking the business license and/or the licenses or certificates of Recon -JN, and/or voiding the agreements.

     Any of these actions could have a material adverse impact on our business, future operating prospects, financial condition and results of
operations.

Our contractual arrangements with the Domestic Companies and their respective shareholders may not be as effective in providi ng control
over these entities as direct ownership.

       We have no equity ownership interest in the Domestic Co mpanies and rely on contractual arrangements to control and operate su ch
businesses. These contractual arrangements may not be as effective in providing control over the Do mestic Co mpanies as direct ownership. For
example, BHD could fail to take actions required for our business or fail to pay dividends to Recon -JN despite its contractual obligation to do
so. If the Do mestic Co mpanies fail to perfo rm under their agreements with us, we may have to rely on legal remedies under PRC law, which
may not be effect ive. In addit ion, we cannot assure you that any of the Domestic Co mpanies ’ shareholders would always act in our best
interests.

Our contractual arrangements with the Domestic Companies may result in adverse tax consequences to us.

       As a result of our corporate structure and contractual arrangements between Recon -JN and the Do mestic Co mpanies, we are effectively
subject to the 5% PRC business tax on both revenues generated by Recon-JN’s operations in Ch ina and revenues derived from Recon-JN’s
contractual arrangements with the Do mestic Co mpanies. Moreover, we would be subject to adverse tax consequences if the PRC ta x authorities
were to determine that the contracts between Recon-JN and the Domestic Co mpanies were not on an arm’s length basis and therefore constitute
a favorable transfer pricing. As a result, the PRC tax authorities could request that we adjust our taxab le income upward for PRC tax purposes.
If the PRC tax authorities took such action, such authorities would be able to establish in its sole discretion the amount of tax pa yable by
Recon-JN, so we cannot predict the effect of such action on our company other than the likely effect that our profits would decrease. Such a
pricing adjustment could adversely affect us by:

        •    increasing our tax expenses, which could subject Recon-JN to late payment fees and other penalties for under-payment of taxes;
             and/or

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        •    resulting in Recon-JN’s loss of preferential tax treat ment.

The principal shareholders of the Domestic Companies have potential conflicts of interest with us, which may adversely affect our business.

      Yin Shenping, our Ch ief Executive Officer, Chen Guangqiang, our Chief Technology Officer, Li Hongqi, our Chief Marketing Officer,
are significant shareholders in our company. They are also the principal shareholders of each of the Do mestic Co mpanies and c ollectively
control the Domestic Co mpanies. Conflicts of interests between their duties to our company and the respective Do mestic Co mp an ies may arise.
For examp le, Mr. Yin, M r. Chen and Mr. Li could cause a Domestic Co mpany to fail to take actions that are in the best interests of our
Co mpany or to fail to pay div idends to Recon-JN despite its contractual obligation to do so if making such payment would harm the Do mestic
Co mpany.

      As Mr. Yin, Mr. Chen and Mr. Li are also directors and executive officers of our co mpany, they have duties of loyalty and care to us
under Cay man Islands law when there are any potential conflicts of interests between our company and the Domestic Co mpanies. Each of
Mr. Yin, Mr. Li and Mr. Chen has executed an irrevocable power of attorney to appoint the individual designated by us to be his
attorney-in-fact to vote on his behalf on all matters related to the Domestic Co mpanies requiring shareholder approval. We cannot assure you,
however, that if conflicts of interest arise, they will act co mpletely in our interests or that conflicts of interests will be res olved in our favor. In
addition, Mr. Yin , Mr. Chen and Mr. Li could v iolate their respective emp loyment agreements with us or his legal duties by diverting business
opportunities fro m us to others. If we cannot resolve any conflicts of interest between us and Mr. Yin, Mr. Chen and Mr. Li, as applicable, we
would have to rely on legal proceedings, which could result in the disruption o f our business.

Any deterioration of the relationship between Recon-JN and the Domestic Companies could materially and adversely affect the overall
business operation of our company.

     Our relationship with our Do mestic Co mpanies is governed by their agreements with Recon-JN, which are intended to provide us,
through our indirect ownership of Recon-JN, with effect ive control over the business operations of our Do mestic Co mpanies. However, these
agreements may not be effect ive in prov iding control over the app lications for and maintenance of the licenses required for our business
operations. Our Do mestic Co mpanies could violate these agreements, go bankrupt, suffer fro m d ifficu lties in its business or o therwise become
unable to perform its obligations under these agreements and, as a result, our operations, reputation, business and stock price could be severely
harmed.

If Recon-JN exercises its purchase option of the Domestic Companies’ equity pursuant to the Exclusive Equity Interest Purchase
Agreement, payment of the purchase price could materially and adversely affect our financial position.

      Under the Exclusive Equity Interest Purchase Agreement, Recon -JN holds an option to purchase all or a portion of the equity of the
Do mestic Co mpanies at a price, based on the capital paid in by the Do mestic Co mpany shareholders. If applicable PRC laws and regulations
require an appraisal of the equity interest or provide other restriction on the purchase price, the purchase price shall be t he lowest price
permitted under the applicable PRC laws and regulations. As the Domestic Co mpanies are already contractually controlled affiliates to our
company, Recon-JN’s purchase of the Domestic Co mpanies ’ equity would not bring immediate benefits to our company and the exercise of the
option and payment of the purchase prices could adversely affect our financial position and available working capital.


                                                     Risks Related to Doing B usiness in China

Adverse changes in political and economic policies of the PRC government could have a material adverse effect on the overall economic
growth of China, which could reduce the demand for our products and materially adversely affect our competitive position.

     We conduct substantially all of our operations and generate most of our revenues in China. Acco rdingly, our business, financial
condition, results of operations and prospects are affected significantly by economic, political and legal develop ments in Ch ina. The PRC
economy differs fro m the economies of most developed countries in many respects, including:

        •    the higher level of government involvement;

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        •    the early stage of development of the market-oriented sector of the economy;

        •    the rapid growth rate;
        •    the higher level of control over foreign exchange; and
        •    the allocation of resources.

      While the PRC economy has grown significantly since the late 1970s, the growth has been uneven, both geographically and among
various sectors of the economy. The PRC govern ment has implemented various measures to encourage economic growth and guide th e
allocation of resources. Some of these measures benefit the overall PRC economy, but may also have a negative effect on our business. For
example, our financial condition and results of operations may be adversely affected by government control over capital investments or
changes in tax regulations that are applicable to us.

      The PRC economy has been transitioning fro m a planned economy to a more market -oriented economy. The PRC government continues
to exercise significant control over economic growth in Ch ina through the allocation of resources, controlling payment of foreign
currency-denominated obligations, setting monetary policy and imposing policies that impact particu lar industries or companies in diff erent
ways.

Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us.

       We conduct substantially all of our business through our operating subsidiary in the PRC, Recon -JN, which is a wholly foreign owned
enterprise in China. Recon-JN is generally subject to laws and regulations applicable to foreign invested enterprises in China an d intellectual
property protections. The PRC legal system is based on written statutes, and prior court decisions may be cited for reference but have limited
precedential value. Since 1979, a series of new PRC laws and regulations have significantly enhanced the protections afforded to intellectual
property rights and various forms of foreign investments in China. However, since these laws and regulations are relat ively n ew and the PRC
legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of
these laws, regulat ions and rules involve uncertainties, which may limit legal protections available to you and us. In addition, any litigat ion in
China may be protracted and result in substantial costs and diversion of resources and management attention.

Our operations could be adversely affected by changes in the political and economic conditions in the PRC .

     We face risks related to conducting business in the PRC. Changes in the social, economic and political conditions of the PRC may
adversely affect our business. Unfavorable changes in government policies, polit ical unrest and economic develop ments may als o have a
negative impact on our operations.

     Currently, all o f our business operations are conducted in the PRC. Accordingly, any significant slowdown in the PRC economy may
cause our customers to reduce expenditures. This may in turn lead to a decline in the demand for our products and services. That would have a
material adverse effect on our business, financial condit ion, growth prospects and results of operations.

      China’s economy experienced overall gro wth of only 8.7% in 2009, its lowest growth rate in eight years, down fro m gro wth rat es of 9.6%
in 2008 and 13% in 2007. The g lobal financial crisis has significantly decreased demand for Chinese exports, resulting in fac tory closures and
losses of millions of jobs. This 8.7% gro wth rate is well above the 7.2% rate p redicted by the World Bank and also exceeds the 8% rate the
Chinese government had predicted and said would be necessary to avoid significant further job losses. While China ’s growth rate has fallen,
China’s growth rate remains well above the World Ban k’s forecast for decline of 1.5% for the world econo my in 2009.

      Since the adoption of the ―open door policy‖ in 1978 and the ―socialist market economy‖ in 1993, the PRC government has been
reforming and is expected to continue to reform its economic and political systems. Any changes in the political and economic policy of the
PRC government may lead to changes in the laws and regulations or the interpretation of the same, as well as changes in the f oreign exchange
regulations, taxat ion and import and export restrict ions, which may in turn adversely affect our financial performance. While the current

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policy of the PRC govern ment seems to be one of imposing economic reform policies to encourage foreign investments and greate r economic
decentralization, there is no assurance that such a policy will continue to prevail in the future.

We do not have business interruption, litigation or natural disaster insurance.

      The insurance industry in Ch ina is still at an early state of development. In part icular PRC insurance companies offer limite d business
products. As a result, we do not have any business liability or d isruption insurance coverage for our operations in China. Any business
interruption, litigation or natural disaster may result in our business incurring substantial costs and the diversion of reso urces.

We may be subject to foreign exchange controls in the PRC.

       Our PRC subsidiary and affiliates are subject to PRC rules and regulations on currency conversion. In the PRC, the State Admi nistration
for Foreign Exchange (―SAFE‖) regulates the conversion of the RMB into foreign currencies. Currently, foreign investment enterprises
(―FIEs‖) are required to apply to SAFE fo r ―Foreign Exchange Reg istration Cert ificate for FIEs.‖ Recon-JN is a FIE. W ith such registration
certifications (which need to be renewed annually), FIEs are allowed to open foreign currency accounts including the ―recurrent account‖ and
the ―capital account.‖ Currently, conversion within the scope of the ―recurrent account‖ can be effected without requiring the approval of
SAFE. However, conversion of currency in the ―capital account‖ (e.g. for capital items such as direct investments, loans, securities, etc.) still
requires the approval of SAFE. Accordingly, co mpliance with SAFE requirements may limit how we are ab le to use our funds, inc luding the
proceeds of this offering, in ways that we would not be limited if we operated in countries other than China.

Recent PRC regulations relating to the establishment of offshore special purpose vehicles by PRC residents, if applied to us, may subject
our PRC resident shareholders to personal liability and limit our ability to acquire PRC companies or to inject capital into Recon-JN and
Recon-HK, limit Recon-JN’s and Recon-HK’s ability to distribute profits to us or otherwise materially adversely affect us.

       In October 2005, SAFE issued a public notice, the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return
Investment Through Special Purpose Co mpanies by Residents Inside China, or the SAFE notice, wh ich requires PRC residents, inc luding both
legal persons and natural persons, to register with the competent local SAFE branch before establishing or controlling any co mpany outside of
China, referred to as an ―offshore special purpose company,‖ for the purpose of overseas equity financing involving onshore assets or equity
interests held by them. In addition, any PRC resident that is the shareholder of an offshore special purpose company is required t o amend its
SAFE reg istration with the local SAFE branch with respect to that offshore special purpose company in connection with a ny increase or
decrease of capital, transfer of shares, merger, div ision, equity investment or creation of any security interest over any as sets located in China.
Moreover, if the offshore special purpose company was established and owned the onshore assets or equity interests before the implementation
date of the SAFE notice, a retroactive SAFE registration is required to have been completed before March 31, 2006. If any PRC shareholder of
any offshore special purpose company fails to make the required SAF E registration and amend ment, the PRC subsidiaries of that offshore
special purpose company (Recon-JN and Recon-HK fo r our co mpany) may be prohibited fro m d istributing their profits and the proceeds fro m
any reduction in capital, share transfer or liquidation to the offshore special purpose company. Moreover, failure to co mply wit h the SAFE
registration and amend ment requirements described above could result in liability under PRC laws for evasion of applicab le fo reign exchange
restrictions.

      Due to lack of official interpretation, some of the terms and provisions in the SAFE notice remain unclear and imp lementation by central
SAFE and local SAFE branches of the SAFE notice has been inconsistent since its adoption. Because of uncertainty over how the SAFE notice
will be interpreted and implemented, we cannot predict how it will affect our business operations or future strategies. For e xample, Recon-JN’s,
Recon-HK’s and any prospective PRC subsidiaries ’ ability to conduct foreign exchange activities, such as th e remittance of div idends and
foreign currency-denominated borrowings, may be subject to compliance with the SAFE notice by our co mpany ’s PRC resident beneficial
holders. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by the SAFE
notice. We also have little control over either our present or prospective direct or indirect shareholders or the outcome of such registration
procedures. A failure by our PRC resident beneficial holders or future P RC resident shareholders to comply with the SAFE notice, if SAFE
requires it, could subject us to fines or legal sanctions, restrict our overseas or cross -border investment activities, limit our subsidiary’s ability
to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

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PRC regulations and potential registration requirements relating to acquisitions of PRC companies by foreign entities may cre ate
regulatory uncertainties that could restrict or limit our ability to operate.

      On August 8, 2006, the PRC M inistry of Co mmerce (―M OC‖), jo ined by the State-owned Assets Supervision and Administration
Co mmission of the State Council, the State Administration of Taxation, the State Administration for Industry and Commerce, t h e China
Securities Regulatory Co mmission (―CSRC‖) and SAFE, released a substantially amended version of the Provisions for Foreig n Investors to
Merge with or Acquire Do mestic Enterprises (the ―Revised M&A Regulations ‖), which took effect September 8, 2006. These new ru les
significantly rev ised China’s regulatory framework governing onshore-to-offshore restructurings and foreign acquisitions of domestic
enterprises. These new rules signify greater PRC government attention to cross -border merger, acquisition and other investment activities, by
confirming MOC as a key regulator for issues related to mergers and acquisitions in China and requiring MOC approval of a broad range of
merger, acquisit ion and investment transactions. Further, the new rules establish reporting requirements for acquisition of c ontrol by foreigners
of companies in key industries, and reinforce the ability of the Chinese government to monitor and prohibit foreign control t ransactions in key
industries.

      Among other things, the revised M&A Regulations include new provisions that purport to require t hat an offshore SPV, formed for listing
purposes and controlled directly or indirect ly by PRC co mpanies or individuals must obtain the approval of the CSRC prior to the listing and
trading of such SPV’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures
specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. H owever, the
application of this PRC regulation remains unclear with no consensus currently existing among the leading PRC law firms regarding the scope
and applicability of the CSRC approval requirement.

       If the PRC regulatory authorities take the view that the VIE Agreements constitute a reverse merger acquisit ion or ro und-trip investment
in related party transactions without the approval of the national offices of MOC, they could invalidate the VIE Agreements. Additionally, the
PRC regulatory authorities may take the view that any public offering plan will require the p rior approval o f CSRC. If we cannot obtain MOC
or CSRC approval in case we are required to do so, our business and financial performance will be materially adversely affect ed. We may also
face regulatory actions or other sanctions from the MOC or other PRC regulatory agencies. These regulatory agencies may imp ose fines and
penalties on our operations in the PRC, limit our operating privileges in the PRC, delay o r restrict the repatriation of the proceeds of this or any
other offering into the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of
operations, reputation and prospects, as well as the trading price of our ordinary shares.

      Also, if the CSRC later requires that we obtain its approval, we may be unable to obtain a waiver of the CSRC approval requirements, if
and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regard ing this CSRC approval
requirement could have a material adverse effect on the trading price of our ord inary shares.

If we make equity compensation grants to persons who are PRC citizens, they may be required to register with SAFE. We may als o face
regulatory uncertainties that could restrict our ability to adopt equity comp ensation plans for our directors and employees and other parties
under PRC laws.

      On April 6, 2007, SAFE issued the ―Operating Procedures for Administration of Do mestic Individuals Part icipating in the Emp loyee
Stock Ownership Plan or Stock Opt ion Plan of An Overseas Listed Co mpany, also know as ―Circular 78.‖ It is not clear whether Circular 78
covers all forms of equity compensation plans or only those which provide for the granting of stock options. For any plans wh ich are so
covered and are adopted by a non-PRC listed company, Circular 78 requires all participants who are PRC cit izens to register with and obtain
approvals from SAFE p rior to their part icipation in the plan. In addit ion, Circular 78 also requires PRC citizens to register with SAFE and
make the necessary applications and filings if they participated in an overseas listed company ’s covered equity compensation plan prior to
April 6, 2007. We believe that the registration and approval requirements contemplated in Circu lar 78 will be burdensome a nd time consuming.

      In the future, we may adopt an equity incentive plan and make numerous stock option grants under the plan to our officers, directors and
emp loyees, some of who m are PRC cit izens and may be required to reg ister with SAFE.

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If it is determined that any of our equity compensation plans are subject to Circular 78, failure to co mply with such provisions ma y subject us
and participants of our equity incentive plan who are PRC citizens to fines and legal sanctions and prevent us from be ing able t o grant equity
compensation to our PRC employees. In that case, our ability to compensate our employees and directors through equity compens ation would
be hindered and our business operations may be adversely affected.

The Chinese government could change its policies toward private enterprise or even nationalize or expropriate private enterprises, which
could result in the total loss of our investment in that country.

      Our business is subject to significant polit ical and economic uncertainties and may be adversely affected by political, economic and social
developments in China. Over the past several years, the Chinese government has pursued economic reform policies including t he
encouragement of private economic activity and greater economic decent ralization. The Ch inese government may not continue to pursue these
policies or may significantly alter them to our detriment fro m t ime to time with litt le, if any, prio r notice.

      Changes in policies, laws and regulations or in their interpretation or the i mposition of confiscatory taxation, restrictions on currency
conversion, restrictions or prohibitions on dividend payments to shareholders, devaluations of currency or the nationalizatio n or other
expropriat ion of private enterprises could have a material adverse effect on our business. Nationalization or expropriation could even result in
the total loss of our investment in China and in the total loss of your investment in us.

We face risks related to health epidemics and other outbreaks.

      Adverse public health epidemics or pandemics could disrupt business and the economies of the PRC and other countries where we do
business. Fro m December 2002 to June 2003, China and other countries experienced an outbreak of a h ighly contagious form o f a typical
pneumonia now known as severe acute respiratory syndrome, or SA RS. On July 5, 2003, the World Health Organization declared that the
SARS outbreak had been contained. However, a nu mber of isolated new cases of SARS were subsequently reported, most recently in central
China in April 2004. During May and June of 2003, many businesses in China were closed by the PRC government to prevent trans mission of
SARS. Moreover, so me Asian countries, including Ch ina, have recently encountered incidents of the H5N1 and H1N1 strains of in fluenza. We
are unable to predict the effect, if any, that avian influenza may have on our business. In particular, any future outbreak o f SARS, avian
influenza or other similar adverse public developments may, among other things, significantly disrup t our business and force us to temporarily
close our offices. Furthermo re, an outbreak may severely restrict the level o f economic activ ity in affected areas, which may in turn materially
adversely affect our financial condition and results of operations. We have not adopted any written preventive measures or contingency plans to
combat any future outbreak of avian influenza, SARS or any other epidemic.

Shareholder rights under Cayman Islands law may differ materially from shareholder rights in the United States, which could adversely
affect the ability of us and our shareholders to protect our and their interests.

      Our corporate affairs are governed by our amended and restated memorandu m and articles of association, by the Companies Law ( 2007
Revision) and the common law of the Cay man Islands. The rights of shareholders to take action against the directors, actions by minority
shareholders, and the fiduciary responsibilities of our d irectors to us under Cay man Islands law are to a large extent govern ed by the common
law of the Cay man Islands. The common law in the Cay man Islands is derived in part fro m co mparat ively l imited judicial precedent in the
Cay man Islands as well as fro m Eng lish common law, the decisions of whose courts are of persuasive authority but are not bind ing on a court
in the Cay man Islands. In particular, the Cay man Islands has a less developed body of securities laws as compared to the United States, and
some states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate laws. Moreover, our c o mpany could be
involved in a corporate co mbination in which d issenting sh areholders would have no rights comparable to appraisal rights which would
otherwise ordinarily be available to dissenting shareholders of United States corporations. Also, our Cay man Islands counsel is not aware of a
significant number of reported class actions or derivative actions having been brought in Cay man Islands courts. Such actions are ordinarily
available in respect of United States corporations in U.S. courts. Finally, Cay man Islands companies may not have standing to initiate
shareholder derivative action before the federal courts of the United States. As a result, our public shareholders may face different
considerations in protecting their interests in actions against the management, directors or our controlling shareholders tha n would shareholders
of a corporation incorporated in a jurisdiction in the Un ited States, and our ability to protect our interests may be limited if we are harmed in a
manner that would otherwise enable us to sue in a Un ited States federal court. See ―Description of Share Capital – Differences in Corporate
Law.‖

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As we are a Cayman Islands company and most of our assets are outside the United States, it will be extremely difficult to acquire
jurisdiction and enforce liabilities against us and our officers, directors and assets based in China.

      We are a Cay man Islands exempt co mpany, and our corporate affairs are governed by our Memorandu m and Articles of Association and
by the Cayman Islands Companies Law (2007 Revision) and other applicab le Cay man Islands laws. Certain o f our directors and of ficers reside
outside of the United States. In addition, the Co mpany’s assets will be located outside the United States. As a result, it may be d ifficu lt or
impossible to effect service of process within the Un ited States upon our directors or officers and our subsidiaries, or en force ag ainst any of
them court judg ments obtained in United States ’ courts, including judgments relating to Un ited States federal securities laws. In addition, there
is uncertainty as to whether the courts of the Cay man Islands and of other offshore juris dictions would recognize or enforce judgments of
United States’ courts obtained against us predicated upon the civil liability provisions of the securities laws of the Un ited States or any state
thereof, or be co mpetent to hear original actions brought in the Cay man Islands or other offshore jurisdictions predicated upon the securities
laws of the Un ited States or any state thereof. Furthermore, because the majority of our assets are located in Ch ina, it would also be extremely
difficult to access those assets to satisfy an award entered against us in United States court. See ―Enfo rceability of Civil Liabilit ies.‖

We may be unable to establish and maintain an effective system of internal control over financial reporting, and as a result we may be
unable to accurately report our financial results or prevent fraud.

      The PRC historically has been deficient in western style management, governance and financial reporting concepts and practice s, as well
as in modern banking, and other control systems. Our current management has litt le experience with western style management, governance
and financial reporting concepts and practices, and we may have difficulty in h iring and retaining a sufficient nu mber of qua lified emp loyees to
work in the PRC. As a result of these factors, and especially given that we are a publicly listed company in the U.S. and subject to regulation as
such, we may experience difficu lty in establishing management, governance, legal and financial controls, collecting financial data and
preparing financial statements, books of account and corporate records and instituting business practices that meet western standards. We may
have difficu lty establishing adequate management, governance, legal and financial controls in the PRC. Therefore, we may, in t urn, experience
difficult ies in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes -Oxley A ct of 2002 and
other applicable laws, ru les and regulations. This may result in significant deficiencies or materia l weaknesses in our internal controls which
could impact the reliability of our financial statements and prevent us fro m co mply ing with SEC rules and regulations and the requirements of
the Sarbanes-Oxley Act of 2002. Any such deficiencies, weaknesses or lack of co mpliance could have a materially adverse effect on our
business and the public announcement of such deficiencies could adversely impact our stock price.


                                                        Risks Associated with this Offering

The market price for our ordinary shares may be volatile, which could result in substantial losses to investors.

      The market p rice for our o rdinary shares is likely to be volatile and subject to wide fluctuations in response to factors inc luding the
following:

        •    actual or anticipated fluctuations in our quarterly operating results;
        •    changes in the Chinese petroleum and energy industries;
        •    changes in the Chinese economy;

        •    announcements by our competitors of significant acquisitions, strategic partnerships, joint ventures or capital co mmit ments;
        •    additions or departures of key personnel; or
        •    potential lit igation.

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     In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the
operating performance of particu lar co mpanies. As a result, to the extent shareholders sell our ordinary shares in negative market fluctuation,
they may not receive a price per share that is based solely upon our business performance. We cannot guarantee that sharehold ers will not lose
some of their entire investment in our ord inary shares.

If we do not maintain an effective registration statement, you may not be able to exercise the warrants.

      For you to be able to exercise the warrants, the resale of the ordinary shares to be issued to you upon exercise of the warra nts must be
covered by an effective and current registration statement. We cannot guarantee that we will continue to maintain a current regist ration
statement relating to the resale of the ordinary shares underlying the warrants. In such circumstances, you would be unable to exercise the
warrants. In those circu mstances, we may, but are not required to, redeem the warrants by payment in cash. Consequently, ther e is a possibility
that you will never be able to exercise the warrants and receive the underlying shares. This pot ential inability to exercise the warrants, our right
to cancel the warrants under certain circu mstances, and the possibility that we may redeem the warrants for nominal value may have an adverse
effect on demand for the warrants and the prices that can be obtained from reselling them.

Our classified board structure may prevent a change in o ur control.

      Our board of d irectors is divided into three classes of directors. The current terms of the directors expire in 2010, 2011 an d 2012.
Directors of each class are chosen for three-year terms upon the expiration of their current terms, and each year one class of directors is elected
by the shareholders. The staggered terms of our directors may reduce the possibility of a tender offer or an attempt at a cha nge in control, even
though a tender offer or change in control might be in the best interest of our shareholders. See ―Management – Board of Direct ors and Board
Co mmittees.‖

Future sales of equity securities may depress our share price.

      The market p rice o f our ordinary shares could decline as a result of sales of substantial amounts of our ordinary shares or other equity
securities convertible into ordinary shares in the public market, or the perception that these sales could occur. In addition , these factors could
make it more difficult fo r us to raise funds through future offerings of ordinary shares. There will be an aggregate of 3,951,811 ordinary shares
outstanding before the consummat ion of this offering and              ordinary shares outstanding immediately after this offering, assuming the
separation of the Units into ordinary shares and warrants. All of the ordinary shares underlying the Units sold in the offering will be freely
transferable without restriction or further reg istration under the Securities Act, except for any shares purchased by our ―affiliates,‖ as defined in
Rule 144 of the Securities Act. The remain ing ordinary shares will be ―restricted securities‖ as defined in Ru le 144. These shares may be sold
in the future without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act. See
―Shares Elig ible for Future Sale.‖

We have not determined a specific use for a significant portion of the proceeds from this offering, and we may use the proceeds in ways
with which you may not agree.

     Our management will have considerable discretion in the application of the net proceeds received by us. You will not have the
opportunity, as part of your investment decision, to assess whether the proceed s are being used appropriately. You must rely on the judgment of
our management regarding the applicat ion of the net proceeds of this offering. The net proceeds may be used for corporate pur poses that do not
improve our efforts to achieve profitability or increase our share price. The net proceeds fro m this offering may be p laced in investments that
do not produce income or that lose value. See ―Use of Proceeds.‖

Our directors and officers will control a significant portion of our ordinary shares, decreasing your i nfluence on shareholde r decisions.

      Upon the closing of this offering, our officers and directors will, in the aggregate, beneficially own appro ximately        % of our
outstanding shares. As a result, our officers and directors will possess substantial ability to impact our management and affairs and the outcome
of matters submitted to shareholders for approval. These shareholders, acting individually or as a group, could exert control and substantial
influence over matters such as electing directors and approving mergers or other business combination transactions. This conc entration of

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ownership and voting power may also discourage, delay or prevent a change in control of our co mpany, wh ich could deprive our shareholders
of an opportunity to receive a premiu m for their shares as part of a sale of our company and might reduce t he price of our ordin ary shares.
These actions may be taken even if they are opposed by our other shareholders, including those who purchase shares in this of fering. See
―Principal Shareholders.‖


                                                    FORWARD-LOOKING STATEMENTS

      We have made statements in this prospectus, including under ―Prospectus Summary,‖ ―Risk Factors,‖ ―Management’s Discussion and
Analysis of Financial Condition and Results of Operations,‖ ―Our Business‖ and elsewhere that constitute forward-looking statements.
Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future
events. In some cases, you can identify forward-looking statements by terminology such as ―anticipate,‖ ―estimate,‖ ―plan,‖ ―project,‖
―continuing,‖ ―ongoing,‖ ―expect,‖ ―we believe,‖ ―we intend,‖ ―may,‖ ―should,‖ ―could‖ and similar exp ressions. These statements involve
estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially fro m any
future results, performances or achievements expressed or imp lied by the forward -looking statements.

      Examples of forward-looking statements include:

        •    projections of revenue, earnings, capital structure and other financial items;
        •    statements of our plans and objectives;
        •    statements regarding the capabilities and capacities of our business operations;

        •    statements of expected future economic performance; and
        •    assumptions underlying statements regarding us or our business.

      The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. We
discuss many of these risks under the heading ―Risk Factors‖ above. Many factors could cause our actual results to differ materially fro m those
expressed or imp lied in our forward-looking statements. Consequently, you should not place undue reliance on thes e forward-looking
statements.

      The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no
obligation to update any forward-looking statement to reflect events or circu mstances after the d ate on which the statement is made or to reflect
the occurrence of unanticipated events.

     In addition, we cannot assess the impact of each factor on our business or the extent to wh ich any factor, or co mb ination of fact ors, may
cause actual results to differ materially fro m those contained in any forward-looking statements.

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                                                     OUR CORPORATE S TRUCTUR E

Corporate History
      On August 21, 2007 our co mpany was incorporated as an exempted company in the Cay man Islands by our founders, Yin Shenping, Li
Hongqi and Chen Guangqiang. On September 6, 2007, we established our wholly owned subsidiary, Recon -HK in Hong Kong. Other than
Recon-CI’s equity interest in Recon-HK, Recon-CI does not own any assets or conduct any operations. On November 15, 2007, Recon-HK
established one wholly owned subsidiary, Recon-JN, in Jining, Shandong Province of PRC. Other than Recon -JN, Recon-HK d oes not own any
assets or conduct any operations. Recon-JN was formed to operate BHD, Nanjing Recon and ENI by contract.

      Our relationships with the Do mestic Co mpanies and their shareholders are governed by a series of contractual arrangements between the
Do mestic Co mpanies, Recon-HK and Recon-JN dated January 1, 2008. We are able to substantially control the Do mestic Co mpanies through
these contractual arrangements. In addition, we and the Domestic Co mpanies are under co mmon control, by virtue of the ownersh ip of mo re
than 60% of our co mpany and each of the Domestic Co mpanies by three shareholders (Mr. Yin Shenping, Mr. Li Hongqi and Mr. Chen
Guangqiang). Accordingly, we have consolidated the Domestic Co mpanies ’ historical financial results in our financial statements as a variable
interest entity pursuant to U.S. GAAP fo llowing the date of the agreements and combined such results prior to the date of the agreements.

      In the opinion of Jingtian & Gongcheng, our PRC legal counsel, (1) our inner-PRC shareholding structure complies with, and
immed iately after this offering, will co mply with, current PRC laws and regulations; (2) the contractual arrangements between the Recon-JN
and (a) Recon-HK, (b) the Do mestic Co mpanies, and (c) the Do mestic Co mpanies’ shareholders are valid and binding on all parties to these
arrangements and the agreements thereof do not violate relevant PRC laws or regulations; and (3) the business operations of Recon-JN and the
Do mestic Co mpanies co mply with current PRC laws and regulations.

                                                                      23
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Corporate Ownershi p Structure
      The following diagram illustrates our current corporate structure and the place of format ion as of the date of this prospectus.




Contractual Arrangements wi th Domestic Companies and their Sharehol ders
      Our relationships with the Do mestic Co mpanies and their shareholders are governed by a series of co ntractual arrangements. The term of
each agreement is 25 years, and our company (or Recon-JN to the extent we are not a party to the agreement in question) is able to renew each
agreement unilaterally fo r one or more additional terms, provided such renewal is permitted under applicable law at the time.

     Equity Interest Pledge Agreement. Recon-JN and the shareholders of each of the Do mestic Co mpanies have entered into Equity Interest
Pledge Agreements, pursuant to which each shareholder pledges all of h is shares of the Do mestic Co mpany to Recon-JN in order to guarantee
cash-flow pay ments under the applicable Exclusive Technical Consulting Service Agreement.

     Exclusive Equity Interest Purchase Agreement. Each of the shareholders of each of the Do mestic Co mpanies has entered into an
Exclusive Equity Interest Purchase Agreement, wh ich provides that Recon -HK will be entit led to

                                                                        24
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acquire the Do mestic Co mpany’s shares from its current shareholders upon certain terms and conditions, if such a purchase is or becomes
allo wable under PRC laws and regulations. If the shares are acquired under the Exclusive Equity Interest Purchase Agreement, the purchase
price will be determined at the time of exercise by negotiation but will be the lo west price permitted at such time under Chinese law.
Recon-HK has not yet taken any corporate action to exercise this right of purchase, and there is no guarantee that it will do so or will be
permitted to do so by applicable law at such time as it may wish to do so.

      Exclusive Technical Consulting Service Agreement. Each of the Do mestic Co mpanies and Recon-JN has entered into an Exclusive
Technical Consulting Service Agreement, which provides that Recon-JN will be the exclusive provider of technology services to the Domestic
Co mpany and that the Domestic Co mpany will pay 90% of net profits to Recon -JN for such services. Payments will be made o n a quarterly
basis, with any over- or underpayment to be reconciled once each Do mestic Co mpany’s annual net profits are determined at its fiscal year end.
Any such payment fro m Recon-JN to Recon-CI would need to comply with applicable Chinese laws affecting payments fro m Chinese
companies to non-Chinese companies. See ―Risk Factors – Restrict ions on currency exchange may limit our ability to receive and use our
revenues effectively‖ and ―Our Business – Regulations on Foreign Exchange.‖

       The remain ing 10% of net profits is restricted by the Equity Pledg e Agreement, wh ich entitles Recon-JN to collect dividends from each
Do mestic Co mpany during the term of the pledge. Because the pledge remains in effect to guarantee payment under the Exclusive Technical
Consulting Service Agreement, Mr. Yin, Mr. Li, and Mr. Chen will not have any right to receive any dividends fro m the Do mestic Co mpanies
if they are declared.

      Operating Agreement. Pursuant to the operating agreement among Recon-JN, each Do mestic Co mpany and each of Mr. Yin , M r. Li and
Mr. Chen, Recon-JN p rovides guidance and instructions on each Domestic Co mpany’s daily operations and financial affairs. The shareholders
of each Do mestic Co mpany must designate the candidates recommended by Recon -JN as their representatives on their respective boards of
directors. Recon-JN has the right to appoint senior executives of each Do mestic Co mpany. In addition, Recon -JN agrees to guarantee each
Do mestic Co mpany’s performance under any agreements or arrangements relating to the Do mestic Co mpany ’s business arrangements with any
third party. Each Do mestic Co mpany, in return, agrees to pledge its accounts receivable and all of its assets to Recon -JN. Moreover, each
Do mestic Co mpany agrees that without the prior consent of Recon -JN, the Do mestic Co mpany will not engage in any transactions that could
materially affect its assets, liab ilities, rights or operations, including, without limitation, incurrence or assumption of a ny indebtedness, sale or
purchase of any assets or rights, incurrence of any encumbrance on any of its as sets or intellectual property rights in favor of a t hird party or
transfer of any agreements relat ing to its business operation to any third party.

      Powers of Attorney. Each of Mr. Yin, Mr. Li and Mr. Chen has executed an irrevocable power of attorney to au thorize Recon-JN to
exercise any and all shareholder rights associated with his ownership in each of the Do mestic Co mpanies, including the right to attend
shareholders’ meetings, the right to execute shareholders ’ resolutions, the right to sell, assign, transfer or pledge any or all of the equity interest
in each Do mestic Co mpany, and the right to vote such equity interest for any and all matters. Because Recon -JN has the authority to exercise
all shareholder rights, only Recon-JN (and our co mpany by virtue of our ownership of Recon-JN) may declare dividends in the Do mestic
Co mpanies.

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                                                               US E OF PROCEEDS

     After deducting the underwrit ing discount, accountable expenses payable to the underwriter and offering expenses payable by us, we
expect to receive net proceeds of approximately $        fro m this offering.

      We intend to use the net proceeds of this offering as follows, and we have ordered the specific uses of proceeds in order of prio rity.

                         Description of Use                                                      Percentage of Net Proceeds
                         Pursuit of favorable merger and acquisition targets                                               45 %
                         Bidding on new projects                                                                           35 %
                         Co mplete existing projects                                                                       20 %
                         Total                                                                                            100 %

     While we intend to use a portion of the net proceeds to pursue favorable merger and acquisition targets, we have no agreement s,
understandings or obligations regarding any such mergers and acquisitions at this time.

      No portion of the net proceeds will be used to repay any loans due to any of our emp loyees.

      Pending use of the net proceeds, we intend to invest our net proceeds in short -term, interest bearing, investment-grade obligatio ns. These
investments may have a material adverse effect on the U.S. federal inco me tax consequences of an investment in our ordinary shares. It is
possible that we may become a passive foreign investment company for U.S. federal inco me taxpayers, which could result in neg ative tax
consequences to you. These consequences are described in more detail in ―Taxation.‖


                                                   PER S HARE MARKET INFORMATION

      Our ord inary shares are quoted on the NASDAQ Capital Market, under the symbol ―RCON.‖

      We completed our initial public offering on July 29, 2009. The fo llo wing table sets forth the quarterly high and low sale prices for our
ordinary shares as reported on the NASDAQ Capital Market.

Fiscal 2010

                                                                                                                High              Low
                    First Quarter Ended September 30, 2009                                                   $ 10.85          $    5.13
                    Second Quarter Ended December 31, 2009                                                   $ 8.28           $    5.21
                    Third Quarter Ended March 31, 2010                                                       $ 7.52           $    5.42
                    Fourth Quarter Ending June 30, 2010 (through June 7, 2010)                               $ 6.40           $    4.12

      As of June 8, 2010, there were appro ximately six holders of record of our ordinary shares. This number excludes our ordinary shares
owned by shareholders holding ordinary shares under nominee security position listings. On June 8, 2010, the last sales price of our ordinary
shares as reported on the NASDAQ Capital Market was $5.61 per ordinary share.


                                                               DIVIDEND POLICY

      We have never declared or paid any cash dividends on our ordinary shares. We anticipate that we will retain any earnings to support
operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in th e foreseeable
future. Any future determination re lating to our dividend policy will be made at the discretion of our Board of Directors and will depend on a
number of factors, includ ing future earnings, capital requirements, financial condit ions and future prospects and other facto rs the Board of
Directors may deem relevant.

      Because we are a holding co mpany with no operations of our own and all of our operations are conducted through our Chinese
subsidiary, our ability to pay dividends and to finance any debt that we may incur is dependent upon dividends and other distributions paid. In
addition, Ch inese legal restrict ions permit payment of d ividends to us

                                                                         26
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by our Chinese subsidiary only out of its accumulated net profit, if any, determined in accordance with Ch inese accounting st andards and
regulations. Under Chinese law, our subsidiary is required to set aside a portion (at least 10%) of its after -tax net income (after discharging all
cumulated loss), if any, each year for co mpulsory statutory reserve until the amount of the reserve reaches 50% of our subsid iaries’ registered
capital. These funds may be distributed to shareholders at the time of its wind up. See ―Management’s Discussion and Analysis of Financial
Condition and Results of Operations —Hold ing Co mpany Structure.‖

       Payments of dividends by our subsidiary in Ch ina to our co mpany are also subject to restrictions including primarily the rest rict ion that
foreign invested enterprises may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business
after providing valid co mmercial docu ments. There are no such similar foreign exchange restrictions in the Cay man Islands.


                                                                CAPITALIZATION

      The following table sets forth our capitalizat ion as of March 31, 2010 on a historical basis and on a pro forma as adjusted b asis (a) g iving
effect to the sale of the issuance and sale of          Units offered in this offering at an assumed offering price of $       per Unit, (b)
assuming the separation of the Units into ordinary shares and warrants but not assuming any exercise of the warrants, a nd (c) reflecting the
application of the proceeds after deducting the estimated underwrit ing fees.

      You should read this table in conjunction with our financial statements and related notes appearing elsewhere in this prospec tus and ―Use
of Proceeds‖ and ―Description of Cap ital Stock.‖


                                                               As of March 31, 2010

                                                                                                                    Pro Forma as
                                                                                            As Reported             Adjusted (1)
                    Ordinary Shares
                    Shares (2)                                                                 3,951,811
                    Amount                                                              $         77,476           $               (2)
                    Additional Paid -In Capital                                         $     10,054,635           $               (3)
                    Appropriated Retained Earnings                                      $        480,809           $
                    Unappropriated Retained Earn ings                                   $      4,932,671           $
                    Accumulated Other Co mprehensive Income                             $        (18,856 )         $
                    Total Capi talization                                               $     15,526,736           $

(1)
       The as adjusted information discussed above is illustrative only. Our addit ional paid-in capital, total shareholders’ equity and total
       capitalizat ion following the complet ion of this offering are subject to adjustment based on the actual public offering price and other terms
       of this offering determined at pricing.
( 2)
       On a pro fo rma as adjusted basis giving effect to the sale of           Un its (excluding the         Units wh ich the Underwriters have the
       option to purchase to cover over-allot ments, if any, and the            shares underlying the Representative’s Warrants).
( 3)
       Pro forma adjusted additional paid in capital reflects the net proceeds we expect to receive, after deducting a 6.75% underwr itin g
       discount and a 0.6% corporate finance fee.

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                                                    EXCHANGE RATE INFORMATION

      Our business is primarily conducted in China, and the financial records of our PRC subsidiary and the VIEs are maintained in RM B, their
functional currency. Ho wever, periodic reports made to shareholders will include current period amounts translated into U.S. d ollars using the
then-current exchange rates, for the convenience of the readers. Such U.S. dollar t ranslated amounts will be marked as ―unaudited‖,
notwithstanding the fact that the equivalent RM B amounts may be audited. Un less otherwise noted, all translations from RMB into U.S. dollars
have been made at a rate of $1.00 to RM B 6.8361, the approximate exchange rate prevailing on March 31, 2010.

      We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RM B, as
the case may be, at any particular rate, or at all. The PRC govern ment imposes control over its foreign currency reserves in part through direct
regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. On June 4, 2010, the exchange rate was
¥6.8268 to $1.00. The Co mpany does not currently engage in currency hedging transactions.

      The following table sets forth informat ion concerning exchange rates between the RMB and the U.S. dollar for the periods indicated.

                                                                                                           Noon Buying Rate
                                                                                                           Average
      Period                                                                                Period-End       (1)          Low         High
                                                                                                         (RMB per U.S. Dollar)
      2005                                                                                     8.0702      8.1940       8.0702       8.2765
      2006                                                                                     7.8041      7.9723       7.8041       8.0702
      2007                                                                                     7.2946      7.6072       7.2946       7.8127
      2008                                                                                     6.8225      6.9477       6.7800       7.2946
      2009                                                                                     6.8259      6.8353       6.8176       6.8395
             September                                                                         6.8277      6.8303       6.8247       6.8262
             October                                                                           6.8267      6.8292       6.8248       6.8264
             November                                                                          6.8271      6.8300       6.8255       6.8272
             December                                                                          6.8259      6.8275       6.8244       6.8299
      2010
             January                                                                           6.8369      6.8347       6.8280       6.8380
             February                                                                          6.8367      6.8377       6.8281       6.8436
             March                                                                             6.8361      6.8359       6.8236       6.8378
             April                                                                             6.8358      6.8329       6.7756       6.8380
             May                                                                               6.8403      6.8364       6.8273       6.8408
             June (through June 4, 2010)                                                       6.8268      6.8281       6.8268       6.8296


(1)
      Averages are calculated using the daily rates during the relevant period .

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                                  S ELECTED HIS TORICAL AND UNAUDITED CONDENS ED
                             CONSOLIDATED AND COMB INED FINANCIAL AND OPERATING DATA

      You should read the following selected financial data in conjunction with ―Management’s Discussion and Analysis of Financial
Condition and Results of Operations ‖ and the financial statements and related notes included elsewhere in this prospectus. The sele cted
statements of operations data are for the fiscal years ended June 30, 2008 and 2009 and the nine months ended March 31, 2010. The selected
balance sheet data set forth below, are as of June 30, 2008 and 2009 and March 31, 2010. Th is selected financial data is derived fro m our
consolidated and combined financial statements and should be read in conjunction with the consolidated and combined financial statements and
notes thereto which are included elsewhere in this prospectus.

                                                                     For the Fiscal Year                                   For the Nine Months
                                                                      Ended June 30,                                         Ended March 31,
                                                                                                    2009                2010                   2010
                                                       2008                  2009                (unaudited)         (unaudited)           (unaudited)
Total Revenues                                    ¥   65,748,234     ¥     75,646,907        $    11,065,798     ¥     98,834,057         $     14,457,667
Income fro m Continuing Operations                ¥   11,100,900     ¥     15,256,875        $     2,231,809     ¥     19,821,690         $      2,899,561
Income (Loss) fro m Discontinued Operations       ¥      496,223     ¥            —          $           —       ¥            —           $            —
Net Inco me Available for Ordinary
  Shareholders                                    ¥   11,580,304     ¥     15,205,321        $      2,224,268    ¥     17,502,923         $       2,560,367
Basic Weighted Average Shares Outstanding              2,139,203            2,139,203               2,139,203           3,753,350                 3,753,350
     Basic Earn ings per Share for Ordinary
       Shareholders                               ¥         5.41     ¥            7.11       $           1.04    ¥            4.66        $            0.68
Diluted Weighted Average Shares Outstanding            2,210,892             2,251,811              2,251,811            3,763,408                3,763,408
     Diluted Earnings per Share for Ord inary
       Shareholders                               ¥           5.24   ¥                6.75   $            0.99   ¥             4.65       $             0.68

                                                                           June 30,                                                March 31,
                                                                                                    2009                2010                      2010
                                                       2008                  2009                (unaudited)         (unaudited)               (unaudited)
Total Assets                                      ¥   61,230,033     ¥     76,632,698        $    11,210,002     ¥    170,620,753         $     24,958,785
Total Liab ilities                                ¥   41,071,889     ¥     39,594,476        $     5,791,969     ¥     55,320,053         $      8,092,341
Redeemable Ord inary Shares                       ¥    1,388,641     ¥      1,434,342        $       209,819     ¥            —           $            —
Non-controlling Interest in Equ ity               ¥    5,210,560     ¥      6,839,616        $     1,000,514     ¥      9,158,383         $      1,339,709
Total Controlling Shareholders ’ Equity           ¥   13,558,943     ¥     28,764,264        $     4,207,701     ¥    106,142,317         $     15,526,736

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                                         MANAGEMENT’S DISCUSS ION AND ANALYS IS OF
                                      FINANCIAL CONDITION AND RES ULTS OF OPERATIONS

      When you read this section of this prospectus, it is important that you also read our selected consolidated financial data, t he consolidated
financial statements and related notes included elsewhere in this prospectus. This section of this prospectus contains forward -looking
statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results
could differ materially from those anticipated in these forward-looking statements for many reasons set forth herein, including the factors
described below and in “Risk Factors.”

Overview
      Our co mpany focuses on production and service for oil field explo itation industry comp anies in the People’s Republic of Ch ina. Through
our contractual relationships with the Do mestic Co mpanies, we provide equip ment, tools and other hardware related to oil field production and
management and develop and sell our o wn specialized industrial au tomat ion control and informat ion solutions. However, we do not engage in
the production of petroleum or petroleu m p roducts.

      Following our init ial public o ffering and listing on the NASDAQ Capital Market, our business has continued to grow due to our efforts to
optimize our product portfolio and expand into new business areas. For the nine months ended March 31, 2010 and 2009, o ur total revenues
amounted to $14.46 million and $9.09 million, respectively. We believe our sustained growth is mainly due to our efforts to e xpand our
business and optimize our product portfolio. We derive revenues from hard ware sales and software servic e. For the nine months ended March
31, 2010, appro ximately 92.01% of our revenues came fro m hard ware sales, and approximately 7.99% came fro m software services. For the
same period in 2009, hard ware sales and software services constituted 96.19% and 3.81%, respectively, of our revenues.

      Our management believes that Chinese oilfields will p ro mote digitizat ion management and stimu lation measures in oil and gas w ells in
the future; as such we are p lacing a higher emphasis on these areas. To a certain extent, o ur change in revenue structure reflects this short-term
strategy. Under this strategy, our business benefits from sales of high -tech products and software systems. Our management also believes the
development and sales of software products facilitated the development of our hard ware and service business. We expect our software service
revenues to continue to grow, as our customers require continuing service associated with their software purchase. As a result, our management
continues to seek to strengthen its competitive position in the oil field service industry by developing software products.

      Our solutions and new technology enable our customers to reduce their expenditures and improve their integrated benefit by changing
fro m manual to mechanized production methods. Our major clients, Sinopec and CNPC, are large oil and refinery firms formed following the
Chinese government’s decision to decentralize the oil and gas industry within Ch ina. Both companies are ranked in the Fortune 500. We aim to
continue extending our market share in the short-term and to be a leading non-government-owned service provider to the oil field exp loitation
industry in the long-term. Our mission is to increase the automation and safety levels of industrial petroleu m production in China, and improve
the under-developed working process and management mode by using high -technology.

Factors Affecting Our B usiness
      Industry Background . As a whole, the Ch inese petroleum industry faces four primary challenges: (a) g lobal co mpetit ion; (b) environ ment
and development; (c) configuration of petroleu m resources; and (d) gradually increased profit margins. Co mpared to developed countries,
however, there are still certain lags in terms of modern ized management levels in China. In part icular, wit h the introduction of computer
techniques over the last ten years, the degree of automation in foreign countries has reached a higher level, wh ile China is still in the initial
stage.

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Table of Contents

      With deeper development of the oil-field industry, most oil-fields in Ch ina have entered the third stage of oil extraction. During this
stage, oil well output decreases, water content increases, and costs associated with extraction inc rease.

      Through application of the automation system we provide, oil well head informat ion such as indicator diagrams, current diagra ms, o il
pressure, oil temperature and the running status of oil wells, can be accurately passed on to management in real time. Management can analyze
informat ion on a graphic co mputer display and act on decisions with remote control over oil extraction wells, including such features as auto
delayed start-up of oil ext raction wells after being switched on/off or intermittent extractions. The system can achieve failure protection and
send timely alarms. For instance, the system is equipped with automatic stopping mechanisms and alarms in case of blocking, b reaking of oil
extraction rods, and phase breaking to avoid major accidents . The measurement station can automatically measure liquid and gas and transfer
the data to the central control room in real time. With this system, the oil well heads and measurement stations do not need to be monitored by
personnel. In addition, real-time information transfers between the oil extraction well and management have improved labor productivity,
reduced manual labor requirements, lowered costs for oil ext raction, eliminated failures in time, increased oil output, actua lized automatic
management for o il fields and integrated management above and below ground. The automation system also provides full and accurate data f or
research and development of petroleum deposit projects as well as a reliable technical basis for oil field productions and de cision-making.

      Our automat ion system can also be used in connection with the delivery of liquefied natural gas. Ch ina ’s natural gas consumption
continued to maintain fast growth while the share of gas in the primary energy consumption mix rose to over 4%. De mands of pipeline
transportation is boasting. We are optimistic about our company ’s products and service development in this aspect.

     Apart fro m the above-mentioned factors, we believe increasingly intense competition in the oil field market, increasing eff icien cy by
reducing redundant staff and reduction of cost is bound to facilitate the all-around generalization of the automation system.

      Accordingly, any significant change in the general demand for oil and liquefied natural gas in China, the PRC governmen t’s policy or the
strategies of major PRC energy co mpanies may significantly affect the demand for our service and products and, as a result, o ur revenues and
financial condition.

      In addition, our oil well water finding/blocking technology, mu ltipurpose fissure shaper, and high-efficiency heating furnace can, in
certain circu mstances, increase the oil field output, decrease the water content, save energy, lower consumption, reduce the oil extraction cost,
and strengthen the competitive force of the domestic oil fields.

      Relevant Industry-Wide Trends . Management believes the Chinese oil field service industry is likely to experience rap id growt h in the
near future. This belief is based on management’s experience in the industry and its analysis of the follo wing recent trends:

        •    Management believes that larger co mpanies in China are becoming more sophisticated in managing and imp lementing their
             informat ion systems. Management believes that these tendencies are likely to create a strong demand for software integration and
             customized system development fro m these larger co mpanies. As a result, management believes that many oil field service
             providers will attempt to reposition their businesses as development services providers, rather than ―off-the-rack‖ vendors. In the
             context of economic transformation, local manufacturers will likely face industrial restructuring as they try to grow to compete and
             fend off increased pressure from greatly shortened product lives. Management believes that the use of advanced information
             technologies is becoming more impo rtant to success in the market.
        •    Management believes that a significant number of Chinese manufacturers, especially those in the oil and gas industry, still lack
             sufficient technical applications and services for their needs. These companies tend to be more cost-sensitive. Management
             believes that such clients would be more likely to use our services and products to reduce expenses. Management believes this will
             be an increasingly competit ive market.
        •    Management also believes that high-tech and precise instruments will beco me increasingly prevalent in the oil field service market,
             as China continues to be more dependent on oil and as oil resources continue to decline.

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      Dependence on CNPC and Sinopec . We derive the majority of our revenues fro m the operating subsidiaries of two customers, (i) CNPC
and (ii) Sinopec. For the nine months ended March 31, 2010, 47.37% o f our revenues came fro m CNPC and 36.87% of our revenues came
fro m Sinopec. In order to grow and to protect our company against the risks associated with our dependence on CNPC and Sinope c,
management intends to improve our services and expand our potential market by seeking to establish new relat ionships. Management believes
that a large number of Chinese petroleu m co mpanies are likely to require services and products such as those we provide.

     Nature of Operations . Our technicians and solutions were developed based on our strong industrial expertise in the oil and gas industry.
Products and services provided by us mainly include:

        •    RSCADA System . RSCA DA is an industrial co mputerized process control system for monitoring, managing and controlling oil
             field service ext raction. RSCADA integrates the underground, ground and above -ground levels of the oil field service ext ractio n
             industry. RSCADA connects the above-ground level central control roo m with the ground level relay station and the relay station
             with the underground bottom intelligent terminal using the 2.4G wireless frequency. RSCA DA has received grants and awards
             fro m the State Min istry of Science and Technology and the city of Nanjing.
        •    Water System . We have developed and imp lemented technology designed to find and block water content in oil fields. As Chin a ’s
             extraction of oil has increased, the quantity of available o il has decreased and the water content in the remain ing oil has increased.
             In order to imp rove our efficiency and profitability in extract ion, we have developed technology to reduce the amount of water in
             extracted oil.
        •    Oil Field Furnaces . Crude oil contains certain impurities that must be removed before the oil can be sold, including water and
             natural gas. To remove the impurities and to prevent solidification and blockage in transport pipes, companies employ heating
             furnaces. We have researched, developed and implemented a new o il field furnace that is advanced, highly automated, reliable,
             easily operable, and co mparatively safe and highly heat efficient (90% efficiency).

        •    Multipurpose Fissure Shaper . We have also developed a mu ltipurpose fissure shaper to improve our ability to test for and ext ract
             oil. Before any oil field service extractor can test for the presence of oil, it must first perforate a hole for testing. The depth of the
             perforated hole is, of course, ext remely important in the testing process: a hole that is too shallow may cause an extractor to miss
             an oil field entirely. We have developed a proprietary mu ltipurpose fissure shaper that is used with the perforating gun to
             effectively increase the perforation depth by between 46% and 80%, shape a great number of stratum fissures, improve the stratum
             diversion capability and, as a result, improve our ability to locate oil fields and increase the output of oil wells.

      As a technology development company, we put a prior ity on research, explo ration, design and innovation. For years we have been
increasing our focus on attracting and training talents to continually imp rove our research and development capability. We cu rrently have more
than 90 emp loyees, approximately 80% of who m graduated fro m college. We also cooperate with the Oil Field Service & Geology Research
Laboratory of Nanjing University.

Factors Affecting Our Results of Operati ons — Generally
      Our operating results in any period are subject to general conditions typically affect ing the Chinese oil -field service industry including:
        •    the amount of spending by our customers, primarily those in the oil and gas industry;
        •    growing demand fro m large corporations for imp roved management and software designed to achieve such corporate performance;

        •    the procurement processes of our customers, especially those in the oil and gas industry;
        •    competition and related pricing pressure fro m other o il field service solution providers, especially those targeting the Chin ese oil
             and gas industry;
        •    the ongoing development of the oil field service market in Ch ina; and

        •    inflation and other factors.

     Unfavorable changes in any of these general conditions could negatively affect the number and size of the projects we underta ke, the
number of products we sell, the amount of services we provide, the price of our products and services and otherwise affect our results of
operations.

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      Our operating results in any period are mo re directly affected by company -specific factors including:

        •    our revenue growth;
        •    the proportion of our business dedicated to large co mpanies;
        •    our ability to successfully develop, introduce and market new solutions and services;

        •    our ability to increase our revenues to businesses, both old customers and new in the Chinese oil and gas industry;
        •    our ability to effectively manage our operating costs and expenses; and
        •    our ability to effectively imp lement any targeted acquisitions and/or strategic alliances so as to provide efficient access t o markets
             and industries in the Chinese oil and gas industry.

Critical Accounti ng Policies and Esti mates
       Estimates and Assumptions . We prepare our financial statements in conformity with U.S. GAAP, wh ich requires us to make ju dgments,
estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently availab le infor mat ion, our own
historical experience and various other assumptions that we believe to be reasonable under the circu mstances. Since the use of estimat es is an
integral co mponent of the financial reporting process, actual results could differ fro m those estimates. An accounting policy is considered
critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate
is made, and if different accounting estimates that reasonably could have been used, or chang es in the accounting estimates that are reasonably
likely to occur periodically, could materially impact the consolidated financial statements. We believe that the follo wing po licies involve a
higher degree of judg ment and complexity in their application and require us to make significant accounting estimates. The following
descriptions of crit ical accounting policies, judg ments and estimates should be read in conjunction with our consolidated fin ancial statements
and other disclosures included in this prospectus. Significant accounting estimates reflected in our co mpany ’s consolidated financial statements
include revenue recognition, allowance fo r doubtful accounts, and useful lives of property and equipment.

      Revenue Recognition . We recognize revenue when it is realized and earned. We consider revenue realized or realizable and earned when
(1) we have 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 client and the client has signed a completion and acceptance report, risk o f loss has transferred to the clie nt, client acceptance
provisions have lapsed, or we have objective evidence that the criteria specified in client acceptance provisions have been s atisfied. The sales
price is not considered to be fixed or determinable until all contingencies related to the sale have been reso lved.

        •    Hardware . Revenue fro m hardware sales is generally recognized when the product is shipped to the customer and when there are
             no unfulfilled co mpany obligations that affect the customer’s final acceptance of the arrangement.
        •    Software . The Co mpany sells self-developed software. For software sales, the Co mpany recognizes revenues in accordance with
             the provisions of Statement of Position No. 97-2 (ASC Topic 985-605), ―Soft ware Revenue Recognition,‖ and related
             interpretations. Revenue fro m software is recognized accord ing to project contracts. Contract costs are accumulated during the
             periods of installation and testing or commissioning. Usually this is short term. Pro fits are not recognized until co mp letion of the
             contracts. Costs included in inventory as work in process include direct materials, labor and related expense. Corporate general and
             administrative expenses are charged to expense in the period they are incurred.
        •    Services . The Co mpany provides services to improve software functions and system requirements on separated fixed-price
             contracts. Revenue is recognized on the comp leted contract method when acceptance is determined by a comp letion report signed
             by the customer. Deferred revenue represents unearned amounts billed to customers related to service agreements.

      Revenues applicable to mu ltip le-element fee arrangements are div ided among the elements such as software, hardware and post-contract
service using vendor-specific objective evidence of fair value. Such evidence consists of pricing of mu ltiple elements when those same
elements are sold as separate products or arrangements. Soft ware maintenance fo r the first year and init ial train ing are included in the purchase
price of the software. Init ial training is provided at the time of installat ion and is recognized as inco me as part of the pr ice of th e software since
it is

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minimal in value. Maintenance is valued based on the fee schedule used by us for providing the regular level of maintenance service as sold to
customers when renewing their maintenance contracts on a standalone basis. Maintenance revenue is included in the income stat ement under
services and is recognized over the term o f the agreement.

       Fair Values of Financial Instruments . The carry ing amounts reported in the consolidated balance sheets for trade accounts receivable,
other receivables, advances to suppliers, trade accounts payable, accrued liabilit ies, advances fro m customers and notes payable approximate
fair value because of the immediate or short-term maturity of these financial instruments.

      Allowance for Doubtful Accounts . Trade accounts receivable and other receivables are recognized in itially at fair value and subsequently
measured at amortized cost using the effective interest method, less a provision made for impairment of these receivables. Provisions are
applied to trade accounts and other receivables where events or changes in circu mstances indicate that the balance may not be collectib le. The
identification of doubtful debts requires the use of judgment and estimates of management. Our management must make estimates of the
collectability of our accounts receivable. Management specifically analy zes accounts receivable, historical bad debts, customer
creditworthiness, current economic trends and changes in our customer pay ment terms when evaluating the adequacy of the allowance for
doubtful accounts. Our allo wance for trade accounts receivable was ¥604,953 ($88,494) and ¥1,993,588 ($291,627) on June 30, 2009 and
March 31, 2010 respectively. Our allowance for trade accounts receivable increased primarily because (i) we did not reclassify any accounts
receivable as receivable fro m related parties, so all amounts were reflected in the allowance and (ii) as our business grows, our management
continually conducts comprehensive risk assessments and increases the allowance to guard against bad debts accordingly. Howev er, most of
the growth occurred between us and our large clients. Because these clients are Chinese state-owned companies, our management believes the
possibility that these accounts receivable will be uncollectable is relatively lo w. If the financial condition of our clients were to deteriorate,
resulting in their inability to make pay ments, an additional allowance might be required.

       Property and Equip ment . We record property and equipment at cost. We depreciate property and equipment on a straight -line b asis over
their estimated useful lives using the following annual rates:

                       Motor Veh icles                                                                                 10 years
                       Office Equ ip ment                                                                             2-5 years
                       Leasehold Improvements                                                                           5 years

     We expense maintenance and repair expenditures as they do not improve or extend an asset ’s productive life. These estimates are
reasonably likely to change in the future since they are based upon matters that are highly uncertain such as general economic conditions,
potential changes in technology and estimated cash flows fro m the use of these assets.

     Gains or losses on sales or retirements are included in the consolidated statements of operations in the year of disposition. Accumu lated
depreciation was ¥1,006,761 ($147,271) and ¥1,085,419 ($158,778) as of June 30, 2009 and March 31, 2010, resp ectively.

                                                                                  Chinese Yuan (Renminbi)                     U.S. Dollars
                                                                             June 30,                 March 31,                March 31,
                                                                               2009                     2010                     2010
                                                                                                     (Unaudited)              (Unaudited)
            Motor vehicles                                             ¥      1,464,918           ¥     1,725,831         $       252,458
            Office equip ment and fixtures                                      779,257                   587,718                  85,973
            Leasehold improvement                                               169,462                   276,938                  40,511

            Total property and equipment                                      2,413,637                 2,590,487                378,942
            Less: Accumulated depreciat ion                                  (1,006,761 )              (1,085,419 )             (158,778 )

            Property and equipment, net                                ¥      1,406,876           ¥     1,505,068         $       220,165


     Software Develop ment Costs . We charge all of our develop ment costs to research and development until we have established
technological feasibility. We acknowledge technological feasib ility of our software when a detailed

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program design has been completed, or upon the completion of a working model. Upon reaching technological feasibility, we cap italize
additional software costs until the software is available for general release to customers. Although we have not established a budget or
timetable fo r software develop ment, we anticipate the need to continue the development of our software products in the future and the cost
could be significant. We believe that, as in the past, the costs of development will result in new products that will increase revenue and
therefore justify costs. There is, however, a reasonable possibility that we may be unable to realize the carrying value of o ur software, and the
amount not so realized may adversely affect our financial position, results of operation or liquidity in the future.

      Cost of Revenues . Cost of revenues includes wages, materials, handling charges, and other expenses associated with manufact ured
products and services provided to customers; the cos t of purchased raw materials such as steel products and chemical materials. We expect cost
of revenues to grow as our revenues grow. It is possible that we could incur development costs with litt le revenue recognitio n, but based upon
our past history, we e xpect our revenues to grow.

      Valuation of Long-Lived Assets . We review the carrying values of our long-lived assets for impairment whenever events or changes in
circu mstances indicate that they may not be recoverable. When such an event occurs, we project undiscounted cash flows to be generated from
the use of the asset and its eventual disposition over the remaining life of the asset. If pro jections indicate that the carrying value of the
long-lived asset will not be recovered, we reduce the carry ing value of the long -lived asset, by the estimated excess of the carrying value over
the projected discounted cash flows. In the past, we have not had to make significant adjustments to the carrying values of o ur long-lived
assets, and we do not anticipate a need to do so in the future. However, circu mstances could cause us to have to reduce the value of our
capitalized software mo re rapidly than we have in the past if our revenues were to significantly decline. Estimated cash flows from the use of
the long-lived assets are highly uncertain and therefore the estimation of the need to impair these assets is reasonably likely to change in the
future. Should the economy or acceptance of our software change in the future, it is likely that our estimate of the future c ash flows fro m the
use of these assets will change by a material amount.

Results of Operations
   Fiscal Year Ended June 30, 2009 Compared with Fiscal Year Ended June 30, 2008.
      Our historical report ing results are not necessarily indicative of the results to be expected for any future period.

       Revenues . Our total revenues increased by approximately 15.06% or ¥ 9,898,673, fro m ¥ 65,748,234 in fiscal 2008 to ¥75,646,907
($11,065,789) in fiscal 2009. In spite of the decrease of oil prices over the past year and the worldwide economic crisis, bo th of which made
companies, including our clients, mo re cautious about their finances, it also encouraged those companies to seek ways to reduce costs and
maximize output by investing in technological solutions that would enable them to imp rove revenues and reduce expenses. Becau se our
solutions are designed to help oil co mpanies operate more efficiently, our customers ordered more of our p roducts and service s. As a result, we
were ab le to continue to grow in a very d ifficu lt year for the oil and gas industry. In addition, this increase also resulted directly fro m our
growing relationships with CNPC and Sinopec. Specifically, the Chinese government has attached great importance to the safety problems that
exist in the Chinese energy industry by implementing nu merous new projects and init iatives designed to increase safety and security in the
Chinese energy industry. This replacement project is a Chinese reform project designed to eliminate hidden security dangers a nd develop key
projects for saving energy and materials. As a result of the new policies, the Chinese government has increased spending to replace equipment
with potential safety problems. As such, we have experienced increased sales and a greater demand for our maintenance services, which has
increased our revenue. Additionally, as we have provided services to CNPC and Sinopec and our relat ionships have grown, they have chosen to
continue to use our solutions. During the years ended June 30, 2008 and 2009, substantially all of our revenues were generated through our
business engagements with CNPC and Sinopec, the two largest Chinese oil co mpanies. These significant engagements made it possible for us
to improve our service quality, p roducts ’ popularity and adaptability for a very limited number of customers. Further, this long -term
cooperation has provided us more priority collect ing receivables on time than we believe we otherwise would have. We expect t hat our gross
revenues will continue to increase over time as we:

        •    use the money we raised in our init ial public o ffering to grow our Co mpany;

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        •    expand the adoption of our solutions into other markets outside the Chinese oil and gas industry; and

        •    introduce our solutions to businesses located outside of China.

      Cost of Revenues . Our cost of revenues includes costs related to the design, implementation, delivery and maintenance of our software
solutions and raw materials. We have set up service and maintenance centers in Xinjiang, Jidong, Qinghai d istrict, and other locations which
can provide our customers with technical consulting, repair and maintenance services. We purchase equipment based on each client ’s needs.
Raw materials used to produce our hardware products consist largely of steel products and chemical p roducts. Our cost of hard ware increased
slightly because some of our clients, especially subsidiaries of Sinopec, required mo re equip ment that we purchase fro m others. We acted as an
agent in these cases and we purchased equipment specified according to our customers. Because we did not produce this equipme nt, we could
not control all of the costs associated with it, wh ich led to increased costs. Our cost of services decreased slightly because we are familiar with
our market in Qinghai and Jidong area, two areas of growth for us in 2009, and were thus able to benefit fro m scale advan tages. We may
devote more resources to business with high marg ins, so our cost of revenues may be variable. We expect that our cost of reve nues will
increase as our revenues grow, but whether our cost of revenues increases as a percentage of revenues will depend on whether we are able to
grow our higher margin areas of business.

     Our cost of revenues increased fro m ¥39,771,955 in fiscal 2008 to ¥45,758,804 ($6,693,700) in fiscal 2009, an increase of 15.05%. As a
percentage of revenues, our cost of revenues remained essentially the same in 2008 and 2009.

      Gross Profit . For the year ended June 30, 2009, our gross profit increased to ¥29,888,103 ($4,372,098) fro m ¥25,976,279 for th e same
period in 2008, an increase of ¥3,911,824, or appro ximately 15.06%. For the year ended June 30, 2009, our g ross profit as a percentage of
revenue remained essentially the same as in 2008.

Expenses
      General and Administrative Expenses . General and ad ministrative expenses consist primarily of costs from our hu man resources
organization, facilities costs, depreciation expenses, professional advisor fees, audit fees and other expenses incurred in connectio n with
general operations. General and ad ministrative expenses increased 42.28% or ¥1,662,177, fro m ¥3,931,205 in 2008 to ¥5,593,382 ($818,212)
in 2009. General and administrative expenses were 5.98% o f total revenues in 2008 and 7.39% of total revenues in 2009. Th is r esult was
primarily due to two factors: (1) we strengthened our management of claimed expenses and increased the allowance level of ot her accounts
receivable, and (2) we co mpleted an assessment of our historical accounting practices. We have included this assessment as a current period
expense. We expect that this assessment expense will be a one-time expense. As we continue to grow, we expect that our general and
administrative expenses will increase. Many of these costs are expected to be non -recurring as they relate primarily to the establish ment of
additional functions in connection with being a publicly -traded company.

       Selling and Distribution Expenses . Selling and distribution expenses consist primarily of salaries and related expenditures of our sales
and marketing organization; sales commissions; costs of our marketing programs, including public relat ions, advertising and t rade shows; and
an allocation of our facilities and depreciation expenses. Selling expenses increased by 5.92%, fro m ¥5,343,840 in 2008 to ¥5,660,198
($827,986) in 2009. Th is increase resulted primarily fro m our business expansion activities. As we continued to solidify our business
relationship with other companies, we required extensive marketing effo rts and incurred the costs associated therewith. At pr esent, we are
expanding our business in Jidong and North West district. In order to successfully increase the scope of our client base, we exp ect that our
selling expenses will co rrespondingly increase. Selling expenses were 8.13% of total revenues in 2008 and 7.48% of total reve nues in 2009.
This slight decrease resulted from the fact that during 2008 and 2009, we were able to gene rate additional revenues from our existing client
base (CNPC and Sinopec) without increasing our marketing efforts. As we increase the scope of our client base over the next s everal years, we
expect to see our selling expenses as a percentage of revenue in crease as a result, in part, of our expanded marketing efforts. We expect that our
market ing efforts will require expenditures for a period of t ime before resulting in addit ional sales.

      Income fro m Operat ions . Income fro m operations was ¥18,634,523 ($2,725,900) fo r the year ended June 30, 2009, an 11.58% increase
fro m ¥ 16,701,234 for the same period in 2008. Th is increase in income fro m operations can be attributed primarily to the increase in sales
volume to CNPC and Sinopec.

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      Subsidy Income . We received grants fro m the local government. For the year ended June 30, 2009, we received ¥2,038,015 ($298,125)
subsidy income, a large increase compared to the year 2008. These grants were given by the government to support local software co mpanies ’
operation and research and development. Grants related to research and development projects are recognized as subsidy income in the
combined and consolidated statements of operations when related expenses are recorded. We plan to arrange more research projects to continue
to seek such subsidy income in the future.

      Income Tax Expense . Inco me taxes are provided fo r based upon the liability method of accounting pursuant to SFAS No. 109,
―Accounting for Income Taxes.‖ Under this approach, deferred inco me taxes are recorded to reflect the tax consequences on future years of
differences between the tax basis of assets and liabilit ies and their financial reporting amounts. A valuation allowance is recorded against
deferred tax assets if it is not likely that the asset will be realized. In June 2006, the Financial Accounting Standards Boa rd issued Financial
Interpretation No. 48, ―Accounting for Uncertainty in Income Taxes —an interpretation of FASB Statement No. 109‖ (―FIN 48‖). FIN 48
prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax p osition taken or
expected to be taken in a tax return. FIN 48 also provides guidance on derecognition classification, interest and penalties, accounting in interim
periods, disclosure, and transition. The interpretation is effective for the fiscal years beginning after December 15, 2006. The ad option of this
interpretation had no material effect on the Co mpany’s financial statements.

     We have not been subject to any income taxes in the United States or the Cay man Islands. Enterprises doing business in PRC ar e
generally subject to enterprise income tax at a rate of 25%.

      Due to Nanjing Recon’s location in a State Standard High Technology Development Zone, it was granted a certificat ion of Hig h
Technology Enterprise and was taxed at a rate of 15% for taxable inco me generated and was 50% exempt fro m this inco me tax fro m 2005 to
2007. The h igh-technology company certificate issued by the Science and Technology Bureau of Jiangsu Province to Nanjing Recon expired
December 19, 2009. This certificate entit led us to preferential tax treat ment of 15% enterprise inco me tax (―EIT‖). We have submitted an
application to renew our h igh-tech status certificate in May 2010 and expect to receive the approval in July 2010. The loss of this certificate
may result in the Co mpany paying an additional 10% EIT on its taxable inco me. While we await renewal of this cert ificate, we are subject to a
25% EIT rate; however, upon renewal, the 15% EIT rate will be applied retroactively. For this reason, we present our effectiv e EIT for Nanjing
Recon at 15%. If Nan jing Recon’s application were not approved, we would need to pay an addit ional amount of taxes to cause Nanjing
Recon’s effective EIT rate to be 25%.

      ENI is subject to a 25% earned inco me tax (―EIT‖) rate. BHD also pays the statutory rate of 25%. We had min imal operations in
jurisdictions other than the PRC. Inco me tax expense for years ended June 30, 2008 and 2009 were ¥ 4,665,897 and ¥3,677,887 ($538,474),
respectively. This decrease resulted from (1) our ab ility to deduct certain expenses from our revenue according to a newly -released Chinese tax
policy; and (2) the reduction of our effective EIT rate according to new Ch inese tax laws. We expect that our effective EIT rate will vary,
depending on which of our Do mestic Co mpanies generate greater revenues, as an increased percentage of revenues from ENI o r BHD will
result in our effective rate mov ing closer to BHD’s and ENI’s 25% rate and away fro m Nanjing Recon’s 15% rate.

      Interest Income . Our interest income represents the interest accrued as a result of bank deposits. Our interest income decreased fro m
¥18,963 in 2008 to ¥15,159 ($2,217) in 2009. We expect that our interest income will dramatically increase in the near future as we will earn
interest on the proceeds of our init ial public offering pending application thereof.

      Income fro m Continuing Operations . As a result of the factors described above, income fro m continuing operation was ¥15,256,875
($2,231,809) for the year in 2009, an increase of ¥4,155,975, or 37.44%, fro m ¥11,100,900 for 2008.

      Discontinued Operations . At the end of the second quarter of fiscal 2009, our Co mpany completed the sale of Inner Mongolia Adar
Energy Technology, Ltd. and Beijing Weigu Windows Co. which were both the ma jority-owned subsidiaries of BHD as well as Xiamen Recon
Technology Development, Ltd., which was the majority -owned subsidiary of Nanjing Recon. In the fourth quarter of 2008, we determined that
these three subsidiaries met the criteria for classification as discontinued operations. The gain on the disposal of these subsidiaries and the
financial results associated with 2008 and prior periods are included in d iscontinued operations.

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     Net Inco me Available For Ordinary Shareholders . As a result of the factors described above, net income availab le for ordinary
shareholders was ¥15,205,321 ($2,224,268) for the year in 2009, an increase of ¥3,625,017, or 31.3%, fro m ¥11,580,304 fo r 2008.

   Nine Months Ended March 31, 2010 Compared to Nine Months Ended March 31, 2009
      Our historical report ing results are not necessarily indicative of the results to be expected for any future period.

      Revenues . Our total revenues increased by approximately 58.97% or ¥ 36,662,415 ($5,363,060), fro m ¥ 62,171,642 ($9,094,607) for the
nine months ended March 31, 2009 to ¥98,834,057 ($14,457,667) for the nine months ended March 31, 2010. The sales of our hardware
products drove our revenue growth. We believe our software and service business are likely to play a large ro le in future revenu es. Most of the
increase of revenue was a result of our cooperation with new clients.

      Cost of Revenues . Our cost of revenues increased from ¥ 37,608,500 ($5,501,456) in the nine months ended March 31, 2009 to
¥56,007,688 ($8,192,930) for the same period of 2010, an increase of ¥ 18,399,188 ($2,691,474) o r 48.92%. As a percentage of revenues, our
cost of revenues decreased from 60.49% in 2009 to 56.67% in 2010. Our focus on solutions with comparatively higher margins, such as our
software and service solutions, allowed our cost of revenues to decrease as a percentage of revenues, even as our business grew. We expect this
trend will continue, provided we are able to continue to grow our higher-margin solution revenues.

      Gross Margin . For the nine months ended March 31, 2010, our gross marg in increased to ¥42,826,369 ($6,264,737) fro m ¥24,563,142
($3,593,151) for the same period in 2009, an increase of ¥18,263,227 ($2,671,586) or appro ximately 74.35%. For the nine mon ths ended
March 31, 2010, our gross margin as a percentage of revenue increased to 43.33%, fro m 39.51% fo r the same period ended March 31, 2009.
This increase in gross margin can be attributed primarily to the increase in sales volume to CNPC and Sinopec, comb ined with the development
of our lo wer cost software and service business. During this period, we entered into many new software contracts in the Sichu an province of
China. The growth of our market share and increase in average revenue per contract has made it possible for us to take advantage of economies
of scale. We believe this increase in sales volume resulted, in part, fro m the Ch inese government ’s policy of imp roving safety and security in
the energy industry.

      General and Administrative Expenses . General and ad ministrative expenses increased 153.47%, or ¥5,935,728 ($868,292), from
¥3,867,763 ($565,785) in the nine months ended March 31, 2009 to ¥9,803,491 ($1,434,077) for the same period of 2010. General and
administrative expenses were 6.22% of total revenues in 2009 and 9.92% of total revenues in the first nine months of 2010. Th is percentage
increase was primarily attributable to an increase in audit fees, attorney fees, and IR expenses.

      Selling and Distribution Expenses . Selling and distribution expenses increased by 58.76%, fro m ¥ 4,760,272 ($696,343) fo r the nine
months ended March 31, 2009 to ¥7,557,188 ($1,105,482) for the same period of 2010. This increase resulted primarily fro m our business
expansion activities. As we continued to solidify our business relationships with other companies, we required extensive marketing efforts and
incurred the costs associated therewith. In order to successfully increase the scope of our client base, we established new local offices in
different areas of Ch ina. We expect that our selling and distribution expenses will correspondingly increase. Selling and dis trib ution expenses
were 7.66% of total revenues in the nine months ended March 31, 2009 and 7.65% of total revenues in the same period of 2010.

       Income fro m Operat ions . Income fro m operations was ¥25,465,690 ($3,725,178) fo r the nine months ended March 31, 2010, compared
to ¥15,935,107 ($2,331,023) fo r the same period of 2009, an increase of ¥9,530,583 ($1,394,155) o r 59.81%. This increase in income fro m
operations can be attributed primarily to the increase in sales volu me to CNPC and Sinopec. In spite of (i) the seasonality of our business,
(ii) our historical performance and (iii) the increase in expenses during the period, we recognized a significant increase in income fro m
operations.

      Subsidy Income . We receive grants fro m the local govern ment. For the nine months ended M arch 31, 2010, we received ¥1,178,034
($172,325) in subsidy income a decrease of 42.20% co mpared to ¥2,038,015 for the same period in 2009. These grants were given by the
government to support local software co mpanies ’ operation and research and development. Grants related to research and development projects
are recognized as subsidy income in the consolidated statements of operations when related expenses are recorded. This income typically
increases at the end of the year.

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       Provision for Income Taxes . Provision fo r income taxes for the nine months ended March 31, 2009 and 2010 were ¥3,481,115
($509,225) and ¥7,189,566 ($1,051,706), respectively. This resulted fro m our increased revenues from sales and our profitable operations. In
light of the fact that BHD began receiv ing the favorable tax rate of 15%, rather than the standard rate of 25% in 2010, we expect our effective
EIT rate to vary depending on which of our do mestic co mpanies generate greater revenues. An increased percentage of revenues from BHD or
Nanjing Recon will result in our effect ive rate moving closer to the 15% rate and away fro m the 25% rate of ENI.

      Income fro m Continuing Operations . As a result of the factors described above, income fro m continuing operations was ¥19,821,690
($2,899,561) for the nine months ended March 31, 2010, an increase of ¥5,469,480 ($800,088) o r 38.11% over the same period of 2009.

     Loss from Discontinued Operations . At the beginning of the fiscal year 2009, we co mpleted the sale of Inner Mongolia Adar Energy
Technology, Ltd. and Beijing Weigu Windows Co. which were both the majority -owned subsidiaries of BHD, as well as Xiamen Recon
Technology Development, Ltd., which was the majority -owned subsidiary of Nanjing Recon. In the second quarter of fiscal year 2009, we
determined that these three subsidiaries met the criteria for classificat ion as discontinued operations. The loss on the disp osal of these
subsidiaries and the financial results associated with the fiscal year 2009 and prio r periods are included in d iscontinued operations.

      Net Inco me Available for Ordinary Shareholders . As a result of the factors described above, net income availab le for ordinary
shareholders was ¥17,502,923 ($2,560,367) for the nine months ended March 31, 2010, an increase of ¥5,219,278 ($763,488) o r 42.49% over
the same period of 2009.

Li qui di ty and Capital Resources.
   General
       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 maturit ies of no more than three months. On March 31, 2010, we had cash and cash equivalents in the amount of
¥22,292,927 ($3,261,059). We believe that current cash, cash equivalents, anticipated cash flow fro m operations and the proceeds from our
initial public offering will be sufficient to meet our anticipated cash needs, including cash needs for working capital and c apital expenditures
for the remainder of the 2010 fiscal year. We expect that our plan to assume new larger, mo re capital intensive projects will req uire us to raise
additional funds in the future beyond those we currently possess.

        Indebtedness . As of March 31, 2010, except for ¥7,750,538 ($1,133,766) o f notes payable, we d id not have any other outstanding loan
capital issued or agreed to be issued, bank overdrafts, loans, debt securities or similar indebtedness, liens, liabilities un der acceptance (other
than normal t rade bills) or acceptance credits, debentures, mortgages, charges, finance leases or hire purchase commit ments, guarantees or
other material contingent liabilities. In addit ion, there has not been any material change in our indebtedness, commit ments a nd contingent
liab ilit ies since June 30, 2009.

       Holding Co mpany Structure . We are a holding co mpany with no operations of our own. All o f our operations are conducted through our
Chinese subsidiary. As a result, our ability to pay dividends and to finance any debt that we may incur is dependent upon dividends and other
distributions paid. In addition, Ch inese legal restrictions permit payment of dividends to us by our Chinese subsidiary only out of its
accumulated net profit, if any, determined in accordance with Ch inese accounting sta ndards and regulations. Under Chinese law, our subsidiary
is required to set aside a portion (at least 10%) of its after-tax net inco me (after d ischarging all cu mulated loss), if any, each year for
compulsory statutory reserve until the amount of the reserve reaches 50% of our subsidiaries ’ registered capital. These funds may be distributed
to shareholders at the time of its wind up. When we were incorporated in the Cay man Islands in August 2007, 5,000,000 o rdinar y shares were
authorized, and 50,000 ordinary shares were issued to Mr. Yin Shenping, Mr. Chen Guangqiang and Mr. Li Hongqi, at a par value of $0.01
each. On December 10, 2007, our co mpany sold 2,632 ordinary shares to an investor at an aggregate consideration of $200,000. On June 8,
2009, in connection with our init ial public offering, the Board o f Directors approved a 42.7840667 -to-1 split of o rdinary shares and redeemable
ordinary shares to shareholders of record as of such date. After giving effect to the share split and the complet ion of our initial public offering,
we had 3,951,811 ord inary shares outstanding.

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      Off-Balance Sheet Arrangements . We have not entered into any financial guarantees or other commit ments to guarantee the payment
obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to our own shares and classified
as shareholders’ equity, or that are not reflected in our financial statements. Furthermore, we do not have any retained or contingent interes t in
assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. Moreover, we do not have any
variable interest in an unconsolidated entity that provides financing, liquid ity, market risk or cred it support to us or engages in leasing, hedging
or research and development services with us.

     Capital Resources . To date we have financed our operations primarily through cash flows fro m financing operations. As of March 31,
2010 we had total assets of ¥170,620,753 ($24,958,785), o f wh ich cash amounted to ¥22,292,927 ($3,261,059), and net accounts receivable
amounted to ¥87,749,487 ($12,836,191). Working capital amounted to ¥113,795,633 ($16,646,280) and shareholders ’ equity amounted to
¥115,300,700 ($16,866,444). The current ratio equaled 3.06, up fro m 1.90 at June 30, 2009.

      Cash fro m Operating Activit ies . Net cash used in operating activities was ¥41,506,878 ($6,071,719) in the nine months ended March 31,
2010. Co mpared to the cash amount used in the operating activities for the nine months ended March 31, 2009, th is was an incr ease of
¥38,642,241 ($5,652,673) or 1,348.94%. Th is increase was driven by (i) an increase in trade accounts receivable and (ii) the purchase of goods
paid for in advance. The increase of receivables reflects the seasonal nature of our business. Our receivables typically increase in the first half
calendar year, and we typically receive payments near the end of the calendar year, decreasing receivables. The reason for th is seasonality is
that most of our customers are Chinese state-owned companies and their payment of purchase follows the national budget, which only allo ws
allocation to the operating oil field subsidiaries after Ju ly. If our customers ’ budget cycles were to change, our seasonality would likewise be
affected.

       The increase in receivables was primarily due to an increase in business contracts in fiscal 2009 and the first nine months of fiscal 2010.
The increase in inventory purchased in advance was due to hardware purchases. The increase in accounts payable and accrued liabilit ies was
due to increased purchases of raw materials and other goods. To protect our liquidity, we seek to pay our suppliers as shortly before payments
are due as practicable. Both changes in account receivables and payables reflect the seasonal nature of our business. Our rev enue has been
subject to high seasonality and the revenue recognized in the first quarter is usually the smallest in proportion to that for the whole year in most
cases, due to our clients’ budgeting and planning schedule. Nevertheless, we continued to experience steady demand for our services fro m our
oil industrial client base.

      Cash fro m Investing Activities . Net cash used in investing activities was ¥370,842 ($54,248) fo r the nine months ended March 31, 2010,
a decrease of ¥1,767,051 ($258,488) co mpared to the same period in 2009. Th is decrease in cash used in investing activities was primarily due
to accounts payable that were written off through agreements to offset credits and debts against one another.

     Cash fro m Financing Activit ies . Cash flows provided by financing activ ities amounted to ¥61,471,426 ($8,992,178) for the nin e months
ended March 31, 2010 and cash flows provided by financing activities amounted to ¥2,016,032 ($294,910) for the nine months ended
March 31, 2009. Our financing activities during this period included receipt of proceeds fro m our IPO.

     Working Capital . Total current assets at March 31, 2010 amounted to ¥169,115,685 ($24,738,621), an increase of appro ximately
¥93,889,863 ($13,734,419) co mpared to ¥75,225,822 ($11,004,201) at June 30, 2009. The increase was attributable mainly to an increase in the
amount of trade receivables resulting fro m h igher revenues, increased inventories and our IPO.

      Current liab ilit ies amounted to ¥55,320,053 ($8,092,341) at March 31, 2010, in co mparison to ¥39,594,476 ($5,791,969) at June 30,
2009. Th is increase is attributable to an increase in the number of pro jects we have undertaken and our need to order materia ls for those
projects. Also, taxes payable increased significantly, and if we paid that amount at the end of 2009, our wor king capital might have been
affected negatively. In addition, contracts signed during this period featured more guaranteed amounts. The deferred inco me a lso increased,
leading to an increase of current liab ilities.

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     The current ratio increased fro m 1.90 at June 30, 2009 to 3.06 at March 31, 2010. The change in our current ratio was primarily due to the
IPO. We believe that this changing trend in the current ratio indicates strong o perating liquidity for us.

   Recently Enacted Accounting Standards
      In December 2007, the Financial Accounting Standards Board (―FASB‖) issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements – an amendment of ARB No. 51 (ASC Topic 810), wh ich changes the accounting and reporting for minority interests.
Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parent’s
equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In
addition, net income attributable to the noncontrolling interest will be included in net income and, upon a loss of control, the int erest sold, as
well as any interest retained, will be recorded at fair value with any gain or loss recognized in net inco me. SFAS No. 160 is effec tive for the
Co mpany beginning July 1, 2009, and will apply prospectively, except for the presentation and disclosure requirements, which will apply
retrospectively. The Co mpany believes the adoption of SFAS No. 160 will not have a material impact on the financial statemen t s.

      In December 2007, the FASB issued SFAS No. 141(R) (ASC Topic 805), Business Combinations , which replaces SFAS No. 141 (ASC
Topic 805). The statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (pre viously
referred to as the purchase method of accounting) be used for all business combinations, but requires a numbe r of changes, including changes
in the way assets and liabilities are recognized as a result of business combinations. It also requires the capitalization of in-process research and
development at fair value and requires the expensing of acquisition -related costs as incurred. In April 2009, the FASB issued FSP FAS
141(R)-1 (ASC Topic 805-10) which amends SFAS No. 141(R) (ASC Topic 805) by establishing a model to account for certain pre -acquisition
contingencies. Under the FSP, an acquirer is required to recognize at fair value an asset acquired or a liability assumed in a business
combination that arises fro m a contingency if the acquisition -date fair value of that asset or liability can be determined during the measurement
period. If the acquisition-date fair value cannot be determined, then the acquirer should follow the recognition criteria in SFAS No. 5,
Accounting for Contingencies , and FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Loss – an interpretation of FASB
Statement No. 5 . SFAS No. 141(R) (ASC Topic 805) and FSP FAS 141(R)-1 (ASC Topic 805-10) are effective for us beginning July 1, 2009,
and will apply prospectively to business combinations completed on or after that date. The impact of the adoption of SFAS No. 141(R) (ASC
Topic 805-10) and FSP FAS 141(R)-1 (ASC Topic 805-10) will depend on the nature of acquisitions completed after the date of adoption.

      In December 2008, the FASB issued FSP 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of
Financial Assets and Interests in Variable Interest Entities (ASC Topic 860), wh ich pro mptly improves disclosures by public companies until
the pending amendments to SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
(ASC Topic 860) and FIN No. 46, Consolidation of Variable Interest Entities (revised December 2003)—an interpretation of ARB No. 51 (FIN
46(R)) (ASC Topic 810), are finalized and approved by the FASB. The FSP amends SFAS No. 140 to re quire public companies to provide
additional disclosures about transfers of financial assets and variable interests in qualifying special-purpose entities. It also amends FIN 46(R)
to require public co mpanies to provide additional d isclosures about their involvement with variable interest entities. This FSP is effective for
reporting periods ending after December 15, 2008. The Co mpany is currently assessing the effect of SFAS 140-4 (ASC Topic 860-10) and FIN
46(R)-8 (ASC Topic 810-10) on its consolidated financial position and results of operations.

     In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) , which is effective for the Co mpany
beginning July 1, 2010. This Statement amends Financial Accounting Standards Board Interpretation (―FIN‖) No. 46(R), Consolidation of
Variable Interest Entities an interpretation of ARB No. 51 , to require revised evaluations of whether entities represent variable interest entities,
ongoing assessments of control over such entities, and additional disclosures for variable interests. The Co mpany believes th e adoption of this
pronouncement will not have a material impact on the financial statements.

     In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles or SFAS No. 168. SFAS No. 168 (ASC Topic 105) will

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become the single source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, A merican Institute of Cert ified Public
Accountants (AICPA), Emerg ing Issues Task Force (EITF), and related accounting literature. SFAS No. 168 (ASC Top ic 105) reorganizes the
thousands of GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure. Also inclu ded is
relevant SEC guidance organized using the same topical structure in separate sections. SFAS No. 168(ASC Topic 105) will be effective fo r
financial statements issued for reporting periods ending after September 15, 2009. Th is will have an impact on the Co mpany ’s financial
disclosures since all future references to authoritative accounting literature will be references in accordance with SFAS No. 168.

     In June 2009, the FASB issued Accounting Standards Update No. 2009-01, ―Generally Accepted Accounting Principles ‖ (ASC Topic
105) wh ich establishes the FASB Accounting Standards Codification (―the Codification‖ or ―ASC‖) as the official single source of
authoritative U.S. generally accepted accounting principles (―GAAP‖). A ll existing accounting standards are superseded. All other accounting
guidance not included in the Codification will be considered non-authoritative. The Codificat ion also includes all relevant Securit ies and
Exchange Co mmission (―SEC‖) guidance organized using the same topical structure in separate sections within the Codificatio n.

     Following the Codification, the FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emergin g Issues
Task Force Abstracts. Instead, it will issue Accounting Standards Updates (―ASU‖) which will serve to update the Codification , provide
background information about the guidance and provide the basis for conclusions on the changes to the Codificat ion.

      The Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is
effective fo r our third-quarter 2009 financial statements and the principal impact on our financial statements is limited to disclosures as all
future references to authoritative accounting literature will be referenced in accordance with the Codification. In order to ease the transition to
the Codification, we are p roviding the Codificat ion cross -reference alongside the references to the standards issued and adopted prior to the
adoption of the Codification.

      In 2006, the FASB issued SFAS No. 157, ―Fair Value Measurements ‖ (ASC Topic 820) wh ich defines fair value, establishes a
market-based framework or h ierarchy for measuring fair value and expands disclosures about fair value measurements. This guidance is
applicable whenever another accounting pronouncement requires or permits assets and liabilit ies to be measured at fair value. It does not
expand or require any new fair value measures; however the application of this statement may change current practice. We adop ted this
guidance for financial assets and liabilities effective January 1, 2008 and for non financial assets and liabilities effective January 1, 2009. The
adoption, which primarily affected the valuation of our derivative contracts, did not have a material effect on our financial condition or results
of operations.

      In April 2009, the FASB issued the following updates that provide additional application guidance and enhance disclosures reg arding fair
value measurements and impairments of securities:

        •    FAS 157-4, ―Determin ing Fair Value When the Volu me and Level of Activ ity for the Asset or Liability Have Significantly
             Decreased and Identifying Transactions That Are Not Orderly ‖ (ASC Topic 820-10-65). This update relates to determin ing fair
             values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms the need to
             exercise judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets ha ve
             become inactive.
        •    FAS 115-2 and FAS 124-2, ―Recognition and Presentation of Other-Than-Temporary Impairments ‖ (ASC topic 320-10-65). This
             update applies to investments in debt securities for which other-than-temporary impairments may be recorded. If an entity’s
             management asserts that it does not have the intent to sell a debt security and it is more likely than not that it will not have to sell
             the security before recovery of its cost basis, then an entity may separate other-than-temporary impairments into two components:
             1) the amount related to credit losses (recorded in earnings) and 2) all other amounts (recorded in Other co mprehensive income).

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        •    FAS 107-1 and APB 28-1, ―Interim Disclosures about Fair Value of Financial Instruments ‖ (ASC Topic 320-10-65). This update
             requires fair value d isclosures for financial instruments that are not currently reflected on the balance sheet at fair value on a
             quarterly basis.

     We adopted these updates effective June 30, 2009 and the adoption did not have a material effect on our financial condition or results of
operations.

       In August 2009, FASB issued ASU No. 2009-05 wh ich amends Fair Value Measurements and Disclosures – Overall (ASC Top ic 820-10)
to provide guidance on the fair value measurement of liabilities. This update requires clarification for circu mstances in which a quoted price in
an active market for the identical liability is not available, and a reporting ent ity is required to measure fair value using one or more of the
following techniques: 1) a valuation technique that uses either the quoted price of the identical liability when traded as an asset or quoted prices
for similar liabilit ies or similar liab ilit ies when traded as an asset; or 2) another valuation technique that is consistent with the principles in ASC
Topic 820 such as the income and market approach to valuation. The amendments in this update also clarify that when estimatin g the fair value
of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existe nce of a restriction
that prevents the transfer of the liability. This update further clarifies that if the fair value of a liab ility is determined by reference to a quoted
price in an active market for an identical liability, that price would be considered a Level 1 measurement in the fair value h ierarchy. Similarly,
if the identical liability has a quoted price when traded as an ass et in an active market, it is also a Level 1 fair value measurement if no
adjustments to the quoted price of the asset are required. Th is update is effective for our fourth quarter 2009.

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                                                                  OUR B US INESS

General
      We are a provider of co mputer software and hardware solutions to companies in the petroleum mining and extraction industry. W e
provide services designed to automate and enhance the extraction of petro leu m in Ch ina. To this end, the Do mestic Co mpanies and we have
developed specialized software and hardware to manage the oil ext raction process in real-t ime and to reduce the costs associated with
extraction.

       We believe that one of the most important advancements in China’s petroleu m industry has been the automation of significant segments
of the exploration and ext raction process. The Do mestic Co mpanies ’ and our automation products and services allow petroleu m min ing and
extraction co mpanies to reduce their labor requirements and improve the productivity of oil fields. The Do mestic Co mpanies ’ and our solutions
allo w our customers to locate productive oil fields more easily and accurately, imp rove control over the extraction process, increase oil yield
efficiency in tert iary stage oil recovery, and improve the transportation of crude oil through the mining process.

Market B ackground
      China is the world’s second-largest consumer of petroleu m products, third-largest importer of petro leu m and sixth-largest producer of
petroleum. In the last twenty years, China’s demand for o il has more than tripled, wh ile its production of oil has only modestly increased.
China became a net importer o f petroleu m in 1983, and, as a result, o il production in Ch ina has been aimed at meeting domestic requirements.
The oil industry in Ch ina is dominated by three state-owned holding companies: China National Petroleu m Corporation (CNPC), China
Petroleu m and Chemical Corporation (Sinopec) and China National Offshore Oil Corporat ion (CNOOC). Foreign companies have also recently
become involved in Ch ina’s petroleum industry; however, according to Chinese law, China’s national o il co mpanies may take a majority (or
minority) stake in any co mmercial discovery. As a result, the number of majo r foreign co mpanies involved in the industry is relat ively limited:
Agip, Apache, BP, ChevronTexaco, ConocoPhillips, Eni, ExxonMobil, Husky Energy, Kerr-McGee, M itsubishi, Royal Dutch Shell, Saudi
Aramco, and Total.

       In the past, China’s petroleum co mpanies mined for petro leu m by leveraging its abundance of inexpensive labor, rather than fo cusing on
new technologies. For examp le, a typical, traditional oil field with an annual capacity o f 1,000,000 tons would require between 10,000 and
20,000 laborers. By contrast, when Baker CAC products were emp loyed to exp lore and automate Cainan Oil Field, a desert oil field in
Xin jiang, annual capacity fo r the field reached 1,500,000 tons. Moreover, only 400 emp loyees were required to manage the oil field. After the
introduction of Baker CA C’s products into China’s petroleum industry, Chinese companies have also sought to provide automation solutions.

       In the primary oil recovery stage, oil pressure in an oil reservoir may be h igh enough to force oil to the surface. Approximately 20% of o il
may be harvested at this stage. The secondary oil recovery stage accounts for another 5% to 15% of o il recovery and involves such efforts as
pumps to extract petroleu m and inject ion of water, natural gas, carbon dio xide or other gasses into the oil reservoir to fo rce oil t o the surface.
Most oil fields in China have now entered into the tertiary stage of oil recovery, at which oil extraction beco mes increasing ly difficult and
inefficient. Tertiary recovery generally focuses on decreasing oil viscosity to make extraction easier and accounts for betwe en 5% and 15% of
oil recovery. Our efforts in tertiary recovery focus on reducing water content in crude oil in order to make extraction more efficient.

China’s Economic Development
      China’s population of appro ximately 1.3 billion people is expected to grow by roughly 9 million people per year. The country’s gross
national product has grown at a rate of appro ximately 9 percent for more than 25 years, making it the fastest growth rate for a major econo my
in recorded history. In the same 25 year period, China has moved more than 300 million people out of poverty and quadrupled the average
Chinese person’s income. The tremendous potential of this market is noted by the fact that 400 of the world’s largest 500 co mpanies are
investing in China.

      China’s economy experienced overall gro wth of only 8.7% in 2009, its lowest growth rate in eight years, down fro m gro wth rat es of 9.6%
in 2008 and 13% in 2007. The g lobal financial crisis has significantly decreased

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demand for Ch inese exports, resulting in factory closures and losses of millions of jobs. This 8.7% g rowth rate is well above the 7. 2% rate
predicted by the World Bank and also exceeds the 8% rate the Chinese government had predicted and said would be necessary to avoid
significant further job losses. While China’s growth rate has fallen, Ch ina’s growth rate remains well above the World Bank’s forecast for
decline of 1.5% for the world econo my in 2009.

Our Products
      Recon-JN, through the Domestic Co mpanies, provides services designed to automate and enhance the extraction of petroleu m in China.
To this end, the Domestic Co mpanies and we have developed our own specialized software and hardware to manage the oil ext ract ion process
in real-t ime and to reduce the costs associated with extraction. We derive the majority of our revenues from the license and imp lementation of
software applications and hardware innovations for the Chinese petroleum industry. These products and services include:

        •    RSCADA . RSCADA is Nanjing Recon’s industrial co mputerized process control system for mon itoring, managing and controlling
             petroleum extraction. RSCADA integrates the underground, ground and above -ground levels of the petroleum extract ion industry.
             RSCADA connects the above-ground level central control roo m with the ground level relay station and the relay station with the
             underground bottom intelligent terminal using the 2.4G wireless frequency. RSCADA has received grants and awards from the
             State Ministry of Sc ience and Technology and the city of Nanjing.
        •    Oil Field Water Finding/Blocking Technology . BHD has developed and imp lemented technology designed to find and block water
             content in petroleum. As China ’s extraction of o il has increased, the quantity of available o il has decreased and the water content in
             remain ing oil has increased. In order to imp rove efficiency and profitability in extraction, BHD has developed technology to
             reduce the amount of water in its clients ’ extracted petroleu m.
        •    High-Efficiency Heating Furnaces . Crude petroleu m contains certain impurities that must be removed before the petroleum can be
             sold, including water and natural gas. To remove the impurities and to prevent solidification and blockage in transport pipes ,
             companies employ heating furnaces. BHD researched, developed and imp lemented a new oil field furnace that is advanced, highly
             automated, reliable, easily operable, co mparatively safe and highly heat efficient (90% efficiency).

        •    Multi-Purpose Fissure Shaper . BHD has also developed a multipurpose fissure shaper to improve its ability to test for and ext ract
             petroleum. Before any petroleu m extractor can test for the presence of oil, it must first perforate a hole for testing. The d epth of the
             perforated hole is, of course, ext remely important in the testing process: a hole that is too shallow may cause an extractor to miss
             an oil field entirely. BHD has developed a proprietary multipurpose fissure shaper that is used with the perforating gun to
             effectively increase the perforation depth by between 46% and 80%, shape a great number of stratum fissures, improve the stratum
             diversion capability and, as a result, improve our ability to locate oil fields and increase the output of oil wells.
        •    Acoustic pipeline monitoring system . Nan jing Recon’s acoustic oil and gas pipeline safety monitoring system has been widely
             used by Sinopec. We are also cooperating with Sinopec to implement our solutions in imports instrumentation, the introduction of
             equipment and oilfield chemical additives.

ISO9000 Certification
       We have received ISO9000 certifications for several of our processes. The International Organizat ion for Standardization cons ists of a
world wide federation of national standards bodies for approximately 130 countries, and the ISO9000 certification represen ts an international
consensus of these standards bodies, with the aim of creating global standards of product and service quality. We have receiv ed ISO9000
certification for the following:
        •    Nanjing Recon has received certification for the developmen t and service of RSCA DA.

        •    ENI has received certification fo r the distribution service of instruments, valves, transformat ion and transmission apparatus ,
             electro mechanical equip ment, and a p ipeline leak hunting system with sound wave for o il fields and oil field assistant agents.
        •    BHD has received certification for high efficiency heating furnaces, import burners, and mano meter surrogate rendition and
             service.

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Customers
     We have provided services to Sinopec and CNPC, the two major Chinese state -owned companies responsible for on-shore petroleum
mining and extract ion. We have conducted automation projects for plants in three of Ch ina ’s four highest producing oil fields, Daqing, Shengli
and Xinjiang. We have undertaken the automation projects at the following locations, among others:

   Sinopec

        •    Jiangsu Oil Field
        •    Shengli Oil Field
        •    Xin jiang Oil Field

        •    Zhongyuan Oil Field
        •    Sichuan Oil Field
        •    Jianghan Oil Field

        •    Puguang Oil Field

     We provide products and services to Sinopec under a series of agreements, each of wh ich is terminable without notice. We firs t began to
provide services to Sinopec in 1998. Sinopec accounted for approximately 33.84% and 49.02% of our revenues in 2008 and 2009, respectively,
and any termination of our business relationships with Sinopec would materially harm our operations.

   CNPC

        •    Huatugou Oil Field
        •    Qinghai Oil Field

        •    Sebei Gas Field
        •    Lu liang Oil Field
        •    Tuha Oil Field

        •    Daqing Oil Field
        •    Jidong Oil Field

     We provide products and services to CNPC under a series of agreements, each of wh ich is terminable without notice. We first began to
provide services to CNPC in 2000. CNPC accounted for approximately 59.82% and 43.11% of our revenues in 2008 and 2009, respec tively,
and any termination of our business relationships with CNPC would materially harm our ope rations.

Our Strengths
        •    Safety of products . The automation projects we have conducted have demonstrated that our products are reliable, safe and
             effective at automat ing the petroleum extraction process.

        •    Efficiency of technology . We believe our technology increases efficiency and profitability for petroleu m co mpanies by enabling
             them to monitor, manage and control petroleum extract ion; increase the amount of petroleum ext racted and reduce impurities in
             extracted petroleum.
        •    Ability to leverage our knowledge of Chinese business culture. Many of our competitors are based outside of China. As the
             Do mestic Co mpanies are based in China, we are in a unique position to emphasize Chinese culture and business knowledge to
             obtain new customers and new agreements with existing customers. We believ e that many Ch inese businesses, including
             state-owned companies like Sinopec and CNPC, would prefer to hire a Chinese company to assist in their business operations if a
             Chinese company exists with the ability to fulfill their needs on a timely and cost -efficient basis. In addition, our knowledge of
             Chinese culture allows us to anticipate and adapt to Chinese oil field management methods. We provide our software solutions in
             Mandarin for the benefit of our Chinese customers, and all of our customer support is available fro m fluent personnel.

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        •    Experienced, successful executive management team . Our executive management team has significant experience and success in
             the petroleum automat ion industry. They will be able to draw on their knowledge of the industry and their relationships in th e
             industry.

        •    Ability to leverage China’s cost structure . As a Chinese company, we believe we can operate our business more cost effectively
             because all of our employees, operations and assets are located in China, resulting in lower labor, development, manufacturin g and
             rent costs than we believe we would incur if we also maintained operations abroad. We expect these costs savings will be reflected
             in lo wer costs to our customers for co mparable products.
        •    Ownership of our intellectual property . Because we own our intellectual p roperty, we are able to avoid licensing fees or
             contravening licensing agreements.

Our Strategies
      Our goal is to help our customers improve their efficiency and profitability by providing them with software and hardware solutions and
services to improve their ability to locate productive oil reservoirs, manage the oil ext raction process, reduce extraction costs, and enhance
recovery fro m extraction activ ities. Key elements of our strategies include:
        •    Increase our market share in China . We believe that as the Chinese economy and oil industry continue to develop, Chinese
             petroleum extraction automat ion companies will co mpete with international businesses at an increasing rate. Consequently, we
             believe we will have opportunities to take market share fro m foreign companies by developing positive business relationships in
             China’s petroleu m min ing and extraction industry. We will also use strategic advertisements, predominantly in China ’s northeast
             and northwest, where China’s major oil fields are located, to increase our brand awareness and market penetration. We will
             continue to develop new technologies designed to imp rove petroleum mining and extraction efficiency and profitability for our
             customers.

        •    Focus on higher-profit subsection of market . While we plan to continue to provide services to all of our clients, we believe that we
             may improve our profit margins by focusing a higher portion of our advertising and promotions at those sub -divisions of our
             industry that have traditionally held the highest profit margins.
        •    Offer services to foreign oil fields contracted by Chinese petroleum companies . As Sinopec and CNPC continue to invest in oil
             fields in other countries, we will focus on offering our services in these new locations based on our success in working with the
             companies in China.
        •    Seek opportunities with foreign companies in China . Even where oil fields in China are partially operated by foreign companies, a
             significant number of emp loyees will be Ch inese and will benefit fro m our Ch inese -language services. We believe our hardware
             and software solutions would be beneficial to any petroleum co mpany doing business in China and will continue to market to
             foreign co mpanies entering the Chinese market.

        •    Provide services that generate high customer satisfaction levels . Ch inese companies in our market are strongly influenced by
             formal and informal referrals. We believe that we have the opportunity to expand market share by providing high levels of
             customer satisfaction with our current customers, thereby fostering strong customer referrals to support sales activities.

Competiti on
      We face competit ion fro m a variety of foreign and domestic co mpanies involved in the petroleu m mining automat ion industry. Wh ile we
believe we effectively co mpete in our market, our co mpetitors hold a substantial market share .

      A few of our existing competitors, as well as a number of potential new co mpetitors, have significantly greater financial, te chnical,
market ing and other resources than we do, wh ich could provide them with a significant co mpetitive advantage over us. We cannot guarantee
that we will be ab le to compete successfully against our current or future co mpetitors in our industry or that competition wi ll not have a
material adverse effect on our business, operating results and financial condition.

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      Our primary domestic co mpetitors include the fo llo wing:

        •    Beijing Satellite Science & Technology Co., Ltd . (―BSS‖). BSS has been retained to provide RSCADA system integrations for
             platforms at Shengli Oil Field at sea.
        •    Beijing Echo Technologies Development Co ., Ltd. (“BET”) . BET provides a co mbination of software and hardware products for
             industrial automatic control systems in the petroleu m industry. BET currently engages in research and development of software
             and hardware applied to industrial automatic control systems, manufacturing and installation of industrial automat ion instrumen ts
             and integration of automatic control products.
        •    Beijing Golden-Time Petroleum Measurement Technology Co., Ltd. ( “BGT”) . BGT develops analysis software used in oil fields
             but does not yet, to our knowledge, produce a substantial amount of hardware products.

        •    Jinan GigaNano Industry Co., Ltd. (“JGI”) . JGI has developed a ratio monitoring system to provide real t ime measurement an d
             recording of oil extraction operating parameters.

      Our primary foreign competitors include the following:
        •    Schlumberger Limited (“Schlumberger”). Schlumberger is an oilfield services provider for o il and gas companies around the
             world. Sch lu mberger recently launched a family of mult istage fracturing and complet ion services, which have integrated
             stimulat ion technologies.
        •    Baltur Technologie Per IL Clima (“Baltur”) . Baltur designs advanced products for the high performance burner, boiler and air
             conditioning markets.

        •    Honeywell International, Inc. (“Honeywell”). Honeywell p rovides diversified products and services including aerospace products
             and services, control technologies for buildings, homes and industry, automotive products, turbochargers, and specialty mater ials.
        •    Emerson Process Management (“Emerson”) . Emerson is a global supplier of products, services, and solutions that measure,
             analyze, control, automate, and improve process -related operations.
        •    Rockwell Automation, Inc. (“Rockwell”) . Rockwell provides industrial automat ion power, control and informat ion solutions to a
             wide range of industries. Rockwell provides both stand-alone, industrial co mponents and enterprise-wide integrated systems.

Research and Development
      We focus our research and development efforts on improving our development efficiency and the quality of our products and services. As
of June 8, 2010, our research and development team consisted of six experienced engineers, developers and programmers. In add ition, some of
our support employees regularly part icipate in our research and development programs.

     In the fiscal years ended June 30, 2009 and 2008, respectively, we spent ¥420,166 ($61,516) and ¥101,288, respectively, on research and
development activities.

Intellectual Property
      Our success and competitive position is dependent in part upon our ability to develop and maintain the proprietary aspect of our
technology. The reverse engineering, unauthorized copying, or other misappropriation of our technology could enable third par ties to benefit
fro m our technology without paying for it. We rely on a co mb ination of trademark, trade secret, copyright law and contractual restrictions to
protect the proprietary aspects of the Domestic Co mpanies ’ and our technology. We seek to protect the source code to the Domestic
Co mpanies’ and our software, documentation and other written materials under trade secret and copyright laws. While we actively take steps to
protect the Domestic Co mpanies ’ and our proprietary rights, such steps may not be adequate to prevent the infringement or misappropriation of
the Domestic Co mpanies’ and our intellectual property. Th is is particularly the case in China where the laws may not protect our proprietary
rights as fully as in the United States.

      We license the Do mestic Co mpanies ’ and our software products under signed license agreements that impose restrictions on the
licensee’s ability to utilize the software and do not permit the re-sale, sublicense or other transfer of the software. Finally, we seek to avoid
disclosure of the Domestic Co mpanies ’ and our intellectual property by requiring employees and independent consultants to execute
confidentiality agreements.

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      Although the Domestic Co mpanies and we develop our software products, each is based upon middleware developed by third partie s. We
integrate this technology, licensed by our customers fro m third parties in our software products. If our customers are unable to continue to
license any of this third party software, or if the third party licensors do not adequately maintain or update their products , we would face delays
in the releases of our software until equivalent technology can be identified, licensed or d eveloped, and integrated into our software products.
These delays, if they occur, could harm our business, operating results and financial condition.

        There has been a substantial amount of litigation in the software industry regarding intellectual property rights. It is poss ible that in the
future third parties may claim that our current or potential future software solutions infringe their intellectual property. We expect that software
product developers will increasingly be subject to infringement claims as the number of products and competitors in our indus try segment
grows and the functionality of products in different industry segments overlap. In a ddition, we may find it necessary to initiate claims or
lit igation against third parties for infringement of our proprietary rights or to protect our trade secrets. Although the Domestic Companies and
we may d isclaim certain intellectual property representations to our customers, these disclaimers may not be sufficient to fully protect us
against such claims. Any claims, with or without merit, could be time consuming, result in costly litigation, cause product s hipment delays or
require the Do mestic Co mpanies and us to enter into royalty or license agreements. Royalty or licensing agreements, if required, may not be
available on terms acceptable to us or at all, which could have a material adverse effect on our business, operating results and financial
condition.

      Our standard software license agreements contain an infringement indemn ity clause under which we agree to indemnify and hold
harmless our customers and business partners against liability and damages arising fro m claims of various copyright or other intellectual
property infringement by the Do mestic Co mpanies ’ and our products. We have never lost an infringement claim and our costs to defend such
lawsuits have been insignificant. Although it is possible that in the future third parties may claim that our current or potential fu ture software
solutions or we infringe on their intellectual p roperty, we do not currently expect a significant impact on our business, ope rating results, or
financial condition.

    We market our products under the following tradema rks wh ich are registered with the PRC Trademark Bureau under the State
Admin istration for Industry and Commerce. We currently own or have applied for the following trademarks:

      1. Trademark of ―Senior‖ valid fro m May 14, 2005 until May 13, 2015;

      2. Trademark of ―BHD‖ valid fro m November 7, 2003 to November 6, 2013;

     3. We have submitted the trademark applicat ion of ―Recon‖ on August 17, 2009. The application was accepted by the PRC Trademark
Bureau and is currently under rev iew process. We anticipate the approval may be granted in the first half year of 2012.

     We own the follo wing eight patents registered with the State Intellectual Property Office wh ich are applied on our automated services
products for the petroleum extraction industry:

      1. Patent of eccentric water distributor valid until February 8, 2011;

      2. Patent of oilfield wastewater degreasing treatment plant valid until May 15, 2013;

      3. Patent of fracturing packer valid until August 5, 2018;

      4. Patent of pressure phase transition furnace valid until June 3, 2019;

      5. Patent of vacuum fu rnace phase transition valid until August 5, 2019;

      6. Patent of heavy oil pipeline valid until June 17, 2015;

      7. Patent of automatically ad justing negative pressure burner valid until July 22, 2019; and

      8. Patent of wireless data instrument diagram valid until December 10, 2018;

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      We have registered the following software p roducts with the State Intellectual Property Office:

      1. Recon flow control co mputer monitoring system software was registered and published on February 8, 2008;

      2. Recon SCADA field mon itoring and data acquisition system software version 2 was published on August 18, 2003, and version 3 was
registered and published on April 5, 2008.

Litigation
      Fro m t ime to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of bu siness.
However, litigation is subject to inherent uncertainties, and an adverse result in the se or other matters may arise fro m time to time that may
harm our business. We are currently not aware of any such pending or threatened legal proceedings, claims, regulatory inquiries or
investigations that we believe will have a material adverse affect o n our business, financial condition or operating results.

Environmental Matters
      We have not incurred material expenses in connection with co mpliance with Ch inese environmental laws and regulations. We do n ot
anticipate expending any material amounts for such compliance purposes for the remainder o f our current or succeeding fiscal year.

China’s Intellectual Property Rights Enforcement System
       In 1998, China established the State Intellectual Property Office (―SIPO‖) to coordinate Ch ina’s intellectual property enforcement efforts.
SIPO is responsible for g ranting and enforcing patents, as well as coordinating intellectual property rights related to copyr ights and trademarks.
Protection of intellectual property in Ch ina follows a t wo-track system. The first track is ad min istrative in nature, whereby a holder of
intellectual property rights files a comp laint at a local ad min istrative office. Determining wh ich intellectual property agen cy can be confusing,
as jurisdiction of intellectual property matters is diffus ed throughout a number of government agencies and offices, with each typically
responsible for the protection afforded by one statute or one specific area of intellectual p roperty -related law. The second track is a judicial
track, whereby co mplaints are filed through the Chinese court system. Since 1993, Ch ina has maintained various intellectual property tribunals.
The total volume o f intellectual property related litigation, however, remains small.

       Although there are differences in intellectual property rights between the United States and China, of most significance to our company is
the inexperience of Ch ina in connection with the development and protection of intellectual property rights. Similar to the U n it ed States, China
has chosen to protect software under copyright law rather than trade secrets, patent or contract law. As such, we will attempt to protect our
most significant intellectual property pursuant to Chinese laws that have only recently been adopted. Unlike the United State s, which has
lengthy case law related to the interpretation and applicability of intellectual property law, Ch ina has a less developed body of r elevant
intellectual property case law.

Regulati on on Software Products
      On March 1, 2009, the M inistry of Industry and Informat ion Technology of China issued the Administrative Measures on Software
Products, or the Software Measures, which became effective as of April 10, 2009, to strengthen the regulation of software pro ducts and to
encourage the development of the Chinese software industry. Under the Software Measures, a software developer must have all s oftware
products imported into or sold in Ch ina tested by a testing organization supervised by the Ministry of Industry and Information Technology.
The software industry authorities in provinces, autonomous regions, municipalities and cities with independent planning are in charge of the
registration, report and management of software p roducts. Software products can be registe red for five years, and the registration is renewable
upon expirat ion. Although Nanjing Recon’s current software products were registered in 2008, there can be no guarantee that the registration
will be renewed in 2013 or that the Domestic Co mpanies ’ and our future products will be registered.

Regulati on of Intellectual Property Rights
     China has adopted legislation governing intellectual property rights, including trademarks and copyrights. China is a signato ry to the
main international conventions on intellectual property rights and became a member of the Agreement on Trade Related Aspects of Intellectual
Property Rights upon its accession to the WTO in December 2001.

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      Copyright . China adopted its first copyright law in 1990. The Nat ional People ’s Congress amended the Copyright Law in 2001 to widen
the scope of works and rights that are elig ible for copyright protection. The amended Copyright Law extends copyright protect ion to software
products, among others. In addition, there is a voluntary registration system ad min istered by the China Copyright Protection Center. Unlike
patent and trademark reg istration, copyrighted works do not require registration for p rotection. Prote ction is granted to individuals fro m
countries belonging to the copyright international conventions or bilateral agreements of which China is a member. Nanjing Re con has two
copyrights for software programs.

       Trademark . The Ch inese Trademark Law, adopted in 1982 and rev ised in 1993 and 2001, protects registered trademarks. The Trademark
Office under the Chinese State Admin istration for Industry and Commerce handles trademark reg istrations and grants a term of ten years to
registered trademarks. Trademark license agreements must be filed with the Trademark Office for record. China has a ―first-to-register‖ system
that requires no evidence of prior use or ownership. The Do mestic Co mpanies and we have registered a number of product names with the
Trademark Office.

Regulati ons on Foreign Exchange
      Foreign Currency Exchange . The principal regulations governing foreign currency exchange in China are the Foreign Exchange
Admin istration Regulations (1996), as amended, and the Admin istration Rules of the Settlement, Sale and Pay ment of Foreign Exchange
(1996). Under these regulations, Renminbi are freely convertible for current account items, including the distribution of div idends, interest
payments, trade and service-related foreign exchange transactions, but not for most capital account items, such as direct investment, loan,
repatriation of investment and investment in securities outside China, unless the prior approval of SAFE o r its local counter parts is obtained. In
addition, any loans to an operating subsidiary in China that is a foreign invested enterprise, cannot, in th e aggregate, exceed the difference
between its respective approved total investment amount and its respective approved registered capital amount. Furthermo re, a n y foreign loan
must be registered with SAFE or its local counterparts for the loan to be effect ive. Any increase in the amount of the total investment and
registered capital must be approved by the PRC Min istry of Co mmerce o r its local counterpart. We may not be able to obtain these government
approvals or registrations on a timely basis, if at all, which could result in a delay in the process of making these loans.

      The dividends paid by the subsidiary to its shareholder are deemed shareholder inco me and are taxab le in China. Pursuant to the
Admin istration Rules of the Settlement, Sale and Pay ment of Fo reign Exchange (1996), fo reign-invested enterprises in China may purchase or
remit foreign exchange, subject to a cap approved by SAFE, for settlement of current account transactions without the approva l of SAFE.
Foreign exchange transactions under the capital account are still subject to limitations and require approvals fro m, or reg istration with, SAFE
and other relevant PRC govern mental authorities.

      Regulation of Dividend Distribution . The principal regulations governing the distribution of dividends by foreign holding companies
include the Foreign Investment Enterprise Law (1986), as amended, and the Administrative Rules under the Foreign Investment Enterprise Law
(2001).

       Under these regulations, foreign investment enterprises in China may pay div ide nds only out of their retained profits, if any, determined
in accordance with PRC accounting standards and regulations. In addition, foreign investment enterprises in China are require d to allocate at
least 10% of their respective retained profits each year, if any, to fund certain reserve funds unless these reserves have reached 50% of the
registered capital of the enterprises. These reserves are not distributable as cash dividends.

       Notice 75 . On October 21, 2005, SAFE issued Notice 75, which became effective as of November 1, 2005. According to Notice 75, prior
registration with the local SA FE branch is required for PRC residents to establish or to control an offshore company for the purposes of
financing that offshore company with assets or equity interests in an onshore enterprise located in the PRC. An amendment to registration or
filing with the local SAFE branch by such PRC resident is also required for the in jection of equity interests or assets of an onshore enterprise in
the offshore company or overseas funds raised by such offshore company, or any other material change involving a change in t he capital of the
offshore company.

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      Moreover, Notice 75 applies retroactively. As a result, PRC residents who have established or acquired control of offshore co mpanies
that have made onshore investments in the PRC in the past are required to co mplete the relevant registration procedures with the local SAFE
branch. Under the relevant rules, failure to co mply with the registration procedures set forth in Notice 75 may result in restrictions being
imposed on the foreign exchange activities of the relevant onshore company, including the increase of its registered capital, the payment of
dividends and other distributions to its offshore parent or affiliate and capital inflow fro m the offshore entity, and may also subject relevant
PRC residents to penalties under PRC fo reign exchange ad min istration regulations.

     PRC residents who control our company are required to register with SAFE in connection with their investments in us. Such ind ividuals
completed this registration in 2007, and 2008, as amended. If we use our equity interest to purchase the assets or equity interest of a PRC
company owned by PRC residents in the future, such PRC residents will be subject to the registration procedures described in Notice 75.

   Regulations on Foreign Investment in Automation Service Industry and Oil Exploration and Extraction Industry in PRC
      In accordance with the Catalogue of Industries for Guid ing Foreign Investment (Revised 2007), the oil and gas automation serv ice
industries are in the catalogue of permitted industries, and thus there are no restrictions on foreign investment in such industry. In addition the
following industries are encouraged for foreign investment in China:

        •    Manufacturing of equipment for oil prospecting, well drilling, and centralized transportation: floating well drilling system and
             floating production system operating at a water depth over 500m, seabed oil extraction & centralized transportation equipment
             operating at a water depth over 600m, deep-water oil driller with winch power over 3000KW, top driv ing power over 850KW and
             drilling pump power over, land-based oil driller & desert-based oil driller for drilling wells deeper than 9000m, 80 ton or b igger
             reciprocating piston compressor for use in oil refineries with a capacity of 10 million tons/year, CNC oil well measuring
             instrument, and oil drilling mud-hole equip ment.
        •    Exp lorat ion and exploitation of o il and natural gas with venture capital (limited to equity joint ventures and cooperative jo int
             ventures);
        •    Develop ment and application of new technologies that increase the recovery ratio of crude oil (limited to e quity joint ventures and
             cooperative joint ventures);

        •    Develop ment and application of new o il exp loration and explo itation technologies such as geophysical exp loration, drilling, w ell
             logging, and downhole operation, etc. (limited to cooperative jo int ventures); and
        •    Exp lorat ion and development of unconventional oil resources such as oil shale, oil sands, heavy oil, and excess oil (limited to
             cooperative joint ventures).

Empl oyees
      As of June 8, 2010, we had 118 emp loyees, all of who m were based in China. Of the total, 17 were in management, 39 were in te chnical
support and research and development, 30 were engaged in sales and marketing, 14 were in financial affairs, and 18 were in administration. We
believe that our relat ions with our employees are good. We have never had a work stoppage, and our employees are not subject to a collective
bargaining agreement.

Insurance
     We do not have any business interruption, litigation or natural disaster insurance coverage for our operations in China. Insurance
companies in China offer limited business insurance products. While business interruption insurance is available to a limited extent in China,
we have determined that the risks of interruption, cost of such insurance and the difficult ies associated with acquiring such insurance on
commercially reasonable terms make it impractical for us to have such insurance. Therefore, we are subject to business and pr oduct liability
exposure. Business or product liability claims or potential regulatory actions could materially and adversely affect our business and financial
condition. See ―Risk Factors—Foreign Operat ional Risks—We do not have business interruption, lit igation or natural disaster insurance.‖

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    We do, however, pay certain required insurance amounts in connection with our emp loyees ’ wages. The amount and types of insurance
we must provide under Chinese and local requirements vary by the location of each of the Do mestic Co mpanies. The following ta ble
summarizes the types of insurance paid for each of the Do mestic Co mpanies:
      Nanjing Recon
      Housing Fund
      Pension
      Unemploy ment Insurance
      Medical Insurance
      Occupational Injury Insurance
      Maternity Insurance
      BHD
      Pension
      Unemploy ment Insurance
      Medical Insurance
      Occupational Injury Insurance
      ENI
      Pension
      Unemploy ment Insurance
      Medical Insurance
      Occupational Injury Insurance
      Maternity Insurance

Facilities
      We currently operate in four facilities throughout China. Ou r headquarters are located in Beijing.

      Office                                              Address                             Rental Term            Space
               Headquarters                      Jinglongguoji Mansion,                    July 1, 2009 to     220 square meters
                                                        19 th Floor                        June 30, 2010
                                                    Chaoyang District
                                                      Beijing, PRC
               Nanjing Recon             Yongfeng Mansion, 14 th Floor No. 123             July 10, 2009 to       440 square
                                                    Jiqing Road                              July 9, 2010           meters
                                                  Nanjing City, PRC
                    BHD                   Jinglongguoji Mansion, 18 th Floor             January 1, 2010 to       450 square
                                            Chaoyang District, Beijing, PRC              December 31, 2010          meters
                    ENI                          Torch Industrial Garden                 January 1, 2010 to       200 square
                                                      4 th Bu ilding                     December 31, 2010          meters
                                            Jining, Shandong Province, PRC

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                                                                MANAGEMENT

Executi ve Officers and Directors
      The following table sets forth our executive officers and directors, their ages and the positions held by them:

                    Name                                                  Age                       Position Held
                    Mr. Yin Shenping                                         41   Chief Executive Officer and Director
                    Ms. Liu Jia                                              27   Chief Financial Officer
                    Mr. Chen Guangqiang                                      47   Chief Technology Officer and Director
                    Mr. Li Hongqi                                            36   Chief Marketing Officer and Director
                    Mr. Dennis O. Laing                                      64   Independent Director
                    Mr. Nelson N.S. Wong                                     48   Independent Director
                    Mr. Hu Jijun                                             45   Independent Director
                    Ms. Liao Xiaorong                                        40   Independent Director

      Yin Shenping. Mr. Yin is our Chief Executive Officer. In 2003 M r. Yin founded Nanjing Recon, a Chinese company that provides
services to automate and enhance the extraction of petroleu m in the PRC, and has been the Chief Executive Officer since that time. Prior to
founding Nanjing Recon, Mr. Yin served as a sales manager for Fujian Haitian Network Co mpany fro m 1992 through 1994. M r. Yin has
founded and operated a number of co mpanies: Xiamen Hengda Hait ian Co mputer Network Co., Ltd. (1994), Baotou Hengda Haitian Co mputer
Network Co., Ltd. (1997) and Beijing Jingke Hait ian Electronic Technology Development Co., Ltd. (1999), and Jingsu Huasheng Information
Technology Co., Ltd. (2000). In 2000, Mr. Yin merged the former Nan jing Kingsley Software Engineering Co., Ltd. into Nanjing Recon.
Mr. Yin received his bachelor’s degree in 1991 fro m Nanjing Agricu ltural University in in formation systems. Mr. Yin has been chosen as a
director because he is one of the founders of our company and we believe h is knowledge of our co mpany and years of experience in our
industry give him the ability to guide our company as a director.

      Liu Jia. Ms. Liu has served as our Chief Financial Officer since 2008. In 2008 Ms. Liu assisted Heilongjiang Province Jintian Group with
financial due diligence, field surveys and data analysis. While in co llege Ms. Liu served internships in Xinghua Cert ified Public Accountants,
Ltd.; Beijing Zhongweihuahao Accountants Affairs Office; Tiantong Securities Co., Ltd. and Industrial and Co mmercial Bank of Ch ina, which
internships focused on auditing, accounting and data analysis. Ms. Liu received her bachelor’s degree in 2006 fro m Beijing University of
Chemical Technology, School of Economics and Management and her master’s degree in industrial economics in 2009 fro m Beijing Wuzi
University.

      Chen Guangqiang. Mr. Chen has served as our Chief Technology Officer since 2003. Mr. Chen was a geological engineer for t he Fourth
Oil Extract ion Plant of Huabei Oil Field fro m 1985 through 1993. Fro m 1993 through 1999, M r. Chen was a chief engineer for Xinda
Co mpany, CNPC Development Bureau. Fro m 1999 through 2003, Mr. Chen served as the general manager of Beijing Adar. M r. Chen received
his bachelor’s degree in 1985 fro m Southwest Petroleum Institute. Mr. Chen has been chosen as a director because he is one of the founders of
our company and we believe we can benefit fro m his years of engineering experience and management experience in the oil ext raction
industry.

     Li Hongqi. Mr. Li serves as our Chief Market ing Officer. He founded Jining ENI Energy & Technology Co., Ltd. and served as Ch ief
Marketing Officer since 2003. Mr. Li served as a sales manager for Beijing ITL Fiber -Optic Co mmunication Technology Co mpany from 1994
through 1997. Mr. Li served as a vice sales president for Beijing Oil-Land Trade Co mpany fro m 1998 through 2003. Mr. Li received his
bachelor’s degree in 1996 fro m the Second Artillery Force Co mmands Institute. Mr. Li has been chosen as a director because he is one o f the
founders of our company and we believe we can benefit fro m his management experience and marketing s kills.

      Nelson N.S. Wong . Mr. Wong joined our Board of Directors in 2008. In 1990 Mr. Wong joined the Vigers Group, a real estate company
that provides services in valuation, corporate property services, investment advisory services, general practice surve ying, building surveying,
commercial, retail and industrial agency, and property and facilit ies management. Mr. Wong became the Vice Chairman and CEO of the Vigers
Group in 1993. In 1995 Mr. Wong established the ACN Group, a business consulting firm, where he has worked continuously and continues to
serve as the Chairman and Managing Partner. Mr. Wong received a bachelor’s degree in arts fro m the PLA Institute of International Relations
in Nan jing in 1983. Mr. Wong has been chosen as a director because we b elieve we can benefit fro m h is leadership skills and management
experience.

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       Hu Jijun . M r. Hu joined our Board of Directors in 2008. Fro m 1988 to 2003, M r. Hu served in a variety of positions at our No. 2
test-drill plant, including technician of installation, assets equipment work, electrical installation, control roo m production dispatcher, Deputy
Chief Engineer o f the Technology Battalion, and Deputy Director of Production. Fro m 2003 to 2005 he served as Head of the Integrated
Battalion and he is currently the Head of the Transport Battalion, Senior Electric Eng ineer. M r. Hu graduated as an automated professional
fro m the China University of Petroleu m in 1988. M r. Hu has been chosen as a director because we believe his years of experien ce and
knowledge gained wh ile working at our No. 2 test-drill plant will prove beneficial to the guidance of our company.

      Liao Xiaorong . Ms. Liao jo ined our Board o f Directors in 2008. Fro m 1992 to 1993, Ms. Liao worked for the Liaohe Oilfield. Fro m
1993 to 1995 Ms. Liao served in the Storage and Transportation Room of the Liaohe Oilfield Design Institute. Fro m 2003 through the present,
Ms. Liao has served as a Senior Engineer in the finance department of Petro leu m Engineering for the Southwest Oil and Gas Branch of
Sinopec. Ms. Liao received her degree in oil and gas storage and transportation projects from Southwest Petroleum Un iversity. Ms. Liao has
been chosen as a director because of her financial expert ise as well as her years of experience wo rking in the oil extraction industry.

      Dennis O. Laing . Mr. Laing joined our Board of Directors in 2008. M r. Laing has practiced law in Rich mond, Virg inia for over 30 years
and currently has his own practice, The Law Offices of Dennis O. Laing. Mr. Laing’s law pract ice centers upon business and corporate law
with special interest in energy, healthcare and technology sectors. Mr. Laing received a bachelor’s degree in govern ment fro m the University of
Virgin ia and a law degree fro m the University of Rich mond. Mr. Laing currently serves as a director of e-Future Informat ion Technology Inc.,
an enterprise solutions software and services company that is listed on the NASDAQ Capital Market (E FUT), and Sino-Global Shipping
America, Ltd., a shipping agency that is listed on the NASDAQ Capital Market (SINO). M r. Laing has been chosen as a director because we
believe his legal experience as well as his experience serving on the board of another Ch inese company listed in the U.S. will b e beneficial to
the guidance of our company.

Executi ve Compensati on
     The following table shows the annual compensation paid by us to Mr. Yin Shenping, our principal executive officer, fo r the years ended
June 30, 2008 and 2009. No other officer had total co mpensation during either of the previous two years of more than $100,000.


                                                         Summary Compensati on Table

                                                                                                                           All Other
Name                                                                                 Year        Salary       Bonus      Compensation       Total   (1)


Yin Shenping                                                                         2009      $ 80,000       $ —        $        —       $ 80,000
  Chief Executive Officer (Principal Executive Officer)                              2008      $ 80,000       $ —        $        —       $ 80,000

(1)
       Mr. Yin d id not receive any payments during 2009 or 2008 other than a base salary. Accordingly, we have omitted colu mns for other
       potential co mpensation categories.

Empl oyment Agreements
       We have employ ment agreements with each of our Chief Executive Officer, Chief Technology Officer, Chief Marketing Officer and
Chief Financial Officer. With the exception of the emp loyment agreement with our Chief Financial Officer, each of these emp lo yment
agreements provides for an indefin ite term. Such employ ment agreements may be terminated (1) if the employee gives written notice of his or
her intention to resign, (2) the employee is absent from three consecutive meet ings of the Board of Directors, wit hout special leave of absence
fro m the other members of the Board of Directors, and the Board of Directors passes a resolution that such employee has vacated his office, or
(3) the death, bankruptcy or mental incapacity of the employee. The emp loy ment agre ement for our Ch ief Financial Officer pro vides for a
two-year term, currently expiring on March 12, 2011. Such employ ment agreement may be terminated if the emp loyee gives thirty days ’
written notice of her intention to resign, or if the Board of Directors determines she can no longer perform her duties as Chief Financial Officer
and provides her with thirty days ’ written notice of termination.

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      Under Chinese law, we may only terminate emp loyment agreements without cause and without penalty by providing notice of
non-renewal one month prior to the date on which the employ ment agreement is scheduled to expire. If we fail to provide this notice or if we
wish to terminate an emp loyment agreement in the absence of cause, then we are obligated to pay the employee one month ’s salary for each
year we have employed the employee. We are, however, permitted to terminate an emp loyee for cause without penalty to our company, where
the employee has committed a crime or the employee’s actions or inactions have resulted in a material adverse effect to us.

Share Option Pool
      In connection with our in itial public offering, we established a pool for share options for the Domestic Co mpanies’ and our employees.
This pool contains options to purchase up to 790,362 of our ordinary shares. The options will vest at a rate of 20% per year for five years and
have an exercise price o f the market price of our shares on the date the options are granted. We have issued 293,000 options out of our
emp loyee share option pool.

Board of Directors and Board Committees
      Our board of d irectors currently consists of seven (7) members. We expect that all current directors will continue to serve after this
offering. There are no family relationships between any of our executive officers and directors.

      The directors are divided into three classes, as nearly equal in nu mber as the then total number o f directors permits. Class I directors shall
face re-election at our annual general meeting of shareholders in 2010 and every three years thereafter. Class II directors shall fac e re-election
at our annual general meeting of shareholders in 2011 and every three years thereafter. Class III d irectors sha ll face re-election at our annual
general meeting of shareholders in 2012 and every three years thereafter.

      If the nu mber of d irectors changes, any increase or decrease will be apportioned among the classes so as to maintain the nu mb er of
directors in each class as nearly as possible. Any additional directors of a class elected to fill a vacancy resulting fro m a n increase in such class
will hold office for a term that coincides with the remaining term o f that class. Decreases in the number of directors will n ot shorten the term of
any incumbent director. These board provisions could make it mo re difficult for thi rd parties to gain control of our co mpany by making it
difficult to rep lace members of our Board of Directors.

      A director may vote in respect of any contract or transaction in wh ich he is interested, provided, however that the nature of the interest of
any director in any such contract or transaction shall be disclosed by him at or prior to its consideration and any vote on that matter. A general
notice or disclosure to the directors or otherwise contained in the minutes of a meeting or a written resolution of the directors or any committee
thereof that a director is a shareholder of any specified firm o r co mpany and is to be regarded as interested in any transact ion with such firm or
company shall be sufficient disclosure and after such general notice it sh all not be necessary to give special notice relating to any particular
transaction.

      There are no membership qualifications for directors. Further, there are no share ownership qualifications for directors unle ss so fixed by
us in a general meeting.

      The Board of Directors maintains a majority of independent directors who are deemed to be independent under the definition of
independence provided by NASDAQ Stock Market Ru le 4200(a)(15). Mr. Laing, M r. Wong, Mr. Hu, and Ms. Liao are our independent
directors.

      Mr. Yin Shenping currently holds both the positions of Chief Executive Officer and Chairman o f the Board. These two positions have not
been consolidated into one position; Mr. Yin simp ly holds both positions at this time. We do not have a lead indepe ndent director because of
the foregoing reason and also because we believe our independent directors are encouraged to freely voice their opinions on a relatively s mall
company board. We believe this leadership structure is appropriate because we are a s ma ller report ing company that recently became listed on
a public exchange; as such we deem it appropriate to be able to benefit fro m the guidance of Mr. Yin as both our principal executive officer and
Chairman of the Board.

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      Our Board of Directors plays a significant ro le in our risk oversight. The Board o f Directors makes all relevant Co mpany decisions. As
such, it is important for us to have our Chief Executive Officer serve on the Board as he plays a key role in the risk oversight of the Co mpany.
As a smaller report ing company with a small board of d irectors, we believe it is appropriate to have the involvement and inpu t of all of our
directors in risk oversight matters.

    Currently, three co mmittees have been established under the board: the audit committee, the compensation committee and the nominating
committee. All of these committees consist solely of independent directors.

      The audit committee is responsible for overseeing the accounting and financial reporting processes of our company and audits of the
financial statements of our company, including the appointment, compensation and oversight of the work of our independent aud itors. The
audit committee consists solely of independent directors, Mr. Dennis O. Laing, Mr. Nelson N.S. Wong, and Ms. Liao Xiaorong. Mr. Wong
qualifies as the audit committee financial expert and serves as the chair of the audit committee.

      The compensation committee of the board of directors reviews and makes reco mmendations to the board regarding our compensatio n
policies for our officers and all forms of co mpensation, and also administers our incentive compensation plans and equity -based plans (but our
board retains the authority to interpret those plans). The compensation committee consists solely of independent directors, M r. Hu Jijun,
Mr. Nelson N.S. Wong, and Ms. Liao Xiaorong. Ms. Liao serves as the chair of the co mpensation committee.

      The nominating co mmittee of the board of directors is responsible for the assessment of the performance of the board, conside ring and
making reco mmendations to the board with respect to the nominations or elect ions of directors and other governance issues . The nominating
committee considers diversity of opinion and experience when no minating directors. The nominating committee consists solely o f independent
directors, Mr. Dennis O. Laing, Mr. Hu Jijun, and Ms. Liao Xiaorong. Mr. Laing serves as the chair of the nominating committ ee.

      There are no other arrangements or understandings pursuant to which our directors are selected or nominated.

Duties of Directors
      Under Cay man Islands law, our directors have a fiduciary duty to the company to act in good faith in their dealings with or on b ehalf of
our company and exercise their powers and fulfill the duties of their office honestly. This duty has four essential elements:

        •    a duty to act in good faith in the best interests of the company;
        •    a duty not to personally profit fro m opportunities that arise fro m the office o f director;
        •    a duty to avoid conflicts of interest; and

        •    a duty to exercise powers for the purpose for which such powers were intended.

       In general, Cay man Islands law imposes various duties on directors of a company with respect to certain matters of management and
administration of the company. In addit ion to the remedies availab le under general law, the Co mpanies Law imposes fines on directors who fail
to satisfy some of these requirements. However, in many circu mstances, an individual is only liab le if he is knowingly guilty of the default or
knowingly and willfu lly authorizes or permits the default. In co mparison, under Delaware law, th e business and affairs of a corporation are
managed by or under the direction of its board of directors. In exercising their powers, d irectors are charged with a fiducia ry duty of care to
protect the interests of the corporation and a fiduciary duty of loy alty to act in the best interests of its shareholders. In addition, under Delaware
law, a party challenging the propriety of a decision of the directors bears the burden of rebutting the applicability of the presumptions afforded
to directors by the ―business judgment rule.‖ If the presumption is not rebutted, the business judgment rule p rotects the directors and their
decisions, and their business judgments will not be second guessed. If the presumption is rebutted, the directors bear the bu rden of
demonstrating the entire fairness of the relevant transaction. Notwithstanding the foregoing, Delaware courts subject directors ’ conduct to
enhanced scrutiny in respect of defensive actions taken in response to a threat to corporate control and approval of a tran saction resulting in a
sale of control of the corporation.

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Director Compensation
       All d irectors hold office until the expiration of their respective terms and until their successors have been duly elected an d qualified.
There are no family relationships among our directors or executive officers. Officers are elected by and serve at the discretion of the Board of
Directors. Emp loyee directors and non-voting observers do not receive any compensation for their services. Non -employee directors are
entitled to receive $2,000 per Board of Directors meeting attended. In addition, non -emp loyee directors are entitled to receive compensation for
their actual travel expenses for each Board of Directors meeting attended.

Li mitation of Director and Officer Liability
        Pursuant to our Memorandum and Articles of Association, every director or officer and the personal representatives of the same shall be
indemn ified and held harmless out of our assets and funds against all actions, proceedings, costs, charges, expenses, losses, damages or
liab ilit ies incurred or sustained by him or her in o r about the condu ct of our business or affairs or in the execution or d ischarge of his or her
duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expens es, losses or liab ilit ies
incurred by him in defending (whether successfully or otherwise) any civil proceedings concerning us or our affairs in any court whether in the
Cay man Islands or elsewhere. No such director or officer will be liab le for: (a) the acts, receipts, neglects, defaults or omissions of any other
such Director or officer or agent; or (b) any loss on account of defect of title to any of our properties; or (c) account of the insufficiency of any
security in or upon which any of our money shall be invested; or (d) any loss incurred through any bank, broker o r other similar person; or
(e) any loss occasioned by any negligence, default, breach of duty, breach of trust, error of judgment or oversight on his or her part; or (f) any
loss, damage or misfortune whatsoever which may happen in or arise fro m the execution or d ischarge of the duties, powers authorities, or
discretions of his or her office or in relation thereto, unless the same shall happen through his or her own dishonesty, gros s negligence or willful
default.

Invol vement i n Certain Legal Proceedings
      To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, exclud in g traffic
violations or similar misdemeanors, or has been a party to any ju dicial or ad min istrative proceeding during the past ten years that resulted in a
judgment, decree or final o rder enjo ining the person from future violat ions of, or prohibit ing activities subject to, federal o r state securities
laws, or a finding of any violat ion of federal or state securities or co mmodities laws, any laws respecting financial institutions or insurance
companies, any law or regulation prohibit ing mail o r wire fraud in connection with any business entity or been subject to any disciplinary
sanctions or orders imposed by a stock, commod ities or derivatives exchange or other self-regulatory organization, except for matters that were
dismissed without sanction or settlement. Except as set forth in our discussion below in ―Related Party Transactions,‖ none of our directors,
director no minees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or
associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

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                                                        PRINCIPAL S HAREHOLDERS

       The following table sets forth informat ion with respect to beneficial o wnership of our ordinary shares as of June 8, 2010 and as adjusted
to reflect the sale of the ordinary shares offered by us in this offering, for each person known by us to beneficially own 5% or more of our
ordinary shares, and all of our executive officers and directors indiv idually and as a group. Beneficial ownership is determined in accordance
with the ru les of the SEC and includes voting or investment power with respect to the secu rities. Except as indicated below, and subject to
applicable co mmun ity property laws, the persons named in the table have sole voting and investment power with respect to all ordinary shares
shown as beneficially owned by them. Percentage of beneficial own ership is based on 3,951,811 shares outstanding as of June 8, 2010,
and           ordinary shares outstanding after comp letion of this offering and 44,600 options vesting on July 30, 2010. Our major shareholders
do not possess voting rights that differ fro m our other shareholders. The address of each of the below shareholders is c/o Recon Technology
Ltd., Roo m 1902, Building C, Kinglong International Mansion, Fulin Rd 9, Chaoyang district, Beijing, PRC 100107

                                                                                                 Percentage           Percentage
                                                                               Amount of         Ownership            Ownership
                                                                               Beneficial          Before                After
                                                                               Ownership          Offering             Offering
            Mr. Yin Shenping (1)                                                  631,761            15.81 %                        %
            Mr. Li Hongqi (2)                                                     843,681            21.11 %                        %
            Mr. Chen Guangqiang (3)                                               629,761            15.76 %                        %
            Mr. Hu Jijun (4)                                                        3,000                *%                         %
            Ms. Liao Xiaorong (5)                                                   3,000                *%                         %
            Mr. Dennis O. Laing (6)                                                 3,500                *%                         %
            Mr. Nelson Wong (7)                                                     3,600                *%                         %
            Total                                                               2,118,303            53.01 %                        %
            Directors and Executive Officers as a Group (seven
              members)                                                          2,118,303            53.01 %                        %

(1)   Includes 12,000 options to purchase ordinary shares which will vest on July 30, 2010.
(2)   Includes 10,000 options to purchase ordinary shares which will vest on July 30, 2010.
(3)   Includes 10,000 options to purchase ordinary shares which will vest on July 30, 2010.
(4)   Includes 3,000 options to purchase ordinary shares which will vest on July 30, 2010.
(5)   Includes 3,000 options to purchase ordinary shares which will vest on July 30, 2010.
(6)   Includes 3,000 options to purchase ordinary shares which will vest on July 30, 2010.
(7)   Includes 3,600 options to purchase ordinary shares which will vest on July 30, 2010.
*     Less than 1%.


                                                    RELAT ED PARTY TRANSACTIONS

Contractual Arrangements wi th Domestic Companies and their Sharehol ders
      We operate our business in China through a series of contractual arrangements with the Do mestic Co mpanies and their sharehold ers. For
a description of these contractual arrangements, s ee ―Our Co rporate Structure – Contractual Arrangements with Do mestic Co mpanies and their
Shareholders.‖

Notes Payable to Empl oyees
      As of the date hereof, we have outstanding notes payable in the amount of appro ximately ¥ 5,660,874 ($829,322) to our employ ees
bearing interest at 6% per annu m, for terms ranging fro m three months to one year.
Lease of Office Space
      While the amount of lease payments falls below the level required to be disclosed by the SEC, our co mpany leases the office s pace for its
principal executive office fro m the wife of the chief executive officer. The term of rent is one year, and we pay ¥15,000 per mo nth for such
lease. We also rent office space from Mr. Chen Guangqiang, our chief technology officer. The term of rent is one year, and we pay ¥4,500 per
month for such lease.

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                                              CHANGES IN CERTIFYING ACCOUNTANT

Dismissal of Independent Registered Public Accounting Firm
      On October 13, 2009, our Board of Directors voted to dismiss its independent registered public accounting firm Hansen Barnett &
Maxwell, P.C. (―HBM‖). HBM’s audit reports on our financial statements for its two most recent fiscal years did not contain an adverse
opinion or disclaimer o f opinion; nor were such reports qualified or mod ified as to uncertainty, audit scope, or accounting prin ciples. The
decision to change our independent registered public accounting firm was recommended by the audit committee of our Boar d o f Directors and
was subsequently unanimously approved by our Board of Directors present at a Board meeting called for such purpose. During ou r two most
recent fiscal years and through the date of this dismissal, we had no disagreements with HBM on any matter of accounting prin ciples or
practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisf action of HBM ,
would have caused HBM to make reference to the subject matter of such disagreement s in its report on our financial statements for such
periods. During our t wo most recent fiscal years and through the date of dismissal, there have been no reportable events as d efined under
Item 304(a)(1)(v) of Regulat ion S-K.

New Independent Registered Public Accounting Firm
      On October 15, 2009, we engaged Bernstein & Pinchuk LLP, an independent member of the BDO Seid man Alliance (―B&P‖), as our
independent registered public accounting firm to audit our financial statements. The decision to engage B&P was reco mmended by the audit
committee of our Board of Directors and was subsequently unanimously approved by our Board of Directors present at a Board me eting called
for such purpose. During our two most recent fiscal years and through the date of the engage ment of B&P, we d id not consult with B&P
regarding either (1) the applicat ion of accounting principles to a specified transaction, either co mpleted or proposed, or the type of audit
opinion that might be rendered on our financial statements, or (2) any matter that was either the subject of a disagreement (as d efined in
Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K). Prior to the engagement of
B&P, B&P d id not provide us with any written or oral advice that B&P concluded was an important factor considered by us in reaching any
decision as to any accounting, auditing or financial reporting issue.

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                                                     DESCRIPTION OF SHARE CAPITAL

General
      Our authorized capital stock consists of 25,000,000 o rdinary shares, par value $0.0185 per share. As of the date of this pros pectus,
3,951,811 ordinary shares are issued and outstanding. As of the date of this prospectus, we have issued options and warrants to purchase, in the
aggregate, 463,000 ord inary shares of our company.

Units
     Each unit consists of four ordinary shares and one warrant. The ordinary shares and warrants are expected to trade separately immediately
upon commencement of trad ing.

Ordinary Shares
      Holders of ord inary shares are entitled to cast one vote for each share on all matters submitted to a vote of shareholders, including the
election of directors. The holders of ordinary shares are entitled to receive ratably such dividends, if any, as may b e declared by the Board of
Directors out of funds legally availab le therefor and subject to any preference of any then authorized and issued preferred s hares. See
―Div idend Policy.‖ Such holders do not have any preemptive or other rights to subscribe for additional shares. All holders of ordinary shares
are entitled to share ratably in any assets for distribution to shareholders upon the liquidation, dissolution or winding up of the Co mpany,
subject to any preference of any then authorized and issued preferred shares. There are no conversion, redemption or sinking fu nd provisions
applicable to the ordinary shares. All outstanding ordinary shares are fully paid and nonassessable.

Warrants
       Each unit purchased includes one warrant. Each warrant may be exercised to purchase an additional ordinary share fro m us at a purchase
price of $        per o rdinary share. The warrants can be exercised at any time until the final calendar day of the month following the fifth
anniversary of the effective date of the regis tration statement covering the offering. The warrants are exercised by surrendering to us a warrant
certificate evidencing the warrants to be exercised, with the exercise form included therein duly co mpleted and executed, and paying to us the
exercise price per share in cash or check payable to us. Except for those warrants issued to the replacement agent, the warrants may not b e
exercised on a cashless or net basis. Stock cert ificates with respect to shares purchased through the exercise of warrants wi ll be issued as soon
thereafter as practicable.

      As long as any warrants remain outstanding, ordinary shares to be issued upon the exercise of warrants will be adjusted in th e event of
one or mo re stock splits, readjustments or reclassifications. In the event o f the foregoing, the remaining number of ord inary shares still subject
to the warrants shall be increased or decreased to reflect proportionately the increase or decrease in the number of ord inary shares outstanding
and the exercise price per share shall be decreased or increased as the case may be, in the same proportion.

       We have reserved a sufficient nu mber of ord inary shares for issuance upon exercise of the warrants and such ordinary shares, when
issued in accordance with the terms of the warrants, will be fu lly paid and non-assessable. The ordinary shares so reserved are included in the
Registration Statement of wh ich this prospectus is a part. We are required to use our best efforts to maintain an effective registration statement
and current prospectus relating to these ordinary shares at all t imes when the market price of the ordinary shares exceeds the exercise price o f
the warrants until the warrants exp ire. We intend to use this registration statement and prospectus to cover the warrant exercises. We plan to
file all post-effective amendments to the registration statements and supplement to the prospectus required to be filed under the Securitie s Act.
However, we cannot assure you that an effective registration statement or current prospectus will be available at the time you desire to exercise
your warrants.

      Fractional shares will not be issued upon the exercise of warrants, and no payment will be made with respect to any fractiona l ordinary
share to which any warrant holder might otherwise be entitled upon exercise of warrants. No adjustments as to previously declared or paid cash
dividends, if any, will be made upon any exercise of warrants.

      The holders of the warrants as such are not entitled to vote, receive div idends or to exercise any of the rig hts of the holders of ordinary
shares for any purpose until such warrants shall have been duly exercised and payment of the purchase price shall have been m ade. There is
currently no market for the warrants and there is no assurance that any such market wi ll ever develop.

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       For the life of the warrants, the warrant holders are g iven the opportunity to profit fro m the rise in market value of our o rdinary shares, if
any, at the expense of the holders of ordinary shares and we might be deprived of favorable opportunities to secu re additional equity capital, if
it should then be needed, for the purpose of its business. A warrant holder may be expected to exercise the warrants at a time when, we, in all
likelihood, would be ab le to obtain equity capital, if we need capital at such time, by a public sale of a new offering on terms more favorable
than those provided in the warrants.

     If upon exercise of the warrants the exercise price is less than the book value per share, the exercise will have a dilutive effect upon the
warrant holder’s investment.

      After the six (6) month anniversary of the closing of the offering, if fo r at least ten (10) trading days within any period of twenty
(20) consecutive trading days, including the last trading day of the period, the closing price per share o f our ordinary shares exceeds $           ,
we may cancel any warrants remaining outstanding and unexercised. The date upon which we may cancel such warrants must be a d ate which
is more than thirty (30) calendar days, but less than sixty (60) calendar days, after a notice is mailed by first class mail to all registered holders
of the warrants following the satisfaction of the conditions described above, or such longer time as may be required by regulato ry authorities.
During such time, holders of warrants shall be permitted to exercise such warrants.

      The warrants issued to the Underwriter are described in the section of this prospectus entitled ―Underwrit ing.‖

Li mitations on the Right to Own Shares
      There are no limitations on the right to own our ordinary shares.

Li mitations on Transfer of Shares
      Our Art icles of Association give our directors, at their discretion, the right to decline to register any transfer of shares.

Disclosure of Sharehol der Ownershi p
     There are no provisions in our Memorandum o f Association or Articles of Association governing the ownership threshold above w hich
shareholder ownership must be disclosed.

Changes in Capi tal
      We may fro m t ime to t ime by ordinary resolution increase the share capital by such sum, to be d ivided into shares of such amount, as the
resolution shall prescribe. The new shares shall be subject to the same provisions with reference to the payment of calls, lien, t ransfer,
transmission, forfeiture and otherwise as the shares in the original share capital. We may by ord inary resolution:

        •    consolidate and divide all or any of our share capital into shares of larger amount than our existing shares;
        •    convert all or any of our paid up shares into stock and reconvert that stock into paid up shares of any denomination;
        •    in many circu mstances, sub-divide our existing shares, or any of them, into shares of smaller amount provided that in the
             subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it
             was in the case of the share from wh ich the reduced share is derived; and

        •    cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and
             dimin ish the amount of its share capital by the amount of the shares so cancelled.

     We may by special resolution reduce our authorized but unissued share capital and any capital redemption reserve fund in any manner
authorized by law.

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Differences in Corporate Law
      The Cay man Islands Co mpanies Law is modeled after English law but does not follow many recent English law statutory enactments. In
addition, the Co mpanies Law d iffers fro m laws applicab le to United States corporations and their shareholders. Set forth belo w is a summary o f
the significant differences between the provisions of the Companies Law applicab le to us and, for co mparison purposes, the laws applicable to
companies incorporated in the State of Delaware and their shareholders.

   Mergers and similar arrangements
      Historically, Cay man Islands law d id not provide for mergers as that expression is understood under United States corporate law and prior
to the enactment of the Co mpanies Law (2009 Rev ision) the statutory provisions that facilitated the reconstruction and amalga mat ion of
companies, provided that the arrangement had to be approved by a majority in nu mber of each class of shareholders and creditors with whom
the arrangement was to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as
the case may be, and subsequently the arrangement had to be sanctioned by the Grand Court of the Cay man Islands.

     A new Part XVA has been added to the Co mpanies Law (2009 Revision) to streamline the process of merger and consolidation of
Cay man Islands companies, without Court approval. The primary characteristics of merger or consolidation under Cay man Law include:

      A plan of merger or consolidation must be approved by (i) a shareholder resolution of each constituent company by a majority in number
representing 75% in value of all shareholders voting together as one class; and (ii) if the shares in the consolidated or surviving company ar e to
have the same rights and economic value as the shares held in each constituent company, a special resolution of all sharehold ers voting together
as one class (in both cases shares which carry no voting rights can vote on the plan). This requirement does not apply if a p arent company is
seeking to merge with one or more subsidiaries (the parent must own 90% of each voting share class of the subsidiary/s), in wh ich case a copy
of the plan only needs be circulated to all shareholders; and

       A plan of merger or consolidation must be signed by one director of each constituent company, along with a director ’s declaration
confirming, amongst other matters, post merger/consolidation solvency, bona fide motives behind the merger/consolidation, that the
merger/consolidation is not intended to defraud unsecured creditors, the absence of adverse court proceedings or other such matters along with
a list of assets and liabilities.

      When a take-over offer is made and accepted (within four months) by holders of not less than 90.0% o f the shares affected, the offerer
may, within a t wo month period, require the holders of the remaining shares to transfe r such shares on the terms of the offer. An objection can
be made to the Grand Court of the Cay man Islands but this is unlikely to succeed unless there is evidence of fraud, bad faith or collusion. If the
arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal right s, which would
otherwise ordinarily be available to dissenting shareholders of a Delaware corporation, providing rights to receive payment in cash for the
judicially determined value of the shares.

   Shareholders’ suits
      We are not aware of any reported class action or derivative action having been brought in a Cay man Islands court. In principle, the
company itself will normally be the proper plaintiff in actions against directors, and derivative actions may not generally be bro ught by a
minority shareholder. However, based on English authorities, who would in all likelihood be of persuasive authority in the Ca yman Islands,
there are exceptions to the foregoing principle, including when:

        •    a company acts or proposes to act illegally o r ultra vires;
        •    the act complained of, although not ultra vires, required a special resolution, which was not obtained; and
        •    those who control the company are perpetrating a ―fraud on the minority.‖

   Directors’ fiduciary duties
      Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholde rs. This
duty has two components: the duty of care and the duty of loyalty. Th e duty of care requires that a director act in good faith, wit h the care that
an ordinarily prudent person would exercise under similar circu mstances. Under this duty, a director must inform himself of, and disclose to
shareholders, all material

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informat ion reasonably available regard ing a significant transaction. The duty of loyalty requires that a director act in a manner he reasonably
believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits
self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any in terest possessed
by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a dire ctor are presumed to
have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation.
However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented
concerning a transaction by a director, a director must prove the procedural fairness of the transaction, and that the transaction was of fair value
to the corporation.

      As a matter of Cay man Islands law, a d irector of a Cay man Islands company is in the position of a fiduciary with respect to the company
and therefore it is considered that he owes the follo wing duties to the company – a duty to act bona fide in the best interests of the company, a
duty not to make a profit out of his position as director (unless the company permits him to do so) and a duty not to put himself in a position
where the interests of the company conflict with his personal interest or his duty to a third -party. A director of a Cay man Islands company owes
to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in th e performance of his duties a
greater degree of skill than may reasonably be expected fro m a person of his knowledge and experience. However, English and Co mmonwealth
courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the
Cay man Islands.

   Shareholder action by written consent
     Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by
amend ment to its certificate of incorporation. Cay man Islands law and our art icles of association provide that shareholders may approve
corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been ent itled to vote
on such matter at a general meeting without a meeting being held.

   Shareholder proposals
      Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shar eholders,
provided it comp lies with the notice provisions in the governing documents. A special meet ing may be called by the board of directors or any
other person authorized to do so in the governing documents, but shareholders may be precluded fro m calling special meetings. Cay man
Islands law and our articles of association allow our shareholders holding not less than 10% of the paid up voting share capital of the Co mpany
to requisition a shareholder’s meeting. As an exempted Cay man Islands company, we are not obliged by law to call shareholders ’ annual
general meetings. However, our art icles of association require us to call such meetings.

   Cumulative voting
       Under the Delaware General Corporation Law, cu mu lative voting for elections of directors is not permitted unless the corporat ion’s
certificate of incorporation specifically provides for it. Cu mu lative voting potentially facilitates the representation of minority shareholders on a
board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which
increases the shareholder’s voting power with respect to electing such director. As permitted under Cay man Islands law, our art icles of
association do not provide for cu mulative voting. As a result, our sharehold ers are not afforded any less protections or rights on this issue than
shareholders of a Delaware corporation.

   Removal of directors
     Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for caus e with the
approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise . Und er our art icles of
association, directors can be removed with cause or by the vote of holders of a majority of our shares, cast at a general meeting, or the
unanimous written resolution of all shareholders.

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   Transactions with interested shareholders
      The Delaware General Corporation Law contains a business combination statute applicable to Delaware public corporations whereby,
unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorpo ratio n, it is
prohibited fro m engaging in certain business combinations with an ―interested shareholder‖ for three years fo llo wing the date that such person
becomes an interested shareholder. An interested shareholder generally is a person or group who or which o wns or owned 15% or more of the
target’s outstanding voting stock within the past three years. This has the effect of limiting the ability of a potential acquirer to make a
two-tiered b id for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to
the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the
transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware public
corporation to negotiate the terms of any acquisition transaction with the target ’s board of directors.

      Cay man Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protec tions afforded by the
Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a comp any and its
significant shareholders, it does provide that such transactions must be entered into bona fide in th e best interests of the company and not with
the effect of constituting a fraud on the minority shareholders.

   Dissolution; Winding up
      Under the Delaware General Corporation Law, un less the board of directors approves the proposal to dissolve, dissolution must be
approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by t he board of
directors may it be approved by a simp le majority of the corporation ’s outstanding shares. Delaware law allows a Delaware corporation to
include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by t he board. Under the
Co mpanies Law o f the Cay man Islands and our articles of association, our company may b e voluntarily dissolved, liquidated or wound up only
by the vote of holders of two-thirds of our shares voting at a meeting or by the holders of at least one-half of our shares voting at a meeting if
the Co mpany is no longer able to pay its debts as they fall due or in each case by the unanimous written resolution of all shareholders. In
addition, our company may be wound up by the Grand Court of the Cay man Islands if the co mpany is unable to pay its debts or if the court is
of the opinion that it is just and equitable that our company is wound up.

   Variation of rights of shares
      Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a maj ority of
the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under Cay man Islands law and our articles of
association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class only with the vote at
a class meeting of holders of t wo-thirds of the shares of such class or unanimous written resolution, provided that if such variation has the
effect of altering our articles of association, the variation will need to be approved in the manner described under the head ing ―Amend ment of
governing documents.‖

   Amendment of governing documents
      Under the Delaware General Corporation Law, a corporation ’s governing documents may be amended with the approval of a majority of
the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by Cay man Islands law, our
memo randum and art icles of association may only be amended with the vote of holders of two -thirds of our shares voting at a meet ing or the
unanimous written resolution of all shareholders.

   Indemnification of directors and executive officers and limitation of liability
      Cay man Islands law does not limit the extent to which a co mpany ’s articles of association may provide for indemnification of o fficers
and directors, except to the extent any such provision may be held by the Cay man Islands courts to be contrary to public policy, such as to
provide indemn ification against civil fraud or the consequences of committing a crime or gross negligence or willfu l default. Our memorandu m
and articles of association permit indemnification of officers and directors for losses, damages, costs and expenses incurred in t heir capacit ies
as such

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unless such losses or damages arise fro m dishonesty, fraud, gross negligence or willful defau lt of such directors or officers . This standard of
conduct is generally the same as permitted under the Delaware General Corporation Law to a Delaware corporation.

     Insofar as indemnificat ion for liabilit ies arising under the Securit ies Act of 1933 may be permitted to our directors, office rs or persons
controlling us under the foregoing provisions, we have been informed that in the opinion of the Securities and Excha nge Co mmission such
indemn ification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable as a matte r of United States
law.

   Rights of non-resident or foreign shareholders
      There are no limitations imposed by our memorandu m and articles of association on the rights of non -resident or foreign shareholders to
hold or exercise voting rights on our shares. In addition, there are no provisions in our memorandum and articles of associat ion governing the
ownership threshold above which shareholder ownership must be disclosed.

   Inspection of books and records
      Holders of our ord inary shares will have no general right under Cay man Islands law to inspect or obtain copies of our list of shareholders
or corporate records except our memo randum and art icles of association. However, we will provide our shareholders with annual audited
consolidated financial statements.

Share Option Pl ans
      Our Board of Directors and shareholders have approved a share option plan. This plan authorizes t he issuance of 790,362 ordin ary shares.
Pursuant to this plan, we may issue options to purchase our ordinary shares to our employees and directors. The Co mpensation Co mmittee of
the Board of Directors will ad minister the plan. The options will have exercis e prices equal to the fair market value of our ord inary shares on
the date of grant. In addition, the options will vest over five years (20% per year) and have terms of ten years. As of the d ate of this prospectus,
293,000 of the 790,362 options authorized under the plan have been granted.

Certain Effects of Authorized but Unissued Ordi nary Shares
      Upon the completion of this offering, the exercise of all Representative’s Warrants issued in this offering, the exercise of all other
outstanding warrants, and the issuance of all shares in our share option plan, we will have        ordinary shares remain ing authorized but
unissued. Authorized but unissued ordinary shares are available for future issuance without shareholder approval. Issuance of these shares will
dilute your percentage ownership in us.

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                                                   SHARES ELIGIB LE FOR FUT URE S ALE

      A liquid t rading market for our ordinary shares presently exists but may not be sustained after this offering. Future sales o f substantial
amounts of ordinary shares, including ordinary shares issued upon exercise of outstanding options and exercise of the warrants offered in this
prospectus in the public market after this offering or the anticipation of those sales could adversely affect market prices p revailing fro m time to
time and could impair our ability to raise capital through sales of our equity securities.

      Upon the completion of the offering, we will have outstanding            ordinary shares, assuming no exercise of outstanding options or
warrants. Of these ordinary shares, the ordinary shares sold in this offering will be freely tradable without restriction under the Securities Act
unless purchased by our ―affiliates‖ as that term is defined in Ru le 144 under the Securities Act.

Rule 144
       In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who is de emed to be an affiliate of
our company at the time of sale, or at any time during the preceding three months, and who has beneficially owned restricted shares for at least
six months, would be entitled to sell within any three-month period a number of our ord inary shares that does not exceed the greater of 1% of
the then outstanding ordinary shares or the average weekly t rading volu me of ord inary shares during the four calendar weeks p receding such
sale. Sales under Rule 144 are subject to certain manner of sale p rovisions, notice requirements and the availability of current public
informat ion about our company. A person who has not been our affiliate at any time during the three months preceding a sale, and who has
beneficially o wned his or her ordinary shares for at least six months, would be entitled under Ru le 144 to sell such shares without regard to any
manner of sale, notice provisions or volu me limitations described above. Any such sales must comply with the public informati on provision of
Rule 144 until our ordinary shares have been held for one year.

Rule 701
      Securities issued in reliance on Ru le 701 are also restricted and may be sold by shareholders other than affiliates of our co mpany subject
only to manner of sale provisions of Rule 144 and by affiliates under Rule 144 without compliance with its six-month holding period
requirement.

Registration on Form S-8
       We have filed a registration statement on Form S -8 under the Securit ies Act to register the 790,362 ordinary shares authorized by our
stock option plan. This registration permits the resale of these ordinary shares by nonaffiliates in the public market wit hout restriction under the
Securities Act, upon the completion of the lock-up period described below. Ord inary shares registered pursuant to the Form S-8 held by
affiliates will be subject to Rule 144 volu me limitat ions. As of the date of this Prospectus, we have issued 293,000 of the 790,362 options
available under our stock option plan.

Lock-Up Agreements
      Our officers, directors and stockholders who hold an aggregate of 5% of our outstanding ordinary shares will be subject to a lock-up
period of 180 days following the effective date of this prospectus. This means that, during the applicable lock -up period fo llo wing the date of
this prospectus, such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of Ladenburg
Thalmann & Co. Inc. Ladenburg Thalmann & Co. Inc. may also waive the terms of these lock-ups. See ―Shares Eligib le fo r Fut ure Sale.‖

       Ladenburg Thalmann & Co. Inc. has no present intention to waive or shorten the lock-up period; however, the terms of the lock-up
agreements may be waived at their discretion. In determin ing whether to waive the terms of the lock -up agreements, Ladenburg Thalmann &
Co. Inc. may base its decision on its assessment of the relat ive strengths of the securities market s and companies similar to ours in general, and
the trading pattern of, and demand for, our securit ies in general.

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                                                                    TAXATION

      The following summary of the material Cayman Islands, Chinese and, U.S. federal income tax consequences of an investment in o ur
ordinary shares or warrants is based upon laws and relevant interpretations thereof in effect as of the date of this prospect us, all of which are
subject to change. This summary does not deal with all possible tax consequences relating to an investment in our ordinary sh ares or warrants,
such as the tax consequences under state, local and other tax laws.

Cayman Islands Taxation
       The Cay man Islands currently levies no taxes on individuals or corporations based upon profits, inco me, gains or appreciation and there
is no taxat ion in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to our co mpa ny levied by the
Govern ment of the Cay man Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought
within the jurisdiction of the Cay man Islands. The Cay man Islands is not a party to any double tax trea ties. There are no exchange control
regulations or currency restrictions in the Cay man Islands.

PRC Taxation
     The following discussion summarizes the material PRC inco me tax considerations relating to the ownership of our ordinary shar es or
warrants following the consummation of th is offering. As used in this discussion, ―we‖, ―our‖ and ―us‖ refers only to Recon-CI.

   Resident Enterprise Treatment
      On March 16, 2007, the Fifth Session of the Tenth National People ’s Congress passed the Enterprise Inco me Tax Law of the PRC (―EIT
Law‖), wh ich became effective on January 1, 2008. Under the EIT Law, enterprises are classified as ―resident enterprises‖ and ―non-resident
enterprises.‖ Pursuant to the EIT Law and its imp lementing ru les, enterprises established outside China whose ―de facto management bodies ‖
are located in China are considered ―resident enterprises‖ and subject to the uniform 25% enterprise inco me tax rate on global income.
According to the implementing rules of the EIT Law, ―de facto management body‖ refers to a managing body that in practice exercises overall
management control over the production and business, personnel, accounting and assets of an enterprise.

      On April 22, 2009, the State Administration of Taxat ion issued the Notice on the Issues Regarding Recognition of Enterprises that are
Do mestically Controlled as PRC Resident Enterprises Based on the De Facto Management Body Criteria, which was retroactively e ffect ive as
of January 1, 2008. This notice provides that an overseas incorporated enterprise that is controlled domestically will be recognized as a
―tax-resident enterprise‖ if it satisfies all of the following conditions: (i) the senior management responsible for daily production/business
operations are primarily located in the PRC, and the location(s) where such senior management execute their responsibilit ies are primarily in
the PRC; (ii) strategic financial and personnel decisions are made or approved by organizations or personnel located in the P RC; (iii) major
properties, accounting ledgers, company seals and minutes of board meet ings and stockholder meetings, are maintained in the PRC; and (iv)
50.0% or mo re of the board members with voting rights or senior management habitually reside in the PRC.

      The EIT Law and the interpretation of many of its provisions, including the definit ion of ―resident enterprise,‖ are unclear. It is also
uncertain how the PRC tax authorities would interpret and imp lement the EIT Law and its imp lementing rules. Our managemen t is
substantially based in the PRC and expected to be based in the PRC in the future.

       Given the short history of the EIT Law and lack of applicab le legal precedent, it remains unclear how the PRC tax authorities will
determine the PRC tax resident status of a company organized under the laws of a foreign (non-PRC) jurisdiction, such as us. If the PRC tax
authorities determine that we are a ―resident enterprise‖ for PRC enterprise income tax purposes, a number of tax consequences could follow.
First, we could be subject to the enterprise income tax at a rate of 25% on our global taxable inco me. Second, the EIT Law prov ides that
dividend income between ―qualified resident enterprises ‖ is exempt fro m inco me tax. It is unclear, however, whether the dividends we receive
would constitute dividend income between ―qualified resident enterprises ‖ and would therefore qualify for tax exemption.

      As of the date of this prospectus, there has not been a definitive determination as to our ―resident enterprise‖ or ―non-resident enterprise‖
status. However, since it is not anticipated that we or Recon-HK would receive

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dividends or generate other income in the near future, we and Recon -HK are not expected to have any income that would be subject to the 25%
enterprise income tax on global inco me in the near future. We and Recon -HK will consult with the PRC tax authorities and make any necessary
tax payment if we or Recon-HK (based on future clarifying guidance issued by the PRC), or the PRC tax authorities, determine that either we
or Recon-HK is a resident enterprise under the EIT Law, and if we or Recon -HK were to have inco me in the future.

   Dividends from PRC Operating Companies
      If we or Recon-HK are not treated as resident enterprises under the EIT Law, then dividends that we or Recon -HK receive may be subject
to PRC withholding tax. The EIT Law and the imp lementing ru les of the EIT Law prov ide that (A) an inco me tax rate of 25% will normally be
applicable to investors that are ―non-resident enterprises,‖ or non-resident investors, which (i) have establishments or premises of business
inside the PRC, and (ii) the inco me in connection with their establishment or premises of business is sourced from the PRC or t he income is
earned outside the PRC but has actual connection with their establishments or places of business inside the PRC, and (B) an income tax rate of
10% will normally be applicable to d ividends payable to investors that are ―non-resident enterprises,‖ or non-resident investors, which (i) do
not have an establishment or place o f business in the PRC or (ii) have an establishment or place o f business in the PRC, bu t the relevant inco me
is not effectively connected with the establishment or p lace of business, to the extent such dividends are derived fro m sourc es within the PRC.

      As described above, the PRC tax authorities may determine the resident enterprise status o f entities organized under the laws of foreign
jurisdictions, on a case-by-case basis. We and Recon-HK are holding co mpanies and the majority of our inco me and that of Recon -HK may be
derived fro m dividends. Thus, if we or Recon-HK are considered as a ―non-resident enterprise‖ under the EIT Law and the dividends paid to us
and Recon-HK are considered inco me sourced within the PRC, such dividends received may be subject to the income tax described in the
foregoing paragraph.

      The State Council of the PRC or a tax treaty between China and the jurisdictions in wh ich the non -PRC investors reside may reduce such
income tax. Pursuant to the Double Tax Avoidance Arrangement between Hong Kong and Mainland Ch ina, if the Hong Kong resident
enterprise owns more than 25% of the equity interest in a co mpany in Ch ina, the 10% withholding tax on the dividends the Hong Kong resident
enterprise receives fro m such company in China is reduced to 5%. Since Recon -HK is considered as a Hong Kong resident enterprise under the
Double Tax Avoidance Arrangement and is considered as a ―non-resident enterprise‖ under the EIT Law, the dividends paid to Recon-HK by
Recon-JN may be subject to the reduced income tax rate of 5% under the Double Tax Avoidance Arrangement. However, based on the Notice
on Certain Issues with Respect to the Enforcement of Div idend Provisions in Tax Treaties, issued on February 20, 2009 by the State
Admin istration of Taxat ion, if the relevant PRC tax authorities determine, in their d iscretion, that a company benefit s fro m such reduced
income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax
treatment.

      As of the date of this prospectus, there has not been a definitive determination as to t he ―resident enterprise‖ or ―non-resident enterprise‖
status of us or Recon-HK. As indicated above, however our Do mestic Co mpanies are not expected to pay any dividends in the near future. We
and Recon-HK will consult with the PRC tax authorities and make any necessary tax withholding if, in the future, the Do mestic Co mpanies
were to pay any dividends and we or Recon-HK (based on future clarifying guidance issued by the PRC), o r the PRC tax authorities, determine
that either we or Recon-HK is a non-resident enterprise under the EIT Law.

   Dividends that Non-PRC Resident Investors Receive From us; Gain on the Sale or Transfer of Our Ordinary Shares
      If d ividends payable to (or gains recognized by) our non-resident investors are treated as income derived fro m sources within the PRC,
then the dividends that non-resident investors receive fro m us and any such gain on the sale or transfer of our ord inary shares, may be subject to
taxes under the PRC tax laws.

       Under the EIT Law and the imp lementing rules of the EIT Law, PRC inco me tax at the rate of 10% is applicable to div idends pay able to
investors that are ―non-resident enterprises,‖ or non-resident investors, which (i) do not have an establishment or place of business in the PRC
or (ii) have an establishment or place of business in the PRC but the relevant inco me is not effectively connected with the e stablish ment or
place of business, to the extent that such dividends have their sources within the PRC. Similarly, any gain realized on the transfer of ord inary
shares by such investors is also subject to 10% PRC income tax if such gain is regarded as income derived fro m sources within the PRC.

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       The dividends paid by us to non-resident investors with respect to our ordinary shares, or gain non -resident investors may realize fro m
sale or the transfer of our ordinary shares, may be treated as PRC-sourced income and, as a result, may be subject to PRC tax at a rate of 10%.
In such event, we also may be required to withhold a 10% PRC tax on any dividends paid to non -resident investors. In addition, non-resident
investors in our ordinary shares may be responsible for paying PRC tax at a rate of 10% on a ny gain realized fro m the sale or transfer of our
ordinary shares after the consummat ion of the offering if such non -resident investors and the gain satisfy the requirements under the EIT Law
and its implementing ru les. Ho wever, under the EIT Law and its imp lementing rules, we would not have an obligation to withhold inco me tax
in respect of the gains that non-resident investors (including United States investors) may realize fro m the sale or transfer of ou r ordinary shares
fro m and after the consummation of this offering.

       If we were to pay any dividends in the future, we would again consult with the PRC tax authorities and if we (based on future clarify ing
guidance issued by the PRC), or the PRC tax authorities, determine that we must withhold PRC tax on an y dividends payable by us under the
EIT Law, we will make any necessary tax withholding on dividends payable to our non -resident investors. If non-resident investors as
described under the EIT Law (including United States investors) realized any gain fro m the sale or transfer of our ord inary shares and if such
gain were considered as PRC-sourced income, such non-resident investors would be responsible for paying 10% PRC inco me t ax on the gain
fro m the sale or t ransfer of our ord inary shares. As indicated above, under the EIT Law and its imp lementing ru les, we would n ot have an
obligation to withhold PRC inco me tax in respect of the gains that non -resident investors (including United States investors) may realize fro m
the sale or transfer of our ordinary shares fro m and after the consummation of this offering.

   Penalties for Failure to Pay Applicable PRC Income Tax
      Non-resident investors in us may be responsible for paying PRC tax at a rate of 10% on any gain realized fro m the sale or transfe r of our
ordinary shares after the consummat ion of this offering if such non-resident investors and the gain satisfy the requirements under the EIT Law
and its implementing ru les, as described above.

       According to the EIT Law and its imp lementing rules, the PRC Tax Ad min istra tion Law and its imp lementing ru les, the Provisional
Measures for the Admin istration of Withholding of Enterprise Inco me Tax for Non -resident Enterprises (the ―Administration Measures‖) and
other applicable PRC laws or regulations (collectively the ―Tax Related Laws‖), where any gain derived by non-resident investors fro m the sale
or transfer of our ord inary shares is subject to any income tax in the PRC, and the withholding agent or such non -resident investors fail to file
any tax return or pay tax in this regard pursuant to the Tax Related Laws, they may be subject to certain fines, penalties or punishments,
including without limitation: (1) if the withholding agent of a non-resident investor fails to file a tax return and present the relevant information
in connection with tax pay ments, the competent tax authorities shall order it to do so within the prescribed time limit and may impose a fine up
to RMB 2,000; (2) if a non-resident investor fails to file a tax return or fails to pay all or part of the amou nt of tax payable, the non-resident
investor shall be required to pay the unpaid tax amount payable, a surcharge on overdue tax pay ments (the daily surcharge is 0.05% of the
overdue amount, beginning fro m the day the deferral begins), and a fine ranging fro m 50% to 500% of the unpaid amount of the tax payable;
(3) if a non-resident investor fails to file a tax return or pay the tax within the prescribed time limit according to the order by the PR C tax
authorities, the PRC tax authorities may collect and check info rmation about the income items of the non-resident investor in the PRC and
other payers (the ―Other Payers‖) who will pay amounts to such non-resident investor, and send a ―Notice of Tax Issues‖ to the Other Payers to
collect and recover the tax payable and impose overdue fines on such non-resident investor fro m the amounts otherwise payable to such
non-resident investor by the Other Payers; (4) if a non-resident investor fails to pay the tax payable within the prescribed time limit as ordered
by the PRC tax authorit ies, a fine may be imposed on the non-resident investor ranging fro m 50% to 500% of the unpaid tax payable; or (5) if
the non-resident investor fails to pay all or part of the amount of tax payable or surcharge for overdue tax payment, and can not provide a
guarantee to the tax authorities, the tax authorit ies may notify authorities to prevent the non -resident investor or its legal representative fro m
leaving the PRC.

United States Federal Income Taxati on
      The following discussion describes the material U.S. federal inco me tax consequences to U.S. Holders (as defined below) under present
law of an investment in our ordinary shares or warrants. This summary applies only to U.S. Holders that hold ordinary shar es as capital assets
and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States in effect as of the date of
this prospectus and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this prospectus, as well as judicial and
administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change
could apply retroactively and could affect the tax consequences described below.

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      The following discussion does not address the tax consequences to any particular investor or to persons in special tax situat ions such as:

        •    banks;
        •    financial institutions;
        •    insurance companies;

        •    regulated investment companies;
        •    real estate investment trusts;
        •    broker-dealers;

        •    traders that elect to mark-to-market;
        •    U.S. expatriates;
        •    tax-exempt entit ies;

        •    persons liable fo r alternative minimu m tax;
        •    persons holding our ordinary shares or warrants as part of a straddle, hedging, conversion or integrated transaction;
        •    persons that actually or constructively own 10% o r more of our voting stock;

        •    persons who acquired our ordinary shares or warrants pursuant to the exercise of any employee share option or otherwise as
             compensation for services; or
        •    persons holding our ordinary shares through partnerships or other pass -through entities.

      Prospective purchasers are urged to consult their tax advisors about the application of the U.S. Federal tax rules to their p art icular
circu mstances as well as the state, local, foreign and other tax consequences to them of the purchase, ownership and disposition of our ordinary
shares or warrants.

      The discussion below of the U.S. federal inco me tax consequences to ―U.S. Holders‖ will apply to you if you are a beneficial o wner of
ordinary shares or warrants and you are, for U.S. federal income tax purposes:
        •    an individual who is a citizen or resident of the United States;

        •    a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the Un ited
             States, any state thereof or the District o f Colu mb ia;
        •    an estate whose income is subject to U.S. federal income ta xation regard less of its source; or
        •    a trust that (1) is subject to the primary supervision of a court with in the United States and the control of one or more U.S. persons
             for all substantial decisions or (2) has a valid elect ion in effect under applicable U.S. Treasury regulations to be treated as a U.S.
             person.

   Taxation of Dividends and Other Distributions on our Ordinary Shares
      Subject to the passive foreign investment company rules discussed below, the gross amount of distributions made by us to you with
respect to the ordinary shares (including the amount of any taxes withheld therefro m) will generally be includable in your gross inco me as
dividend income on the date of receipt by you, but only to the extent that the distribution is paid out of our current or acc umu lated earnings and
profits (as determined under U.S. federal inco me tax principles). The dividends will not be elig ible for the div idends-received deduction
allo wed to corporations in respect of dividends received fro m other U.S. corporations.

      With respect to non-corporate U.S. Holders, including indiv idual U.S. Holders, fo r taxab le years beginning before January 1, 2011,
dividends will be taxed at the lower capital gains rate applicable to qualified div idend income, provided that (1) the ordinary shares are readily
tradable on an established securities market in the United States, or we are elig ible for the benefits of an approved qualifying income tax treaty
with the Un ited States that includes an exchange of in formation program, (2) we are not a passive foreign investment company (as discussed

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below) for either our taxab le year in which the dividend is paid or the preceding taxab le year, and (3) certain holding period requirements are
met. Under U.S. Internal Revenue Service authority, ordinary shares are considered for purpose of clause (1) above to be readily tradable on an
established securities market in the United States if they are listed on the NASDAQ Capital Market. You should consult your t ax advisors
regarding the availability of the lo wer rate for d ividends paid with respect to our ordinary shares, including the effects of any change in law
after the date of this prospectus.

      Div idends paid with respect to our ordinary shares will constitute foreign source income for foreign tax cred it limitation pu rposes. If the
dividends are taxed as qualified d ividend inco me (as discussed above), the amount of the dividend taken into account for purposes of
calculating the foreign tax cred it limitation will be limited to the gross amount of the dividend, mult iplied by the reduced rate divided by the
highest rate of tax normally applicab le to dividends. The limitation on foreign taxes eligib le for cred it is calcu lated separately with respect to
specific classes of income. For th is purpose, dividends distributed by us with respect to our ordinary s hares will constitute ―passive category
income‖ but could, in the case of certain U.S. Holders, constitute ―general category income.‖

       To the extent that the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S.
federal inco me tax principles), it will be treated first as a tax-free return of your tax basis in your ordinary shares, and to the extent the amount
of the distribution exceeds your tax basis, the excess will be taxed as capital gain. We do not intend to calculate our earnings and profits under
U.S. federal inco me tax principles. Therefo re, a U.S. Holder should expect that a distribution will be t reated as a dividend even if that
distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.

   Taxation of Dispositions of Ordinary Shares or Warrants
       Subject to the passive foreign investment company rules discussed below, you will recognize taxable gain or loss on any sale, exchange
or other taxab le disposition of an ordinary share or warrant equal to the difference between the amount realized (in U.S. dollars ) for such
ordinary share or warrant and your tax basis (in U.S. dollars) in such ordinary share or warrant. The gain or loss will be capital gain or loss. If
you are a non-corporate U.S. Holder, including an ind ividual U.S. Holder, who has held the ordinary shares for more than one year, you will be
elig ible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any such gain or loss that you recognize will generally
be treated as United States source income or loss for foreign tax credit limitation purposes.

      Subject to the discussion of the PFIC rules below, a U.S. Holder generally will not recognize gain or loss upon the exercise of a warrant
for cash. Ord inary shares acquired pursuant to the exercise of a warrant for cash generally will have a tax basis equal to th e U.S. Ho lder’s tax
basis for the warrant, increased by the amount paid to exercise the warrant. The holding period of such ordinary shares generally would begin
on the day after the date of exercise of the warrant. If a warrant is allowed to lapse unexercised, a U.S. Holder generally w ill recognize a capital
loss equal to such holder’s tax basis in the warrant.

   Passive Foreign Investment Company
      Based on our current and anticipated operations and the composition of our assets, we do not expect to be a passive foreign inv estment
company, or PFIC, for U.S. federal inco me tax purposes for our current taxable year ending June 30, 2010. Our actual PFIC status for the
current taxab le year ending June 30, 2010 will not be determinable until the close of such taxable year and, accordingly, the re is no guarantee
that we will not be a PFIC for the current taxab le year because PFIC status is a factual determination for each taxab le year which cann ot be
made until the close of the taxable year. A non-U.S. corporat ion such as our company is considered a PFIC fo r any taxable year if either:

        •    at least 75% of its gross income is passive income; or
        •    at least 50% of the value of its assets (based on an average of the quarterly values of the assets during a taxab le year) is attributable
             to assets that produce or are held for the production of passive income (the ―asset test‖).

      Passive income generally includes dividends, interest, rents, royalties and gain fro m the disposition of passive assets. We will be treated
as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own,
directly or indirectly, at least 25% (by value) of the stock.

     We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status may change. In part icular,
because the value of our assets for purposes of the asset test will generally be determined

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based on the market price of our ordinary shares, our PFIC status will depend in large part on the market price of our ordina ry s hares.
Accordingly, fluctuations in the market price of the ordinary shares may cause us to become a PFIC. In addit ion, the app licatio n of the PFIC
rules is subject to uncertainty in several respects and the composition of our income and assets will be affected by how, and how quickly, we
spend the cash we raise in this offering. If we are a PFIC fo r any year during which you hold ordinary shares, we will continue to be treated as
a PFIC for all succeeding years during which you hold ordinary shares. However, if we cease to be a PFIC, you may avoid some of the adverse
effects of the PFIC regime by making a ―deemed sale‖ elect ion with respect to the ordinary shares.

      If we are a PFIC for any taxab le year during which you hold ordinary shares, you will be subject to special tax rules with re spect to any
―excess distribution‖ that you receive and any gain you realize fro m a sale or other disposition (including a p ledge) of the ordin ary shares,
unless you make a ―mark-to-market‖ election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the
average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ordinary shares
will be treated as an excess distribution. Under these special tax ru les:

        •    the excess distribution or gain will be allocated ratably over your holding period for the ord inary shares;
        •    the amount allocated to the current taxab le year, and any taxable year prior to the first taxab le year in which we were a PFI C, will
             be treated as ordinary income, and
        •    the amount allocated to each other year will be subject to the highest tax rate in effect for that year and the interest charge generally
             applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

      The tax liability for amounts allocated to years prior to the year of disposition or ―excess distribution‖ cannot be offset by any net
operating losses for such years, and gains (but not losses) realized on the sale of the ordinary shares cannot be treated as capital, even if you
hold the ordinary shares as capital assets.

       A U.S. Holder o f ―marketable stock‖ (as defined belo w) in a PFIC may make a mark-to-market elect ion for such stock to elect out of the
tax treat ment discussed above. If you make a mark-to-market election fo r the ordinary shares, you will include in inco me each year an amount
equal to the excess, if any, of the fair market value of the ord inary shares as of the close of your taxable year over your a djusted basis in such
ordinary shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the ordinary shares over their fair market value as
of the close of the taxable year. However, deductions are allowab le only to the extent of any net mark -to-market gains on the ordinary shares
included in your inco me for prior ta xable years. A mounts included in your inco me under a mark -to-market elect ion, as well as gain on the
actual sale or other disposition of the ordinary shares, are treated as ordinary inco me. Ord inary loss treatment also applies to the deductible
portion of any mark-to-market loss on the ordinary shares, as well as to any loss realized on the actual sale or disposition of the ordinary shares,
to the extent that the amount of such loss does not exceed the net mark -to-market gains previously included for such ordinary shares. Your
basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. If you make a valid mark -to-market election, the tax
rules that apply to distributions by corporations which are not PFICs would apply to distrib utions by us, except that the lower applicable capital
gains rate for qualified dividend inco me discussed above under ―—Taxat ion of Div idends and Other Distributions on our Ord inary Shares ‖
generally would not apply.

       The mark-to-market election is available only for ―marketable stock‖, wh ich is stock that is traded in other than de minimis quantities on
at least 15 days during each calendar quarter (―regularly traded‖) on a qualified exchange or other market, as defined in applicable U.S.
Treasury regulations. We expect that our ordinary shares will be listed on the NASDAQ Capital Market and, consequently, we expect that,
provided that the ordinary shares are regularly traded, if you are a holder of ordinary shares the mark-to-market election would be available to
you were we to be or become a PFIC. Currently, a mark-to-market election may not be made with respect to warrants.

      Alternatively, a U.S. Holder of stock in a PFIC may make a ―qualified electing fund‖ election with respect to such PFIC to elect out of
the tax treat ment discussed above. A U.S. Holder who makes a valid qualified electing fund election with respect to a PFIC wi ll generally
include in gross income for a taxable year such holder’s pro rata share of the corporation’s earnings and profits for the taxable year. Ho wever,
the qualified electing fund elect ion is availab le only if such PFIC provides such U.S. Holder with certain informat ion regard ing its earnings and
profits as required under applicable U.S. Treasury regulations. We do not current ly intend to prepare or provide the informat ion that would
enable you to make a qualified electing fund elect ion. Moreover, under current law a U.S. Ho lder may not make a QEF elect ion with respect to
its warrants.

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      If you hold ordinary shares in any year in which we are a PFIC, you will be required to file U.S. Internal Revenue Serv ice F orm 8621
regarding distributions received on the ordinary shares and any gain realized on the disposition of the ordinary shares.

     On March 18, 2010, President Obama signed the Hiring Incentives to Restore Emp loy ment Act of 2010 (the ―Hiring Act‖). The Hiring
Act amends the Internal Revenue Code by adding a new provision (Sect ion 1298(f) that requires United States persons who are s hareholders of
a PFIC to file an annual report containing such informat ion as the Secretary may require.

       The Internal Revenue Service is developing further guidance regarding the new reporting obligations. In the meantime, persons that were
required to file Form 8621 prior to the enactment must continue to file Fo rm 8621 as provided in the Instructions to such for m (e.g., upon
disposition of stock of a PFIC, or with respect to a qualified elect ing fund). Shareholders of a PFIC that were not otherwise req uired to file
Form 8621 annually prior to March 18, 2010, will not be required to file an annual report as a result of the addition of Section 1298(f) for
taxab le years beginning before March 18, 2010.

      You are urged to consult your tax advisors regarding the application of the PFIC ru les to your investment in our ord inary sha res and the
elections discussed above.

   Information Reporting and Backup Withholding
      Div idend payments with respect to our ordinary shares and proceeds from the sale, exchange or redemption of our ord inary shar es or
warrants may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding at a current rate of
28%. Backup withholding will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any
other required certificat ion on U.S. Internal Revenue Service Form W -9 o r who is otherwise exempt fro m backup withholding. U.S. Holders
who are required to establish their exempt status generally must provide such certificat ion on U.S. Internal Revenue Service Form W-9. U.S.
Holders should consult their tax advisors regarding the application of the U.S. information reporting and backup withholding rules.

       Backup withholding is not an additional tax. A mounts withheld as backup withholding may be credited against your U.S. federal income
tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim
for refund with the U.S. Internal Revenue Serv ice and furnishing any required informat ion.


                                                 ENFORCEAB ILITY OF CIVIL LIAB ILITIES

      We are incorporated in the Cay man Islands because of the following benefits found there:

        •    political and economic stability;
        •    an effective judicial system;
        •    a favorable tax system;

        •    the absence of exchange control or currency restrict ions; and
        •    the availability of p rofessional and support services.

      However, certain d isadvantages accompany incorporation in the Cay man Islands. These disadvantages include:
        •    the Cayman Islands has a less developed body of securities laws than the United States and provides significantly less protection to
             investors; and

        •    Cay man Islands companies may not have standing to sue before the federal courts of the United State s.

      All of our operations are conducted in Ch ina, and the majority of our assets are located in China. A majority of our o fficers are nationals
or residents of jurisdictions other than the United States and a substantial portion of their assets are located outside the United States. As a
result, it may be d ifficu lt for a shareholder to effect service of process within the Un ited States upon these persons, or to enforce against us or
them judgments obtained in United States courts, including judg ments predic ated upon the civil liability provisions of the securities laws of the
United States or any state in the United States.

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                                                                  UNDERWRITING

      Subject to the terms and conditions in the underwriting agreement, dated              , 2010, by and between us and Ladenburg Thalmann &
Co. Inc., who is acting as the underwriter of this offering, the underwriter named belo w has agreed to purchase from us, on a firm co mmit ment
basis, the number of units set forth opposite its name belo w, at the public o ffering price, less the underwrit ing discount se t forth on the cover
page of this prospectus.


                        Underwriter                                                                            Number of Units
                        Ladenburg Thalmann & Co. Inc.
                        Rod man & Renshaw, LLC

                        Total

      The underwrit ing agreement provides for the purchase of a specific nu mber of units by the underwriter. The underwriter’s oblig ation is
several, which means that the underwriter is required to purchase a specified number of units, but is not responsible for the commit ment of any
other underwriter to purchase units.

      The underwrit ing agreement provides that the obligations of the underwriters to pay for and accept delivery of the units are subject to the
passing upon certain legal matters by counsel and certain conditions such as confirmat ion of the accuracy of representations and warranties by
us about our financial condition and operations.

       The units should be ready for delivery on or about           , 2010 against payment in immed iately available funds. The underwriters may
reject all or part of any order.

     Some of the underwriters are expected to make offers and sales both inside and outside the United States through their respective selling
agents.

     The address of Ladenburg Thalmann & Co. Inc. is 520 Madison Avenue, New York, NY 10022. The address of Rod man & Renshaw,
LLC is 1251 Avenue of the Americas, 20 th Floor, New Yo rk, NY 10020.

Over-allotment Option
       We have granted the underwriters an over-allot ment option. This option, which is exercisable for up to 45 days after the date of this
prospectus, permits the underwriters to purchase up to              additional units to cover over-allot ments. If the underwriters exercise all or part
of this option, they will purchase units covered by the option at the public offering price that appears on the cover page of this prospectus, less
the underwriting discount. If this option is exercised in full, the total price to the public will be $        and the total proceeds to us will be
$        . The underwriters have severally agreed that, to the extent the over-allot ment option is exercised, they will each purchase a number of
additional units proportionate to the underwriter’s in itial amount reflected in the foregoing table.

Listing
    Our ord inary shares are listed on the Nasdaq Capital Market under the symbol ―RCON‖. We expect the warrants to be listed under the
symbols ―RCONW‖.

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Commissions and Discounts
      The following table provides information regarding the amount of the discounts and commissions to be paid to the underwriters by us:

                                                                                                                   Total
                                                                                                      Without                    With
                                                                                                       Over-                     Over-
                                                                                 Per unit            Allotment                 Allotment

            Public o ffering price                                      $                       $                          $
            Underwrit ing discounts and commissions payable by
              us                                                        $                       $                          $
            Non-accountable expense allowance ( 1 )                     $                       $                          $
            Proceeds, before expenses, to us ( 2 )                      $                       $                          $

(1)   The non-accountable expense allowance of 0.6% of the gross proceeds of the offering is not payable with respect to the units sold upo n
      exercise of the underwriters’ over-allot ment option.
(2)   We estimate the total expenses of this offering excluding the underwriters ’ discount, together with the 0.6% non-accountable expense
      allo wance, will be appro ximately $       .

       We have agreed to sell the units to the underwriters at the public offering price less the underwriting dis count set forth on the cover page
of this prospectus. The underwriting discount will be equal to 6.75% of the gross proceeds received fro m the sale of the unit s. The underwriting
agreement also provides that Ladenburg Thalmann & Co. Inc., the representative of the underwriters, will be paid a non-accountable expense
allo wance equal to 0.6% o f the gross proceeds fro m the sale of the units offered by this prospectus ($37,500 of which has bee n previously
advanced to Ladenburg Thalmann & Co. Inc.), exclusive of any units purchased on exercise of the underwriters ’ over-allot ment option.

Pricing of Securities
      The representative has advised us that the underwriters propose to offer the units directly to the public at the public offer ing price that
appears on the cover page of this prospectus. In addition, the representative may offer some of the units to other securities dealers at such price
less a concession of $         per unit. The underwriters may also allow, and such dealers may reallow, a concession not in excess of
$         per unit to other dealers. After the units are released for sale to the public, the rep resentatives may change the offering p rice and other
selling terms at various times.

     The offering price of our units was determined by negotiation between us and the underwriters. The principal factors considered in
determining the public offering price o f the units included:
        •    the information in this prospectus and otherwise availab le to the underwriters;

        •    the history and the prospects for the industry in which we co mpete;
        •    the ability of our management;
        •    the prospects for our future earnings;

        •    the present state of our development and our current financial condition;
        •    the general condition of the economy and the securities markets in the United States at the time of this offering;
        •    the recent market prices of, and the demand for, publicly-traded securities of generally co mparable co mpanies, as well as our own
             recent market prices; and

        •    other factors as were deemed relevant.

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      We can offer no assurances that the public offering price in this offering will correspond to the price at wh ich our shares will t rade in the
public market fo llowing this offering when such shares trade separately from the units or that an active trading market for o ur shares will
continue after this offering.

Representati ve ’s Warrants
       We have also agreed to issue to Ladenburg Thalmann & Co. Inc. share purchase warrants to purchase 18,750 units. The warrants will
have an exercise price equal to 125% of the offering price of the units sold in this offering. The warrants are exercisable commencing on the
later of (i) our consummat ion of a merger, capital stock exchange, asset acquisition, offering or other similar business combination, or ( ii) 180
days after the effective date of the reg istration statement related to this offering, and wi ll be exercisable for five (5) years thereafter. The
warrant is not redeemable by us, and allows for ―cashless‖ exercise. Pursuant to the rules of the Financial Industry Regulatory Authority, Inc.,
or FINRA, and in part icular FINRA Ru le 5110, the warrants (and underlying shares) issued to Ladenburg Thalmann & Co. Inc. may not be
sold, transferred, assigned, pledged, or hypothecated, or the subject of any hedging, short sale, derivative, put or call tra nsaction that would
result in the effective d isposition of the securities by any person for a period of 180 days immediately following the date of delivery and
payment for the shares offered hereunder; provided, however, the warrant (and underlying shares) may be transferred to office rs or directors of
Ladenburg Thalmann & Co. Inc. and members of the underwrit ing syndicate and their affiliates as long as the warrants (and underlying shares)
remain subject to the lockup.

Lock-up Agreements
      Our officers, directors and stockholders who hold an aggregate of 5% of ou r outstanding ordinary shares will be subject to a lock-up
period of 180 days following the effective date of this prospectus. This means that, during the applicable lock -up period fo llo wing the date of
this prospectus, such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of Ladenburg
Thalmann & Co. Inc. Ladenburg Thalmann & Co. Inc. may also waive the terms of these lock-ups. See ―Shares Eligib le fo r Fut ure Sale.‖

       Ladenburg Thalmann & Co. Inc. has no present intention to waive or shorten the lock-up period; however, the terms of the lock-up
agreements may be waived at their discretion. In determin ing whether to waive the terms of the lock -up agreements, Ladenburg Thalmann &
Co. Inc. may base its decision on its assessment of the relat ive strengths of the securities markets and companies similar to ours in general, and
the trading pattern of, and demand for, our securit ies in general.

Other Matters
        The underwrit ing agreement provides for indemnification between the underwriters and us against specified liabilities, includin g
liab ilit ies under the Securities Act, and for contribution by us and the underwriters to payments that may be required to be made with respect to
those liabilities. We have been advised that, in the opinion of the Securities and Exchange Co mmission, indemnificat ion liabilit ies under the
Securities Act is against public policy as expressed in the Securities Act, and is therefore, unenforceable.

      A prospectus in electronic fo rmat may be made availab le on a website maintained by the representatives of the underwriters and may also
be made available on a website maintained by other underwriters. The underwriters may agree to allocate a nu mber of units to underwriters for
sale to their online bro kerage account holders. Internet distributions will be allocated by the representatives of the underwriters to unde rwriters
that may make Internet distributions on the same basis as other allocations. In connection with the offering, the underwr iters or syndicate
members may distribute prospectuses electronically. No forms of electronic p rospectus other than prospectuses that are printa ble as Adobe®
PDF will be used in connection with this offering.

      The underwriters have informed us that they do not expect to confirm sales of units offered by this prospectus to accounts over which
they exercise discretionary authority.

Stabilization
      Until the distribution of the units offered by this prospectus is completed, rules of the SEC may limit the ability of the underwriters to bid
for and to purchase our ordinary shares. As an exception to these rules, the

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underwriters may engage in transactions effected in accordance with Regulation M under the Securities Exchange Act of 1934 th at are intended
to stabilize, maintain or otherwise affect the price of our ord inary shares. The underwriters may engage in over-allot ment sales, syndicate
covering transactions, stabilizing transactions and penalty bids in accordance with Regulation M.

        •    Stabilizing transactions permit b ids or purchases for the purpose of pegging, fixing or maintain ing the price of the ordinary shares,
             so long as stabilizing bids do not exceed a specified maximu m.
        •    Over-allot ment involves sales by the underwriters of ord inary shares in excess of the number of ordinary shares the underwriters
             are obligated to purchase, which creates a short position. The short position may be either a covered short position or a naked short
             position. In a covered short position, the number of ordinary shares over-allotted by the underwriters is not greater than the number
             of ordinary shares that they may purchase in the over-allot ment option. In a naked short position, the number of ord inary shares
             involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short
             position by either exercising their over-allot ment option or purchasing ordinary shares in the open market.
        •    Covering transactions involve the purchase of securities in the open market after the distribution has been completed in order to
             cover short positions. In determining the source of securities to close out the short position, the underwriters will conside r, among
             other things, the price of securities available for purchase in the open market as compared to the price at wh ich they may purchase
             securities through the over-allotment option. If the underwriters sell mo re ordinary shares than could be covered by the
             over-allot ment option, creating a naked short position, the position can only be closed out by buying securities in the open market.
             A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure o n the
             price of the securities in the open market after pricing that could adversely affect investors who purchase in this offering.

        •    Penalty bids permit the underwriters to reclaim a selling concession from a selected dealer when the ordinary shares original ly sold
             by the selected dealer are purchased in a stabilizing or syndicate covering transaction.

      These stabilizing transactions, covering transactions and penalty bids may have the effect of raising or maintaining the market p rice of
our ordinary shares or preventing or retarding a decline in the market pr ice of our o rdinary shares. As a result, the price of our o rdinary shares
may be h igher than the price that might otherwise exist in the open market.

      Neither we nor the underwriters make any representation or prediction as to the effect that the transactio ns described above may have on
the prices of our ordinary shares. These transactions may occur on the Nasdaq Capital Market or on any other trading market. If any of these
transactions are commenced, they may be d iscontinued without notice at any time.

 Other Relati onshi ps
      Certain of the underwriters and their respective affiliates may in the future perform various financial advisory, investment banking or
other services for us or our affiliates, for which they will receive customary fees and expenses. As of the date of this prospectus no such
arrangement has been entered into.

 Stamp Taxes
      If you purchase our units offered in this prospectus, you may be required to pay stamp taxe s and other charges under the laws and
practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

Foreign Regul atory Restrictions on Purchase of Units
       We have not taken any action to permit a public offering of the units outside the United States or to permit the possession or distribution
of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform
themselves about and observe any restrictions relating to this offering of units and the distribution of the prospectus outside the United States.

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      People’s Republic of China. The underwriters have not circulated and will not circu late or distribute this prospectus in the PRC and the
underwriters have not offered or sold, and will not offer or sell to any person for re-offering or resale, directly or indirectly, any units to any
resident of the PRC except pursuant to applicable laws and regulations of the PRC.

      Cayman Islands. Th is prospectus does not constitute an invitation or offer to the public in the Cay man Islands of our units, wh ether by
way of sale or subscription. The underwriters have not offered or sold, and will not offer or sell, d irectly or indirectly, any units in the Cay man
Islands.

       Italy. This offering of the units has not been cleared by Consob, the Italian Stock Exchanges regulatory agency of public co mp anies,
pursuant to Italian securities legislation and, accordingly, no units may be offered, sold or delivered, nor may copies of th is prospectus or of
any other document relat ing to the units be distributed in Italy, except (1) to professional investors (operatori qualificati); o r (2) in
circu mstances which are exempted fro m the rules on solicitation of investments pursuant to Decree No. 58 and Article 33, firs t paragraph, of
Consob Regulation No. 11971 of May 14, 1999, as amended. Any offer, sale o r delivery of the units or distribution of copies of this prospectus
or any other document relating to the units in Italy under (1) or (2) above must be (i) made by an investment firm, bank or finan cial
intermediary permitted to conduct such activities in Italy in accordance with the Decree No. 58 and Legislat ive Decree No. 385 of September 1,
1993, or the Ban king Act; and (ii) in co mp liance with Art icle 129 of the Banking Act and the imp lementing guidelines of the B ank of Italy, as
amended fro m time to time, pursuant to which the issue or the offer of securities in Italy may need to be preceded and followed by an
appropriate notice to be filed with the Bank of Italy depending, inter alia, on the aggregate value of the securities issued or offered in Italy and
their characteristics; and (iii) in co mpliance with any other applicable laws and regulations.

      Germany. The offering of the units is not a public offering in the Federal Republic of Germany. The units may only be acquired in
accordance with the provisions of the Securities Sales Prospectus Act (Wertpapier-Verkaufsprospektgesetz), as amended, and any other
applicable German law. No application has been made under German law to publicly market the units in or out of the Federal Repu blic of
Germany. The units are not registered or authorized for distribution under the Securities Sales Prospectus Act and accordin gly may not be, and
are not being, offered or advertised publicly or by public pro motion. Therefo re, this prospectus is strictly for private use and the offering is only
being made to recipients to whom the document is personally addressed and does not constitute an offer or advertisement to the public. The
units will only be availab le to persons who, by profession, trade or business, buy or sell units for their own o r a third party’s account.

      France. The units offered by this prospectus may not be offered or sold, directly or indirect ly, to the public in France. This pro spectus
has not been or will not be submitted to the clearance procedure of the Autorit é des Marchés Financiers, or the AMF, and may not be released
or distributed to the public in France. Investors in France may only purchase the units offered by this prospectus for their o wn account and in
accordance with articles L. 411-1, L. 441-2 and L. 412-1 of the Code Monétaire et Financier and decree no. 98-880 dated October 1, 1998,
provided they are ―qualified investors‖ within the meaning of said decree. Each French investor must represent in writing that it is a qualified
investor within the meaning of the aforesaid decree. Any resale, d irect ly or indirectly, to the public of the units offered b y this prospectus may
be effected only in co mpliance with the above mentioned regulations.

       ―Les actions offertes par ce document d’information ne peuvent pas être, directement ou indirectement, offertes ou vendues au public en
France. Ce document d’informat ion n’a pas été ou ne sera pas soumis au visa de l’Autorité des Marchés Financiers et ne peut être diffusé ou
distribué au public en France. Les investisseurs en France ne peuvent acheter les actions offertes par ce document d ’informatio n que pour leur
compte propre et conformément au x articles L. 411-1, L. 441-2 et L. 412-1 du Code Monétaire et Financier et du décret no. 98-880 du 1
octobre 1998, sous réserve qu’ils soient des investisseurs qualifiés au sens du décret susvisé. Chaque investisseur doit déclarer par écrit qu’il est
un investisseur qualifié au sens du décret susvisé. Toute revente, directe ou indirecte, des actions offertes par ce document d ’informat ion au
public ne peut être effectuée que conformément à la réglementation susmentionnée.‖

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       Switzerland. This prospectus may only be used by those persons to whom it has been directly handed out by the offeror or its designated
distributors in connection with the offer described therein. The units are only offered to those persons and/or entities directly solicited by the
offeror or its designated distributors, and are not offered to the public in Switzerland. Th is prospectus constitutes neither a public offer in
Switzerland nor an issue prospectus in accordance with the respective Swiss legislation, in particu lar but not limited to Article 652A Sw iss
Code Ob ligations. Accordingly, this prospectus may not be used in connection with any other offer, whether private or public and shall in
particular not be distributed to the public in Switzerland.

       United Kingdom. In the United Kingdom, the units offered by this prospectus are directed to and will only be availab le for purchase to a
person who is an exempt person as referred to at paragraph (c) below and who warrants, represents and agrees that: (a) it has not offered or
sold, will not offer or sell, any units offered by this prospectus to any person in the United Kingdom except in circumstance s which do not
constitute an offer to the public in the Un ited Kingdom for the purposes of the section 85 of the Financial Services and Markets Act 2000 (as
amended) (―FSMA‖); and (b) it has comp lied and will co mply with all applicable provisions of FSMA and the regulations mad e thereunder in
respect of anything done by it in relation to the units offered by this prospectus in, fro m o r otherwise involving the United King dom; and (c) it
is a person who falls within the exemptions to Section 21 of the FSMA as set out in The Financial Services an d Markets Act 2000 (Financial
Pro motion) Order 2005 (―the Order‖), being either an investment professional as described under Article 19 or any body corporate (which itself
has or a group undertaking has a called up share capital or net assets of not less than £500,000 (if mo re than 20 members) or otherwise £5
million) or an unincorporated association or partnership (with net assets of not less than £5 million) or is a trustee of a high valu e trust or any
person acting in the capacity of director, officer o r emp loyee of such entities as defined under Article 49(2)(a) to (d) of the Order, or a person to
whom the invitation or inducement may otherwise lawfully be co mmunicated or cause to be communicated. The investment activity to wh ich
this document relates will only be available to and engaged in only with exempt persons referred to above. Persons who are not investment
professionals and do not have professional experience in matters relating to investments or are not an exempt person as descr ibed above, should
not review nor rely or act upon this document and should return this document immediately. It should be noted that this document is not a
prospectus in the United Kingdom as defined in the Prospectus Regulations 2005 and has not been approved by the Fin ancial Services
Authority or any competent authority in the United Kingdom.

      Norway. Th is prospectus has not been produced in accordance with the prospectus requirements laid down in the Norwegian Securities
Trading Act 1997 as amended. This prospectus has not been approved or disapproved by, or registered with, either the Oslo Stock Exchange or
the Norwegian Registry of Business Enterprises. This prospectus may not, either directly or indirectly be distributed to Norweg ian potential
investors.

      Denmark. This prospectus has not been prepared in the context of a public offering of securit ies in Den mark within the meaning of the
Danish Securit ies Trading Act No. 171 of 17 March 2005 as amended fro m time to time or any Executive Orders issued on the basis thereof
and has not been and will not be filed with or approved by or filed with the Danish Financial Supervisory Authority or any ot her public
authorities in Den mark. The offering of un its will only be made to persons pursuant to one or more of the exempt ions set out in Executive
Order No. 306 of 28 April 2005 on Prospectuses for Securit ies Admitted for Listing or Trade on a Regulated Market and on the First Public
Offer of Securities exceeding EUR 2,500,000 or Executive Order No. 307 of 28 April 2005 on Prospectuses for the First Public Offer of
Certain Securities between EUR 100,000 and EUR 2,500,000, as applicable.

     Sweden. Neither this prospectus nor the units offered hereunder have been registered with or approved by the Swedish Financial
Supervisory Authority under the Swedish Financial Instruments Trading Act (1991:980) (as amended), nor will such registration or approval be
sought. Accordingly, this prospectus may not be made availab le nor may the units offered hereunder be marketed or offered for sale in Sweden.

      No action may be taken in any jurisdiction other than the United States that would permit a public offering of our units or t he possession,
circulat ion or distribution of this prospectus in any jurisdiction where act ion for that pu rpose is required. Accordingly, our units may not be
offered or sold, d irectly or indirectly, and neither the prospectus nor any other offering material or advertisements in conn ection with our units
may be d istributed or published in or fro m any country or jurisdiction except under circu mstances that will result in co mpliance with any
applicable rules and regulations of any such country or jurisdiction.

                                                                          80
Table of Contents

                                                                LEGAL MATTERS

      Certain matters of Un ited States federal law will be passed on for us by Kaufman & Canoles, P.C., Rich mond, Virgin ia. Certain legal
matters relating to the offering as to Chinese law will be passed upon for us by Jingtian & Gongcheng, Beijing, People’s Republic of China.
The validity of the units and ordinary shares and certain legal matters relat ing to the offering as to Cay man Islands law wil l be passed upon for
us by Campbells, 4th Floor, Scotia Centre, P.O. Bo x 884, Georgetown, Grand Cay man, Cay man Islands. Kaufman & Canoles, P.C. may rely
upon Campbells with respect to matters governed by Cayman Islands law and Jingtian & Gongcheng with respect to matters governed by PRC
law. Certain legal matters as to U.S. federal securities law in connection with this offering will be passed upon for the underwriters by Ellenoff
Grossman & Schole LLP, New York, New York.


                                                                     EXPERTS

      Our consolidated and combined balance sheets as of June 30, 2009 and 2008, and our consolidated and combined statements of
operations, shareholders’ equity (deficit), and cash flows for the years ended June 30, 2009 and 2008, presented in Ch inese Yuan (RM B), have
been included herein and in the registration statement in reliance upon the report of Hansen, Barnett & Maxwell, P.C., an independent
registered public accounting firm, appearing elsewhere herein, and upon the authority of that firm as experts in accounting a nd auditing. While
Hansen, Barnett & Maxwell, P.C. have audited the financial statements for the years ended June 30, 2009 and 2008, we dis missed them as our
independent registered public accounting firm on October 13, 2009, and they have not been engaged to rev iew any quarterly reports for any
period after June 30, 2009.


                                                  INTEREST OF EXPERTS AND COUNS EL

      Attorneys with Kaufman & Canoles, P.C., representing our company with respect to this offering, beneficially own 33,000 ord inary
shares of our company as of the date of this prospectus.


                                              WHER E YOU CAN FIND MORE INFORMATION

      We have filed with the SEC a reg istration statement on Form S-1, as amended, under the Securit ies Act of 1933 with respect to our
ordinary shares offered by this prospectus. This prospectus does not contain all of the informat ion set forth in the registra tion statement and the
exhibits to the registration statement. For further information regarding us and our ordinary shares offered hereby, please refer t o the
registration statement and the exh ibits filed as part of the registration statement.

      This registration statement, including exh ibits thereto may be inspected without charge at the Public Reference Roo m maintain ed by the
SEC at 100 F Street, NE, Washington, D.C. 20549. You may obtain copies of the registration statement, including the exh ibits thereto, after
payment of the fees prescribed by the SEC. For addit ional informat ion regarding the operation of the Public Reference Roo m, y ou may call the
SEC at 1-800-SEC-0330. The SEC also maintains a website wh ich provides on-line access to reports and other informat ion regarding
registrants that file electronically with the SEC at the address: http://www.sec.gov.

                                                                         81
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                                                    RECON TECHNOLOGY, LTD
                                               INDEX TO FINANCIAL STATEMENTS

                                                                                                                     PAG
                                                                                                                      E

Report of Independent Registered Public Accounting Firm                                                              F-2
Consolidated Balance Sheets as of June 30, 2008 and 2009                                                             F-3
Co mbined and Consolidated Statements of Operat ions for the Years Ended June 30, 2008 and 2009                      F-4
Co mbined and Consolidated Statements of Shareholders’ Equity (Deficit) for the Years Ended June 30, 2008 and 2009   F-5
Co mbined and Consolidated Statements of Cash Flows for the Years Ended June 30, 2008 and 2009                       F-6
Notes to Combined and Consolidated Financial Statements                                                              F-8

                                                                   F-1
Table of Contents

               H ANSEN , B ARNETT & M AXWELL , P . C .                                       Registered wi th the Public Company
                      A Professional Corporation                                                Accounti ng Oversight Board
                CERTIFIED PUBLIC A CCOUNTANTS

                                                                                              A Member of the Forum of Firms

                          5 Triad Center, Suite 750
                       Salt Lake City, UT 84180-1128
                            Phone: (801) 532-2200
                             Fax: (801) 532-7944
                             www.hb mcpas.com
                                REPORT OF INDEPENDENT REGIS TER ED PUB LIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
of Recon Technology, Ltd:
We have audited the accompanying combined and consolidated balance sheets of Recon Technology, Ltd (―the Co mpany‖), as of June 30,
2008 and 2009, and the related co mbined and consolidated statements of operations, stockholders ’ equity (deficit), and cash flows for the years
then ended. These financial statements are the responsibility of the Co mpany ’s management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Co mpany Accounting Oversight Board (United States). Th ose
standards require that we plan and perfo rm the audit to obtain reasonable assurance about whether the financial statements ar e free of material
misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over fina ncial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circu mstances, but not for the purpose of expressing an opinion on the effectiveness of the company ’s internal control over financial reporting.
Accordingly, we exp ress no such opinion. An audit includes e xamining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, as well as evalu ating the overall
financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the combined and consolidated financial
position of Recon Technology, Ltd as of June 30, 2008 and 2009, and the comb ined and consolidated results of their operations and their cash
flows fo r the years then ended in conformity with accounting principles generally accepted in the United States of America.

                                                                                           HANS EN, B ARNETT & MAXWELL, P.C.

Salt Lake City, Utah
September 23, 2009

                                                                        F-2
Table of Contents

                                                        RECON TECHNOLOGY, LTD
                                                  CONSOLIDATED BALANCE S HEETS

                                                                                                  Chinese Yuan (Renminbi)             U.S. Dollars
                                                                                               June 30,             June 30,            June 30,
                                                                                                 2008                 2009                2009
                                                                                                                                      (Unaudited)
ASSETS
Current assets
Cash and cash equivalents                                                                  ¥    7,637,421      ¥     2,727,735    $        399,019
Trade accounts receivable, net of allo wance for doubtful accounts of ¥1,558,917 and
  ¥604,953 ($88,494), respectively                                                             29,870,110           44,103,981           6,451,629
Trade accounts receivable-related parties, net of allowance fo r doubtful accounts of ¥0
  and ¥350,498 ($51,272), respectively                                                          6,352,983            7,458,302           1,091,017
Other receivable, net of allowance for doubtful accounts of ¥299,150 and ¥1,291,923
  ($188,985), respectively                                                                      2,391,014            2,048,015             299,588
Other receivable-related parties, net of allo wance for doubtful accounts of ¥543,204
  and ¥169,074 ($24,733), respectively                                                              99,550              507,541              74,244
Purchase advances, net of allo wance for doubtful accounts of ¥851,962 and
  ¥1,239,234 ($181,278), respectively                                                           3,570,568            5,637,082             824,605
Purchase advances-related parties                                                                  22,238               73,028              10,683
Prepaid expenses                                                                                  112,975              338,072              49,454
Inventories                                                                                     8,776,117           10,710,018           1,566,685
Deferred tax assets                                                                             1,621,034                  —                   —
Deferred offering costs                                                                               —              1,622,048             237,277

Total current assets                                                                           60,454,010           75,225,822          11,004,201

Property and equipment, net of accu mulated depreciation of ¥ 685,461 and ¥1,006,761
  ($147,271), respectively                                                                        776,023            1,406,876             205,801

Total assets                                                                               ¥   61,230,033      ¥    76,632,698    $     11,210,002

LIAB ILITIES AND S HAREHOLDERS ’ EQUITY
Current liabilities
Trade accounts payable                                                                     ¥   16,242,323      ¥    15,601,101    $      2,282,164
Trade accounts payable-related parties                                                          1,257,278              189,744              27,756
Other payables                                                                                  3,847,756            1,767,005             258,481
Other payables-related parties                                                                  1,653,859               73,579              10,763
Deferred inco me                                                                                4,543,691            2,361,605             345,461
Advances from customers                                                                         1,068,311              910,215             133,148
Accrued payroll and employees ’ welfare                                                           465,875              393,074              57,500
Accrued expenses                                                                                  262,651              262,083              38,338
Taxes payable                                                                                   8,204,710            9,182,676           1,343,262
Short-term notes payable                                                                        2,639,058            3,143,792             459,881
Short-term notes payable-related parties                                                          840,000            3,344,377             489,223
Long-term notes payable-related parties, current portion                                           46,377                  —                   —
Deferred tax liabilit ies                                                                             —              2,365,225             345,990

Total current liabilities                                                                      41,071,889           39,594,476           5,791,969
Mi nority i nterest                                                                             5,210,560            6,839,616           1,000,514
Redeemable ordinary shares                                                                      1,388,641            1,434,342             209,819
Sharehol ders’ equity
Ordinary shares, $0.0185 U.S. dollar par value, 25,000,000 shares authorized and
  2,139,203 shares outstanding                                                                    300,534              300,534              43,963
Additional paid-in capital                                                                      8,732,266            8,732,266           1,277,375
Statutory reserves                                                                              1,687,772            1,687,772             246,891
Retained earnings                                                                               2,838,371           18,043,692           2,639,472

Total sharehol ders’ equity                                                                    13,558,943           28,764,264           4,207,701
Total liabilities and sharehol ders ’ equity                                             ¥   61,230,033     ¥   76,632,698   $   11,210,002


                     The accompanying notes are the integral part of these combined and consolidated financial statements.

                                                                     F-3
Table of Contents

                                                       RECON TECHNOLOGY, LTD
                                COMB INED AND CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                   Chinese Yuan (Renminbi)                   U.S. Dollars
                                                                                                                             For the Year
                                                                                         For the Year                       Ended June 30,
                                                                                        Ended June 30,                           2009

                                                                                 2008                     2009
                                                                                                                             (Unaudited)
Revenues
    Hardware                                                                ¥   58,043,813        ¥      70,121,586     $      10,257,542
    Service                                                                        894,194                1,495,662               218,789
    Software                                                                     1,422,051                  226,496                33,132
    Hardware-related parties                                                     3,138,876                2,143,590               313,569
    Service-related parties                                                      2,249,300                      —                     —
    Software -related parties                                                          —                  1,659,573               242,766

Total revenues                                                                  65,748,234               75,646,907            11,065,798
Cost of revenues                                                                39,771,955               45,758,804             6,693,700

Gross profit                                                                    25,976,279               29,888,103             4,372,098

Operating expenses
    Selling and distribution expenses                                            5,343,840                5,660,198               827,986
    General and administrative expenses                                          3,931,205                5,593,382               818,212

Total operating expenses                                                         9,275,045               11,253,580             1,646,198

Income from operations                                                          16,701,234               18,634,523             2,725,900
Subsi dy income                                                                    669,829                2,038,015               298,125
Interest income                                                                     18,963                   15,159                 2,217
Interest expense                                                                   (61,519 )               (113,179 )             (16,556 )
Other i ncome (expenses)                                                          (296,777 )                (10,700 )              (1,565 )

Income before income taxes and mi nority interest                               17,031,730               20,563,818             3,008,121
Provision for income taxes                                                      (4,665,897 )             (3,677,887 )            (538,010 )
Mi nority i nterest, net of income taxes                                        (1,264,933 )             (1,629,056 )            (238,302 )

Income from continuing operati ons                                              11,100,900               15,256,875             2,231,809
Income from operations of discontinued subsidi aries, net of income taxes          496,223                      —                     —

Net income                                                                      11,597,123               15,256,875             2,231,809
Accrued di vi dend for redeemable ordinary shares                                  (16,819 )                (51,554 )              (7,541 )

Net income avail able for ordinary sharehol ders                            ¥   11,580,304        ¥      15,205,321     $       2,224,268

Basic earnings per share:
    Income fro m continuing operations                                      ¥           5.19      ¥              7.13   $              1.04

     Income fro m discontinued operations                                   ¥           0.23      ¥              —      $              —

     Net inco me                                                            ¥           5.42      ¥              7.13   $              1.04

     Net inco me available for ordinary shareholders                        ¥           5.41      ¥              7.11   $              1.04

Basic weighted average ordinary shares outstanding                               2,139,203                2,139,203             2,139,203

Diluted earnings per share:
     Income fro m continuing operations                                     ¥           5.02      ¥              6.78   $              0.99

     Income (loss) fro m discontinued operations                            ¥           0.22      ¥              —      $              —
    Net inco me                                                                ¥          5.25      ¥          6.78        $        0.99

    Net inco me available for ordinary shareholders                            ¥          5.24      ¥          6.75        $        0.99

Diluted weighted average ordinary shares outstanding                                2,210,892             2,251,811            2,251,811


                   The accompanying notes are the integral part of these combined and consolidated financial statements.

                                                                   F-4
Table of Contents

                                                        RECON TECHNOLOGY, LTD
                    COMB INED AND CONSOLIDATED STATEMENTS OF S HAREHOLDERS ’ EQUIT Y (DEFICIT)

                                                                                Chinese Yuan (Renminbi)
                                                                          Additional                          Retained
                                                                           Paid-in            Statutory       Earnings
                                              Ordinary Shares              Capital            Reserves        (Deficit)            Total

                                           Shares         Amount
Balance as of June 30, 2007               2,139,203     ¥ 300,534     ¥     4,328,466    ¥      913,939   ¥   (7,968,100 )    ¥   (2,425,161 )
Capital contribution - Principal
  Shareholders                                      —           —           4,403,800                —                    —        4,403,800
Transfer fro m retained earn ings to
  statutory reserves                                —           —                 —             773,833          (773,833 )                —
Net inco me available for co mmon
  shareholders for the year                         —           —                 —                  —        11,580,304          11,580,304

Balance as of June 30, 2008               2,139,203         300,534         8,732,266         1,687,772         2,838,371         13,558,943
Net inco me available for co mmon
  shareholders for the year                         —           —                 —                  —        15,205,321          15,205,321

Balance as of June 30, 2009               2,139,203     ¥ 300,534     ¥     8,732,266    ¥    1,687,772   ¥   18,043,692      ¥   28,764,264


                     The accompanying notes are the integral part of these combined and consolidated financial statements.

                                                                      F-5
Table of Contents

                                                         RECON TECHNOLOGY, LTD.
                                COMB INED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                     Chinese Yuan (Renminbi)                     U.S. Dollars
                                                                                                                                 For the Year
                                                                                         For the Years                          Ended June 30,
                                                                                         Ended June 30,                              2009

                                                                                  2008                     2009
                                                                                                                                 (Unaudited)
Cash flows from operating acti vities:
    Net income avail able for common sharehol ders                           ¥   11,580,304         ¥     15,205,321        $       2,224,268
    Adjustments to reconcile net income to net cash provi ded by
       (used in) operating acti vities:
         Depreciat ion                                                              195,624                   321,300                  47,000
         Loss on sale of property and equipment                                     278,096                       —                       —
         Gain on sale of subsidiaries                                              (381,631 )                     —                       —
         Minority interest                                                        1,264,933                 1,629,056                 238,302
         Accrued dividend for redeemable ord inary shares                            16,819                    45,698                   6,685
         Deferred inco me taxes                                                    (157,445 )               3,986,259                 583,119
Changes in operating assets and liabilities, including discontinued
  operations:
         Trade accounts receivable, net                                          (1,987,501 )             (22,988,109 )            (3,362,752 )
         Trade accounts receivable-related parties, net                          (3,828,027 )              (1,105,319 )              (161,689 )
         Other receivables, net                                                  (1,489,921 )                 343,000                  50,175
         Other receivables-related parties, net                                   2,351,350                  (407,991 )               (59,682 )
         Purchase advances, net                                                    (844,241 )              (2,066,514 )              (302,294 )
         Purchase advances-related parties, net                                     297,102                   (50,790 )                 (7,430 )
         Prepaid expenses                                                          (112,632 )                (225,097 )               (32,928 )
         Inventories                                                             (4,130,185 )              (1,933,901 )              (282,895 )
         Trade accounts payable                                                  (3,437,345 )               6,774,850                 991,040
         Trade accounts payable-related parties                                     728,332                (1,067,534 )              (156,161 )
         Other payables                                                           3,444,546                (2,080,751 )              (304,377 )
         Other payables-related parties                                          (3,686,992 )                (980,280 )              (143,398 )
         Deferred inco me                                                         2,231,424                (2,182,086 )              (319,200 )
         Advances from customers                                                   (398,367 )                (158,096 )               (23,127 )
         Advances from customers-related parties                                   (846,630 )                     —                        —
         Accrued payroll and employees ’ welfare                                     13,897                   (72,802 )               (10,650 )
         Accrued expenses                                                           171,146                      (561 )                    (82 )
         Taxes payable                                                            4,856,818                   977,966                 143,059

Net cash (used in) provi ded by operati ng acti vities                       ¥    6,129,474         ¥      (6,036,381 )     $        (883,017 )


                    The accompanying notes are the integral part of these combined and consolidated financial statements.

                                                                      F-6
Table of Contents

                                                          RECON TECHNOLOGY, LTD
                        COMB INED AND CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                                                                       Chinese Yuan (Renminbi)                 U.S. Dollars
                                                                                                                               For the Year
                                                                                            For the Years                     Ended June 30,
                                                                                            Ended June 30,                         2009

                                                                                     2008                    2009
                                                                                                                                  (Unaudited)
Cash flows from investing acti vi ties:
    Payments for purchases of property and equipment                                ¥ (248,649 )             ¥ (952,153 )           $(139,283 )
    Proceeds from sale of property and equipment                                       269,500                      —                     —
    Decrease in cash resulting fro m de-consolidation of disposed
       subsidiaries                                                                   (286,439 )                      —                     —

Net cash used in investing acti vi ties                                               (265,588 )                 (952,153 )           (139,283 )

Cash flows from financing acti vities:
    Proceeds from contribution by Principal Shareholders                             4,400,000                      —                      —
    Proceeds from contribution by minority parties                                   1,100,000                      —                      —
    Proceeds from (repayment of) short-term notes payable, net                      (6,953,655 )              1,842,896                269,583
    Proceeds from short-term notes payable-related parties, net                        820,000                1,858,000                271,792
    Proceeds from issuance of redeemable shares                                      1,371,822                      —                      —
    Repayment of long-term notes payable                                            (1,247,460 )                    —                      —
    Payments for init ial public offering costs                                            —                 (1,622,048 )             (237,277 )

Net cash provi ded by (used i n) financing acti vi ties                               (509,293 )             2,078,848                 304,098

Net change in cash                                                                   5,354,593               (4,909,686 )             (718,202 )
Cash and cash equi valents at beginni ng of the year                                 2,282,828                7,637,421              1,117,221

Cash and cash equi valents at end of the year                                   ¥    7,637,421         ¥     2,727,735        $        399,019


Supplemental cash flow information
    Cash paid during the year for inco me taxes                                 ¥      379,714         ¥     9,578,370        $      1,401,145


                     The accompanying notes are the integral part of these combined and consolidated financial statements.

                                                                     F-7
Table of Contents

                                                       RECON TECHNOLOGY, LTD
                            NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS
                               (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

NOTE 1. ORGANIZATION AND BAS IS OF PRES ENTA TION
Organization - Recon Technology, Ltd (the ―Co mpany‖) was incorporated under the laws of the Cay man Islands on August 21, 2007 by
Mr. Yin Shenping, Mr. Chen Guangqiang and Mr. Li Hongqi (the ―Principal Shareholders‖) as a co mpany with limited liability. The Co mpany
provides services designed to automate and enhance the extract ion of petroleu m 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 Co mpany does not own any assets or conduct any operations. On November 15, 2007, Recon-HK established
one wholly owned subsidiary, Jin ing 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.

Recon-JN conducts its business through the following PRC legal entit ies that are consolidated as variable interest entities (―VIEs‖) and operate
in the Ch inese petroleum industry:

        •    Beijing BHD Petroleu m Technology Co., Ltd. (―BHD‖),
        •    Nanjing Recon Technology Co., Ltd. (―Nanjing Recon‖), and
        •    Jining ENI Energy Technology Co., Ltd. (―ENI‖)

The following former subsidiaries of BHD entit ies were sold in June, 2008:

        •    Inner Mongolia Adar Energy Technology (―Inner Mongolia Adar‖)
        •    Beijing Weigu Windows Co. Technology (―Beijing Weigu‖)

The following former subsidiary of Nanjing Recon was sold in June 2008:
        •    Xiamen Recon Technology, Ltd. (―Xiamen Recon‖).

Chinese laws and regulations currently do not prohibit or restrict foreign ownership in petroleu m businesses. However, Chines e laws and
regulations do prevent direct foreign investment in certain industries. On January 1, 2008, to protect the Co mpany’s shareholders fro m possible
future foreign ownership restrict ions, the Principal Shareholders, who also hold the controlling interest of BHD, Nanjing Rec on and ENI,
reorganized the corporate and shareholding structure of these entities by entering into certain exclusive agreements with Recon-JN, wh ich
entitles Recon-JN to receive a majority of the residual returns. On May 29, 2009 Recon JN and BHD, Nan jing Recon, and ENI entered into an
operating agreement to provide full guarantee for the perfo rmance of such contracts, agreements or transactions entered into by BHD, Nan jing
Recon, and ENI. As a result of the new agreement, Recon-JN will absorb 100% of the expected losses and receive 90% of the expected gains of
BHD, Nan jing Recon, and ENI, which results in Recon-JN being the primary beneficiary of these Co mpanies.

Recon-JN also entered into Share Pledge Agreements with the Principal Shareholders, who pledged all their equity interest in these entities to
Recon-JN. The Share Pledge Agreements, wh ich were entered into by each Principal Shareholder, p ledged each of the Principal Shareholders ’
equity interest in BHD, Nan jing Recon and ENI 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, Nanjing Recon, and ENI, states that Recon-JN will
provide technical consulting services to BHD, Nanjing Recon, and ENI in exchange for 90% of their annual net profits as a ser vice fee, wh ich
is to be paid quarterly.

In addition, Recon-HK entered into Option Agreements to acquire the Principal Shareholders ’ equity interest in these entities if or when
permitted by the PRC laws.

Based on these exclusive agreements, the Co mpany consolidates BHD, Nanjing Recon and ENI as VIEs as required by Financial Accounting
Standards Board (―FASB‖) Interpretation No. 46R (―FIN 46(R)‖), Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51
because the Company is the primary beneficiary of the VIEs.

                                                                      F-8
Table of Contents

                                                        RECON TECHNOLOGY, LTD
                     NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                              (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

On August 28, 2000 a Principal Shareholder of the Co mpany purchased a controlling interest in BHD wh ich was organized under the laws of
the PRC on June 29, 1999. At June 30, 2008 and 2009, the Principal Shareholder held 68% o wnership in BHD. BHD is co mbin ed with the
Co mpany through the date of the exclusive agreements, and is consolidated following January 1, 2008, the date of the agreements based on FIN
46(R). The profits and losses to the Company are allocated based upon the control agreements, which is 90% and 100%, respectively. The
profits allocated to the minority interest are the remain ing amount (10%).

On April 18, 2007, BHD organized Inner Mongolia Adar under the laws of the PRC, of which BHD owned a 70% majority interest. On
May 11, 2007 BHD created another subsidiary, Beijing Weigu, of which BHD held a 90% interest. On June 21, 2008 Beijing Weigu was sold
to unrelated parties. On June 24, 2008 Inner Mongolia Adar was sold to unrelated parties. Inner Mongolia Adar and Beijing Weigu are
consolidated with BHD for all periods presented to the date of disposition.

On January 21, 2003, ENI was organized under the laws the PRC. Principal Shareholders of the Co mpany own a controlling interest of ENI. At
June 30, 2008 and 2009, the Principal Shareholders held 80% ownership interest in ENI. ENI is co mbined with the Co mpany through the date
of the exclusive agreements, and is consolidated follo wing January 1, 2008, the date of the agreements based on FIN 46(R). Th e profits and
losses to the Company are allocated based upon the control agreements, which is 90% and 100%, respectively. The profits allocated to the
minority interest are the remain ing amount (10%).

On August 27, 2007 the Principal Shareholders of the Co mpany purchased a majority ownership of Nanjing Recon fro m a related party who
was a majority owner of Nanjing Recon. At June 30, 2008 and 2009, the Principal Shareholders held 80% ownership interest in Nanjing Recon.
Nanjing Recon was organized under the laws of the PRC on Ju ly 4, 2003. Nanjing Recon is comb ined with the Co mpany through the date of
the exclusive agreements, and is consolidated following January 1, 2008, the date of the agreements based on FIN 46(R). The profits and losses
to the Company are allocated based upon the control agreements, wh ich is 90% and 100%, respectively. The profits allocated to the minority
interest are the remain ing amount (10%).

Nature of Operations - The Co mpany is mainly engaged in (1) p roviding equip ment, tools and other hardware related to oilfield production
and management. Simple installations may happen in connection with some projects; (2) developing and selling its own specialized industrial
automation control and informat ion solutions. The products and services provided by the Company include:
        •    Oil Field Water Finding/Blocking Technology - The Co mpany developed this technology designed to find and block water content
             in petroleu m.

        •    High-Efficiency Heating Furnaces - High-Efficiency Heating Furnaces are designed to remove the impu rit ies an d to prevent
             solidification blockage in transport pipes carrying crude petroleum. Crude petroleu m contains certain impurities that must be
             removed before the petroleum can be sold, including water and natural gas.
        •    Multi-Purpose Fissure Shaper - Multipurpose fissure shapers improve the extractors ’ ability to test for and extract petroleu m
             which must be perforated into the earth before any petroleum extractor can test for the presence of oil.
        •    Supervisory Control and Data Acquisition (“SCADA”) - SCADA is an industrial co mputerized process control system for
             monitoring, managing and controlling petroleum ext raction. SCADA integrates underground and above -ground activities of the
             petroleum extraction industry. This system can help to manag e the oil extract ion process in real-time to reduce the costs associated
             with ext raction.

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                                                        RECON TECHNOLOGY, LTD
                     NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                              (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

NOTE 2. S IGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Translating Financial Statements - The acco mpanying comb ined and consolidated financial statements were
prepared in accordance with accounting principles generally accepted in the United States of America (―U.S. GAAP‖). They are comb ined
through the date of the exclusive agreements, and they are consolidated following January 1, 2008, the date of the agreements. The
accompanying combined and consolidated financial statements include the financial statements of the Co mpany, its subsidiaries, and VIEs for
which the Co mpany is the primary beneficiary. All inter-co mpany transactions and balances between the Co mpany, its subsidiaries and VIEs
are eliminated upon consolidation. In the opinion of management, all adjustments considered necessary for a fair presentation have been
included, and such adjustments are of a normal recurring nature.

Convenience Translation - The Co mpany’s functional currency is the Ch inese Yuan (―Ren minbi‖) and the acco mpanying combined and
consolidated financial statements have been expressed in Chinese Yuan. The co mbined and consolidated financial statements as of and for the
period ended June 30, 2009 have been translated into United States dollars (―U.S. dollars‖) solely for the convenience of the readers, are not
presented in accordance with U.S. GAAP and are unaudited. The co mbined and consolidated financial statements have been translated into
U.S. dollars at the rate of ¥ 6.8361 = US$1.00, the approximate exchange rate prevailing on March 31 30, 2010. 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 c onverted
into U.S. dollars.

Accounting Estimates - The preparation of the co mbined and consolidated financial statements in conformity with U.S. GAAP requires that
management make estimates and assumptions that affect the reported amounts of assets and liabil it ies and disclosure of contingent assets and
liab ilit ies at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting p eriods. Estimates are
adjusted to reflect actual experience when necessary. Significant accounting estimates reflected in the Co mpany’s combined and consolidated
financial statements include revenue recognition, allowance for doubtful accounts, and useful lives of property and equipment . Since the use of
estimates is an integral co mponent of the financial reporting process, actual results could differ fro m those estimates.

Fair Values of Financial Instruments - The carry ing amounts reported in the consolidated balance sheets for trade accounts receivable, other
receivables, advances to suppliers, trade accounts payable, accrued liabilit ies, advances from customers and notes payable ap proximate fair
value because of the immed iate or short-term maturity of these financial instruments.

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 maturit ies of no more than three months.

Trade Accounts and Other Receivables - Accounts receivable are recorded when revenue is recognized and are carried at original invoiced
amount less a provision for any potential uncollectible amounts. Provision is made against trade acc ounts and other receivables to the extent
they are considered to be doubtful. Other receivables are fro m t ransactions with non -trade customers.

Purchase Advances - Purchase advances are the amounts prepaid to suppliers for purchases of inventory and are re cognized 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. The method of determinin g inventory
costs is used consistently fro m year to year. Allowance for inventory obsolescence is provided when the market value of certain inventory
items are lower than the cost.

Valuation of Long-lived Assets - The carry ing values of the Co mpany’s long-lived assets are reviewed for impairment annually or whenever
events or changes in circu mstances indicate that they may not be recoverable. When such an event occurs, the Co mpany projects the
undiscounted cash flows to be generated from the use of the asset and its eventual disposition over the remaining life of the asset. If

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                                                         RECON TECHNOLOGY, LTD
                     NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                              (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

projections indicate that the carrying value of the long-lived asset will not be recovered, the carrying value of the long -lived asset is reduced by
the estimated excess of the carrying value over the projected discounted cash flows.

Advances from Customers - The Co mpany, as is common practice in the PRC, will often receive advance payments fro m its customers for its
products. The advances are recognized as revenue when the products are delivered. The Co mpany had advances from its customers in the
amount of ¥1,068,311, ¥ 910,215 ($133,148) at June 30, 2008 and 2009, respectively.

Stock Split - On June 8, 2009, in connection with the Co mpany’s contemplated in itial public offering (―IPO‖) o f ordinary shares, the Board of
Directors approved a 42.7840667-to-1 split of ordinary shares and redeemable ord inary shares to shareholders of record as of such date. All
references to the number of ordinary shares and per share amounts have been restated as appropriate to reflect the effect of the split for all
periods presented.

Revenue Recognition - The Co mpany recognizes revenue when the four following criteria are met : (1) persuasive evidence of an arrangement,
(2) delivery has occurred or services 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 client and the client has signed a comp let ion and
acceptance report, risk of loss has transferred to the client, client acceptance provisions have lapsed, or the Co mpany has objective evidence
that the criteria specified in client acceptance provisions have been satisfied. The sales price is not considered to be fixe d or determinable until
all contingencies related to the sale have been resolved.

Hardware:
      Revenue fro m hard ware 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.

Software:
      The Co mpany sells self-developed software. For software sales, the Co mpany recognizes revenues in accordance with the provisions of
      Statement of Position No. 97-2, ―Software Revenue Recognition,‖ and related interpretations. Revenue fro m software is recognized
      according to project contracts. Contract cost are accumulated during the periods of installation and testing or commissioning . Usually this
      is short term. Profits are not recognized until co mplet ion of the contracts. Costs included in inventory as work in process include direct
      materials, labor and related expense. Corporate general and ad ministrative expenses are charged to expense in the period they are
      incurred.

Services:
      The Co mpany provides services to improve software functions and system require ments on separated fixed-price contracts. Revenue is
      recognized on the completed contract method when acceptance is determined by a comp letion report signed by the customer. Defe rred
      revenue represents unearned amounts billed to customers related to service agreements.

Cost of Revenues - When the criteria for revenue recognition have been met, costs incurred are recognized as cost of revenue. Cost of revenues
include wages, materials, handling charges, and other expenses associated with manufactured products and service provided to customers; the
cost of purchased equipment and pipes.

Research and Development Expenses - Research and development costs are expensed when incurred. Total research and development
expenses were ¥101,288 and ¥420,166 ($61,463) for the years ended June 30, 2008 and 2009 respectively.

Subsidy Income - The Co mpany received grants of ¥669,829 and ¥2,038,015 ($298,125) fro m the local government for the year ended June 30,
2008 and 2009, respectively. These grants were given by the government to support local software co mpanies’ operation and research and
development. Grants related

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                                                         RECON TECHNOLOGY, LTD
                     NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                              (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

to research and development projects are recognized as subsidy income in the co mbined and consolidated statements of operatio ns when
related expenses are recorded. Grants in form of value-added-tax refund are recognized when received.

Share-Based Compensation - The Co mpany accounts for share-based compensation in accordance with SFAS No. 123(R), Share-Based
Payment . Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on
the fair value of the award and is recognized as expense over the applicable vesting period of the share award using the stra ight-line method.

Income Taxes - Inco me taxes are provided based upon the liability method of accounting pursuant to SFAS No. 109, Accounting for Income
Taxes . Provisions for inco me taxes are based on taxes payable or refundable for the current year and deferred taxes. Deferred taxe s are
provided on differences between the tax bases of ass ets 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 liabilit ies are expected to be realized or settled. As changes in tax laws or rates are enacted, deferre d
tax assets and liabilities are ad justed through the provision for inco me taxes. The Co mpany has not been subject to any income taxes in the
United States or the Cay man Islands.

Business Segments - The Co mpany operates in one industry which includes the sale of products for the oil field construction solely to
customers in China; therefore, no business segment information has been presented.

Earnings per Ordinary Share (“EPS”) - Basic EPS is co mputed by dividing net income availab le for co mmon shareholders by the weighted
average number of ord inary shares outstanding. Diluted EPS are co mputed by dividing net income availab le for co mmo n shareholders by the
weighted-average number of ordinary shares and dilutive potential ordinary share equivalents outstanding.

In accordance with SFAS 128, Earnings per Share , outstanding common shares that are contingently returnable and shares that are subject to
redemption are treated in the same manner as contingently issuable shares. Contingently issuable shares are considered outstanding for EPS
based on the assumption that the current status of the condition will remain unchanged until the continge ncy no longer exists. Accordingly, the
Co mpany’s 112,608 redeemable ord inary shares are currently excluded in the calculat ion of the basic EPS but are included in t he calcu lation of
diluted EPS.

                                                                                       Chinese Yuan (Renminbi)               U.S. Dollars
                                                                                                                             For the Year
                                                                                              For the Year                  Ended June 30,
                                                                                             Ended June 30,                      2009
                                                                                      2008                     2009
                                                                                                                               (Unaudited)
            Basic weighted average ordinary shares outstanding                        2,139,203                2,139,203          2,139,203
            Effect of redeemable ord inary shares (Note 6)                               71,688                  112,608            112,608
            Diluted weighted average ordinary shares outstanding                      2,210,892                2,251,811          2,251,811
            Net income from continuing operations                               ¥    11,100,900        ¥      15,256,875   $      2,231,809
                 Basic earn ing per share                                       ¥          5.19        ¥            7.13   $           1.04
                 Diluted earnings per share                                     ¥          5.02        ¥            6.78   $           0.99
            Income from discontinued operations                                 ¥       496,223        ¥              —    $             —
                Basic earn ing per share                                        ¥          0.23        ¥              —    $             —
                Diluted earnings per share                                      ¥          0.22        ¥              —    $             —
            Net income avail able for common sharehol ders                      ¥    11,580,304        ¥      15,205,321   $      2,224,268
                 Basic earn ings per share                                      ¥          5.41        ¥            7.11   $           1.04
                 Diluted earnings per share                                     ¥          5.24        ¥            6.75   $           0.99

                                                                         F-12
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                                                         RECON TECHNOLOGY, LTD
                     NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                              (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

Recently Enacted Accounting Standards - In December 2007, the Financial Accounting Standards Board (―FASB‖) issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51 , which changes the accounting and reporting
for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a comp onent of equity
separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as
equity transactions. In addition, net inco me attributable to the noncontrolling interest will be included in net inco me and, upon a loss of control,
the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in net income. SFAS No. 160 is
effective fo r the Co mpany beginning July 1, 2009, and will apply prospectively, except fo r the presentation and disclosure requirements, wh ich
will apply retrospectively. The Co mpany believes the adoption of SFAS No. 160 will not have a material impact on the financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations , wh ich replaces SFAS No. 141. The statement retains the
fundamental requirements in SFAS No. 141 that the acquisition method of accounting (previously referred to as the purchase method of
accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are
recognized as a result of business combinations. It also requires the capitalizat ion of in -process research and development at fair value and
requires the expensing of acquisition-related costs as incurred. In April 2009, the FASB issued FSP FAS 141(R)-1 which amen ds SFAS
No. 141(R) by establishing a model to account for certain pre-acquisition contingencies. Under the FSP, an acquirer is required to recognize at
fair value an asset acquired or a liability assumed in a bus iness combination that arises fro m a contingency if the acquisition -date fair value of
that asset or liab ility can be determined during the measurement period. If the acquisition -date fair value cannot be determined, then the
acquirer should follo w the recognition criteria in SFA S No. 5, Accounting for Contingencies, and FASB Interpretation No. 14, Reasonable
Estimation of the Amount of a Loss – an interpretation of FASB Statement No. 5. SFAS No . 141(R) and FSP FAS 141(R)-1 are effective fo r us
beginning July 1, 2009, and will apply prospectively to business combinations completed on or after that date. The impact of th e adoption of
SFAS No. 141(R) and FSP FAS 141(R)-1 will depend on the nature of acquisitions completed after the date of adoption.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities . SFAS No. 161 is intended
to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to
better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effect ive for financial
statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Co mpany
does not expect the adoption of SFAS No. 161 to have a material impact on its co mbined and consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles . SFAS No. 162 identifies the
sources of accounting principles and provides entities with a framework for selecting the principles used in preparation of f inancial statements
that are presented in conformity with GAAP. The current GAAP hierarchy has been criticized because it is directed to the auditor rather than
the entity, it is co mplex, and it ranks FASB Statements of Financial Accounting Concepts, which are subject to the same level of due process as
FASB Statements of Financial Accounting Standards, below industry practices that are widely recognized as generally accepted but that are not
subject to due process. The Board believes the GAAP h ierarchy should be directed to entities because it is the entity (not its auditors) that is
responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. The adoption of FASB
162 is not expected to have a material impact on the Co mpany ’s financial statements.

In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts . SFAS No. 163 requires that an
insurance enterprise recognize a claim liability prio r to an event of default (insured event) when there is evidence that cre dit deteriorat ion has
occurred in an insured financial obligation. Th is Statement also clarifies how SFAS No. 60, Accounting and Reporting by Insurance
Enterprises, as amended , applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account
for premiu m revenue and claim liabilities. This Statement also requires

                                                                         F-13
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                                                        RECON TECHNOLOGY, LTD
                     NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                              (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

expanded disclosures about financial guarantee insurance contracts. SFAS No. 163 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and all interim periods within those fiscal years, except for some d isclosures about the insurance
enterprise's risk-management activit ies. Early application is not permitted. The Co mpany does not expect the adoption of SFAS No. 161 to
have a material impact on its combined and consolidated financial statements.

In May 2008, the FASB issued FASB Staff Position (FSP) No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion (Including Partial Cash Settlement) . FSP No. APB 14-1 clarifies that convertible debt instruments that may be settled
in cash upon conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Op inion No. 14, Accounting for
Convertible Debt and Debt Issued with Stock Purchase Warrants, and specifies that issuers of such instruments should separately account for
the liability and equity components in a manner that will reflect the entity's nonconvertible debt borrowing rate when intere st cost is recognized
in subsequent periods. Effect ive for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. The Co mpany does not expect the adoption of SFAS No. 161 to have a material impact on its co mbined and consolidated
financial statements.

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities (FSP 03-6-1), which classifies unvested share-based payment awards that contain non-forfeitable rights to dividends or
dividend equivalents as participating securities and requires them to be included in the computation of earnings per share pu rsuant to the
two-class method described in SFAS No. 128, Earnings per Share ‖ FSP 03-6-1 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those years. It requires all prior period earn ings per share data presented to be
adjusted retrospectively. The Co mpany is currently evaluating the effect, if any, that the adoption of FSP 03-6-1 will have on its consolidated
financial position, results of operations and cash flows.

In September 2008, the FASB issued FSP No. 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An
Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161
(―FSP 133-1‖). FSP 133-1 requires more extensive disclosure regarding potential adverse effects o f changes in credit risk on the financial
position, financial performance, and cash flows of sellers of credit derivatives. FSP 133 -1 also amends FASB Interpretation No. 45,
Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others , to require
additional disclosure about the current status of the payment or performance risk o f a guarantee. FSP 133 -1 also clarifies the effective date of
FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities , by stating that the disclosures required should be
provided for any reporting period (annual or quarterly interim) beginning after November 15, 2008. The Co mpany is currently evaluating the
effect, if any that the adoption of FSP 133-1 will have on its consolidated financial position, results of operations and cash flows.

In December 2008, the FASB issued FSP 140-4 and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of Financial
Assets and Interests in Variable Interest Entities , which pro mptly improves disclosures by public co mpanies until the pending amend ments to
SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities and FIN No. 46, Consolidation
of Variable Interest Entities (revised December 2003)—an interpretation of A RB No. 51 (FIN 46(R)), are finalized and approved by the Board.
The FSP amends SFAS No. 140 to require public co mpanies to provide additional disclosures about transfers of fina ncial assets and variable
interests in qualifying special-purpose entities. It also amends FIN 46(R) to require public co mpanies to provide additional disclosures about
their involvement with variable interest entities. This FSP is effective for reporting periods ending after December 15, 2008. The Co mpany is
currently assessing the effect of SFAS 140-4 and FIN 46(R)-8 on its consolidated financial position and results of operations.

In April 2009, the FASB issued three FSPs that are intended to provide add itional applicat ion guidance and enhance disclosures about fair
value measurements and impairments of securities. FSP 157-4 clarifies the

                                                                       F-14
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                                                        RECON TECHNOLOGY, LTD
                     NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                              (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

objective and method of fair value measurement even when there has been a significant decrease in market activity for the ass et being
measured. FSP 115-2 and FSP 124-2 establish a new model fo r measuring other-than-temporary impairments for debt securities, including
establishing criteria for when to recognize a write-down through earnings versus other comprehensive income. FSP 107 -1 and APB 28-1
expands the fair value disclosures required for all financial instruments within the scope of SFAS No. 107, Disclosures about Fair Value of
Financial Instruments, to interim periods. The Co mpany does not expect the adoptions of the three Staff Po sitions have a material impact on its
combined and consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) , which is effective for the Co mpany beginning
July 1, 2010. Th is Statement amends Financial Accounting Standards Board Interpretation (―FIN‖) No. 46(R), Consolidation of Variable
Interest Entities an interpretation of ARB No. 51 , to require revised evaluations of whether entities represent variable interest entities, ongoing
assessments of control over such entities, and additional disclosures for variable interests. The Co mpany believes the adoption of this
pronouncement will not have a material impact on the financial statements.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles or SFAS No. 168. SFAS No. 168 will beco me the single source of authoritative nongovernmental U.S. GAAP,
superseding existing FASB, A merican Institute of Cert ified Public Accountants (AICPA), Emerging Issues Task Force (EITF), and related
accounting literature. SFAS No. 168 reorganizes the thousands of GAAP p ronouncements into roughly 90 accounting topics and displays them
using a consistent structure. Also included is relevant SEC guidance organized using the same topical structure in separate sections. SFAS
No. 168 will be effective for financial statements issued for reporting periods ending after September 15, 2009. This will have an impact on the
Co mpany’s financial disclosures since all future references to authoritative accounting literature will be references in accordance with SF AS
No. 168.

NOTE 3. TRADE ACCOUNTS REC EIVAB LE
Accounts receivable consisted of the follo wing at June 30, 2008 and 2009:

                                                                                 Chinese Yuan (Renminbi)                    U.S. Dollars
                                                                            June 30,                 June 30,                 June 30,
                                                                              2008                     2009                     2009
                                                                                                                            (Unaudited)
            Trade accounts receivable                                  ¥    31,429,027          ¥    44,708,934         $        6,540,123
            Allowance for doubtful accounts                                 (1,558,917 )               (604,953 )                  (88,494 )

            Trade accounts receivable, net                             ¥    29,870,110          ¥    44,103,981         $        6,451,629


NOTE 4. INVENTORIES
Inventories consisted of the following at June 30, 2008 and 2009:

                                                                                        Chinese Yuan (Renminbi)                  U.S. Dollars
                                                                                     June 30,             June 30,                 June 30,
                                                                                       2008                 2009                     2009
                                                                                                                                 (Unaudited)
            Purchased goods and raw materials                                    ¥    8,479,842       ¥       228,569        $         33,435
            Work in p rocess                                                             41,138               319,490                  46,736
            Fin ished goods                                                             255,137            10,161,959               1,486,514

            Total inventories                                                    ¥    8,776,117       ¥    10,710,018        $      1,566,685


                                                                        F-15
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                                                        RECON TECHNOLOGY, LTD
                     NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                              (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed on a straight -line basis over the estimated useful lives of the assets as
follows:

                       Motor vehicles                                                               10 Years
                       Office equip ment                                                            2-5 Years
                       Leasehold improvement                                                         5 years

Gain or loss on the sales or retirements is included in the co mbined and consolidated statements of operations. Depreciation expense was
¥195,624 and ¥ 321,300 ($ 47,000) for the year ended June 30, 2008 and 2009, respectively. Property and equipment consisted of the following
at June 30, 2008 and 2009:

                                                                                    Chinese Yuan (Renminbi)                 U.S. Dollars
                                                                               June 30,                 June 30,              June 30,
                                                                                 2008                     2009                  2009
                                                                                                                            (Unaudited)
            Motor vehicles                                               ¥        684,183          ¥      1,464,918     $       214,292
            Office equip ment and fixtures                                        777,301                   779,257             113,991
            Leasehold improvement                                                     —                     169,462              24,789

            Total property and equipment                                        1,461,484                2,413,637             353,072
            Less: Accumulated depreciat ion                                      (685,461 )             (1,006,761 )          (147,271 )

            Property and equipment, net                                  ¥        776,023          ¥      1,406,876     $       205,801


NOTE 6. S HAREHOLDERS’ EQUITY
Ordinary Shares - When the Company was incorporated in Cay man Islands on August 21, 2007, 25,000,000 o rdinary shares were authorized,
and 2,139,203 ord inary shares were issued to the Principal Shareholders, at a par value of $0.0185 each. On Ju ly 29, 2009, the Co mpany
completed its IPO by offering 1,700,000 ord inary shares at $6.00 per share as discussed in Note 13.

Statutory Reserves - According to the Articles of Incorporation, the Co mpany is required to transfer a certain portion of its net profit, as
determined under PRC accounting regulations, from current net inco me to the statutory reserve fund. As of June 30, 2008 and 2009, the
balance of total statutory reserves was ¥1,687,772 and ¥ 1,687,772 ($246,891).

Redeemable Ordinary Shares - On December 10, 2007, the Co mpany signed an Ordinary Shares Subscription Agreement (the ―Agreement‖)
to sell 112,608 ord inary shares to an investor at an aggregate consideration of $200,000. Net total p roceeds of $200,000 were received by the
Co mpany during March and April, 2008.

The ordinary shares issued are subject to redemption under certain conditions. In the event that the Company fails to list on a recognized stock
exchange or complete a qualified IPO within 18 months after the signature of the Agreement, the Co mpany shall repay all the consideration
plus 5% of the consideration per annum to the investor. The three Principal Shareholders, Nan jing Recon, ENI, and BHD severally and jointly
guaranteed the payment.

The shares issued are only conditionally redeemable as described above and are therefore not classified as a liability. However, redemption of
the shares is not solely with in the control of the Co mpany; therefore, the shares are classified outside of permanent equity. During the year
ended June 30, 2009, the Co mpany accrued dividends in the amount of ¥51,554 ($7,541) on the redeemab le ord inary shares, which are reported
as part of the carrying value of the redeemable o rdinary shares in the accompanying consolidated balance sheets. As discussed in Note 13, upon
the completion of the IPO in July 2009, all the 112,608 redeemable ord inary shares outstanding were automatically converted i nto
non-redeemable ord inary shares pursuant to the Agreement.

                                                                        F-16
Table of Contents

                                                          RECON TECHNOLOGY, LTD
                      NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                               (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

Share-based Awards Plan - In June 2009, the Board of Directors and the shareholders of the Company adopted the 2009 Stock Incentive Plan
(the ―2009 Plan‖). The 2009 Plan provides for the granting of share options and restricted ordinary shares to employees, non -emp loyee
directors and consultants of the Company. Options granted un der the 2009 Plan may be Incentive Stock Opt ions or Non-statutory Stock
Options. Non-employee directors and Consultants are not eligib le to receive the award of an Incentive Stock Option. The Co mpensation
Co mmittee of the Board is entitled to establish the term, vesting conditions and exercise price of the options as well as the vesting conditions
and transferability of restricted shares. Under the 2009 Plan, 790,362 unissued ordinary shares have been reserved for issuance. As discussed in
Note 13, under the 2009 Plan, the Co mpany granted options to purchase 293,000 ordinary shares to its employees and non -employee directors
on July 29, 2009.

NOTE 7. INCOME TAXES
The Co mpany is not subject to any income taxes in the United States or the Cay man Islands and ha d minimal operations in jurisdictions other
than the PRC. ENI, BHD and Nan jing Recon are subject to PRC’s inco me taxes as PRC domestic co mpanies. Before the implementation of the
new Enterprise Inco me Tax Law (―EIT Law‖), PRC do mestic companies are generally subject to an enterprise income tax (―EIT‖) rate of
33.0%. On March 16, 2007, the National People’s Congress of China passed the new EIT Law, and on December 6, 2007, the State Council of
China passed the Implementing Rules for the EIT Law (―Imp lementing Rules‖) which took effect on January 1, 2008. The new amended EIT
Law introduces a wide range of changes which include, but are not limited to, the unificat ion of the inco me tax rate fo r do me stic-invested and
foreign-invested enterprises at 25%. As a res ult, inco me tax rate for BHD and ENI was reduced fro m 33% to 25% in calendar y ear 2008 and
after.

As approved by the local tax authority in the PRC, Nanjing Recon was entitled to a tax holiday with 50% tax exempt ion for cal endar year 2006
and 2007. Nanjing Recon is also a government-certified high technology company and is subject to an income tax rate of 15%. As a result,
Nanjing Recon was subject to an income tax rate of 7.5% for calendar year 2007 and 15% for calendar year 2008 and after.

Deferred taxes are co mprised of the following:

                                                                                   Chinese Yuan (Renminbi)                 U.S. Dollars
                                                                                           June 30,                          June 30,
                                                                                  2008                 2009                    2009
                                                                                                                           (Unaudited)
            Allowance for doubtful receivables                                ¥    656,110      ¥       913,943        $      133,694
            Deferred revenue and cost recognition in tax return                    964,924           (3,901,616 )            (570,737 )
            Loss carryforward                                                          —                622,448                91,053

            Total deferred inco me tax assets (liabilities)                   ¥   1,621,034     ¥    (2,365,225 )      $     (345,990 )


                                                                       F-17
Table of Contents

                                                          RECON TECHNOLOGY, LTD
                      NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                               (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

Following is a reconciliat ion of inco me taxes at the calculated statutory rates:

                                                                                  Chinese Yuan (Renminbi)                     U.S. Dollars
                                                                                       For the Years                         For the Years
                                                                                      Ended June 30,                        Ended June 30,
                                                                                2008                    2009                     2009
                                                                                                                              (Unaudited)
            Income tax calculated at statutory rates                     ¥      4,934,326          ¥     4,722,553          $       690,826
            Nondeductible expenses (non-taxable income)                           650,344                  (90,090 )                (13,179 )
            Benefit of favorable rate for high-technology
              companies                                                       (1,184,710 )               (588,251 )                 (86,051 )
            Benefit of operating loss carryforwards                                  —                   (622,448 )                 (91,053 )
            Effect of change in inco me tax rates                                253,541                 (132,485 )                 (19,380 )
            Effect of non-taxable parent company inco me                          12,396                  388,608                    56,847

            Provision for inco me taxes                                  ¥      4,665,897          ¥     3,677,887          $       538,010


The provision for inco me taxes is comprised of the following:

                                                                                       Chinese Yuan (Renminbi)                    U.S. Dollars
                                                                                            For the Years                        For the Years
                                                                                           Ended June 30,                       Ended June 30,
                                                                                     2008                    2009                    2009
                                                                                                                                  (Unaudited)
            Current income taxes                                                ¥    4,823,342           ¥     2,435,342        $       356,248
            Deferred inco me taxes                                                    (157,445 )               1,242,545                181,762

            Provision for inco me taxes                                         ¥    4,665,897           ¥     3,677,887        $       538,010


NOTE 8. NOTES PAYAB LE
Notes payable consist of the follo wing:

                                                                                               Chinese Yuan (Renminbi)              U.S. Dollars
                                                                                            June 30,             June 30,             June 30,
                                                                                              2008                 2009                 2009
                                                                                                                                    (Unaudited)
            Short-term notes payable due to non-rel ated parties:
            Due-on-demand note payable, no interest                                    ¥     2,049,058         ¥   1,374,888        $   201,122
            Short-term note payable, no interest, matures on December 31,
              2009                                                                                  —                193,504            28,306
            Short-term notes payable, interest at 6%, matures on December 9,
              2008 and 2009, respectively                                                      590,000               625,400            91,485
            Short-term note payable, no interest, matures on December 31,
              2009                                                                                  —                300,000            43,885
            Short-term note payable, no interest, matures on May 10, 2010                           —                650,000            95,083

            Total short-term notes payable due to non-related parties                  ¥     2,639,058         ¥   3,143,792        $   459,881


                                                                         F-18
Table of Contents

                                                       RECON TECHNOLOGY, LTD
                     NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                              (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

                                                                                             Chinese Yuan (Renminbi)       U.S. Dollars
                                                                                          June 30,            June 30,       June 30,
                                                                                            2008                2009           2009
                                                                                                                           (Unaudited)
            Short-term notes payable due to rel ated parties:
            Due-on-demand note payable to Principal Shareholders, no interest         ¥         —         ¥      376,377   $   55,057
            Short-term note payable to a Principal Shareholder ’s family
              member, interest at 6%, matures on May 5, 2008 and 2009,
              respectively                                                                 140,000               182,000       26,623
            Short-term note payable to a Principal Shareholder ’s family
              member, interest at 6%, matures on December 9, 2008 and 2009,
              respectively                                                                  50,000                53,000         7,753
            Short-term note payable to management, interest at 6%, matures on
              December 9, 2008 and 2009, respectively                                      550,000               583,000       85,283
            Short-term note payable to management, no interest, matures on
              April 28, 2008 and 2009, respectively                                        100,000               100,000       14,628
            Short-term note payable to management, interest at 3.72%, matures
              on April 21, 2009                                                                 —              2,050,000       299,879

            Total short-term notes payable due to related parties                     ¥ 840,000           ¥    3,344,377   $   489,223


NOTE 9. CONCENTRATIONS
In fiscal year 2008, the Co mpany’s two largest customers accounted for approximately 59% and 33% of its revenue; in fiscal y ear 2009, the
largest two customers represented about 49% and 43% of the Co mpany ’s revenue. In fiscal year 2008, the Co mpany’s largest supplier
accounted for 17% of its cost of revenue.

NOTE 10. COMMITMENTS AND CONTINGENCIES
The Co mpany leases offices in Beijing, Nan jing and Shandong. The amount of co mmit ments for non -cancelable operating leases for 2010 is
¥97,200 ($14,219). All the lease agreements exp ire in 2010.

NOTE 11. RELATED PARTY TRANSACTIONS
Receivables from related parties - At June 30, 2008 and 2009, the Co mpany had net trade receivables fro m related parties of ¥ 6,352,983 and
¥7,458,302 ($1,091,017), respectively, for the sale of goods to related parties and net other receivables fro m related parties of ¥ 99,550 and
¥507,541 ($74,244), respectively.

Payables to related parties - At June 30, 2008 and 2009, the Co mpany owed related parties ¥1,257,278 and ¥189,744 ($27,756), respectively,
for the purchase of goods. The Company also had other payables to related parties of ¥1,653,859 and ¥ 73,579 ($10,763), respectively, due to
Principal Shareholders and companies under common ownership for pay ments of expenses made on behalf of the Co mpany.

Sales to related parties - At June 30, 2008 and 2009, the Co mpany had sales to a Company under common control in the amounts of
¥5,388,176 and ¥3,803,163, respectively.

Leases from related parties - On January 1, 2009, the Co mpany entered into a one year agreement with Mr. Chen Guangqiang for the lease of
office space. The terms of the agreement state that the Company will lease the property for one year, and pay Mr. Chen Guangqiang ¥4,500 per
month.

The Co mpany also rents office space fro m Mr. Yin Shenping’s wife. The Co mpany pays ¥15,000 per month to Mr. Yin Shenping’s wife for its
use.

                                                                      F-19
Table of Contents

                                                        RECON TECHNOLOGY, LTD
                      NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                               (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

NOTE 12. DISCONTINUED OPERATIONS
In June 2008, the Co mpany comp leted the sale of Inner Mongolia Adar, Weigu Windows and Xiamen Recon. Inner Mongolia Adar and Weigu
Windows were both the majo rity-owned subsidiaries of BHD, and Xiamen Recon was the majority-owned subsidiary of Nanjing Recon. The
Co mpany determined that these three subsidiaries met the criteria fo r classification as discontinued operations in the last q uarter of fiscal year
2008. The financial results associated with the three subsidiaries for the year ended June 30, 2008 are included in d iscontinued operations.

Summarized Statements of Income data fo r discontinued operations is as follows:

                                                                                        Chinese Yuan (Renminbi)               U.S. Dollars
                                                                                             For the Years                    For the Year
                                                                                            Ended June 30,                   Ended June 30,
                                                                                         2008                  2009               2009
                                                                                                                              (Unaudited)
            Revenue                                                                 ¥    3,163,542           ¥ —            $           —

            Income(loss) before provision for income tax                                   276,993              —                       —
            Provision for inco me tax                                                     (162,401 )            —                       —

            Income fro m discontinued operations, net of tax                               114,592              —                       —
            Gain on disposal of discontinued operations                                    381,631              —                       —

            Income (loss) fro m discontinued operations, net of tax                 ¥      496,223           ¥ —            $           —


NOTE 13. S UBS EQUENT EV ENTS
Share-based Payments - As discussed in Note 6, the Co mpany granted options to purchase 293,000 ordinary shares under the 2009 Plan to its
emp loyees and non-employee directors on July 29, 2009. The options have an excise price of $6.00 equal to the IPO price of the Co mpany and
will be vested over a period of five years, with the first 20% vesting on July 29, 2010. The options will exp ire ten years after the date of grant,
on July 28, 2019. The grant date fair value of the options was of ¥8,616,898 ($1,260,499) will be recognized as compensation expense over the
requisite service period of 5 years. The following table presents the assumptions used in the Black-Scholes valuation model to estimate the fair
values of the share options granted:

                       Risk-free interest rate                                                                           2.69 %
                       Div idend yield                                                                                      0%
                       Expected volatility                                                                              77.57 %
                       Expected life (in years)                                                                       6.25-10

The risk-free rate for periods of the option is based on the U.S. Treasury yield curve in effect at the time of g rant. The dividend yield is
calculated based on management’s estimate of d ividends to be paid on the underlying stock. The expected volatility is calculated using
historical data obtained fro m an appropriate index due to lack of the Co mpany ’s own historical trad ing data. The expected life is calculated
based on management’s estimated life of the instrument.

Placement Agent Warrants - As discussed in Note 6, the Co mpany completed its IPO offering on July 31, 2009, and the gross proceeds
received by the Co mpany for the Offering were $10,200,000 (1,700,000 ord inary shares at $6.00 per share) before the cash offe ring costs of
¥9,651,771 ($1,411,883).

In connection with the Offering, the Co mpany sold the placement agent warrants to purchase 170,000 o rdinary shares at $7.20 p er share for a
nominal amount. These warrants are exercisable for a period of five years. The Co mpany has agreed to file, during th e five year period at its
cost, at the request of the holders of a majority of the placement agents warrants and the underlying ordinary shares, and to use its best efforts
to cause to become effective a registration statement under the Securities Act, as required to permit the public sale of ord inary shares issued or
issuable upon exercise of the placement agent’s warrants. The Co mpany accounted for the warrants as an additional offering cost with an
estimated value of ¥4,213,304 ($616,332.). The following table presents the assumptions used in Black-Scholes valuation model to estimate the
fair values of the placement agent warrants sold:

                       Risk-free interest rate                                                                          2.69 %
                       Div idend yield                                                                                     0%
                       Expected volatility                                                                             77.57 %
Expected life (in years)          5

                           F-20
Table of Contents

                                                        RECON TECHNOLOGY, LTD
                     NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                              (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

The risk-free rate for periods of the warrants is based on the U.S. Treasury yield curve in effect at the time of grant. The d ividend yield is
calculated based on management’s estimate of d ividends to be paid on the underlying stock. The expected volatility is calculated using
historical data obtained fro m an appropriate index due to lack of the Co mpany ’s own historical trad ing data. The expected life is calculated
based on management’s estimated life of the instrument.

On July 31, 2009 ord inary shares of the Company co mmenced trading on NASDAQ Exchange. The Co mpany has 3,951,811 ordinary shares
issued and outstanding at July 31, 2009.

NOTE 14. PARENT COMPANY ONLY CONDENS ED FINANCIAL INFORMATION
Basis of presentation - For the purpose of presenting parent company only condensed financial in formation, the Co mpany recorded its interest
in subsidiaries and variable interest entities under the equity method of accounting in the condensed balance sheets and rep orted its share of the
profit (loss) of its subsidiaries and variable entities as equity in (profit) loss of subsidiaries and variable interest entities in the condensed
statements of operations. These parent-company-only financial statements should be read in conjunction with the Co mpany’s combined and
consolidated financial statements.


                                                       RECON TECHNOLOGY, LTD
                                                      CONDENS ED B ALANCE S HEETS

                                                                                                     Chinese Yuan (Renminbi)                U.S. Dollars
                                                                                                             June 30,                        June 30,

                                                                                                    2008                 2009                  2009
                                                                                                                                            (Unaudited)
ASSETS
   Cash and cash equivalents                                                                  ¥     1,370,000     ¥            22       $             3
   Receivables fro m a subsidiary                                                                         —             1,373,487               200,917
   Interests in subsidiaries and variable interest entities                                        13,597,887          28,844,818             4,219,486

Total assets                                                                                  ¥    14,967,887     ¥    30,218,327       $     4,420,406


LIAB ILITIES AND S HAREHOLDERS ’ EQUITY
Current liabilities
    Other payable                                                                             ¥           582     ¥               —     $             —
    Other payable - related parties                                                                    19,721                  19,721               2,886

Total current Liabilities                                                                              20,303               19,721                 2,886
Redeemable ordinary shares                                                                          1,388,641            1,434,342               209,819
Sharehol ders’ equity
    Ordinary shares, $0.0185 U.S. dollar par value, 25,000,000 shares authorized and
       2,139,203 shares outstanding                                                                   300,534             300,534                43,963
    Additional paid-in capital                                                                      8,732,266           8,732,266             1,277,375
    Statutory reserves                                                                              1,687,772           1,687,772               246,891
    Retained earnings                                                                               2,838,371          18,043,692             2,639,472

Total sharehol ders’ equity                                                                        13,558,943          28,764,264             4,207,701

Total liabilities and sharehol ders ’ equity                                                  ¥    14,967,887     ¥    30,218,327       $     4,420,406


                                                                        F-21
Table of Contents

                                                           RECON TECHNOLOGY, LTD
                      NOTES TO COMB INED AND CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                               (INFORMATION IN UNITED S TATES DOLLARS IS UNAUDITED)

                                                      RECON TECHNOLOGY, LTD
                                                CONDENS ED STATEMENTS OF OPERATIONS

                                                                                      Chinese Yuan (Renminbi)                     U.S. Dollars
                                                                                           For the Years                         For the Years
                                                                                          Ended June 30,                        Ended June 30,
                                                                                   2008                      2009                    2009
                                                                                                                                  (Unaudited)
General, ad ministrative and selling expense                                  ¥       (25,959 )      ¥                —     $              —
Other inco me (expenses)                                                                  —                         5,855                  856

Operating income (l oss)                                                              (25,959 )                     5,855                  856

Profit fro m variable interest entities and subsidiaries                          11,623,048                15,251,020              2,230,954
Interest income                                                                           34                       —                      —

Net inco me                                                                       11,597,123                15,256,875              2,231,810
Div idends on redeemable ordinary shares                                             (16,819 )                 (51,554 )               (7,541 )

Net Income available for common sharehol ders                                 ¥   11,580,304         ¥      15,205,321      $       2,224,269


                                                                                      Chinese Yuan (Renminbi)                    U.S. Dollars
                                                                                           For the Years                         For the Year
                                                                                          Ended June 30,                        Ended June 30,
                                                                                   2008                      2009                    2009
                                                                                                                                 (Unaudited)
Cash flows from operating acti vities:
Net inco me available for co mmon shareholders                                ¥   11,580,304         ¥      15,205,321      $       2,224,269
Adjustments to reconcile net inco me (loss) to net cash provided by (used
  in) operating activit ies:
     Equity in (profit) loss of subsidiaries and variable interest entities       (11,623,048 )            (15,251,020 )           (2,230,953 )
     Expense paid by shareholders as contribution                                       3,800                      —                      —
     Div idends on redeemable ordinary shares                                          16,819                   51,554                  7,541
     Remeasurement (gain) o r loss                                                        —                     (1,764 )                 (259 )
Changes in current assets and liabilit ies
     Receivables fro m a subsidiary                                                       —                 (1,373,487 )             (200,917 )
     Other payables                                                                       582                     (582 )                  (85 )
     Other payables-related parties                                                    19,721                      —                      —

Net cash used in operating acti vities                                                 (1,822 )             (1,369,978 )             (200,404 )

Cash flows from financing acti vities:
Proceeds from issuance of redeemable ordinary shares                                1,371,822                        —                     —

Net cash provi ded by financing acti vities                                         1,371,822                        —                     —

Net change in cash                                                                  1,370,000               (1,369,978 )             (200,404 )
Cash and cash equi valents at beginni ng of year                                          —                  1,370,000                200,407

Cash and cash equi valents at end of year                                     ¥     1,370,000        ¥                22    $                    3


                                                                       F-22
Table of Contents

                                                    RECON TECHNOLOGY, LTD


INDEX TO FINA NCIA L STATEM ENTS                                             PA GE
Consolidated Balance Sheets                                                     F-1
Consolidated Statements of Operations and Comp rehensive Income                 F-2
Consolidated Statements of Cash Flows                                           F-3
Notes to the Consolidated Financial Statements                              F-4-F23
Table of Contents

                                                                     RECON TECHNOLOGY, LTD
                                                                   CONSOLIDATED B ALANCE S HEETS

                                                                                                                          Chinese Yuan (Renminbi)                  U.S. Dollars
                                                                                                                     June 30, 2009       March 31, 2010           March 31, 2010
                                                                                                                                           (Unaudited)             (Unaudited)
ASSETS
Current assets
Cash and cash equivalents                                                                                        ¥        2,727,735    ¥       22,292,927     $          3,261,059
Trade accounts receivable, net of allowance for doubtful accounts of ¥604,953 ($88,570) and
   ¥1,993,588($291,627), respectively                                                                                    44,103,981            87,749,487               12,836,191
Trade accounts receivable-related parties, net of allowance for doubt ful accounts of ¥350,498 ($51,316) and
   ¥0($0), respectively                                                                                                   7,458,302                   —                        —
Other receivables, net of allowance for doubtful accounts of ¥1,291,923 ($189,149) and ¥158,968($23,254),
   respectively                                                                                                           2,048,015             6,565,432                 960,406
Other receivables -rel ated parties, net of allowance for doubt ful accounts of ¥169,074 ($24,754) and ¥0($0),
   respectively                                                                                                             507,541                   —                        —
Purchase advances, net of allowance for doubtful accounts of ¥1,239,234 ($181,435) and ¥654,740($95,777),
   respectively                                                                                                           5,637,082            38,239,189                5,593,714
Purchase advances -rel ated parties                                                                                          73,028                   —                        —
Prepaid expenses                                                                                                            338,072             1,116,579                  163,336
Inventories                                                                                                              10,710,018            13,152,071                1,923,914
Deferred offering costs                                                                                                   1,622,048                   —                        —

Total current assets                                                                                                     75,225,822           169,115,685               24,738,621
Property and equipment, net of accumulated depreci ation of ¥1,006,761 ($147,398) and
   ¥1,085,419($158,778), respectively                                                                                     1,406,876             1,505,068                 220,165

                                                                                                                 ¥       76,632,698    ¥      170,620,753     $         24,958,785


LIABILITIES AND EQ UITY
Current liabilities
Trade accounts payable                                                                                           ¥       15,601,101    ¥       17,582,246     $          2,571,970
Trade accounts payable-related parties                                                                                      189,744                   —                        —
Other payables                                                                                                            1,767,005             2,607,624                  381,449
Other payables -rel ated parties                                                                                             73,579                   —                        —
Deferred income                                                                                                           2,361,605             4,184,521                  612,121
Advances from customers                                                                                                     910,215                25,650                    3,752
Accrued payroll and employees’ wel fare                                                                                     393,074               296,635                   43,392
Accrued expens es                                                                                                           262,083               293,760                   42,972
Taxes payable                                                                                                             9,182,676            18,884,422                2,762,455
Short-term notes payable                                                                                                  3,143,792             3,602,881                  527,037
Short-term notes payable-related parties                                                                                  3,344,377             4,147,657                  606,729
Deferred tax liabilities                                                                                         ¥        2,365,225    ¥        3,694,658     $            540,463

Total current liabilities                                                                                                39,594,476            55,320,053                8,092,341

Redeemable common stock                                                                                                   1,434,342                   —                        —
Equity
common stock, $0.0185 U.S. dollar par value, 25,000,000 shares authorized; 2,139,203 and 3,951,811 shares
   issued and outstanding                                                                                                   300,534              529,637                    77,476
as of June 30, 2009 and March 31, 2010
Additional paid-in capital                                                                                                8,732,266            68,734,489               10,054,635
Appropriated retained earnings                                                                                            1,687,772             3,286,861                  480,809
Unappropri ated retained earnings                                                                                        18,043,692            33,720,232                4,932,671
Accumulated other comprehensive income                                                                                          —                (128,902 )                (18,856 )

Total controlling shareholders’ equity                                                                                   28,764,264           106,142,317               15,526,736
Non-controlling interest, net of tax                                                                                      6,839,616             9,158,383                1,339,709

Total equity                                                                                                             35,603,880           115,300,700               16,866,444

                                                                                                                 ¥       76,632,698    ¥      170,620,753     $         24,958,785
See notes to the consolidated financial statements.

                       F-1
Table of Contents

                                                   RECON TECHNOLOGY, LTD
                               CONSOLIDATED S TATEMENTS OF OPERATIONS AND COMPREHENS IVE INCOME

                                                                                                 Chinese Yuan (Renminbi)                                  U.S. Dollars
                                                                            For the Nine Months ended              For the Three Months ended             For the Nine
                                                                                     March 31,                              March 31,                      March 31,
                                                                              2010                2009               2010                2009                 2010
                                                                          (Unaudited)          (Unaudited)        (Unaudited)         (Unaudited)         (Unaudited)
Revenues
Hardware                                                                 ¥   90,932,348     ¥   57,656,322      ¥   24,578,963      ¥   12,124,602    $      13,301,787
Service                                                                       7,675,214          1,495,662           1,709,402              95,662            1,122,747
Software                                                                        226,496            226,496                 —               226,495               33,132
Hardware — relat ed parties                                                         —            2,143,590                 —                   —                    —
Software — related parties                                                          —              649,572                 —                   —                    —

Total revenues                                                               98,834,057         62,171,642          26,288,365          12,446,759           14,457,667
Cost of revenues                                                             56,007,688         37,608,500          14,538,530           6,467,134            8,192,930

Gross margin                                                                 42,826,369         24,563,142          11,749,835           5,979,625            6,264,737

Selling and distribution expenses                                             7,557,188          4,760,272           1,534,090           1,422,598            1,105,482
General and administrative expenses                                           9,803,491          3,867,763           3,337,591             640,148            1,434,077

Operating expenses                                                           17,360,679          8,628,035           4,871,681           2,062,746            2,539,559

Income from operations                                                       25,465,690         15,935,107           6,878,153           3,916,878            3,725,178
Subsidy income                                                                1,178,034          2,038,015              20,000             373,400              172,325
Interest income                                                                   5,693             12,608                 (79 )               683                  833
Interest expens e                                                              (110,075)          (152,405 )           (32,762 )           (92,376)             (16,102 )
Other income (expens es)                                                        471,914                —               389,668             (38,167)              69,033

Income before income taxes and non-controlling interest                      27,011,256         17,833,325            7,254,979          4,160,419             3,951,267
Provision for income taxes                                                   (7,189,566)        (3,481,115)          (2,082,801)          (230,006)           (1,051,706)

Income from continuing operations                                            19,821,690         14,352,210           5,172,178           3,930,413            2,899,561
Loss from operations of discontinued subsidiaries, net of income taxes              —             (442,547 )               —              (442,547)                 —

Net income                                                                   19,821,690         13,909,663           5,172,178           3,487,866            2,899,561
Non-controlling interest, net of tax                                         (2,318,767)        (1,574,687)           (647,827 )          (456,265)            (339,194 )
Accrued dividend for redeemable                                                     —              (51,331 )               —               (17,044)                 —
common stock

Net income available for common shareholders                             ¥   17,502,923     ¥   12,283,645      ¥    4,524,351      ¥    3,014,557    $       2,560,367


Basic earnings per share:
Income from continuing operations                                        ¥         5.28     ¥         6.71      ¥         1.31      ¥         1.84    $            0.77


Loss from discontinued operations                                        ¥         —        ¥         (0.21 )   ¥          —        ¥        (0.21)   $             —


Net income                                                               ¥         5.28     ¥         6.50      ¥         1.31      ¥         1.63    $            0.77


Net income available for common shareholders                             ¥         4.66     ¥         5.74      ¥         1.14      ¥         1.41    $            0.68


Basic weighted average of common stock outstanding                            3,753,350          2,139,203           3,951,811           2,139,203            3,753,350


Diluted earnings per share:
Income from continuing operations                                        ¥         5.27     ¥         6.37      ¥         1.29      ¥         1.75    $            0.77


Loss from discontinued operations                                        ¥         —        ¥         (0.20 )   ¥          —        ¥        (0.20)   $             —


Net income                                                               ¥         5.27     ¥         6.18      ¥         1.29      ¥         1.55    $            0.77


Net income available for common shareholders                             ¥         4.65     ¥         5.46      ¥         1.13      ¥         1.34    $            0.68


Diluted weighted average of common stock outstanding                          3,763,408          2,251,811           4,002,298           2,251,811            3,763,408


Comprehensive income
Net income                                                                   19,821,690         13,858,332           5,172,178           3,470,822            2,899,561
Foreign currency translation adjustment                                         119,992                —               119,992                 —                 17,553
Comprehensive income                                                          ¥   19,941,682   ¥   13,858,332   ¥     5,292,170   ¥   3,470,822   $   2,917,114
Comprehensive income attributable to non-controlling interest                      2,330,766        1,574,687           659,826         456,265         340,950

Comprehensive income attributable to common shareholders                      ¥   17,610,916   ¥   12,283,645   ¥     4,632,344   ¥   3,014,557   $   2,576,164




                                                                See notes to the consolidated financial statements.

                                                                                        F-2
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                                                         RECON TECHNOLOGY, LTD
                                              CONSOLIDATED FINANCIAL STATEMENTS OF CAS H FLOW

                                                                                           Chinese Yuan (Renminbi)                         U.S. Dollars
                                                                                           For the Nine Months ended               For the Nine Months ended
                                                                                                   March 31,                               March 31,
                                                                                          2010                    2009                        2010
Cash flows from operating activities:                                                  (Unaudited)             (Unaudited)                (Unaudited)
Net income                                                                           ¥    19,821,690         ¥    14,352,210     $                      2,899,561
Adjustments to reconcile net income to net cash used in operating activities:
   Depreciation                                                                              263,036                248,401                               38,477
   Share-based compensation expens es                                                      1,178,701                    —                                172,423
   Accrued dividend for redeemable common stock                                                  —                   51,331                                  —
   Increase in deferred taxes                                                              1,329,433                    —                                194,472
Changes in operating assets and liabilities:
   Trade accounts receivable, net                                                        (43,645,506)            (20,455,176)                          (6,384,562)
   Trade accounts receivable-related parties, net                                          7,458,302              (1,630,676)                           1,091,017
   Other receivables, net                                                                 (4,517,417)               (501,661 )                           (660,818 )
   Other receivables related parties, net                                                    507,541                 117,794                               74,244
   Purchase advances, net                                                                (33,963,030)               (134,115 )                         (4,968,188)
   Prepaid expenses                                                                         (778,507 )              (354,169 )                           (113,882 )
   Inventories                                                                            (2,442,053)              1,441,121                             (357,229 )
   Trade accounts payable                                                                  1,981,145               3,528,582                              289,806
   Trade accounts payable-related parties                                                   (189,744 )              (965,826 )                            (27,756 )
   Other payables                                                                            840,619              (1,767,525)                             122,968
   Other payables -rel ated parties                                                           73,579              (1,337,918)                              10,763
   Deferred income                                                                         1,822,916              (1,508,896)                             266,660
   Advances from customers                                                                  (884,565 )               107,345                             (129,396 )
   Accrued payroll                                                                           (96,439 )                   —                                (14,107 )
   Accrued employees’ wel fare                                                                   —                   (81,921 )                                —
   Accrued expens es                                                                          31,677                 (18,333 )                              4,634
   Taxes payable                                                                           9,701,746               6,044,796                            1,419,193

Net cash used in provided by operating activities                                    ¥   (41,506,877)       ¥     (2,864,636)    $                     (6,071,719)

Cash flows from investing activities:
  Purchases of property and equipment                                                       (371,162 )              (781,397 )                            (54,294 )
  Proceeds from sale of property and equipment                                                   320                     —                                     47
  Payment of short-term notes receivable                                                         —                (1,356,496)                                 —

Net cash used in investing activities                                                ¥      (370,842 )      ¥     (2,137,893)    $                        (54,248 )

Cash flows from financing activities:
  Proceeds from stock issuance                                                            60,209,057                     —                             8,807,516
  Proceeds from short-term notes payable                                                     459,089               1,831,655                              67,157
  Proceeds from short-term notes payable-related party                                       803,280                 184,377                             117,506

Net cash provided by financing activities                                            ¥    61,471,426        ¥      2,016,032     $                     8,992,178

Effect of exchange rate fluctuation on cash and cash equivalent                              (28,514 )                   —                                 (4,171 )

Increase (decreas e) in cash and cash equivalents                                    ¥    19,565,192        ¥     (3,037,828)    $                     2,862,040
Cash and cash equivalents at beginning of period                                           2,727,735               7,637,421                             399,019

Cash and cash equivalents at end of period                                           ¥    22,292,927        ¥      4,599,593     $                     3,261,059


Supplemental cash flow information
Cash paid for interest                                                                          —                       —                                    —
Cash paid for taxes                                                                  ¥       98,834                 323,340                               14,458


                                                           See notes to the consolidated financial statements.

                                                                                  F-3
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                                                  RECON TECHNOLOGY, LTD
                                      NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

NOTE 1. ORGANIZATION AND BAS IS OF PRES ENTATION
Organization – Recon Technology, Ltd (the ―Co mpany‖) was incorporated under the laws of the Cay man Islands on August 21, 2007 by
Mr. Yin Shenping, Mr. Chen Guangqiang and Mr. Li Hongqi (the ―Principal Shareholders‖) as a co mpany with limited liability. The Co mpany
provides services designed to automate and enhance the extract ion of petroleu m 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 Co mpany does not own any assets or conduct any operations. On November 15, 2007, Recon-HK established
one wholly owned subsidiary, Jin ing 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.

Recon-JN conducts its business through the following PRC legal entit ies that are consolidated as variable interest entities (―VIEs‖) and operate
in the Ch inese oilfield equip ment & service industry:
Beijing BHD Petroleu m Technology Co., Ltd. (―BHD‖),
Nanjing Recon Technology Co., Ltd. (―Nanjing Recon‖), and
Jining ENI Energy Technology Co., Ltd. (―ENI‖)

The following former subsidiaries of BHD entit ies were sold by June 2008:
Inner Mongolia Adar Energy Technology (―Inner Mongolia Adar‖)
Beijing Weigu Windows Co. Technology (―Beijing Weigu‖)

The following former subsidiaries of Nan jing Recon were sold by June 2009:
Xiamen Recon Technology, Ltd. (―Xiamen Recon‖).
Xiamen Hengda Haitian (―Hengda Hait ian‖)
Beijing YabeiNuoda Technology, Ltd. (―Yabei Nuoda‖).

Chinese laws and regulations currently do not prohibit or restrict foreign ownership in petroleu m businesses. However, Chinese laws and
regulations do prevent direct foreign investment in certain industries. On January 1, 2008, to protect the Co mpany’s shareholders fro m possible
future foreign ownership restrict ions, the Principal Shareholders, who also hold the controlling interest of BHD, Nanjing Recon and ENI,
reorganized the corporate and shareholding structure of these entities by entering into certain exclusive agreements with Rec on-JN, wh ich
entitles Recon-JN to receive a majority of the residual returns. On May 29, 2009 Recon JN and BHD, Nan jing Recon, and ENI entered into an
operating agreement to provide full guarantee for the perfo rmance of such contracts, agreements or transactions entered into by BHD, Nan jing
Recon, and ENI. As a result of the new agreement, Recon-JN will absorb 100% of the expected losses and receive 90% of the expected gains of
BHD, Nan jing Recon, and ENI, which results in Recon-JN being the primary beneficiary of these Co mpanies.

Recon-JN also entered into Share Pledge Agreements with the Principal Shareholders, who

                                                                      F-4
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                                                  RECON TECHNOLOGY, LTD
                                     NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

pledged all their equity interest in these entities to Recon-JN. The Share Pledge Agreements, which were entered into by each Principal
Shareholder, pledged each of the Principal Shareholders ’ equity interest in BHD, Nanjing Recon and ENI as a guarantee fo r the service
payment under the Service Agreement.

The Service Agreement, entered into on January 1, 2008, between Recon-JN and BHD, Nanjing Recon, and ENI, states that Recon-JN will
provide technical consulting services to BHD, Nanjing Recon, and ENI in e xchange for 90% of their annual net profits as a service fee, wh ich
is to be paid quarterly.

In addition, Recon-HK entered into Option Agreements to acquire the Principal Shareholders ’ equity interest in these entities if or when
permitted by the PRC laws.

Based on these exclusive agreements, the Co mpany consolidates BHD, Nanjing Recon and ENI as VIEs as required by Financial Acc ounting
Standards Board (―FASB‖) Interpretation No. 46R (―FIN 46(R)‖) (ASC Topic 810), Consolidation of Variable Interest Entities, an
Interpretation of ARB No. 51 (ASC Top ic 810) because the Co mpany is the primary beneficiary of the VIEs.

On August 28, 2000 a Principal Shareholder of the Co mpany purchased a controlling interest in BHD wh ich was organized under the laws of
the PRC on June 29, 1999. As at December 31, 2008 and 2009, the Principal Shareholder held 67.5% o wnership in BHD. BHD is co mbined
with the Co mpany through the date of the exclusive agreements, and is consolidated follo wing January 1, 2008, the date of the agreements
based on FIN 46(R) (ASC Topic 810). The profits and losses to the Company are allocated based upon the control agreeme nts, which is 90%
and 100%, respectively. The profits allocated to the minority interest are the remaining amount (10%).

On April 18, 2007, BHD organized Inner Mongolia Adar under the laws of the PRC, of which BHD owned a 70% majority interest. On
May 11, 2007 BHD created another subsidiary, Beijing Weigu, of which BHD held a 90% interest. On June 21, 2008 Beijing Weigu was sold
to unrelated parties. On June 24, 2008 Inner Mongolia Adar was sold to unrelated parties. Inner Mongolia Adar and Beijing Weigu are
consolidated with BHD for all periods presented to the date of disposition.

On January 21, 2003, ENI was organized under the laws the PRC. Principal Shareholders of the Co mpany own a controlling interest of ENI. As
at December 31, 2008 and 2009, the Principal Shareholders held 80% o wnership interest in ENI. ENI is comb ined with the Company through
the date of the exclusive agreements, and is consolidated follo wing January 1, 2008, the date of the agreements based on FIN 46(R) (ASC
Topic 810). The profits and losses to the Company are allocated based upon the control agreements, which is 90% and 100%, respectively. The
profits allocated to the minority interest are the remain ing amount (10%).

On August 27, 2007 the Principal Shareholders of the Co mpany purchased a majority ownership of Nanjing Recon fro m a related party who
was a majority owner of Nanjing Recon. At September 30, 2008 and 2009, the Principal Shareholders held 80% o wnership interest in Nanjing
Recon.

                                                                      F-5
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                                                  RECON TECHNOLOGY, LTD
                                     NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

Nanjing Recon was organized under the laws of the PRC on Ju ly 4, 2003. Nanjing Recon is comb ined with the Co mpany through the date of
the exclusive agreements, and is consolidated following January 1, 2008, the date of the agreements based on FIN 46(R) (ASC Topic 810). The
profits and losses to the Company are allocated based upon the control agreements, wh ich is 90% and 100%, respectively. The profits allocated
to the minority interest are the remaining amount (10%).

Nature of Operations – The Co mpany is main ly engaged in (1) provid ing equipment, tools and other hardware related to oilfield production
and management. Simple installations may happen in connection with some projects; (2) developing and selling its own specialized industrial
automation control and informat ion solutions. The products and services provided by the Company include:
Oil Field Water Finding/Blocking Technology – The Company developed this technology designed to find and block water content in
petroleum.

High-Efficiency Heating Furnaces – High-Efficiency Heat ing Furnaces are designed to remove the impurit ies and to prevent solid ification
blockage in transport pipes carrying crude petroleum. Crude petroleu m contains certain impu rit ies that must be removed before the petroleum
can be sold, including water and natural gas.

Multi-Purpose Fissure Shaper – Multipurpose fissure shapers improve the extractors ’ ability to test for and extract petroleu m which must be
perforated into the earth before any petroleum extractor can test for the presence of oil.

Supervisory Control and Data Acquisition (“SCADA”) – SCA DA is an industrial co mputerized process control system for mon itoring,
managing and controlling petroleum ext raction. SCADA integrates underground and above -ground activities of the petroleum ext raction
industry. This system can help to manage the oil extract ion process in real-time to reduce the costs associated with extraction.

                                                                      F-6
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                                                    RECON TECHNOLOGY, LTD
                                       NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

NOTE 2. S IGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Translating Financial Statements – The accompanying consolidated financial statements were prep ared in
accordance with accounting principles generally accepted in the United States of America (―U.S. GAAP‖). They are co mbined through the date
of the exclusive agreements, and they are consolidated following January 1, 2008, the date of the agreements. The accompanying consolidated
financial statements include the financial statements of the Co mpany, its subsidiaries, and VIEs for which the Co mpany is the primary
beneficiary. All inter-co mpany transactions and balances between the Company, its subsidiaries and VIEs are eliminated upon consolidation. In
the opinion of management, all adjustments considered necessary for a fair presentation have been included, and such adjustme nts are of a
normal recurring nature.

Convenience Translation – The Co mpany’s functional currency is the Ch inese Yuan (―Ren minbi‖) and the accompanying consolidated
financial statements have been expressed in Ch inese Yuan. The consolidated financial statements as of and for the period ended March 31,
2010 have been translated into United States dollars (―U.S. dollars‖) solely for the convenience of the readers and are unaudited. The
translation has been made at the rate of ¥ 6.8361 = US$1.00, the appro ximate exchange rate prevailing on March 31, 2010. These translated
U.S. dollar amounts should not be construed as representing Chinese Yuan amounts or that the Chinese Yuan amounts have been o r could be
converted into U.S. dollars.

Accounting Estimates – 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 liabilit ies 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 Co mpany ’s consolidated financial statements
include revenue recognition, allowance fo r doubtful accounts, and useful lives of property and equipment. Since the use of es timates is an
integral co mponent of the financial reporting process, actual results could differ fro m those estimates.

Fair Values of Financial Instruments – The carrying amounts reported in the consolidated balance sheets for trade accounts receivable, other
receivables, advances to suppliers, trade accounts payable, accrued liabilit ies, advances from customers and notes payable ap proximate fair
value because of the immed iate or short-term maturity of these financial instruments.

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 maturit ies of no more than three months.

Trade Accounts and Other Receivables – Accounts receivable are recorded when revenue is recognized and are carried at orig inal invoiced
amount less a provision for any potential

                                                                        F-7
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                                                    RECON TECHNOLOGY, LTD
                                       NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

uncollectible amounts. Provision is made against trade accounts and other receivables to the extent they are considered to be doubtful. Other
receivables are fro m transactions with non-trade customers.

Purchase Advances – Purchase advances are the amounts prepaid to suppliers for purchases of inventory and are recognized 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. The method of determining inventory
costs is used consistently fro m year to year. Allowance for inventory obsolescence is provided when the market value of certain inventory
items are lower than the cost.

Valuation of Long-lived Assets – The carry ing values of the Co mpany’s long-lived assets are reviewed for impairment annually or whenever
events or changes in circu mstances indicate that they may not be recoverable. When such an event occurs, the Co mpany projects the
undiscounted cash flows to be generated from the use of the asset and its eventual disposition over the remaining life of the asset. If projections
indicate that the carrying value of the long-lived asset will not be recovered, the carrying value of the long -lived asset is reduced by the
estimated excess of the carrying value over the projected discounted cash flows.

Advances from Customers – The Co mpany, as is common pract ice in the PRC, will often receive advance payments from its customers for its
products. The advances are showed as current liabilit ies and are recognized as revenue when the products are delivered.

Stock Split – On June 8, 2009, in connection with the Co mpany’s contemplated in itial public offering (―IPO‖) of co mmon shares, the Board of
Directors approved a 42.7840667-to-1 split of co mmon shares and redeemable co mmon shares to shareholders of record as of such date. All
references to the number of co mmon shares and per share amounts have been restated as appropriate to reflect the effect of the split for all
periods presented.

Revenue Recognition – The Co mpany recognizes revenue when the four following 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 client and the c lient has signed a
complet ion and acceptance report, risk of loss has transferred to the client, client acceptance provisions have lapsed, or th e Co mpany has
objective evidence that the criteria specified in client 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.

Hardware:
Revenue fro m hard ware sales is generally recognized when the product is shipped to the customer and when there are no unfulfilled co mpany
obligations that affect the customer’s final acceptance of the arrangement.

                                                                        F-8
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                                                     RECON TECHNOLOGY, LTD
                                        NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

Software:
The Co mpany sells self-developed software. For software sales, the Co mpany recognizes revenues in accordance with the provisions of
Statement of Position No. 97-2 (ASC985-605), ―Soft ware Revenue Recognition,‖ and related interpretations. Revenue fro m software is
recognized according to project contracts. Contract costs are accumulated during the periods of installation and testing or c ommissioning.
Usually this is short term. Profits are not recognized until co mp letion of the contracts. Costs included in inventory as work in process include
direct materials, labor and related expense. Corporate general and ad min istrative expenses are charged to expense in the pe riod they are
incurred.

Services:
The Co mpany provides services to improve software functions and system requirements on separated fixed -price contracts. Revenue is
recognized on the completed contract method when acceptance is determined by a comp letion report signed by the customer. Defe rred revenue
represents unearned amounts billed to customers related to service agreements.

Revenues applicable to mu ltip le-element fee arrangements are div ided among the elements such as software, hardware and post-contract
service using vendor-specific objective evidence of fair value. Such evidence consists of pricing of mu ltiple elements when those same
elements are sold as separate products or arrangements. Soft ware maintenance for the first year and init ial train ing are included in the purchase
price of the software. Init ial training is provided at the time of installat ion and is recognized as inco me as part of the price of th e software since
it is minimal in value. Maintenance is valued based on the fee schedule used by us for providing the regular le vel of maintenance service as
sold to customers when renewing their maintenance contracts on a standalone basis. Maintenance revenue is included in the inc ome statement
under services and is recognized over the term of the agreement.

Cost of Revenues – When the criteria for revenue recognition have been met, costs incurred are recognized as cost of revenue. Cost of revenues
include wages, materials, handling charges, and other expenses associated with manufactured products and service provided to customers; the
cost of purchased equipment and pipes.

Subsidy Income – The Co mpany received grants of ¥1,178,034 ($172,325) and ¥2,038,015 fro m the local government for the nine months
ended March 31, 2010 and 2009, respectively. These grants were given by the government to support local software co mpanies ’ operation and
research and development. Grants related to research and development projects are recognized as subsidy income in the consoli dated
statements of operations when received. Grants in form of value-added-tax refund are recognized when received.

Share-Based Compensation – The Co mpany accounts for share-based compensation in accordance with SFAS No. 123(R) (A SC Topic.718) ,
Share-Based Payment . Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant

                                                                           F-9
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                                                    RECON TECHNOLOGY, LTD
                                       NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

date based on the fair value of the award and is recognized as expense over the applicable vesting period of the share award using the
straight-line method.

Income Taxes – Inco me taxes are p rovided based upon the liability method of accounting pursuant to SFAS No. 109 (ASC Top ic 740),
Accounting for Income Taxes . Provisions for inco me taxes are based on taxes payable or refundable fo r 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 fo rwards. Deferred tax assets and liabilities are included in the financial statements at currently enacted inc ome tax rates
applicable to the period in wh ich 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 ad justed through the provision for inco me taxes. The Co mpany has not been su bject to any
income taxes in the Un ited States or the Cayman Islands.

Business Segments – The Co mpany operates in one industry which includes the sale of products for the oil field construction solely to
customers in China; therefore, no business segment information has been presented.

Earnings per Common Share (“EPS”) – Basic EPS is co mputed by dividing net income availab le fo r co mmon shareholders by the weighted
average number of co mmon shares outstanding. Diluted EPS are co mputed by dividing net inco me available for co mmon shareholder s by the
weighted-average number of co mmon shares and dilutive potential co mmon share equivalents outstanding.

Recentl y Enacted Accounti ng Standards – In December 2007, the Financial Accounting Standards Board (―FASB‖) issued SFAS No. 160,
Non-controlling Interests in Consolidated Financial Statements — an amend ment of ARB No. 51 (ASC Topic 810) , wh ich changes the
accounting and reporting for minority interests. Minority interests will be re-characterized as non-controlling interests and will be reported as a
component of equity separate fro m the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be
accounted for as equity transactions. In addition, net inco me attributable to the non -controlling interest will be included in net income and,
upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in net
income. SFAS No. 160 is effective for the Co mpany beginning July 1, 2009, and will apply prospectively, except for the presentation and
disclosure requirements, which will apply retrospectively. The Co mpany believes the adoption of SFAS No. 160 will not have a material
impact on the financial statements.

In December 2007, the FASB issued SFAS No. 141(R) (ASC Topic 805), Business Comb inations, which rep laces SFAS No. 141(ASC Topic
805). The statement retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (previously referred to as
the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way
assets and liabilit ies are recognized as a result of business combinations. It also requires the capitali zation of in-p rocess research and
development

                                                                        F-10
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                                                    RECON TECHNOLOGY, LTD
                                       NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

at fair value and requires the expensing of acquisition-related costs as incurred. In April 2009, the FASB issued FSP FAS 141(R) -1(ASC Topic
805-10) wh ich amends SFAS No. 141(R) (ASC Topic 805) by establishing a model to account for certain pre-acquisition contingencies. Under
the FSP, an acquirer is required to recognize at fair value an asset acquired or a liability assumed in a business combinatio n that arises fro m a
contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the acquisition-date
fair value cannot be determined, then the acquirer should follow the recognition criteria in SFAS No. 5, Accounting for Contingencies, and
FASB Interpretation No. 14, Reasonable Estimation of the A mount of a Loss — an interpretation of FASB Statement No. 5. SFAS No. 141(R)
(ASC Topic 805) and FSP FAS 141(R)-1(ASC Topic 805-10) are effective for us beginning July 1, 2009, and will apply prospectively to
business combinations completed on or after that date. The impact of the adoption of SFAS No. 141(R) (ASC Topic 805) and FSP FAS
141(R)-1(ASC Topic 805-10) will depend on the nature of acquisitions completed after the date of adoption.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the
sources of accounting principles and provides entities with a framework for selecting the principles used in preparation of f inancial statements
that are presented in conformity with GAAP. The current GAAP hierarchy has been criticized because it is directed to the auditor rather than
the entity, it is co mplex, and it ranks FASB Statements of Financial Accounting Concepts, which are subject to the same level of due process as
FASB Statements of Financial Accounting Standards, below industry practices that are widely recognized as generally accepted but that are not
subject to due process. The Board believes the GAAP h ierarchy should be directed to entities because it is the entity (not its audito rs) that is
responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. The adoption of FASB
162 is not expected to have a material impact on the Co mpany ’s financial statements.

In June 2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities (FSP 03-6-1) (ASC Topic 260-10-45), wh ich classifies unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents as participating securities and requires them to be included in the computation of
earnings per share pursuant to the two-class method described in SFAS No. 128, Earnings per Share‖ FSP 03-6-1(ASC Topic 260-10-45) is
effective fo r financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. It requires
all prio r period earnings per share data presented to be adjusted retrospectively. The Co mpany is currently evaluating the effect, if any, that the
adoption of FSP 03-6-1(ASC Top ic 260-10-45) will have on its consolidated financial position, results of operations and cash flows.

In April 2009, the FASB issued three FSPs that are intended to provide additional ap plicat ion guidance and enhance disclosures about fair
value measurements and impairments of securities. FSP 157-4 (A SC Topic 820-10) clarifies the objective and method of fair value
measurement even when there has been a significant decrease in market activ ity for the asset being measured. FSP 115-2 (ASC Topic 320-10)
and FSP 124-2 (ASC Topic 320-10) establish a new model for

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                                                    RECON TECHNOLOGY, LTD
                                       NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

measuring other-than-temporary impairments for debt securities, including establishing criteria for when to recognize a write -down through
earnings versus other comprehensive income. FSP 107-1 and APB 28-1(ASC Topic 825-10) expands the fair value disclosures required for all
financial instruments within the scope of SFAS No. 107, Disclosures about Fair Value of Financial Instruments(ASC Topic 26), to interim
periods. The Co mpany does not expect the adoptions of the three Staff Positions hav e a material impact on its consolidated financial
statements.

In June 2009, the FASB issued SFAS No. 167, A mend ments to FASB Interpretation No. 46(R), which is effective for the Co mpany beginning
July 1, 2010. Th is Statement amends Financial Accounting Standards Board Interpretation (―FIN‖) No. 46(R), Consolidation of Variable
Interest Entities an interpretation of A RB No. 51, to require revised evaluations of whether entities represent variable interest entities, ongoing
assessments of control over such entities, and additional disclosures for variable interests. The Co mpany believes the adoption of this
pronouncement will not have a material impact on the financial statements.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Princip les or SFAS No. 168. SFAS No. 168(ASC Topic 105) will become the single source of authoritative nongovernmental U.S.
GAAP, superseding existing FASB, A merican Institute of Cert ified Public Accountants (AICPA), Emerging Issues Task Force (EITF), and
related accounting literature. SFAS No. 168(ASC Topic 105) reorganizes the thousands of GAAP pronouncements into roughly 90 accounting
topics and displays them using a consistent structure. Also included is relevant SEC guidance organized using the same topical structure in
separate sections. SFAS No. 168(ASC Topic 105) will be effective for financial statements issued for reporting periods ending after
September 15, 2009. This will have an impact on the Co mpany’s financial disclosures since all future references to authoritative accounting
literature will be references in accordance with SFAS No. 168.

In June 2009, the FASB issued Accounting Standards Update No. 2009-01, ―Generally Accepted Accounting Principles ‖ (ASC Topic 105)
which establishes the FASB Accounting Standards Codification (―the Codification‖ or ―ASC‖) as the official single source of authoritative
U.S. generally accepted accounting principles (―GAAP‖). All existing accounting standards are superseded. All other accounting guidance not
included in the Codification will be considered non-authoritative. The Codificat ion also includes all relevant Securities and Exchange
Co mmission (―SEC‖) guidance organized using the same topical structure in separate sections within the Codification.

Following the Codification, the Board will not issue new standards in the form of Statements, FASB Staff Positions or Emerg in g Issues Task
Force Abstracts. Instead, it will issue Accounting Standards Updates (―ASU‖) which will serve to update the Codification, prov ide background
informat ion about the guidance and provide the basis for conclusions on the changes to the Codification.

The Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is effective
for our third-quarter 2009 financial statements and the

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                                                     RECON TECHNOLOGY, LTD
                                        NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

principal impact on our financial statements is limited to disclosures as all future references to authoritative accounting literature will be
referenced in accordance with the Codificat ion. In order to ease the transition to the Codificat ion, we are provid ing the Codification
cross-reference alongside the references to the standards issued and adopted prior to the adoption of the Codification.

In 2006, the FASB issued SFAS No. 157, ―Fair Value Measurements‖ (ASC Topic 820) wh ich defines fair value, establishes a market-based
framework or h ierarchy fo r measuring fair value and expands disclosures about fair value measurements. This guidance is appli cable whenever
another accounting pronouncement requires or permits assets and liabilities to be measured at fair value. It does not expand or require any new
fair value measures; however the application of this statement may change current practice. We adopted this guidance for fina ncial assets and
liab ilit ies effective January 1, 2008 and for non financial assets and liabilit ies effective January 1, 2009. The adoption, which primarily affected
the valuation of our derivative contracts, did not have a material effect on our financial condition or results of operations .

In April 2009, the FASB issued the following updates that provide additional application guidance and enhance disclosures regarding fa ir value
measurements and impairments of securities:

 •     FAS 157-4, ―Determin ing Fair Value When the Volu me and Level of Activ ity for the Asset or Liability Have Significantly Decreased
       and Identifying Transactions That Are Not Orderly‖ (ASC Topic 820-10-65). This update relates to determin ing fair values wh en there is
       no active market or where the price inputs being used represent distressed sales. It reaffirms the need to exercise judgment to ascertain if
       a formerly act ive market has become inactive and in determin ing fair values when markets have become inactive.
 •     FAS 115-2 and FAS 124-2, ―Recognition and Presentation of Other-Than-Temporary Impairments‖ (ASC topic 320-10-65). This update
       applies to investments in debt securities for wh ich other-than-temporary impairments may be recorded. If an entity’s management asserts
       that it does not have the intent to sell a debt security and it is more likely than not that it will not have to sell the secu rity before recovery
       of its cost basis, then an entity may separate other-than-temporary impairments into two co mponents: 1) the amount related to credit
       losses (recorded in earnings) and 2) all other amounts (recorded in Other co mprehensive inco me).
 •     FAS 107-1 and APB 28-1, ―Interim Disclosures about Fair Value of Financial Instruments ‖ (ASC Topic 320-10-65). This update
       requires fair value d isclosures for financial instruments that are not currently reflected on the balance sheet at fair value on a qu arterly
       basis.

We adopted these updates effective June 30, 2009 and the adoption did not have a material effect on our financial condition or results of
operations.

In August 2009, FASB issued ASU No. 2009-05 wh ich amends Fair Value Measurements and Disclosures — Overall (ASC To pic 820-10) to
provide guidance on the fair value measurement of liab ilities. Th is update requires clarification for circu mstances in which a quoted price in an
active

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                                                     RECON TECHNOLOGY, LTD
                                        NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

market for the identical liability is not available, a reporting entity is required to measure fair value using one or more o f the following
techniques: 1) a valuation technique that uses either the quoted price of the identical liab ility when traded as an asset or quoted prices for
similar liabilities or similar liabilit ies when traded as an asset; or 2) another valuation technique that is consistent with the principles in ASC
Topic 820 such as the income and market approach to valuation. The amendments in this update also clarify that when estimating the fair value
of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relatin g to the existence of a restriction
that prevents the transfer of the liability. This update further clarifies that if the fair value of a liab ility is determine d by reference to a quoted
price in an active market for an identical liability, that price wou ld be considered a Level 1 measurement in the fair value h ierarchy. Similarly,
if the identical liability has a quoted price when traded as an asset in an active market, it is also a Level 1 fair value measurement if no
adjustments to the quoted price of the asset are required.

NOTE 3. TRADE ACCOUNTS REC EIVAB LE
Accounts receivable consisted of the follo wing at June 30, 2009 and March 31, 2010:

                                                                                               Chinese Yuan (Renminbi)                      U.S. Dollars
                                                                                           June 30,               March 31,                  March 31,
                                                                                             2009                   2010                       2010
                                                                                                                 (Unaudited)                (Unaudited)
Trade accounts receivable                                                              ¥   44,708,934         ¥    89,743,075           $     13,127,818
Allowance for doubtful accounts                                                              (604,953 )            (1,993,588 )                 (291,627 )

Trade accounts receivable, net                                                         ¥   44,103,981         ¥    87,749,487           $     12,836,191



NOTE 4. INVENTORIES
Inventories consisted of the following at June 30, 2009 and March 31, 2010:

                                                                                                         Chinese Yuan (Renminbi)                  U.S. Dollars
                                                                                                      June 30,             March 31,               March 31,
                                                                                                        2009                 2010                    2010
                                                                                                                          (Unaudited)             (Unaudited)
Low-value consumption goods                                                                      ¥           —        ¥            9,235      $          1,351
Purchased goods and raw materials                                                                        228,569               6,210,205               908,443
Work in p rocess                                                                                         319,490                 869,058               127,128
Fin ished goods                                                                                       10,161,959               6,063,572               886,993
Total inventories                                                                                ¥    10,710,018      ¥    13,152,071         $     1,923,914



NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed on a straight -line basis over the estimated useful lives of the assets as
follows:

                                                                          F-14
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                                                  RECON TECHNOLOGY, LTD
                                     NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

Motor vehicles                                  10 Years
Office equip ment                              2-5 Years
Leasehold improvement                             5 years

Gain or loss on the sales or retirements is included in the consolidated statements of operations. Accumulated depreciation e xpense was
¥1,006,761 and ¥1,085,419 ($158,778) as at June 30, 2009 and March 31, 2010, respectively. Property and equipment consis ted of the
following at June 30, 2009 and March 31, 2010:

                                                                                          Chinese Yuan (Renminbi)                  U.S. Dollars
                                                                                      June 30,                March 31,             March 31,
                                                                                        2009                    2010                  2010
                                                                                                             (Unaudited)           (Unaudited)
Motor vehicles                                                                    ¥     1,464,918         ¥     1,725,831      $       252,458
Office equip ment and fixtures                                                            779,257                 587,718               85,973
Leasehold improvement                                                                     169,462                 276,938               40,511

Total property and equipment                                                            2,413,637               2,590,487             378,942
Less: Accumulated depreciat ion                                                        (1,006,761 )            (1,085,419 )          (158,778 )

Property and equipment, net                                                       ¥     1,406,876         ¥     1,505,068      $       220,165



NOTE 6. S HAREHOLDERS’ EQUITY
Common Shares – When the Co mpany was incorporated in the Cay man Islands on August 21, 2007, 25,000,000 co mmon shares were
authorized, and 2,139,203 co mmon shares were issued to the Principal Shareholders, at a par value of $0.0185 each. On July 29, 2009, the
Co mpany comp leted its IPO by offering 1,700,000 co mmon shares at $6.00 per share as discussed in Note 13. After this IPO, all the 112,608
redeemab le co mmon shares outstanding were automatically converted into non -redeemable co mmon shares pursuant to the Agreement.

Statutory Reserves – According to the Articles of Incorporation, the Co mpany is required to transfer a certain portion of its net profit, as
determined under PRC accounting regulations, from current net inco me to the statutory reserve fund. As of June 30, 2009 and March 31, 2010
the balance of total statutory reserves was ¥1,687,772 and ¥3,286,861 ($480,809).

Redeemable Common Shares – On December 10, 2007, the Co mpany signed a Common Shares Subscription Agreement (the ―Agreement‖) to
sell 112,608 co mmon shares to an investor at an aggregate consideration of $200,000. Net total proceeds of $200,000 were received by the
Co mpany during March and April, 2008.

The common shares issued are subject to redemption under certain conditions. In the event that the Company fails to list on a recognized stock
exchange or complete a qualified IPO within 18 months after the signing of the Agreement, the Co mpany shall repay all the con sideration plus
5% per annu m of the consideration to the investor. The three Principal Shareho lders, Nanjing Recon, ENI, and BHD severally and jointly
guaranteed the payment.

The shares issued are only conditionally redeemable as described above and are therefore not

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                                                    RECON TECHNOLOGY, LTD
                                       NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

classified as a liability. Ho wever, redempt ion of the shares is not solely within the control of the Co mpany; therefore, the shares are classified
outside of permanent equity. As discussed in Note 13, upon the completion of the IPO in Ju ly 2009, all the 112,608 redeemab le common shares
outstanding were automat ically converted into non-redeemable co mmon shares pursuant to the Agreement.

Share-based Awards Plan – In June 2009, the Board of Directors and the shareholders of the Company adopted the 2009 Stock Incentive Plan
(the ―2009 Plan‖). The 2009 Plan provides for the granting of share options and restricted common shares to employees, non -emp loyee
directors and consultants of the Company. Options granted under the 2009 Plan may be Incentive Stock Opt ions o r Non-statutory Stock
Options. Non-employee directors and Coennsultants are not eligible to receive the award o f an Incentive Stock Option. The Co mpensation
Co mmittee of the Board of Director is entitled to establish the term, vesting conditions and exercise price of the options as well as the vesting
conditions and transferability of restricted shares. Under the 2009 Plan, 790,362 un issued common shares have been reserved for issuance. As
discussed in Note 13, under the 2009 Plan, the Co mpany granted optio ns to purchase 293,000 co mmon shares to its employees and
non-employee directors on July 29, 2009.

NOTE 7. INCOME TAXES
The Co mpany is not subject to any income taxes in the United States or the Cay man Islands and had minimal operations in juris dictions other
than the PRC. ENI, BHD and Nan jing Recon are subject to PRC’s inco me taxes as PRC domestic co mpanies. Before the implementation of the
new Enterprise Inco me Tax Law (―EIT Law‖), PRC do mestic companies are generally subject to an enterprise income tax (―EIT‖) rate of 33%.
On March 16, 2007, the Nat ional People ’s Congress of China passed the new EIT Law, and on December 6, 2007, the State Co uncil of Ch ina
passed the Imp lementing Rules for the EIT Law (―Imp lementing Ru les‖) wh ich took effect on January 1, 2008. The new amend ed EIT Law
introduces a wide range of changes which include, but are not limited to, the unificat ion of the inco me tax rate for do mestic -invested and
foreign-invested enterprises at 25%. As a result, inco me tax rate for ENI was reduced fro m 33% to 25% in calendar year 2008 and after.

As approved by the domestic tax authority in the PRC, Nanjing Recon was entitled to a tax holiday with 50% tax exempt ion for calendar year
2006 and 2007. Nanjing Recon is also a government-certified high technology company and is subject to an income tax rate of 15%. As a
result, Nanjing Recon was subject to an income tax rate of 7.5% fo r calendar year 2007 and 15% for calendar year 2008 and 2009. By the end
of calendar year 2009, Nan jing Recon’s high-tech enterprises certificate of two years was exp ired, and the co mpany is applying for renewal of
the high-tech certification now.

As approved by the domestic tax authority in the PRC, BHD was recognized as a government -certified h igh technology company on
November. 25, 2009 and is subject to an income tax rate of 15% for calendar year 2010. This qualificat ion certificate will stay effe ctive till the
certificate matures in 2012.

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                                                    RECON TECHNOLOGY, LTD
                                       NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

Deferred taxes are co mprised of the following:

                                                                                                  Chinese Yuan (Renminbi)                        U.S. Dollars
                                                                                              June 30,               March 31,                    March 31,
                                                                                                2009                   2010                         2010
                                                                                                                    (Unaudited)                  (Unaudited)
Allowance for doubtful receivables                                                       ¥        913,943         ¥          529,282         $       77,425
Deferred revenue and cost recognition in tax return                                            (3,901,616 )               (4,223,939 )             (617,887 )
Loss carryforward                                                                                 622,448                        —                      —

Total deferred income tax assets (liabilities)                                           ¥     (2,365,225 )       ¥       (3,694,658 )       $     (540,463 )


Following is a reconciliat ion of inco me taxes at the calculated statutory rates:

                                                                                        Chinese Yuan (Renminbi)                            U.S. Dollars
                                                                                           For the Nine months                         For the Nine months
                                                                                            Ended March 31,                             Ended March 31,
                                                                                      2009                     2010                            2010
                                                                                                            (Unaudited)                    (Unaudited)
Income tax calculated at statutory rates                                        ¥    (3,580,519 )       ¥      (7,994,081 )        $             (1,169,392 )
Benefit of favorable rate for high-technology companies                                                           150,646                            22,037
Benefit of operating loss carry forwards                                                                          653,869                            95,649
Tax loss for which no deferred tax assets has been recogni                               99,404                                                         —

Provision for income taxes                                                      ¥    (3,481,115 )       ¥      (7,189,566 )        $             (1,051,706 )


The provision for inco me taxes is comprised of the following:

                                                                                       Chinese Yuan (Renminbi)                             U.S. Dollars
                                                                                          For the Nine months                          For the Nine months
                                                                                           Ended March 31,                              Ended March 31,
                                                                                     2009                     2010                             2010
                                                                                                           (Unaudited)                     (Unaudited)
Current income taxes                                                            ¥    (1,115,890 )       ¥     10,884,224           $               1,592,169
Deferred inco me taxes                                                               (2,365,225 )             (3,694,658 )                          (540,463 )

Provision for income taxes                                                      ¥    (3,481,115 )       ¥       7,189,566          $               1,051,706



NOTE 8. NOTES PAYAB LE
Notes payable consist of the follo wing:

                                                                                                              Chinese Yuan (Renminbi)                U.S. Dollars
                                                                                                            June 30,           March 31,              March 31,
                                                                                                              2009               2010                   2010
                                                                                                                              (Unaudited)            (Unaudited)
Short-term notes payable due to non-rel ated parties:
Due-on-demand note payable, no interest                                                                ¥      1,374,888      ¥    1,440,470         $    210,715
Short-term note payable, no interest, matures on December 31, 2009                                              193,504                 —                    —
Short-term notes payable, interest at 6%, matures on December 9, 2009                                           625,400           1,172,911              171,576
Short-term note payable, no interest, matures on December 31, 2009                                              300,000             540,000               78,992
Short-term note payable, no interest, matures on May 10, 2010                                                   650,000             449,500               65,754

Total short-term notes payable due to non-related parties                                              ¥      3,143,792      ¥    3,602,881         $    527,037


                                                                         F-17
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                                                   RECON TECHNOLOGY, LTD
                                      NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

                                                                                                         Chinese Yuan (Renminbi)         U.S. Dollars
                                                                                                       June 30,           March 31,       March 31,
                                                                                                         2009               2010            2010
                                                                                                                         (Unaudited)     (Unaudited)
Short-term notes payable due to rel ated parties:
Due-on-demand note payable to Principal Shareholders, no interest                                  ¥      376,377     ¥      380,577    $     55,672
Short-term note payable to a Principal Shareholder ’s family member, interest at 6%, matures
  on May 5, 2009                                                                                          182,000            249,100          36,439
Short-term note payable to a Principal Shareholder ’s family member, interest at 6%, matures
  on December 9, 2009                                                                                      53,000          3,000,000        438,847
Short-term note payable to management, interest at 6%, matures on December 9, 2009                        583,000            517,980         75,771

Total short-term notes payable due to related parties                                              ¥    3,344,377     ¥    4,147,657    $   606,729



NOTE 9. CONCENTRATIONS
For the nine months ended March 31, 2010, the largest two customers, CNPC and SINOPEC, represented about 47.37% and 36.87% of the
Co mpany’s revenue. For the period ended March 31, 2010, no supplier accounted 10% of its cost of revenue.

NOTE 10. COMMITMENTS AND CONTINGENCIES
The Co mpany leases offices in Beijing, Nan jing and Shandong. The amount of co mmit ments for non -cancelable operating leases for remaining
quarters of 2010 is ¥32,400 ($4,740). All the lease agreements expire in 2010.

NOTE 11. RELATED PARTY TRANSACTIONS
Receivables from related parties – At June 30, 2009 and March 31, 2010, the Co mpany had net trade receivables fro m related parties of
¥7,458,302 ($1,091,960) and ¥0 ($0), respectively, for the sale of goods to related parties and net other receivables fro m related parties of
¥507,541 ($74,308) and ¥0 ($0), respectively.

Payables to related parties – At June 30, 2009 and March 31, 2010, the Co mpany owed related parties ¥189,744 ($27,780) and ¥0 ($0),
respectively, for the purchase of goods. The Company also had other payables to related parties of ¥ 73,579 ($10,773) and ¥0 ($0),
respectively, due to Principal Shareholders and companies under co mmon ownership for pay ments of expenses made on behalf of the
Co mpany.

Leases from related parties – On January 1, 2010, the Co mpany entered into a one-year agreement with Mr. Chen Guangqiang for the lease of
office space. The terms of the agreement state that the Company will lease the property for one year, and pay Mr. Chen Guangqiang ¥4,500 per
month.

                                                                       F-18
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                                                    RECON TECHNOLOGY, LTD
                                       NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

The Co mpany also rents office space fro m Mr. Yin Shenping’s wife. The Co mpany pays ¥15,000 per month to Mr. Yin Shenping’s wife for its
use.

NOTE 12. DISCONTINUED OPERATIONS
At the end of calendar year 2008, the Co mpany comp leted the sale of Xiamen Hengda Haitian and Yabei Nuoda. Both Xiamen Hengda Haitian
and Yabei Nuoda were previously controlled by one of our principle shareholders. The Co mpany determined that these two subsid iaries met
the criteria for classificat ion as discontinued operations by the en d of calendar year 2008.

NOTE 13. STOCK-B AS ED COMPENSATION
Effective January 1, 2006, the Co mpany adopted Statement of Financial Accounting Standards (SFAS) No. 123-R, ―Share-Bas ed Payment‖
(―SFAS No. 123-R‖)(ASC 718), which requires the measurement and recognition of co mpensation expense for all share-based payment awards
made to emp loyees and directors, including stock options based on their fair values. SFAS No. 123-R supersedes Accounting Princip les Board
Opinion No. 25, ―Accounting for Stock Issued to Employees‖ (―APB 25‖), wh ich the Co mpany previously followed in accounting for
stock-based awards. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (SA B 107) (ASC 718) to provide guidance on SFAS
No. 123-R. The Co mpany has applied SAB 107 in its adoption of SFAS No. 123-R.

Statement No. 123(R) requires companies to record co mpensation expense for stock options measured at fair value, on the date of grant, usin g
an option-pricing model. The fair value of stock options is determined using the Bino mial Lattice valuation model instead of the Black-Scholes
Model previously utilized under Statement No. 123. The Co mpany believes that the revised model rep resents a more likely pro jection of actual
outcomes.

Statement No. 123(R) requires that the realized tax benefit related to the excess of the deductible amount over the compensation expense
recognized be reported as a financing cash flow rather than as an operating cash flow, as required under previous accounting guidance. The
Co mpany does not recognize any tax benefit related to this based on the Company’s historical operating performance, lack of taxable inco me
and the accumulated deficit.

As of March 31, 2010, there was no unrecognized compensation cost related to non -vested share-based compensation arrangements granted
under the Company’s option plans.

Share-based Payments – As discussed in Note 6, the Co mpany granted options to purchase 293,000 co mmon shares under the 2009 Plan to its
emp loyees and non-employee directors on July 30, 2009. The options have an excise price of $6.00 equal to the IPO price of the Co mpany and
will be vested over a period of five years, with the first 20% vesting on July 30, 2010. The options will exp ire ten years after the date of grant,
on July 29, 2019. For the nine months ended March 31, 2010, the fair value were estimated using the Binomial Lattice valuation model, with
the following weighted-average assumptions and fair values as follows:

                                                                        F-19
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                                                      RECON TECHNOLOGY, LTD
                                         NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

                    Vo latility*                                                                                      78%
                    Life of option (in years)**                                                                       10
                    Risk free interest rate***                                                                        4.6118%
                    Expected div idend rate                                                                           0%
                    Forfeiture rate****                                                                               15%
                    Weighted-average fair value per option granted                                                    4.4166

*    Vo latility 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 approximat es the life
     of the option.
**** Forfeiture rate is the estimated percentage of options forfeited by employees by leaving or being terminated before vesting.

The Co mpany recognized co mpensation 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 o f the options was ¥30.17 per share. Co mpensation expense recorded for the nine months ended
March 31, 2010 was ¥1,178,701 ($172,423).

Placement Agent Warrants – As discussed in Note 6, the Co mpany completed its IPO offering on July 30, 2009, and the gross proceeds
received by the Co mpany for the Offering were $10,200,000 (1,700,000 co mmon shares at $6.00 per share) before the cash offering costs of
¥9,651,771 ($1,412,896).

In connection with the Offering, the Co mpany sold the placement agent warrants to purchase 170,000 co mmon shares at $7.20 per share for a
nominal amount. These warrants are exercisable for a period of five years. The Co mpany has agreed to file, during the five ye ar period at its
cost, at the request of the holders of a majority of the placement agents warrants and the underlying common shares, and to use its be st efforts
to cause to become effective a registration statement under the Securities Act, as required to permit the public sale of co mmon shares issued or
issuable upon exercise of the placement agent’s warrants. The Co mpany accounted for the warrants as an additional offering cost with an
estimated value of $627,341. The fo llo wing table presents the assumptions used in the Black-Scholes valuation model to estimate the fair value
of the placement agent warrants sold:

                    Risk-free interest rate                                                                              3.77%
                    Div idend yield                                                                                         0%
                    Expected volatility                                                                                    78%
                    Expected life (in years)                                                                                 5

On July 31, 2009 co mmon shares of the Co mpany commenced trading on NASDAQ Exchange. The Co mpany has 3,951,811 common shares
issued and outstanding on July 31, 2009.

                                                                      F-20
Table of Contents

                                                  RECON TECHNOLOGY, LTD
                                     NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

The Co mpany had 293,000 of granted stock options that were exercisable as of March 31, 2010 and zero of granted stock options were
exercised. The Co mpany had 170,000 of granted placement agent warrants as of March 31, 2010 and zero of warrants were exercised.

NOTE 14. EARNINGS PER S HARE.
Statement of Financial Accounting Standards No. 128 (ASC Topic 260), ―Earnings per share‖ requires the presentation of basic earnings per
share and diluted earnings per share. Basic and diluted earnings per share computations are presented by the Company conform to the standard
and are based on the weighted average number of shares of Co mmon Stock outstanding during the year.

Basic earn ings per share are computed by dividing net income or loss by the weighted average number of shares outstanding for the year.
―Diluted‖ earnings per share is computed by dividing net income o r loss by the total of the weighted average number of shares outstanding, and
the dilutive effect of outstanding stock options (applying the treasury stock method). Ho wever, the effect fro m warrant would h ave been
anti-dilutive due to the fact that the weighted average exercise price per share of the warrant is higher than the weighted average market price
per share of the common stock during the three months and nine months ended March 31, 2010.

According to the share subscription agreement signed on December 10, 2007, if the company co mpletes an initial public offering of its
common stock on or before September 30, 2009, the founder’s obligation to purchase, and the investor’s obligation to sell, the shares shall
terminate automatically and immediately. So the co mpany’s 112,608 redeemab le co mmon shares are currently included in the calculation of
the basic EPS and there are no more redeemable shares. The following is a reconciliation of the numerators and denominators of the basic and
diluted earnings per share computations:

                                                                                      Chinese Yuan (Renminbi)                      U.S. Dollars
                                                                                         For the Nine Months                   For the Nine Months
                                                                                          Ended March 31,                      Ended December 31,
                                                                                    2010                     2009                      2010
                                                                                                         (Unaudited)               (Unaudited)
Basic weighted average of common shares outstanding                                 3,753,350               2,139,203                   3,753,350
Effect of redeemable co mmon shares                                                       —                   112,608                         —
Effect of Share-based Payments                                                         10,058                     —                        10,058
Diluted weighted average common shares outstanding                                  3,763,408               2,251,811                   3,763,408

Net inco me fro m continuing operations                                       ¥    19,821,690        ¥    14,352,210       $            2,899,561
Basic earn ing per share                                                      ¥          5.28        ¥          6.71       $                 0.77
Diluted earnings per share                                                    ¥          5.27        ¥          6.37       $                 0.77

Loss from discontinued operations                                             ¥           —          ¥       (442,547 )    $                   —
Basic earn ing per share                                                      ¥           —          ¥          (0.21 )    $                   —
Diluted earnings per share                                                    ¥           —          ¥          (0.20 )    $                   —

Net inco me available for co mmon shareholders                                ¥    17,502,923        ¥    12,283,645       $            2,560,367
Basic earn ings per share                                                     ¥          4.66        ¥          5.74       $                 0.68
Diluted earnings per share                                                    ¥          4.65        ¥          5.46       $                 0.68

                                                                     F-21
Table of Contents

                                                     RECON TECHNOLOGY, LTD
                                        NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

NOTE 15. PARENT COMPANY ONLY CONDENS ED FINANCIAL INFORMATION
Basis of presentation – For the purpose of presenting parent company only condensed financial informat ion, the Co mpany recorded its interest
in subsidiaries and variable interest entities under the equity method of accounting in the condensed balance sheets and repo rted its share of the
profit (loss) of its subsidiaries and variable entities as equity in (profit) loss of subsidiaries and variable interest entities in the condensed
statements of operations. These parent-company-only financial statements should be read in conjunction with the Co mpany’s consolidated
financial statements.

                                                                                            Chinese Yuan (Renminbi)                        U.S. Dollars
                                                                                         June 30,            March 31,                     March 31,
                                                                                           2009                 2010                          2010
ASSETS                                                                                                         (Unaudited)                 (Unaudited)
   Cash and cash equivalents                                                         ¥            22      ¥      20,568,477            $      3,008,803
   Receivables fro m a subsidiary                                                          1,373,487             35,969,301                   5,261,670
   Purchase advance                                                                              —               256,354.00                      37,500
   Prepaid expenses                                                                              —                  722,220                     105,648
   Interests in subsidiaries and variable interest entities                               28,844,818             47,143,662                   6,896,280

Total assets                                                                         ¥    30,218,327      ¥    104,660,014             $    15,309,901

LIAB ILITIES AND S HAREHOLDERS ’ EQUITY
Current liabilities
    Other payable                                                                    ¥            —       ¥         164,056            $         23,998
    Payable to a subsidiary                                                                       —               1,640,502                     239,976
    Other payable — related parties                                                            19,721                   —                             0

Total current Liabilities                                                                     19,721              1,804,558                     263,975
Redeemable ordinary shares                                                                 1,434,342                    —                           —
Sharehol ders’ equity
    Ordinary shares, $0.0185 U.S. dollar par value, 25,000,000 shares
       authorized and 2,139,203 shares outstanding                                           300,534                529,637                     77,476
    Additional paid-in capital                                                             8,732,266             68,734,489                 10,054,635
    Statutory reserves                                                                     1,687,772                    —                            0
    Retained earnings                                                                     18,043,692             33,720,232                  4,932,671
    Other co mprehensive income                                                                  —                 (128,902 )                  (18,856 )

Total sharehol ders’ equity                                                               28,764,264           102,855,456                  15,045,926

Total liabilities and sharehol ders ’ equity                                         ¥    30,218,327      ¥    104,660,014             $    15,309,901


                                                                                    Chinese Yuan (Renminbi)                             U.S. Dollars
                                                                                   For the Nine months Ended                        For the Nine months
                                                                                           March 31,                                     March 31,
                                                                                 2009                      2010                             2010
                                                                                                        (Unaudited)                     (Unaudited)
General, ad ministrative and selling expense                               ¥    (1,397,829 )        ¥     (4,547,153 )          $              (665,168 )
Other expenses                                                                     (51,331 )                 (19,289 )                            (2,822 )

Operating loss                                                                  (1,449,160 )              (4,566,442 )                         (667,990 )

Profit fro m variable interest entities and subsidiaries                       14,172,182                22,186,344                           3,245,468
Interest income                                                                     3,170                     3,014                                 441

Net inco me                                                                    12,726,192                17,622,916                           2,577,919
Div idends on redeemable ordinary shares                                              —                         —                                   —

Net Income available for common sharehol ders                              ¥   12,726,192           ¥    17,622,916             $             2,577,919
F-22
Table of Contents

                                                    RECON TECHNOLOGY, LTD
                                       NOTES TO THE CONSOLIDATED FINANCIA L STATEM ENTS

                                                                                Chinese Yuan (Renminbi)                        U.S. Dollars
                                                                                For the Nine monts Ended                   For the Nine months
                                                                                        March 31,                               March 31,
                                                                             2009                        2010                      2010
                                                                                                     (Unaudited)               (Unaudited)
Cash flows from operating acti vities:
Net inco me available for co mmon shareholders                        ¥     12,726,192           ¥     17,622,916      $             2,577,920
Adjustments to reconcile net inco me (loss) to net cash provided
  by (used in) operating activities:
     Equity in (profit) loss of subsidiaries and variable interest
        entities                                                            (14,172,182 )             (22,186,344 )                (3,245,468 )
     Expense paid by shareholders as contribution                                   —                         —                           —
     Div idends on redeemable ordinary shares                                       —                         —                           —
     Share-based payment                                                            —                   1,178,701
Changes in current assets and liabilit ies
     Receivables fro m a subsidiary                                                —                  (34,595,814 )                (5,060,753 )
     Other receivable                                                              —                     (256,354 )                   (37,500 )
     Prepaid expense                                                               —                     (722,220 )                  (105,648 )
     Interest payable                                                           (3,170 )                      —
     Trade payable                                                             318,244
     Other payable                                                             409,869                    (839,864 )

Net cash used in operating acti vities                                        (721,047 )              (39,798,979 )                (5,871,449 )

Cash flows from financing acti vities:
Proceeds from issuance of redeemable ordinary shares                                —                         —                            —
Proceeds from issuance of ordinary shares                                           —                  60,209,057                    8,807,516

Net cash provi ded by financing acti vities                                         —                  60,209,057                    8,807,516

Effect of foreign exchange rate fluctuation                                      28,853                   158,377                       23,168
Net change in cash                                                             (692,194 )              20,568,455                    3,008,800
Cash and cash equi valents at beginni ng of year                              1,370,000                        22                            3

Cash and cash equi valents at end of year                             ¥        677,806           ¥     20,568,477      $             3,008,803


                                                                     F-23
Table of Contents




   No dealer, salesperson or other person is authorized to gi ve
any informati on or to represent anything not contained in this
pros pectus. You must not rely on any unauthorized information
or representations. This pros pectus is an offer to sell only the
shares offered hereby, but onl y under circumstances and i n
jurisdicti ons where it is lawful to do so. The information
contained in this pros pectus is current only as of its date.



                     TAB LE OF CONTENTS

Prospectus Summary                                                  1
Risk Factors                                                        8
Forward-Looking Statements                                         22
Our Corporate Structure                                            23
Use Of Proceeds                                                    26
Per Share Market Information                                       26
Div idend Policy                                                   26
Capitalization                                                     27
Selected Historical and Unaudited Condensed Consolidated
  and Co mbined Financial and Operating Data                       29
Our Business                                                       44
Management                                                         54
Principal Shareholders                                             59
Related Party Transactions                                         59
Changes in Cert ifying Accountant                                  60
Description Of Share Capital                                       61
Shares Elig ible For Future Sale                                   67
Taxation                                                           68
Underwrit ing                                                      75
Other Relat ionships                                               78
Stamp Taxes                                                        78
Legal Matters                                                      81
Experts                                                            81
Where You Can Find More In formation                               81
Index to Financial Statements                                     F-1



   Until              , all dealers that effect transactions in these
securities, whether or not partici pating in this offering, may be
required to deli ver a pros pectus. This is in addition to the
dealer’s obligation to deli ver a pros pectus when acting as an
underwriter and wi th res pect to unsol d allotments or
subscriptions.
RECON TECHNOLOGY, LTD
                    Units
Each Unit Consisting of Four Ordinary
      Shares and One Warrant




             Prospectus




  Ladenburg Thalmann & Co. Inc.
    Rodman & Renshaw, LLC
Table of Contents

                                                                      PART II

                                            INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.      Other Expenses of Issuance and Distribution.
      The estimated expenses payable by us in connection with the offering described in this registration statement (other than the underwriting
discounts and commissions) will be as follows. With the exception of the filing fees for the U.S. Securities Exchange Co mmission and FINRA,
all amounts are estimates.

                        U.S. Securit ies and Exchange Co mmission registration fee                                $     1,665
                        FINRA filing fee                                                                                2,834
                        Legal fees and expenses                                                                       150,000
                        Accounting fees and expenses                                                                  100,000
                        Printing fees                                                                                  40,000
                        Miscellaneous                                                                                   5,501

                        Total                                                                                     $ 300,000

Item 14.      Indemni ficati on of Directors and Officers
       Cay man Islands law and our articles of association provide that we may indemnify our directors, officers, advisors and truste e acting in
relation to any of our affairs against actions, proceedings, costs, charges, losses, damages and expenses incurred by reason of any act done or
omitted in the execution of their duty in their capacit ies as such. Under our articles of association, indemn ification is not available, however, if
those events were incurred or sustained by or through their own willful neglect or default.

     Insofar as indemnificat ion for liabilit ies arising under the Securit ies Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Co mmission such indemnification is against public policy as expressed in the Act and is, therefore, u nenforceable.

Item 15.      Recent Sales of Unregistered Securities
      In the past three years, we (i) issued 20,000 ord inary shares to Mr. Li Hongqi and 15,000 ord inary shares each to Mr. Yin Shenping and
Mr. Chen Guangqiang, in connection with the format ion of Recon -CI and (ii) issued 2,632 o rdinary shares to Bloo msway Development Ltd in
return for $200,000, in t ransactions that were not required to be registered under the Securities Act of 1933. Giving effect to the
42.7840667-for-1 split of our shares and subsequent transfers by each of Mr. Li, M r. Yin and Mr. Chen, (a) Mr. Li now owns 833,681 ord inary
shares; (b) Mr. Yin and Mr. Chen each own 619,761 o rdinary shares; and (c) Bloomsway Develop ment Ltd now o wns 112,608 ordinary shares.

      All issuances of ordinary shares to Mr. Li, Mr. Yin, Mr. Chen and Bloo msway Development Ltd were deemed to be exempt under the
Securities Act by virtue of Section 4(2) thereof as a transaction not involving any public offering and not to fall within Section 5 under the
Securities Act by virtue of being issuances of securities by non-U.S. co mpanies to non-U.S. cit izens or residents, conducted outside the United
States and not using any element of interstate commerce.

                                                                         II-1
Table of Contents

Item 16.        Exhi bits and Financial Statement Schedules
        (a) Exhib its

        The following exhib its are filed herewith or incorporated by reference in this prospectus:

Exhibit
Number                                                                          Document

 1.1            Form of Underwriting Agreement (1)
 3.1            Amended and Restated Articles of Association of the Registrant (2)
 3.2            Amended and Restated Memorandum of Association of the Registrant (2)
 4.1            Specimen Share Certificate (2)
 4.2            Form of Representative’s Warrant (included in Exh ibit 10.31) (3)
 5.1            Opinion of Campbells, Cay man Islands counsel (1)
 5.2            Opinion of Kaufman & Canoles, P.C. (1)
10.1            Translation of Exclusive Technical Consulting Service Agreement between Recon Technology (Jining) Co., Ltd. and Beijing
                BHD Petroleu m Technology Co., Ltd. (2)
10.2            Translation of Power of Attorney for rights of Chen Guangqiang in Beijing BHD Pet roleu m Technology Co., Ltd. (2)
10.3            Translation of Power of Attorney for rights of Yin Shenping in Beijing BHD Petroleu m Technology Co., Ltd. (2)
10.4            Translation of Power of Attorney for rights of Li Hongqi in Beijing BHD Petroleu m Technology Co., Ltd. (2)
10.5            Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Chen Guangqiang
                and Beijing BHD Petro leu m Technology Co., Ltd. (2)
10.6            Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Yin Shenping and
                Beijing BHD Petroleu m Technology Co., Ltd. (2)
10.7            Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Li Hongqi and
                Beijing BHD Petroleu m Technology Co., Ltd. (2)
10.8            Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Beijing
                BHD Petroleu m Technology Co., Ltd. (2)
10.9            Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co ., Ltd., Yin Shenping and Beijing BHD
                Petroleu m Technology Co., Ltd. (2)
10.10           Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Li Hongqi and Beijing BHD
                Petroleu m Technology Co., Ltd. (2)
10.11           Translation of Exclusive Technical Consulting Service Agreement between Recon Technology (Jining) Co., Ltd. and Jining ENI
                Energy Technology Co., Ltd. (2)
10.12           Translation of Power of Attorney for rights of Chen Guangqiang in Jining ENI Energy Tech nology Co., Ltd. (2)
10.13           Translation of Power of Attorney for rights of Yin Shenping in Jining ENI Energy Technology Co., Ltd. (2)
10.14           Translation of Power of Attorney for rights of Li Hongqi in Jin ing ENI Energy Technology Co., Ltd. (2)
10.15           Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Chen Guangqiang
                and Jining ENI Energy Technology Co., Ltd. (2)

                                                                         II-2
Table of Contents



10.16         Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Yin Shenping and
              Jining ENI Energy Technology Co., Ltd. (2)
10.17         Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Li Hongqi and Jining
              ENI Energy Technology Co., Ltd. (2)
10.18         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Jining ENI
              Energy Technology Co., Ltd. (2)
10.19         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Yin Shenping and Jining ENI
              Energy Technology Co., Ltd. (2)
10.20         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Li Hongqi and Jin ing ENI Energy
              Technology Co., Ltd. (2)
10.21         Translation of Exclusive Technical Consulting Service Agreement between Recon Technology (Jin ing) Co., Ltd. and Nan jing
              Recon Technology Co., Ltd. (2)
10.22         Translation of Power of Attorney for rights of Chen Guangqiang in Nanjing Recon Technology Co., Ltd. (2)
10.23         Translation of Power of Attorney for rights of Yin Shenping in Nanjing Recon Technology Co., Ltd. (2)
10.24         Translation of Power of Attorney for rights of Li Hongqi in Nanjing Recon Technology Co., Ltd. (2)
10.25         Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Chen Guangqiang
              and Nanjing Recon Technology Co., Ltd. (2)
10.26         Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Yin Shenping and
              Nanjing Recon Technology Co., Ltd. (2)
10.27         Translation of Exclusive Equity Interest Purchase Agreement between Recon Technolog y (Jining) Co. Ltd., Li Hongqi and
              Nanjing Recon Technology Co., Ltd. (2)
10.28         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Nanjing
              Recon Technology Co., Ltd. (2)
10.29         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Yin Shenping and Nanjing Recon
              Technology Co., Ltd. (2)
10.30         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Li Hongqi and Nanjing Recon
              Technology Co., Ltd. (2)
10.31         Form of Warrant Agreement (3)
10.32         Form of Lock-Up Agreement (1)
10.33         Emp loy ment Agreement between Recon Technology (Jining) Co., Ltd. and Mr. Yin Shenping (2)
10.34         Emp loy ment Agreement between Recon Technology (Jining) Co., Ltd. and Mr. Chen Guangqiang (2)
10.35         Emp loy ment Agreement between Recon Technology (Jining) Co., Ltd. and Mr. Li Hongqi (2)
10.36         Summary Translation of Technical Serv ice Contract by and between Natural Gas Development Co mpany of Qinghai Oilfield and
              Beijing BHD Petroleu m Technology Co., Ltd. (2)
10.37         Summary Translation of Sales Contract, by and between the West Site Depart ment of Bazhou, Zhongyuan Petroleum Exp loration
              Bureau Project Construction Corporation and Jining ENI Energy Technology Co., Ltd. (2)
10.38         Ordinary Shares Subscription Agreement dated December 31, 2007 between the Reg istrant and Bloo msway Develop ment Ltd (2)
10.39         Translation of Contract for the Sale of Industrial and Mineral Products between Nanjing Recon Technology Co., Ltd. and
              PetroChina Qinghai Oilfield Co., Ltd. (2)

                                                                     II-3
Table of Contents



10.40         Translation of Contract of Material Reserves and Sales between Beijing BHD Petroleu m Technology Co., Ltd. and Petro China
              Qinghai Oilfield Co., Ltd. (2)
10.41         Translation of Contract of Material Reserves and Sales between Beijing BHD Petroleu m Technology Co., Ltd. and Petro China
              Qinghai Oilfield Co., Ltd. (2)
10.42         Translation of Contract for Purchasing Vacuum-Heating-Furnace between Beijing BHD Petro leu m Technology Co., Ltd. and
              PetroChina Huabei Oilfield Co., Ltd. (2)
10.43         Translation of Contract of the Sale of Goods between Beijing BHD Petro leu m Technology Co., Ltd. and PetroCh ina Huabei
              Oilfield Co., Ltd. (2)
10.44         Summary Translation of Chuan East to Chuan West Transferring Gas Pipe Project Product Collective Contract between Jining ENI
              Energy Technology Co., Ltd. and Southwest Oil Gas Co mpany of Sinopec. (2)
10.45         Summary Translation of Industrial Product Purchasing Agreement between Jining ENI Energy Technology Co., Ltd. and
              Southwest Oil Gas Co mpany of Sinopec. (2)
10.46         Summary Translation of Purchase Agreement between Jining ENI Energy Technology Co., Ltd. and Southwest Oil Gas Co mpany
              of Sinopec. (2)
10.47         Summary Translation of Chuan East to Chuan West Transferring Gas Pipe Project Product Collective Contract be tween Jining ENI
              Energy Technology Co., Ltd. and Southwest Oil Gas Co mpany of Sinopec. (2)
10.48         Operating Agreement among Recon Technology (Jining) Co. Ltd., Nanjing Recon Technology Co., Ltd. and Mr. Yin Shenping,
              Mr. Chen Guangqiang and Mr. Li Hongqi (2)
10.49         Operating Agreement among Recon Technology (Jining) Co. Ltd., Jining ENI Energy Technology Co., Ltd., and Mr. Yin
              Shenping, Mr. Chen Guangqiang and Mr. Li Hongqi (2)
10.50         Operating Agreement among Recon Technology (Jining) Co. Ltd., Beijing BHD and Mr. Yin Shenping, Mr. Chen Guangqiang and
              Mr. Li Hongqi (2)
21.1          Subsidiaries of the Registrant (2)
23.1          Consent of Hansen Barnett & Maxwell (1)
23.4          Consent of Campbells (included in Exh ibit 5.1) (1)
24.1          Power o f Attorney (included on page II-6 of the Registration Statement) (4)
99.1          Stock Option Plan (2)
99.2          Code of Business Conduct and Ethics (2)
99.3          Opinion of Jingtian & Gongcheng (1)

(1)     Filed herewith
(2)     Incorporated by reference to the registrant’s registration statement on Form S-1, File No. 333-152964, filed on August 12, 2008, as
        amended
(3)     To be filed by amendment.
(4)     Previously filed.

        (b) Financial Statement Schedules
             None.

Item 17.       Undertakings
        The Registrant hereby undertakes:

        (a) to file, during any period in which offers or sales are being made, a post -effective amendment to this registration statement to:
             (i) include any prospectus required by section 10(a)(3) of the Securit ies Act;

                                                                          II-4
Table of Contents

            (ii) reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the inf ormation
      in the registration statement. Notwithstanding the foregoing, any increase or decrea se in volume of securit ies offered (if the total dollar
      value of securities offered would not exceed that which was registered) and any deviation from the low or h igh end of the est imated
      maximu m o ffering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the
      changes in volume and price represent no more than a 20% change in the maximu m aggregate offering price set forth in the ―Calculation
      of Reg istration Fee‖ table in the effective registration statement; and
           (iii) include any material information with respect to the plan of distribution not previously disclosed in the registration statement or
      any material change to such information in the reg istration statement.

      (b) that, for the purpose of determining any liability under the Securities Act, each post -effective amend ment shall be deemed t o be a new
registration statement relating to the securities offered therein, and the offering of such securities at that time s hall be deemed to be the initial
bona fide offering thereof.

      (c) to file a post-effective amend ment to remove fro m registration any of the securities that remain unsold at the end of the offering.

      (d) that insofar as indemn ification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant, the Registrant has been advised that in the opinion of the SEC, such indemn ification is against pu blic policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemn ification against such liabilities (other than the
payment by the Registration of expenses incurred or paid by a director, officer or controlling person to the Registrant in th e successful defense
of any action, suit or proceeding) is asserted by such director, officer o r controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemn ification by it is against public policy as expressed in the Securities Act a nd will be governed
by the final adjudicat ion of such issue.

       (e) that, for the purpose of determining liability under the Securit ies Act to any purchaser, each prospectus filed pursuant to Rule 424(b)
as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B o r other than prospectuses
filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first us ed after
effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the re gistration statement or
made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is par t of the
registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was
made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prio r to
such date of first use.

       (f) that, for the purpose of determining liability of the Reg istrant under the Securities Act to any purchaser in the in itial distribution of the
securities, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold t o such
purchaser by means of any of the following co mmunications, the Registrant will be a seller to the purchaser and will be considered to offer or
sell such securities to such purchaser:
            (i) any preliminary prospectus or prospectus of the Registrant relating to the offering filed pursuant to Rule 424;
           (ii) any free writing prospectus relating to the offering prepared by or on behalf of the Registrant or used or referred to b y the
      Registrant;
            (iii) the portion of any other free writ ing prospectus relating to the offerin g containing material information about the Registrant or
      its securities provided by or on behalf of the Registrant; and
            (iv) any other communicat ion that is an offer in the offering made by the Registrant to the purchaser.

                                                                           II-5
Table of Contents

                                                                  SIGNATURES

       Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable groun ds to believe
that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the People ’s Republic of China, on the 9th day of June, 2010.

                                                                                         RECON TECHNOLOGY, LTD,
                                                                                         a Cay man Islands exempted company

                                                                                         By:                     / S/   Y IN S HENPING
                                                                                         Name:                            Yin Shenping
                                                                                         Title:        Chief Executive Officer (Principal Executive Officer)


                                                                                         Date:       June 9, 2010

                                                                        II-6
Table of Contents

     Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the fo llowing
persons in the capacities and on the dates indicated:

                             Signature                                                Title                                        Date


              / S/      Y IN S HENPING                  Chief Executive Officer and Director                                   June 9, 2010
                                                        (Principal Executive Officer)
                            Yin Shenping


                     / S/     L IU J IA                 Chief Financial Officer                                                June 9, 2010
                                                        (Principal Accounting and Financial Officer)
                               Liu Jia


                                 *                      Chief Technology Officer and Director                                  June 9, 2010
                       Chen Guangqiang


                                 *                      Chief Marketing Officer and Director                                   June 9, 2010
                             Li Hongqi


            / S/      D ENNIS O. L AING                 Director (Authorized Representative in the Un ited States)             June 9, 2010
                        Dennis O. Laing


                                 *                      Director                                                               June 9, 2010
                       Nelson N.S. Wong


                                 *                      Director                                                               June 9, 2010
                              Hu Jijun


                                 *                      Director                                                               June 9, 2010
                            Liao Xiaorong



*By:                   / S/      Y IN S HENPING
                                  Yin Shenping
                                 Attorney -in-fact

                                                                      II-7
Table of Contents

                                                               EXHIB IT INDEX

Exhibit
Number                                                                        Document

 1.1           Form of Underwriting Agreement (1)
 3.1           Amended and Restated Articles of Association of the Registrant (2)
 3.2           Amended and Restated Memorandum of Association of the Registrant (2)
 4.1           Specimen Share Certificate (2)
 4.2           Form of Representative’s Warrant (included in Exh ibit 10.31) (3)
 5.1           Opinion of Campbells, Cay man Islands counsel (1)
 5.2           Opinion of Kaufman & Canoles, P.C. (1)
10.1           Translation of Exclusive Technical Consulting Service Agreement between Recon Technology (Jining) Co., Ltd. and Beijing
               BHD Petroleu m Technology Co., Ltd. (2)
10.2           Translation of Power of Attorney for rights of Chen Guangqiang in Beijing BHD Pet roleu m Technology Co., Ltd. (2)
10.3           Translation of Power of Attorney for rights of Yin Shenping in Beijing BHD Petroleu m Technology Co., Ltd. (2)
10.4           Translation of Power of Attorney for rights of Li Hongqi in Beijing BHD Petroleu m Technology Co., Ltd. (2)
10.5           Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Chen Guangqiang
               and Beijing BHD Petro leu m Technology Co., Ltd. (2)
10.6           Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Yin Shenping and
               Beijing BHD Petroleu m Technology Co., Ltd. (2)
10.7           Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd ., Li Hongqi and
               Beijing BHD Petroleu m Technology Co., Ltd. (2)
10.8           Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Beijing
               BHD Petroleu m Technology Co., Ltd. (2)
10.9           Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Yin Shenping and Beijing BHD
               Petroleu m Technology Co., Ltd. (2)
10.10          Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Li Hongqi and Beijing BHD
               Petroleu m Technology Co., Ltd. (2)
10.11          Translation of Exclusive Technical Consulting Service Agreement between Recon Technology (Jining) Co., Ltd. and Jining ENI
               Energy Technology Co., Ltd. (2)
10.12          Translation of Power of Attorney for rights of Chen Guangqiang in Jining ENI Energy Technology Co., Ltd. (2)
10.13          Translation of Power of Attorney for rights of Yin Shenping in Jining ENI Energy Technology Co., Ltd. (2)
10.14          Translation of Power of Attorney for rights of Li Hongqi in Jin ing ENI Energy Technology Co., Ltd. (2)
10.15          Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Chen Guangqiang
               and Jining ENI Energy Technology Co., Ltd. (2)
10.16          Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Yin Shenping and
               Jining ENI Energy Technology Co., Ltd. (2)

                                                                       II-8
Table of Contents

10.17         Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Li Hongqi and Jining
              ENI Energy Technology Co., Ltd. (2)
10.18         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Jining ENI
              Energy Technology Co., Ltd. (2)
10.19         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Yin Shenping and Jining ENI
              Energy Technology Co., Ltd. (2)
10.20         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Li Hongqi and Jin ing ENI Energy
              Technology Co., Ltd. (2)
10.21         Translation of Exclusive Technical Consulting Service Agreement between Recon Technology (Jining) Co., Ltd. and Nan jing
              Recon Technology Co., Ltd. (2)
10.22         Translation of Power of Attorney for rights of Chen Guangqiang in Nanjing Recon Technology Co., Ltd. (2)
10.23         Translation of Power of Attorney for rights of Yin Shenping in Nanjing Recon Technology Co., Ltd. (2)
10.24         Translation of Power of Attorney for rights of Li Hongqi in Nanjing Recon Technology Co., Ltd. (2)
10.25         Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Chen Guangqiang
              and Nanjing Recon Technology Co., Ltd. (2)
10.26         Translation of Exclusive Equity Interest Purchase Agreement between Recon Techno logy (Jining) Co. Ltd., Yin Shenping and
              Nanjing Recon Technology Co., Ltd. (2)
10.27         Translation of Exclusive Equity Interest Purchase Agreement between Recon Technology (Jining) Co. Ltd., Li Hongqi and
              Nanjing Recon Technology Co., Ltd. (2)
10.28         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Chen Guangqiang and Nanjing
              Recon Technology Co., Ltd. (2)
10.29         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., Yin Shenping and Nanjing Recon
              Technology Co., Ltd. (2)
10.30         Translation of Equity Interest Pledge Agreement between Recon Technology (Jining) Co., Ltd., L i Hongqi and Nanjing Recon
              Technology Co., Ltd. (2)
10.31         Form of Warrant Agreement (3)
10.32         Form of Lock-Up Agreement (1)
10.33         Emp loy ment Agreement between Recon Technology (Jining) Co., Ltd. and Mr. Yin Shenping (2)
10.34         Emp loy ment Agreement between Recon Technology (Jining) Co., Ltd. and Mr. Chen Guangqiang (2)
10.35         Emp loy ment Agreement between Recon Technology (Jining) Co., Ltd. and Mr. Li Hongqi (2)
10.36         Summary Translation of Technical Serv ice Contract by and between Natural Gas Development Co mpany of Qinghai Oilfield and
              Beijing BHD Petroleu m Technology Co., Ltd. (2)
10.37         Summary Translation of Sales Contract, by and between the West Site Depart ment of Bazhou, Zhongyuan Petroleum Exp loration
              Bureau Project Construction Corporation and Jining ENI Energy Technology Co., Ltd. (2)
10.38         Ordinary Shares Subscription Agreement dated December 31, 2007 between the Reg istrant and Bloo msway Develop ment Ltd (2)
10.39         Translation of Contract for the Sale of Industrial and Mineral Products between Nanjing Recon Technology Co., Ltd. and
              PetroChina Qinghai Oilfield Co., Ltd. (2)
10.40         Translation of Contract of Material Reserves and Sales between Beijing BHD Petroleu m Technology Co., Ltd. and Petro China
              Qinghai Oilfield Co., Ltd. (2)

                                                                     II-9
Table of Contents

10.41        Translation of Contract of Material Reserves and Sales between Beijing BHD Petroleu m Technology Co., Ltd. and Petro China
             Qinghai Oilfield Co., Ltd. (2)
10.42        Translation of Contract for Purchasing Vacuum-Heating-Furnace between Beijing BHD Petro leu m Technology Co., Ltd. and
             PetroChina Huabei Oilfield Co., Ltd. (2)
10.43        Translation of Contract of the Sale of Goods between Beijing BHD Petro leu m Technology Co., Ltd. and PetroCh ina Huabei
             Oilfield Co., Ltd. (2)
10.44        Summary Translation of Chuan East to Chuan West Transferring Gas Pipe Project Product Collective Contract between Jining ENI
             Energy Technology Co., Ltd. and Southwest Oil Gas Co mpany of Sinopec. (2)
10.45        Summary Translation of Industrial Product Purchasing Agreement between Jining ENI Energy Technology Co., Ltd. and
             Southwest Oil Gas Co mpany of Sinopec. (2)
10.46        Summary Translation of Purchase Agreement between Jining ENI Energy Technology Co., Ltd . and Southwest Oil Gas Co mpany
             of Sinopec. (2)
10.47        Summary Translation of Chuan East to Chuan West Transferring Gas Pipe Project Product Collective Contract between Jining ENI
             Energy Technology Co., Ltd. and Southwest Oil Gas Co mpany of Sinopec. (2)
10.48        Operating Agreement among Recon Technology (Jining) Co. Ltd., Nanjing Recon Technology Co., Ltd. and Mr. Yin Shenping,
             Mr. Chen Guangqiang and Mr. Li Hongqi (2)
10.49        Operating Agreement among Recon Technology (Jining) Co. Ltd., Jining ENI Energy Technology Co., Ltd., and Mr. Yin
             Shenping, Mr. Chen Guangqiang and Mr. Li Hongqi (2)
10.50        Operating Agreement among Recon Technology (Jining) Co. Ltd., Beijing BHD and Mr. Yin Shenping, Mr. Chen Guangqiang and
             Mr. Li Hongqi (2)
21.1         Subsidiaries of the Registrant (2)
23.1         Consent of Hansen Barnett & Maxwell (1)
23.4         Consent of Campbells (included in Exh ibit 5.1) (1)
24.1         Power o f Attorney (included on page II-6 of the Registration Statement) (4)
99.1         Stock Option Plan (2)
99.2         Code of Business Conduct and Ethics (2)
99.3         Opinion of Jingtian & Gongcheng (1)



(1)     Filed herewith
(2)     Incorporated by reference to the registrant’s registration statement on Form S-1, File No. 333-152964, filed on August 12, 2008, as
        amended
(3)     To be filed by amendment.
(4)     Previously filed.

                                                                       II-10
                                                                1,000,000 Units

                                                       RECON TECHNOLOGY, LTD

                                                      UNDERWRITING AGREEMENT

                                                                 June [ ], 2010

LADENBURG THA LMANN & CO. INC.
520 Mad ison Avenue
New York, NY 10022

As Representative of the Underwriters
named on Schedule A hereto

Ladies and Gentlemen :

      Recon Technology, Ltd, a corporation organized and existing under the laws of the Cay man Islands (the ― Company ‖), confirms its
agreement, subject to the terms and conditions set forth herein, with each of the underwriters listed on Exhib it A hereto (collectively, the ―
Underwriters ‖), for who m Ladenburg Thalmann & Co. Inc. is acting as representative (in such capacity, the ― Representati ve ‖), to sell and
issue to the Underwriters an aggregate of 1,000,000 units (the ― Firm Units ‖) consisting of four ordinary shares, par value $0.0185 per share
(the ― Ordinary Shares ‖), and one warrant to purchase one Ordinary Share (the ― Warrant(s) ‖). The Firm Un its, Ord inary Shares and
Warrants are more fully described in the Registration Statement and Prospectus re ferred to below.

      In addition, the Co mpany shall, at the Closing (as defined herein) issue to the Representative a Unit Purchase Option (the ― UPO ‖) to
purchase up to 18,750 Units. The Un its (as defined below) and the UPO are more fully described in the Re g istration Statement and Prospectus
referred to below. The offering and sale of the Un its contemplated by this underwriting agreement (this ― Agreement ‖) is referred to herein as
the ― Offering .‖

     1.1 Firm Securit ies; Over-Allot ment Option .

            (a) Purchase of Firm Units . On the basis of the representations and warranties herein contained, but subject to the terms and
conditions herein set forth, the Co mpany agrees to issue and sell, severally and not jointly, to the several Underwriters, th e Firm Un its at a
purchase price (net of d iscounts and commissions) of $[ ] per Firm Unit. The Underwriters, severally and not jointly, agree to purchase fro m
the Co mpany the number of Firm Units set forth opposite their respective names on Schedule A attached hereto and made a part hereof at a
purchase price (net of d iscounts and commissions) of $[ ] per Firm Units. Each Firm Unit consists of four Ordinary Shares and one Warrant.
Each whole Warrant entitles its holder to purchase one Ordinary Share for $[ ] per share during the period co mmencing on the effective date
(the ―Effective Date‖) of the Registration Statement (as defined in Section 2.1(a) hereof), and terminating on the five year anniversary of the
Effective Date.
                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

             (b) Pay ment and Delivery . Delivery and payment fo r the Firm Un its shall be made at 10:00 A.M ., New Yo rk time, on the third
Business Day following the effective date (the ― Effecti ve Date‖ ) of the Registration Statement (or the fourth Business Day following the
Effective Date, if the Registration Statement is declared effective after 4:30 p.m.) o r at such earlier time as shall be agre ed upon by the
Representative and the Co mpany at the offices of the Representative or at such other place as shall be agreed upon by the Representative and
the Co mpany. The hour and date of delivery and payment for the Firm Units is called the ― Closing Date .‖ Pay ment for the Firm Un its shall be
made on the Closing Date at the Representative’s election by wire transfer in Federal (same day) funds or by certified or bank cashier’s
check(s) in New York Clearing House funds. Any remain ing proceeds (less commissions, expense allowance and actual expense payments or
other fees payable pursuant to this Agreement) shall be paid to the order of the Co mpany upon delivery to you of certificates (in form and
substance satisfactory to the Underwriters) representing the Firm Un its (or through the facilities of the Depository Trust Co mpany (the ― DTC
‖)) for the account of the Underwriters. The Firm Units shall be registered in such name or names and in such authorized denom inations as the
Representative may request in writ ing at least two Business Days prior to the Closing Date. The Co mpany will permit the Representative to
examine and package the Firm Units for delivery at least one full Business Day prior to the Closing Date. The Co mpany shall n ot be obligated
to sell or deliver the Firm Units except upon tender of payment by the Representative for all the Firm Units.

            (c) Option Un its . For the purposes of covering any over-allot ments in connection with the distribution and sale of the Firm Units,
the Representative on behalf of the Underwriters is, hereby granted, an option to purchase up to an additional 15% of the nu mber of Firm Units
to be offered by the Co mpany in the Offering (the ― Over-allotment Option ‖). Such additional 150,000 Units shall be identical in all respects
to the Firm Un its and are hereinafter referred to as ― Opti on Uni ts .‖ The Firm Units and the Option Units are hereinafter collectively referred
to as the ― Units ‖. The Units, the Ordinary Shares, the Warrants and the Ordinary Shares underlying the Warrants are referred t o as the ―
Securities ‖. The purchase price to be paid for the Option Units (net of discounts and commissions) will be $[ ] per Option. The Option Units
are to be offered init ially to the public at the offering price of $[ ] per Option Unit.

             (d) Exercise of Option . The Over-allot ment Option granted pursuant to Section 1.1(c) hereof may be exercised by the
Representative as to all (at any time) or any part (fro m time to time) of the Option Units within 45 days after the Effective Date. The
Underwriters will not be under any obligation to purchase any Option Units prior to the exercise of the Over-allotment Option. The
Over-allot ment Opt ion granted hereby may be exercised by the giving of oral notice to the Co mpany fro m the Representa tive, which must be
confirmed in writing by overnight mail or facsimile transmission setting forth the number of Option Units to be purchased and the date and
time fo r delivery of and pay ment for the Opt ion Units, wh ich will not be later than five Business Days after the date of the notice or such other
time as shall be agreed upon by the Company and the Representative, at the offices of the Representative or at such other pla ce as shall be
agreed upon by the Company and the Representative. If such

                                                                          2
                                                                                                                  Ladenburg Thalmann & Co. Inc.
                                                                                                                                 June [ ], 2010

delivery and payment for the Option Un its does not occur on the Closing Date, the date and time of the closing for such Optio n Units will be as
set forth in the notice (hereinafter the ― Opti on Closing Date ‖). Upon exercise of the Over-allot ment Option, the Co mpany will beco me
obligated to convey to the Underwriters, and, subject to the terms and conditions set forth herein, the Underwriters will bec ome obligated to
purchase, the number of Option Un its specified in such notice.

           (e) Pay ment and Delivery of Option Un its . Pay ment for the Option Units shall be made on the Option Closing Date at the
Representative’s election by wire transfer in Federal (same day) funds or by certified or bank cashier’s check(s) in New Yo rk Clearing House
funds, by deposit upon delivery to the Underwriters of certificates (in form and substance satisfactory to the Underwriters) representing the
Option Units (or through the facilit ies of DTC) for the account of the Underwriters. The certificates representing the Option Units to be
delivered will be in such denominations and registered in such names as the Representative requests not less than two Busines s Days prior to
the Closing Date or the Option Closing Date, as the case may be, and will be made available to the Representative for inspection, checking and
packaging at the aforesaid office o f the Co mpany’s transfer agent or correspondent not less than one full Business Day prior to such Closing
Date or Option Closing Date.

     2. Representations and Warranties of the Company .

            2.1 The Co mpany represents, warrants and covenants to, and agrees with, each of the Underwriters that, as of the date hereof and as
of the Closing Date and the closing date of the Over-allotment Option:

             (a) The Co mpany has filed with the Securities and Exchange Co mmission (the ― Commission ‖) a registration statement on Form
S-1 (Reg istration No. 333-166540), and amend ments thereto, and related preliminary prospectuses for the registration under the Securit ies Act
of 1933, as amended (the ― Securities Act ‖), of the Securit ies which registration statement, as so amended (including post -effective
amend ments, if any), has been declared effective by the Co mmission and copies of which have heretofore been delivered to the Underwriters.
The registration statement, as amended at the time it became effective, including the prospectus, financial statements, sched ules, exh ibits and
other information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act, is hereinafter referred to as the ― Registration Statement .‖ If the Co mpany has filed or is required pursuant to the terms hereof
to file a registration statement pursuant to Rule 462(b) under the Securit ies Act registering additional Securities (a ― Rule 462(b) Registrati on
Statement ‖), then, unless otherwise specified, any reference herein to the term ―Registration Statement‖ shall be deemed to include such Rule
462(b ) Registration Statement. Other than a Rule 462(b) Registration Statement, wh ich, if filed, becomes effect ive upon filing, no other
document with respect to the Registration Statement has heretofore been filed with the Co mmission. All o f the Securities have been registered
under the Securities Act pursuant to the Registration Statement or, if any Ru le 462(b) Registration Statement is filed, will be duly registered
under the Securities Act with the filing of such Rule 462(b) Reg istration Statement. Based on communicat ions fro m the Co mmission, no stop
order suspending the effectiveness of

                                                                         3
                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

either the Reg istration Statement or the Rule 462(b) Registration Statement, if any, has be en issued and no proceeding for that purpose has been
initiated or threatened by the Co mmission. The Co mpany, if required by the Securities Act and the rules and regulations of th e Co mmission
(the ― Rules and Regulations ‖), proposes to file the Prospectus with the Co mmission pursuant to Rule 424(b) under the Securities Act (― Rule
424(b) ‖). The prospectus, in the form in wh ich it is to be filed with the Co mmission pursuant to Rule 424(b), or, if the prospectus is not to be
filed with the Co mmission pursuant to Rule 424(b), the prospectus in the form included as part of the Registration Statement at the time the
Registration Statement became effective, is hereinafter referred to as the ― Prospectus ,‖ except that if any revised prospectus or prospectus
supplement shall be provided to the Underwriters by the Company for use in connection with the Offering which differs fro m t he Pr ospectus
(whether or not such revised prospectus or prospectus supplement is required to be filed by the Co mpany pursuant to Rule 4 24(b)), the term
―Prospectus‖ shall also refer to such revised prospectus or prospectus supplement, as the case may be, fro m and after the time it is first
provided to the Underwriters for such use. Any preliminary prospectus or prospectus subject to complet ion included in the Registration
Statement or filed with the Co mmission pursuant to Rule 424 under the Securities Act is hereafter called a ― Preliminary Prospectus .‖ Any
reference herein to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the
exhibits incorporated by reference therein pursuant to the Rules and Regulations on or before the effective date of the Regis tration Statement,
the date of such Preliminary Prospectus or the date of the Prospectus, as the case may be. Any reference herein to the terms ―amend‖,
―amend ment‖ or ―supplement‖ with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include: (i) the filing of any document under the Securit ies Exchange Act of 1934, as amended, and together with the Rules and
Regulations promu lgated thereunder (the ― Exchange Act ‖), after the effective date of the Registration Statement, the date of such Preliminary
Prospectus or the date of the Prospectus, as the case may be, which is incorporated therein by reference, and (ii) any such document so filed.
All references in this Agreement to the Registration Statement, the Rule 462(b) Reg istration Statement, a Preliminary Prospec tus and the
Prospectus, or any amendments or supplements to any of the foregoing shall be deemed to include any copy thereof filed with t he Co mmission
pursuant to its Electronic Data Gathering and Retrieval (― EDGAR ‖) system.

            (b) The Co mpany has filed with the Co mmission a Form 8-A (File Nu mber 001-34409) provid ing for the reg istration under the
Securities Exchange Act of 1934, as amended (the ―Exchange Act‖), of the Units, the Ordinary Shares and the Warrants. The registration of the
Units, Ordinary Shares and Warrants under the Exchange Act has been declared effective by the Co mmission on or prior to the d ate hereof.

             (c) At the time o f the effect iveness of the Registration Statement or any Rule 462(b) Registration Statement or the effect iveness of
any post-effective amendment to the Registration Statement, when the Prospectus is first filed with the Co mmission pursuant to Ru le 42 4(b),
when any supplement to or amend ment of the Prospectus is filed with the Co mmission, when any d ocument filed under the Exchange Act was
or is filed and at the Closing Date (as hereinafter defined), if any, the Registration Statement and the Prospectus and any a mendments thereof
and supplements or exhibits thereto complied or will comp ly in all material respects with

                                                                          4
                                                                                                                  Ladenburg Thalmann & Co. Inc.
                                                                                                                                 June [ ], 2010

the applicable provisions of the Securities Act, the Exchange Act and the Rules and Regulations, and did not and will not contain an untrue
statement of a material fact and did not and will not omit to state any material fact required to be stated therein or necess ary in order to make
the statements therein: (i) in the case of the Registration Statement, not misleading, and (ii) in the case of the Prospectus or any related
Preliminary Prospectus in light of the circu mstances under which they were made, not misleading. When any Preliminary Prospec tus was first
filed with the Co mmission (whether filed as part of the registration statement for the registration of the Securities or any amendment thereto or
pursuant to Rule 424(a) under the Securities Act) and when any amendment thereof or supplement thereto was first filed with t he Co mmission,
such Preliminary Prospectus and any amendments thereof and supplements thereto complied in all material respects with the app licable
provisions of the Securities Act, the Exchange Act and the Rules and Regulations and did not contain an untrue stateme nt of a material fact and
did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the
circu mstances under which they were made, not misleading. No representation and warranty is made in this subsection (c), however, with
respect to any information contained in or o mitted fro m the Registration Statement or the Prospectus or any related Prelimina ry Prospectus or
any amend ment thereof or supplement thereto in reliance upon and in conformity with informat ion furnished in writing to the Company by or
on behalf of any Underwriter through the Representative specifically for use therein. The parties acknowledge and agree that such informat ion
provided by or on behalf of any Underwriter consists solely of the subsections of the ―Underwriting‖ section of the Prospectus captioned
―Stabilization‖ and ―Foreign Regulatory Restrict ions on Purchase of Units ‖ (the ― Underwriters’ Information‖ ).

           (d) Each of Hansen Barnett & Maxwell, P.C. (―HBM‖), whose reports relating to the Company are included in the Registration
Statement, and Bernstein & Pinchuk LLP (―B&P‖), are independent public accountants as required by the Securities Act, the Exchange Act and
the Rules and Regulations.

            (e) Subsequent to the respective dates as of which information is presented in the Registration Statement and the Prospectus, and
except as disclosed in the Registration Statement and the Prospectus: (i) neither the Co mpany nor any Subsidiary has declared, paid or made
any dividends or other distributions of any kind on or in respect of its capital stock, and (ii) there has been no material adverse change (or, to
the knowledge of the Co mpany, any development which has a high probability of involving a material adverse change in the future), whether or
not arising fro m transactions in the ordinary course of business, in or affecting: (A) the business, condition (financial or otherwise), results of
operations, shareholders’ equity, properties or prospects of the Company and each direct or indirect subsidiary or jo int venture of the Co mpany
listed on Exh ibit 21.1 of the Registration Statement hereto (the ― Subsidiaries ‖), taken as a whole; (B) the long-term debt or capital stock of
the Co mpany or any of its Subsidiaries; or (C) the Offering or consummat ion of any of the other transactions contemplated by this Agreement,
the Registration Statement or the Prospectus (a ― Material Adverse Change ‖). Since the date of the latest balance sheet presented in the
Registration Statement and the Prospectus, neither the Co mpany nor any Subsidiary has
                   (i)      suffered any damage, destruction or loss, whether or not covered by insurance, in an amount in excess of $100,000;

                                                                         5
                                                                                               Ladenburg Thalmann & Co. Inc.
                                                                                                              June [ ], 2010

(ii)     granted or agreed to make any increase in the co mpensation payable or to become payable by the Co mpany or any
         of its Subsidiaries to any officer or employee, except for normal raises for nonexecutive personnel made in the
         ordinary course of business that are usual and normal in amount;
(iii)    declared, set aside or paid any dividend or made any other distribution on or in respect of the shares of capital stock
         of the Co mpany or any of its Subsidiaries, or declared or agreed to any direct or indirect redemption, ret irement,
         purchase or other acquisition by the Company or any of its Subsidiaries of such shares;
(iv)     issued any shares of capital stock of the Co mpany or any of its Subsidiaries, or any warrants, righ ts or options
         thereof, or entered into any commit ment relating to the shares of capital stock of the Co mpany or any of its
         Subsidiaries;

(v)      adopted or proposed the adoption of any change in the Company ’s Memo randum and Articles of Association;
(vi)     made any change in the accounting methods or practices they follow, whether fo r general financial o r tax purposes,
         or any change in depreciation or amortizat ion policies or rates adopted therein, or any tax election;
(vii)    sold, leased, abandoned or otherwise disposed of any real property or any machinery, equip ment or other operating
         property other than in the ordinary course of business;

(viii)   sold, assigned, transferred, licensed or otherwise disposed of any of the Intellectual Property (as defined below) or
         the interest thereunder or other intangible asset except in the ordinary course of business;
(ix)     been involved in any dispute involving any employee which has had or would reasonably be expected to have a
         Material Adverse Effect;
(x)      entered into, terminated or modified any emp loyment, severance, termination or similar agreement or arrangement
         with, or granted any bonuses (or bonus opportunity) to, or otherwise increased the compensation of any executiv e
         officer;

(xi)     entered into any material co mmit ment or transaction (including without limitation any borrowing or capital
         expenditure);

                                                      6
                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

                   (xii)     amended or modified, or waived any default under, any contract, the result of which would be a Material Adverse
                             Effect;
                   (xiii)    incurred any material liabilities, contingent or otherwise, either matured or unmatured (whether or not required to
                             be reflected in financial statements in accordance with GAAP, and whether due or to become due), except for
                             accounts payable or accrued salaries that have been incurred by the Co mpany in the ordinary course of business and
                             consistent with past practices;
                   (xiv)     permitted or allo wed any of their material propert ies to be subjected to any Lien (as defined below);

                   (xv)      made any capital expenditure or co mmit ment for additions to property, plant or equipment individually in excess of
                             $100,000, or in the aggregate, in excess of $250,000;
                   (xvi)     paid, loaned or advanced any amount to, or sold, transferred or leas ed any properties of the Co mpany or any
                             Subsidiary to, or entered into any agreement or arrangement with any of their Affiliates (as defined herein),
                             officers, directors or stockholders or, to the Co mpany’s knowledge, any Affiliate or associate of any of the
                             foregoing;
                   (xvii)    compro mised or settled any claims relat ing to taxes, any tax audit o r other tax proceeding, or filed any amended tax
                             returns;

                   (xviii)    merged or consolidated with any other Person, or acquired a material amount of assets of an y other Person;
                   (xix)     agreed to take any action described in this section or which would reasonably be expected to otherwise constitute a
                             breach of any of the representations or warranties contained in this Agreement; or
                   (xx)      incurred or undertaken any liabilities or obligations, whether direct or indirect, liquidated or contingent, matured or
                             unmatured, or entered into any transactions, including any acquisition or disposition of any business or asset, which
                             are material to the Co mpany and the Subsidiaries taken as a whole, except for liabilit ies, obligations and
                             transactions which are disclosed in the Registration Statement and the Prospectus.

             (f) There are no liabilities of the Co mpany or any Subsidiary of any kind whatsoeve r, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition, situation or set of circu mstances which could reas onably be expected
to result in such a liability, other than:

                   (i)       liab ilit ies provided for in the (A) audited consolidated balance sheet of the Company and the Subsidiaries as of
                             June 30, 2009 and 2008 o r disclosed in the notes thereto; and (B) the unaudited balance sheet for the Company and
                             the Subsidiaries as of March 31, 2010 or disclosed in the notes thereto; and

                                                                         7
                                                                                                                       Ladenburg Thalmann & Co. Inc.
                                                                                                                                      June [ ], 2010

                    (ii)     other undisclosed liabilit ies which, individually or in the aggregate, have not resulted in or could reasonably be
                             expected to result in a Material Adverse Effect.

             (g) As of the dates indicated in the Prospectus, the authorized, issued and outstanding sha res of capital stock of the Co mpany were
as set forth in the Prospectus in the column headed ―Actual‖ under the section thereof captioned ―Capitalization‖ and, after g iving effect to the
Offering and the other transactions contemplated by this Agreement, the Reg istration Statement and the Prospectus, will be as set forth in the
column headed ―As Adjusted‖ in such section. After giving effect to the Offering, the other transactions contemplated by this Agreement, the
Registration Statement and the Prospectus , the authorized, issued and outstanding shares of capital stock of the Co mpany will b e as set forth in
the column headed ―Pro Forma As Adjusted‖ in the section of the Prospectus captioned ―Capitalization.‖ All of the issued and outstanding
shares of capital stock of the Co mpany are fully paid and non-assessable and have been duly and validly authorized and issued, in co mpliance
with all applicab le state, federal and foreign securities laws and not in violation of or subject to any right of first refus al, preemptive right, right
of participation, or similar right that does or will entitle any Person (as defined below), upon the issuance or sale of any security, to acquire
fro m the Co mpany or any Subsidiary any Relevant Security. As used herein, the term ― Relevant Security ‖ means any Ordinary Shares or
other security of the Co mpany or any Subsidiary that is convertible into, or exercisable or exchangeable for Ord inary Shares or equity
securities, or that holds the right to acquire any Ord inary Shares or equity securities of the Co mpany or any Subsidiary or any other such
Relevant Security, except fo r such rights as may have been fully satisfied or waived prior to the effectiveness of the Regist ration Statement. As
used herein, the term ― Person ‖ means any foreign or domestic individual, corporation, trust, partnership, joint venture, limited liability
company or other entity.

            (h) The Securities have been duly and validly authorized and, when issued, delivered and paid for in accordance with this
Agreement and as described in the Prospectus on the Closing Date, will be duly and valid ly issued, fully paid and non -assessable, will have
been issued in compliance with all applicable state, federal and foreign securities laws and will not have been issued in violat ion of or subject
to any preemptive or similar right that does or will entitle any Person to acquire any Relevant Security fro m the Co mpany or any Subsidiary
upon issuance or sale of Securities in the Offering. The Ordinary Shares underlying the Un its and the Warrants conform to the descriptions
thereof contained in the Registration Statement and the Prospectus. Except as disclosed in the Registration Statement and the Prospectus,
neither the Co mpany nor any Subsidiary has outstanding warrants, options to purchase, or any preemptive rights or other right s to subscribe for
or to purchase, or any contracts or commit ments to issue or sell, any Relevant Security.

                                                                            8
                                                                                                                  Ladenburg Thalmann & Co. Inc.
                                                                                                                                 June [ ], 2010

             (i) The Ordinary Shares underlying the UPO will conform to the description thereof in the Registration Statement and in the
Prospectus and have been validly reserved for future issuance and will, upon exercise of the UPO and pay ment of the exercise price thereof, be
duly and validly issued, fully paid and non-assessable and, to our knowledge, will not have been issued in violation of or subject to preemptive
or similar rights to subscribe for or purchase securities of the Co mpany. The issuance of such securities is not subject to any statutory
preemptive rights under the laws of the PRC, the Cay man Islands or the Amended and Restated Memorandum and Articles of Association of
the Co mpany as in effect at the time of issuance or, to our knowledge, other similar rights of any securityholder of the Co mpany (except for
such preemptive or contractual rights as were waived).

            (j) The Subsidiaries are the only subsidiaries of the Co mpany within the meaning of Ru le 405 under the Securities Act. Except for
the Subsidiaries and as otherwise disclosed in the Registration Statement and the Prospectus, the Company holds no ownership or other
interest, nominal or beneficial, direct or indirect, in any corporation, partnership, joint venture or other business entity. All of th e issued and
outstanding shares of capital stock of, or other ownership interests in, each Subsidiary have been duly and validly authorize d and issued and are
fully paid and non-assessable and are owned, direct ly or indirectly, by the Co mpany, free and clear of any lien, charge, mortgage, pledge,
security interest, claim, equity, trust or other encumbrance, preferential arrangement, defect or restriction of any kind wha tsoever (any ― Lien
‖). No director, officer or key employee of the Co mpany named in the Prospectus holds any direct equity, debt or other pecuniary int erest in
any Subsidiary or any Person with who m the Co mpany or any Subsidiary does business or is in priv ity of contract with, othe r t han, in each
case, indirectly through the ownership by such individuals of Ordinary Shares.

            (k) Each of the Co mpany and the Subsidiaries has been duly incorporated, formed or organized, and validly exists as a corpora tion,
partnership or limited liab ility co mpany in good standing under the laws of its jurisdiction of incorporation, formation or organization. Each of
the Co mpany and the Subsidiaries has all requisite power and authority to carry on its business as it is currently being cond ucted and as
described in the Prospectus, and to own, lease and operate its respective properties. Each of the Co mpany and the Subsidiaries is duly qualified
to do business and is in good standing as a foreign corporation, partnership or limited liability company in each jurisdiction in which the
character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary,
except, in each case, for those failures to be so qualified or in good standing which (individually and in the aggregate) could not reasonably be
expected to have a material adverse effect on: (i) the business, condition (financial or otherwise), results of operations, shareholders ’ equity,
properties or prospects of the Company and the Subsidiaries, taken as a whole; (ii) the long-term debt or capital stock of the Co mpany or any
Subsidiary; or (iii) the Offering or consummation of any of the other transactions contemplated by this Agreement, the Registration Statement
or the Prospectus (any such effect being a ― Material Adverse Effect ‖).

                                                                         9
                                                                                                                    Ladenburg Thalmann & Co. Inc.
                                                                                                                                   June [ ], 2010

            (l) Neither the Co mpany nor any Subsidiary: (i) is in vio lation of its certificate or art icles of incorporation, by-laws, certificate of
formation, limited liability company agreement, jo int venture agreement, partnership agreement or other organizat ional docume nts, (ii) is in
default under, and no event has occurred which, with notice or lapse of time or both, would constitute a default under or result in the creation or
imposition of any Lien upon any of its property or assets pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to wh ich it is a party or by wh ich it is bound or to which any of its property or assets is subject or (iii) is in vio lation in any
respect of any law, rule, regulation, ord inance, direct ive, judgment, decree or o rder of any judicial, regulatory or other legal or governmental
agency or body, foreign or do mestic, except (in the case of clause (ii) above) for any lien, charge or encu mbrance disclosed in the Registration
Statement and the Prospectus.

            (m) The Co mpany, through its wholly owned Subsidiary, Recon Technology Co., Limited, a limited company organized under the
laws of Hong Kong, owns 100% o f the issued and outstanding capital stock of Recon Technology (Jining) Co., Ltd., (―Recon-JN‖) a limited
company organized under the laws of the People’s Republic of Ch ina (― PRC ‖). Recon-JN indirectly controls Beijing BHD Petroleum
Technology Co., Ltd., Nanjing Recon Technology Co., Ltd., and Jining ENI Energy Technology Co., Ltd., limited companies organ ized under
the laws of the PRC (co llect ively, the ―VIEs‖ ), through a series of variable interest entity contractual agreements (the ― VIE Agreements ‖)
entered into with those domestic companies and its shareholders.

            (n) The Co mpany has full right, power and authority to execute and deliv er this Agreement, the UPO and all other agreements,
documents, certificates and instruments required to be delivered pursuant to this Agreement. The Co mpany has duly and validly authorized this
Agreement and each of the transactions contemplated by this A greement. This Agreement has been duly and validly executed and delivered by
the Co mpany and constitutes the legal, valid and binding obligation of the Co mpany and is enforceable against the Co mpany in accordance
with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, mo ratoriu m or similar laws
affecting creditors’ rights generally and except as enforceability may be subject to general princip les of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

             (o) The execution, delivery, and performance of this Agreement and consummat ion of the transactions contemplated by this
Agreement do not and, to the knowledge of the Co mpany, will not: (i) conflict with, require consent under or result in a breach of any of the
terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or
result in the creation or imposition of any Lien upon any property or assets of the Company or any Subsidiary pursuant to, any indenture,
mortgage, deed of trust, loan agreement or other agreement, instrument, franchise, license or permit to which the Co mpany or any Subsidiary is
a party or by which the Co mpany or any Subsidiary or their respective properties, operations or assets may be bound or (ii) vio late or conflict
with any provision of the certificate or articles of incorporation or association, by -laws, certificate of format ion, limited liab ility company
agreement, partnership agreement or other organizational docu ments of the Company or any Subsidiary, o r (iii) v iolate or conflict with any

                                                                          10
                                                                                                                     Ladenburg Thalmann & Co. Inc.
                                                                                                                                    June [ ], 2010

law, ru le, regulation, ord inance, directive, judg ment, decree or order of any judicial, regulatory or other legal or governme ntal agency or body,
domestic or foreign, except for such violations or conflicts wh ich, singly or in the aggregate, would not reas onably be expected to have a
Material Adverse Effect.

             (p) Each of the Co mpany and the Subsidiaries has all material consents, approvals, authorizations, orders, registrations,
qualifications, licenses, filings and permits of, with and fro m all judicial, regulatory and other legal or governmental agencies and bodies and
all third part ies, foreign and domestic (collectively, the ― Consents ‖), to own, lease and operate its properties and conduct its business as it is
now being conducted and as disclosed in the Registration Statement and the Prospectus, and each such Consent is valid and in full force and
effect. Neither the Co mpany nor any Subsidiary has received notice of any investigation or proceedings which results in or, if d ecided
adversely to the Co mpany or any Subsidiary, could reasonably be expected to result in, the revocation of, or imposition of a materially
burdensome restriction on, any Consent. No Consent contains a materially burdensome restriction not adequately disclosed in t he Registration
Statement and the Prospectus.

           (q) Each of the Co mpany and the Subsidiaries is in co mpliance with all applicable laws, ru les, regulations, ordinances, direc tives,
judgments, decrees and orders, foreign and domestic, except for such violations or conflicts which, singly or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Neither the Co mpany, nor any of its Affiliates (within the meaning o f Rule 144
under the Securities Act) (― Affiliates ‖) has received any notice or other informat ion fro m any regulatory or other legal or governmental
agency relating to any default or potential decertification by the Co mpany, or any of its Affiliates.

            (r) No Consent of, with or fro m any judicial, regulatory or other legal or govern mental agen cy or body or any third party, foreig n or
domestic is required for the execution, delivery and performance of this Agreement, the UPO or consummation of each of the tr ansactions
contemplated by this Agreement, including the issuance, sale and delivery of t he Securit ies to be issued, sold and delivered hereunder, except
the registration under the Securities Act of the Securities, which has become effective, and such Consents as may be required u nder state
securities or blue sky laws or the by-laws and rules of The NASDA Q Stock Market, Inc., including the NASDAQ Capital Market, where the
Ordinary Shares are listed (― NASDAQ ‖) and the Financial Industry Regulatory Authority, Inc. (― FINRA ‖) in connection wit h the purchase
and distribution of the Securities by the Underwriters, each of which has been obtained and is in full force and effect.

            (s) There is no judicial, regulatory, arb itral or other legal or governmental proceeding or other litigation or arb itration, do mestic or
foreign, pending to which the Co mpany or any Subsidiary is a party or of wh ich any property, operations or assets of the Co mpany or any
Subsidiary is the subject which, indiv idually o r in the aggregate, if determined adversely to the Company or any Subsidiary, co uld reasonably
be expected to have a Material Adverse Effect. To the Co mpany’s knowledge, no such proceeding, lit igation or arb itration is threatened or
contemplated; and the defense of all such proceedings, litigation and arbitrat ion against or involving the Co mpany or any Sub sidiary could not
reasonably be expected to have a Material Adverse Effect.

                                                                          11
                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

            (t) The financial statements, including the notes thereto, and the supporting schedules included in the Registration Statemen t and the
Prospectus present fairly the financial position as of the dates indicated and the cash flows and results of operations for the periods specified of
the Co mpany and its consolidated Subsidiaries and the VIE’s. Except as otherwise stated in the Registration Statement and the Prospectus, said
financial statements have been prepared in conformity with United States generally ac cepted accounting principles applied on a consistent basis
throughout the periods involved. The supporting schedules included in the Registration Statement and the Prospectus present f airly the
informat ion required to be stated therein. No other financial statements or supporting schedules are required to be included or incorporated by
reference in the Registration Statement. The other financial and statistical informat ion included in the Registration Stateme nt an d the
Prospectus present fairly the information included therein and have been prepared on a basis consistent with that of the financial statements that
are included in the Registration Statement and the Prospectus and the books and records of the respective entities presented therein.

            (u) There are no pro forma or as adjusted financial statements which are required to be included in the Registration Statement and
the Prospectus in accordance with Regulation S -X wh ich have not been included as so required. The pro forma and pro fo rma as adjusted
financial informat ion included in the Registration Statement and the Prospectus has been properly compiled and prepared in accord ance with
the applicable requirements of the Securities Act and the Rules and Regulations and include all adjustments necessary to present fairly in
accordance with generally accepted accounting principles the pro forma and as adjusted financial position of the respective e ntity or entities
presented therein at the respective dates indicated and their cash flows and the results of ope rations for the respective periods specified. The
assumptions used in preparing the pro forma and pro forma as adjusted financial information included in the Registration Stat ement and the
Prospectus provide a reasonable basis for presenting the significan t effects directly attributable to the transactions or events described therein.
The related pro forma and pro forma as adjusted adjustments give appropriate effect to those assumptions, and the pro forma a nd pro forma as
adjusted financial in formation reflect the proper application of those adjustments to the corresponding historical financial statement amounts.

            (v) The statistical, industry-related and market-related data included in the Registration Statement and the Prospectus are based on
or derived fro m sources which the Co mpany reasonably and in good faith believes are reliable and accurate, and such data ag ree with the
sources from wh ich they are derived.

             (w) The Co mpany is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and files reports with the
Co mmission on the EDGA R system. The Ord inary Shares are registered pursuant to Section 12(b) or 12(g) of the Exchange Act and the
outstanding Ordinary Shares are listed on the NASDAQ Capital Market. The Co mpany has taken no action designed to, or likely t o have the
effect of, terminating the registration of the

                                                                         12
                                                                                                                     Ladenburg Thalmann & Co. Inc.
                                                                                                                                    June [ ], 2010

Ordinary Shares under the Exchange Act or de-listing the Ord inary Shares fro m the NASDAQ Capital Market, nor has the Co mpany received
any notification that the Commission or NASDAQ is contemplat ing terminating such registration or listing.

            (x) The Co mpany and the Subsidiaries maintain a system of internal accounting and other controls sufficient to provide reason able
assurances that: (i) transactions are executed in accordance with management’s general or specific authorizat ions, (ii) transactions are recorded
as necessary to permit p reparation of financial statements in conformity with United States generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in accordance with management’s general or specific authorization,
and (iv) the recorded accounting for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect
to any differences.

            (y) The Co mpany’s Board of Directors has validly appointed an audit committee whose composition satisfies the requirements of
Rule 4350(d)(2) of the Rules of the NASDAQ (the ― NASDAQ Rules ‖) and the Board of Directors and/or audit committee has adopted a
charter that satisfies the requirements of Rule 4350(d)(1) of the NASDAQ Rules. The audit co mmittee has reviewed the adequacy of its charter
within the past twelve months. Neither the Board of Directors nor the audit committee has been informed, nor is any director o f the Co mpany
aware, of: (i) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Co mpany’s ability to record, process, summarize and report financial informat ion; or (ii) any fraud,
whether or not material, that involves management or other emp loyees who have a significant role in the Co mpany ’s internal control over
financial report ing.

            (z) Neither the Co mpany nor any of its Affiliates has taken, directly or indirectly, any action wh ich constitutes or is designed to
cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilizat ion or man ipulatio n of the price of any
security to facilitate the sale or resale of the Securities.

            (aa) Neither the Co mpany nor any of its Affiliates has, prior to the date hereof, made any offer o r sale of any securities wh ich are
required to be ―integrated‖ pursuant to the Securities Act or the Rules and Regulat ions with the offer and sale of the Securit ies pursuant to the
Registration Statement. Except as disclosed in the Registration Statement, the Prospectus or in any public filings relating t o the Co mpany filed
with the Co mmission, neither the Co mpany nor any of its Affiliates has sold or issued any Relevant Security during the six-mo nth period
preceding the date of the Prospectus, including but not limited to any sales pursuant to Rule 144A or Regulation D or S under the Securities
Act, other than Ordinary Shares issued pursuant to employee benefit plans, qualified stock option plans or the employee co mpensation plans or
pursuant to outstanding options, rights or warrants as described in the Registration Statement and the Prospectus.

           (bb) No d irector or o fficer of the Co mpany is subject to any non-competition agreement or non-solicitat ion agreement with any
emp loyer or prior emp loyer which could materially affect h is ability to be and act in his respective capacity of the Company.

                                                                          13
                                                                                                                  Ladenburg Thalmann & Co. Inc.
                                                                                                                                 June [ ], 2010

            (cc) Except as disclosed in the Registration Statement and the Prospectus, no holder of any Relevant Security has any rights to
require registration of any Relevant Security as part or on accou nt of, or otherwise in connection with, the offer and sale of the Securities
contemplated hereby, and any such rights so disclosed have either been fully co mp lied with by the Co mpany or effectively waiv ed by the
holders thereof, and any such waivers remain in fu ll force and effect.

             (dd) The documents, exhibits or other materials incorporated or deemed to be incorporated by reference in the Prospectus, at the
time they were or hereafter are filed with the Co mmission, complied and will co mply in all material respects with the requirements of the
Securities Act, the Exchange Act and the Rules and Regulations, and, when read together with the other informat ion in the Pro spectus, do not
contain an untrue statement of a material fact or o mit to state a material fact required to be stated therein or necessary to make the statements
therein, in the light of the circu mstances under which they were made, not misleading.

           (ee) The conditions for use of Form S-1 to register the Offering under the Securities Act, as set forth in the General Instructions to
such Form, have been satisfied.

            (ff) The Co mpany is not and, at all times up to and including consummat ion of the transactions contemplated by this Agreemen t ,
and after giving effect to application of the net proceeds of the Offering, will not be, subject to registration as an ―investment company‖ under
the Investment Co mpany Act of 1940, as amended, and is not and will not be an entity ―controlled‖ by an ―investment company‖ within the
mean ing of such act.

            (gg) There are no contracts or other documents (including, without limitation, any voting agreement) wh ich are required to be
described in the Registration Statement and the Prospectus or filed as exhibits to the Registration Statement by the Securities Act, the Exchange
Act or the Rules and Regulations and which have not been so described, filed or incorporated by reference.

             (hh) No relat ionship, direct or indirect, exists between or among any of the Co mpany or any Affiliate of the Co mpany, on the one
hand, and any director, officer, shareholder, customer or supplier of the Co mpany or any affiliate of the Co mpany, on the oth er hand, which is
required by the Securit ies Act, the Exchange Act or the Rules and Regulat ions to be described in the Reg istration Statement or the Prospectus
which is not so described and described as required. There are no outstanding loans, advances (except normal advances for bus iness expenses
in the ordinary course of business) or guarantees of indebtedness by the Company to or for the benefit of any of the officers or directors of the
Co mpany or any of their respective family members, except as disclosed in the Registration Statement and the Prospectus. The Co mpany has
not, directly or indirect ly, including through a Subsidiary, extended or maintained credit, arranged for the extension of credit, or renewed an
extension of credit, in the form of a personal loan to or for any director or execut ive officer of the Co mpany.

                                                                        14
                                                                                                                 Ladenburg Thalmann & Co. Inc.
                                                                                                                                June [ ], 2010

             (ii) The Co mpany is in material co mpliance with the provisions of the Sarbanes -Oxley Act of 2002 (― Sarb-Ox ‖), and the Rules
and Regulations promulgated thereunder and related or similar ru les and regulations promulgated by NASDA Q or any other governmental or
self regulatory entity or agency, except for such violations which, singly or in the aggregate, would not have a Material Adv erse Effect.
Without limiting the generality of the fo regoing: (i) all members of the Co mpany’s board of directors who are required to be ―independent‖ (as
that term is defined under applicable laws, rules and regulations), including, without limitat ion, all members of the audit c o mmittee of the
Co mpany’s board of directors, meet the qualifications of independence as set forth under applicable laws, rules and regulations and (ii) the
audit committee of the Co mpany’s board of directors has at least one member who is an ―audit co mmittee financial expert‖ (as that term is
defined under applicable laws, rules and regulations).

           (jj) Except as disclosed in the Registration Statement and the Prospectus, there are no contracts, agreements or understandin gs
between the Company and any Person that would give rise to a valid claim against the Company or any Underwrit er for a brokerage
commission, finder’s fee or other like pay ment in connection with the transactions contemplated by this Agreement or, to the Company ’s
knowledge, any arrangements, agreements, understandings, payments or issuances with respect to the Company or any of its officers, d irectors,
shareholders, partners, employees, Subsidiaries or Affiliates that may affect the Underwriters ’ co mpensation as determined by FINRA.

            (kk) The Co mpany and each Subsidiary leases all such properties as are necessary to the conduct of its business as presently
operated and as proposed to be operated as described in the Registration Statement and the Prospectus. The Co mpany and the Su bsidiaries have
good and marketable t itle in fee simple to all real property and good and marketable title to all personal property owned by them, in each case
free and clear of all Liens except such as are described in the Registration Statement and the Prospectus or such as do not (individually or in the
aggregate) materially affect the business or prospects of the Company or any of the Subsidiaries. Any real property and buildin gs held under
lease or sublease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with su ch exceptions as
are not material to, and do not interfere with, the use made and proposed to be made of such property and buildings by the Company and the
Subsidiaries. Neither the Co mpany nor any Subsidiary has received any notice of any claim adverse to its ownership of any rea l or personal
property or of any claim against the continued possession of any real property, whether owned or held under lease or sublease by the Co mpany
or any Subsidiary.

             (ll) The Co mpany and each Subsidiary: (i) o wns or possesses adequate right to use all patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service mark reg istrations, copyrights, licenses, formu lae, customer lis ts, and know-how
and other intellectual property (including trade secrets and other unpatented and/or unpatentable proprietary or confidential info rmation,
systems or procedures, ― Intellectual Property ‖) necessary for the conduct of their respective businesses as being conducted and as described
in the Reg istration Statement and Prospectus and (ii) have no knowledge that the conduct of their respective businesses do not or will not
conflict with, and they have not received

                                                                        15
                                                                                                                Ladenburg Thalmann & Co. Inc.
                                                                                                                               June [ ], 2010

any notice of any claim of conflict with, any such right of others. To the Co mpany ’s knowledge, all material technical informat ion developed
by and belonging to the Company or any Subsidiary which has not been patented (including, without limitat ion, the t rade secrets referred to in
the Prospectus) has been kept confidential so as, among other things, all such information may be deemed proprietary to the Co mpany (the
―Confidential Info rmation‖). Each employee, consultant and contractor who has had access to Confidential Informat ion has executed an
agreement to maintain the confidentiality of such Confidential Information and has executed appropriate agreements that are s ubstantially
consistent with the Co mpany’s standard forms thereof. Except under confidentiality obligations, there has been no material d isclosure of any of
the Co mpany’s or its Subsidiaries’ Confidential Info rmation to any third party. Neither the Co mpany nor any Subsidiary has granted or
assigned to any other Person any right to sell the current products and services of the Co mpany and its Subsidiaries or those products and
services described in the Registration Statement and Prospectus. To the Company ’s best knowledge, there is no infringement by third parties of
any such Intellectual Property; there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others
challenging the Co mpany’s or any Subsidiary’s rights in or to any such Intellectual Property, and the Co mpany is unaware of any facts which
would form a reasonable basis for any such claim; and there is no pending or, to the Company ’s knowledge, threatened action, suit, proceeding
or claim by others that the Company or any Subsidiary infringes or otherwise violates any patent, trademark, copyright, trade secret or other
proprietary rights of others, and the Company is unaware of any other fact which would fo rm a reasonable basis for any such c laim. As used
herein, the term ― Company Filings ‖ means all of the Co mpany’s filings with the Co mmission prior to the date hereof via EDGA R.

            (mm) The Co mpany has duly and properly filed or caused to be filed with the Ch ina Patent and Trademark Office (the ―CPTO‖)
and applicable foreign and international patent authorities all patent applications owned by the Co mpany or any Subsidiary or VIE (the
―Co mpany Patent Applications ‖). The Co mpany has complied in all material respects with the CPTO’s duty of candor and disclosure for the
Co mpany Patent Applications and has made no material misrepresentation in the Compan y Patent Applications. The Co mpany Patent
Applications disclose patentable subject matters, and the Co mpany has not been notified of any inventorship challenges nor ha s any
interference been declared or p rovoked nor is any material fact known by the Co mpan y that would preclude the issuance of patents with respect
to the Company Patent Applications or would render such patents invalid or unenforceable. No third party possesses rights to the Intellectual
Property that, if exercised, could enable such party to develop products competitive to those the Co mpany intends to develop as described in
the Preliminary Prospectus and the Prospectus.

            (nn) Neither the Co mpany nor any Subsidiary is a party to or bound by any collective bargaining agreements or other agreeme n ts
with labor organizations. Neither the Co mpany nor any Subsidiary has violated in any material respect any laws, regulations, orders or contract
terms, affecting the collective bargain ing rights of employees, labor organizations or any laws, regulations or orders affecting emp loyment and
emp loyment practices, emp loyment discrimination, equal opportunity employ ment, or emp loyees ’ health, safety, welfare, wages and hours. No
material labor dispute exists or, to the knowledge of the Co mpany, is imminent wit h respect to any of the employees of the Company wh ich
could reasonably be expected to result in a Material Adverse Effect.

                                                                       16
                                                                                                                    Ladenburg Thalmann & Co. Inc.
                                                                                                                                   June [ ], 2010

           (oo) The Co mpany and the Subsidiaries have good and marketable t itle in fee simple or the equivalent right under PRC law, as the
case may be, to all real property owned by them and good and marketable t itle in all personal property owned by them that is material to the
business of the Co mpany and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of
such Property and do not materially interfere with the use made and proposed to be made of such Property by the Company and the
Subsidiaries. Any real property and facilities held under lease by the Company or the Subsidiaries are held by them under valid, subsisting and
enforceable leases with wh ich the Co mpany or the Subsidiaries are in comp liance in all respects. All real property and facilities used by the
Co mpany or any Subsidiary are either owned by the Co mpany or a Subsidiary or held under lease by the Company or a Subsidiary.

            (pp) Except as otherwise set forth in the Reg istration Statement, neither the Co mpany nor any of its Subsidiaries is a party to or
subject to, or bound by:

                  (i) any agreements, contracts or commit ments that call for prospective fixed and/or contingent payments or expenditures by
or to the Co mpany or any of its Subsidiaries of more than $250,000, or wh ich is otherwise material and not entered into in the ordinary course
of business;

                   (ii) any contract, lease or agreement involving payments in excess of $250,000, which is not cancelable by the Co mpany or
any of its Subsidiaries, as applicable, without penalty on not less than sixty (60) days notice;

                  (iii) any contract, including any distribution agreements, containing covenants dire ctly or exp licit ly limit ing the freedom of
the Co mpany or any of its Subsidiaries to compete in any line of business or with any Person or to offer any of its products or services;

                 (iv) any indenture, mortgage, promissory note, loan agreement, guaranty or other agreement or co mmit ment for the
borrowing of money or p ledging or granting a security interest in any assets;

                     (v) any employ ment contracts, non-competition agreements, invention assignments, severance or other agreements with
officers, directors, employees, stockholders or consultants of the Company or any of its Subsidiaries or Persons related to or affiliated with such
Persons;

                   (vi) any stock redemption or purchase agreements or other agreements affecting or relating to the capital stock of the
Co mpany or any of its Subsidiaries, including, without limitation, any agreement with any stockholder of the Co mpany or any of it s
Subsidiaries wh ich includes, without limitation, antid ilution rights, voting arrangements or operating covenants;

                   (vii) any pension, profit sharing, ret irement, stock option or stock ownership plans;

                                                                         17
                                                                                                                     Ladenburg Thalmann & Co. Inc.
                                                                                                                                    June [ ], 2010

                   (viii) any royalty, div idend or similar arrangement based on the revenues or profits of the Co mpany or any o f its Subsidiaries
or based on the revenues or profits derived fro m any material contract;

                     (ix) any acquisition, merger, asset purchase or other similar agreement;

                     (x) any sales agreement wh ich entitles any customer to a right of set-off, or right to a refund after acceptance thereof;

                   (xi) any agreement with any supplier or licensor containing any provision permitting such supplier or licensor to change the
price or other terms upon a breach or failure by the Co mpany or any of its Subsidiaries, as applicable, to meet its obligations under such
agreement; or

                     (xii) any agreement under which the Co mpany or any of its Subsidiaries has granted any Person registration rights for
securities.

              (qq) With respect to the employees of the Company and the Subsidiaries:

                (i) the Co mpany and its Subsidiaries have no policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of emp loyment services;

                   (ii) Each Person who performs services for the Co mpany or any of its Subsidiaries has been, and is, properly classified by
the Co mpany or its Subsidiaries as an emp loyee or an independent contractor (or its PRC equivalent);

                    (iii) To the Co mpany’s knowledge, no emp loyee or advisor of the Co mpany or any of its Subsidiaries is or is alleged to be in
violation of any term of any employ ment contract, non-disclosure agreement, proprietary informat ion and inventions agreement or any other
contract or agreement or any restrictive covenant or any other common law obligation to a former emp loyer relating to the rig ht of any such
emp loyee to be employed by the Co mpany or any of its Subsidiaries because of the nature of the business con ducted or to be conducted by the
Co mpany or any of its Subsidiaries or to the use of trade secrets or proprietary informat ion of others, and the employ ment of the employees of
the Co mpany and its Subsidiaries does not subject the Company or any of its Subs idiaries or their stockholders to any liability. There is neither
pending nor, to the Company’s knowledge, threatened, any actions, suits, proceedings or claims, or, to the Co mpany ’s knowledge, any basis
therefor or threat thereof with respect to any contract, agreement, covenant or obligation referred to in the preceding sentence; and

                  (iv) No executive officer, to the Co mpany’s knowledge, is, or is now expected to be, in v iolation of any material term of any
emp loyment contract, confidentiality, disclosure or proprietary info rmation agreement or non-co mpetition agreement, or any other contract or
agreement or any restrict ive covenant in favor of any third party, and the continued employment of each such executive office r does not subject
the Co mpany or any of its Subsidiaries to any liability with respect to any of the foregoing matters.

                                                                           18
                                                                                                                    Ladenburg Thalmann & Co. Inc.
                                                                                                                                   June [ ], 2010

            (rr) None of the Co mpany or any of its Affiliates, officers, directors, stockholders or emp loyees, or any Affiliate of any of such
Person, has any material interest in any property, real or personal, tangible o r intangible, including the Co mpany ’s Intellectual Property used in
or pertaining to the business of the Co mpany, except for the normal rights of a stockholder, or, to the knowledge of the Co mp an y, any supplier,
distributor or customer of the Co mpany. There are no agreements, understandings or propose d transactions between the Co mpany or any
Subsidiary, on the one hand, and any of the officers, directors, employees, Affiliates of the Co mpany or any Subsidiary, or, to the Co mpany’s
knowledge, any Affiliate thereof, on the other hand (except for services as officers, directors and employees). To the Co mpany’s knowledge,
no employee, officer or director of the Co mpany or any Subsidiary has any direct or indirect ownership interest in any firm o r corporation with
which the Co mpany is affiliated or with which the Co mpany has a business relationship, or any firm or corporation that compet es with the
Co mpany. To the Co mpany’s knowledge, no member of the immediate family of any officer or d irector of the Co mpany is directly or ind irectly
interested in any material contract of the Co mpany. Other than salaries, fees and expense reimbursements to be paid in accordance with the
Co mpany’s normal payroll policies, there are no amounts owed (whether in the form of cash or securities) to officers, directors and c onsultants,
whether salary, bonuses or other forms of co mpensation.

           (ss) None of the Co mpany or any of its Subsidiaries is or intends to become a ―passive foreign investment company‖ within the
mean ing of Section 1297 of the Code.

            (tt) The operations of the Co mpany and its Subsidiaries are and have been conducted at all times in material co mpliance with the
money laundering statutes of applicable jurisdictions, the rules and regulations thereunder and any related or similar ru les, regulations or
guidelines, issued, admin istered or enforced by any applicable governmental agency and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving any of the Co mpany or any of its Subsidiaries with respect thereto is
pending or, to the Company’s knowledge, threatened.

            (uu) Under the laws of their respective jurisdictions of incorporation and the PRC, neither the Co mpany nor any Subsidiary is , nor
are any of their respective properties, assets or revenues, entitled to any right of immunity on the grounds of sovereignty f rom any legal action,
suit or proceeding, fro m set-off o r counterclaim, fro m the jurisdiction of any court, fro m service of process, fro m attachment prior to or in aid
of execution of judgment, or fro m other legal process or proceeding for the giving of an y relief or for the enforcement of any ju dgment.

            (vv) The agreements and documents described in the Registration Statement, and the Prospectus conform to the descriptions the reof
contained therein and there are no agreements or other documents required to be described in the Registration Statement or the Prospectus or to
be filed with the Co mmission as exh ibits to the Registration Statement, that have not been so described or filed. Each agreemen t or other
instrument (however characterized

                                                                          19
                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

or described) to which the Co mpany is a party or by which its property or business is or may be bound or affected and (i) that is referred to in
the Registration Statement or attached as an exhib it thereto, or (ii) is material to the Co mpany’s business, has been duly and validly executed
by the Company, is in fu ll force and effect in all material respects and is enforceable a gainst the Company and, to the Co mpany’s knowledge,
the other parties thereto, in accordance with its terms, and none of such agreements or instruments has been assigned by the Company, and
neither the Co mpany nor, to the Co mpany’s knowledge, any other party is in breach or defau lt thereunder and, to the Company ’s knowledge,
no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a breach or default the reunder. To the
Co mpany’s knowledge, performance by the Co mpany of the material p rovisions of such agreements or instruments will not result in a v iolation
of any existing applicab le law, ru le, regulation, judgment, order o r decree of any governmental agency or court, domestic or foreign, having
jurisdiction over the Co mpany or any of its assets or businesses, including, without limitation, those relating to environmental laws and
regulations.

            (ww) The disclosures in the Registration Statement, the Sale Preliminary Prospectus and the Prospectus concerning the effect s of
foreign, federal, state and local regulation on the Co mpany’s business as currently contemplated are correct in all material respects and do not
omit to state a material fact necessary to make the statements therein, in light of the circu mstances in which they were made, no t misleading.

             (xx) Each of the Co mpany and the Subsidiaries has accurately prepared and timely filed all federal, state, foreign and other tax
returns (including, without limitat ion, all PRC tax returns and filings) that are required to be filed by it and has paid or made provision for the
payment of all taxes, assessments, governmental or other similar charges (whether or not such amounts are shown as due on any tax return). No
deficiency assessment with respect to a proposed adjustment of the Co mpany’s or any Subsidiary’s federal, state, local or foreign taxes is
pending or, to the Company’s knowledge, threatened. The accruals and reserves on the books and records of the Company and the Subsidiaries
in respect of tax liab ilities for any taxable period not finally determined are adequate to meet any assessments and related liabilities for any
such period and, since the date of the Company’s most recent audited financial statements, the Company and the Subsidiaries have not incurred
any liability for taxes other than in the ordinary course of its business. There is no tax lien, whether imposed by any federal, state, foreign or
other taxing authority, outstanding against the assets, properties or business of the Company or any Subsidiary.

            (yy) No labor disturbance by the employees of the Company or any Subsidiary currently exists or, to the Company ’s knowledge, is
likely to occur.

           (zz) The Co mpany and each Subsidiary have at all t imes operated their respective businesses in material co mp liance with all
Environmental Laws, and no material expenditures are or will be required in order to co mply therewith. Neither the Co mpany no r any
Subsidiary has received any notice or communicat ion that relates to or alleges any actual or potential violat io n or failure to co mply with any
Environmental Laws that will result in a Material Adverse Effect. As used herein, the term ― Environmental Laws ‖ means all applicable

                                                                         20
                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

PRC laws and regulations, including any licensing, permits or reporting requirements, and any action by a national, provincia l or local
government entity pertaining to the protection of the environment, protection of public health, protection of wo rker hea lth and safety, or the
handling of hazardous materials, including without limitation, the Clean Air Act, 42 U.S.C. § 7401, et seq., the Co mprehensive Environmental
Response, Co mpensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq., the Federal Water Pollution Control Act, 33 U.S.C. § 1321, et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. § 690-1,
et seq., and the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq. or similar laws and regulations, to the extent applicable, under the
PRC.

           (aaa) Neither the Co mpany nor any Subsidiary is a party to or subject to any employment contract or arrangement providing fo r
annual future compensation, or the opportunity to earn annual future co mpensation (whether through fixed salary, bonus, commission, options
or otherwise) of more than $150,000 to any officer, consultant, director or emp loyee.

             (bbb) The execution of this Agreement, the UPO or consummat ion of the Offering doe s not constitute a triggering event under any
Emp loyee Plan or any other employ ment contract, whether or not legally enforceable, wh ich (either alone or upon the occurrenc e of any
additional or subsequent event) will o r may result in any payment (of severance pay or otherwise), accelerat ion, increase in vesting, or increase
in benefits to any current or former participant, employee or director of the Co mpany or any Subsidiary other than an event that is not material
to the financial condition or business of the Company or any Subsidiary, either individually or taken as a whole.

            (ccc) Each of the Co mpany and the Subsidiaries are in co mp liance with the requirements of the insurance laws and regulations of
their respective states of incorporation or organizat ion and the insurance laws and regulations of other jurisdictions which are applicable to the
Co mpany or such Subsidiaries, and each have filed all notices, reports, documents or other informat ion required to be filed t hereunder, except
where the failure to comp ly with such requirement could not reasonably be expected to have a Material Adverse Effect.

           (ddd) Neither the Co mpany, any Subsidiary nor, to the Co mpany ’s knowledge, any of their respective employees or agents has at
any time during the last five (5) years: (i) made any unlawfu l contribution to any candidate for foreign office, or failed to disclose fully any
contribution in violation of law, o r (ii) made any payment to any federal or state governmental officer or o fficial, or other Person charged wit h
similar public or quasi-public duties, other than payments that are not prohibited by the laws of the Un ited States of any jurisdiction thereof.

           (eee) The Co mpany has not offered, or caused the Underwriters to offer, the Firm Un its to any Person or entit y with the intention of
unlawfully influencing: (i) a customer or supplier of the Co mpany or any Subsidiary to alter the customer ’s or supplier’s level or type of
business with the Co mpany or any Subsidiary or (ii) a journalist or publication to write or publish favorable informat ion about the Co mpany,
any Subsidiary or its products or services.

                                                                         21
                                                                                                                     Ladenburg Thalmann & Co. Inc.
                                                                                                                                    June [ ], 2010

             (fff) The Co mpany is in co mpliance with all applicable Ch inese and other foreign and U.S. laws, ru les, regulations, ordinances,
directives, judg ments, decrees and orders (including, without limitation, all securities and tax laws, rules and regulations of the PRC), except
for such non-compliance as would not have a Material Adverse Effect. As of the date hereof and as of the Closing Date, and except as
contemplated by this Agreement, the Co mpany does not operate within the jurisdiction of the United States or any s tate or territory thereof.

           (ggg) The operations of the Company are and have been conducted at all times in co mp liance with applicable financial record
keeping and reporting requirements and money laundering statutes of the PRC and, to the Co mpany ’s knowledge, all other ju risdictions to
which the Co mpany is subject, the rules and regulations thereunder and any related or similar rules, regulations or guideline s, is sued,
administered or enforced by any applicable govern mental agency (collect ively, the ― Money Laundering Laws ‖) and no action, suit or
proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Co mpany with resp ect to the
Money Laundering Laws is pending or, to the best knowledge of the Co mpany, th reatened.

            (hhh) Except as set forth in, or contemp lated by, the Registration Statement and the Prospectus, on the Effective Date and on the
Closing Date, there will be no options, warrants, or other rights to purchase or otherwise acquire any authorized, b ut unissued Ordinary Shares
or any security convertible into Ordinary Shares, or any contracts or commit ments to issue or sell Ordinary Shares or any suc h options,
warrants, rights or convertible securities.

            (iii) Except as set forth in the Registration Statement and the Prospectus, no holders of any securities of the Co mpany or any rig hts
exercisable for or convertible or exchangeable into securities of the Co mpany have the right to require the Co mpany to regist er any such
securities of the Co mpany under the Act or to include any such securities in a registration statement to be filed by the Co mpany.

          (jjj) Th is Agreement has been duly and validly authorized, executed and delivered by the Co mpany and constitute valid and bin ding
agreements of the Co mpany, enforceable against the Co mpany in accordance with their respective terms.

            (kkk) The execution, delivery, and performance by the Co mpany of this Agreement, and the consummation by the Co mpany of the
transactions herein and therein contemplated and the compliance by the Co mpany with the terms hereof and thereof do not and will not, with or
without the giving of notice or the lapse of time or both: (i) result in a breach or v iolation of, or conflict with any of the terms and provisions of,
or constitute a default under, or result in the creat ion, modificat ion, termination or imposition of any lien, charge or encu mbran ce upon any
property or assets of the Company pursuant to the terms of any agreement, obligation, condition, covenant or instrument to wh ich the Co mpany
is a party or bound or to which its property is subject; (ii) result in any vio lation of the provisions of the Memorandum and Articles of
Association or the Bylaws of the Co mpany; or (iii) violate any existing applicable statute, law, ru le, regulation, judgment, order or decree of
any governmental agency or court, domestic or

                                                                          22
                                                                                                                  Ladenburg Thalmann & Co. Inc.
                                                                                                                                 June [ ], 2010

foreign, having jurisdiction over the Co mpany or any of its properties or business, except for such violations which, singly or in the aggreg ate,
would not reasonably be expected to have a Material Adverse Effect.

            (lll) Neither the Co mpany nor, to the knowledge of the Co mpany, any director, officer, agent, employee or affiliate of the Co mpany
(as such term is defined under Rule 144 under the Securities Act, an ― Affiliate ‖) is currently subject to any U.S. sanctions administered by the
Office o f Foreign Assets Control of the U.S. Treasury Department (― OFAC ‖); and the Co mpany will not directly or ind irectly use the
proceeds of the Offering, o r lend, contribute or otherwise make available such proceeds to any joint venture partner or other person or entity,
for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFA C.

            (mmm) As used in this Agreement, references to matters being ― materi al ‖ with respect to the Company or its Subsidiaries shall
mean a material event, change, condition, status or effect related to the condition (financial or otherwise), properties, assets (including
intangible assets), liab ilities, business, prospects, operations or results of operations of the Company or the applicable Su bsidiaries, either
individually or taken as a whole, as the context requires.

            (nnn) As used in this Agreement, the term ― knowledge of the Company ‖ (o r similar language) shall mean the knowledge of t he
officers and directors of the Co mpany and the applicable Subsidiaries who are named in the Prospectus, with the assumption that such officers
and directors shall have made reasonable and diligent inquiry of the matters presented (with reference to what is customary a nd prudent for the
applicable individuals in connection with the discharge by the applicable individuals of their duties as officers, directors or managers of the
Co mpany or the applicable Subsidiaries).

           (ooo) Representations and Warranties Relating to the PRC Subsidiaries.
                   (i) The constitutional documents of the Subsidiaries that have been established under the laws of the PRC (the ― PRC
                   Subsi diaries ‖) are valid and have been duly approved by and registered with the relevant PRC governmental bodies
                   (collect ively, as applicab le, the ―PRC Govern mental Bodies ‖).
                   (ii) All material consents, approvals, authorizations, permits and licenses requisite under PRC law fo r the due and proper
                   establishment and operation of each PRC Subsidiary have been duly obtained from the relevant PRC Govern mental Bodies
                   and are in fu ll force and effect.
                   (iii) A ll filings and registrations with the relevant PRC Govern mental Bodies required in respect of each PRC Subsidiary and
                   its operations including, without limitat ion, the registrations with the Ministry of Co mmerce, the State Adminis tration of
                   Industry and Commerce, the State Administration for Foreign Exchange (the ― SAFE ‖), tax bureau and customs authorities
                   have been duly completed in accordance with the relevant PRC laws, rules, regulations and guidelines.

                                                                        23
                                                                                              Ladenburg Thalmann & Co. Inc.
                                                                                                             June [ ], 2010

(iv) The shareholders of each PRC Subsidiary have complied with all relevant PRC laws and regulations regarding the
contribution and payment of the registered capital of such PRC Subsidiary, th e payment schedule of which has been
approved by the relevant PRC Govern ment Bodies. All of the registered capital of each PRC Subsidiary has been timely
contributed, such contribution has been duly verified by a cert ified accountant registered in the PRC and the accounting firm
emp loying such accountant and the report of the certified accountant evidencing such verification has been registered with
the relevant PRC Govern mental Body. There are no resolutions pending to increase the registered capital of an y PRC
Subsidiary. There are no outstanding rights of, or co mmit ments made by, the Co mpany or any Subsidiary to sell any equity
interest in any PRC Subsidiary, or by any of the other shareholders of any PRC Subsidiary to sell any equity interest in such
PRC Subsidiary. To the extent that any direct or indirect shareholder of the Co mpany or any of its Subsidiaries is subject to
the jurisdiction of Circu lar 75 issued by SAFE on October 21, 2005, including any amend ment, implement ing rules, or
official interpretation thereof or any replacement, successor or alternative leg islation having the same subject matter thereof
(collect ively ― Circular 75 ‖), each such shareholder has complied in all respects with Circular 75 and any related
requirement of law, including without limitat ion, the complet ion of any applicable foreign exchange registration, settlement
or remittance requirement therein.
(v) Neither the Co mpany nor any Subsidiary is in receipt of any letter or notice fro m any PRC Govern mental Body notifying
it of revocation or non-renewal of any licenses, permits or qualifications issued or granted to it or any Subsidy by any PRC
Govern mental Body.
(vi) Each of the Co mpany and the Subsidiaries has conducted its business activities within the permitted scope of b usiness or
has otherwise operated its business in compliance with all relevant legal requirements and with all requisite licenses, permits
and approvals granted by the PRC Govern mental Bodies.
(vii) W ith respect to the licenses, permits, approvals and government grants and concessions requisite or useful for the
Co mpany’s business in any part of the PRC that are subject to periodic renewal, the Co mpany has no knowledge of any
grounds on which such requisite renewals will not be granted by the relevant PRC Govern mental Bodies.

                                                     24
                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

                   (viii) With regard to emp loy ment, staff and labor matters, each of the PRC Subsidiaries has complied with all applicable
                   PRC laws and regulations in all material respects, including without limitation, laws and regulations pertaining to welfare
                   funds, social benefits, medical benefits, insurance, retirement benefits and pensions.

            Any certificate signed by or on behalf of the Co mpany and delivered to the Underwriters or to Ellenoff Grossman & Schole LLP (―
Underwriters’ Counsel ‖) shall be deemed to be a representation and warranty by the Company to each Underwriter listed on Schedule A
hereto as to the matters covered thereby.

           2.2 Free Writing Prospectus . Additionally, the Co mpany hereby represents, warrants and covenants as to the following:

           2.2.1 Neither: (i) any Issuer-Represented General Free Writ ing Prospectus(es) (as defined below) issued at or prior to the Time of
Sale and the Statutory Prospectus, all considered together (collectively, the ― General Disclosure Package ‖), nor (ii) any indiv idual
Issuer-Represented Limited-Use Free Writ ing Prospectus(es) (as defined below), when considered together with the General Disclosure
Package, includes or included as of the Time of Sale any untrue statement of a material fact or o mits or o mitted as of the Ti me of Sale to state
any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not
misleading. The preced ing sentence does not apply to statements in or omissions fro m any Statutory Prosp ectus included in the Registration
Statement or any Issuer-Represented Free Writing Prospectus based upon and in conformity with written informat ion furnished to the Co mpany
by the Representative specifically for use therein.

            2.2.2 Each Issuer-Represented Free Writ ing Prospectus, as of its issue date and at all subsequent times through the complet ion of
the public offer and sale of the Securit ies or until any earlier date that the Co mpany notified or notifies the Representativ e as described in the
next sentence, did not, does not and will not include any information that conflicted, conflicts or will conflict with the info rmation contained in
the Registration Statement, any Statutory Prospectus or the Prospectus. If at any time following issuance of an Issue r-Represented Free Writing
Prospectus there occurred or occurs an event or development as a result of wh ich such Issuer-Represented Free Writing Prospectus conflicted,
conflicts or would conflict with the informat ion contained in the Registration Statement , any Statutory Prospectus or the Prospectus relating to
the Securities or included or would include an untrue statement of a material fact or o mitted or wou ld o mit to state a material fact necessary in
order to make the statements therein, in the light of the circu mstances prevailing at that subsequent time, not misleading, the Co mpany has
notified or will notify pro mptly the Representative so that any use of such Issuer-Represented Free Writing Prospectus may cease until it is
promptly amended or supplemented by the Co mpany, at its own expense, to eliminate or correct such conflict, untrue statement or o mission.
The foregoing two sentences do not apply to statements in or o missions from any Issuer-Represented Free Writing Prospectus based upon and
in conformity with written information furn ished to the Company by the Representative specifically for use therein.

                                                                         25
                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

            2.2.3 The Co mpany has not distributed and will not distribute any prospectus or other offering material in connection with th e
offering and sale of the Public Securities other than any Preliminary Prospectus, the General Disclosure Package or the Prosp ectus or other
materials permitted by the Act to be distributed by the Company. Unless the Co mpany obtains the prior consent of the Represen tative, the
Co mpany has not made and will not make any offer relating to the Securities that would constitute an ―issuer free writing prospectus,‖ as
defined in Rule 433 under the Act, or that would otherwise constitute a ―free writing prospectus,‖ as defined in Ru le 405 under the Act,
required to be filed with the Co mmission. The Co mpany has complied and will co mply with t he requirements of Ru les 164 and 433 under the
Act applicable to any Issuer-Represented Free Writ ing Prospectus as of its issue date and at all subsequent times through the comp letion of the
public offer and sale of the Securities, including timely filing with the Co mmission where required, legending and record keeping. The
Co mpany has satisfied and will satisfy the conditions in Rule 433 under the Act to avoid a requirement to file with the Co mmission any
electronic road show.

            2.2.4 Free Writing Prospectus . Each Underwriter agrees that, unless it obtains the prior written consent of the Co mpany, it will not
make any offer relating to the Securities that would constitute an Issuer-Represented Free Writing Prospectus (as defined in Section 2.2 hereof)
or that would otherwise (without taking into account any approval, authorizat ion, use or reference thereto by the Company) constitu te a ―free
writing prospectus‖ required to be filed by the Co mpany with the Co mmission (as defined herein) or retained by the Co mpa ny under Rule 433
of the Act (as defined herein).

           2.2.5 Definit ions . As used in this Agreement, the terms set forth below shall have the follo wing mean ings:

                   (i) ― Ti me of Sale ‖ means         a.m. (Eastern time) on the date of this Agreement.

                     (ii) ― Statutory Pros pectus ‖ as of any time means the prospectus that is included in the Registration Statement immediately
prior to that time. For purposes of this definition, informat ion contained in a form of prospectus that is deemed retroactive ly to be a part of the
Registration Statement pursuant to Rule 430A shall be considered to be included in the Statutory Prospectus as of the actual time that form of
prospectus is filed with the Co mmission pursuant to Rule 424(b) under the Act.

                                                                         26
                                                                                                                    Ladenburg Thalmann & Co. Inc.
                                                                                                                                   June [ ], 2010

                   (iii) ― Issuer-Represented Free Writing Prospectus ‖ means any ―issuer free writ ing prospectus,‖ as defined in Ru le 433
under the Act, relating to the Securities that (A) is required to be filed with the Co mmission by the Company, or (B) is exempt from filing
pursuant to Rule 433(d)(5)(i) under the Act because it contains a description of the Securities or of the offering that does not reflect the final
terms or pursuant to Rule 433(d)(8)(ii) because it is a ―bona fide electronic road show,‖ as defined in Rule 433 of the Regulatio ns which is
made available without restriction, in each case in the form filed or required to be filed with the Co mmission or, if not req uired to be filed, in
the form retained in the Co mpany’s records pursuant to Rule 433(g) under the Act.

                   (iv) ― Issuer-Represented General Free Wri ting Pros pectus ‖ means any Issuer-Represented Free Writing Prospectus that
is intended for general distribution to prospective investors.

                    (v) ― Issuer-Represented Li mited-Use Free Writing Pros pectus ‖ means any Issuer-Represented Free Writing Prospectus
that is not an Issuer-Represented General Free Writing Prospectus. The term Issuer-Represented Limited-Use Free Writ ing Pro spectus also
includes any ―bona fide electronic road show,‖ as defined in Rule 433 of the Regulations, that is made available without restriction pursuant to
Rule 433(d)(8)(ii), even though not required to be filed with the Co mmission.

      3. Purchase, Sale and Delivery of the Securit ies and the UPO .

            (a) On the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Co mpany agrees to sell to each Underwr iter and each Underwriter, severally and not jointly, agrees to purchase
fro m the Co mpany, at a purchase price per Un it of $[        ], the number of Firm Units set forth opposite their respective names on Schedule
A hereto together with any additional nu mber of Un its which such Underwriter may beco me obligated to purchase pursuant to the provisions of
Section 10 hereof.

            (b) Pay ment of the purchase price for, and delivery of cert ificates representing, the Firm Units shall be made at the offices of the
Underwriters’ Counsel, 150 East 42 nd Street, New York, New Yo rk 10017, or at such other place as shall be agreed upon by the Representative
and the Company, at 10:00 A.M ., New Yo rk City time, on the third (3rd) or, as permitted under Ru le 15c6-1 under the Exchange Act, fourth
(4th) business day (unless postponed in accordance with the provisions of Section 10 hereof) following the date of the effectiveness of the
Registration Statement, or such other time not later than ten (10) business days after such date as shall be agreed upon by the Representative
and the Company as permitted under Rule 15c6-1 under the Exchange Act (such time and date of payment and delivery being herein called the
― Closing Date ‖). The closing of the payment of the purchase price for, and delivery of cert ificates representing, the Firm Unit s is referred to
herein as the ― Closing .‖

          (c) Pay ment of the purchase price for the Firm Un its shall be made by wire t ransfer in immediately available funds to or as d irected
by the Company upon delivery of

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certificates for the Firm Un its to the Representative through the facilities of DTC fo r the respective accounts of the severa l Underwriters.
Cert ificates for the Firm Un its shall be registered in such name or names and shall be in such denominations as the Representative may request
at least two (2) business days before the Closing Date. The Co mpany will permit the Representative to examine and package such certificates
for delivery at least one (1) full business day prior to the Closing Date.

            (d) Pay ment of the purchase price for the Option Un its shall be made by wire transfer in immed iately available funds to or as
directed by the Co mpany upon delivery of certificates for the Option Units to the Representative through the facilit ies of DT C for the
respective accounts of the several Underwriters. Certificates for the Option Units shall be registered in such name or names and shall be in such
denominations as the Representative may request at least two (2) business days before the Option Closing Date. The Co mpany will permit the
Representative to examine and package such certificates for delivery at least one full business day prior to the Option Closing Date.

            (e) On the Closing, the Co mpany will further issue and sell to the Representative or, at the directio n of the Representative, to other
Underwriters or selling group members or bona fide officers of the Underwriters or selling group members, for an aggregate purchase price of
$100, the UPO, which shall entitle the holders thereof to purchase an aggregate o f 18,750 Un its for a period of five years fro m t he effective
date of the Registration Statement co mmencing on the six-month anniversary of the effect ive date of the Registration Statement. The UPO shall
be exercisable at a price equal to 125% of the offering price of the Firm Un its and shall contain terms and provisions as set forth more
particularly in the UPO to be executed by the Co mpany on the Closing Date. The UPO shall not be redeemab le. As provided in th e UPO, the
Representative may designate that the UPO be issued in varying amounts directly to other Underwriters and selling group members and to bona
fide officers of the Underwriters and selling group members.

      4. Offering . Upon authorization of the release of the Firm Un its by the Representative, th e Underwriters propose to offer the Units for
sale to the public upon the terms and conditions set forth in the Prospectus.

     5. Covenants of the Company . The Co mpany acknowledges, covenants and agrees with the Underwriters that:

            (a) The Registration Statement and any amend ments thereto have been declared effective, and if Rule 430A is used or the filing of
the Prospectus is otherwise required under Rule 424(b), the Co mpany will file the Prospectus (properly comp leted if Ru le 430A has been used)
pursuant to Rule 424(b) within the prescribed time period and will provide evidence satisfactory to the Representative of such timely fil ing.
The Co mpany will notify the Representative immed iately (and, if requested by the Representative, will confirm such notice in writing):
(i) when the Registration Statement and any amend ments thereto become effective, (ii) of any request by the Commission for any amend ment
of or supplement to the Registration Statement or the Prospectus or for any additional informat ion, (iii) of the Co mpany’s intention to

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file or prepare any supplement or amend ment to the Registration Statement or the Prospectus, (iv) of the mailing or the delivery to the
Co mmission for filing of any amend ment of or supplement to the Registration Statement or the Prospectus, including but not limited to Ru le
462(b ) under the Securit ies Act, (v) of the issuance by the Commission of any s top order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto or of the initiat ion, or the threatening, of any proceedings therefor, it being understood that
the Co mpany shall make every effort to avoid the is suance of any such stop order, (vi) of the receipt of any co mments fro m the Co mmission,
and (vii) of the receipt by the Co mpany of any notification with respect to the suspension of the qualificat ion of the Securit ies for s ale in any
jurisdiction or the init iation or threatening of any proceeding for that purpose. If the Co mmission shall propose to enter or enter a stop order at
any time, the Co mpany will make every reasonable effort to prevent the issuance of any such stop order and, if issued, to obt ain the lifting of
such order as soon as possible. The Co mpany will not file any amendment to the Reg istration Statement or any amend ment of or supplement to
the Prospectus (including the prospectus required to be filed pursuant to Rule 424(b)) that differs fro m the prospectus on file at the time of the
effectiveness of the Registration Statement or file any document under the Exchange Act if such document would be deemed to b e incorporated
by reference into the Prospectus to which the Representative shall object in writ ing after being t imely furnished in advance a copy thereof. The
Co mpany will provide the Representative with copies of all such amend ments, filings and other documents in a sufficient time prior to any
filing or other publication thereof to permit the Representative a reasonable opportunity to review and comment thereon.

             (b) The Co mpany shall co mply with the Securities Act, the Exchange Act and all applicable Rules and Regulat ions to permit
complet ion of the distribution as contemplated in this Agreement, the Registration Statement and the Prospectus. If, at any time when a
prospectus relating to the Securities is required to be delivered under the Securities Act, the Exchange Act and all applicab le Ru les and
Regulations in connection with the sales of Units, any event shall have occurred as a result of wh ich the Prospectus as then amended or
supplemented would, in the judg ment of the Underwriters or the Co mpany, include an untrue statement of a material fact or o mit to state any
material fact required to be stated therein or necessary to make the statements therein, in the light of the circu mstances existing at the time o f
delivery to the purchaser, not misleading, o r if, to comp ly with the Securities Act, the Exchange Act or the Rules and Regula tio ns, it shall be
necessary at any time to amend or supplement the Prospectus or Registration Statement, o r to file any document which is an exhibit to the
Registration Statement or the Prospectus or in any amend ment thereof or supplement thereto, the Company will notify the Representative
promptly and prepare and file with the Co mmission, subject to Section 5(a) hereof, an appropriate amendment or supplement (in form and
substance satisfactory to the Representative) which will correct such statement or o mission or which will effect such compliance and will use
its best efforts to have any amend ment to the Registration Statement declared effective as soon as possible.

              (c) The Co mpany will pro mptly deliver to the Underwriters and Underwriters ’ Counsel a signed copy of the Registration Statement,
as initially filed and all amendments thereto, including all consents and exhibits filed therewith, and will maintain in the

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                                                                                                                     Ladenburg Thalmann & Co. Inc.
                                                                                                                                    June [ ], 2010

Co mpany’s files manually signed copies of such documents for at least five (5) years after the date of filing thereof. The Co mp any will
promptly deliver to each of the Underwriters such number of copies of any Preliminary Prospectus, the Prospectus, the Registr ation Statement,
and all amend ments of and supplements to such documents, if any, and all documents which are exhib its to the Registration Sta tement and
Prospectus or any amendment thereof or supplement thereto, as the Underwriters may reasonably request. Prior to 10:00 A.M., New York t ime,
on the business day next succeeding the date of this Agreement and fro m time to time thereafter, the Co mpany will furnish the Underwriters
with copies of the Prospectus in New Yo rk City in such quantities as the Underwriters may reaso nably request.

           (d) The Co mpany consents to the use and delivery of the Preliminary Prospectus by the Underwriters in accordance with Rule 430
and Section 5(b) of the Securities Act.

              (e) If the Co mpany elects to rely on Ru le 462(b) under the Securit ies Act, the Co mpany shall both file a Rule 462(b) Registra tio n
Statement with the Co mmission in co mpliance with Rule 462(b) and pay the applicable fees in accordance with Rule 111 of the A ct by the
earlier o f: (i) 10:00 p.m., New Yo rk City t ime, on the date of this Agreement, and (ii) the time that confirmations are given or sent, as specified
by Rule 462(b)(2).

            (f) The Co mpany will use its best efforts, in cooperation with the Representativ e, at or prior to the time of effect iveness of the
Registration Statement, to qualify the Securit ies for offering and sale under the securities laws relating to the offering or sale of the Securities
of such jurisdictions, domestic or foreign, as the Representative may designate and to maintain such qualification in effect for so long as
required for the distribution thereof; except that in no event shall the Co mpany be obligated in connection therewith to qualify as a foreign
corporation or to execute a general consent to service of process.

            (g) The Co mpany will make generally availab le to its security holders and to the Underwriters as soon as practicable, but in any
event not later than twelve (12) months after the effective date of the Registration State ment (as defined in Rule 158(c) under the Securit ies
Act), an audited earnings statement of the Co mpany and the Subsidiaries co mply ing with Section 11(a) of the Securit ies Act and the Rules and
Regulations (including, at the option of the Co mpany, Rule 158).

            (h) Except with respect to (i) securities of the Co mpany which may be issued in connection with an acquisition of another entity (or
the assets thereof) (ii) the issuance of securities of the Co mpany intended to provide the Co mpany with proceeds to acqu ire anther entity (or the
assets thereof), or (iii) the issuance of securities at Fair Market Value (as defined below) under the Co mpany ’s stock option plans in effect fro m
time to time, during the ninety (90) day period following the Closing Date, the Co mpany or any successor to the Company shall not undertake
any public or private offerings of any equity securities of the Co mpany (including equity -linked securities) without the prior written consent of
the Representative.

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                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

             (i) During the six (6) month period following the Closing Date (the ― Lock-Up Period ‖), without the consent of the
Representative, the individuals listed on Schedule B hereto (the ― Lock-Up Parties ‖) shall not sell or otherwise dispose of any securities of the
Co mpany, whether publicly or in a private placement; provided, however, that the holders of options to purchase Ordinary Shar es shall be
entitled to exercise their outstanding options, subject to a written agreement by the recipient of the lock-up terms contained in t his Section 5(k).

            The Co mpany will deliver to the Representative the agreements of the Lock-Up Parties to the foregoing effect prior to the Closing
Date, wh ich agreements shall be substantially in the form attached hereto as Annex II .

           For purposes of this Section 5, the term ― Fair Market Val ue ‖ shall mean the last sale price of the Ordinary Shares, during normal
operating hours, as reported on NASDAQ.

             (j) If the Co mpany fails to maintain the listing of its Ordinary Shares on a nationally recognized exchange for a period of t wo
(2) years fro m the effective date of the Registration Statement, the Co mpany, at its expense, shall obtain and keep current a listing in the
Standard & Poor’s Corporation Records Serv ices or the Moody’s Industrial Manual; provided that Moody’s OTC Industrial Manual is not
sufficient for these purposes.

            (k) The Co mpany will not issue press releases or engage in any other publicity, without the Representative’ prior written consent,
for a period ending at 5:00 p.m. Eastern time on the first business day following the forty -fifth (45th) day fo llo wing the Closing Date, other
than normal and customary releases issued in the ordinary course of the Company’s business.

            (l) Prio r to the consummation of the Offering, the Co mpany will engage or continue to engage (for no less than two (2) years from
the date of the Closing Date) a financial public relations firm mutually acceptable to the Co mpa ny and the Representative.

            (m) The Co mpany has or will retain Co mputershare Trust Co mpany, N.A. as transfer agent for the Securities and shall continue to
retain such transfer agent for a period of two (2) years following the Closing Date.

           (n) The Co mpany will apply the net proceeds from the sale of the Securit ies as set forth under the caption ―Use of Proceeds‖ in the
Prospectus. The Company will not use proceeds from the Offering to pay outstanding loans fro m officers, d irectors or shareholders or to pay
any accrued salaries or bonuses to any employees or former emp loyees.

            (o) The Co mpany will use its best efforts to maintain the listing of the Securit ies on the NASDAQ Cap ital Market for at least three
(3) years after the Closing Date.

             (p) The Co mpany, during the period when the Prospectus is required to be delivered under the Securities Act or the Exchange Act,
will use its best efforts to file all documents required to be filed with the Co mmission pursuant to the Securities Act, the Exchange Act and the
Rules and Regulat ions within the time periods required thereby.

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                                                                                                                    Ladenburg Thalmann & Co. Inc.
                                                                                                                                   June [ ], 2010

          (q) The Co mpany will use its best efforts to do and perform all things required to be done or performed under this Agreement b y the
Co mpany prior to the Closing Date, and to satisfy all conditions precedent to the delivery of the Firm Units.

            (r) The Co mpany will not take, and will cause its Affiliates not to take, direct ly or indirect ly, any action which constitutes or is
designed to cause or result in, or which could reasonably be expected to constitute, cause or result in, the stabilization or manip ulation of the
price of any security to facilitate the sale or resale of the Securities.

             (s) The Co mpany shall cause to be prepared and delivered to the Representative, at its expense, within one (1) business day from the
effective date of this Agreement, an Electronic Prospectus to be used by the Underwriters in connection with the Offering. As used herein, the
term ― Electronic Prospectus ‖ means a form of prospectus, and any amendment or supplement thereto, that meets each of the following
conditions: (i) it shall be encoded in an electronic format, satisfactory to the Representative, that may be transmitted electronically by the ot her
Underwriters to offerees and purchasers of the Securities for at least the period during wh ich a Prospectus relating to the S ecurities is required
to be delivered under the Securities Act; (ii) it shall disclose the same in formation as the paper prospectus and prospectus filed pursuant to
EDGA R, except to the extent that graphic and image material cannot be disseminated electronic ally, in which case such graphic and image
material shall be replaced in the electronic prospectus with a fair and accurate narrative description or tabular representat ion of such material,
as appropriate; and (iii) it shall be in or convertible into a paper format or an electronic format, satisfactory to the Representative, that will
allo w recipients thereof to store and have continuously ready access to the Prospectus at any future time, without charge to such recip ients
(other than any fee charged for subscription to the Internet as a whole and for on-line t ime). The Co mpany hereby confirms that it has included
or will include in the Prospectus filed pursuant to EDGA R or otherwise with the Co mmission and in the Registration Statement at the time it
was declared effect ive an undertaking that, upon receipt of a request by an investor or his or her representative within the perio d when a
prospectus relating to the Securities is required to be delivered under the Securities Act, the Co mpany shall transmit or c ause to be transmitted
promptly, without charge, a paper copy of the Prospectus.

          (t) The Co mpany shall not take any action that would result in the Underwriters or the Co mpany being required to file with th e
Co mmission pursuant to Rule 433(d) under the Act a Free Writ ing Prospectus prepared by or on behalf of the Underwriters that the
Underwriters otherwise would not have been required to file.

            (u) The Co mpany shall have filed with the Co mmission all Issuer-Represented Free Writ ing Prospectuses or other informat ion
required to be filed by the Co mpany under the Act and the Regulations.

           (v) For a period of 3 years fro m the Closing Date the Co mpany agrees to hold all special and annual meetings of its sharehold ers
within the United States.

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                                                                                                                    Ladenburg Thalmann & Co. Inc.
                                                                                                                                   June [ ], 2010

      6. Consideration; Pay ment of Expenses .

           (a) In consideration of the services to be provided for hereunder, the Co mpany shall pay to the Underwriters or their respect ive
designees their pro rata portion (based on the Securities purchased) of the following co mpensation:

                   (i) An underwriting discount of six and three-quarters percent (6.75%); and

                    (ii) a non-accountable expense allowance equal to six-tenths of one percent (0.6%) of the gross proceeds of the Offering.
The Co mpany has heretofore paid a $37,500 advance to the Representative, which shall be applied against its out-of-pocket expenses
anticipated to be incurred and will be reimbursed to the Co mpany to the extent not actually incurred.

            (b) The Representative reserves the right to reduce any item of co mpensation or adjust the terms thereof as specified herein in the
event that a determination shall be made by FINRA to the effect that the Underwriters ’ aggregate compensation is in excess of FINRA Ru les or
that the terms thereof require adjustment.

            (c) Whether or not the transactions contemplated by this Agreement, the Registration Statement and the Prospectus are
consummated or this Agreement is terminated, the Co mpany hereby agrees to pay all costs and expenses incident to the performa nce of its
obligations hereunder, including the follo wing:

                  (i) all expenses in connection with the preparation, printing, formatting for EDGA R and filing of the Reg istration Statement,
any Preliminary Prospectus and the Prospectus and any and all amend ments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers;

                   (ii) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the registration of
the Securities under the Securities Act and the Offering;

                   (iii) all expenses in connection with the qualifications of the Units for offering and sale under state or foreign securities or
blue sky laws, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection
with any blue sky survey undertaken by such counsel;

                   (iv) all fees and expenses in connection with listing the Securit ies on the NASDAQ Capital Market;

                   (v) all travel expenses of the Co mpany’s officers and employees and any other expense of the Co mpany incurred in
connection with attending or hosting meetings with prospective purchasers of the Units (― Road Show Expenses ‖);

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                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

                   (vi) any stock transfer taxes incurred in connection with this Agreement or the Offering;

                   (vii) the cost of preparing stock certificates representing the Securities;

                   (viii) the cost and charges of any transfer agent or registrar for the Securit ies;

                  (ix) any cost and expenses in conducting satisfactory due diligence investigation and analysis of the Company ’s officers,
directors, employees, and affiliates; and

                   (x) all other costs and expenses incident to the performance of the Co mpany obligations hereunder which are not otherwise
specifically provided for in this Section 6.

           (d) In addit ion to the costs and expenses set forth in Section 6(c), the Co mpany will be responsible for: (i) the cost of five (5) bound
volumes of the Offering documents and Offering co mmemo rative lucite (or other reasonable form) memorab ilia in such quantities as the
Representative shall require, both to be supplied to the Representative.

             (e) It is understood, however, that except as provided in this Section, and Sections 7, 8, 9 and 11 hereof, the Underwriters will p ay
all of their own costs and expenses, including the fees of their counsel.

       7. Conditions of Underwriters ’ Ob ligations . The obligations of the Underwriters to purchase and pay for the Firm Units as provided
herein shall be subject to: (i) the accuracy of the representations and warranties of the Co mpany herein contained, as of the date hereof and as
of the Closing Date; (ii) the absence from any cert ificates, opinions, written statements or letters furnished to the Representative or to
Underwriters’ Counsel pursuant to this Section 7 of any misstatement or omission; (iii) the performance by the Co mpany of its obligations
hereunder; and (iv) each of the following additional conditions. For purposes of this Section 7, the terms ―Closing Date‖ and ―Closing‖ shall
refer to the Closing Date for each of the Firm Units and the Option Units, as applicable, and each of the foregoing and follo win g conditions
must be satisfied as of each Closing.

           (a) The Registration Statement shall have become and remain effective and all necessary regulatory or listing approvals shall have
been received not later than 5:30 P.M., New Yo rk time, on the date of this Agreement, or at such later t ime and date as shall have been
consented to in writing by the Representative. If the Co mpany shall have elected to rely upon Rule 430A under the Securit ies Act, the
Prospectus shall have been filed with the Co mmission in a timely fashio n in accordance with the terms hereof and a form of the Prospectus
containing information relating to the description of the Securit ies and the method of distribution and similar matters shall have been filed with
the Co mmission pursuant to Rule 424(b ) within the applicable time period; and at or prior to each Closing Date or the actual time of the
Closing, no

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                                                                                                                     Ladenburg Thalmann & Co. Inc.
                                                                                                                                    June [ ], 2010

stop order suspending the effectiveness of the Registration Statement or any post -effective amend ment thereof shall have been issued and no
proceedings therefor shall have been initiated or threatened by the Co mmission.

            (b) The Representative shall have received the favorable written opinion of Kaufman & Canoles, P.C., legal counsel for the
Co mpany, dated as of the Closing Date addressed to the Underwriters in the fo rm attached hereto as Annex I , the favorable written opinion of
Jingtian & Gongcheng, legal counsel for the Co mpany with respect to the laws of the People’s Republic of China and Campbells, legal counsel
for the Co mpany with respect to the laws of the Cay man Islands, each dated as of the Closing Date, addressed to the Underwrit ers in the form
attached hereto as Annex III .

           (c) All proceedings taken in connection with the sale of the Firm Units herein contemp lated shall be satisfactory in form and
substance to the Representative and to Underwriters ’ Counsel.

            (d) The Representative shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of the Co mp any,
dated as of the Closing Date to the effect that: (i) the condition set forth in subsection (a) of this Section 7 has been satisfied, (ii) as of the date
hereof and as of the applicable Closing Date, the representations and warranties of the Co mpany set forth in Sections 1 and 2 hereof are
accurate and complete, (iii) as of the applicab le Closing Date, all agreements, conditions and obligations of the Co mpany to be p erformed or
complied with hereunder on or prior thereto have been duly performed o r co mplied with, (iv) the Co mpany and the Subsidiaries have not
sustained any material loss or interference with their respective businesses, whether or not covered by insura nce, or fro m any labor dispute or
any legal or govern mental proceeding, (v) no stop order suspending the effectiveness of the Registration Statement or any post -effective
amend ment thereof has been issued and no proceedings therefor have been initiated or threatened by the Commission, (vi) there are no pro
forma or as adjusted financial statements that are required to be included or incorporated by reference in the Registration S tatement and the
Prospectus pursuant to the Rules and Regulations which are not so included or incorporated by reference and (vii) subsequent to the respective
dates as of which info rmation is given in the Reg istration Statement and the Prospectus there has not been any Material Adver se Change or any
development involving a prospective Material Adverse Change, whether or not arising fro m transactions in the ordinary course of business.

            (e) On the date of this Agreement and on the Closing Date, the Representative shall have received a ―cold co mfort‖ letter fro m each
of HBM and B&P as of the date of the date of delivery and addressed to the Underwriters and in form and substance satisfactory to the
Representative and Underwriters ’ Counsel, confirming that they are independent certified public accountants with respect to the Co mpany and
its Subsidiaries within the meaning of the Securities Act and the Rules and Regulations, and stating, as of the date of delive ry (or, with respect
to matters involving changes or developments since the respective dates as of which specified financial in formation is given in t he Prospectus,
as of a date not more than five (5) days prior to the date of such letter), the conclusions and findings of such firm with respect to the financial
informat ion and other matters relat ing to the Registration Statement covered by such letter.

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                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

            (f) Subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the
Registration Statement (exclusive of any amendment thereof) and the Prospectus (exclusive of any supplement thereto), there s hall not have
been any change in the capital stock or long-term debt of the Co mpany or any Subsidiary or any change or development involving a change,
whether or not arising fro m transactions in the ordinary course of business, in the business, condition (financial or otherwise), results of
operations, shareholders’ equity, properties or prospects of the Company and the Subsidiaries, taken as a whole, including but not limited to the
occurrence of any fire, flood, storm, exp losion, accident, act of war or terroris m or other calamity, the effect of which, in any such case
described above, is, in the sole judg ment of the Representative, so material and adverse as to make it imp racticable o r inadv isable to proceed
with the Offering on the terms and in the manner contemplated in the Prospectus (exclusive of any supplement).

          (g) The Representative shall have received a lock-up agreement fro m each Lock-Up Party, duly executed by the applicable
Lock-Up Party, in each case substantially in the form attached hereto as Annex II .

           (h) The Ordinary Shares and Warrants shall have been approved for quotation on the NASDAQ Cap ital Market.

            (i) FINRA shall have confirmed that it has not raised any objection with respect to the fairness and reasonableness of the
underwrit ing terms and arrangements.

             (j) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by a ny
federal, state or foreign governmental o r regulatory authority that would, as of the Closing Date, prevent t he issuance or sale of the Securities;
and no injunction or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date, prevent the issuance
or sale of the Securities.

          (k) The Co mpany shall have furnished the Underwriters and Underwriters ’ Counsel with such other certificates, opinions or other
documents as they may have reasonably requested.

             If any of the conditions specified in this Section 7 shall not have been fulfilled when and as required by this Agreement, or if an y of
the certificates, opinions, written statements or letters furnished to the Representative or to Underwriters ’ Counsel pursuant to this Section 7
shall not be reasonably satisfactory in form and substance to the Representative and to Underwriters ’ Counsel, all obligations of the
Underwriters hereunder may be cancelled by the Rep resentative at, or at any time prior to, the consummat ion of the Closing. N otice of such
cancellation shall be g iven to the Company in writ ing or by telephone. Any such telephone notice shall be confirmed pro mptly t hereafter in
writing.

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                                                                                                                  Ladenburg Thalmann & Co. Inc.
                                                                                                                                 June [ ], 2010

      8. Indemn ification .

             (a) The Co mpany shall indemn ify and hold harmless each Underwriter and each Person, if any, who controls each Underwriter
within the mean ing of Section 15 of the Securities Act or Sect ion 20 of the Exchange Act, against any and all losses, liabilit ies, claims,
damages and expenses whatsoever as incurred (including but not limited to attorneys ’ fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, co mmenced or threatened, or any claim whatsoever, a nd any and all amounts paid
in settlement of any claim or litigation), jo int or several, to which they or any of them may beco me subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expens es (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact made by such party contained in the Registration Statement, as
originally filed or any amend ment thereof, or any related P reliminary Prospectus or the Prospectus, or in any supplement thereto or amendment
thereof, or arise out of or are based upon the omission or alleged o mission made by such party to state therein a material fa ct required to be
stated therein or necessary to make the statements therein not mislead ing; provided, however, that the Company will not be liab le in any such
case to the extent but only to the extent that any such loss, liability, claim, damage or expense arises out of or is based u pon any such untrue
statement or alleged untrue statement or omission or alleged o mission made therein in reliance upon and in conformity with wr itten information
furnished to the Company by or on behalf of any Underwriter through the Representative expressly for use therein . The parties agree that such
informat ion provided by or on behalf of any Underwriter through the Representative consists solely of the Underwriters ’ Informat ion. This
indemn ity agreement will be in addition to any liability, wh ich the Co mpany or any Selling Shareholder may otherwise have, in cluding but not
limited to other liability under this Agreement.

            (b) Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, each of the directors of the
Co mpany, each of the officers of the Co mpany who shall have signed the Registration Statement, and each other Person, if any, who controls
the Co mpany within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, liab ilit ies, claims,
damages and expenses whatsoever as incurred (including but not limited to attorneys ’ fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, co mmenced or threatened, or any claim whatsoever, and any a nd all amounts paid
in settlement of any claim or litigation), jo int or several, to which they or any of them may beco me subject under the Securities Act, the
Exchange Act or otherwise, but only insofar as such losses, liab ilit ies, claims, damages or expen ses (or actions in respect thereof) arise out of
or are based upon any untrue statement of a material fact contained in the Registration Statement, as originally filed or any amendment thereof,
or any related Preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon
the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not m isleading, in each
case to the extent, but only to the extent, that any such loss, liab ility, claim, damage or expense arises out of or is based upon any such untrue
statement or o mission made therein in reliance upon and in conformity with the Underwriters ’ In formation; provided ,

                                                                         37
                                                                                                                     Ladenburg Thalmann & Co. Inc.
                                                                                                                                    June [ ], 2010

however, that in no case shall any Underwriter be liable o r responsible for any amo unt in excess of the underwriting discount applicable to the
Securities to be purchased by such Underwriter hereunder. The parties hereto agree that such informat ion provided by or on behalf of any
Underwriter through the Representative consists solely of the Underwriters’ Information.

             (c) Pro mptly after receipt by an indemn ified party under subsection (a) or (b) above of notice of any claims or the commencement
of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemn ify ing party under such subsection,
notify each party against whom indemnificat ion is to be sought in writing of the claim or the co mmencement thereof (but the f ailu re so to
notify an indemn ify ing party shall not relieve the indemnify ing party fro m any liab ility which it may have under this Section 8 t o the extent that
it is not materially prejudiced as a result thereof and in any event shall not relieve it fro m any liability that such indemn ifying party may have
otherwise than on account of the indemnity agreement hereunder). In case any such claim or act ion is brought against any indemn ified party,
and it notifies an indemnifying party of the co mmencement thereof, the indemnifying party will be entitled to participate, at its own expense in
the defense of such action, and to the extent it may elect, by written notice delivered to the indemn ified party pro mptly after r eceiving the
aforesaid notice fro m such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnif ied party; provided
however, that counsel to the indemnifying party shall not (except with the written consent of the indemn ified party) also be counsel to the
indemn ified party. Notwithstanding the foregoing, the indemn ified party or parties shall have th e right to employ its or their o wn counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or part ies unless (i) the emp loyment of
such counsel shall have been authorized in writing by one of th e indemn ify ing parties in connection with the defense of such action, (ii) the
indemn ify ing parties shall not have employed counsel to have charge of the defense of such action within a reasonable time af t er notice of
commencement of the action, (iii) the indemn ify ing party does not diligently defend the action after assumption of the defense, or (iv) such
indemn ified party or parties shall have reasonably concluded that there may be defenses available to it or them which are dif ferent fro m or
additional to those available to one or all of the indemn ifying part ies (in which case the indemn ify ing parties shall not have the right to direct
the defense of such action on behalf of the indemnified party or part ies), in any of wh ich events such fees and expenses s hall be borne by the
indemn ify ing parties. No indemn ify ing party shall, without the prior written consent of the indemnified parties, effect any s ettlement or
compro mise of, or consent to the entry of judgment with respect to, any pending or threatened cla im, investigation, action or proceeding in
respect of which indemnity or contribution may be or could have been sought by an indemnified party under this Section 8 or Section 9 hereof
(whether or not the indemnified party is an actual or potential party th ereto), unless (x) such settlement, co mpro mise or judgment (i) includes
an unconditional release of the indemn ified party fro m all liability arising out of such claim, investigation, action or proc eeding and (ii) does
not include a statement as to or an admission of fault, cu lpability or any failu re to act, by or on behalf of the indemnified party, and (y) the
indemn ify ing party confirms in writ ing its indemnification obligations hereunder with respect to such settlement, co mp ro mise or judg ment.

                                                                          38
                                                                                                                     Ladenburg Thalmann & Co. Inc.
                                                                                                                                    June [ ], 2010

        9. Contribution . In order to provide for contribution in circu mstances in which the indemnificat ion provided for in Section 8 hereof is for
any reason held to be unavailable fro m any indemnifying party or is insufficient to hold harmless a party indemnified thereunder, the Co mpany
and the Underwriters shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplat ed by such
indemn ification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, dama ges, liabilities and
expenses suffered by the Co mpany, any contribution received by the Company fro m Persons, other than the Underwriters, who may also be
liab le fo r contribution, including Persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, officers of the Co mpany who signed the Registration Statement and directors of the Co mpany) as incurred to whic h the
Co mpany and one or more of the Underwriters may be subject, in such proportions as is appropriate to reflect the relative benefits received by
the Co mpany and the Underwriters fro m the Offering or, if such allocation is not permitted by applicable law, in such proport ions as are
appropriate to reflect not only the relat ive benefits referred to above but also the relative fault of the Co mpany and the Underwriters in
connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Co mpany and the Underwriters shall be deemed to be in the same
proportion as (x) the total proceeds from the Offering (net of underwrit ing discounts and commissions but before deducting exp enses) received
by the Company bears to (y) the underwrit ing discount or commissions received by the Underwriters, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault of each of the Co mpany and of the Underwriters shall be determined by re ference to, among
other things, whether the untrue or alleged untrue statement of a material fact or the o mission or alleged o mission to state a mat eria l fact relates
to information supplied by the Co mpany or the Underwriters and the parties ’ relative intent, knowledge, access to informat ion and opportunity
to correct or prevent such statement or o mission. The Co mpany and the Underwriters agree that it would not be just and equita ble if
contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underw riters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemn ified party and referred to above in this Section 9
shall be deemed to include any legal o r other expenses reasonably incurred by such indemnified party in investigating, prepar in g or defending
against any lit igation, or any investigation or proceeding by any judicial, regulatory or other legal o r governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or o mission or alleged o mission .
Notwithstanding the provisions of this Section 9: (i) no Underwriter shall be required to contribute any amount in excess of the amount by
which the discounts and commissions applicable to the Units underwritten by it and distributed to the public exceeds the amou nt of any
damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or
alleged o mission and (ii) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution fro m any Person who was not guilty of such fraudulent misrepresentation. For purposes of this Sectio n 9, each Person,
if any, who controls

                                                                          39
                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

an Underwriter within the meaning of Section 15 of the Securit ies Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Underwriter, and each Person, if any, who controls the Co mpany within the mean ing of Section 15 of the Securities Act or
Section 20 of the Exchange Act, each officer of the Co mpany who shall have signed the Registration Statement and each director of the
Co mpany shall have the same rights to contribution as the Co mpany, subject in each case to clauses (i) and (ii) of the immed iately preceding
sentence. Any party entitled to contribution will, pro mptly after receipt of notice of co mmencement of any action, suit or pr oceeding against
such party in respect of which a claim fo r contribution may be made agains t another party or parties, notify each party or parties from who m
contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties fro m whom contribution
may be sought from any obligation it or they may have under this Section 9 o r otherwise. The obligations of the Underwriters t o contribute
pursuant to this Section 9 are several in proportion to the respective number of Units to be purchased by each of the Underwriters hereunder
and not joint.

      10. Underwriter Default .

            (a) If any Underwriter o r Underwriters shall default in its or their obligation to purchase Firm Un its hereunder, and if the Firm Units
with respect to which such default relates (the ― Default Units ‖) do not (after giving effect to arrangements, if any, made by the Representative
pursuant to subsection (b) below) exceed in the aggregate 10% of the number of Firm Units, each non -defaulting Underwriter, acting severally
and not jointly, agrees to purchase from the Co mpany that number of Defau lt Un its that bears the same proportion of the total n umber o f
Default Units then being purchased as the number of Firm Units set forth opposite the name of such Underwriter on Schedule A hereto bears to
the aggregate number of Firm Un its set forth opposite the names of the non -defaulting Underwriters, subject, however, to such adjustments to
eliminate fractional shares as the Representative in its sole discretion shall make.

            (b) In the event that the aggregate number of Default Units exceeds 10% of the nu mber of Firm Un its, the Representative may i n its
discretion arrange for itself or for another party or parties (including any non -defaulting Underwriter or Underwriters who s o agree) to purchase
the Default Units on the terms contained herein. In the event that within five calendar days after such a default the Represe ntative does not
arrange for the purchase of the Default Units as provided in this Section 10, this Agreement shall thereupon terminate, without liability on the
part of the Co mpany with respect thereto (except in each case as provided in Sections 5, 7, 8, 10 and 12(d)) or the Underwrit ers, but nothing in
this Agreement shall relieve a defaulting Underwriter or Underwriters of its or their liability, if any, to the other Underwriters and the Company
for damages occasioned by its or their default hereunder.

            (c) In the event any Default Units are to be purchased by the non -defaulting Underwriters, or are to be purchased by another party
or parties as aforesaid, the Representative or the Co mpany shall have the right to postpone the Closing Date for a period, no t exceeding five
(5) business days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus or in any
other documents and arrangements, and the Company agrees to file pro mptly any amendment or supplement to the Registration Sta tement or

                                                                         40
                                                                                                                     Ladenburg Thalmann & Co. Inc.
                                                                                                                                    June [ ], 2010

the Prospectus which, in the reasonable opinion of Underwriters ’ Counsel, may thereby be made necessary or advisable. The term
―Underwriter‖ as used in this Agreement shall include any party substituted under this Section 10 with like effect as if it had originally been a
party to this Agreement with respect to such Firm Un its.

      11. Su rvival of Representations, Agreements and Other Terms . All representations, warranties, covenants and agreements of the
Co mpany and the Underwriters contained in this Agreement or in certificates of officers of the Co mpany or any Subsidiary submitted pursuant
hereto, including the agreements contained in Section 6, the indemnity agreements contained in Section 8 and the contribution agreements
contained in Section 9 hereof, shall remain operative and in full fo rce and effect regard less of any investigation made by or on behalf of any
Underwriter or any controlling Person thereof or by or on behalf of the Co mpany, any of its officers and directors or any con trolling Person
thereof, and shall survive delivery of and payment for the Units to and by the Underwriters. The rep resentations contained in Sections 1 and 2
hereof and the covenants and agreements contained in Sections 5, 6, 8, 9, this Section 11 and Sect ions 15 and 16 hereof shall survive any
termination of this Agreement, including termination pursuant to Section 10 or 12 hereof.

      12. Effective Date of Agreement; Termination .

            (a) Th is Agreement shall beco me effective upon the later of: (i) receipt by the Representative and the Co mpany of notification of
the effectiveness of the Registration Statement or (ii) the execution of this Agreement. Notwithstanding any termination of this Agreement, the
provisions of this Section 12 and of Sect ions 1, 5, 7, 8, 9 and 12 through 17, inclusive, shall remain in full force and effect at all times after the
execution hereof.

             (b) The Representative shall have the right to terminate this Agreement at any time prior to the consummat ion of the Closing if:
(i) any domestic or international event or act or occurrence has materially disrupted, or in the opinion of the Representative will in the
immed iate future materially d isrupt, the market fo r the Co mpany ’s securities or securities in general; or (ii) trad ing on the New Yo rk Stock
Exchange, the NASDAQ or the AM EX shall have been suspended or been made subject to material limitat ions, or min imu m o r maximu m
prices for trad ing shall have been fixed , or maximu m ranges for prices for securities shall have been required , on the New Yo rk Stock
Exchange, the NASDAQ or the AM EX or by order of the Co mmission or any other governmental authority having jurisdiction; or (i ii) a
banking moratoriu m has been declared by any state or federal authority or if any material disruption in co mmercial banking or securities
settlement or clearance services shall have occurred; (iv ) any downgrading shall have occurred in the Co mpany ’s corporate credit rating or the
rating accorded the Company’s debt securities or trust preferred stock by any ―nationally recognized statistical rat ing organizat ion‖ (as defined
for purposes of Rule 436(g) under the Securities Act) or if any such organization shall have publicly announced that it has u nder surveillance or
review, with possible negative implications, its rating of any of the Co mpany’s debt securities; or (v) (A) there shall have occurred any
outbreak or escalation of hostilities or acts of terroris m involving the United States or there is a declarat ion of a nationa l emergency or war by
the United States or (B) there shall have been any other calamity or crisis or any change in political, financial or

                                                                          41
                                                                                                                  Ladenburg Thalmann & Co. Inc.
                                                                                                                                 June [ ], 2010

economic conditions if the effect of any such event in (A) or (B), in the judg ment of the Rep resentative, is so material and adverse that such
event makes it imp racticable or inadvisable to proceed with the offering, sale and delivery of the Firm Units on the terms an d in the manner
contemplated by the Prospectus.

           (c) Any notice of termination pursuant to this Section 12 shall be in writ ing.

             (d) If this Agreement shall be terminated pursuant to any of the provisions hereof (other than pursuant to Section 10(b) hereof), or if
the sale of the Units provided for herein is not consummated because any condition to the obligations of the Underwriters set forth herein is not
satisfied or because of any refusal, inability or failure on the part of the Co mpany to perform any agreement herein or co mp ly with any
provision hereof, the Co mpany will, subject to demand by the Representative, reimbu rse the Underwriters for only those out -of-pocket
expenses (including the fees and expenses of their counsel) actually incurred by the Underwriters in connection herewith.

     13. Notices . All co mmun ications hereunder, except as may be otherwise specifically p rovided herein, shall be in writ ing, and:

           (a) if sent to the Representative or any Underwriter, shall be mailed, delivered, or faxed and confirmed in writing, to Laden burg
Thalmann & Co. Inc., 520 Madison Avenue, New York, New Yo rk 10022, Attention: Steven Kaplan, with a copy to Underwrit ers ’ Counsel at
Ellenoff Grossman & Schole LLP, 150 East 42 nd Street 11 th Floor, New York, New York, 10017, Attention: Douglas S. Elleno ff, Esq.; and

           (b) if sent to the Company, shall be mailed, delivered, or faxed and confirmed in writ ing to the Co mpany and its counsel at the
addresses set forth in the Registration Statement,

provided, however, that any notice to an Underwriter pursuant to Section 8 shall be delivered or sent by mail or facsimile t ransmission to such
Underwriter at its address set forth in its acceptance facsimile to the Representative, which address will be supplied to any other party hereto by
the Representative upon request. Any such notices and other communicat ions shall take effect at the time of receipt thereof.

     14. Parties; Limitation of Relationship .

            (a) Th is Agreement shall inure solely to the benefit of, and shall be binding upon, the Underwriters, the Co mpany and the
controlling Persons, directors, officers, employees and agents referred to in Sections 7 and 8 hereof, and their respective successors and assigns,
and no other Person shall have or be construed to have any legal or equitable right, remedy or claim under or in respe ct of or by virtue of this
Agreement or any provision herein contained. This Agreement and all condit ions and provisions hereof are intended to be for t he sole and
exclusive benefit of the parties hereto and said controlling Persons and their respective su ccessors, officers, directors, heirs and legal
representatives, and it is not for the benefit of any other Person. The term ―successors and assigns‖ shall not include a purchaser, in its capacity
as such, of Units fro m any of the Underwriters.

                                                                        42
                                                                                                                   Ladenburg Thalmann & Co. Inc.
                                                                                                                                  June [ ], 2010

            (b) The Co mpany acknowledges and agrees that: (i) the sale and issuance of the Units pursuant to this Agreement is an arm’s-length
commercial transaction between the Co mpany and the Underwriters; (ii) in connection therewith and with the process leading to the Offering,
the Underwriters are acting solely as a principal and not the agent or fiduciary of the Co mpany; (iii) no Underwriter has assumed an advisory or
fiduciary responsibility in favor of the Co mpany with respect to the Offering contemplated hereby or the process leading ther eto, including any
negotiation related to the pricing of the Un its; and (iv) the Co mpany has consulted its own legal and financial advisors to the extent it has
deemed appropriate in connection with this Agreement and the Offering.

      15. Govern ing Law . Th is Agreement shall be deemed to have been executed and delivered in New York and both this Agre ement and the
transactions contemplated hereby shall be governed as to validity, interpretation, construction, effect, and in all other res pects by the laws of the
State of New Yo rk, without regard to the conflicts of laws principals thereof (other than Se ction 5-1401 o f New York General Obligations
Law). Each of the Underwriters and the Co mpany: (a) agrees that any legal suit, action or proceeding arising out of or relat ing to this
Agreement and/or the transactions contemplated hereby shall be instituted exclusively in the Supreme Court of the State of New Yo rk, New
Yo rk County, or in the Un ited States District Court for the Southern District of New York, (b) waives any objection which it may now have or
hereafter to the venue of any such suit, action or proceeding, and (c) irrevocably consents to the jurisdiction of the Supreme Court of the State
of New Yo rk, New York County, or in the United States District Court fo r the Southern District of New York in any such suit, action or
proceeding. Each of the Underwriters and the Co mpany further agrees to accept and acknowledges service of any and all process which may be
served in any such suit, action or proceeding in the Supreme Court of the State of New Yo rk, New York County, or in the Unite d States District
Court for the Southern District of New Yo rk and agrees that service of process upon the Co mpany mailed by certified mail to the Co mpany’s
address or delivered by Federal Exp ress via overnight delivery shall be deemed in every respect effective service of pro cess upon the Company
in any such suit, action or proceeding, and service of process upon the Underwriters mailed by certified mail to the Underwriters’ address or
delivered by Federal Exp ress via overnight delivery shall be deemed in every respect effective service of process upon the Underwriter in any
such suit, action or proceeding. THE COMPANY, ON BEHA LF OF ITSELF, THE SUBSIDIA RIES A ND, TO THE FULLEST EXTENT
PERM ITTED BY LAW, ON BEHA LF OF ITS RESPECTIVE EQUITY HOLDERS AND CREDITORS, HEREBY WAIVES ANY R IGHT
IT OR THEY MA Y HA VE TO A TRIA L BY JURY IN RESPECT OF ANY CLAIM BA SED UPON, ARISING OUT OF OR IN
CONNECTION WITH THIS A GREEM ENT AND THE TRA NSA CTIONS CONTEM PLATED BY THIS A GREEM ENT, THE
REGISTRATION STATEM ENT AND THE PROSPECTUS.

      16. Entire Agreement . Th is Agreement, together with the schedule and exhib its attached hereto, as the same may be amended from time
to time in accordance with the terms hereof, contains the entire agreement among the parties hereto relating to the subject matter hereof and
there are no other or further agreements outstanding not specifically mentioned herein.

                                                                         43
                                                                                                                 Ladenburg Thalmann & Co. Inc.
                                                                                                                                June [ ], 2010

      17. Severab ility . If any term or provision of this Agreement or the perfo rmance thereof shall be invalid or unenforceable to any extent,
such invalid ity or unenforceability shall not affect or render invalid or unenforceable any other provision of this Agreement and this Agreement
shall be valid and enforced to the fullest extent permitted by law.

      18. Counterparts . This Agreement may be executed in any nu mber of counterparts, each of which shall be deemed to be an original, but
all such counterparts shall together constitute one and the same instrument. Delivery of a signed count erpart of this Agreement by facsimile
transmission shall constitute valid and sufficient delivery thereof.

      19. Headings . The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the
mean ing or interpretation of, this Agreement.

      20. Time Of The Essence . Time shall be of the essence of this Agreement. As used herein, the term ―business day‖ shall mean any day
other than a Saturday, Sunday or any day on which the major stock exchanges in New York, Ne w York are not open for business.

                                                            [Signature Pages Follow]

                                                                        44
                                                                                                                 Ladenburg Thalmann & Co. Inc.
                                                                                                                                June [ ], 2010

       If the foregoing correctly sets forth your understanding, please so indicate in the space provided below for that purpose, wh ereupon this
letter shall constitute a binding agreement among us.

                                                                                        Very tru ly yours,

                                                                                        RECON TECHNOLOGY, LTD.

                                                                                        By:
                                                                                               Name:
                                                                                               Title:

                                                                        45
                                                                           Ladenburg Thalmann & Co. Inc.
                                                                                          June [ ], 2010

Accepted by the Representati ve, acting for themselves and as
Representati ve of the Underwriters named on Schedule A attached hereto,
as of the date first written above:

LADENBURG THA LMANN & CO. INC.

By:
      Name: Steven Kaplan
      Title:

                                                                46
                                SCHED ULE A

                                Underwriters

                                           Total Number of Firm    Over-Allotment
Underwriter                                Units to be Purchased    Option Units

Ladenburg Thalmann & Co. Inc.
TOTAL

                                    V-1
SCHED ULE B

Lock-Up Parties

     V-2
                                                                                                                                       Exhi bit 5.1

                                                                                                                                   Scotia Centre
                                                                                                                                   P.O. Bo x 884
                                                                                                                      Grand Cay man KY1-1103
                                                                                                                           CA YMAN ISLA NDS
                                                                                                                            Tel: (345) 949-2648
                                                                                                                            Fax: (345) 949-8613
                                                                                                                         www.campbells.co m.ky

                                                                                      Your Ref:
                                                                                      Our Ref:                                            ID/vg
                                                                                      Direct Email:                   idillon@campbells.co m.ky
                                                                                      Direct Line:

8 June 2010

Recon Technology, Ltd
Roo m 1401 Yong Feng Mansion
123 Jiq ing Road
Nanjing
People’s Republic of China 210006

Dear Sir

RECON TECHNOLOGY, LTD

We are Cay man Islands counsel for Recon Technology, Ltd, a Cayman Islands corporation (the ―Company‖), in connection wit h the
registration and offering of o rdinary shares of the Co mpany, $0.0185 par value (―Ordinary Shares‖), warrants to purchase Ordinary Shares
(―Warrants‖), the underwriter’s unit purchase option (the ―Option‖) and the Ordinary Shares underlying the Option (the ―Option Securities‖),
through a Registration Statement on Form S-l (―Reg istration Statement‖) as to which this opinion is a part, to be filed with the Securities and
Exchange Co mmission (the ―Co mmission‖).

In connection with rendering our opinion as set forth below, we have reviewed and examined the following:

1     Copy of the Memo randum of Association and Articles of Association of t he Co mpany as adopted by the Company by a special
      resolution of the shareholders on the 23rd day of June, 2009 (the ―Shareholders Resolution‖).
2     A copy of unexecuted minutes as provided containing the written deliberations and resolutions of the Board of Directors of th e Co mpany
      dated the 29 July, 2009.
3     A copy of unexecuted minutes as provided containing the written deliberations and resolutio ns of the Board of Directors of the Co mpany
      dated the 19 January, 2010.

                                                                                                                                    Cont.../...
4     A copy of the Shareholders Resolution dated the 23rd day of June 2009.
5     An electronic copy of an undated draft Pre-Effective amend ment No.l to Form S-l Registration Statement as provided and to be filed the
      Co mmission.

6     An uncertified copy of the Register of Members of the Co mpany dated 7 April 2010 as provided.
7     An uncertified and undated copy of the Register of Directors of the Co mpany as provided.
8     Copy of a Cert ificate of a d irector of the Co mpany dated 8 June 2010, a copy of wh ich is attached hereto.

9     Such other documents and laws as we consider necess ary as a basis for giving this opinion.

The Registration Statement and the exhib its to the Registration Statement are referred to below as the ―Docu ments‖.

The following opinion is given only as to matters of Cay man Islands law and we exp ress no opinion with respect to any matters governed by or
construed in accordance with the laws of any ju risdiction other than the Cayman Islands. We have assumed that there is nothin g under any law
(other than the laws of the Cay man Islands) which would affect or vary th e fo llo wing opinion. Specifically, we have made no independent
investigation of the laws of the United States of America generally and the Co mmonwealth of Virginia specifically and we offe r no opinion in
relation thereto. We offer no opinion in relat ion to any representation or warranty given by any party to the Documents save as specifically
hereinafter set forth. This opinion is strictly limited to the matters stated in it, does not apply by implication to other matters, and only relates to
(1) those circumstances or facts specifically stated herein and (2) the laws of the Cay man Islands, as they respectively exist at the date hereof.

In giving this opinion we have assumed, without independent verification:
(a)   the genuineness of all signatures and seals, the authenticity of all documents submitted to us as originals, the conformity o f all copy
      documents or the forms of documents provided to us to their orig inals or, as the case may be, to the final form of the o rig inals and that
      any markings showing revisions or amend ments to documents are correct and comp lete;
(b)   that the copies produced to us of minutes of meetings and/or of resolutions are true copies and correctly record the proceedings of such
      meet ings and/or the subject matter which they propose to record and that all factual statements therein contained are t rue and correct and
      that any meetings referred to in such copies were duly convened and held and that all resolutions set out in such copy minute s or
      resolutions were duly passed and are in fu ll force and effect and that all factual statements made in such resolutions, the Director’s
      Cert ificate and any other certificates and documents on which we have relied are t rue and correct (and continue to be true an d correct);

                                                                                                                                        Cont.../...

                                                                        Page 2
(c)   that the statutory registers of directors and officers, members, mortgages and charges and the minute book of the Co mpany are true,
      complete, accurate and up to date;
(d)   the accuracy of all representations, warranties and covenants as to factual matters made by the parties to the Documents; and

(e)   that there is no contractual or other prohibition (other than as may arise by virtue of the laws of the Cay man Islands) binding on the
      Co mpany or on any other party prohibiting it fro m entering into and performing its obligations.

Based upon the foregoing and in reliance thereon, it is our opinion that the Ordinary Shares, the Ordinary Shares underlying the Warrants and
the Option Securit ies will, upon the receipt of full pay ment, issuance and delivery in accordance with the terms of the offering described in the
Registration Statement and registration in the register of members (shareholders) of the Co mpany, be fully and validly author ized, legally
issued, fully paid and nonassessable.

The foregoing opinion is subject to the following reservations and qualificat ions:
1     In the event that the Documents are executed in or brought within the ju risdiction of the Cay man Islands (e.g., for the purpo ses of
      enforcement or obtaining pay ment), stamp duty may be payable.
2     We neither express nor imply any opinion as to any representation or warranty given by the Co mpany in the Docu ments as to its
      capability (financial or otherwise) to undertake the obligations assumed by it under the Docu ments.

3     To maintain the Co mpany in good standing under the laws of the Cay man Islands annual fees must be paid and annual returns mad e to
      the Registrar of Co mpanies.

We hereby consent to the use of this opinion as an exh ibit to the Registration Statement and to the use of our name under the caption ―Legal
Matters‖ in the Prospectus constituting a part thereof. In giv ing such consent, we do not thereby admit that we co me with in the category of
persons whose consent is required under section 7 of the U.S. Securities Act of 1933, as amended, or the Ru les and Regulation s of the
Co mmission thereunder.

Yours faithfully




Campbells



                                                                      Page 3
                                                                                                                                         Exhi bit 5.2

                                                                                                     Kaufman & Canoles, P.C.
                                                                                                     Three James Center, 12 th Floor
                                                                                                     1051 East Cary Street
                                                                                                     Rich mond, VA 23219

                                                                                                     Mailing Address
                                                                                                     Post Office Bo x 27828
                                                                                                     Rich mond, VA 23261

                                                                                                     T (804) 771.5700
                                                                                                     F (804) 771.5777

                                                                                                     kaufCAN.co m

June 9, 2010

Recon Technology, Ltd
Kinglong International Mansion
Fulin Rd 9, Chaoyang District,
Beijing, PRC 100107

     Re:       Recon Technol ogy, Ltd

Dear Sir:

We have acted as counsel for Recon Technology, Ltd, a Cay man Islands corporation (the ―Company‖), in connection with the preparation and
filing of the Co mpany’s registration statement on Form S-1 (Registration No. 333-166540) and all amend ments thereto (as amended, the
―Registration Statement‖), as originally filed with the Securities and Exchange Co mmission (the ―Co mmission‖) on May 5, 2010. The
Registration Statement relates to the offering (the ―Offering‖) of (i) a nu mber of the Co mpany’s units (the ―Units‖), each consisting of four
ordinary shares, $0.0185 par value (―Ord inary Shares‖), and one warrant to purchase one Ordinary Share (―Warrants‖), and (ii) an
underwriter’s unit purchase option to purchase 18,750 Units. The aggregate dollar amount of the O ffering being $23,343,750.

In connection with this opinion, we have examined the Registration Statement and the prospectus contained therein (the ―Prospectus‖), the
Co mpany’s Articles and Memorandu m of Association, as amended to date, and the originals, or copies certified to our satisfaction, of such
records, documents, certificates, memoranda and other instruments as in our judgment are necessary or appropriate to enable u s to render the
opinions expressed below (collectively, the ―Documents‖). We are rely ing (without any independent investigation thereof) upon an Officer ’s
Cert ificate fro m an Officer of the Co mpany, certify ing to the truth and accuracy of the factual statements, covenants, repres entations and
warranties set forth in the Docu ments. We have assumed the authenticity of the signatures and seals set forth in such Officer ’s Cert ificate. In
addition, for all purposes of this opinion, as to questions of fact material to this opinion, we have, to the extent deemed a ppropriate, relied upon
certain representations of certain officers of the Co mpany.

We exp ress no opinion as to the laws of any jurisdiction other than those of the Common wealth of Virgin ia, the corporate laws of the State of
Delaware and the federal laws of the United States of America. We call your attention to the fact that the Warrants are to be governed by and
construed in accordance with the internal laws of the State of New Yo rk. We are of the opinion that a Delaware court or a fed eral court sitting
in Delaware would, under conflict of law principles observed by the courts of Delaware, give effect to such provision. For purposes of the
opinion expressed herein, we have assumed that the Warrants provide that they are to be governed by and would be governed by and construed
in accordance with the laws of the State of Delaware.
Based upon the foregoing, and in reliance thereon, we are of the opinion that all Warrants to be issued in connection with th e Offering have
been duly authorized by all requisite corporate action of the Co mpany and, when issued, will be legal, binding obligations of the Co mpany.

We hereby consent to the use of this opinion as an exh ibit to the Registration Statement and to the use of our name in the Pr ospectus
constituting a part thereof. In giving such consent, we do not thereby admit that we co me within the category of persons whose consent is
required under section 7 of the U.S. Securities Act of 1933, as amended, or the Ru les and Regulations of the Co mmission thereunder.

                                                                                       Sincerely,
                                                                                       /s/ Kaufman & Canoles, P.C.
                                                                                       Kaufman & Canoles, P.C.
                                                                                                                                        Exhi bit 10.32

                                                            LOCK-UP AGREEMENT

                                                                   June [ ], 2010

Ladenburg Thalmann & Co. Inc.
520 Mad ison Avenue, New Yo rk
NY 10022

Ladies and Gentlemen :

      In order to induce Ladenburg Thalmann & Co. Inc. (the ― Ladenburg ‖) to act as lead placement agent of Recon Technology, Ltd, a
Cay man Islands exempted company (the ― Company ‖), with respect to a secondary offering (the ― Offering ‖) of the Co mpany’s units, each
consisting of four Ordinary Shares and One Warrant (each, a ― Unit ‖), the undersigned hereby agrees that until 180 days following the
effectiveness date of the registration statement filed in connection with the Offering (the ― Lock-up Peri od ‖), the undersigned will not,
without the prior written consent of Ladenburg, directly or indirectly: (i) offer, sell, assign, transfer, pledge, contract to sell, or otherwise
dispose of, any Units, any Ordinary Shares of the Co mpany, whether now owned or hereafter acquired and whether forming a p art of or
underlying the Units or otherwise (the ― Ordi nary Shares ‖) or any ord inary share purchase warrants, whether forming a part o f the Units or
otherwise (the ― Warrants ‖), o r any other securities convertible into or exercisable or exchangeable for Ord inary Shares (inclu ding, w ithout
limitat ion, Ordinary Shares or any other securities which may be deemed to be beneficially o wned by the undersigned in accordance with the
rules and regulations promulgated under the Securities Act of 1933, as amended, as the same may be further ame nded or supplemented fro m
time to time (such shares or securities, the ― Beneficially Owned Shares ‖); (ii) establish or increase any ―put equivalent position‖ or liqu idate
or decrease any ―call equivalent position‖ (in each case with in the meaning of Sect ion 16 of the Securit ies Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder) with respect to any Units, Ord inary Shares, Warrants or Beneficially Ow ned Shares, or
otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic
consequence of ownership of Units, Ordinary Shares, Warrants, Beneficially Owned Shares or other securities convertible into or exercisable
or exchangeable for Ord inary Shares, whether or not such transaction is to be settled by delivery of Beneficially Owned Shares, other
securities, cash or other consideration; or (iii) engage in any short selling of any Units, Ordinary Shares, Warrants, Beneficially Owned Shares,
or securities convertible into or exercisable or exchangeable for Ordinary Shares.

       If (i) the Co mpany issues an earnings release or material news or a material event relat ing to the Co mpany occurs during the last
seventeen (17) days of the Lock-up Period, or (ii) p rior to the expirat ion of the Lock-up Period, the Co mpany announces that it will release
earnings results during the sixteen (16)-day period beginning on the last day of the Lock-up Period, the restrictions imposed by this Agreement
shall continue to apply until the exp irat ion of the eighteen (18)-day period beginning on the issuance of the earnings release or the occurrence
of the material news or material event.

      Notwithstanding the foregoing, the undersigned may sell or otherwise transfer Ordinary Shares o r Beneficially Owned Shares during the
undersigned’s lifetime or on death by will or intestacy to the undersigned ’s immed iate family or to a trust, the beneficiaries of which are
exclusively the undersigned and a member or members of the undersigned ’s immed iate family, provided that the transferee thereof agrees to be
bound by the restrictions set forth herein.

     The undersigned hereby authorizes the Co mpany during the Lock -up Period to cause any transfer agent for the Beneficially Owned
Shares to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to, Ordinary Shares, securities
convertible into or exercisable or

                                                                     Page 1 of 2
exchangeable for Ordinary Shares or Beneficially Owned Shares subject to restriction hereunder for wh ich the undersigned is the record holder
and, in the case of Ordinary Shares, securities convertible into or exercisable or exchangeable for Ordinary Shares or Beneficially Owned
Shares for wh ich the undersigned is the beneficial but not the record holder, agrees during the Lock-up Period to cause the record holder to
cause the relevant transfer agent to decline to transfer, and to note stop transfer restrictions on the stock register and other records relating to,
such Ordinary Shares, securities convertible into or exercisable or exchangeable for Ordinary Shares or Beneficially Owned Sh ares subject to
restriction hereunder.

      The undersigned hereby represents and warrants to Ladenburg and the Co mpany that the und ersigned has full power and authority to
enter into this Agreement and that this Agreement constitutes the legal, valid and binding obligat ion of the undersigned, enf orceable in
accordance with its terms. Upon request, the undersigned will execute any additional documents necessary in connection with enforcement
hereof. Any obligations of the undersigned shall be binding upon the successors and assigns of the undersigned from the date first above
written.

      This agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts
of laws princip les thereof. Delivery of a signed copy of this letter by facsimile o r other electronic transmission shall be e ffectiv e as delivery of
the original hereo f.

                                                                      Page 2 of 2
                                                                                                                                   Exhi bit 23.1
             H ANSEN , B ARNETT & M AXWELL , P . C .
                    A Professional Corporation                                           Registered wi th the Public Company
               CERTIFIED PUBLIC A CCOUNTANTS                                                Accounti ng Oversight Board

                      5 Triad Center, Suite 750
                   Salt Lake City, UT 84180-1128
                        Phone: (801) 532-2200
                         Fax: (801) 532-7944
                         www.hb mcpas.com


                            CONS ENT OF INDEPENDENT REGIS TERED PUB LIC ACCOUNTING FIRM

To the Board of Directors
Recon Technology, Ltd.

As an independent registered public accounting firm, we hereby consent to the use of our report on the financial statements o f Recon
Technology, Ltd., dated September 23, 2009 with respect to the consolidated and combined balance sheets of Recon Technology, Ltd. as of
June 30, 2009 and 2008, and the related consolidated and combined statements of operations, shareholders ’ equity (deficit) and cash flows for
the years then ended in the Registration Statement of Recon Technology, Ltd. on Form S-1. We also consent to the use of our name and the
reference to us in the Experts section of the Registration Statement.

                                                                                      /S/ HANSEN, BARNETT & MA XWELL, P.C.

                                                                                      HANS EN, B ARNETT & MAXWELL, P.C.

Salt Lake City, Utah
June 8, 2010
                                                                                                                                     Exhi bit 99.3




June 8, 2010

Recon Technology, Ltd
Roo m 1902, Bu ild ing C
Kinglong International Mansion
Fulin Rd 9, Chaoyang District,
Beijing, PRC 100107

Dear Sirs,

We are qualified lawyers of the People’s Republic of Ch ina (the ―PRC‖ ) and are qualified to issue opinions on the laws and regulations of the
PRC.

We have acted as PRC counsel for Recon Technology, Ltd, a co mpany incorporated under the laws of the Cay man Islands (the ―Company‖ ),
in connection with (i) the Co mpany’s registration statement on Form S-1, including all amend ments or supplements thereto (the ―Registration
Statement‖ ), filed with the Securit ies and Exchange Co mmission (the ―SEC‖ ), under the U.S. Securities Act of 1933, as amended (the
―Securities Act‖ ), relating to the offering by the Co mpany of units, each unit consisting of four ordinary shares and one warrant.

In rendering this opinion, we have examined the originals, or copies certified or otherwise identified to our satisfaction, o f documents provided
to us by the Company and such other documents, corporate records, certificates issued by governmental authorities in the PRC and officers of
the Co mpany and other instruments as we have deemed necessary or advisable for the purposes of rendering this o pinion.

In rendering this opinion, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the
conformity with authentic original documents submitted to us as copies and the completeness of the doc uments provided to us. We have also
assumed that no amendments, revisions, modifications or other changes have been made with respect to any of the documents aft er they were
submitted to us for purposes of this opinion. We have further assumed the accuracy and completeness of all factual statements in the
documents.

As used herein, (a) ―PRC Laws‖ means all laws, regulations, statutes, orders, decrees, guidelines, notices, judicial interpretations,
subordinary legislations of the PRC wh ich are publicly availab le (other than the laws of the Hong Kong Special Ad ministrative Region, Macao
Special Administrative Region and Taiwan Region); (b) ― Governmental Agencies‖ means any court, governmental agency or body or any
stock exchange authorities of the PRC (other than the Hong Kong Special Ad ministrative Reg ion, Macao Special Ad min istrative Region and
Taiwan Reg ion); (c) ― Governmental Approvals‖ means all approvals, consents, waivers, sanctions, authorizations, declaratio ns, filings,
registrations, exempt ions, permissions, endorsements, annual inspections, qualifications, licenses, certificates and permits required by
Govern mental Agencies; (d) ―Pros pectus‖ means the prospectus, including all amend ments or supplements thereto, that forms part of the
Registration Statement.

On August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of Co mmerce ( ― MOFCOM‖ ), the State Assets Supervision and
Admin istration Co mmission, the State Admin istration for Taxation, the State Administration for Industry and Comme rce, the China Securit ies
Regulatory Co mmission ( ―CSRC‖ ), and the State Administration of Fo reign Exchange ( ―SAFE‖ ), jo intly adopted the Regulations on
Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the ―New M&A Rule‖ ), which became effective on September 8,
2006.
The New M&A Rule purports, among other things, to require offshore special purpose vehicles , or SPVs, formed for overseas listing purposes
through acquisitions of PRC do mestic companies and controlled by PRC co mpanies or individuals, to obtain the approval of the CSRC prior to
publicly listing their securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official web site procedures
specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings.

Based on our understanding of current Chinese laws, regulations and rules, including the New M&A Rule and the CSRC procedures
announced on September 21, 2006:
•     the Co mpany’s inner-PRC shareholding structure complies with, and immediately after this offering, will co mply with, current PRC laws
      and regulations;

•     the contractual arrangements between Recon-JN and (a) Recon-HK, (b) the Do mestic Co mpanies, and (c) the Do mestic Co mpanies’
      shareholders are valid and binding on all part ies to these arrangements and the agreements thereof do not violate relevant P RC laws or
      regulations; and
•     the business operations of Recon-JN and the Do mestic Co mpanies comp ly with current PRC laws and regulations.

This opinion relates to the PRC Laws in effect on the date hereof.

We hereby consent to the use of this opinion in, and the filing hereof as an exhib it to, the above-mentioned Reg istration Statement. We hereby
further consent to the use of our name ―Jingtian & Gongcheng‖ under the captions ―Our Corporate Structure‖ and ―Legal Matters‖ in the
prospectus included in the above-mentioned registration statement. In g iving such consent, we do not thereby admit that we fall within the
category of the person whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the regulations
promu lgated thereunder.

								
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